Federal Register of Legislation - Australian Government

Primary content

Income Tax Assessment Act 1936

  • - C2008C00698
  • In force - Superseded Version
  • View Series
Act No. 27 of 1936 as amended, taking into account amendments up to Act No. 145 of 2008
An Act to consolidate and amend the law relating to the imposition assessment and collection of a tax upon incomes
Administered by: Treasury
General Comments: This compilation is affected by a retrospective amendment, please see Tax Laws Amendment (2011 Measures No. 9) Act 2012 [Act No. 12 of 2012], for details.
Registered 23 Dec 2008
Start Date 10 Dec 2008
End Date 17 Feb 2009
Table of contents.

 

Income Tax Assessment Act 1936

Act No. 27 of 1936 as amended

This compilation was prepared on 18 December 2008
taking into account amendments up to Act No. 145 of 2008

Volume 2 includes:     Table of Contents
                                    Sections 79A – 121L

The text of any of those amendments not in force
on that date is appended in the Notes section

The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section

Part IIILiability to taxation

Division 3Deductions

  


Contents

Part III—Liability to taxation                                                                                          i

Division 3—Deductions                                                                                                 i

79A....... Rebates for residents of isolated areas................................................. 1

79B....... Rebates for members of Defence Force serving overseas................... 6

82.......... Double deductions............................................................................ 10

82A....... Deductions for expenses of self‑education........................................ 10

Subdivision CB—Regional Headquarters (RHQs)                                          12

82C....... Object................................................................................................ 12

82CA.... Deduction for setup costs of RHQ companies.................................. 12

82CB..... Interpretation..................................................................................... 12

82CC..... Associated companies....................................................................... 14

82CD.... Application to become an RHQ company......................................... 14

82CE..... Determination of RHQ companies.................................................... 14

Subdivision D—Losses and outgoings incurred under certain tax avoidance schemes                15

82KH.... Interpretation..................................................................................... 15

82KJ...... Deduction not allowable in respect of certain pre‑paid outgoings..... 39

82KK..... Schemes designed to postpone tax liability....................................... 39

82KL..... Tax benefit not allowable in respect of certain recouped expenditure 42

Subdivision H—Period of deductibility of certain advance expenditure  44

82KZL... Interpretation..................................................................................... 44

82KZLA Subdivision does not apply to financial arrangements to which Subdivision 250‑E applies     46

82KZM. Expenditure by small business entities and individuals incurring non‑business expenditure    47

82KZMAApplication of section 82KZMD...................................................... 48

82KZMDBusiness expenditure and non‑business expenditure by
non‑individual
................................................................................... 49

82KZMEExpenditure under some agreements................................................. 49

82KZMFProportional deduction...................................................................... 52

82KZMGDeductions for certain forestry expenditure...................................... 52

82KZMGADeductions for certain forestry expenditure................................... 54

82KZMGBCGT event in relation to interest in 82KZMG agreement............... 54

82KZN.. Transfer etc. of rights under agreement............................................. 55

82KZO.. Partnership changes where entire interest in agreement rights is not transferred      56

Division 3A—Convertible notes                                                                            58

82LA..... Application of Division..................................................................... 58

82L........ Interpretation..................................................................................... 58

82M...... New loans and replacement loans..................................................... 62

82N....... Prescribed stock exchanges............................................................... 63

82P........ Bonus share allotments..................................................................... 63

82Q....... Classes of shares............................................................................... 65

82R....... Interest on certain convertible notes not to be an allowable deduction 65

82SA..... Interest on certain convertible notes to be an allowable deduction—where loan made on or after 1 January 1976   66

82T........ Value of shares................................................................................. 70

Division 5—Partnerships                                                                                          72

90.......... Interpretation..................................................................................... 72

91.......... Liability of partnerships.................................................................... 72

92.......... Income and deductions of partner..................................................... 72

92A....... Deductions in respect of outstanding subsection 92(2AA) amounts. 74

94.......... Partner not having control and disposal of share in partnership income 76

Division 5A—Income of certain limited partnerships                               86

Subdivision A—Preliminary                                                                                 86

94A....... Object................................................................................................ 86

94B....... Interpretation..................................................................................... 86

94C....... Continuity of limited partnership not affected by changes in composition                86

Subdivision B—Corporate limited partnerships                                              87

94D....... Corporate limited partnerships.......................................................... 87

94E........ Continuity of business test................................................................ 88

