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Tax Law Improvement Act 1997

  • - C2004A05263
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Act No. 121 of 1997 as made
An Act to amend the law about income tax, and for related purposes
Administered by: Treasury
Date of Assent 08 Jul 1997

 

 

 

Tax Law Improvement Act 1997

 

No. 121, 1997

 

 

 

 

An Act to amend the law about income tax, and for related purposes

 


Contents

1............ Short title............................................................................................ 1

2............ Commencement.................................................................................. 1

3............ Schedule(s).......................................................................................... 2

4............ Application of amendments............................................................... 2

Schedule 1—Amendment of the Income Tax Assessment Act 1997         3

Schedule 2—Assessable income                                                                                271

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  271

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              274

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              276

Part 4—Consequential amendments of other Acts                                          281

Financial Corporations (Transfer of Assets and Liabilities) Act 1993        281

Schedule 3—Exempt income                                                                                        282

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  282

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              286

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              293

Part 4—Consequential amendments of other Acts                                          300

Australian Industry Development Corporation Act 1970                               300

Australian National Railways Commission Act 1983                                      300

Australian Postal Corporation Act 1989                                                           300

Australian Trade Commission Act 1985                                                             300

Development Allowance Authority Act 1992                                                     300

Export Finance and Insurance Corporation Act 1991                                    301

Federal Airports Corporation Act 1986                                                             301

Health Insurance Commission Act 1973                                                             301

Legislative Instruments Act 1997                                                                         301

National Rail Corporation Agreement Act 1992                                              302

Social Security Act 1991                                                                                        302

Superannuation Guarantee (Administration) Act 1992                                  302

Schedule 4—Deductions                                                                                                 303

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  303

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              308

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              316

Part 4—Consequential amendments of other Acts                                          327

Fringe Benefits Tax Assessment Act 1986                                                           327

Schedule 5—Trading stock (and some related matters)                               328

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  328

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              337

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              343

Part 4—Consequential amendments of other Acts                                          353

Cattle Transaction Levy Act 1995                                                                        353

Financial Corporations (Transfer of Assets and Liabilities) Act 1993        353

Schedule 6—Depreciation                                                                                              354

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  354

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              370

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              382

Part 4—Consequential amendments of other Acts                                          393

Bounty and Capitalisation Grants (Textile Yarns) Act 1981                         393

Income Tax Rates Act 1986                                                                                    393

Sales Tax Assessment Act 1992                                                                             393

Social Security Act 1991                                                                                        394

Student and Youth Assistance Act 1973                                                              394

Veterans’ Entitlements Act 1986                                                                          394

Schedule 7—Leased cars                                                                                               395

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  395

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              399

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              400

Schedule 8—Recoupment                                                                                              401

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  401

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              403

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              408

Part 4—Consequential amendments of other Acts                                          413

Financial Corporations (Transfer of Assets and Liabilities) Act 1993        413

Schedule 9—Gifts or contributions                                                                           414

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  414

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              418

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              420

Part 4—Consequential amendments of other Acts                                          424

Customs Tariff Act 1995                                                                                         424

Sales Tax (Exemptions and Classifications) Act 1992                                     424

Schedule 10—Entertainment expenses                                                                  425

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  425

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              426

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              428

Part 4—Consequential amendments of other Acts                                          429

Fringe Benefits Tax Assessment Act 1986                                                           429

Schedule 11—Capital allowances for primary producers and some land‑holders   431

Part 1—Amendment of the Income Tax (Transitional Provisions) Act 1997                  431

Part 2—Consequential amendment of the Income Tax Assessment Act 1997              443

Part 3—Consequential amendment of the Income Tax Assessment Act 1936              449

Schedule 12—Miscellaneous                                                                                       454

Part 1—Amendment of the Income Tax Assessment Act 1997                 454

Part 2—Amendment of the Income Tax Assessment Act 1936                 457

Part 3—Amendment of the Income Tax (Consequential Amendments) Act 1997       460

Part 4—Amendment of other Acts                                                                         461

Airports (Transitional) Act 1996                                                                         461

Legislative Instruments Act 1997                                                                         462

Social Security Act 1991                                                                                        462

Student and Youth Assistance Act 1973                                                              462

Veterans’ Entitlements Act 1986                                                                          462


Tax Law Improvement Act 1997

No. 121, 1997

 

 

 

An Act to amend the law about income tax, and for related purposes

[Assented to 8 July 1997]

  

  

  

The Parliament of Australia enacts:

1  Short title

                   This Act may be cited as the Tax Law Improvement Act 1997.

2  Commencement

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

             (2)  Schedule 1 commences on 1 July 1997 immediately after the commencement of the Income Tax Assessment Act 1997.

             (3)  Each of the other Schedules (except Schedule 12) commences immediately after the commencement of the immediately preceding Schedule.

             (4)  If a note specifies the commencement of an item in Schedule 12, the item commences as specified in the note.

             (5)  If there is no note specifying the commencement of an item in Schedule 12, the item commences on 1 July 1997 immediately after the commencement of the Income Tax Assessment Act 1997.

3  Schedule(s)

                   Subject to section 2, each Act specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned. Any other item in a Schedule to this Act has effect according to its terms.

4  Application of amendments

                   An amendment made by an item in a Schedule (except Schedule 1) applies to assessments for the 1997-98 income year and later income years, unless otherwise indicated in that Schedule.


Schedule 1Amendment of the Income Tax Assessment Act 1997

1  Chapter 2 (link note after heading)

Repeal the link note.

2  Before Part 2‑5

Insert:

Part 2-1—Assessable income

Division 15—Some items of assessable income

 

Guide to Division 15

15-1  What this Division is about

This Division sets out some items that are included in your assessable income. Remember that the general rules about assessable income in Division 6 apply to these items.

Table of sections

Operative provisions

15-3          Return to work payments

15-5          Accrued leave transfer payments

15-10        Bounties and subsidies

15-15        Profit-making undertaking or plan

15-20        Royalties

15-25        Amount received for lease obligation to repair

15-30        Insurance or indemnity for loss of assessable income

15-35        Interest on overpayments and early payments of tax

Operative provisions

15-3              Return to work payments

                   Your assessable income includes an amount you receive under an *arrangement that an entity enters into for a purpose of inducing you to resume working for, or providing services to, any entity.

15-5  Accrued leave transfer payments

                   Your assessable income includes an *accrued leave transfer payment that you receive.

To find out if the payment is deductible to the payer, see section 26-10.

15-10  Bounties and subsidies

                   Your assessable income includes a bounty or subsidy that:

                     (a)  you receive in relation to carrying on a *business; and

                     (b)  is not assessable as *ordinary income under section 6‑5.

15-15  Profit-making undertaking or plan

             (1)  Your assessable income includes profit arising from the carrying on or carrying out of a profit-making undertaking or plan.

             (2)  This section does not apply to a profit that:

                     (a)  is assessable as *ordinary income under section 6‑5; or

                     (b)  arises in respect of the sale of property acquired on or after 20 September 1985.

Note:          If you sell property you acquired before 20 September 1985 for profit-making by sale, your assessable income includes the profit: see section 25A of the Income Tax Assessment Act 1936.

15-20  Royalties

                   Your assessable income includes an amount that you receive as or by way of royalty within the ordinary meaning of “royalty” (disregarding the definition of royalty in subsection 995-1(1)) if the amount is not assessable as *ordinary income under section 6‑5.

15-25  Amount received for lease obligation to repair

                   Your assessable income includes an amount you receive from an entity if:

                     (a)  you receive it as a lessor or former lessor of premises; and

                     (b)  the entity pays you the amount for failing to comply with a lease obligation to make repairs to the premises; and

                     (c)  the entity uses or has used the premises for the *purpose of producing assessable income; and

                     (d)  the amount is not assessable as *ordinary income under section 6‑5.

Note:          The entity can deduct the amount: see section 25-15.

15-30  Insurance or indemnity for loss of assessable income

                   Your assessable income includes an amount you receive by way of insurance or indemnity for the loss of an amount (the lost amount) if:

                     (a)  the lost amount would have been included in your assessable income; and

                     (b)  the amount you receive is not assessable as *ordinary income under section 6‑5.

15-35  Interest on overpayments and early payments of tax

                   Your assessable income includes interest payable to you under the Taxation (Interest on Overpayments and Early Payments) Act 1983. The interest becomes assessable when it is paid to you or applied to discharge a liability you have to the Commonwealth.

Division 20—Amounts included to reverse the effect of past deductions

 

Table of Subdivisions

             Guide to Division 20

20-A     Insurance, indemnity or other recoupment for deductible expenses

20-B      Disposal of a car for which lease payments have been deducted

Guide to Division 20

20-1  What this Division is about

This Division includes amounts in your assessable income to reverse the effect of certain kinds of deductions.

Table of sections

20-5......... Other provisions that reverse the effect of deductions

20-5  Other provisions that reverse the effect of deductions

                   The table lists other provisions that reverse the effect of certain kinds of deductions.

                   Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold, are provisions of the Income Tax Assessment Act 1936.

 

Provisions that adjust your tax position in respect of deductions

Item

In this situation:

See:

1   

A balancing charge for property on which you incurred expenditure deductible under a capital allowance is included in your assessable income.

40-25 and 40‑30

2   

An amount you receive by way of insurance or indemnity for a loss of trading stock is included in your assessable income.

70-115

3   

Because of:

petroleum resource rent tax; or

an instalment of petroleum resource rent tax;

that you have deducted or can deduct, an amount is refunded, credited, paid or applied: the amount is included in your assessable income.

330-350(3)

4   

You receive a fringe benefit by way of reimbursement or payment of a loss or outgoing you incurred: your deduction for the loss or outgoing is reduced.

51AH

5   

A company receives (or becomes entitled to) an amount:

in respect of the results of research and development activities on which it incurred deductible expenditure; or

attributable to it having incurred deductible expenditure on research and development activities.

The amount is included in its assessable income.

73B(27A)

6   

You receive an amount as recoupment of expenditure on research and development activities that you have deducted at the rate of 150%: the rate of deduction is reduced to 100%.

73C

7   

You receive an amount as recoupment for your local governing body election expenses: an amount is included in your assessable income.

74A(4)

8   

You receive superannuation benefits as a result of someone’s deductible contributions: the benefits are included in your assessable income.

82AAQ

Subdivision 20-A—Insurance, indemnity or other recoupment for deductible expenses

Guide to Subdivision 20-A

20-10  What this Subdivision is about

Your assessable income may include an amount that you receive by way of insurance, indemnity or other recoupment if:

        it is for a deductible expense; and

        it is not otherwise assessable income.

Table of sections

20-15        How to use this Subdivision

What is an assessable recoupment?

20-20        Assessable recoupments

20-25        What is recoupment?

20-30        Tables of deductions for which recoupments are assessable

How much is included in your assessable income?

20-35        If the expense is deductible in a single income year

20-40        If the expense is deductible over 2 or more income years

20-45        Effect of balancing charge

20-50        If the expense is only partially deductible

20-55        Meaning of previous recoupment law

20-15  How to use this Subdivision

             (1)  First, read sections 20-20 to 20-30 to work out whether you have received an assessable recoupment. If not, you do not need to read the rest of the Subdivision.

             (2)  If you have received one or more assessable recoupments, sections 20-35 to 20-55 tell you how much is included in your assessable income for an income year.

What is an assessable recoupment?

20-20  Assessable recoupments

Exclusion

             (1)  An amount is not an assessable recoupment to the extent that it is *ordinary income, or it is *statutory income because of a provision outside this Subdivision.

Insurance or indemnity

             (2)  An amount you receive as *recoupment of a loss or outgoing is an assessable recoupment if:

                     (a)  you receive the amount by way of insurance or indemnity; and

                     (b)  you can deduct an amount for the loss or outgoing for the *current year, or you have deducted or can deduct an amount for it for an earlier income year, under any provision of this Act.

Other recoupment

             (3)  An amount you receive as *recoupment of a loss or outgoing (except by way of insurance or indemnity) is an assessable recoupment if:

                     (a)  you can deduct an amount for the loss or outgoing for the *current year; or

                     (b)  you have deducted or can deduct an amount for the loss or outgoing for an earlier income year;

under a provision listed in section 20-30.

20-25  What is recoupment?

General

             (1)  Recoupment of a loss or outgoing includes:

                     (a)  any kind of recoupment, reimbursement, refund, insurance, indemnity or recovery, however described; and

                     (b)  a grant in respect of the loss or outgoing.

Amount paid for you

             (2)  If some other entity pays an amount for you in respect of a loss or outgoing that you incur, you are taken to receive the amount as recoupment of the loss or outgoing.

Amount for disposing of right to recoupment

             (3)  If you dispose of your right to receive an amount as *recoupment of a loss or outgoing you are taken to receive as recoupment of the loss or outgoing any amount you receive for disposing of that right. (The disposal need not be to another entity.)

Amount received that is recoupment to an unspecified extent

             (4)  If you receive an amount that is, to an unspecified extent, *recoupment of a loss or outgoing, the amount is taken to be recoupment of the loss or outgoing to whatever extent is reasonable.

Balancing adjustments not covered

             (5)  If a balancing adjustment is required for property on which you incurred a loss or outgoing, no part of the *termination value of the property is an amount you receive as recoupment of the loss or outgoing.

Note:          The termination value is usually the amount you receive because of disposal, loss or destruction of the property.

20-30  Tables of deductions for which recoupments are assessable

             (1)  This table shows the deductions under the Income Tax Assessment Act 1997 for which recoupments are assessable.

Note:          References are to section numbers except where otherwise indicated.

 

Provisions of the Income Tax Assessment Act 1997

Item

Provision

Description of expense

1.1

8-1 (so far as it allows you to deduct a bad debt, or part of a debt that is bad)

bad debts

1.2

8-1 (so far as it allows you to deduct rates or taxes)

rates or taxes

1.3

25-5

tax-related expenses

1.4

25-35

bad debts

1.5

25-45

embezzlement or larceny by an employee

1.6

25-60

election expenses, Commonwealth and State elections

1.7

25-75

rates and land taxes on premises used to produce mutual receipts

1.8

330-15

exploration or prospecting expenditure

1.9

330-80

allowable capital expenditure relating to mining or quarrying

1.10                  

330-370

transport capital expenditure relating to mining or quarrying

1.11                  

330-435

rehabilitation expenditure relating to mining or quarrying

1.12                  

330-485

balancing adjustment deduction for expenditure relating to mining or quarrying

1.13                  

Subdivision 387‑A

landcare operations expenditure

1.14                  

Subdivision 387‑B

expenditure on facilities to conserve or convey water

1.15                  

Subdivision 387‑D

grapevine establishment expenditure

1.16                  

Subdivision 387‑E

mains electricity connection expenditure

             (2)  This table shows the deductions under the Income Tax Assessment Act 1936 for which recoupments are assessable.

Note:          References are to section numbers except where otherwise indicated.

Provisions of the Income Tax Assessment Act 1936

Item

Provision

Description of expense

2.1

51(1) (so far as it allows you to deduct a bad debt, or part of a debt that is bad)

bad debts

2.2

51(1) (so far as it allows you to deduct rates or taxes)

rates or taxes

2.3

63

bad debts

2.4

69

tax-related expenses

2.5

70A(3)

mains electricity connection expenditure

2.6

71

embezzlement or larceny by an employee

2.7

72

rates and land tax

2.8

73B

research and development activity expenditure

2.9

74

election expenses, Commonwealth and State elections

2.10                  

75AA(1) or (6)

grape vine establishment expenditure

2.11                  

75B(2) or (3A)

water conservation or conveyance expenditure

2.12                  

75D(2)

land degradation prevention expenditure

2.13                  

82AB

development allowance expenditure

2.14                  

82BB

environmental impact study expenditure

2.15                  

82BK

environmental protection expenditure

2.16                  

82Z(1)

currency exchange loss

2.17                  

Division 10 of
Part III

mining and quarrying expenditure

2.18                  

Division 10AAA of Part III

expenditure on transport of minerals and quarry materials

2.19                  

Division 10AA of Part III

expenditure on prospecting and mining for petroleum

2.20                  

124BA

expenditure on rehabilitating mining, quarrying and petroleum sites

2.21                  

124ZZF

horticultural plant establishment expenditure (effective life of the plant less than 3 years)

2.22                  

124ZZG

horticultural plant establishment expenditure (effective life of the plant more than 3 years)

2.23                  

628

drought mitigation property expenditure by a primary producer

2.24                  

636

drought mitigation property expenditure by a leasing company

How much is included in your assessable income?

20-35  If the expense is deductible in a single income year

             (1)  Your assessable income includes an *assessable recoupment of a loss or outgoing if:

                     (a)  you can deduct the whole of the loss or outgoing for the *current year; or

                     (b)  you have deducted or can deduct the whole of the loss or outgoing for an earlier income year.

Note 1:       The operation of this section may be affected if a balancing charge has been included in your assessable income because of a deduction for the loss or outgoing: see section 20-45.

Note 2:       Recoupment of a loss or outgoing for which you can deduct amounts over more than one income year is covered by section 20-40.

Note 3:       Recoupment of a loss or outgoing that is only partially deductible is covered by section 20-50.

Total assessed not to exceed the loss or outgoing

             (2)  The total of all amounts that subsection (1) includes in your assessable income for one or more income years in respect of a loss or outgoing cannot exceed the amount of the loss or outgoing.

Recoupment received before income year of the deduction

             (3)  If:

                     (a)  you can deduct the whole of a loss or outgoing for the *current year; and

                     (b)  before the current year you received an *assessable recoupment of the loss or outgoing;

your assessable income for the current year includes so much of the recoupment as subsection (1) would have included if you had instead received the recoupment at the start of the current year.

20-40  If the expense is deductible over 2 or more income years

             (1)  This section includes an amount in your assessable income if:

                     (a)  you receive in the *current year an *assessable recoupment of a loss or outgoing for which you can deduct amounts over 2 or more income years; or

                     (b)  you received in an earlier income year an *assessable recoupment of a loss or outgoing of that kind (unless all of the recoupment has already been included in your assessable income for one or more earlier income years by this section or a *previous recoupment law).

(This section applies even if the recoupment was received before the first of those income years.)

Note:          Recoupment of a loss or outgoing that is only partially deductible is covered by section 20-50.

             (2)  Work out as follows how much is included in your assessable income for the *current year because of one or more *assessable recoupments of the loss or outgoing.

Note:          The method statement ensures that assessable recoupments are included:

·      · only so far as they have not already been included for an earlier income year; and

·      · only to the extent of your total deductions to date for the loss or outgoing.

Method statement

Step 1.   Add up all the *assessable recoupments of the loss or outgoing that you have received (in the *current year or earlier). The result is the total assessable recoupment.

Step 2.   Add up the amounts (if any) included in your assessable income for earlier income years, in respect of the loss or outgoing, by this section or a *previous recoupment law. The result is the recoupment already assessed. (If no amount was included, the recoupment already assessed is nil.)

Step 3.   Subtract the recoupment already assessed from the total assessable recoupment. The result is the unassessed recoupment.

Step 4.   Add up each amount that you can deduct for the loss or outgoing for the *current year, or you have deducted or can deduct for the loss or outgoing for an earlier income year. The result is the total deductions for the loss or outgoing.

                   Note:          The total deductions may be reduced if an amount has been included in your assessable income because of a balancing adjustment: see section 20-45.

Step 5.   Subtract the recoupment already assessed from the total deductions for the loss or outgoing. The result is the outstanding deductions.

Step 6.   The unassessed recoupment is included in your assessable income, unless it is greater than the outstanding deductions. In that case, the amount of the outstanding deductions is included instead.

Example:    At the start of the 1997-98 income year, a mining company incurs $100,000 of expenditure on mining operations. $10,000 is deductible for the 1997-98 income year and for each of the following 9 income years under section 330-80.

                   In the 1997-98 income year, the company receives $20,000 as recoupment. How much is assessable for the 1997-1998 income year?

                   Applying the method statement:

                   After Step 1: the total assessable recoupment is $20,000.

                   After Step 2: the recoupment already assessed is nil.

                   After Step 3: the unassessed recoupment is:
total assessable recoupment – recoupment already assessed,
ie $20,000 – 0 = $20,000.

                   After Step 4: the total deductions for the loss or outgoing are $10,000.

                   After Step 5: the outstanding deductions are:
total deductions for the loss or outgoing – recoupment already assessed, ie $10,000 – 0 = $10,000.

                   After Step 6: the unassessed recoupment (Step 3) is greater than outstanding deductions (Step 5), so the amount of the outstanding deductions is included in assessable income, ie $10,000.

                   Applying the method statement to the 1998-99 income year: a further $10,000 is included in the company’s assessable income.

20-45  Effect of balancing charge

             (1)  This section may affect the operation of section 20-35 or 20-40 (as appropriate) if:

                     (a)  a balancing adjustment is required for the *current year (or for an earlier income year) because you have deducted or can deduct an amount for an income year for the loss or outgoing; and

                     (b)  an amount (the balancing charge) is included in your assessable income for the *current year (or for the earlier income year) because of the balancing adjustment.

To find out about balancing adjustments, see section 40-25.

Effect on section 20-35

             (2)  In applying section 20-35, treat each of the following as reduced by the balancing charge:

                     (a)  the amount of the loss or outgoing;

                     (b)  the total of what you can deduct for the loss or outgoing for the *current year, or have deducted or can deduct for an earlier income year.

Effect on section 20-40

             (3)  In applying the method statement in subsection 20-40(3), reduce the total deductions for the loss or outgoing by the balancing charge.

Example:    Continuing the example in subsection 20-40(3): during the 2000-2001 income year, the mining company:

·      · receives a further $10,000 as recoupment of the original expenditure; and

·      · sells its mining operations for $75,000.

                   As a result of the sale, a balancing charge of $5,000 is included under section 330-485 in the company’s assessable income for that income year.

                   How much of the recoupment amount received in the 2000-2001 income year is assessable for that income year?

                   Applying the method statement in subsection 20-40(3):

                   After Step 1: the total assessable recoupment is $30,000 (received during 1997‑98 and 2000-2001).

                   After Step 2: the recoupment already assessed is $20,000 (for 1997‑98 and 1998-99).

                   After Step 3: the unassessed recoupment is:
total assessable recoupment – recoupment already assessed,
ie $30,000 – $20,000 = $10,000.

                   After Step 4: the total deductions for the loss or outgoing are $30,000 ($10,000 for each of 1997-98, 1998-99 and 1999-2000), reduced by $5,000 (the amount included in assessable income for the balancing adjustment), ie $25,000.

                   After Step 5: the outstanding deductions are:
total deductions for the loss or outgoing – recoupment already assessed, ie $25,000 – $20,000 = $5,000.

                   After Step 6: the unassessed recoupment (Step 3) is greater than outstanding deductions (Step 5), so the amount of the outstanding deductions is included in assessable income, ie $5,000.

20-50  If the expense is only partially deductible

             (1)  This section extends the operation of section 20-35 or 20-40 (as appropriate) to a case where the total of what you can deduct under a provision (the deduction provision) for a loss or outgoing is limited to a proportion of the loss or outgoing.

             (2)  If you receive an *assessable recoupment of the loss or outgoing, section 20-35 or 20-40 applies as if:

                     (a)  you had incurred only that proportion of the loss or outgoing, but could deduct the whole of that proportion under the deduction provision; and

                     (b)  you had received only that proportion of the recoupment.

Example:    You incur expenditure of $500. A provision listed in section 20-30 entitles you to deduct 10% of the expenditure ($50) over 5 years. This means you can deduct $10 in each of the 5 years.

                   You recoup $300 of the expenditure. This section treats you as receiving only 10% of the recoupment. Therefore, $30 is dealt with by section 20-40.

20-55  Meaning of previous recoupment law

Previous recoupment law means a provision of the Income Tax Assessment Act 1936 listed in this table.

 

Previous recoupment law


Item


Provision

What kind of expense the provision relates to:

1   

26(j) (so far as it relates to an amount received for or in respect of a loss or outgoing that is an allowable deduction)

a loss or outgoing that is an allowable deduction

2   

26(k)

embezzlement or larceny by an employee

3   

63(3)

bad debts

4   

69(8)

tax-related expenses

5   

70A(5)

mains electricity connection expenditure

6   

72(2) (so far as it relates to a refund of an amount allowed or allowable as a deduction)

rates or taxes

7   

74(2)

election expenses, Commonwealth and State elections

Subdivision 20-B—Disposal of a car for which lease payments have been deducted

Guide to Subdivision 20-B

20-100  What this Subdivision is about

This Subdivision reverses the effect of deductions for lease payments for a car leased to you (or to your associate), but only if you make a profit by disposing of the car after acquiring it from the lessor. The smallest of these amounts is included in your assessable income:

        your profit on the disposal;

        the total deductible lease payments for the period of the lease;

        the total amounts you could have deducted for depreciation of the car if, instead of leasing it, you had owned it and used it solely for the purpose of producing assessable income.

Table of sections  

20-105      Map of this Subdivision

The usual case

20-110      Disposal of a leased car for profit

20-115      Working out the profit on the disposal

20-120      Meaning of notional depreciation

The associate case

20-125      Disposal of a leased car for profit

Successive leases

20-130      Successive leases

Previous disposals of the car

20-135      No amount included if earlier disposal for market value

20-140      Reducing the amount to be included if there has been an earlier disposal

Miscellaneous rules

20-145      No amount included if you inherited the car

20-150      Reducing the amount to be included if another provision requires you to include an amount for the disposal

20-155      Exception for particular cars taken on hire

Disposals of interests in a car: special rules apply

20-160      Disposal of an interest in a car

20-105  Map of this Subdivision

The usual case

20-110  Disposal of a leased car for profit

             (1)  Your assessable income includes the *profit you make on disposing of a *car if:

                     (a)  the car was designed mainly for carrying passengers; and

                     (b)  the car was leased to you and has been leased to no-one else; and

                     (c)  you or another entity can deduct for the income year any of the lease payments paid or payable by you, or have deducted or can deduct any of them for an earlier income year, under this Act; and

                     (d)  you acquired the car from the lessor.

Note 1:       Even if subsection (1) does not apply, an amount may still be included in your assessable income:

·      · under section 20-125 (which deals with more complicated cases that may involve your associate); or

·      · if you disposed of an interest in a car (rather than the car itself): see section 20-160.

Note 2:       In some cases you do not include an amount in your assessable income:

·      · if there has been an earlier disposal of the car for market value: see section 20-135; or

·      · if you inherited the car: see section 20-145; or

·      · if the car was let on hire in the circumstances set out in section 20‑155.

             (2)  However, the amount included cannot exceed the smaller of these limits:

                     (a)  the total lease payments for the lease that you or another entity have deducted or can deduct under this Act for an income year;

                     (b)  the amount of *notional depreciation for the lease period.

Note 1:       If, because of more than one lease of the car, there is more than one way to work out the amount to be included, you only include the largest amount: see section 20-130.

Note 2:       In some cases you reduce the amount to be included:

·      · if there has been an earlier disposal of the car, or of an interest in it: see section 20-140; or

·      · if another provision requires you to include an amount because of the disposal: see section 20-150.

             (3)  You increase those limits if you have previously leased the *car from the same lessor, or from an *associate of that lessor.

                   You increase the first limit by the total lease payments for each previous lease of that kind that you or another entity have deducted or can deduct under this Act for an income year.

                   You increase the second limit by the amount of *notional depreciation for the period of each previous lease of that kind.

20-115  Working out the profit on the disposal

             (1)  The profit on the disposal is the amount by which the *consideration receivable for the disposal exceeds:

   the amount it cost you to acquire the *car;

                   plus:

   any capital expenditure you incurred on the car after acquiring it.

             (2)  The consideration receivable is worked out using this table:

 

Consideration receivable for the disposal of the car

Item

In this situation:

the consideration receivable is:

1

you sell the *car for a price specific to it

that price, less the expenses of the sale

2

you sell the *car with other property without a specific price being allocated to it

the part of the total sale price that is reasonably attributable to the car less the part of the reasonably attributable expenses of the sale

3

you trade the *car in and buy another car

the value of the trade-in, plus any other consideration you receive

4

you sell the *car and another entity buys another car

the amount by which the cost of the other car is reduced by the sale, plus any other consideration you receive

5

you dispose of the *car to an insurer because it is lost or destroyed

the amount or value received or receivable under the insurance policy

20-120  Meaning of notional depreciation

                   This is how to work out the notional depreciation for a lease period:

Method statement

Step 1.   Compare:

                      the *car’s *cost to the lessor for the purposes of Subdivision 42-B (which is about working out the cost of *plant for the purposes of depreciation);

              with:

                      the car’s *termination value for the purposes of section 42-205 when the lessor disposed of it.

Step 2.   If the car’s cost exceeds the car’s termination value, multiply the excess by:

                      the number of days in the lease period;

              divided by:

                      the number of days the lessor owned the car.

Step 3.   The result is the notional depreciation for the lease period.

Step 4.   If the car’s cost does not exceed the car’s termination value, the notional depreciation for the lease period is zero.

Note 1:       The notional depreciation for the lease period represents:

·      · the amount you could have deducted for depreciation of the car if, instead of leasing it, you had owned it and used it solely for the purpose of producing assessable income for that period;

                   adjusted by:

·      · the balancing adjustment you would have made if you had disposed of the car at the end of that period.

Note 2:       The car’s cost to the lessor is worked out differently if the lessor acquired it in the 1996-97 income year or an earlier income year: see section 20-105 of the Income Tax (Transitional Provisions) Act 1997.

Note 3:       The car’s termination value is worked out differently if the lessor disposed of it in the 1996-97 income year or an earlier income year: see section 20-110 of the Income Tax (Transitional Provisions) Act 1997.

The associate case

20-125  Disposal of a leased car for profit

             (1)  Your assessable income includes the *profit you make on disposing of a *car if:

                     (a)  section 20-110 does not include an amount in your assessable income because of the disposal; and

                     (b)  the car was designed mainly for carrying passengers; and

                     (c)  the car was leased to you or your *associate; and

                     (d)  you, your associate or another entity can deduct for the income year any of the lease payments paid or payable by the lessee, or have deducted or can deduct any of them for an earlier income year, under this Act; and

                     (e)  either:

                              (i)  you, your associate, or entities including you or your associate, acquired the car from the lessor; or

                             (ii)  another entity acquired the car from the lessor under an *arrangement that enabled you or your associate to acquire the car.

Note 1:       Even if subsection (1) does not apply, an amount may be included in your assessable income if you disposed of an interest in a car (rather than the car itself): see section 20-160.

Note 2:       In some cases you do not include an amount in your assessable income:

·      · if there has been an earlier disposal of the car for market value: see section 20-135; or

·      · if you inherited the car: see section 20-145; or

·      · if the car was let on hire in the circumstances set out in section 20‑155.

             (2)  However, the amount included cannot exceed the smallest of these limits:

                     (a)  the total lease payments for the lease that you, your *associate or another entity have deducted or can deduct under this Act for an income year;

                     (b)  the amount of *notional depreciation for the lease period;

                     (c)  if an entity other than you, or if entities including you, acquired the *car from the lessor—the amount by which the *consideration receivable for the disposal of the car by you exceeds the total of:

                              (i)  the car’s cost to that entity, or those entities; and

                             (ii)  any capital expenditure that entity, or any of those entities, incurred on the car after that acquisition and before you acquired it.

Note 1:       If, because of more than one lease of the car, there is more than one way to work out the amount to be included, you only include the largest amount: see section 20-130.

Note 2:       In some cases you reduce the amount to be included:

·      · if there has been an earlier disposal of the car, or of an interest in it: see section 20-140; or

·      · if another provision requires you to include an amount because of the disposal: see section 20-150.

Example:    Your associate leases a car for 5 years and then acquires it from the lessor for $4,000. Your associate sells it to you for $3,000. You sell it for $10,000.

                   Your profit is $10,000 (the consideration receivable) less $3,000 (the car’s cost to you) = $7,000.

                   The first 2 limits on the amount to be included in your assessable income are $9,000 (total deductible lease payments for the lease) and $8,000 (notional depreciation for the lease period).

                   Since your associate acquired the car from the lessor, the third limit is $10,000 (the consideration receivable by you) less $4,000 (the car’s cost to the associate) = $6,000.

                   The amount you include in your assessable income cannot exceed the smallest of the limits. So, you do not include your profit of $7,000. Instead, you include $6,000 (the smallest of the limits).

             (3)  You increase the first 2 limits if you, or your associate, have previously leased the *car from the same lessor, or from an associate of that lessor.

                   You increase the first limit by the total lease payments for each previous lease of that kind that you, your *associate or another entity have deducted or can deduct under this Act for an income year.

                   You increase the second limit by the amount of *notional depreciation for the period of each previous lease of that kind.

Successive leases

20-130  Successive leases

                   If, because of 2 or more leases of the *car, there are different amounts that could be included in your assessable income because of the disposal, only the largest of those amounts is included.

Previous disposals of the car

20-135  No amount included if earlier disposal for market value

                   You do not include an amount in your assessable income because of the disposal if, after the lessor disposed of the *car and before you disposed of it, an entity other than you disposed of the car and:

                     (a)  the *consideration receivable for that disposal was at least the market value of the car at the time of that disposal; or

                     (b)  because of that disposal, that market value was included, or an amount worked out using that market value was included, in the entity’s assessable income under this Act.

20-140  Reducing the amount to be included if there has been an earlier disposal

                   Each limit on the amount to be included in your assessable income because of your disposal of the *car is reduced if, after the lease period began and before your disposal, the car, or an interest in it, was disposed of in one of these situations:

 

Reducing each limit on the amount to be included

Item

In this situation:

reduce each limit by:

1

Section 20-110 or 20-125 included an amount in your assessable income in respect of such an earlier disposal by you

that amount

2

Section 20-110 or 20-125 included an amount in another entity’s assessable income in respect of such an earlier disposal by the other entity

that amount

3

Section 20-110 or 20-125 would have included an amount in your assessable income in respect of such an earlier disposal by you but for the operation of section 20-145

that amount

4

Section 20-110 or 20-125 would have included an amount in another entity’s assessable income in respect of such an earlier disposal by the other entity but for the operation of section 20‑145

that amount

5

Section 20-150 reduced the amount to be included in your assessable income in respect of such an earlier disposal by you

the amount of the reduction

6

Section 20-150 reduced the amount to be included in another entity’s assessable income in respect of such an earlier disposal by the other entity

the amount of the reduction

Examples:  Your associate leases a car for 5 years and then acquires it. Your associate disposes of it to you and section 20-110 includes $500 in your associate’s assessable income.

                   You later dispose of the car.

                   In working out the amount to include in your assessable income for your disposal, you can reduce each limit in subsection 20-125(2) by $500 because the disposal by your associate occurred after the lease period began.

                   Contrast this case:

                   You lease a car for 5 years and then acquire it. You dispose of it to another entity and section 20-110 includes $1,000 in your assessable income.

                   You lease the car from that entity for 2 years and then acquire it. You later dispose of it.

                   In working out the amount to include in your assessable income in respect of the second lease, you cannot reduce each limit in subsection 20‑110(2) by $1,000 because the first disposal did not occur after the start of that lease.

Note:          If the earlier disposal occurred in the 1996-97 income year or an earlier income year, each limit may be able to be reduced by a further amount: see section 20-115 of the Income Tax (Transitional Provisions) Act 1997.

Miscellaneous rules

20-145  No amount included if you inherited the car

                   You do not include an amount in your assessable income because of the disposal if you inherited the *car.

20-150  Reducing the amount to be included if another provision requires you to include an amount for the disposal

                   The amount to be included in your assessable income because of the disposal is reduced by any amount that another provision of this Act (except sections 42-190 and 42-240) requires you to include in your assessable income because of the disposal.

Note:          Sections 42-190 and 42-240 are about including an amount after making a balancing adjustment on the disposal of a car.

20-155  Exception for particular cars taken on hire

                   This Subdivision does not apply to these kinds of leases:

                     (a)  letting a *car on hire under a hire purchase agreement; or

                     (b)  letting a *car on hire under an agreement of a kind ordinarily entered into by people who take cars on hire intermittently on an hourly, daily, weekly or monthly basis.

Disposals of interests in a car: special rules apply

20-160  Disposal of an interest in a car

             (1)  This Subdivision applies to the disposal of an interest in a *car in almost the same way as it does to the disposal of the car itself. The differences are set out below.

             (2)  Your assessable income includes so much of your *profit on the disposal as is reasonable. The limits in subsections 20-110(2) and 20-125(2) do not apply.

             (3)  The cost of the interest to you is taken to be a reasonable amount.

             (4)  Sections 20-135 and 20-140 do not apply to the disposal.

Note 1:       Section 20-135 says that you do not include an amount if there has been an earlier disposal of the car for market value.

Note 2:       Section 20-140 allows you to reduce the amount to be included if there has been an earlier disposal of the car.

             (5)  Section 20-145 applies to the disposal if you inherited either the interest or the *car itself.

Note:          Section 20-145 says that you do not include an amount if you inherited the car.

3  Part 2-5 (link note after heading)

Omit “Division 26”, substitute “Division 25”.

4  Before Division 26

Insert:

Division 25—Some amounts you can deduct

 

Guide to Division 25

25-1  What this Division is about

This Division sets out some amounts you can deduct. Remember that the general rules about deductions in Division 8 (which is about general deductions) apply to this Division.

Table of sections

Operative provisions

25-5          Tax-related expenses

25-10        Repairs

25-15        Amount paid for lease obligation to repair

25-20        Lease document expenses

25-25        Borrowing expenses

25-30        Expenses of discharging a mortgage

25-35        Bad debts

25-40        Loss from profit-making undertaking or plan

25-45        Loss by theft etc.

25-50        Payments of pensions, gratuities or retiring allowances

25-55        Payments to associations

25-60        Parliament election expenses

25-70        Deduction for election expenses does not extend to entertainment

25-75        Rates and land taxes on premises used to produce mutual receipts

Operative provisions

25-5  Tax-related expenses

             (1)  You can deduct expenditure you incur to the extent that it is for:

                     (a)  managing your *tax affairs; or

                     (b)  complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of an entity; or

                     (c)  interest under section 170AA (Underpayment of tax) or 207A (Late payment of tax) of the Income Tax Assessment Act 1936.

Note:          To find out whether a trustee of a deceased estate can deduct expenditure under this section, see subsection 69(7) of the Income Tax Assessment Act 1936.

No deduction for certain expenditure

             (2)  You cannot deduct under subsection (1):

                     (a)  *tax; or

                     (b)  an amount payable under Part VI (Collection and recovery of tax) of the Income Tax Assessment Act 1936; or

                     (c)  expenditure for borrowing money (including payments of interest) to pay an amount covered by paragraph (a) or (b); or

                     (d)  expenditure for a matter relating to the commission (or possible commission) of an offence against an *Australian law or a *foreign law; or

                     (e)  a fee or commission for advice about the operation of a *Commonwealth law relating to taxation, unless that advice is provided by a *recognised tax adviser.

No deduction for expenditure excluded from general deductions

             (3)  You cannot deduct expenditure under subsection (1) to the extent that a provision of this Act (except section 8-1) expressly prevents or limits your deducting it under section 8-1 (about general deductions). It does not matter whether the provision specifically refers to section 8-1.

No deduction for capital expenditure

             (4)  You cannot deduct capital expenditure under subsection (1). However, for this purpose, expenditure is not capital expenditure merely because the *tax affairs concerned relate to matters of a capital nature.

Example:    Under this section, you can deduct expenditure you incur in applying for a private ruling on whether you can depreciate an item of property.

Use of property taken to be for income producing purpose

             (5)  Under some provisions of this Act it is important to decide whether you used property for the *purpose of producing assessable income. For provisions of that kind, your use of property is taken to be for that purpose insofar as you use the property for:

                     (a)  managing your *tax affairs; or

                     (b)  complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of another entity.

Example:    You buy a computer to prepare your tax returns. The expenditure you incur in buying the computer is capital expenditure and cannot be deducted under this section.

                   However, to the extent that you use the computer in preparing your income tax return, you will be able to depreciate your computer and deduct an amount under section 54 (Depreciation) of the Income Tax Assessment Act 1936. That is because, under this subsection, the computer is property that you are taken to use for the purpose of producing assessable income.

             (6)  If another provision of this Act expressly provides that a particular use of property is not taken to be for the *purpose of producing assessable income, that provision overrides subsection (5).

25-10  Repairs

             (1)  You can deduct expenditure you incur for repairs to premises (or part of premises), *plant, machinery, tools or articles that you held or used solely for the *purpose of producing assessable income.

Property held or used partly for that purpose

             (2)  If you held or used the property only partly for that purpose, you can deduct so much of the expenditure as is reasonable in the circumstances.

No deduction for capital expenditure

             (3)  You cannot deduct capital expenditure under this section.

25-15  Amount paid for lease obligation to repair

                   You can deduct an amount that you pay for failing to comply with a lease obligation to make repairs to premises if you use or have used the premises for the *purpose of producing assessable income.

Note:          The amount is assessable income of the entity to which you pay it: either as ordinary income under section 6-5 or because it is included by section 15-25.

25-20  Lease document expenses

             (1)  You can deduct expenditure you incur for preparing, registering or stamping:

                     (a)  a lease of property; or

                     (b)  an assignment or surrender of a lease of property;

if you have used or will use the property solely for the *purpose of producing assessable income.

Property used partly for that purpose

             (2)  If you have used, or will use, the leased property only partly for that purpose, you can deduct the expenditure to the extent that you have used, or will use, the leased property for that purpose.

25-25  Borrowing expenses

             (1)  You can deduct expenditure you incur for borrowing money, to the extent that you use the money for the *purpose of producing assessable income. In most cases the deduction is spread over the *period of the loan.

For the cases where the deduction is not spread, see subsection (6).

Note:          Your deductions under this section may be reduced if any of your commercial debts have been forgiven in the income year: see Subdivision 245-E of Schedule 2C to the Income Tax Assessment Act 1936.

Income year when money used solely for the purpose of producing assessable income

             (2)  You can deduct for an income year the maximum amount worked out under subsection (4) if you use the borrowed money during that income year solely for the *purpose of producing assessable income.

Example:    In 1997-98 you borrow $100,000 and incur expenditure of $1,500 for the borrowing. You use the money to buy a house. Throughout 1998‑99 you rent the house to a tenant. You can deduct for the expenditure for 1998‑99 the maximum amount worked out under subsection (4).

Income year when borrowed money used partly for that purpose

             (3)  If you use the money only partly for that purpose during that income year, you can deduct the proportion of that maximum amount that is appropriate having regard to the extent that you used the borrowed money for that purpose.

Note:          You cannot deduct anything for that income year if you do not use the money for that purpose at all during that income year.

Maximum deduction for an income year

             (4)  You work out as follows the maximum amount that you can deduct for the expenditure for an income year:

Method statement

Step 1.   Work out the remaining expenditure as follows:

                      For the income year in which the *period of the loan begins, it is the amount of the expenditure.

                      For a later income year, it is the amount of the expenditure reduced by the the maximum amount that you can deduct for the expenditure for each earlier income year.

Step 2.   Work out the remaining loan period as follows:

                      For the income year in which the *period of the loan begins, it is the period of the loan (as determined at the end of the income year).

                      For a later income year, it is the period from the start of the income year until the end of the period of the loan (as determined at the end of the income year).

Step 3.   Divide the remaining expenditure by the number of days in the remaining loan period.

Step 4.   Multiply the result from Step 3 by the number of days in the remaining loan period that are in the income year.

Example:    To continue the example in subsection (2): suppose the original period of the loan is 4 years starting on 1 September 1997. What is the maximum amount you can deduct for the expenditure for 1997‑98?

                   Applying the method statement:

                   After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure).

                   After Step 2: the remaining loan period is 4 years from 1 September 1997 (1,461 days).

                   After Step 3: the result is $1,500 divided by 1,461 = $1.03.

                   After Step 4: the result is $1.03 multiplied by 302 days = $310.06.

                   Suppose you repay the loan early, on 31 December 1998. What is the maximum amount you can deduct for the expenditure for 1998-99?

                   Applying the method statement:

                   After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure) reduced by $310.06 (the maximum amount you can deduct for 1997-98) = $1,189.94.

                   After Step 2: the remaining loan period is the period from 1 July 1998 to 31 December 1998 (183 days).

                   After Step 3: the result is $1,189.94 divided by 183 days = $6.50.

                   After Step 4: the result is $6.50 multiplied by 183 days = $1,189.94.

Meaning of period of the loan

             (5)  The period of the loan is the shortest of these periods:

                     (a)  the period of the loan as specified in the original loan contract;

                     (b)  the period starting on the first day on which the money was borrowed and ending on the day the loan is repaid;

                     (c)  5 years starting on the first day on which the money was borrowed.

When deduction not spread

             (6)  If the total of the following is $100 or less:

                     (a)  each amount of expenditure you incur in an income year for borrowing money you use during that income year solely for the *purpose of producing assessable income;

                     (b)  for each amount of expenditure you incur in that income year for borrowing money you use during that income year only partly for that purpose—the proportion of that amount that is appropriate having regard to the extent that you use the money during that income year for that purpose;

you can deduct for the income year:

                     (c)  each amount covered by paragraph (a); and

                     (d)  each proportion covered by paragraph (b).

25-30  Expenses of discharging a mortgage

Mortgage for borrowed money

             (1)  You can deduct expenditure you incur to discharge a mortgage that you gave as security for the repayment of money that you borrowed if you used the money solely for the *purpose of producing assessable income.

Mortgage for property bought

             (2)  You can deduct expenditure you incur to discharge a mortgage that you gave as security for the payment of the whole or part of the purchase price of property that you bought if you used the property solely for the *purpose of producing assessable income.

Money or property used partly for that purpose

             (3)  If you used the money you borrowed, or the property you bought, only partly for the *purpose of producing assessable income, you can deduct the expenditure to the extent that you used the money or property for that purpose.

No deduction for payments of principal or interest

             (4)  You cannot deduct payments of principal or interest under this section.

25-35  Bad debts

             (1)  You can deduct a debt (or part of a debt) that you write off as bad in the income year if:

                     (a)  it was included in your assessable income for the income year or for an earlier income year; or

                     (b)  it is in respect of money that you lent in the ordinary course of your *business of lending money.

Note:          If a bad debt is in respect of a payment that is required to be made under a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936): see subsection 63(1A) of that Act.

Writing off a debt you have bought

             (2)  You can deduct a debt that you write off as bad in the income year if you bought the debt in the ordinary course of your *business of lending money. However, you cannot deduct more than the expenditure you incurred in buying the debt.

Writing off part of a debt you have bought

             (3)  You can deduct a part of a debt if:

                     (a)  you write off that part as bad in the income year; and

                     (b)  you bought the debt in the ordinary course of your *business of lending money.

             (4)  However, the maximum that you can deduct under subsection (3) for one or more income years is the amount (if any) by which:

                          the expenditure you incurred in buying the debt;

exceeds:

                          so much of the debt as has not yet been written off as bad.

Special rules affecting deductions under this section

             (5)  Your entitlement to deductions under this section may be affected by the rules described in the table.

                   Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold, are provisions of the Income Tax Assessment Act 1936.

 

Rules affecting deductions for bad debts

Item

For the rules about this situation:

See:

1   

A company cannot deduct a bad debt if there has been a change in ownership or control of the company and the company has not carried on the same business.

sections 63A and 63C

2   

A company cannot deduct a bad debt in various other cases that may involve trafficking in bad debts.

sections 63B and 63D

3   

A deduction under this section is reduced if the debt is forgiven and the debtor and creditor are companies under common ownership and agree for the creditor to forgo the deduction to a specified extent.

section 245‑90 of Schedule 2C

25-40  Loss from profit-making undertaking or plan

             (1)  You can deduct a loss arising from the carrying on or carrying out of a profit-making undertaking or plan if any profit from that plan would have been included in your assessable income by
section 15-15 (which is about profit-making undertakings and plans).

When section does not apply

             (2)  You cannot deduct a loss under subsection (1) if the loss arises in respect of the sale of property acquired on or after 20 September 1985.

Note:          If you sell property you acquired before 20 September 1985 for profit-making by sale, you may be able to deduct a loss on the sale: see section 52 of the Income Tax Assessment Act 1936.

Notice to Commissioner

             (3)  You can deduct a loss under subsection (1), insofar as it arises in respect of property, only if:

                     (a)  you notified the Commissioner that you acquired the property for the purpose of profit-making by sale or for the carrying on or carrying out of any profit-making undertaking or plan (however described); or

                     (b)  the Commissioner is satisfied that you acquired the property for either of those purposes.

When notice must have been given

             (4)  The notice must have been given at or before the time you lodged your *income tax return:

                     (a)  for the income year in which you acquired the property; or

                     (b)  if you were not required to lodge an income tax return for that income year—for the first income year after that income year for which you were required to lodge one.

25-45  Loss by theft etc.

                   You can deduct a loss in respect of money if:

                     (a)  you discover the loss in the income year; and

                     (b)  the loss was caused by theft, stealing, embezzlement, larceny, defalcation or misappropriation by your employee or *agent (other than an individual you employ solely for private purposes); and

                     (c)  the money was included in your assessable income for the income year, or for an earlier income year.

25-50  Payments of pensions, gratuities or retiring allowances

             (1)  You can deduct a payment of a pension, gratuity or retiring allowance that you make to:

                     (a)  an employee; or

                     (b)  a former employee; or

                     (c)  a dependant of an employee or a former employee.

             (2)  However, you can deduct it only to the extent that it is made in good faith in consideration of the past services of the employee, or former employee, in any *business that you carried on for the purpose of gaining or producing assessable income.

             (3)  You cannot deduct a payment under this section if you can deduct it under any other provision of this Act.

25-55  Payments to associations

             (1)  You can deduct a payment you make for membership of a trade, business or professional association.

Note:          Alternatively, you can deduct the expense under section 8-1 (which is about general deductions) if you satisfy the requirements of that section.

Maximum amount—$42

             (2)  However, $42 is the maximum amount you can deduct under this section for the payments that you make in the income year to any one association.

If you deduct under section 8-1

             (3)  If you deduct a payment under section 8-1 (which is about general deductions) instead of this section:

                     (a)  the payment does not count towards the $42 limit; and

                     (b)  the amount that you can deduct for the payment is not limited to $42.

25-60  Parliament election expenses

                   You can deduct expenditure you incur in contesting an election for membership of:

                     (a)  the Parliament of the Commonwealth; or

                     (b)  the Parliament of a State; or

                     (c)  the Legislative Assembly for the Australian Capital Territory; or

                     (d)  the Legislative Assembly of the Northern Territory of Australia.

Note:          Entertainment expenses are excluded: see section 25-70.

25-70  Deduction for election expenses does not extend to entertainment

             (1)  To the extent that you incur expenditure in respect of providing *entertainment, you cannot deduct it under section 25-60.

             (2)  However, subsection (1) does not stop you deducting expenditure to the extent that you incur it in respect of:

                     (a)  providing *entertainment that is available to the public generally; or

                     (b)  providing food or drink to yourself, unless it would be concluded that you have a purpose of enabling or facilitating *entertainment to be provided to someone else.

25-75  Rates and land taxes on premises used to produce mutual receipts

             (1)  An entity can deduct these amounts it pays for premises:

                     (a)  rates which are annually assessed;

                     (b)  land tax imposed under a *State law or *Territory law.

But only if it uses the premises:

                     (c)  for the purpose of producing mutual receipts; or

                     (d)  in carrying on a *business for the purpose of producing mutual receipts.

When premises used only for deductible purposes

             (2)  The entity can deduct the whole of the rates or land tax if it uses the premises only in one or more of these ways:

                     (a)  for the purpose of producing mutual receipts;

                     (b)  in carrying on a *business for the purpose of producing mutual receipts;

                     (c)  for the *purpose of producing assessable income.

When premises used partly for deductible purposes

             (3)  If the entity uses the premises partly in one or more of the ways referred to in subsection (2) and partly in some other way, it can deduct the rates or land tax to the extent that it uses the premises in one or more of the ways referred to in that subsection.

No deduction under section 8-1

             (4)  The entity cannot deduct the rates or land tax under section 8-1 (which is about general deductions).

5  Division 26 (heading and link note)

Repeal the heading and the link note, substitute:

Division 26—Some amounts you cannot deduct, or cannot deduct in full

 

Guide to Division 26

26-1  What this Division is about

This Division sets out some amounts that you cannot deduct, or that you cannot deduct in full.

Table of sections

Operative provisions

26-5          Penalties

26-10        Leave payments

26-20        HECS and student assistance

26-30        Relative’s travel expenses

26-35        Reducing deductions for amounts paid to related entities

26-40        Maintaining your family

26-45        Recreational club expenses

26-50        Expenses for a leisure facility or boat

Operative provisions

26-5  Penalties

                   You cannot deduct under this Act:

                     (a)  an amount (however described) payable, by way of penalty, under an *Australian law or a *foreign law; or

                     (b)  an amount ordered by a court to be paid on the conviction of an entity for an offence against an *Australian law or a *foreign law.

26-10  Leave payments

             (1)  You cannot deduct under this Act a loss or outgoing for long service leave, annual leave, sick leave or other leave except:

                     (a)  an amount paid in the income year to the individual to whom the leave relates (or, if that individual has died, to that individual’s dependant or *legal personal representative); or

                     (b)  an *accrued leave transfer payment that is made in the income year.

             (2)  An accrued leave transfer payment is a payment that an entity makes:

                     (a)  in respect of an individual’s leave (some or all of which accrued while the entity was required to make payments in respect of the individual’s leave, or leave the individual might take); and

                     (b)  when the entity is no longer required (or is about to stop being required) to make payments in respect of such leave; and

                     (c)  to another entity when the other entity has begun (or is about to begin) to be required to make payments in respect of such leave; and

                     (d)  under (or for the purposes of facilitating the provisions of) an *Australian law, or an award, order, determination or industrial agreement under an *Australian law.

It does not matter whether the leave accrues to the individual as an employee or for some other reason.

Example:    Your employee goes to a new employer. You pay the new employer $2,000 for the employee’s unused long service leave because an industrial agreement requires you to make that payment.

Note:          An accrued leave transfer payment is included in the assessable income of the entity to which it is made: see section 15-5.

26-20  HECS and student assistance

             (1)  You cannot deduct under this Act:

                     (a)  a contribution made under Chapter 4 of the Higher Education Funding Act 1988; or

                     (b)  a basic charge within the meaning of Chapter 5 of that Act; or

                     (c)  a payment made to reduce a debt to the Commonwealth under Chapter 5A of that Act; or

                     (d)  a payment made to reduce a debt to the Commonwealth, or to a participating corporation, under Part 4A of the Student Assistance Act 1973.

Exception when you provide a fringe benefit

             (2)  Subsection (1) does not stop you deducting expenditure you incur in *providing a *fringe benefit.