94F........ Change in composition of limited partnership—election that partnership not be treated as an eligible limited partnership.......................................................................................................... 89

94G....... Continuity of ownership test............................................................. 89

Subdivision C—Corporate tax modifications applicable to corporate limited partnerships     90

94H....... Corporate tax modifications applicable to corporate limited partnerships 90

94J........ Company includes corporate limited partnership............................... 90

94K....... Partnership does not include corporate limited partnership.............. 90

94L........ Dividend includes distribution of corporate limited partnership........ 90

94M...... Drawings etc. deemed to be dividends paid out of profits................. 91

94N....... Private company does not include corporate limited partnership....... 91

94P........ Share includes interest in corporate limited partnership.................... 91

94Q....... Shareholder includes partner in corporate limited partnership.......... 91

94R....... Liquidator may include partner in corporate limited partnership....... 91

94S........ Continuity of corporate limited partnership not affected by changes in composition                92

94T........ Residence of corporate limited partnership........................................ 92

94U....... Incorporation..................................................................................... 92

94V....... Obligations and offences................................................................... 92

94X....... Modification of loss provisions........................................................ 93

Division 6—Trust income                                                                                         94

95.......... Interpretation..................................................................................... 94

95AA.... Division does not apply in relation to FHSA trust............................ 95

95A....... Special provisions relating to present entitlement.............................. 95

95B....... Certain beneficiaries deemed not to be under legal disability............. 95

96.......... Trustees............................................................................................. 95

96A....... Application of Division in respect of interests in non‑resident trust estates to which Part XI applies      95

96B....... Beneficiary of non‑resident trust estate............................................. 98

96C....... Calculation of beneficiary’s share of net income of non‑resident trust estate            99

97.......... Beneficiary not under any legal disability........................................ 102

97A....... Beneficiaries who are owners of farm management deposits.......... 104

98.......... Liability of trustee........................................................................... 105

98A....... Non‑resident beneficiaries assessable in respect of certain income. 107

98B....... Deduction from beneficiary’s tax.................................................... 109

99.......... Certain trust income to be taxed as income of an individual............ 110

99A....... Certain trust income to be taxed at special rate................................ 111

99B....... Receipt of trust income not previously subject to tax...................... 114

99C....... Determining whether property is applied for benefit of beneficiary 116

99D....... Refund of tax to non‑resident beneficiary....................................... 117

99E........ Later trust not taxed on income already taxed under subsection 98(4) 118

99G....... Amounts covered by withholding requirement............................... 118

99H....... Late payments................................................................................. 118

100........ Beneficiary assessable in respect of certain trust income................. 119

100A..... Present entitlement arising from reimbursement agreement............. 122

101........ Discretionary trusts......................................................................... 127

101A..... Income of deceased received after death.......................................... 127

102........ Revocable trusts.............................................................................. 128

Division 6AAA—Special provisions relating to non‑resident trust estates etc. 130

Subdivision A—Preliminary                                                                               130

102AAA................................................................................. Object of Division  130

102AAB......................................................................................... Interpretation  130

102AAC Each listed country and unlisted country to be treated as a separate foreign country 136

102AAD.................................. Subject to tax—application of subsection 324(2)  136

102AAE Listed country trust estates.............................................................. 136

102AAF Public unit trusts............................................................................. 139

102AAG............................... When entity is in a position to control a trust estate  140

102AAH..................................................................... Non‑resident family trusts  141

102AAJ Transfer of property or services...................................................... 144

102AAK........................ Deemed transfers of property or services to trust estate  144

102AAL Division not to apply to transfers by trustees of deceased estates... 149

Subdivision B—Payment of interest by taxpayer on distributions from certain non‑resident trust estates            149

102AAMPayment of interest by taxpayer on distributions from
certain non‑resident trust estates
...................................................... 149

Subdivision D—Accruals system of taxation of certain non‑resident trust estates        159

102AAS Object of Subdivision..................................................................... 159

102AAT Accruals system of taxation—attributable taxpayer......................... 159

102AAU...................................................... Attributable income of a trust estate  163

102AAV.............................................. Double tax agreements to be disregarded  167

102AAWCertain provisions to be disregarded in calculating
attributable income
.......................................................................... 167

102AAY.................................. Modified application of trading stock provisions  168

102AAZ Modified application of depreciation provisions............................. 168

102AAZAModified application of Division 13 of Part III............................ 169

102AAZBGeneral modifications—CGT....................................................... 169

102AAZBAModified application of CGT—effect of certain
changes of residence
....................................................................... 170

102AAZCModified application of loss provisions—pre‑1990‑91 losses...... 171

102AAZDAssessable income of attributable taxpayer to include
attributable income of trust estate to which taxpayer has transferred property or services
        171

102AAZEAccruals system of taxation does not apply to small amounts....... 176

102AAZFOnly resident partners, beneficiaries etc. liable to be
assessed as a result of attribution
.................................................... 176

102AAZGKeeping of records........................................................................ 177

Division 6AA—Income of certain children                                                   179

102AA.. Interpretation................................................................................... 179

102AB.. Application of Division................................................................... 180

102AC.. Persons to whom Division applies.................................................. 180

102AD.. Taxable income to which Division applies...................................... 183

102AE... Eligible assessable income.............................................................. 183

102AF... Employment income and business income...................................... 188

102AG.. Trust income to which Division applies.......................................... 189

102AGA...................... Transfer of property as the result of a family breakdown  193

Division 6A—Alienation of income                                                                   196

102A..... Interpretation................................................................................... 196

102B..... Certain income transferred for short periods to be included in assessable income of transferor               197

102C..... Effect of certain transfers of rights to receive income from property 199

102CA.. Consideration in respect of transfer to be included in assessable income of transferor in certain cases    200

Division 6B—Income of certain unit trusts                                                   202

102D..... Interpretation................................................................................... 202

102E...... Prescribed arrangements................................................................. 204

102F...... Eligible unit trusts........................................................................... 205

102G..... Public unit trusts............................................................................. 206

102H..... Resident unit trusts.......................................................................... 210

102J...... Corporate unit trusts........................................................................ 210

102K..... Taxation of net income of corporate unit trust................................. 211

102L...... Modified application of Act in relation to certain unit trusts............ 211

Division 6C—Income of certain public trading trusts                            216

102M.... Interpretation................................................................................... 216

102MA. Arrangements not covered.............................................................. 219

102MB.. Investing in land.............................................................................. 221

102MC.. When trading business not carried on............................................. 222

102N..... Trading trusts.................................................................................. 222

102NA.. Certain interposed trusts not trading trusts...................................... 223

102P...... Public unit trusts............................................................................. 224

102Q..... Resident unit trusts.......................................................................... 229

102R..... Public trading trusts........................................................................ 229

102S...... Taxation of net income of public trading trust................................. 231

102T...... Modified application of Act in relation to certain unit trusts............ 231

Division 6D—Provisions relating to certain closely held trusts         236

Subdivision A—Overview                                                                                    236

102UA.. What this Division is about............................................................. 236

Subdivision B—Interpretation                                                                            236

102UB.. Definitions—general....................................................................... 236

102UC.. Closely held trust............................................................................ 237

102UD.. Trustee beneficiary.......................................................................... 238

102UE... Meaning of untaxed part................................................................. 239

102UG.. Correct TB statement....................................................................... 239

102UH.. TB statement period........................................................................ 240

102UI.... Tax‑preferred amount...................................................................... 240

102UJ... Extended concept of present entitlement to capital of a trust............ 240

Subdivision C—Trustee beneficiary non‑disclosure tax on share of net income           241

102UK.. Trustee beneficiary non‑disclosure tax where no correct TB statement 241

102UL... Exclusion of directors of closely held trust from liability to pay tax 243

102UM. Trustee beneficiary non‑disclosure tax where share is distributed to trustee of closely held trust             244

Subdivision D—Payment etc. of trustee beneficiary non‑disclosure tax  245

102UN.. Amount of trustee beneficiary non‑disclosure tax reduced by notional tax offset     245

102UO.. Payment of trustee beneficiary non‑disclosure tax.......................... 245

102UP... Late payment of trustee beneficiary non‑disclosure tax................... 246

102UR.. Notice of liability............................................................................. 247

102URA................................................................. Request for notice of liability  247

102US... Evidentiary effect of notice of liability............................................. 248

102USA Recovery of trustee beneficiary non‑disclosure tax from trustee beneficiaries providing incorrect information etc. to head trustee.............................................................................................. 248

Subdivision E—Making correct TB statement about trustee beneficiaries of tax‑preferred amounts    250

102UT... Requirement to make correct TB statement about trustee beneficiaries of tax‑preferred amounts             250

Subdivision F—Special provisions about tax file numbers                         251

102UU.. Trustee beneficiary may quote tax file number to trustee of closely held trust          251