26-30  Relative’s travel expenses

             (1)  You cannot deduct under this Act a loss or outgoing you incur, insofar as it is attributable to your *relative’s travel, if:

                     (a)  you travelled in the course of performing your duties as an employee, or in the course of carrying on a *business for the purpose of gaining or producing your assessable income; and

                     (b)  your relative accompanied you while you travelled.

Exception to subsection (1)

             (2)  Subsection (1) does not stop you deducting a loss or outgoing if:

                     (a)  your *relative, while accompanying you, performed substantial duties as your employer’s employee, or as your employee; and

                     (b)  it is reasonable to conclude that your relative would still have accompanied you even if he or she had not had a personal relationship with you.

Exception when you provide a fringe benefit

             (3)  Subsection (1) does not stop you deducting expenditure you incur in *providing a *fringe benefit.

This section applies to PAYE earners

             (4)  If an individual is not an employee, but is a *PAYE earner, this section applies to him or her as if:

                     (a)  he or she were an employee; and

                     (b)  the entity (the notional employer) who pays (or is liable to pay) *PAYE earnings because of which he or she is (or would be) a *PAYE earner were his or her employer; and

                     (c)  any other individual who receives (or is entitled to receive) *PAYE earnings:

                              (i)  because of which the other individual is (or would be) a *PAYE earner; and

                             (ii)  that the notional employer pays (or is liable to pay) to the other individual;

                            were also an employee of the notional employer.

This section applies to entities liable to PAYE earnings

             (5)  If an entity is not an employer, but pays (or is liable to pay) *PAYE earnings, this section applies to the entity as if:

                     (a)  it were an employer; and

                     (b)  an individual to whom the entity pays (or is liable to pay) *PAYE earnings were the entity’s employee.

26-35  Reducing deductions for amounts paid to related entities

You can only deduct reasonable amounts paid to related entities

             (1)  If, under another provision of this Act, you can deduct an amount for a payment you make, or for a liability you incur, to a *related entity, then you can only deduct so much of the amount as the Commissioner considers reasonable.

Note:          This section has a special operation if the payment is made, or the liability is incurred, by a partnership in which a private company is a partner: see section 65 (Payments to associated persons and relatives) of the Income Tax Assessment Act 1936.

Meaning of related entity

             (2)  A related entity is any of the following:

                     (a)  your *relative; or

                     (b)  a partnership in which your relative is a partner.

             (3)  In the case of a partnership, a related entity is any of the following:

                     (a)  a *relative of a partner in the partnership;

                     (b)  an individual who is or has been a director of a company that is a partner in the partnership and is a *private company for the income year;

                     (c)  an entity that is or has been a shareholder in a company of that kind;

                     (d)  a *relative of an individual who is or has been a director or shareholder of a company of that kind;

                     (e)  a beneficiary of a trust if the trustee is a partner in the partnership;

                      (f)  a *relative of a beneficiary of a trust if the trustee is a partner in the partnership;

                     (g)  another partnership, if a partner in the other partnership is a *relative of a partner in the first partnership.

However, a partner in a partnership is not a related entity of the partnership.

If you can’t deduct, then related entity doesn’t include amount as income

             (4)  To the extent that subsection (1) stops you deducting an amount, the amount is neither assessable income, nor exempt income, of the *related entity.

Amendments of assessments

             (5)  The Commissioner can amend an assessment at any time for the purpose of giving effect to subsection (4).

Example:    An amount was not included in the related entity’s assessable income because at the time you could not deduct the amount. At a later time you discover that you could deduct the amount and your assessment is amended. The Commissioner can amend the entity’s assessment so that the amount is included in the entity’s assessable income.

26-40  Maintaining your family

                   You cannot deduct under this Act expenditure you incur for maintaining:

                     (a)  your *spouse (except a spouse permanently living separately and apart from you); or

                     (b)  your *child who is under 16 years.

Example:    A farmer cannot deduct an amount for food or lodgings that the farmer provides to his or her child who is under 16 years for the work the child performs on the farm.

26-45  Recreational club expenses

             (1)  You cannot deduct under this Act a loss or outgoing to the extent you incur it to obtain or maintain:

                     (a)  membership of a *recreational club; or

                     (b)  rights to enjoy (otherwise than as a *member) facilities provided by a *recreational club for the use or benefit of its *members;

whether for yourself or someone else.

Meaning of recreational club

             (2)  A recreational club is a company that was established or is carried on mainly to provide facilities, for the use or benefit of its *members, for drinking, dining, *recreation or entertainment.

Exception when you provide a fringe benefit

             (3)  Subsection (1) does not stop you deducting expenditure you incur in *providing a *fringe benefit.

26-50  Expenses for a leisure facility or boat

             (1)  You cannot deduct under this Act a loss or outgoing to the extent you incur it:

                     (a)  to acquire ownership of a *leisure facility or boat; or

                     (b)  to retain ownership of a *leisure facility or boat; or

                     (c)  to acquire rights to use a *leisure facility or boat; or

                     (d)  to retain rights to use a *leisure facility or boat; or

                     (e)  to use, operate, maintain or repair a *leisure facility or boat; or

                      (f)  in relation to any obligation associated with your ownership of a *leisure facility or boat; or

                     (g)  in relation to any obligation associated with your rights to use a *leisure facility or boat.

However, there are exceptions (see subsections (3), (4), (5), (6) and (8)).

What is a leisure facility?

             (2)  A leisure facility is land, a building, or part of a building or other structure, that is used (or held for use) for holidays or *recreation.

Exception—leisure facilities

             (3)  Subsection (1) does not stop you deducting a loss or outgoing for a *leisure facility if at all times in the income year:

                     (a)  you hold the leisure facility for sale in the ordinary course of your business of selling leisure facilities; or

                     (b)  you use the leisure facility (or hold it for use) mainly to provide it:

                              (i)  in the ordinary course of your *business of providing leisure facilities for payment; or

                             (ii)  to produce your assessable income in the nature of rents, lease premiums, licence fees or similar charges; or

                            (iii)  for your employees to use; or

                            (iv)  for the care of your employees’ children.

In the case of a company, subparagraphs (b)(iii) and (iv) do not apply to employees who are *members or directors of the company.

Exception—part year use of leisure facilities

             (4)  If you use a *leisure facility (or hold it) as described in subsection (3) at all times during part of the income year, then subsection (1) does not stop you deducting so much of the loss or outgoing as is reasonable in the circumstances.

Exception—boats

             (5)  Subsection (1) does not stop you deducting a loss or outgoing for a boat if at all times in the income year you:

                     (a)  hold the boat as *trading stock for sale in the ordinary course of a *business that you carry on; or

                     (b)  use the boat (or hold it) mainly for letting it on hire in the ordinary course of a *business that you carry on; or

                     (c)  use the boat (or hold it) mainly for transporting for payment in the ordinary course of a *business that you carry on, the public or goods; or

                     (d)  use the boat for a purpose that is essential to the efficient conduct of a *business that you carry on.

Exception—part year use of boats

             (6)  If you use a boat (or hold it) as described in subsection (5) at all times during part of the income year, then subsection (1) does not stop you deducting so much of the loss or outgoing as is reasonable in the circumstances.

Anti-avoidance—when exceptions do not apply

             (7)  A *leisure facility or boat is taken not to be used (or held) as described in subsection (3) or (5) if:

                     (a)  apart from this subsection, the leisure facility or boat would be used (or held) in that way because of a *scheme; and

                     (b)  in the Commissioner’s opinion, the scheme would not have been entered into or carried out if this section had not been enacted.

Exception when you provide a fringe benefit

             (8)  Subsection (1) does not stop you deducting expenditure you incur in *providing a *fringe benefit.

6  Section 28-185 (link note)

Omit “Division 36”, substitute “Division 30”.

7  After Division 28

Insert:

Division 30—Gifts or contributions

Table of Subdivisions

             Guide to Division 30

30-A      Deductions for gifts or contributions

30-B      Tables of recipients for deductible gifts

30-C      Rules applying to particular gifts of property

30-D      Testamentary gifts under the Cultural Bequests Program

30-E      Register of environmental organisations

30-F       Register of cultural organisations

30-G      Index to this Division

Guide to Division 30

30-1  What this Division is about

This Division sets out the rules for working out deductions for certain gifts or contributions that you make.

Table of sections

30-5          How to find your way around this Division

30-10        Index

30-5  How to find your way around this Division

             (1)  You should start at Subdivision 30-A unless you are making a testamentary gift under the Cultural Bequests Program.

Note:          Subdivision 30-D deals with the deductibility of such a gift.

             (2)  Subdivision 30-A contains a table of all the gifts and contributions that you can deduct. You need to look at the table to see whether the type of gift or contribution you are making is covered by it.

             (3)  In some cases, the table sends you off to Subdivision 30-B. It has a number of tables that list particular funds, authorities or institutions that deductible gifts can be made to.

             (4)  In other cases, the table sends you off to Subdivision 30-C. It contains rules that apply to particular gifts of property.

             (5)  Subdivision 30-E requires the establishment of a register of *environmental organisations. Subdivision 30-F requires the establishment of a register of *cultural organisations. Their only relevance to you is that you can deduct a gift that you make to a fund listed on either register.

30-10  Index

                   There is an index to this Division in Subdivision 30-G.

Subdivision 30-A—Deductions for gifts or contributions

Table of sections

30-15        Table of gifts or contributions that you can deduct

30-15  Table of gifts or contributions that you can deduct

             (1)  You can deduct a gift or contribution that you make in the situations set out in the following table. It tells you:

                          who the recipient of the gift or contribution can be; and

                          the type of gift or contribution that you can make; and

                          how much you can deduct for the gift or contribution; and

                          any special conditions that apply.

             (2)  A testamentary gift or contribution is not deductible under this section.

Note:          Subdivision 30-D deals with the deductibility of testamentary gifts under the Cultural Bequests Program.

 

Deductible gifts or contributions

Recipient

Type of gift or contribution

How much you can deduct

Special conditions

1

A fund, authority or institution covered by an item in any of the tables in Subdivision 30-B.

A gift of:

(a)  money; or

(b) property (including *trading stock) that you purchased during the 12 months before making the gift; or

(c)  an item of your *trading stock if:

· the gift is a disposal of the item outside the ordinary course of your *business; and

· no election has been made, or is made, in relation to the item under Subdivision 385-E (about electing to spread or defer profit from the forced disposal or death of *live stock).

(a)  if the gift is money—the amount you are giving; or

(b) if the gift is property (except *trading stock covered by paragraph (c))—the lesser of the market value of the property on the day you made the gift and the amount you paid for the property; or

(c)  if the gift is an item of your *trading stock:

· that you disposed of outside the ordinary course of your *business; and

· for which no election has been made, or is made, in relation to the item under Subdivision 385-E;

      the market value of the item on the day you made the gift.

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

(b) the value of the gift must be $2 or more; and

(c)  any conditions set out in the relevant table item in Subdivision 30-B must be satisfied.

2

A public fund established and maintained under a will or instrument of trust solely for:

(a)  the purpose of providing money, property or benefits:

· to a fund, authority or institution covered by an item in any of the tables in Subdivision 30-B; and

· for any purposes set out in the item; or

(b) the establishment of such a fund, authority or institution.

A gift of:

(a)  money; or

(b) property (including *trading stock) that you purchased during the 12 months before making the gift; or

(c)  an item of your *trading stock if:

· the gift is a disposal of the item outside the ordinary course of your *business; and

· no election has been made, or is made, in relation to the item under Subdivision 385-E (about electing to spread or defer profit from the forced disposal or death of *live stock).

(a)  if the gift is money—the amount you are giving; or

(b) if the gift is property (except *trading stock covered by paragraph (c))—the lesser of the market value of the property on the day you made the gift and the amount you paid for the property; or

(c)  if the gift is an item of your *trading stock:

· that you disposed of outside the ordinary course of your *business; and

· for which no election has been made, or is made, in relation to the item under Subdivision 385-E;

      the market value of the item on the day you made the gift.

(a)  the value of the gift must be $2 or more; and

(b) the terms of the will or trust must allow the trustee to invest money that the fund receives because of the gift only in a way that an *Australian law allows trustees to invest trust money.

3

A political party that is registered under Part XI of the Commonwealth Electoral Act 1918.

A contribution of:

(a)  money; or

(b) property that you purchased during the 12 months before making the contribution.

(a)  if the contribution is money—the amount of the contribution; or

(b) if the contribution is property—the lesser of the market value of the property on the day you made the contribution and the amount you paid for the property.

(a)  a company cannot deduct a contribution it makes; and

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

(c)  you cannot deduct more than $100 of contributions for any one income year.

4

(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

(e)  an institution in Australia consisting of a public library, a public museum and a public art gallery or any 2 of them.

A gift of property (except an estate or interest in land or in a building or part of a building).

The general rule is that you can deduct the average of the market values specified in the written valuations you get from approved valuers.

 

Subdivision 30-C sets out:

(a)  how a person becomes an approved valuer; and

(b) the exceptions to the general rule; and

(c)  the situations when the amount you can deduct is reduced.

 

If the property is jointly owned, see section 30-225 to work out how much of the gift you can deduct.

(a)  the property must be accepted by the recipient for inclusion in a collection it is maintaining or establishing; and

(b) the value of the gift must be $2 or more; and

(c)  you must satisfy the valuation requirements in section 30-200, unless section 30-205 (about the sale price being assessable) applies.

5

The Commonwealth (for the purposes of Artbank).

A gift of property (except an estate or interest in land or in a building or part of a building).

The general rule is that you can deduct the average of the market values specified in the written valuations you get from approved valuers.

 

Subdivision 30-C sets out:

(a)  how a person becomes an approved valuer; and

(b) the exceptions to the general rule; and

(c)  the situations when the amount you can deduct is reduced.

 

If the property is jointly owned, see section 30-225 to work out how much of the gift you can deduct.

(a)  the property must be accepted by the Commonwealth for inclusion in a collection maintained, or being established, for the purposes of Artbank; and

(b) you must satisfy the valuation requirements in section 30-200, unless section 30-205 (about the sale price being assessable) applies.

6

(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.

A gift of a place listed in the Register of the National Estate (kept under the Australian Heritage Commission Act 1975).

The general rule is that you can deduct the average of the market values specified in the written valuations you get from approved valuers.

 

Subdivision 30-C sets out:

(a)  how a person becomes an approved valuer; and

(b) the exceptions to the general rule; and

(c)  the situations when the amount you can deduct is reduced.

 

If the place is jointly owned, see
section 30-225 to work out how much of the gift you can deduct.

(a)  the place must be accepted by the recipient for the purpose of preserving it for the benefit of the public; and

(b) the value of the gift must be $2 or more; and

(c)  you must satisfy the valuation requirements in section 30-200, unless section 30-205 (about the sale price being assessable) applies.

Subdivision 30-B—Tables of recipients for deductible gifts

Table of sections 

Health

30-20        Health

Education

30-25        Education

30-30        Gifts that must be for certain purposes

30-35        Gifts to a public fund established to benefit a rural school hostel building must satisfy certain requirements

Research

30-40        Research

Welfare and rights

30-45        Welfare and rights

Defence

30-50        Defence

Environment

30-55        The environment

30-60        Gifts to a National Parks body or conservation body must satisfy certain requirements

Industry, trade and design

30-65        Industry, trade and design

The family

30-70        The family

30-75        Marriage guidance organisations must be approved

International affairs

30-80        International affairs

30-85        Declaration must be in force at the time you make the gift

Sports and recreation

30-90        Sports and recreation

Philanthropic trusts

30-95        Philanthropic trusts

Cultural organisations

30-100      Cultural organisations

Health

30-20  Health

             (1)  This table sets out general categories of health recipients.

 

Health—General

Item

Fund, authority or institution

Special conditions

1.1.1

a public hospital

none

1.1.2

a hospital carried on by a society or association otherwise than for the purposes of profit or gain to the individual members of the society or association

none

1.1.3

a public fund established before 23 October 1963 and maintained for the purpose of providing money for hospitals covered by item 1.1.1 or 1.1.2 or for the establishment of such hospitals

none

1.1.4

a public authority engaged in research into the causes, prevention or cure of disease in human beings, animals or plants

the gift must be made for such research

1.1.5

a public institution engaged solely in research into the causes, prevention or cure of disease in human beings, animals or plants

none

             (2)  This table sets out specific health recipients.

 

Health—Specific

Item

Fund, authority or institution

Special conditions

1.2.1

The Australian College of Obstetricians and Gynaecologists

none

1.2.2

the Australian College of Occupational Medicine

none

1.2.3

the Australian Postgraduate Federation in Medicine

the gift must be made for education or research in medical knowledge or science

1.2.4

the College of Radiologists in Australasia

the gift must be made for education or research in medical knowledge or science

1.2.5

the New South Wales College of Nursing

none

1.2.6

the Royal Australian and New Zealand College of Psychiatrists

none

1.2.7

the Royal Australian College of General Practitioners

the gift must be made for education or research in medical knowledge or science

1.2.8

the Royal Australasian College of Physicians

none

1.2.9

the Royal Australasian College of Surgeons

none

1.2.10

the Royal College of Pathologists of Australasia

the gift must be made for education or research in medical knowledge or science

1.2.11

the Australian Regional Council of the Royal College of Obstetricians and Gynaecologists

none

1.2.12

the Royal College of Nursing, Australia

none

1.2.13

the Australian and New Zealand College of Anaesthetists

none

Education

30-25  Education

             (1)  This table sets out general categories of education recipients.

 

Education—General

Item

Fund, authority or institution

Special conditions

2.1.1

a public university

none

2.1.2

a public fund for the establishment of a public university

none

2.1.3

a higher education institution within the meaning of the Employment, Education and Training Act 1988

none

2.1.4

a residential educational institution affiliated under statutory provisions with a public university

none

2.1.5

a residential educational institution established by the Commonwealth

none

2.1.6

a residential educational institution that is affiliated with a higher education institution within the meaning of the Employment, Education and Training Act 1988

none

2.1.7

an institution that the Minister for Employment, Education, Training and Youth Affairs has declared by a signed instrument to be a technical and further education institution within the meaning of the Employment, Education and Training Act 1988

see section 30-30

2.1.8

a public fund established and maintained solely for the purpose of providing religious instruction in government schools in Australia

none

2.1.9

a public fund established and maintained by a Roman Catholic archdiocesan or diocesan authority solely for the purpose of providing religious instruction in government schools in Australia

none

2.1.10

a public fund established and maintained solely for providing money for the acquisition, construction or maintenance of a building used, or to be used, as a school or college by:

(a) a government; or

(b) a public authority; or

(c) a society or association which is carried on otherwise than for the purposes of profit or gain to the individual members of the society or association

none

 2.1.11

a public fund established and maintained solely for providing money for the acquisition, construction or maintenance of a rural school hostel building

see section 30-35

             (2)  This table sets out specific education recipients.

 

Education—Specific

Item

Fund, authority or institution

Special conditions

2.2.1

The Academy of the Social Sciences in Australia Incorporated

none

2.2.2

the Australian Academy of Science

none

2.2.3

the Australian Academy of the Humanities for the Advancement of Scholarship in Language, Literature, History, Philosophy and the Fine Arts

none

2.2.4

the Australian Academy of Technological Sciences and Engineering Limited

none

2.2.5

the Australian Administrative Staff College

none

2.2.6

the Australian and New Zealand Association for the Advancement of Science

none

2.2.7

the Australian Ireland Fund

none

2.2.8

the Life Education Centre

none

2.2.9

a company that conducts life education programs under the auspices of the Life Education Centre if the company:

(a) is not carried on for the purposes of profit or gain to its individual members; and

(b) is prohibited by its *constitution from making any distribution of money or property to its members

the gift must be for the conduct of such programs

2.2.10

the Council for Christian Education in Schools

none

2.2.11

the Council for Jewish Education in Schools

none

2.2.12

H.R.H. The Duke of Edinburgh’s Commonwealth Study Conferences (Australia) Incorporated

none

2.2.13

the Lionel Murphy Foundation

none

2.2.14

the Marcus Oldham Farm Management College

see section 30-30

2.2.15

the Constitutional Centenary Foundation Incorporated

none

2.2.16

the Polly Farmer Foundation (Inc)

none

30-30  Gifts that must be for certain purposes

             (1)  You can deduct a gift that you make to:

                     (a)  a technical and further education institution covered by item 2.1.7 of the table in subsection 30-25(1); or

                     (b)  the Marcus Oldham Farm Management College;

only if the gift is for:

                     (c)  purposes of the institution, or of the College, that have been declared by the Minister for Employment, Education, Training and Youth Affairs to relate solely to tertiary education; or

                     (d)  the provision of facilities for the institution, or the College, if the Minister has declared that he or she is satisfied the facilities are to be used principally for such purposes.

             (2)  A declaration under subsection (1) must be in writing, signed by the Minister.

30-35  Gifts to a public fund established to benefit a rural school hostel building must satisfy certain requirements

             (1)  You can deduct a gift that you make to a public fund covered by item 2.1.11 of the table in subsection 30-25(1) only if each requirement in this section is satisfied.

             (2)  The rural school hostel building must be used, or going to be used, principally as residential accommodation for students:

                     (a)  whose usual place of residence is in a rural area; and

                     (b)  who are undertaking primary or secondary education, or special education programs for children with disabilities, at a school in the same area as the building.

             (3)  The costs of the school must be solely or partly funded by the Commonwealth, a State or a Territory.

             (4)  The residential accommodation must be provided by:

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

                     (b)  a public authority; or

                     (c)  a company that:

                              (i)  is not carried on for the purposes of profit or gain to its individual members; and

                             (ii)  is prohibited by its *constitution from making any distribution of money or property to its members.

Research

30-40  Research

             (1)  This table sets out general categories of research recipients.

 

Research—General

Item

Fund, authority or institution

Special conditions

3.1.1

a university, college, institute, association or organisation which is an approved research institute for the purposes of section 73A (Expenditure on scientific research) of the Income Tax Assessment Act 1936

the gift must be made for purposes of scientific research in the field of natural or applied science

             (2)  This table sets out specific research recipients.

 

Research—Specific

Item

Fund, authority or institution

Special conditions

3.2.1

the Centre for Independent Studies

none

3.2.2

the Ian Clunies Ross Memorial Foundation

none

3.2.3

the Commonwealth

the gift must be made for purposes of research in the Australian Antarctic Territory

Welfare and rights

30-45  Welfare and rights

             (1)  This table sets out general categories of welfare and rights recipients.

 

Welfare and rights—General

Item

Fund, authority or institution

Special conditions

4.1.1

a public benevolent institution

none

4.1.2

a public fund established before
23 October 1963 and maintained for the purpose of providing money for public benevolent institutions or for the establishment of public benevolent institutions

none

4.1.3

a public fund established and maintained for the relief of persons in Australia who are in necessitous circumstances

none

             (2)  This table sets out specific welfare and rights recipients.

 

Welfare and rights—Specific

Item

Fund, authority or institution

Special conditions

4.2.1

Amnesty International

none

4.2.2

the Child Accident Prevention Foundation of Australia

none

4.2.3

the National Foundation for Australian Women Limited

none

4.2.4

the National Safety Council of Australia

none

4.2.5

the Pearl Watson Foundation Limited

none

4.2.6

the Royal Society for the Prevention of Cruelty to Animals New South Wales

none

4.2.7

the Royal Society for the Prevention of Cruelty to Animals (Victoria)

none

4.2.8

the Royal Queensland Society for the Prevention of Cruelty

none

4.2.9

the Royal Society for the Prevention of Cruelty to Animals (South Australia) Incorporated

none

4.2.10

the Royal Society for the Prevention of Cruelty to Animals Western Australia (Incorporated)

none

4.2.11

the R.S.P.C.A. (Tasmania) Incorporated

none

4.2.12

the Society for the Prevention of Cruelty to Animals (Northern Territory)

none

4.2.13

the Royal Society for the Prevention of Cruelty to Animals (A.C.T.) Incorporated

none

4.2.14

the R.S.P.C.A. Australia Incorporated

none

Defence

30-50  Defence

             (1)  This table sets out general categories of defence recipients.

 

Defence—General

Item

Fund, authority or institution

Special conditions

5.1.1

the Commonwealth or a State

the gift must be made for purposes of defence

5.1.2

a public institution or public fund established and maintained for the comfort, recreation or welfare of members of the armed forces of any part of Her Majesty’s dominions, or of any allied or other foreign force serving in association with Her Majesty’s armed forces

none

             (2)  This table sets out specific defence recipients.

 

Defence—Specific

Item

Fund, authority or institution

Special conditions

5.2.1

the Shrine of Remembrance Restoration and Development Trust

the gift must be made before 1 July 1999

5.2.2

The Sandakan Memorials Trust Fund

the gift must be made before 30 July 1997

5.2.3

the Cobram and District War Memorial Incorporated Fund

the gift must be made before 19 October 1997

5.2.4

The Central Synagogue Restoration Fund

the gift must be made before 23 December 1997

5.2.5

The Borneo Memorials Trust Fund

the gift must be made before 23 December 1997

Environment

30-55  The environment

             (1)  This table sets out general categories of environment recipients.

 

The environment—General

Item

Fund, authority or institution

Special conditions

6.1.1

a public fund that, when the gift is made, is on the register of *environmental organisations kept under Subdivision 30‑E

none

             (2)  This table sets out specific environment recipients.

 

The environment—Specific

Item

Fund, authority or institution

Special conditions

6.2.1

the Australian Conservation Foundation Incorporated

see section 30-60

6.2.2

Greening Australia Limited

see section 30-60

6.2.3

Landcare Australia Limited

see section 30-60

6.2.4

the National Parks Association of New South Wales

see section 30-60

6.2.5

the Victorian National Parks Association

see section 30-60

6.2.6

the Victoria Conservation Trust

see section 30-60

6.2.7

the National Parks Association of Queensland

see section 30-60

6.2.8

The Nature Conservation Society of South Australia Incorporated

see section 30-60

6.2.9

the National Parks Foundation of South Australia Incorporated

see section 30-60

6.2.10

the Western Australian National Parks and Reserves Association Incorporated

see section 30-60

6.2.11

the Tasmanian Conservation Trust Incorporated

see section 30-60

6.2.12

the National Parks Association of the Australian Capital Territory Incorporated

see section 30-60

6.2.13

the National Trust of Australia (New South Wales)

none

6.2.14

the National Trust of Australia (Victoria)

none

6.2.15

The National Trust of Queensland

none

6.2.16

The National Trust of South Australia

none

6.2.17

The National Trust of Australia (W.A.)

none

6.2.18

the National Trust of Australia (Tasmania)

none

6.2.19

The National Trust of Australia (Northern Territory)

none

6.2.20

the National Trust of Australia (A.C.T.)

none

6.2.21

the Australian Council of National Trusts

none

6.2.22

the World Wide Fund for Nature

see section 30-60

30-60  Gifts to a National Parks body or conservation body must satisfy certain requirements

                   You can deduct a gift that you make to:

                     (a)  an environmental institution covered by any of the items 6.2.1 to 6.2.12 of the table in subsection 30-55(2); or

                     (b)  the World Wide Fund for Nature;

only if, at the time of making the gift:

                     (c)  the institution or Fund has agreed to give the Secretary to the Department of the Environment, Sport and Territories, within a reasonable period after the end of the income year in which you made the gift, statistical information about gifts made to the institution or Fund during that income year; and

                     (d)  the institution or Fund has a policy of not acting as a mere conduit for the donation of money or property to other institutions, bodies or persons.

Industry, trade and design

30-65  Industry, trade and design

                   This table sets out specific industry, trade and design recipients.

 

Industry, trade and design—Specific

Item

Fund, authority or institution

Special conditions

7.2.1

the Industrial Design Council of Australia

none

7.2.2

the Productivity Promotion Council of Australia

none

7.2.3

the Work Skill Australia Foundation Incorporated

none

The family

30-70  The family

             (1)  This table sets out general categories of family recipients.

 

The family—General

Item

Fund, authority or institution

Special conditions

8.1.1

a public fund established and maintained solely for the purpose of providing money to be used in giving marriage guidance to persons in Australia through a voluntary organisation or a branch or section of a voluntary organisation

see section 30-75

             (2)  This table sets out specific family recipients.

 

The family—Specific

Item

Fund, authority or institution

Special conditions

8.2.1

the Nursing Mothers’ Association of Australia

none

30-75  Marriage guidance organisations must be approved

             (1)  You can deduct a gift that you make to a public fund covered by item 8.1.1 of the table in subsection 30-70(1) only if the organisation, or branch or section of the organisation, has been declared by the Attorney‑General to be a marriage guidance organisation.

             (2)  The Attorney-General may declare an organisation, or a branch or section of an organisation, to be a marriage guidance organisation if he or she is satisfied that:

                     (a)  it is willing and able to engage in marriage guidance; and

                     (b)  marriage guidance is, or will be, its only activity, or a major part of its activities.

             (3)  A declaration under subsection (1) must be in writing, signed by the Attorney-General.

International affairs

30-80  International affairs

             (1)  This table sets out general categories of international affairs recipients.

 

International affairs—General

Item

Fund, authority or institution

Special conditions

9.1.1

a public fund declared by the Treasurer to be a relief fund

see section 30-85

             (2)  This table sets out specific international affairs recipients.

 

International affairs—Specific

Item

Fund, authority or institution

Special conditions

9.2.1

the Australian Institute of International Affairs

none

9.2.2

the Australian National Travel Association

none

9.2.3

The Foundation for Development Cooperation Ltd

none

30-85  Declaration must be in force at the time you make the gift

             (1)  You can deduct a gift that you make to a public fund covered by item 9.1.1 of the table in subsection 30-80(1) only if the declaration is in force at the time you make the gift.

             (2)  The Treasurer may, by notice in the Gazette, declare a public fund to be a relief fund if he or she is satisfied that the fund:

                     (a)  has been established by an organisation declared by the Minister for Foreign Affairs to be an approved organisation; and

                     (b)  is solely for the relief of people in a country declared by the Minister for Foreign Affairs to be a developing country.

             (3)  The notice must specify the day on which it has effect. It cannot have effect earlier than the day on which it is published in the Gazette.

             (4)  The Treasurer may, by notice in the Gazette, revoke a declaration that a public fund is a relief fund. The notice must specify the day on which it has effect. It cannot have effect earlier than the day on which it is published in the Gazette.

             (5)  A declaration by the Minister for Foreign Affairs under this section must be in writing, signed by the Minister.

Sports and recreation

30-90  Sports and recreation

                   This table sets out specific sports and recreation recipients.

 

Sports and recreation—Specific

Item

Fund, authority or institution

Special conditions

10.2.1

the Australian Sports Foundation

none

10.2.2

the Girl Guides Association of Australia

none

10.2.3

an institution that is known as a State or Territory branch of the Girl Guides Association of Australia

none

10.2.4

the Scout Association of Australia

none

10.2.5

an institution that is known as a State or Territory branch of the Scout Association of Australia

none

10.2.6

the Australian Games Uniform Company Limited

none

Philanthropic trusts

30-95  Philanthropic trusts

                   This table sets out specific philanthropic trusts.

 

Philanthropic trusts—Specific

Item

Fund, authority or institution

Special conditions

11.2.1

the Connellan Airways Trust

none

11.2.2

The Friends of the Duke of Edinburgh’s Award in Australia Incorporated

none

11.2.3

the Herbert Vere Evatt Memorial Foundation Incorporated

none

11.2.4

the Playford Memorial Trust

none

11.2.5

The Sir Robert Menzies Memorial Foundation Limited

none

11.2.6

the Queen Elizabeth II Silver Jubilee Trust for Young Australians

none

11.2.7

the Winston Churchill Memorial Trust

none

Cultural organisations

30-100  Cultural organisations

             (1)  This table sets out general categories of cultural recipients.

 

Cultural organisations—General

Item

Fund, authority or institution

Special conditions

12.1.1

a public fund that, when the gift is made, is on the register of *cultural organisations kept under Subdivision 30-F

none

12.1.2

a public library

none

12.1.3

a public museum

none

12.1.4

a public art gallery

none

12.1.5

an institution consisting of a public library, public museum and public art gallery or of any 2 of them

none

             (2)  This table sets out specific cultural recipients.

 

Cultural organisations—Specific

Item

Fund, authority or institution

Special conditions

12.2.1

The Australiana Fund

none

Subdivision 30-C—Rules applying to particular gifts of property

Table of sections

Valuation requirements

30-200      Getting written valuations

30-205      Sale price would have been assessable

30-210      Approved valuers

Working out the amount you can deduct for a gift of property

30-215      How much you can deduct

30-220      Reducing the amount you can deduct

Joint ownership of property

30-225      Gift of property by joint owners

Valuation requirements

30-200  Getting written valuations

             (1)  You satisfy the valuation requirements if you get 2 or more written valuations of the gift you made.

Note 1:       In most cases, you need to get these written valuations to be able to deduct a gift of property that you make to a recipient covered by
item 4, 5 or 6 of the table in section 30-15.

Note 2:       You do not need to get written valuations in the circumstances set out in section 30-205.

             (2)  The valuations must be by different individuals, each of whom is an approved valuer of the kind of property you are giving away.

Note:          Section 30-210 deals with how an individual becomes an approved valuer.

             (3)  Each valuation must state the amount that, in the opinion of the valuer, was:

                     (a)  the market value of the property on the day you made the gift; or

                     (b)  the market value of the property on the day the valuation was made.

             (4)  If a valuation states the market value of the property on the day the valuation was made, it must have been made within 90 days before or after the gift was made. However, the Commissioner may allow a longer period than this.

30-205  Sale price would have been assessable

                   You do not need to get written valuations of the gift you made if:

                     (a)  no amount is included in your assessable income in respect of the gift you made; but

                     (b)  an amount would have been included in your assessable income if you had sold the property instead of making the gift.

30-210  Approved valuers

             (1)  The Secretary to the Department of Communications and the Arts may approve an individual as a valuer of a particular kind of property. The approval must be in writing, signed by the Secretary.

             (2)  The Secretary must, in deciding whether to approve an individual, have regard to:

                     (a)  the individual’s qualifications, experience and knowledge in valuing that kind of property; and

                     (b)  the individual’s knowledge of the current market value of that kind of property; and

                     (c)  the individual’s standing in the professional community.

Working out the amount you can deduct for a gift of property

30-215  How much you can deduct

             (1)  This section contains the rules for working out how much you can deduct for a gift of property that you make to a recipient covered by item 4, 5 or 6 of the table in section 30-15.

             (2)  The general rule is that the amount you can deduct for a gift of this kind is the average of the market values specified in the written valuations you got from the approved valuers.

Note:          In some situations you must reduce the amount you can deduct: see section 30-220.

             (3)  The exceptions to the general rule are set out in this table:

 

Amount you can deduct for a gift of property

Item

In this case:

The amount you can deduct is:

1

Section 30-205 (which is about the sale price being assessable) applies, and you bought the property

the amount you paid for the property

2

Section 30-205 (which is about the sale price being assessable) applies, and you created or produced the property

so much of the cost of creation or production as you would have been able to deduct if you had sold the property

3

Neither of cases 1 and 2 applies, and you acquired the property:

(a)  less than one year before making the gift (otherwise than by inheriting it); or

(b) for the purpose of giving it away; or

(c)  subject to an *arrangement that the property would be given away

the lesser of the amount you paid for the property and:

(a)  if the average of the written valuations you got fairly represents the market value of the property on the day you made the gift—that average; or

(b) if it does not— the market value of the property on the day you made the gift

4

None of cases 1 to 3 applies, and the average of the written valuations you got does not fairly represent the market value of the property on the day you made the gift

the market value of the property on the day you made the gift

30-220  Reducing the amount you can deduct

             (1)  The amount you can deduct is reduced by a reasonable amount if:

                     (a)  the terms and conditions on which the gift is made are such that the recipient:

                              (i)  does not receive immediate custody and control of the property; or

                             (ii)  does not have the unconditional right to retain custody and control of the property in perpetuity; or

                            (iii)  does not obtain an immediate, indefeasible and unencumbered legal and equitable title to the property; or

                     (b)  the custody, control or use of the property by the recipient is affected by an *arrangement entered into in respect of the making of the gift.

             (2)  In deciding what is a reasonable amount, have regard to the effect of those terms and conditions, or that *arrangement, on the market value of the gift.

Joint ownership of property

30-225  Gift of property by joint owners

                   If:

                     (a)  you own property jointly with one or more other entities; and

                     (b)  you and the other entities make a gift of the property; and

                     (c)  you would have been able to deduct the gift under section 30-15 because of item 4, 5 or 6 of the table in that section if you had made a gift of the property as sole owner of it;

you can deduct so much of the gift as is reasonable, having regard to your interest in the property.

Subdivision 30-D—Testamentary gifts under the Cultural Bequests Program

Table of sections

30-230      Testamentary gifts of property

30-235      Getting a certificate

30-240      Limit on total value of gifts for an income year

30-230  Testamentary gifts of property

             (1)  A testamentary gift of property (except an estate or interest in land or in a building or part of a building) that you make under the Cultural Bequests Program is deductible for the income year in which you die.

Note:          The trustee of your estate can claim the deduction in the tax return lodged for you that covers the period from the start of the income year to the day you die.

             (2)  The recipient of the gift must be:

                     (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

                     (e)  an institution in Australia consisting of a public library, a public museum and a public art gallery or any 2 of them.

             (3)  The property must be given to, and accepted by, the recipient for inclusion in a collection it is maintaining or establishing.

             (4)  The value of the gift must be $2 or more.

             (5)  When you die, there must be in force a certificate from the Minister for Communications and the Arts:

                     (a)  approving the gift; and

                     (b)  specifying the value of the gift.

             (6)  If:

                     (a)  you die before the last day of an income year; and

                     (b)  section 26-55 (which is about a limit on deductions) prevents the whole or a part of the gift from being deductible in the tax return lodged for you for that income year;

the trustee of your estate can claim the whole or part as a deduction in the trust return for that income year.

Note:          The trust return covers the period from the day you die to the end of the income year.

30-235  Getting a certificate

             (1)  You get a certificate by making a written application for one to the Minister for Communications and the Arts.

             (2)  The Minister must decide your application in accordance with written guidelines made by the Minister under this section.

             (3)  The guidelines may require the Minister to decide an application having regard to:

                     (a)  specified criteria; or

                     (b)  recommendations of particular bodies.

             (4)  If the Minister approves your gift, he or she must give you a certificate:

                     (a)  approving the gift; and

                     (b)  specifying the value of the gift; and

                     (c)  setting out any other information that the Commissioner requires.

30-240  Limit on total value of gifts for an income year

                   The total value of all gifts approved by the Minister for Communications and the Arts for an income year cannot exceed an amount that the Minister determines in writing. The Minister must determine this amount before approving any gifts for that income year.

Subdivision 30-E—Register of environmental organisations

Guide to Subdivision 30-E

30-250  What this Subdivision is about

This Subdivision requires the establishment of a register of environmental organisations. Section 30-15 allows you to deduct a gift that you make to a fund that is on the register.

Table of sections

Operative provisions

30-255      Establishing the register

30-260      Meaning of environmental organisation

30-265      Its principal purpose must be protecting the environment

30-270      Other requirements it must satisfy

30-275      Further requirement for a body corporate or a co-operative society

30-280      What must be on the register

30-285      Removal from the register

Operative provisions

30-255  Establishing the register

                   The Secretary to the Department of Environment, Sport and Territories must keep a register of *environmental organisations.

Note:          Section 30-280 sets out what details must be entered on the register.

30-260  Meaning of environmental organisation

                   An environmental organisation is:

                     (a)  a body corporate; or

                     (b)  a co-operative society; or

                     (c)  a trust; or

                     (d)  an unincorporated body established for a public purpose by the Commonwealth, a State or a Territory;

that satisfies each requirement in sections 30-265 and 30-270.

Note:          A body corporate or a co-operative society must satisfy a further requirement: see section 30-275.

30-265  Its principal purpose must be protecting the environment

             (1)  Its principal purpose must be:

                     (a)  the protection and enhancement of the natural environment or of a significant aspect of the natural environment; or

                     (b)  the provision of information or education, or the carrying on of research, about the natural environment or a significant aspect of the natural environment.

             (2)  It must maintain a public fund:

                     (a)  to which gifts of money or property for its principal purpose can be made; and

                     (b)  to which any money received because of such gifts is to be credited; and

                     (c)  that does not receive any other money or property.

             (3)  It must use gifts made to the fund, and any money received because of such gifts, only for its principal purpose.

             (4)  It must have agreed to comply with any rules that the Treasurer and the Minister for Environment, Sport and Territories make to ensure that gifts made to the fund are used only for its principal purpose.

30-270  Other requirements it must satisfy

No payment of profits to its members

             (1)  It must not pay any of its profits or financial surplus, or give any of its property, to its members, beneficiaries, controllers or owners (as appropriate).

No acting as a conduit

             (2)  It must have a policy of not acting as a mere conduit for the donation of money or property to other organisations, bodies or persons.

Surplus assets to be transferred on winding up

             (3)  It must have rules providing that, if the public fund is wound up, any surplus assets of the fund are to be transferred to another fund that is on the register.

Statistical information to be provided

             (4)  It must have agreed to give the Secretary to the Department of Environment, Sport and Territories, within a reasonable period after the end of each income year, statistical information about gifts made to the public fund during that income year.

30-275  Further requirement for a body corporate or a co-operative society

                   A body corporate (except a statutory authority) or a co-operative society is an environmental organisation only if:

                     (a)  its membership consists principally of bodies corporate; or

                     (b)  it has at least 50 members who are individuals that are:

                              (i)  regarded as financial members; and

                             (ii)  entitled to vote at a general meeting of it; or

                     (c)  the Minister for Environment, Sport and Territories has determined that, because of special circumstances, it does not have to meet either of the requirements in paragraph (a) or (b).

30-280  What must be on the register

             (1)  The Secretary to the Department of Environment, Sport and Territories must enter on the register each *environmental organisation, and the public fund it maintains, that he or she has been directed to enter by the Treasurer and the Minister for Environment, Sport and Territories.

             (2)  The Treasurer and the Minister may so direct the Secretary only if the Minister has notified the Treasurer that he or she is satisfied that an organisation is an *environmental organisation. The notification must be in writing.

             (3)  The direction must be in writing and must specify the day on which the organisation and public fund are to be entered on the register. The day must be the day on which the direction is given or a later day.

             (4)  The Treasurer and the Minister for Environment, Sport and Territories must have regard to the policies and budgetary priorities of the Commonwealth Government in deciding whether to give a direction.

30-285  Removal from the register

             (1)  The Treasurer and the Minister for Environment, Sport and Territories may direct the Secretary to the Department of Environment, Sport and Territories to remove an *environmental organisation, and the public fund it maintains, from the register.

             (2)  The direction must be in writing and must specify the day on which the organisation and public fund are to be removed from the register. The day must be the day on which the direction is given or a later day.

Subdivision 30-F—Register of cultural organisations

Guide to Subdivision 30-F

30-290  What this Subdivision is about

This Subdivision requires the establishment of a register of cultural organisations. Section 30-15 allows you to deduct a gift that you make to a fund that is on the register.

Table of sections

Operative provisions

30-295      Establishing the register

30-300      Meaning of cultural organisation

30-305      What must be on the register

30-310      Removal from the register

Operative provisions

30-295  Establishing the register

                   The Secretary to the Department of Communications and the Arts must keep a register of *cultural organisations.

Note:          Section 30-305 sets out what details must be entered on the register.

30-300  Meaning of cultural organisation

             (1)  A cultural organisation is:

                     (a)  a body corporate; or

                     (b)  a trust; or

                     (c)  an unincorporated body established for a public purpose by the Commonwealth, a State or a Territory;

that satisfies each requirement in this section.

             (2)  Its principal purpose must be the promotion of literature, music, a performing art, a visual art, a craft, design, film, video, television, radio, community arts, Aboriginal arts or movable cultural heritage.

             (3)  It must maintain a public fund:

                     (a)  to which gifts of money or property for its principal purpose can be made; and

                     (b)  to which any money received because of such gifts is to be credited; and

                     (c)  that does not receive any other money or property.

             (4)  It must use gifts made to the fund, and any money received because of such gifts, only for its principal purpose.

             (5)  It must not pay any of its profits or financial surplus, or give any of its property, to its members, beneficiaries, controllers or owners (as appropriate).

             (6)  It must have agreed to comply with any rules that the Treasurer and the Minister for Communications and the Arts make to ensure that gifts made to the fund are used only for its principal purpose.

             (7)  It must have agreed to give the Secretary to the Department of Communications and Arts, at intervals of 6 months, statistical information about gifts made to the public fund during the last 6 months.

30-305  What must be on the register

             (1)  The Secretary to the Department of Communications and the Arts must enter on the register each *cultural organisation, and the public fund it maintains, that he or she has been directed to enter by the Treasurer and the Minister for Communications and the Arts.

             (2)  The Treasurer and the Minister may so direct the Secretary only if the Minister has notified the Treasurer that he or she is satisfied that an organisation is a *cultural organisation. The notification must be in writing.

             (3)  The direction must be in writing and must specify the day on which the organisation and public fund are to be entered on the register. The day must be the day on which the direction is given or a later day.

             (4)  The Treasurer and the Minister for Communications and the Arts must have regard to the policies and budgetary priorities of the Commonwealth Government in deciding whether to give a direction.

30-310  Removal from the register

             (1)  The Treasurer and the Minister for Communications and the Arts may direct the Secretary to the Department of Communications and the Arts to remove a *cultural organisation, and the public fund it maintains, from the register.

             (2)  The direction must be in writing and must specify the day on which the organisation and public fund are to be removed from the register. The day must be the day on which the direction is given or a later day.

Subdivision 30-G—Index to this Division

Table of sections

30-315      Index

30-320      Effect of this Subdivision

30-315  Index

             (1)  The table in this section gives you an index to this Division.

             (2)  It tells you:

·   each topic covered by this Division; and

·   where in this Division you can find the detail about each topic.

Note:          In the last column there are many references in this form: item 2.2.1. These refer to items in the tables in Subdivision 30-B.

 

Index

Topic

Provision

1   

Academies - professional

section 30-25

2   

Academy of the Social Sciences in Australia Incorporated

item 2.2.1

3   

Amnesty International

item 4.2.1

4   

Ancillary funds

item 2 of the table in section 30‑15

5   

Antarctic research

item 3.2.3

6   

Approved research institutes

item 3.1.1

7   

Armed forces, auxiliaries

item 5.1.2

8   

Artbank

item 5 of the table in section 30‑15

9   

Art galleries

items 12.1.4 and 12.1.5; item 4 of the table in section 30-15

10 

Australian Academy of Science

item 2.2.2

11 

Australian Academy of Technological Sciences and Engineering Limited

item 2.2.4

12 

Australian Academy of the Humanities for the Advancement of Scholarship in Language, Literature, History, Philosophy and the Fine Arts

item 2.2.3

13 

Australian Administrative Staff College

item 2.2.5

14 

Australiana Fund

item 12.2.1; item 4 of the table in section 30-15

15 

Australian and New Zealand Association for the Advancement of Science

item 2.2.6

16 

Australian and New Zealand College of Anaesthetists

item 1.2.13

17 

Australian Antarctic Territory, payment to Commonwealth for research

item 3.2.3

18 

Australian College of Obstetricians and Gynaecologists

item 1.2.1

19 

Australian College of Occupational Medicine

item 1.2.2

20 

Australian Conservation Foundation Incorporated

item 6.2.1

21 

Australian Games Uniform Company Limited

item 10.2.6

22 

Australian Institute of International Affairs

item 9.2.1

23 

Australian Ireland Fund

item 2.2.7

24 

Australian National Travel Association

item 9.2.2

25 

Australian Postgraduate Federation in Medicine

item 1.2.3

26 

Australian Regional Council of the Royal College of Obstetricians and Gynaecologists

item 1.2.11

27 

Australian Sports Foundation

item 10.2.1

28 

Borneo Memorials Trust Fund

item 5.2.5

29 

Central Synagogue Restoration Fund

item 5.2.4

30 

Centre for Independent Studies

item 3.2.1

31 

Child Accident Prevention Foundation of Australia

item 4.2.2

32 

Cobram and District War Memorial Incorporated Fund

item 5.2.3

33 

College buildings

item 2.1.10

34 

College of Radiologists in Australasia

item 1.2.4

35 

Conditional gifts

section 30-220

36 

Connellan Airways Trust

item 11.2.1

37 

Conservation bodies

section 30-55

38 

Constitutional Centenary Foundation Incorporated

item 2.2.15

39 

Council for Christian Education in Schools

item 2.2.10

40 

Council for Jewish Education in Schools

item 2.2.11

41 

Cultural Bequests Program, testamentary gifts

Subdivision 30-D

42 

Cultural organisations

section 30-100

43 

Cultural organisations, register of

Subdivision 30-F

44 

Defence organisations

section 30-50

45 

Diseases - institutions researching causes, prevention or cure

items 1.1.4 and 1.1.5

46 

Education bodies

section 30-25

47 

Environmental organisations

section 30-55

48 

Environmental organisations, register of

Subdivision 30-E

49 

Family organisations

section 30-70

50 

Foundation for Development Cooperation Ltd

item 9.2.3

51 

Friends of the Duke of Edinburgh’s Award in Australia Incorporated

item 11.2.2

52 

Girl Guides

items 10.2.2 and 10.2.3

53 

Greening Australia Limited

item 6.2.2

54 

Health organisations

section 30-20

55 

Herbert Vere Evatt Memorial Foundation Incorporated

item 11.2.3

56 

Heritage properties

item 6 of the table in section 30‑15

57 

Higher education institutions

item 2.1.3

58 

Hospitals

items 1.1.1, 1.1.2 and 1.1.3

59 

H.R.H. The Duke of Edinburgh’s Commonwealth Study Conferences (Australia) Incorporated

item 2.2.12

60 

Ian Clunies Ross Memorial Foundation

item 3.2.2

61 

Industrial Design Council of Australia

item 7.2.1

62 

Industry, trade and design

section 30-65

63 

International affairs

section 30-80

64 

Joint ownership of property

section 30-225

65 

Landcare Australia Limited

item 6.2.3

66 

Libraries

items 12.1.2 and 12.1.5; item 4 of the table in section 30-15

67 

Life Education Centre

items 2.2.8 and 2.2.9

68 

Lionel Murphy Foundation

item 2.2.13

69 

Marcus Oldham Farm Management College

item 2.2.14

70 

Marriage guidance organisations

item 8.1.1

71 

Medical colleges

section 30-20

72 

Medical research

section 30-20

73 

Museums

items 12.1.3 and 12.1.5; item 4 of the table in section 30-15

74 

National Foundation for Australian Women Limited

item 4.2.3

75 

National Parks associations

section 30-55

76 

National Safety Council of Australia

item 4.2.4

77 

National Trust bodies

section 30-55; item 6 of the table in section 30-15

78 

Nature organisations

section 30-55

79 

Necessitous circumstances - funds for relief of persons in

item 4.1.3

80 

New South Wales College of Nursing

item 1.2.5

81 

Nursing Mothers’ Association of Australia

item 8.2.1

82 

Overseas relief funds

item 9.1.1

83 

Pearl Watson Foundation Limited

item 4.2.5

84 

People in need, fund for

item 4.1.3

85 

Philanthropic trusts

section 30-95

86 

Playford Memorial Trust

item 11.2.4

87 

Political contributions

item 3 of the table in section 30‑15

88 

Polly Farmer Foundation (Inc)

item 2.2.16

89 

Prevention of cruelty to animals

section 30-45

90 

Productivity

section 30-65

91 

Productivity Promotion Council of Australia

item 7.2.2

92 

Property, rules for valuing gifts

section 30-15 and Subdivision 30-C

93 

Public benevolent institutions

items 4.1.1 and 4.1.2

94 

Queen Elizabeth II Silver Jubilee Trust for Young Australians

item 11.2.6

95 

Religious instruction/education

section 30-25

96 

Research institutions

items 1.1.4 and 1.1.5

97 

Residential education institutions

section 30-25

98 

Royal Australian and New Zealand College of Psychiatrists

item 1.2.6

99 

Royal Australian College of General Practitioners

item 1.2.7

100                  

Royal Australasian College of Physicians

item 1.2.8

101                  

Royal Australasian College of Surgeons

item 1.2.9

102                  

Royal College of Nursing, Australia

item 1.2.12

103                  

Royal College of Pathologists of Australasia

item 1.2.10

104                  

Royal Societies for the Prevention of Cruelty to Animals

section 30-45

105                  

Rural school hostel buildings

item 2.1.11

106                  

Sandakan Memorials Trust Fund

item 5.2.2

107                  

School building funds

item 2.1.10

108                  

Schools

section 30-25

109                  

Scouts

items 10.2.4 and 10.2.5

110                  

Shrine of Remembrance Restoration and Development Trust

item 5.2.1

111                  

Sir Robert Menzies Memorial Trust Foundation Limited

item 11.2.5

112                  

Sports and recreation

section 30-90

113                  

Tasmanian Conservation Trust Incorporated

item 6.2.11

114                  

Taxation incentives for the Arts scheme

items 4 and 5 of the table in section 30‑15

115                  

Technical and further education institution

item 2.1.7

116                  

Tertiary education/TAFE

section 30-25

117                  

Trusts - philanthropic

section 30-95

118                  

Trusts - ancillary

item 2 of the table in section 30‑15

119                  

Universities - general

section 30-25

120                  

Universities - research

section 30-40

121                  

Valuers

section 30-210

122                  

Victoria Conservation Trust

item 6.2.6

123                  

War Memorials

section 30-50

124                  

Welfare and rights

section 30-45

125                  

Winston Churchill Memorial Trust

item 11.2.7

126                  

Work Skill Australia Foundation Incorporated

item 7.2.3

127                  

World Wide Fund for Nature Australia

item 6.2.22

30-320  Effect of this Subdivision

                   This Subdivision (except this section) has effect as if it were a *Guide.

Note:          In interpreting an operative provision, a Guide may be considered only for limited purposes: see section 950-150.

Division 32—Entertainment expenses

Table of Subdivisions

             Guide to Division 32

32-A      No deduction for entertainment expenses

32-B      Exceptions

32-C      Definitions relevant to the exceptions

32-D      In-house dining facilities (employer expenses table item 1.2)

32-E      Anti-avoidance

32-F       Special rules for companies and partnerships

Guide to Division 32

32-1  What this Division is about

You cannot deduct costs of providing entertainment. Nor can you deduct amounts for property that you use for providing entertainment. But there are exceptions.

Subdivision 32-A—No deduction for entertainment expenses

Table of sections

32-5          No deduction for entertainment expenses

32-10        Meaning of entertainment

32-15        No deduction for property used for providing entertainment

32-5  No deduction for entertainment expenses

                   To the extent that you incur a loss or outgoing in respect of providing *entertainment, you cannot deduct it under section 8-1. However, there are exceptions, which are set out in
Subdivision 32-B.

Note 1:       Under section 8-1 you can deduct a loss or outgoing that you incur for the purpose of producing assessable income.

Note 2:       If you have used your property in providing entertainment, you may not be able to deduct an amount for the property: see section 32-15.