102UV.. Trustee of closely held trust may record etc. tax file number........... 251

Division 7—Private companies                                                                            253

102V..... Application of Division to non‑share dividends.............................. 253

103........ Interpretation................................................................................... 253

103A..... Private companies........................................................................... 254

109........ Excessive payments to shareholders, directors and associates deemed to be dividends            264

Division 7A—Distributions to entities connected with a private company          265

Subdivision A—Overview of this Division                                                       265

109B..... Simplified outline of this Division.................................................. 265

Subdivision AA—Application of Division to non‑share equity interests  266

109BA.. Application of Division to non‑share dividends.............................. 266

Subdivision B—Private company payments, loans and debt forgiveness are treated as dividends          266

109C..... Payments treated as dividends......................................................... 266

109D..... Loans treated as dividends.............................................................. 267

109E...... Amalgamated loan from a previous year treated as dividend if minimum repayment not made                270

109F...... Forgiven debts treated as dividends................................................ 273

Subdivision C—Forgiven debts that are not treated as dividends             275

109G..... Debt forgiveness that does not give rise to a dividend.................... 275

Subdivision D—Payments and loans that are not treated as dividends    277

109H..... Simplified outline of this Subdivision............................................. 277

109J...... Payments discharging pecuniary obligations not treated as dividends 278

109K..... Inter‑company payments and loans not treated as dividends........... 278

109L...... Certain payments and loans not treated as dividends....................... 278

109M.... Loans made in the ordinary course of business on arm’s length terms not treated as dividends               279

109N..... Loans meeting criteria for minimum interest rate and maximum term not treated as dividends 279

109NA.. Certain liquidator’s distributions and loans not treated as dividends 281

109NB.. Loans to purchase shares under employee share schemes not treated as dividends  281

109P...... Amalgamated loans not treated as dividends in the year they are made 281

109Q..... Commissioner may allow amalgamated loan not to be treated as dividend               282

109R..... Some payments relating to loans not taken into account.................. 283

Subdivision DA—Demerger dividends not treated as dividends                285

109RA.. Demerger dividends not treated as dividends.................................. 285

Subdivision DB—Other exceptions                                                                    285

109RB... Commissioner may disregard operation of Division or allow dividend to be franked              285

109RC... Dividend may be franked if taken to be paid because of family law obligation        287

109RD.. Commissioner may extend period for repayments of amalgamated loan  287

Subdivision E—Payments and loans through interposed entities              288

109S...... Simplified outline of this Subdivision............................................. 288

109T...... Payments and loans by a private company to an entity through one or more interposed entities              289

109U..... Payments and loans through interposed entities relying on guarantees 290

109UA.. Certain liabilities under guarantees treated as payments.................. 291

109V..... Amount of private company’s payment to target entity through one or more interposed entities              292

109W.... Private company’s loan to target entity through one or more interposed entities      293

109X..... Operation of Subdivision D in relation to payment or loan............. 294

Subdivision EA—Unpaid present entitlements                                               295

109XA.. Payments, loans and debt forgiveness by a trustee in favour of a shareholder etc. of a private company with an unpaid present entitlement........................................................................... 295

109XB.. Amounts included in assessable income......................................... 298

109XC.. Modifications.................................................................................. 299

Subdivision F—General rules applying to all amounts treated as dividends  300

109Y..... Proportional reduction of dividends so they do not exceed distributable surplus     300

109Z...... Characteristics of dividends taken to be paid under this Division... 302

109ZA... No dividend taken to be paid for withholding tax purposes............ 303

109ZB... Amount treated as dividend is not a fringe benefit.......................... 303

109ZC... Treatment of dividend that is reduced on account of an amount taken under this Division to be a dividend             304

Subdivision G—Defined terms                                                                            305

109ZD... Defined terms.................................................................................. 305

109ZE... Interpretation rules about entities..................................................... 306

Division 9—Co‑operative and mutual companies                                     307

117........ Co‑operative companies.................................................................. 307

118........ Company not co‑operative if less than 90% of business with members 308

119........ Sums received to be taxed............................................................... 308

120........ Deductions allowable to co‑operative company.............................. 308

121........ Mutual insurance associations......................................................... 310

Division 9AA—Demutualisation of insurance companies and affiliates                311

Subdivision A—What this Division is about                                                    311

121AA.. What this Division is about............................................................. 311

Subdivision B—Key concepts and related definitions                                  311

121AB.. Insurance company definitions........................................................ 311