Note 3:       Section 32-75 deals with arrangements to avoid the operation of this section.

32-10  Meaning of entertainment

             (1)  Entertainment means:

                     (a)  entertainment by way of food, drink or *recreation; or

                     (b)  accommodation or travel to do with providing entertainment by way of food, drink or *recreation.

             (2)  You are taken to provide entertainment even if business discussions or transactions occur.

Note:          These are some examples of what is entertainment:

·      · business lunches

·      · social functions.

                   These are some examples of what is not entertainment:

·      · meals on business travel overnight

·      · theatre attendance by a critic

·      · a restaurant meal of a food writer.

32-15  No deduction for property used for providing entertainment

                   To the extent that you use property in providing *entertainment, your use of the property is taken not to be for the *purpose of producing assessable income if section 32-5 would stop you deducting a loss or outgoing if you incurred it in the income year in providing the entertainment.

Note:          Under some provisions of this Act, in order to deduct an amount for your property, you must have used the property for the purpose of producing assessable income.

Subdivision 32-B—Exceptions

Table of sections

32-20        The main exception—fringe benefits

32-25        The tables set out the other exceptions

32-30        Employer expenses

32-35        Seminar expenses

32-40        Entertainment industry expenses

32-45        Promotion and advertising expenses

32-50        Other expenses

32-20  The main exception—fringe benefits

                   Section 32-5 does not stop you deducting a loss or outgoing to the extent that you incur it in respect of providing *entertainment by way of *providing a *fringe benefit.

                   But this exception does not apply to the extent that the taxable value of the *fringe benefit is reduced under section 63A of the Fringe Benefits Tax Assessment Act 1986.

Note 1:       You may be able to deduct losses or outgoings that are fringe benefits under section 51AEA, 51AEB or 51AEC of the Income Tax Assessment Act 1936. If you do, then you cannot deduct them under section 8-1 (about general deductions) and so this section is not relevant.

Note 2:       There are other exceptions for a loss or outgoing you incur in providing a benefit that would be a fringe benefit if it were not an exempt benefit: see items 1.6 and 1.7 of the table in section 32-30.

32-25  The tables set out the other exceptions

                   Section 32-5 does not stop you deducting a loss or outgoing to the extent that you incur it in respect of providing *entertainment as described in column 2 of an item of a table in this Subdivision.

                   However, if column 3 of that item applies, the exception in column 2 of that item does not.

32-30  Employer expenses

 

Employer expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

1.1

providing food or drink to your employees in an *in-house dining facility.

the food or drink is provided at a party, reception or other social function.

1.2

providing food or drink to individuals (other than your employees) in an *in-house dining facility.

(a)  you choose (under section 32-70) not to include in your assessable income $30 for each meal you provide in the *in-house dining facility in the income year to an individual (other than your employee); or

(b) the food or drink is provided at a party, reception or other social function.

1.3

providing food or drink in a *dining facility to your employees who perform most of their duties in connection with:

(a)  the dining facility; or

(b) a facility (of which the dining facility forms a part) for providing accommodation, *recreation or travel.

the food or drink is provided at a party, reception or other social function.

1.4

providing food or drink to your employee under an *industrial instrument relating to overtime.

 

1.5

providing a facility for *recreation on property you occupy, if the facility is mainly operated for your employees to use.

the facility is for:

(a)  accommodation; or

(b) dining or drinking (unless it is a food or drink vending machine).

1.6

providing food or drink which would be a *fringe benefit apart from sections 54, 58, 58N, 58S and 58T of the Fringe Benefits Tax Assessment Act 1986 (disregarding section 58P of that Act).

 

1.7

providing a meal which would be a *fringe benefit apart from sections 58A, 58F, 58L, 58LA and 58M of the Fringe Benefits Tax Assessment Act 1986 (disregarding section 58P of that Act).

 

1.8

giving your employee an allowance that is included in his or her assessable income.

(a)  the employee is a *relative of another employee of yours; and

(b) you give the allowance to the relative, as your employee, because:

(i)      he or she provides, or facilitates providing, *entertainment to do with the other employee’s employment; and

(ii)     you expect the relative to do so.

Note 1:       In the case of a company, items 1.1, 1.2, 1.3, 1.5 and 1.8 cover directors of the company as if they were employees: see section 32‑80.

Note 2:       In the case of a company, items 1.1, 1.2, 1.3 and 1.5 cover directors, employees and property of another company that is a member of the same wholly-owned group: see section 32-85.

Note 3:       Item 1.8 has a special operation for partnerships: see section 32-90.

32-35  Seminar expenses

 

Seminar expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

2.1

providing food, drink, accommodation or travel to an individual (including yourself) that is reasonably incidental to the individual attending a *seminar that *goes for at least 4 hours.

(a)  the seminar is a *business meeting; or

(b) the *seminar’s main purpose is to promote or advertise a *business (or prospective *business) or its goods or services; or

(c)  the *seminar’s main purpose is to provide *entertainment at, or in connection with, the seminar.

32-40  Entertainment industry expenses

 

Entertainment industry expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

3.1

providing *entertainment for payment in the ordinary course of a *business that you carry on.

 

3.2

providing *entertainment in performing your duties to your employer who carries on a *business that includes providing that entertainment for payment.

 

32-45  Promotion and advertising expenses

 

Promotion and advertising expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

4.1

providing *entertainment if:

(a)  you provide it to an individual under a contract to supply him or her with goods or services in the ordinary course of your *business; and

(b) you incur the loss or outgoing to promote or advertise to the public your business or its goods or services.

 

4.2

providing or exhibiting your *business’s goods or services if you incur the loss or outgoing to promote or advertise those goods or services to the public.

 

4.3

providing *entertainment to promote or advertise to the public a *business or its goods or services.

some people have a greater opportunity to get the benefits of the entertainment than ordinary members of the public have.

32-50  Other expenses

 

Other expenses

Item

Section 32-5 does not stop you deducting a loss or outgoing for ...

But the exception does not apply if ...

5.1

buying food or drink to do with overtime that you work, if you receive an allowance under an *industrial instrument to buy the food or drink.

 

5.2

providing *entertainment free to members of the public who are sick, disabled, poor or otherwise disadvantaged.

 

Subdivision 32-C—Definitions relevant to the exceptions

Table of sections

32-55        In-house dining facility (employer expenses table items 1.1 and 1.2)

32-60        Dining facility (employer expenses table item 1.3)

32-65        Seminars (seminar expenses table item 2.1)

32-55  In-house dining facility (employer expenses table items 1.1
and 1.2)

                   An in-house dining facility is a canteen, dining room or similar facility that:

                     (a)  is on property you occupy; and

                     (b)  is operated mainly for providing food and drink to your employees; and

                     (c)  is not open to the public.

Note 1:       In the case of a company, this definition also covers directors of the company as if they were employees: see section 32-80.

Note 2:       In the case of a company, this definition also covers directors, employees and property of another company that is a member of the same wholly-owned group: see section 32-85.

32-60  Dining facility (employer expenses table item 1.3)

                   A dining facility is:

                     (a)  a canteen, dining room or similar facility; or

                     (b)  a cafe, restaurant or similar facility;

that is on property you occupy.

Note:          In the case of a company, this definition also covers property of another company that is a member of the same wholly-owned group: see section 32-85.

32-65  Seminars (seminar expenses table item 2.1)

             (1)  Seminar includes a conference, convention, lecture, meeting (including a meeting for the presentation of awards), speech, “question and answer session”, training session or educational course.

             (2)  In working out whether a *seminar goes for at least 4 hours the following are taken not to affect the seminar’s continuity, nor to form part of it:

                     (a)  any part of the seminar that occurs during a meal;

                     (b)  any break during the seminar for the purpose of a meal, rest or *recreation.

             (3)  A *seminar is a business meeting if its main purpose is for individuals who are (or will be) associated with the carrying on of a particular *business to give or receive information, or discuss matters, relating to the business.

                   However, the *seminar is not a business meeting if it:

                     (a)  is organised by (or on behalf of) an employer solely for either or both of these purposes:

                              (i)  training the employer and the employer’s employees (or just those employees) in matters relevant to the employer’s *business (or prospective *business);

                             (ii)  enabling the employer and the employer’s employees (or just those employees) to discuss general policy issues relevant to the internal management of the employer’s *business; and

                     (b)  is conducted on property that is occupied by a person (other than the employer) whose *business includes organising seminars or making property available for conducting seminars.

Note 1:       In the case of a company, subsection (3) covers directors of the company as if they were employees: see section 32-80.

Note 2:       In the case of a company, paragraph (3)(b) also covers property of another company that is a member of the same wholly-owned group: see section 32-85.

Note 3:       Subsection (3) has a special operation for partnerships: see section 32‑90.

Subdivision 32-D—In-house dining facilities (employer expenses table item 1.2)

Table of sections

32-70        $30 is assessable for each meal provided to non-employee in an in‑house dining facility

32-70  $30 is assessable for each meal provided to non-employee in an in‑house dining facility

             (1)  Your assessable income includes $30 for a meal you provide in an *in-house dining facility in the income year to an individual other than your employee, but only if:

                     (a)  you incur a loss or outgoing in respect of providing the meal; and

                     (b)  because of item 1.2 of the table in section 32-30,
section 32‑5 does not stop you deducting the loss or outgoing under section 8-1 (which deals with general deductions); and

                     (c)  the loss or outgoing is one that you can deduct under
section 8-1 for the income year or some other income year.

             (2)  However, you can choose not to include in your assessable income $30 for each meal you provide in the *in-house dining facility in the income year to an individual other than your employee.

Note:          If you do choose, you cannot rely on item 1.2 of the table in
section 32-30 as a basis for deducting a loss or outgoing you incur in respect of providing a meal.

             (3)  You must choose by the day you lodge your *income tax return for the income year, or within a further time allowed by the Commissioner.

Subdivision 32-E—Anti-avoidance

Table of sections

32-75        Commissioner may treat you as having incurred entertainment expense

32-75  Commissioner may treat you as having incurred entertainment expense

                   If:

                     (a)  you incur a loss or outgoing under an *arrangement; and

                     (b)  someone provides *entertainment under the arrangement to you or someone else; and

                     (c)  section 32-5 would have stopped you deducting the loss or outgoing under section 8-1 (which deals with general deductions) if you had incurred it in respect of providing that entertainment;

this Division applies to you as if you had incurred the loss or outgoing in providing that entertainment, to the extent (if any) that the Commissioner thinks reasonable.

Note:          This means that section 32-5 will prevent you from deducting the loss or outgoing under section 8-1 unless an exception applies.

Example:    A company pays $1,000 to sponsor a football game. Under the same arrangement, the company is given a viewing box at the game. To the extent the Commissioner thinks reasonable, he or she can treat the company as having incurred the $1,000 in providing entertainment.

Subdivision 32-F—Special rules for companies and partnerships

Table of sections

32-80        Company directors

32-85        Directors, employees and property of wholly-owned group company

32-90        Partnerships

32-80  Company directors

                   In the case of a company, these provisions cover directors of the company as if they were the company’s employees:

                          item 1.1 (exception for *in-house dining facilities) of the table in section 32-30;

                          item 1.2 (exception for *in-house dining facilities) of the table in section 32-30;

                          item 1.3 (exception for *dining facilities) of the table in section 32-30;

                          item 1.5 (exception for recreational facilities) of the table in section 32-30;

                          item 1.8 (exception for providing your employee with an allowance) of the table in section 32-30;

                          section 32-55 (which defines in-house dining facility);

                          subsection 32-65(3) (which defines business meeting).

32-85  Directors, employees and property of wholly-owned group company

Employees and directors of group company

             (1)  In the case of a company, these provisions cover directors and employees of another company that is a member of the same *wholly-owned group as if they were the company’s own directors and employees:

                          item 1.1 (exception for *in-house dining facilities) of the table in section 32-30;

                          item 1.2 (exception for *in-house dining facilities) of the table in section 32-30;

                          item 1.3 (exception for *dining facilities) of the table in section 32-30;

                          item 1.5 (exception for recreational facilities) of the table in section 32-30;

                          section 32-55 (which defines in-house dining facility);

                          subsection 32-60(1) (which defines dining facility);

                          paragraph 32-65(3)(b).

Property occupied by group company

             (2)  Those provisions also cover property occupied by that other company as if the company occupied that property.

32-90  Partnerships

                   In the case of a partnership:

                          item 1.8 (exception for providing employee with an allowance) of the table in section 32-30; and

                          subsection 32-65(3) (which defines business meeting);

apply to a partner in the same way as they apply to an employee of the partnership, but only for the purposes of calculating, in accordance with section 90 of the Income Tax Assessment Act 1936, the partnership’s net income or partnership loss.

Division 34—Non-compulsory uniforms

 

Table of Subdivisions

             Guide to Division 34

34-A      Application of Division 34

34-B      Deduction for your non-compulsory uniform

34-C      Registering the design of a non-compulsory uniform

34-D      Appeals from Industry Secretary’s decision

34-E      The Register of Approved Occupational Clothing

34-F       Approved occupational clothing guidelines

34-G      The Industry Secretary

Guide to Division 34

34-1  What this Division is about

This Division is about deductions for the costs of non‑compulsory uniforms.

Table of sections

34-3          What you need to read

34-3  What you need to read

Employees

             (1)  If you incur expenditure for your non-compulsory uniform, you need to read Subdivision 34-B (which is about deductions for your non‑compulsory uniform), starting at section 34-10.

Employers

             (2)  If you have people working for you who want to deduct expenditure of that kind, you need to read:

                          Subdivision 34-C (which is about registering the design of a non-compulsory uniform), starting at section 34-25; and

                          Subdivision 34-D (which is about appeals from Industry Secretary’s decision), starting at section 34-40.

Subdivision 34-A—Application of Division 34

Table of sections

34-5          This Division applies to employees, PAYE earners and others

34-7          This Division applies to employers and others

34-5  This Division applies to employees, PAYE earners and others

             (1)  This Division applies not only to an individual who is an employee. It also applies to an individual who is not an employee, but who:

                     (a)  is a *PAYE earner; or

                     (b)  is not a *PAYE earner, but would be a *PAYE earner apart from paragraph (q) of the definition of salary or wages in subsection 221A(1) of the Income Tax Assessment Act 1936 (which excludes recipients of prescribed payments within the meaning of Division 3A of Part VI of that Act).

             (2)  If an individual is not an employee, but is covered by paragraph (1)(a) or (b), this Division applies to him or her as if:

                     (a)  he or she were an employee; and

                     (b)  the entity (the notional employer) who pays (or is liable to pay) *PAYE earnings because of which he or she is (or would be) a *PAYE earner were his or her employer; and

                     (c)  any other individual who receives (or is entitled to receive) *PAYE earnings:

                              (i)  because of which the other individual is (or would be) a *PAYE earner; and

                             (ii)  that the notional employer pays (or is liable to pay) to the other individual;

                            were the employee of the notional employer.

34-7  This Division applies to employers and others

                   If an entity is not an employer, but pays (or is liable to pay) *PAYE earnings, this Division applies to the entity as if:

                     (a)  it were an employer; and

                     (b)  an individual to whom the entity pays (or is liable to pay) *PAYE earnings were the entity’s employee.

Subdivision 34-B—Deduction for your non-compulsory uniform

Table of sections

34-10        What you can deduct

34-15        What is a non-compulsory uniform?

34-20        What are occupation specific clothing and protective clothing?

34-10  What you can deduct

             (1)  If you are an employee, you can deduct expenditure you incur in respect of your *non-compulsory uniform if:

                     (a)  you can deduct the expenditure under another provision of this Act; and

                     (b)  the *design of the uniform is registered under this Division when you incur the expenditure.

Note 1:       This Division also applies to PAYE earners and other individuals who are not employees: see Subdivision 34-A.

Note 2:       Employers apply to register designs of uniforms: see
Subdivision 34‑C.

             (2)  You cannot deduct the expenditure under this Act if the *design is not registered at the time you incur the expenditure.

             (3)  However, this Division does not stop you deducting expenditure you incur in respect of your *occupation specific clothing or *protective clothing.

34-15  What is a non-compulsory uniform?

What is a uniform?

             (1)  A uniform is one or more items of clothing (including accessories) which, when considered as a set, distinctively identify you as a person associated (directly or indirectly) with:

                     (a)  your employer; or

                     (b)  a group consisting of your employer and one or more of your employer’s *associates.

When is a uniform non-compulsory?

             (2)  Your uniform is non-compulsory unless your employer consistently enforces a policy that requires you and the other employees (except temporary or relief employees) who do the same type of work as you:

                     (a)  to wear the uniform when working for your employer; and

                     (b)  not to substitute an item of clothing not included in the uniform for an item of clothing included in the uniform when working for your employer;

except in special circumstances.

34-20  What are occupation specific clothing and protective clothing?

             (1)  Occupation specific clothing is clothing that distinctively identifies you as belonging to a particular profession, trade, vocation, occupation or calling. To determine this, disregard any feature of the clothing that distinctively identifies you as a person associated (directly or indirectly) with:

                     (a)  your employer; or

                     (b)  a group consisting of your employer and one or more of your employer’s *associates.

Example:    Occupation specific clothing includes a nurse’s uniform, a chef’s checked pants and a religious cleric’s ceremonial robes.

             (2)  Protective clothing is clothing of a kind that you mainly use to protect yourself, or someone else, from risk of:

                     (a)  death; or

                     (b)  *disease (including the contraction, aggravation, acceleration or recurrence of a disease); or

                     (c)  injury (including the aggravation, acceleration or recurrence of an injury); or

                     (d)  damage to clothing; or

                     (e)  damage to an artificial limb or other artificial substitute, or to a medical, surgical or other similar aid or appliance.

Example:    Protective clothing includes overalls, aprons, goggles, hard hats and safety boots, when worn to protect the wearer.

Meaning of disease

             (3)  Disease includes any mental or physical ailment, disorder, defect or morbid condition, whether of sudden onset or gradual development and whether of genetic or other origin.

Subdivision 34-C—Registering the design of a non-compulsory uniform

Table of sections

34-25        Application to register the design

34-30        Industry Secretary’s decision on application

34-33        Written notice of decision

34-35        When uniform becomes registered

34-25  Application to register the design

             (1)  The employer of an employee who has, or will have, a *non‑compulsory uniform can apply to the Secretary to the Department of Industry, Science and Tourism (the Industry Secretary) for the *design of the uniform to be registered.

Note:          This Division also applies to entities that are not employers: see Subdivision 34-A.

Meaning of design of a uniform

             (2)  The design of a *uniform includes features such as its colouring, construction, durability, ornamentation, pattern and shape.

Form of application

             (3)  The application must be:

                     (a)  in writing; and

                     (b)  in a form approved in writing by the *Industry Secretary; and

                     (c)  accompanied by such information as the Industry Secretary requires.

34-30  Industry Secretary’s decision on application

Industry Secretary must decide to grant or refuse application

             (1)  After considering the application, the *Industry Secretary must decide to either grant or refuse the application.

Criteria for grant of application

             (2)  The *Industry Secretary must not decide to grant an application unless he or she is satisfied that the design meets the criteria set out in the *approved occupational clothing guidelines.

Note:          The approved occupational clothing guidelines are created under section 34-55.

When Industry Secretary taken to have refused application

             (3)  The *Industry Secretary is taken to have refused an application if he or she does not make a decision by the later of the following times (the deadline):

                     (a)  the end of 90 days (the 90-day period) after the day the Industry Secretary receives the application;

                     (b)  if the Industry Secretary, by written notice given to the applicant within the 90-day period, requests the applicant to give further information about the application—the end of
90 days after the Industry Secretary receives the further information.

34-33  Written notice of decision

             (1)  If the *Industry Secretary makes a decision to grant or refuse an application under subsection 34-30(1) before the *deadline, the Industry Secretary must give the applicant written notice of the decision.

Reasons for refusal

             (2)  If the notice is a notice of a decision to refuse the application, it must also set out the reasons for the refusal.

Statements to accompany notice of decision

             (3)  The notice of the decision is to include the statements set out in subsections (4) and (5).

             (4)  There must be a statement to the effect that, subject to the Administrative Appeals Tribunal Act 1975, an application may be made to the *AAT, by (or on behalf of) any entity whose interests are affected by the decision, for review of the decision.

             (5)  There must also be a statement to the effect that a request may be made under section 28 of that Act by (or on behalf of) such an entity for a statement:

                     (a)  setting out the findings on material questions of fact; and

                     (b)  referring to the evidence or other material on which those findings were based; and

                     (c)  giving the reasons for the decision;

except where subsection 28(4) of that Act applies.

Failure does not affect validity

             (6)  If the *Industry Secretary fails to comply with subsection (4) or (5), that failure does not affect the validity of his or her decision.

34-35  When uniform becomes registered

                   If the *Industry Secretary decides to grant the application, the *design of the *uniform becomes registered on:

                     (a)  the day the decision is made; or

                     (b)  if the applicant requests—such earlier day as the Industry Secretary specifies.

Note:          When the design becomes registered, an entry for the design is made on the Register of Approved Occupational Clothing.
Subdivision 34‑E is about the Register.

Subdivision 34-D—Appeals from Industry Secretary’s decision

Table of sections

34-40        Review of decisions by the Administrative Appeals Tribunal

34-40  Review of decisions by the Administrative Appeals Tribunal

                   Applications may be made to the *AAT for review of a decision made by the *Industry Secretary under subsection 34‑30(1).

Subdivision 34-E—The Register of Approved Occupational Clothing

Table of sections

34-45        Keeping of the Register

34-50        Changes to the Register

34-45  Keeping of the Register

             (1)  The *Industry Secretary must keep the Register of Approved Occupational Clothing, listing the designs that are required to be entered on the Register because of this Division.

Register to be open for inspection

             (2)  The *Industry Secretary must arrange for the Register to be available for inspection at any reasonable time by any person on request.

34-50  Changes to the Register

Removal of registration

             (1)  The *Industry Secretary must remove an entry for a *design from the Register of Approved Occupational Clothing if requested to do so by the employer who applied for the design to be registered.

Correcting errors and mistakes

             (2)  The *Industry Secretary may correct a clerical error or an obvious mistake in an entry for a design in the Register and, if the Industry Secretary does so, the correction takes effect on the day on which the design to which the entry relates was registered.

Subdivision 34-F—Approved occupational clothing guidelines

Table of sections

34-55        Approved occupational clothing guidelines

34-55  Approved occupational clothing guidelines

             (1)  The Treasurer must formulate written guidelines (the approved occupational clothing guidelines) setting out criteria that *designs of uniforms must meet if the designs are to be registered.

Matters to be taken into account in making guidelines

             (2)  In making *approved occupational clothing guidelines, the matters to which the Treasurer is to have regard include:

                     (a)  how distinctively a *uniform’s *design identifies the wearer as a person associated (directly or indirectly) with:

                              (i)  the applicant for registering the uniform’s design; or

                             (ii)  a group consisting of the applicant and one or more of the applicant’s *associates; and

                     (b)  the nature of the *business or activities the applicant carries on.

Guidelines to be published

             (3)  The Treasurer must arrange for the *approved occupational clothing guidelines to be:

                     (a)  published in the Gazette; and

                     (b)  made available, without charge, to any interested entity.

Subdivision 34-G—The Industry Secretary

Table of sections

34-60        Industry Secretary to give Commissioner information about entries

34-65        Delegation of powers by Industry Secretary

34-60  Industry Secretary to give Commissioner information about entries

                   The *Industry Secretary must give the Commissioner information about entries of *designs on the Register of Approved Occupational Clothing if the Commissioner requests him or her to do so.

34-65  Delegation of powers by Industry Secretary

                   The *Industry Secretary may, by writing, delegate any or all of his or her functions and powers under this Division to an individual who holds or performs the duties of:

                     (a)  a *Senior Executive Service office; or

                     (b)  an office of Senior Officer Grade A, B or C;

in the Department of Industry, Science and Tourism.

8  Section 41-85 (link note)

Repeal the link note.

9  After Division 41

Insert:

Division 42—Depreciation of plant 

 

Table of Subdivisions

             Guide to Division 42

42-A      Key operative provisions

42-B      Cost of plant

42-C      Effective life

42-D      Depreciation rates

42-E      Calculation of depreciation deductions

42-F       Calculation of balancing adjustments

42-G      Calculation of balancing adjustments for some cars

42-H      Balancing adjustment relief

42-I       Quasi-ownership

42-J       Partial change of ownership

42-K      Car depreciation limit

42-L      Pooling

Guide to Division 42

42-1  What this Division is about

This Division sets out the basis on which you can deduct amounts for depreciation of property that is a unit of plant.

To work out how this Division applies to existing plant (and some plant where roll-overs are involved), you need to refer to the transitional provisions in Division 42 of the Income Tax (Transitional Provisions) Act 1997.

Table of sections

42-5          Key concepts used in this Division

42-5  Key concepts used in this Division

Subdivision 42-A—Key operative provisions

Guide to Subdivision 42-A

42-10  What this Subdivision is about

This Subdivision contains the key operative provisions for depreciation, including the main deduction provision.

Table of sections

Operative provisions

42-15        Deduction for depreciation

42-18        Meaning of plant

42-19        References to plant

42-20        Amount you deduct

42-25        Calculation

42-30        Balancing adjustments

42-35        Application of Division 41 Common rules

42-40        Choices

42-45        Exclusions

42-48        Debt forgiveness: amounts deducted for depreciation

Non-operative provisions

42-50        What are other “amounts deducted for depreciation”?

42-55        Signposting to other parts of the Act

Operative provisions

42-15  Deduction for depreciation

                   You deduct an amount for depreciation of a unit of *plant for an income year if, in that year:

                     (a)  you are its owner or *quasi-owner; and

                     (b)  you use it, or have it *installed ready for use, for the *purpose of producing assessable income.

Note:          If there is a quasi-owner, the owner cannot deduct: see
section 42‑320.

42-18  Meaning of plant

             (1)  Plant includes:

                     (a)  articles, machinery, tools and rolling stock; and

                     (b)  animals used as beasts of burden or working beasts in a *business, other than a *primary production business; and

                     (c)  fences, dams and other structural improvements, other than those used for domestic or residential purposes, on land that is used for agricultural or pastoral operations; and

                     (d)  structural improvements, other than a *forestry road or structural improvements used for domestic or residential purposes, on land used in a business involving:

                              (i)  planting or tending trees in a plantation or forest that are intended to be felled; or

                             (ii)  felling trees in a plantation or forest; or

                            (iii)  transporting trees, or parts of trees, that you felled in a plantation or forest to the place where they are first to be milled or processed, or from which they are to be transported to the place where they are first to be milled or processed; and

                     (e)  structural improvements, other than those used for domestic or residential purposes, that are used wholly for operations (carried out in the course of a business) relating directly to:

                              (i)  taking or culturing pearls or pearl shell; or

                             (ii)  taking or catching trochus, bêche-de-mer or green snails;

                            and that are situated at or near a port or harbour from which the business is conducted; and

                      (f)  structural improvements that are excluded from paragraph (c), (d) or (e) because they are used for domestic or residential purposes if they are provided for the accommodation of employees, tenants or sharefarmers who are engaged in or in connection with the activities referred to in that paragraph.

             (2)  Plant also includes plumbing fixtures and fittings (including wall and floor tiles) provided by an entity mainly for:

                     (a)  either or both:

                              (i)  employees in a *business carried on by the entity for the *purpose of producing assessable income; or

                             (ii)  employees in a business carried on for that purpose by a company that is a member of the same *wholly-owned group of which the entity is a member; or

                     (b)  *children of any of those employees.