121AC.. Mutual affiliate company................................................................. 312

121AD.. Demutualisation and demutualisation resolution day....................... 312

121AE... Demutualisation methods, the policyholder/member group and the listing period    313

121AEA Replacement of policyholders by persons exercising certain rights. 316

121AF... Demutualisation method 1............................................................... 316

121AG.. Demutualisation method 2............................................................... 317

121AH.. Demutualisation method 3............................................................... 320

121AI.... Demutualisation method 4............................................................... 322

121AJ... Demutualisation method 5............................................................... 324

121AK.. Demutualisation method 6............................................................... 326

121AL... Demutualisation method 7............................................................... 328

121AM. Embedded value of a mutual life insurance company...................... 330

121AN.. Net tangible asset value of a general insurance company or mutual affiliate company              332

121AO.. Treasury bond rate, capital reserve adequacy level, eligible actuary and security      334

121AP... Subsidiary and wholly‑owned subsidiary....................................... 335

121AQ.. Other definitions............................................................................. 335

121AR.. List of definitions............................................................................ 336

Subdivision C—Tax consequences of demutualisation                                337

121AS... CGT consequences of demutualisation........................................... 337

121AT... Other tax consequences of demutualisation..................................... 356

Division 9A—Offshore banking units                                                              367

Subdivision A—Object and simplified outline                                                367

121A..... Object.............................................................................................. 367

121B..... Simplified outline............................................................................ 367

Subdivision B—Interpretation                                                                            368

121C..... Interpretation................................................................................... 368

121D..... Meaning of OB activity................................................................... 370

121DA.. Meaning of expressions relevant to investment activity................... 375

121E...... Meaning of offshore person............................................................ 376

121EA... OBU requirement............................................................................ 376

121EB... Internal financial dealings of an OBU............................................. 376

121EC... Meaning of OBU resident‑owner money........................................ 377

121ED... Meaning of trade with a person...................................................... 377

121EE... Definitions relating to assessable income of an OBU..................... 377

121EF... Definitions relating to allowable deductions of an OBU................. 379

Subdivision C—Operative provisions                                                               380

121EG... Reduction of assessable OB income, allowable OB deductions and foreign income tax paid  380

121EH... Loss of special treatment where excessive use of non‑OB money.. 381

121EJ.... Source of income derived from OB activities.................................. 382

121EK... Deemed interest on 90% of certain OBU resident‑owner money.... 382

121EL... Exemption of income etc. of OBU offshore investment trusts........ 383

121ELA Exemption of income etc. of overseas charitable institutions........... 384

121ELB. Adjustment of capital gains and losses from disposal of units in OBU offshore investment trusts          385

Division 9C—Assessable income diverted under certain tax avoidance schemes            387

121F...... Interpretation................................................................................... 387

121G..... Diverted income and diverted trust income..................................... 389

121H..... Assessment of diverted income and diverted trust income.............. 396

121J...... Ascertainment of diverted income or diverted trust income deemed to be an assessment         396

121K..... Application of International Tax Agreements Act........................... 396

121L...... Division applies notwithstanding exemption under other laws....... 397


79A  Rebates for residents of isolated areas

             (1)  For the purpose of granting to residents of the prescribed area an income tax concession in recognition of the disadvantages to which they are subject because of the uncongenial climatic conditions, isolation and high cost of living in Zone A and, to a lesser extent, in Zone B, in comparison with parts of Australia not included in the prescribed area, a taxpayer (not being a company or a taxpayer in the capacity of a trustee) who is a resident of the prescribed area in the year of income is entitled, in his assessment in respect of income of that year of income, to a rebate of tax ascertained in accordance with this section.

             (2)  Subject to subsections (2A) and 79B(4), the rebate allowable under this section in the assessment of a taxpayer in respect of income of the year of income is:

                     (a)  where the taxpayer is a resident of the special area in Zone A, or of the special area in Zone B, in the year of income—$1,173 increased by 50% of the relevant rebate amount in relation to the taxpayer in relation to the year of income;

                     (d)  where the taxpayer is a resident of Zone A in the year of income but has not resided or actually been in the special area in Zone A or the special area in Zone B during any part of the year of income—$338 increased by 50% of the relevant rebate amount in relation to the taxpayer in relation to the year of income;

                     (e)  where the taxpayer is a resident of Zone B in the year of income but has not resided or actually been in Zone A or the special area in Zone B during any part of the year of income—$57 increased by 20% of the relevant rebate amount in relation to the taxpayer in relation to the year of income; or

                      (f)  in any other case—such amount as, in the opinion of the Commissioner, is reasonable in the circumstances, being an amount not greater than the amount of the rebate to which the taxpayer would have been entitled under this section if paragraph (a) had applied to him in respect of the year of income and not less than the amount of rebate to which he would have been so entitled if paragraph (e) had so applied to him.