42-19  References to plant

                   References in the following provisions of this Division to *plant are to a unit of plant.

42-20  Amount you deduct

             (1)  The amount you deduct is worked out under Subdivision 42‑E. However, for *plant in a *pool, you work out the amount under Subdivision 42-L.

             (2)  You cannot deduct more than the *undeducted cost of the *plant.

42-25  Calculation

             (1)  The calculation of your deduction is based on the *cost of the *plant to you.

             (2)  The rate you use to calculate your deduction is set out in Subdivision 42-D. Generally, the rate is based on the *effective life of the *plant.

             (3)  You have a choice of 2 calculation methods: the *diminishing value method and the *prime cost method. You make the choice for the income year in which a depreciation deduction is first allowable to you for the *plant.

Note:          The diminishing value method calculates your deduction each year as a percentage of the balance you have left to deduct.

                   The prime cost method calculates your deduction each year as a percentage of your cost.

42-30  Balancing adjustments

             (1)  You must make a balancing adjustment calculation for *plant if:

                     (a)  you have deducted or can deduct an amount for depreciation of it or, if Common rule 1 (roll-over relief for related entities) applied to your acquisition of it, the transferor or an earlier successive transferor deducted or can deduct an amount for depreciation of it; and

                     (b)  a *balancing adjustment event occurs.

Note 1:       However, no balancing adjustment calculation is required if Common rule 1 applies to the balancing adjustment event.

Note 2:       A balancing adjustment calculation may include an amount in your assessable income or allow you to deduct an amount. If you are required to include an amount in your assessable income, balancing adjustment relief may be available: see sections 42‑285, 42‑290 and 42-295.

             (2)  Balancing adjustments are calculated under:

                     (a)  Subdivision 42-F; or

                     (b)  Subdivision 42-G for some *cars; or

                     (c)  section 42-390 for *plant in a *pool.

             (3)  A balancing adjustment event occurs as shown in the table:

 

A balancing adjustment event occurs:

Item

If you are ...

when:

1

the owner of *plant

(a)  you dispose of it and do not become its *quasi‑owner; or

(b) it is lost or destroyed; or

(c)  subsection 42-330(1) applies.

2

the *quasi-owner of *plant

(a)  you cease to be the *quasi-owner of it and do not become its owner; or

(b) it is lost or destroyed; or

(c)  subsection 42-330(2) applies.

Note:          Section 42-330 deals with partial change of ownership.

42-35  Application of Division 41 Common rules

                   The following Common rules apply to this Division:

                     (a)  Common rule 1 (roll-over relief for related entities);

                     (b)  Common rule 2 (non-arm’s length transactions);

                     (c)  Common rule 3 (anti-avoidance—ownership).

For modifications to Common rule 1, see sections 42-275 and 42-280.

For modifications to Common rule 2, see sections 42-75 and 42‑210.

42-40  Choices

             (1)  Any choice you are required to make under this Division must be made:

                     (a)  by the day you lodge your *income tax return for the income year to which the choice relates; or

                     (b)  within a further time allowed by the Commissioner.

             (2)  Your choice, once made, applies to that income year and all later income years.

42-45  Exclusions

Primary production expenditure

             (1)  You cannot deduct an amount for depreciation of *plant if any expenditure incurred on it by any entity has been or can be deducted under Subdivision 387-A (Landcare operations) or 387-B (Facilities to conserve or convey water).

Research and development plant

             (2)  You cannot deduct an amount for depreciation of *plant that you have *installed ready for use exclusively for the purpose of carrying on *research and development activities unless you have elected under subsection 73B(18) of the Income Tax Assessment Act 1936 that the research and development provisions are not to apply to the plant.

Leisure facilities and boats

             (3)  You cannot deduct an amount for depreciation of a *leisure facility or a boat unless, at some time in the income year:

                     (a)  its use constitutes a *fringe benefit; or

                     (b)  you use the leisure facility or hold it for use as mentioned in subsection 26-50(3); or

                     (c)  you use the boat or hold it for use as mentioned in
paragraph 26-50(5)(b), (c) or (d).

42-48  Debt forgiveness: amounts deducted for depreciation

             (1)  An amount applied in reduction of deductible expenditure (within the meaning of Division 245 of Schedule 2C to the Income Tax Assessment Act 1936) for *plant under section 245-155 of that Schedule is taken to be an amount you have deducted under section 42-15 for depreciation of the plant.

             (2)  The amount is taken to have been deducted as at the first day of your income year that corresponds to the forgiveness year of income for the reduction within the meaning of Division 245 of that Schedule.

Note:          Therefore, the amount must be taken into account for the plant under paragraph (a) of the definition of undeducted cost in section 42-175. Also, because the amount is taken to have been deducted as at the first day of the income year, it will reduce the opening undeducted cost of the plant if you are using the diminishing value method.

Non-operative provisions

42-50  What are other “amounts deducted for depreciation”?

             (1)  A number of provisions in this Division require you to work out the amounts you have deducted or can deduct for depreciation of plant. Apart from amounts you have deducted or can deduct under section 42-15, other amounts may need to be taken into account.

             (2)  Those other amounts are:

                     (a)  amounts you have deducted or can deduct for depreciation under Division 28 using the “log book” method or the “one‑third of actual expenses” method; and

                     (b)  amounts you treat as having been deducted for depreciation under section 42-285 or 42-290 (balancing adjustment relief); and

                     (c)  amounts taken to be depreciation under paragraph 159GJ(1)(e) of the Income Tax Assessment Act 1936.

42-55  Signposting to other parts of the Act

Entertainment

             (1)  Section 32-15 treats some property that is used for entertainment as not being used for the purpose of producing assessable income.

Environment

             (2)  Even if you do not use property for the purpose of producing assessable income, you will be taken to do so in some circumstances. See section 330-455 (mine site rehabilitation) and sections 82BG and 82BR of the Income Tax Assessment Act 1936 (environmental impact or protection).

Debt forgiveness

             (3)  Your deductions under this Division may be reduced if any of your commercial debts have been forgiven in the income year: see Subdivision 245-E of Schedule 2C to the Income Tax Assessment Act 1936.

Anti-avoidance

             (4)  The anti-avoidance provisions in section 51AD, and Division 16D of Part III, of the Income Tax Assessment Act 1936 may deny a depreciation deduction.

Record-keeping

             (5)  The rules in Division 900 requiring individuals and certain partnerships to keep written evidence of work expenses and car expenses apply to this Division.

             (6)  There are special record-keeping rules that apply to this Division in section 262A of the Income Tax Assessment Act 1936.

 Subdivision 42-B—Cost of plant

Guide to Subdivision 42-B

42-60  What this Subdivision is about

A depreciation deduction for plant is based on its cost. This Subdivision tells you how to work out its cost.

Table of sections

Operative provisions

42-65        How to work out your cost

42-70        Adjustment: acquiring a car at a discount

42-75        Adjustment: non-arm’s length transactions

42-80        Adjustment: car depreciation limit

42-85        Adjustment: double deduction

42-90        Adjustment: previously depreciated plant limit

Operative provisions

42-65  How to work out your cost

Method statement

Step 1.   Work out the cost of the *plant using the following table. If more than one row applies, use the cost under the last applicable row.

Step 2.   The table indicates provisions that may adjust the cost. Refer to them to see if an adjustment is necessary.

Step 3.   If more than one provision adjusts the cost, apply them in the order they appear in the table to:

               (a)     the cost; or

               (b)     the adjusted cost after applying the last applicable provision.

Step 4.   The result is your cost.

Example:    An entity acquires a car in a non-arm’s length transaction for $80,000. The market value of the car is $60,000. Assume the car depreciation limit for the year is $55,000.

                   The provisional cost is $80,000 (item 1 of the table). The non-arm’s length rule is applied next to reduce it to $60,000. Then the car depreciation limit applies to further reduce it. Your cost is $55,000.

Cost table

Item

For *plant ...

The cost is:

May be adjusted by:

1

generally

its cost to you

•   car discount (42-70)

•   non-arm’s length (42‑75)

•   car limit (42-80)

•   double deduction (42‑85)

•   prev. dep. limit (42-90)

2

you acquire with, or attached to, other assets without a specific value being allocated to it

so much of the overall cost as is reasonably attributable to the *plant

•   car discount (42-70)

•   non-arm’s length (42-75)

•   car limit (42-80)

•   double deduction (42‑85)

•   prev. dep. limit (42-90)

3

you acquire under subsection 42-335(1)

the market value of the *plant immediately before its acquisition

•   car limit (42‑80)

•   double deduction (42‑85)

•   prev. dep. limit (42-90)

4

attached to land over which you hold a *quasi-ownership right assigned to you

so much of any consideration for the acquisition of the right as is reasonably attributable to the *plant

•   non-arm’s length (42‑75)

•   double deduction (42‑85)

•   prev. dep. limit (42-90)

5

that reverts to you because of the expiry, surrender or termination of a *quasi-ownership right over land

so much of any consideration for the expiry, surrender or termination as is reasonably attributable to the *plant

•   double deduction (42‑85)

•   prev. dep. limit (42-90)

6

that reverts to you because of the expiry, surrender or termination of a *quasi-ownership right over land and you grant a new right to an *associate or an *associated government entity of the former holder

the market value of the *plant immediately before the expiry, surrender or termination, worked out as if the former holder held an estate in fee simple in the land

•   double deduction (42‑85)

•   prev. dep. limit (42-90)

7

attached to land over which you hold a *quasi-ownership right and which you acquire under subsection 42-335(2)

the market value of the *plant immediately before its acquisition, worked out as if the former holder held an estate in fee simple in the land

•   double deduction (42‑85)

•   prev. dep. limit (42-90)

 

8

you stop holding as trading stock and acquire under
section 70-110

the amount worked out under section 70-110

•   car limit (42‑80)

•   double deduction (42‑85)

9

for which you have deducted or can deduct an amount under the research and development provisions

the amount worked out under subsection 73B(21) or (22) of the Income Tax Assessment Act 1936

•   car limit (42‑80)

•   double deduction (42‑85)

10

you acquire in circumstances where Common rule 1 applies

the transferor’s cost (see subsection 42-280(2))

 

11

for which you have deducted or can deduct an amount under the mining and quarrying provisions

the amount worked
out under
subsection 330‑590(3)

•   car limit (42‑80)

•   double deduction (42‑85)

 

12

you acquire in circumstances where section 73E of the Income Tax Assessment Act 1936 (R&D roll-over relief) applies

the amount applicable under paragraph 73E(6)(a) of the Income Tax Assessment Act 1936

•   car limit (42‑80)

•   double deduction (42‑85)

 

42-70  Adjustment: acquiring a car at a discount

             (1)  You must increase the cost of a *car designed mainly for carrying passengers and which you acquire at a discount if:

                     (a)  it is reasonable to conclude that any portion (discount portion) of the discount is referable to you or another entity selling other *plant for less than its market value; and

                     (b)  you, or another entity, deducted or can deduct an amount for depreciation of the other plant for any income year; and

                     (c)  the sum of the cost of the car and the discount portion exceeds the *car depreciation limit calculated under
section 42-345 for the *financial year in which you first use the car for any purpose.

             (2)  The cost of the *car is increased by the discount portion.

Note:          The termination value of the other plant is also increased by the discount portion: see section 42-205.

             (3)  This section does not apply to a *car that is excluded from
section 42-80 by subsection 42-80(2).

42-75  Adjustment: non-arm’s length transactions

                   Common rule 2 applies for the purpose of working out the cost of *plant, but with the following modifications:

                     (a)  it applies to cost rather than expenditure; and

                     (b)  it compares the cost with the amount that would have been the cost if the parties had dealt with each other at arm’s length, and substitutes that amount instead of market value.

42-80  Adjustment: car depreciation limit

             (1)  If the cost of a *car designed mainly for carrying passengers would exceed the *car depreciation limit for the *financial year in which you first use the car for any purpose, your cost is reduced to that limit.

             (2)  This section does not apply to a *car that, immediately before you first used it for any purpose, was specially fitted out for transporting disabled people in wheelchairs unless, at that time:

                     (a)  it was for your personal transportation; and

                     (b)  it would be covered by subitem 96(1) or 97(1) of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992.

42-85  Adjustment: double deduction

             (1)  The cost of *plant is reduced by any portion of its cost that you have deducted or can deduct, or that has been or will be taken into account in working out an amount you can deduct, other than for depreciation.

             (2)  Subsection (1) does not apply to deductions for:

                     (a)  research and development (section 73B of the Income Tax Assessment Act 1936);

                     (b)  development and investment allowances (Subdivisions B and BA of Division 3 of Part III of that Act);

                     (c)  drought investment allowance (Part XII of that Act).

42-90  Adjustment: previously depreciated plant limit

             (1)  The Commissioner may limit the cost to you of *plant for which an amount has been deducted or can be deducted for depreciation by any earlier owner or *quasi-owner.

             (2)  The cost of the *plant may be limited to the sum of:

                     (a)  its *written down value, immediately before the *balancing adjustment event occurred, in the hands of the last entity who had deducted or can deduct an amount for depreciation of it; and

                     (b)  any balancing adjustment included in that entity’s assessable income for the plant under Subdivision 42-F or 42-G; and

                     (c)  any balancing adjustment that would have been included in that entity’s assessable income for the plant if balancing adjustment relief under section 42-285 (same year relief) or 42-290 (later year relief) had not applied.

             (3)  If the last entity had the *plant in a *pool for the income year in which the *balancing adjustment event occurred, its cost may be limited to the sum of:

                     (a)  any balancing adjustment included in that entity’s assessable income for the plant under section 42-390; and

                     (b)  any balancing adjustment that would have been included in that entity’s assessable income for the plant if balancing adjustment relief under section 42-285 or 42‑290 had not applied.

             (4)  The matters to be taken into account by the Commissioner in deciding whether to limit the cost of *plant include:

                     (a)  whether you acquired the plant from an *associate; and

                     (b)  the market value of the plant; and

                     (c)  how the purchase price of the plant was calculated; and

                     (d)  how the acquisition was financed; and

                     (e)  whether the plant is for use by the entity from whom you acquired it or by an associate of the entity.

Subdivision 42-C—Effective life

Guide to Subdivision 42-C

42-95  What this Subdivision is about

The rate at which you depreciate plant is generally determined by its effective life. There are 2 methods of working out effective life.

Table of sections

Operative provisions

42-100      Choice of method

42-105      How to work out effective life

42-110      Commissioner’s determination of effective life

Operative provisions

42-100  Choice of method

             (1)  You must either:

                     (a)  work out the *effective life of *plant; or

                     (b)  adopt the *effective life specified by the Commissioner (if any) for the plant under section 42-110.

             (2)  You make the choice for the income year in which a depreciation deduction is first allowable to you for the *plant.

42-105  How to work out effective life

             (1)  You work out the *effective life of *plant by estimating how long it can be used by any entity for income producing purposes. You do this as at the time you first use it, or have it *installed ready for use, for the *purpose of producing assessable income.

             (2)  In making that estimate, you assume that the *plant:

                     (a)  is new; and

                     (b)  will be subject to wear and tear at a rate that was reasonable for you to expect when you were working it out having regard to the expected circumstances of your use; and

                     (c)  will be maintained in reasonably good order and condition.

             (3)  If, at that time, you conclude that you would be likely to scrap the *plant, sell it for scrap or abandon it before the end of the period worked out under subsection (1), its *effective life ends at the earlier time. This conclusion is also to be made on the assumption that the plant is new.

42-110  Commissioner’s determination of effective life

             (1)  The Commissioner may make a written determination specifying the *effective life of *plant.

             (2)  Any conditions in the determination must be satisfied when you first use the *plant, or have it *installed ready for use, for the *purpose of producing assessable income.

Subdivision 42-D—Depreciation rates

Guide to Subdivision 42-D

42-115  What this Subdivision is about

This Subdivision sets out the depreciation rates. More than one rate can apply depending on the nature of the plant and its use.

Table of sections

Operative provisions

42-120      Which rate do you use?

42-123      Change of rate

42-125      General rates

42-130      Low cost plant

42-135      Cars and motor cycles

42-140      Artworks

42-145      Scientific research

42-150      Employee amenities

Operative provisions

42-120  Which rate do you use?

             (1)  If more than one rate can apply to your *plant, choose the one you prefer. However, in any case, you may choose a lower rate.

             (2)  You make the choice for the income year in which a depreciation deduction is first allowable to you for the *plant.

42-123  Change of rate

             (1)  You must make a new choice of rate if you were using the *plant as mentioned in section 42-145 (scientific research) or 42-150 (employee amenities) and you cease to use it in that way.

             (2)  You may make a new choice of rate if you start using the *plant as mentioned in section 42-150.

42-125  General rates

             (1)  The general rates are set out in the following table.

 

General rates table

Item

Years in *effective life

*Diminishing value rate

*Prime cost rate

1

fewer than 3

not applicable

100%

2

3 to fewer than 5

60%

40%

3

5 to fewer than 62/3

40%

27%

4

62/3 to fewer than 10

30%

20%

5

10 to fewer than 13

25%

17%

6

13 to fewer than 30

20%

13%

7

30 or more

10%

7%

             (2)  These rates do not apply to a *car, or a motor cycle or similar vehicle, or an *artwork.

42-130  Low cost plant

                   The *prime cost rate for *plant is 100% if its *cost does not exceed $300 (or a higher prescribed amount).

42-135  Cars and motor cycles

                   The rates for *cars, and motor cycles or similar vehicles, are set out in the following table.

 

Cars and motor cycles rates table

Item

Years in *effective life

*Diminishing value rate

*Prime cost rate

1

fewer than 3

not applicable

100%

2

3 to fewer than 5

50%

33%

3

5 to fewer than 62/3

30%

20%

4

62/3 to fewer than 10

22.5%

15%

5

10 to fewer than 13

15%

10%

6

13 to fewer than 20

11.25%

8%

7

20 to fewer than 40

7.5%

5%

8

40 or more

3.75%

3%

42-140  Artworks

             (1)  The *diminishing value rate for *artworks is the percentage worked out using the formula:

             (2)  The *prime cost rate for *artworks is the percentage worked out using the formula:

             (3)  However, the *prime cost rate for an *artwork having an *effective life of fewer than 3 years is 100%.

42-145  Scientific research

                   For *plant that you acquired before 1 July 1995 and use only for scientific research in the fields of natural or applied science:

                     (a)  the *diminishing value rate is 50%; and

                     (b)  the *prime cost rate is 33%.

42-150  Employee amenities

             (1)  There is a rate for *plant an entity uses mainly for providing clothing cupboards, first aid, rest-room or recreational facilities, or meals or facilities for meals for:

                     (a)  either or both:

                              (i)  employees in a *business carried on by the entity for the *purpose of producing assessable income; or

                             (ii)  employees in a business carried on for that purpose by a company that is a member of the same *wholly-owned group of which the entity is a member; or

                     (b)  *children of any of those employees.

             (2)  The *diminishing value rate is 50%, and the *prime cost rate is 33%.

Subdivision 42-E—Calculation of depreciation deductions

Guide to Subdivision 42-E

42-155  What this Subdivision is about

This Subdivision shows you how to work out the amount of a depreciation deduction. There are 2 calculation formulae: one for each calculation method.

Table of sections

Operative provisions

42-160      Diminishing value method

42-165      Prime cost method

42-170      Reducing deductions

42-175      Meaning of undeducted cost

Operative provisions

42-160  Diminishing value method

                   Calculate your deduction using the formula:

                   where:

opening undeducted cost is the *undeducted cost of the *plant on the first day of the income year on which you were its owner or *quasi-owner.

days owned is the number of days in the income year you were the owner or *quasi-owner of the *plant.

42-165  Prime cost method

             (1)  Calculate your deduction using the formula:

                   where:

days owned is the number of days in the income year you were the owner or *quasi-owner of the *plant.

             (2)  However, if you are using the 100% rate, your deduction is your *cost.

             (3)  In applying this section, the *cost of the *plant is reduced by:

                     (a)  any amount that you choose under section 42-285 or 42-290 (balancing adjustment relief) to treat as having been deducted for depreciation of the plant; and

                     (b)  any amount you are taken to have deducted for depreciation of the plant under subsection 42-48(2) (debt forgiveness).

Note:          You cannot deduct more than the undeducted cost of the plant.

42-170  Reducing deductions

General

             (1)  Reduce your deduction by an amount that reasonably reflects the extent (if any) you neither used the *plant, nor had it *installed ready for use, for the *purpose of producing assessable income during the period in the income year you were its owner or *quasi-owner.

Leisure facilities and boats

             (2)  You may have to make a further reduction if your *plant is a *leisure facility or a boat. That reduction is made for any period in the income year during which you:

                     (a)  were its owner or *quasi-owner; and

                     (b)  used it, or had it *installed ready for use, for the *purpose of producing assessable income.

             (3)  The reduction must reflect the extent (if any) to which you did not satisfy any of the exceptions in paragraphs 42-45(3)(a), (b) and (c) for the *leisure facility or boat in that period.

Note:          Paragraphs 42-45(3)(a), (b) and (c) set out the limited circumstances in which you can deduct an amount for a leisure facility or a boat.

42-175  Meaning of undeducted cost

                   The undeducted cost of *plant is its *cost less the sum of:

                     (a)  for plant that is not a *car—the amounts you have deducted or can deduct for depreciation of the plant; and

                     (b)  for plant that is not a car—any further amounts you could have deducted for depreciation of the plant for any period you were its owner or *quasi-owner and used it, or had it *installed ready for use, assuming that:

                              (i)  you used it wholly for the *purpose of producing assessable income during that period; and

                             (ii)  you used the same rate and method during that period as you used for the income year in which a depreciation deduction was first allowable to you for the plant; and

                            (iii)  no provision of this Act denied a depreciation deduction for it; and

                     (c)  if the plant is a car—the amounts you could have deducted under this Division for any period you were its owner and used it, or had it installed ready for use, assuming that:

                              (i)  you used it wholly for the purpose of producing assessable income during that period; and

                             (ii)  you used the same rate and method during that period as you used for the income year in which a depreciation deduction was first allowable to you for the car; and

                            (iii)  no provision of this Act denied a depreciation deduction for it; and

                            (iv)  Division 28 (Car expenses) did not apply; and

                     (d)  if Common rule 1 applied to your acquisition of the plant—the sum of the amounts that would apply under paragraphs (a), (b) and (c) to the transferor and earlier successive transferors.

Subdivision 42-F—Calculation of balancing adjustments

Guide to Subdivision 42-F

42-180  What this Subdivision is about

This Subdivision explains how to calculate your balancing adjustment when a balancing adjustment event occurs.

The calculation may result in:

     ·   an amount being included in your assessable income; or

     ·   you being able to deduct an amount; or

     ·   no further action being required.

Table of sections

42-182      Diagram showing the application of this Subdivision

Operative provisions

42-185      When do you make a balancing adjustment calculation?

42-190      Including an amount in assessable income

42-195      Deducting an amount

42-200      Meaning of written down value

42-205      Meaning of termination value

42-210      Adjustment: non-arm’s length transactions

42-215      Adjustment: car depreciation limit

42-220      Plant used for research and development

42-182  Diagram showing the application of this Subdivision

Operative provisions

42-185  When do you make a balancing adjustment calculation?

                   You must make a balancing adjustment calculation for the income year in which a *balancing adjustment event occurs.

42-190  Including an amount in assessable income

             (1)  You include an amount in your assessable income if the *termination value of *plant exceeds its *written down value.

             (2)  You include the lesser of:

                     (a)  the amounts you have deducted or can deduct for depreciation of the *plant; and

                     (b)  the excess referred to in subsection (1).

For balancing adjustment relief, see sections 42-285, 42-290 and 42-295.

For plant used for research and development, see section 42-220.

             (3)  If Common rule 1 applied to your acquisition of the *plant, the amounts you have deducted or can deduct are taken to include amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.

42-195  Deducting an amount

             (1)  You deduct an amount if the *termination value of *plant is less than its *undeducted cost.

             (2)  The amount you deduct is the difference between those amounts.

             (3)  However, you reduce that difference to reasonably reflect the extent (if any) to which you used the *plant, or had it *installed ready for use, other than for the *purpose of producing assessable income when you were its owner or *quasi-owner.

42-200  Meaning of written down value

                   The written down value of *plant is its *cost less the sum of:

                     (a)  the amounts you have deducted or can deduct for depreciation of it; and

                     (b)  if Common rule 1 applied to your acquisition of it—the amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.

42-205  Meaning of termination value

Method statement

Step 1.   Work out the termination value of the *plant using the following table. If more than one row applies, use the value under the last applicable row.

Step 2.   The table indicates provisions which may adjust the value. Refer to them to see if an adjustment is necessary.

Step 3.   If more than one provision adjusts the value, apply them in the order they appear in the table to:

               (a)     the termination value; or

               (b)     the adjusted termination value after applying the last applicable provision.

Step 4.   The result is your termination value.

 

Termination value table


Item


For
*plant ...

The termination value is:


May be adjusted by:

1

you sell for a specific price

the sale price less the reasonably attributable expenses of sale

•   non-arm’s length (42‑210)

•   car limit (42-215)

2

you sell with, or attached to, other assets without a specific price being allocated to it

the part of the total sale price that is reasonably attributable to the *plant less the part of the reasonably attributable expenses of the sale

•   non-arm’s length (42‑210)

•   car limit (42-215)

3

you sell as part of a transaction involving the acquisition of a *car the *cost of which has been increased under section 42‑70

the sum of the sale price (less the reasonably attributable expenses of sale) and the discount portion referred to in section 42-70

•   non-arm’s length (42‑210)

•   car limit (42-215)

4

you dispose of other than by sale

the market value of the *plant immediately before its disposal

•   car limit (42-215)

5

for which a *balancing adjustment event occurs because of subsection 42‑330(1)

the market value of the *plant immediately before the *balancing adjustment event

•   car limit (42-215)

6

attached to land over which you hold a *quasi-ownership right that you assign

so much of the consideration received for the assignment of the *quasi-ownership right as is reasonably attributable to the *plant

 

7

attached to land over which you hold a *quasi-ownership right that you assign to an *associate or an *associated government entity

the market value of the *plant immediately before the assignment, worked out as if you had held an estate in fee simple in the land

 

8

attached to land over which you hold a *quasi-ownership right that expires, is surrendered or is terminated

so much of the consideration received for the expiry, surrender or termination of the *quasi-ownership right as is reasonably attributable to the *plant

 

9

attached to land over which you hold a *quasi-ownership right that expires, is surrendered or is terminated and a new right or an estate in fee simple is granted to an *associate or an *associated government entity of yours

the market value of the *plant immediately before the expiry, surrender or termination, worked out as if you had held an estate in fee simple in the land

 

10

attached to land over which you hold a *quasi-ownership right and for which a *balancing adjustment event occurs because of subsection 42‑330(2)

the market value of the *plant immediately before the *balancing adjustment event, worked out as if you had held an estate in fee simple in the land

 

11

you start holding as trading stock and you sell under
section 70‑30

the amount worked out under section 70-30

•   car limit (42-215)

12

that is lost or destroyed

the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction

•   car limit (42-215)

Note 1:       Section 42-70 increases the cost of a car you acquire at a discount in certain circumstances.

Note 2:       Section 42-330 sets out the circumstances in which a partial change of ownership results in a balancing adjustment event.

42-210  Adjustment: non-arm’s length transactions

             (1)  Common rule 2 applies for the purpose of working out the *termination value of *plant.

             (2)  However, that Common rule has a different application for depreciation purposes in 2 respects:

                     (a)  it only applies to disposals by sale; and

                     (b)  instead of requiring the party disposing of the property to have incurred capital expenditure, it is taken to require that party to have incurred a *cost.

42-215  Adjustment: car depreciation limit

                   For a *car the *cost of which was worked out by applying section 42‑80 (Car depreciation limit), adjust the value by multiplying it by the fraction:

where:

CDL is the *car depreciation limit for the *car for the *financial year in which you first used it for any purpose.

original cost is the *cost of the *car (ignoring the *car depreciation limit).

42-220  Plant used for research and development

             (1)  The amounts referred to in paragraph 42-190(2)(a) are increased if you have deducted or can deduct an amount for the *plant under section 73B of the Income Tax Assessment Act 1936. However, this subsection does not apply if subsection (3) applies.

             (2)  The increase for *plant to which subsection (1) applies is the difference between:

                     (a)  its cost under section 73B, ignoring subsection 73B(6); and

                     (b)  its written down value under that section.

Note:          Subsection 73B(6) imposed a ceiling of $10,000,000 on the cost of certain pilot plant for research and development purposes.

             (3)  The amounts referred to in paragraph 42-190(2)(a) are increased if you acquired the *plant under a disposal to which Common rule 1 or section 73E of the Income Tax Assessment Act 1936 (roll-over relief) applied and:

                     (a)  the transferor had deducted or could deduct an amount for the plant under section 73B of that Act; or

                     (b)  your acquisition of the plant was the last of 2 or more successive transfers to which Common rule 1 or section 73E applied and any of the prior transferors had deducted or could deduct an amount for the plant under section 73B.

             (4)  The increase for *plant to which subsection (3) applies is worked out using the formula:

where:

transferor’s original cost means:

                     (a)  the *plant’s cost; or

                     (b)  if paragraph (3)(b) applies—the plant’s cost to the earliest successive transferor;

under section 73B, ignoring subsection 73B(6).

modified written down value means the written down value under section 73B worked out as though:

                     (a)  the transferor's original cost were your cost; and

                     (b)  the amount mentioned in paragraph (3)(a) or (b) had been deducted or deductible by you.

Subdivision 42-G—Calculation of balancing adjustments for some cars

Guide to Subdivision 42-G

42-225  What this Subdivision is about

This Subdivision explains how to calculate your balancing adjustment when a balancing adjustment event occurs for a car for which you have:

     ·   deducted depreciation; and

     ·   chosen the “cents per kilometre” method or the “12% of original value” method for deducting your car expenses.

 

Table of sections

42-230      Explanatory material

42-232      Diagram showing the operation of this Subdivision

Operative provisions

42-235      When do you use this Subdivision for a car?

42-240      Including an amount in assessable income

42-245      Deducting an amount

42-250      Reduction to take account of days when depreciation not claimed

42-255      Meaning of notional depreciation amount

42-260      Meaning of notional written down value

42-230  Explanatory material

             (1)  This Subdivision has limited application because:

                     (a)  if you have used only the “cents per kilometre” method or the “12% of original value” method since you began using the car, you will not have been able to deduct depreciation and so balancing adjustments are not relevant; and

                     (b)  if you have used only the “log book” method or the
“one-third of actual expenses” method since you began using the car, balancing adjustments are calculated under Subdivision 42-F.

             (2)  If this Subdivision applies, you have to reduce your balancing adjustment to reflect the extent to which you have chosen the “cents per kilometre” method or the “12% of original value” method: see section 42-250.

42-232  Diagram showing the operation of this Subdivision

Operative provisions

42-235  When do you use this Subdivision for a car?

             (1)  A balancing adjustment for a *car is calculated under this Subdivision if, for the period you were its owner:

                     (a)  you deducted or can deduct an amount for depreciation of the car in one or more income years; and

                     (b)  you chose:

                              (i)  the “cents per kilometre” method in
Subdivision 28‑C; or

                             (ii)  the “12% of original value” method in
Subdivision 28‑D;

                            for deducting your *car expenses for the car for one or more other income years.

             (2)  You must make that calculation for the income year in which a *balancing adjustment event occurs for the *car.

42-240  Including an amount in assessable income

             (1)  You include an amount in your assessable income if the *termination value of the *car exceeds its *notional written down value.

             (2)  First, work out the lesser of:

                     (a)  the sum of the *notional depreciation amount and the amounts you have deducted or can deduct for depreciation of the *car; and

                     (b)  the excess referred to in subsection (1).

             (3)  Then apply the reduction rule in section 42-250 and include the result in your assessable income.

For balancing adjustment relief, see sections 42-285, 42-290 and 42-295.

             (4)  If Common rule 1 applied to your acquisition of the *car, the amounts you have deducted or can deduct are taken to include amounts the transferor, and earlier successive transferors, deducted or can deduct for depreciation of it.

42-245  Deducting an amount

             (1)  You deduct an amount if the *termination value of the *car is less than its *undeducted cost.

             (2)  Work out the difference between those amounts.

             (3)  Reduce that difference to reasonably reflect the extent (if any) to which you used the *car, or had it *installed ready for use, other than for the *purpose of producing assessable income when you were its owner. In working out the reduction for the income years for which you chose the “cents per kilometre” method or the “12% of original value” method for the car, you apply the assumptions in section 42-255.

             (4)  Then apply the reduction rule in section 42-250 and deduct the result.

42-250  Reduction to take account of days when depreciation not claimed

                   Multiply the amount from subsection 42-240(2) or 42-245(3) by the fraction calculated using the formula:

where:

depreciation days is the total number of days you were the owner of the *car in each income year for which you have deducted or can deduct an amount for depreciation of it.

non-depreciation days is the total number of days you were the owner of the *car in each income year for which you chose the “cents per kilometre” method or the “12% of original value” method for deducting your *car expenses.

42-255  Meaning of notional depreciation amount

                   The notional depreciation amount for a *car is the sum of the amounts you could have deducted for depreciation of the car for the income years for which you chose the “cents per kilometre” method or the “12% of original value” method for the car assuming that:

                     (a)  you had not chosen either of those methods for the car; and

                     (b)  Division 28 (car expenses) had not applied to the car; and

                     (c)  you used the car for the *purpose of producing assessable income:

                              (i)  to the extent of 20% if you used the “cents per kilometre” method; or

                             (ii)  to the extent of one-third if you used the “12% of original value” method.

42-260  Meaning of notional written down value

                   The notional written down value of a *car is its *written down value less its *notional depreciation amount.

Subdivision 42-H—Balancing adjustment relief

Guide to Subdivision 42-H

42-265  What this Subdivision is about

This Subdivision explains how to apply the various forms of relief that may be available when a balancing adjustment event occurs.

Table of sections

42-270      Explanatory material

Roll-over relief

42-275      Modifications of Common rule 1

42-280      Additional consequences

Offsetting

42-285      Same year relief

42-290      Later year relief

Concessional rate

42-295      Concessional rate

42-300      Working out notional income and abnormal income for the concessional rate

42-270  Explanatory material

             (1)  There are 3 forms of balancing adjustment relief.

             (2)  The first is in Common rule 1. If it applies, you do not have to make a balancing adjustment calculation.

             (3)  The second is an alternative, or partial alternative, to including an amount in your assessable income.

             (4)  The third may reduce your income tax payable in certain circumstances where a balancing adjustment amount is included in your assessable income.

Roll-over relief

42-275  Modifications of Common rule 1

             (1)  The following provisions of Common rule 1 do not apply for the purposes of this Division:

                     (a)  section 41-40;

                     (b)  section 41-45.

             (2)  Despite section 41-30, the transferor and the transferee must
pro-rate their depreciation deductions for the income year in which the *roll-over event occurred on the basis of the number of days in the income year each of them was its owner or *quasi-owner.

             (3)  The obligation in subsection 41-50(4) applies to the transferee as if the period for keeping the notice referred to in subsection 41-50(2) were until the end of 5 years after the next *balancing adjustment event occurs for the *plant.

             (4)  The obligation in subsection 41-55(5) applies to the transferee as if the period for keeping the election referred to in subsection 41‑55(2) or a copy of it were until the end of 5 years after the next *balancing adjustment event occurs for the *plant.

42-280  Additional consequences

             (1)  In addition to the consequences of the roll-over set out in
section 41-30 (about the transferor’s and transferee’s right to a deduction), the roll-over has the consequences set out in this section for the purposes of this Division.

Note:          For other consequences of the roll-over, see the definitions of written down value in section 42-200 and undeducted cost in section 42-175 and the provisions dealing with balancing adjustments.

Cost

             (2)  The *cost of the *plant is the same for the transferee as it is for the transferor.

Method

             (3)  The transferee must use the same method for calculating depreciation deductions for the *plant as the transferor was using for the income year in which the *roll-over event occurred.

Effective life

             (4)  The *effective life of the *plant in the hands of the transferee is the same as that worked out by the transferor, or the earliest successive transferor, under Subdivision 42-C.

Scientific research

             (5)  If the transferor was deducting amounts for depreciation of the *plant using the special rate for plant used for scientific research in the fields of natural or applied science—the transferee is taken to have acquired the plant before 1 July 1995.

Note:          This subsection allows the transferee to satisfy the condition of the special rate about date of acquisition, but the transferee will still have to satisfy the other conditions of the special rate in order to use it.

Offsetting

42-285  Same year relief

             (1)  You do not have to include an amount in your assessable income for *plant as a result of a balancing adjustment calculation to the extent that you choose to treat that amount as an amount you have deducted for depreciation of other *plant.

             (2)  You make the choice, for the same income year in which the *balancing adjustment event occurred, successively for:

                     (a)  any replacement *plant you acquire in that year; and

                     (b)  other *plant you acquire in that year; and

                     (c)  any other *plant.

             (3)  You can only make this choice if:

                     (a)  at the end of the income year in which the *balancing adjustment event occurred, you used the replacement or other *plant, or had it *installed ready for use, wholly for the *purpose of producing assessable income; and

                     (b)  you can deduct an amount for depreciation of that plant.

             (4)  The amount covered by the choice is taken to be an amount you have deducted for depreciation of the replacement or other *plant as at the first day of the income year in which the *balancing adjustment event occurred.

Note:          Therefore, the amount must be taken into account for the plant under paragraph (a) of the definition of undeducted cost in section 42-175. Also, because the amount is taken to have been deducted as at the first day of the income year, it will reduce the opening undeducted cost of the plant if you are using the diminishing value method.

42-290  Later year relief

             (1)  You may exclude an amount that has been included in your assessable income for *plant as a result of a balancing adjustment calculation to the extent that you choose to treat that amount as an amount you have deducted for depreciation of replacement *plant.

             (2)  You can only make this choice for the replacement *plant if:

                     (a)  you acquire it within 2 income years after the end of the income year in which the *balancing adjustment event occurred; and

                     (b)  at the end of the income year in which you acquired it, you used it, or had it *installed ready for use, wholly for the *purpose of producing assessable income; and

                     (c)  you can deduct an amount for depreciation of it; and

                     (d)  you have not made a choice under section 42-285 for the balancing adjustment event.

             (3)  The amount covered by the choice is taken to be an amount you have deducted for depreciation of the replacement *plant as at the first day of the income year in which you acquired it.

Note:          Therefore, the amount must be taken into account for the plant under paragraph (a) of the definition of undeducted cost in section 42-175. Also, because the amount is taken to have been deducted as at the first day of the income year, it will reduce the opening undeducted cost of the plant if you are using the diminishing value method.

Concessional rate

42-295  Concessional rate

             (1)  If this section applies, you may choose to request, in writing, the Commissioner to determine a *notional income under section 42-300 that is less than your taxable income. That notional income must be used for the purposes of any Act that fixes an income tax rate by reference to a notional income.

             (2)  This section applies if:

                     (a)  a *balancing adjustment event causes the cessation of a *business carried on by:

                              (i)  you; or

                             (ii)  a partnership of which you are a partner; or

                            (iii)  the trustee of a trust in which you have a present entitlement to a share of the net income and are not under a legal disability; and

                     (b)  as a result of the following balancing adjustment calculation, an amount is included in your assessable income or the assessable income of the partnership or trust.

             (3)  This section does not apply if, for the income year in which the *balancing adjustment event occurred:

                     (a)  you are a company, other than a corporate trustee; or

                     (b)  you are the trustee of a trust and are liable to be assessed under section 99A of the Income Tax Assessment Act 1936 (Certain trust income to be taxed at special rate); or

                     (c)  the *plant was in a *pool; or

                     (d)  Division 16 of Part III of that Act (averaging of income) applies to your assessment; or

                     (e)  you chose balancing adjustment relief under section 42-285 (same year relief) or 42‑290 (later year relief) for the balancing adjustment event.

42-300  Working out notional income and abnormal income for the concessional rate

             (1)  Your notional income for the income year in which the *balancing adjustment event occurred is:

                     (a)  if your taxable income is greater than your *abnormal income—your taxable income less 2/3 of your abnormal income;

                     (b)  if your taxable income is equal to or less than your abnormal income—1/3 of your taxable income;

                     (c)  if section 86 of the Income Tax Assessment Act 1936 (Notional income of a taxpayer deriving a premium) applies to you and your notional income under that section is:

                              (i)  greater than your abnormal income—your notional income under that section less 2/3 of your abnormal income;

                             (ii)  equal to or less than your abnormal income—1/3 of your notional income under that section.

             (2)  Your abnormal income is worked out using the following table.

 

Abnormal income table




Item

If the *balancing adjustment event referred to in
section 42‑295 relates to assets of a
*business carried on ...

And the balancing adjustment calculation causes an amount to be included in assessable income, your abnormal income is ...

1

by you, other than in partnership or as trustee of a trust

that amount

2

by a partnership of which you were a partner

the part of the amount included in your individual interest in the net income of the partnership

3

by you as trustee of a trust and you are being assessed as trustee under Division 6 of Part III of the Income Tax Assessment Act 1936

the part of the amount included in the net income of the trust to which the assessment relates

4

by a trustee of a trust and you were a beneficiary in the trust

the part of the amount that is included in the share of the net income of the trust to which you are presently entitled and on which you are assessed

Subdivision 42-I—Quasi-ownership

Guide to Subdivision 42-I

42-305  What this Subdivision is about

This Subdivision explains the circumstances in which you are the quasi-owner of plant.

Table of sections

Operative provisions

42-310      Meaning of quasi-owner

42-315      Grant of new quasi-ownership right

42-320      Only one entity can deduct

Operative provisions

42-310  Meaning of quasi-owner

             (1)  You are a quasi-owner of *plant if:

                     (a)  it is attached to land you hold under a *quasi-ownership right granted by an *exempt Australian government agency or an *exempt foreign government agency; and

                     (b)  you either:

                              (i)  attached the plant to the land after you acquired the right; or

                             (ii)  acquired the right from the entity that attached the plant or from a later successive holder of the right; and

                     (c)  you are not its owner.

             (2)  You are not a *quasi-owner under subsection (1) if, when you would otherwise have become a quasi-owner, you had entered into a *scheme:

                     (a)  under which an entity, other than the grantor of the right or that person’s successor, would become the owner of the *plant at a later time; or

                     (b)  that has a purpose of providing finance to enable an entity, other than you, the grantor of the right or that person’s successor, to become the end-user of the plant:

                              (i)  if you attached the plant to the land—for the whole, or a substantial part, of the *effective life of the plant as worked out or adopted by you; or

                             (ii)  if the plant was already attached to the land when you acquired the *quasi-ownership right—for the whole, or a substantial part, of the remainder of the *effective life of the plant as worked out or adopted by the person who first attached the plant to the land.

42-315  Grant of new quasi-ownership right

                   If your *quasi-ownership right over land expires, is surrendered or is terminated and that event is followed by a grant of a new *quasi-ownership right over the land to you:

                     (a)  the new right is taken to be a continuation of the original right; and

                     (b)  you are taken not to have ceased to be the *quasi-owner of *plant attached to the land.

42-320  Only one entity can deduct

                   If there is both an owner and a *quasi-owner of *plant, only the quasi-owner can deduct an amount for depreciation.

Subdivision 42-J—Partial change of ownership

Guide to Subdivision 42-J

42-325  What this Subdivision is about

This Subdivision sets out when a partial change of ownership will result in a balancing adjustment event.

Table of sections

Operative provisions

42-330      Partial change of ownership

42-335      Acquisition and roll-over relief

Operative provisions

42-330  Partial change of ownership

             (1)  This subsection applies if:

                     (a)  for any reason, a change occurs in the ownership of, or in the interests of entities in, *plant; and

                     (b)  the entity or one of the entities that owned the plant before the change has an interest in it after the change.

             (2)  This subsection applies if:

                     (a)  there is a *quasi-owner of *plant; and

                     (b)  for any reason, a change occurs in the quasi-ownership of, or in the interests of quasi-owners in, the plant; and

                     (c)  the entity or one of the entities that was a quasi-owner of the plant before the change has an interest in it after the change.

Note:          If subsection (1) or (2) applies, a balancing adjustment event occurs for the plant, see subsection 42-30(3).

             (3)  However, subsection (1) or (2) applies only if a *balancing adjustment event does not otherwise occur for the *plant.

             (4)  The reasons for the change occurring include:

                     (a)  the formation or dissolution of a partnership; and

                     (b)  a variation in the constitution of a partnership, or in the interests of the partners.

42-335  Acquisition and roll-over relief

             (1)  If subsection 42-330(1) applies, the owners of the *plant after the change (the transferee) are taken to have acquired it from its owners before the change (the transferor).

             (2)  If subsection 42-330(2) applies, the *quasi-owners of the *plant after the change (the transferee) are taken to have acquired it from its *quasi-owners before the change (the transferor).

             (3)  Common rule 1 applies if the transferor and transferee jointly elect for roll-over relief.

Note:          For the conditions relating to the election, see section 41-55.

Subdivision 42-K—Car depreciation limit

Guide to Subdivision 42-K

42-340  What this Subdivision is about

This Subdivision explains how to calculate the car depreciation limit referred to in section 42-80.

Table of sections

Operative provisions

42-345      Calculation of limit

Operative provisions

42-345  Calculation of limit

             (1)  The car depreciation limit for the 1996-97 *financial year is $55,134.

             (2)  The car depreciation limit for a later *financial year is the amount calculated using the formula:

where:

depreciation limit is the *car depreciation limit for the *financial year immediately before the financial year for which the limit is being calculated.

indexation factor is the number calculated, to 3 decimal places, under subsection (3) for the *financial year for which the limit is being calculated.

             (3)  The indexation factor for a *financial year is the number calculated using the formula:

where:

index number, for a quarter, means the index number for the motor vehicle purchase sub-group of the Consumer Price Index, being the weighted average of the 8 capital cities, first published by the Australian Statistician for the quarter.

first March year means the period of 12 months ending on
31 March immediately before the *financial year for which the limit is being calculated.

second March year means the period of 12 months immediately before the first March year.

             (4)  If the Australian Statistician changes the reference base for the motor vehicle purchase sub-group of the Consumer Price Index, only index numbers published in terms of the new base are to be used after the change.

             (5)  The Commissioner must publish before the beginning of each *financial year the indexation factor and the *car depreciation limit for that financial year.

Subdivision 42-L—Pooling

Guide to Subdivision 42-L

42-350  What this Subdivision is about

You can reduce the number of depreciation calculations you have to make by allocating a number of units of plant that have the same depreciation rate to a pool. One calculation is made for all plant in the pool.

You cannot pool plant for the year you acquire it.

Table of sections

Operative provisions

42-355      Creating a pool

42-360      Allocating plant to a pool

42-365      What plant is eligible for allocation to a pool?

42-370      Removal of plant from a pool

42-375      Calculating depreciation deductions for pooled plant

42-380      Meaning of opening balance

42-385      Meaning of closing balance

42-390      Calculation of balancing adjustments for pooled plant

42-395      Application of CGT to pooled plant

Operative provisions

42-355  Creating a pool

                   You may choose to create a pool by recording in writing:

                     (a)  the first income year for which *plant may be allocated to it; and

                     (b)  the pool percentage.

42-360  Allocating plant to a pool

                   You may choose to allocate *plant to a *pool by recording in writing:

                     (a)  the pool to which you are allocating it; and

                     (b)  the income year for which it is allocated.

42-365  What plant is eligible for allocation to a pool?

                   You can only allocate *plant to a *pool for an income year if:

                     (a)  you can deduct an amount for depreciation of it for that year; and

                     (b)  the *diminishing value rate for the plant matches the pool percentage; and

                     (c)  during the period you were its owner or *quasi-owner before that year, you used it, or had it *installed ready for use, wholly for the *purpose of producing assessable income; and

                     (d)  you were its owner or *quasi-owner immediately after the beginning of that year; and

                     (e)  it has not been allocated to another *pool for that year.

42-370  Removal of plant from a pool

             (1)  *Plant is removed from a *pool if you choose to remove it and you record the removal and the date of removal in writing.

Note:          You may re-allocate the plant to a pool under section 42-360.

             (2)  *Plant is automatically removed from a *pool if:

                     (a)  you cease to use it, or to have it *installed ready for use, wholly for the *purpose of producing assessable income and the cessation was not caused by a *balancing adjustment event; or

                     (b)  the *diminishing value rate for the plant no longer matches the pool percentage; or

                     (c)  a balancing adjustment event occurs for the plant and Common rule 1 applies to that event.

Note:          Property removed from a pool because of paragraph (b) can be allocated to another pool under section 42-360.

             (3)  If *plant is removed from a *pool:

                     (a)  it is taken not to have been in the pool for the income year in which it is removed; and

                     (b)  you are taken to have deducted amounts for depreciation of it for the period it was in the pool as if you had used the pool percentage as your rate and the *diminishing value method; and

                     (c)  you must use the diminishing value method in calculating future depreciation deductions for it.

42-375  Calculating depreciation deductions for pooled plant

                   Calculate your deduction for a *pool using the formula:

42-380  Meaning of opening balance

                   The opening balance of a *pool for an income year is worked out using the formula:

where:

closing balance for last year means the *closing balance for the *pool for the preceding income year worked out under section 42‑385.

undeducted cost of new plant means the sum of the *undeducted costs, as at the beginning of the income year, of *plant allocated to the *pool for that year that was not in the pool for the preceding year.

reduction for removed plant means the sum of the *undeducted costs, as at the beginning of the income year, of any *plant removed for that year that was in the *pool for the preceding year. You work out those undeducted costs as if you had deducted amounts for depreciation of it for the period it was in the pool using the pool percentage as your rate and the *diminishing value method.

42-385  Meaning of closing balance

                   The closing balance of a *pool for an income year is worked out using the formula:

where:

total depreciation means the total amount you have deducted for depreciation for the income year for all *plant in the *pool for that year.

42-390  Calculation of balancing adjustments for pooled plant

             (1)  You must make a balancing adjustment calculation under this section for *plant if it is in a *pool for the income year in which a *balancing adjustment event occurs for it.

Note:          However, if the plant is removed from the pool for the year in which the balancing adjustment event occurred, your balancing adjustment is calculated under Subdivision 42-F or 42-G.

             (2)  You include in your assessable income the lesser of:

                     (a)  the *termination value of the *plant; and

                     (b)  its *cost.

                   For balancing adjustment relief, see sections 42-285 and 42-290.

             (3)  If a balancing adjustment calculation is made under this section, you can continue to deduct amounts for depreciation of the *plant as part of the *pool.

42-395  Application of CGT to pooled plant

             (1)  This section applies if *plant that is in a *pool for an income year is disposed of within the meaning of Part IIIA of the Income Tax Assessment Act 1936 (Capital gains and capital losses).

             (2)  Section 160ZK of that Act (Reduction of amounts for purposes of reduced cost base) applies to the disposal as if you had deducted amounts for depreciation of it for the period it was in the *pool using the pool percentage as your rate and the *diminishing value method.

10  Section 43-260 (link note)

Repeal the link note, substitute:

11  After Part 2-10

Insert:

Part 2-15Exempt income

Division 50—Exempt entities

Table of Subdivisions

50-A      Various exempt entities

Subdivision 50-A—Various exempt entities

Table of sections

50-1          Entities whose ordinary income and statutory income is exempt

50-5          Charity, education, science and religion

50-10        Community service

50-15        Employees and employers

50-20        Finance

50-25        Government

50-30        Health

50-35        Mining

50-40        Primary and secondary resources, and tourism

50-45        Sports, culture, film and recreation

50-1  Entities whose ordinary income and statutory income is exempt

                   The total *ordinary income and *statutory income of the entities covered by the following tables is exempt from income tax. In some cases, the exemption is subject to special conditions.

Note 1:       Ordinary and statutory income that is exempt from income tax is called exempt income: see section 6-20. The note to subsection 6‑15(2) describes some of the other consequences of it being exempt income.

Note 2:       Even if you are an exempt entity, the Commissioner can still require you to lodge an income tax return or information under section 161 of the Income Tax Assessment Act 1936.

50-5  Charity, education, science and religion

 

Charity, education, science and religion

Item

Exempt entity

Special conditions

1.1

charitable institution

none

1.2

religious institution

none

1.3

scientific institution

none

1.4

public educational institution

none

1.5

fund established for public charitable purposes by will or instrument of trust

fund applied for the purpose for which it was established

1.6

fund established to enable scientific research to be conducted by or in conjunction with a public university or public hospital

fund applied for the purpose for which it was established

1.7

society, association or club established for the encouragement of science

not carried on for the profit or gain of its individual members

50-10  Community service

 

Community service

Item

Exempt entity

Special conditions

2.1

society, association or club established for community service purposes (except political or lobbying purposes)

not carried on for the profit or gain of its individual members

50-15  Employees and employers

 

Employees and employers

Item

Exempt entity

Special conditions

3.1

(a)  employee association; or

(b) employer association

registered under an *Australian law relating to the settlement of industrial disputes

3.2

trade union

none

Note:          Despite items 3.1 and 3.2, certain ordinary and statutory income of some associations of employees and some registered trade unions may be subject to income tax under Division 8A of Part III of the Income Tax Assessment Act 1936.

                   50-20  Finance

 

Finance

Item

Exempt entity

Special conditions

4.1

a *friendly society (except a *friendly society dispensary)

not carried on for the profit or gain of its individual members

50-25  Government

 

Government

Item

Exempt entity

Special conditions

5.1

(a)  a municipal corporation; or

(b) a local governing body

none

5.2

a public authority constituted under a *Commonwealth law

none

Note:          The ordinary and statutory income of a State or Territory body is exempt: see Division 1AB of Part III of the Income Tax Assessment Act 1936.

50-30  Health

 

Health

Item

Exempt entity

Special conditions

6.1

public hospital

none

6.2

hospital carried on by a society or association

not carried on for the profit or gain of its individual members

6.3

the following organisations registered for the purposes of the National Health Act 1953:

(a)  a medical benefits organisation;

(b) a health benefits organisation;

(c)  a hospital benefits organisation

not carried on for the profit or gain of its individual members

50-35  Mining

 

Mining

Item

Exempt entity

Special conditions

7.1

the Phosphate Mining Company of Christmas Island Limited (incorporated in the Australian Capital Territory)

none

7.2

the British Phosphate Commissioners Banaba Contingency Fund (established on 1 June 1981)

none

50-40  Primary and secondary resources, and tourism

 

Primary and secondary resources, and tourism

Item

Exempt entity

Special conditions

8.1

a society or association established for the purpose of promoting the development of:

(a)  aviation; or

(b) tourism

not carried on for the profit or gain of its individual members

8.2

a society or association established for the purpose of promoting the development of any of the following Australian resources:

(a)  agricultural resources;

(b) horticultural resources;

(c)  industrial resources;

(d) manufacturing resources;

(e)  pastoral resources;

(f)  viticultural resources

not carried on for the profit or gain of its individual members

50-45  Sports, culture, film and recreation

 

Sports, culture, film and recreation

Item

Exempt entity

Special conditions

9.1

a society, association or club established for the encouragement of:

(a)  animal racing; or

(b) art; or

(c)  a game or sport; or

(d) literature; or

(e)  music

not carried on for the profit or gain of its individual members

9.2

a society, association or club established for musical purposes

not carried on for the profit or gain of its individual members

9.3

the Australian Film Finance Corporation Pty Limited (incorporated under the Companies Act 1981 on 12 July 1988)

none

Division 51—Exempt amounts

 

Table of sections

51-1          Amounts of ordinary income and statutory income that are exempt

51-5          Defence

51-10        Education and training

51-15        Vice-regal representatives

51-25        Mining

51-30        Welfare

51-45        Mining payments made to an Aboriginal or a distributing body

51-50        Maintenance payments to a spouse or child

51-1  Amounts of ordinary income and statutory income that are exempt

                   The amounts of *ordinary income and *statutory income covered by the following tables are exempt from income tax. In some cases, the exemption is subject to exceptions or special conditions, or both.

Note 1:       Ordinary and statutory income that is exempt from income tax is called exempt income: see section 6-20. The note to subsection 6‑15(2) describes some of the other consequences of it being exempt income.

Note 2:       Even if an exempt payment is made to you, the Commissioner can still require you to lodge an income tax return or information under section 161 of the Income Tax Assessment Act 1936.

51-5  Defence

 

Defence




Item




If you are:


... the following amounts are exempt from income tax:

... subject to these exceptions and special conditions:

1.1

a member of the Defence Force

(a) payments of allowances or bounty of a kind prescribed in the regulations; and

(b) the market value of rations and quarters supplied to you without charge

none

1.2

a recipient of a payment in respect of a member of the Defence Force

payments of allowances or bounty of a kind prescribed in the regulations

none

1.3

a member of:

(a) the Naval Emergency Reserve Force; or

(b) the Regular Army Emergency Reserve; or

(c) the Air Force Emergency Force

(a) pay and allowances as a member; and

(b) gratuities for the calling out for continuous service of all or part of the force

except pay and allowances for continuous full time service

1.4

a member of:

(a) the Australian Naval Reserve; or

(b) the Australian Army Reserve; or

(c) the Australian Air Force Reserve

pay and allowances as a member

except pay and allowances for continuous full time service

51-10  Education and training

 

Education and training




Item




If you are:


... the following amounts are exempt from income tax:

... subject to these exceptions and special conditions:

2.1

a recipient of a grant made by the Australian-American Educational Foundation

the grant

the grant is from funds made available to the Foundation under the agreement establishing it

2.2

an employer

payments under the CRAFT Scheme (the Commonwealth Rebate for Apprentice
Full-Time Training Scheme)

none

51-15  Vice-regal representatives

 

Vice-regal representatives




Item




If you are:


... the following amounts are exempt from income tax:

... subject to these exceptions and special conditions:

3.1

(a)  the Governor-General; or

(b) a State Governor

(a) official salary; and

(b) *ordinary income derived from a source outside Australia; and

(c) *statutory income that has a source outside Australia

none

51-25  Mining

 

Mining




Item




If you are:


... the following amounts are exempt from income tax:

... subject to these exceptions and special conditions:

4.1

an *Aboriginal

a *mining payment or a payment by a *distributing body out of a *mining payment

see section 51-45

 

4.2

a *distributing body

a *mining payment or a payment by a *distributing body out of a *mining payment

see section 51-45

 

51-30  Welfare

 

Welfare




Item




If you are:


... the following amounts are exempt from income tax:

... subject to these exceptions and special conditions:

5.1

an individual in receipt of periodic payments in the nature of maintenance

the payments

see section 51-50

5.2

a person who pays or is liable to pay rent

rent subsidy payments under the Mortgage and Rent Relief Scheme by an *Australian government agency

none

5.3

a recipient of an open employment incentive bonus

payments under Part VIIIA of the Handicapped Persons Assistance Act 1974

none

51-45  Mining payments made to an Aboriginal or a distributing body

             (1)  The following are exempt from income tax:

                     (a)  a *mining payment made to a *distributing body;

                     (b)  a *mining payment made to one or more *Aboriginals, or applied for their benefit.

             (2)  A payment:

                     (a)  made to a *distributing body; or

                     (b)  made to one or more *Aboriginals, or applied for their benefit;

is exempt from income tax if the payment is made by a *distributing body out of a *mining payment that it has received.

             (3)  A payment made to a *distributing body by another distributing body, out of a *mining payment received by the other distributing body, is taken to be a mining payment for the purposes of:

                     (a)  any further applications of subsection (2); and

                     (b)  any further applications of this subsection.

             (4)  Subsection (2) does not exempt a payment by a *distributing body for the purposes of meeting its administrative costs.

             (5)  An amount paid to or applied for the benefit of a person is not exempt from income tax because of section 51-25 if it is remuneration or consideration for goods or services provided by that person.

51-50  Maintenance payments to a spouse or child

             (1)  This section sets out the conditions on which a periodic payment, in the nature of maintenance, that:

                     (a)  is made by an individual (the maintenance payer); or

                     (b)  is attributable to a payment made by an individual (also the maintenance payer);

is exempt from income tax under item 5.1 of the table in section 51-30.

             (2)  The maintenance payment is exempt from income tax only if it is made:

                     (a)  to an individual who is or has been the maintenance payer’s *spouse; or

                     (b)  to or for the benefit of an individual who is or has been:

                              (i)  a child of the maintenance payer; or

                             (ii)  a child who is or has been a child of an individual who is or has been a *spouse of the maintenance payer.

             (3)  The maintenance payment is not exempt if, in order to make it or a payment to which it is attributable, the maintenance payer:

                     (a)  divested any income-producing assets; or

                     (b)  diverted *ordinary income or *statutory income upon which the maintenance payer would otherwise have been liable to income tax.

Division 52—Certain pensions, benefits and allowances are exempt from income tax

Guide to Division 52

52-1  What this Division is about

Certain payments made under various Acts are wholly or partly exempt from income tax. This Division tells you if a payment is exempt and how much is exempt.

Table of Subdivisions

52-A      Exempt payments under the Social Security Act 1991

52-B      Exempt payments under the Veterans’ Entitlements Act 1986

52-C      Exempt payments made because of the Veterans’ Entitlements (Transitional Provisions and Consequential Amendments) Act 1986

Subdivision 52-A—Exempt payments under the Social Security Act 1991

Guide to Subdivision 52-A

52-5  What this Subdivision is about

This Subdivision tells you:

               (a)     the payments under the Social Security Act 1991 that are wholly or partly exempt from income tax; and

               (b)     any special circumstances, conditions or exceptions that apply to a payment in order for it to be exempt; and

               (c)     how to work out how much of a payment is exempt.

Table of sections

Operative provisions

52-10        How much of a social security payment is exempt?

52‑15        Supplementary amounts of payments

52-20        Tax-free amount of an ordinary payment after the death of your partner

52-25        Tax-free amount of certain bereavement lump sum payments

52-30        Tax-free amount of certain other bereavement lump sum payments

52-35        Tax-free amount of a lump sum payment made because of the death of a person you are caring for

52-40        Provisions of the Social Security Act 1991 under which payments are made

Operative provisions

52-10  How much of a social security payment is exempt?

             (1)  The table in this section tells you about the income tax treatment of social security payments.

Note:          Section 52-40 sets out the provisions of the Social Security Act 1991 under which the payments are made.

             (2)  Expressions used in this Subdivision that are also used in the Social Security Act 1991 have the same meaning as in that Act.

             (3)  Ordinary payment means a payment other than a payment made because of a person’s death.



Income tax treatment of social security payments

Item

Payment

Case 1

Case 2

Case 3

Case 4

1.1

Advance pharmaceutical supplement

Exempt

Exempt

Not applicable

Not applicable

2.1

Age pension

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

3.1

Bereavement allowance

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Exempt

Not applicable

4.1

Carer pension: you are pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

(a)  exempt up to the tax-free amount if it is made under section 236A of the Social Security Act 1991
(see section 52-35); or

(b) exempt up to the tax-free amount if it is made under section 239 of that Act
(see section 52-25)

4.2

Carer pension: the severely handicapped person is pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

(a)  exempt up to the tax-free amount if it is made under section 236A of the Social Security Act 1991
(see section 52-35); or

(b) exempt up to the tax-free amount if it is made under section 239 of that Act
(see section 52-25)

4.3

Carer pension: both you and the severely handicapped person are under pension age

Exempt

Exempt

Exempt

(a)  exempt up to the tax-free amount if it is made under section 236A of the Social Security Act 1991
(see section 52-35); or

(b) exempt up to the tax-free amount if it is made under section 239 of that Act
(see section 52-25)

4.4

Carer pension: you are under pension age and the severely handicapped person has died

Exempt

Exempt

Exempt

(a)  exempt up to the tax-free amount if it is made under section 236A of the Social Security Act 1991
(see section 52-35); or

(b) exempt up to the tax-free amount if it is made under section 239 of that Act
(see section 52-25)

5.1

Child disability allowance

Exempt

Exempt

Exempt

Not applicable

6.1

Disability support pension: you are pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

6.2

Disability support pension: you are under pension age

Exempt

Exempt

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

7.1

Disability wage supplement: you are pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

7.2

Disability wage supplement: you are under pension age

Exempt

Exempt

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

8.1

Disaster relief payment

Exempt

Exempt

Not applicable

Not applicable

9.1

Double orphan pension

Exempt

Exempt

Exempt

Not applicable

10.1

Employment entry payment

Exempt

Exempt

Not applicable

Not applicable

11.1

Family payment

Exempt

Exempt

Not applicable

Not applicable

12.1

Family payment advance

Exempt

Exempt

Not applicable

Not applicable

13.1

Family tax payment

Exempt

Exempt

Not applicable

Not applicable

14.1

Maternity allowance

Exempt

Exempt

Not applicable

Not applicable

15.1

Mature age allowance (paid under Part 2.12A)

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

16.1

Mature age allowance (paid under Part 2.12B)

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52-30)

17.1

Mature age partner allowance

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

18.1

Mobility allowance

Exempt

Exempt

Not applicable

Not applicable

19.1

Newstart allowance

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52‑30)

20.1

Parenting allowance (benefit parenting allowance)

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Exempt

Exempt up to the tax‑free amount
(see section 52-30)

21.1

Parenting allowance (non‑benefit parenting allowance)

Exempt

Exempt

Not applicable

Not applicable

22.1

Partner allowance

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Exempt

Exempt up to the tax‑free amount
(see section 52‑30)

23.1

Sickness allowance

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52-30)

24.1

Sole parent pension

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52‑25)

25.1

Special benefit

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52‑30)

26.1

Special needs age pension

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52‑25)

 27.1

Special needs disability support pension: you are pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52‑25)

27.2

Special needs disability support pension: you are under pension age

Exempt

Exempt

Exempt

Exempt up to the tax‑free amount
(see section 52‑25)

28.1

Special needs sole parent pension

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Not applicable

Not applicable

29.1

Special needs widow B pension

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Not applicable

Not applicable

30.1

Special needs wife pension: you are pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

30.2

Special needs wife pension: your partner is pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount, and tax‑free amount, are exempt
(see sections 52‑15 and 52‑20)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

30.3

Special needs wife pension: both you and your partner are under pension age

Exempt

Exempt

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

30.4

Special needs wife pension: you are under pension age and your partner has died

Exempt

Exempt

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

31.1

Telephone allowance

Exempt

Exempt

Not applicable

Not applicable

32.1

Widow allowance

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Not applicable

Not applicable

33.1

Widow B pension

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Exempt

Not applicable

34.1

Wife pension: you are pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

34.2

Wife pension: your partner is pension age or over

Supplementary amount is exempt
(see section 52‑15)

Supplementary amount is exempt
(see section 52‑15)

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

34.3

Wife pension: both you and your partner are under pension age

Exempt

Exempt

Exempt

Exempt up to the tax‑free amount
(see section 52-25)

34.4

Wife pension: you are under pension age and your partner has died

Exempt

Exempt

Exempt

Exempt up to the tax‑free amount
(see section 52-25)


52‑15  Supplementary amounts of payments

                   You work out the supplementary amount of a social security payment using the following table:

 

Supplementary amount of a social security payment


Item

For this category of social security payment:

the supplementary amount is the total of:

1

Age pension

Bereavement allowance

Carer pension

Disability support pension

Disability wage supplement

Mature age allowance (paid under Part 2.12A)

Mature age partner allowance

Sole parent pension

Special needs age pension

Special needs disability support pension

Special needs sole parent pension

Special needs widow B pension

Special needs wife pension

Widow B pension

Wife pension

(a)  so much of the payment as is included by way of rental assistance; and

(b) so much of the payment as is included by way of remote area allowance; and

(c)  so much of the payment as is included by way of pharmaceutical allowance; and

(d) so much of the payment as is included by way of incentive allowance; and

(e)  so much of the payment as is included by way of residential care charge

2

Mature age allowance (paid under Part 2.12B)

Newstart allowance

Partner allowance

Sickness allowance

Special benefit

Widow allowance

(a)  so much of the payment as is included by way of rental assistance; and

(b) so much of the payment as is included by way of remote area allowance; and

(c)  so much of the payment as is included by way of pharmaceutical allowance; and

(d) so much of the payment as is included by way of residential care charge

3

Parenting allowance (benefit parenting allowance)

(a)  so much of the payment as is included by way of rental assistance; and

(b) so much of the payment as is included by way of remote area allowance; and

(c)  so much of the payment as is included by way of pharmaceutical allowance; and

(d) so much of the payment as is included by way of residential care charge; and

(e)  so much of the payment as is included by way of provisional rate of parenting allowance up to the maximum basic component of the parenting allowance worked out using the method statement in point 1068A‑A3 of the Social Security Act 1991

52‑20  Tax-free amount of an ordinary payment after the death of your partner

             (1)  You work out under this section the *tax-free amount of an *ordinary payment made under the Social Security Act 1991 after the death of your partner if:

                     (a)  you do not qualify for payments under a *bereavement Subdivision; and

                     (b)  the ordinary payment became due to you on any of the
7 pension paydays after the death of your partner.

Note:          For the provisions of the Social Security Act 1991 that tell you if you qualify for payments under a bereavement Subdivision: see subsection (3).

             (2)  This is how to work out the tax‑free amount:

Method statement

Step 1.   Work out the *supplementary amount of the payment.

                   Note:             The supplementary amount is also exempt and is worked out under section 52‑15.

Step 2.   Subtract the *supplementary amount from the amount of the payment.

Step 3.   Work out what would have been the amount of the payment if your partner had not died.

Step 4.   Work out what would have been the *supplementary amount of the payment if your partner had not died.

Step 5.   Subtract the amount at Step 4 from the amount at Step 3.

Step 6.   Subtract the amount at Step 5 from the amount at Step 2: the result is the tax‑free amount.

             (3)  This table sets out:

                     (a)  the Subdivisions of the Social Security Act 1991 that are bereavement Subdivisions; and

                     (b)  the provision of that Act that tells you if you qualify for payments under the relevant bereavement Subdivision.

 

Bereavement Subdivisions



Item



For this bereavement Subdivision:

This provision tells you if you qualify for payments under it:

1   

Subdivision A of Division 9 of Part 2.2

paragraph 82(1)(e)

2   

Subdivision A of Division 10 of Part 2.3

paragraph 146F(1)(e)

3   

Subdivision B of Division 9 of Part 2.5

paragraph 237(1)(e)

4   

Subdivision B of Division 9 of Part 2.6

paragraph 303(1)(e)

5   

Subdivision A of Division 10 of Part 2.9

paragraph 469(1)(e)

6   

Subdivision AA of Division 9 of Part 2.12

paragraph 660LA(1)(f)

7   

Subdivision A of Division 11 of Part 2.12A

paragraph 660XKA(1)(e)

8   

Subdivision C of Division 11 of Part 2.12B

paragraph 660YKC(1)(e)

9   

Subdivision AA of Division 9 of Part 2.14

paragraph 728PA(1)(f)

10 

Subdivision AA of Division 9 of Part 2.15

paragraph 768A(1)(f)

11 

Subdivision A of Division 10 of Part 2.16

paragraph 822(1)(e)

52-25  Tax-free amount of certain bereavement lump sum payments

             (1)  This section applies if a lump sum of any of these categories of social security payments becomes due to you because of your partner’s death.

 

Category of social security payment

Age pension

Carer pension

Disability support pension

Disability wage supplement

Mature age allowance (paid under Part 2.12A)

Mature age partner allowance

Sole parent pension

Special needs age pension

Special needs disability support pension

Special needs wife pension

Wife pension

             (2)  The total of the following are exempt up to the *tax-free amount:

                     (a)  the lump sum payment;

                     (b)  all other payments that become due to you under the Social Security Act 1991 on pension paydays that occur during the bereavement lump sum period.

             (3)  This is how to work out the tax‑free amount:

Method statement

Step 1.   Work out the payments under the Social Security Act 1991 that would have become due to you on each of the pension paydays during the bereavement lump sum period if:

               (a)     your partner had not died; and

               (b)     your partner had been under pension age; and

               (c)     immediately before your partner died, you and your partner had been neither an illness separated couple nor a respite care couple.

Step 2.   Work out how much of those payments would have been exempt in those circumstances.

Step 3.   Work out the payments under the Social Security Act 1991 or Part III of the Veterans’ Entitlements Act 1986 that would have become due to your partner on each of the pension paydays during the bereavement lump sum period if:

               (a)     your partner had not died; and

               (b)     immediately before your partner died, you and your partner were neither an illness separated couple nor a respite care couple;

              even if the payments would not have been exempt.

Step 4.   Total the payments worked out at Steps 2 and 3: the result is the tax‑free amount.

Example:    You are receiving a disability support pension of $300 a fortnight and a pharmaceutical allowance of $5 a fortnight. You are over pension age. Your partner is receiving a partner allowance of $250 a fortnight and rental assistance of $75 a fortnight.

                   Your partner dies. There are 7 pension paydays during the bereavement lump sum period. You work out the tax-free amount as follows:

                   Step 1: The payments that would have become due to you on each of those 7 paydays are $300 + $5 = $305. The total for the 7 paydays is  $2,135.

                   Step 2: The exempt component of the $305 you receive on each of the 7 paydays is $5. The total for the 7 paydays is $35.

                   Step 3: The payments that would have become due to your partner on each of those 7 paydays are $250 + $75 = $325. The total for the 7 paydays is $2,275.

                   Step 4: The tax‑free amount is $35 + $2,275 = $2,310.

52-30  Tax-free amount of certain other bereavement lump sum payments

             (1)  This section applies if a lump sum of any of these categories of social security payments becomes due to you because of your partner’s death.

 

Category of social security payment

Mature age allowance (paid under Part 2.12B)

Newstart allowance

Parenting allowance (benefit parenting allowance)

Partner allowance

Sickness allowance

Special benefit

             (2)  The total of the following are exempt up to the *tax-free amount:

                     (a)  the lump sum payment;

                     (b)  all other payments that become due to you under the Social Security Act 1991 on pension paydays that occur during the bereavement lump sum period.

             (3)  This is how to work out the tax‑free amount:

Method statement

Step 1.   Work out the payments under the Social Security Act 1991 that would have become due to you on each of the pension paydays during the bereavement lump sum period if:

               (a)     your partner had not died; and

               (b)     your partner had been under pension age; and

               (c)     immediately before your partner died, you and your partner had been neither an illness separated couple nor a respite care couple.

Step 2.   Work out how much of those payments would have been exempt in those circumstances.

Step 3.   Work out the payments under the Social Security Act 1991 that would have become due to your partner on each of the pension paydays during the bereavement lump sum period if your partner had not died, even if the payments would not have been exempt.

Step 4.   Total the payments worked out at Steps 2 and 3: the result is the tax‑free amount.

52-35  Tax-free amount of a lump sum payment made because of the death of a person you are caring for

             (1)  This section applies if a lump sum payment becomes due to you under section 236A of the Social Security Act 1991 because of the death of the severely handicapped person you are caring for.

             (2)  The total of the following are exempt up to the *tax-free amount:

                     (a)  the lump sum payment;

                     (b)  all other payments that become due to you under the Social Security Act 1991 on pension paydays that occur during the bereavement lump sum period.

             (3)  This is how to work out the tax‑free amount:

Method statement

Step 1.   Work out the payments under the Social Security Act 1991 that would have become due to you on each of the pension paydays during the bereavement lump sum period if:

               (a)     the severely handicapped person had not died; and

               (b)     the severely handicapped person had been under pension age.

Step 2.   Work out how much of those payments would have been exempt in those circumstances.

Step 3.   Work out the payments under the Social Security Act 1991 that would have become due to the severely handicapped person on each of the pension paydays during the bereavement lump sum period if the severely handicapped person had not died, even if the payments would not have been exempt.

Step 4.   Total the payments worked out at Steps 2 and 3: the result is the tax‑free amount.

52-40  Provisions of the Social Security Act 1991 under which payments are made

                   This table lists the provisions of the Social Security Act 1991 under which social security payments are made that are wholly or partly exempt from income tax under this Subdivision.

 

Provisions under which social security payments are made





Item



Category of social security payment




Ordinary payment

Payment made because of a person’s death (unless covered by next column)


Lump sum payment made because of your partner’s death

1   

Advance pharmaceutical supplement

Part 2.23

Not applicable

Not applicable

2   

Age pension

Part 2.2

Sections 83, 86 and 91

Section 84

3   

Bereavement allowance

Part 2.7

Section 359

Not applicable

4   

Carer pension

Part 2.5

Sections 238, 241 and 246

Sections 236A and 239

5   

Child disability allowance

Part 2.19

Sections 992 and 992A

Not applicable

6   

Disability support pension

Part 2.3

Sections 146G, 146K and 146Q

Section 146H

7   

Disability wage supplement

Part 2.9

Sections 470, 473, 475 and 476

Section 471

8   

Disaster relief payment

Part 2.24

Not applicable

Not applicable

9   

Double orphan pension

Part 2.20

Sections 1034 and 1034A

Not applicable

10 

Employment entry payment

Part 2.13

Not applicable

Not applicable

11 

Family payment

Part 2.17

Not applicable

Not applicable

12 

Family payment advance

Part 2.17

Not applicable

Not applicable

13 

Family tax payment

Part 2.17AA or section 1070

Not applicable

Not applicable

14 

Maternity allowance

Part 2.17A

Not applicable

Not applicable

15 

Mature age allowance (paid under Part 2.12A)

Part 2.12A

Sections 660XKB, 660XKE and 660XKG

Section 660XKC

16 

Mature age allowance (paid under Part 2.12B)

Part 2.12B

Section 660YKD

Section 660YKE

17 

Mature age partner allowance

Part 2.12A

Sections 660XKK and 660XKM

Section 660XKL

18 

Mobility allowance

Part 2.21

Not applicable

Not applicable

19 

Newstart allowance

Part 2.12

Section 660LB

Section 660LC

20 

Parenting allowance (benefit parenting allowance)

Part 2.18

Sections 951Y and 951ZB

Section 951ZC

21 

Parenting allowance (non‑benefit parenting allowance)

Part 2.18

Not applicable

Not applicable

22 

Partner allowance

Part 2.15A

Section 771NW

Section 771NX

23 

Sickness allowance

Part 2.14

Section 728PB

Section 728PC

24 

Sole parent pension

Part 2.6

Sections 304, 307 and 312

Section 305

25 

Special benefit

Part 2.15

Section 768B

Section 768C

26 

Special needs age pension

Section 772

Sections 823, 826 and 830

Section 824

27 

Special needs disability support pension

Section 773

Sections 823, 826 and 830

Section 824

28 

Special needs sole parent pension

Section 775

Not applicable

Not applicable

29 

Special needs widow B pension

Section 778

Not applicable

Not applicable

30 

Special needs wife pension

Section 774

Sections 823, 826 and 830

Section 824

31 

Telephone allowance

Part 2.25

Not applicable

Not applicable

32 

Widow allowance

Part 2.8A

Not applicable

Not applicable

33 

Widow B pension

Part 2.8

Section 407

Not applicable

34 

Wife pension

Part 2.4

Sections 189 and 191

Section 190

Subdivision 52-B—Exempt payments under the Veterans’ Entitlements Act 1986

Guide to Subdivision 52-B

52-60  What this Subdivision is about

This Subdivision tells you:

               (a)     the payments under the Veterans’ Entitlements Act 1986 that are wholly or partly exempt from income tax; and

               (b)     any special circumstances, conditions or exceptions that apply to a payment in order for it to be exempt; and

               (c)     how to work how much of a payment is exempt.

Table of sections

Operative provisions

52-65        How much of a veterans’ affairs payment is exempt?

52-70        Supplementary amounts of payments

52-75        Provisions of the Veterans’ Entitlements Act 1986 under which payments are made

Operative provisions

52-65  How much of a veterans’ affairs payment is exempt?

             (1)  The table in this section tells you about the income tax treatment of veterans’ affairs payments.

Note:          Section 52-75 sets out the provisions of the Veterans’ Entitlements Act 1986 under which the payments are made.

             (2)  Expressions (except “pension age”) used in this Subdivision that are also used in the Veterans’ Entitlements Act 1986 have the same meaning as in that Act.

             (3)  Pension age has the meaning given by subsection 23(1) of the Social Security Act 1991.

             (4)  Ordinary payment means a payment other than a payment made because of a person’s death.

 

Income tax treatment of veterans’ affairs payments



Item


Category of veterans’ affairs payment



Ordinary payment

Payment made because of a person’s death

1.1

Age service pension

Supplementary amount is exempt
(see section 52-70)

Exempt

2.1

Attendant allowance

Exempt

Not applicable

3.1

Carer service pension: unless covered by item 3.2 or 3.3

Supplementary amount is exempt
(see section 52-70)

Exempt

3.2

Carer service pension: both you and your partner are under pension age and your partner is receiving an invalidity service pension

Exempt

Exempt

3.3

Carer service pension: you are under pension age, your partner has died and was receiving an invalidity service pension at death

Exempt

Exempt

4.1

Clothing allowance

Exempt

Not applicable

5.1

Decoration allowance

Exempt

Not applicable

6.1

Income support supplement: unless covered by item 6.2, 6.3, 6.4 or 6.5

Supplementary amount is exempt
(see section 52-70)

Exempt

6.2

Income support supplement: you are under pension age and receiving the supplement on the grounds of permanent incapacity

Exempt

Exempt

6.3

Income support supplement: both you and the severely handicapped person you are caring for are under pension age and you are receiving the supplement for providing constant care for that person

Exempt

Exempt

6.4

Income support supplement: both you and your partner are under pension age and your partner is an invalidity service pensioner or a disability support pensioner

Exempt

Exempt

6.5

Income support supplement: both you and your partner are under pension age and your partner is receiving the supplement on the grounds of permanent incapacity

Exempt

Exempt

7.1

Invalidity service pension: you are pension age or over

Supplementary amount is exempt
(see section 52-70)

Exempt

7.2

Invalidity service pension: you are under pension age

Exempt

Exempt

8.1

Loss of earnings allowance

Exempt

Not applicable

9.1

Partner service pension: unless covered by item 9.2 or 9.3

Supplementary amount is exempt
(see section 52-70)

Exempt

9.2

Partner service pension: both you and your partner are under pension age and your partner is receiving an invalidity service pension

Exempt

Exempt

9.3

Partner service pension: you are under pension age, your partner has died and was receiving an invalidity service pension at death

Exempt

Exempt