          (2A)  The amount of any rebate that would, but for this subsection, be allowable to a taxpayer under this section in his assessment in respect of income of a year of income shall be reduced by the amount of any prescribed allowance paid to the taxpayer in respect of the year of income.

             (3)  Any alteration of the boundaries of any area referred to in Schedule 2 made (otherwise than by an amendment of this Act) after the commencement of this section shall not affect the operation of this section.

          (3A)  This section has effect subject to section 23AB.

          (3B)  For the purposes of this section, a taxpayer is a resident of a particular area, being the prescribed area, Zone A, Zone B, the special area in Zone A or the special area in Zone B (in this subsection referred to as the relevant area) in a year of income if:

                     (a)  the taxpayer resided in the relevant area in the year of income for a period of more than one‑half of the year of income;

                     (b)  the taxpayer was actually in the relevant area in the year of income for a period of more than one‑half of the year of income;

                     (c)  the taxpayer died during the year of income and at the date of his death resided in the relevant area;

                     (d)  the following conditions are satisfied:

                              (i)  the taxpayer resided, or actually was, in the relevant area in the year of income for a period of not more than one‑half of the year of income;

                             (ii)  the taxpayer resided, or actually was, in the relevant area in the next preceding year of income for a period of not more than one‑half of the next preceding year of income;

                            (iii)  for the purposes of this section, the taxpayer was not a resident of the relevant area in the next preceding year of income; and

                            (iv)  the sum of:

                                        (A)  the number of days in the period mentioned in subparagraph (i); and

                                        (B)  the number of days in the period mentioned in subparagraph (ii), other than days included in a period to which subsection 23AB(8) or 79B(3) applied in relation to the taxpayer in relation to the next preceding year of income;

                                   exceeds 182; or

                     (e)  the following conditions are satisfied:

                              (i)  the taxpayer resided in the relevant area in the year of income for a period of not more than one‑half of the year of income, being a period that included the first day of the year of income;

                             (ii)  the taxpayer resided in the relevant area, in a relevant preceding year of income, for a period of not more than one‑half of that relevant preceding year of income;

                            (iii)  for the purposes of this section, the taxpayer was not a resident of the relevant area in that relevant preceding year of income;

                            (iv)  the sum of:

                                        (A)  the number of days in the period mentioned in subparagraph (i); and

                                        (B)  the number of days in the period mentioned in subparagraph (ii), other than days included in a period to which subsection 23AB(8) or 79B(3) applied in relation to the taxpayer in relation to that relevant preceding year of income;

                                   exceeds 182; and

                             (v)  the taxpayer resided in the relevant area continuously from the commencement of the period mentioned in subparagraph (ii) until the end of the period mentioned in subparagraph (i).

          (3C)  In subsection (3B), a reference to a taxpayer residing, or actually being, in a particular area in a year of income for a period of more than, or not more than, one‑half of the year of income is a reference to the taxpayer:

                     (a)  residing, or actually being, in that area in the year of income for one period of more than, or not more than, as the case may be, one‑half of the year of income; or

                     (b)  residing, or actually being, in that area in the year of income for 2 or more periods the aggregate of the lengths of which is more than, or not more than, as the case may be, one‑half of the year of income.

          (3D)  For the purposes of this section:

                     (a)  the special area within Zone A or Zone B is constituted by:

                              (i)  the points in that Zone that were not, as at 1 November 1981, situated at a distance of 250 kilometres or less by the shortest practicable surface route, from the centre point of the nearest urban centre (whether or not within that Zone) with a census population of not less than 2,500; and

                             (ii)  the points in that Zone that were within the special area in that Zone for the purposes of this section as in force immediately before the commencement of the Income Tax Assessment Amendment Act (No. 4) 1984; and

                     (b)  the distance, by the shortest practicable surface route, between a point in Zone A or Zone B and the centre point of an urban centre is:

                              (i)  where there is only one location within that urban centre from which distances between the urban centre and other places are usually measured—the distance, by the shortest practicable surface route, between that point in Zone A or Zone B and that location; and

                             (ii)  where there are 2 or more locations within that urban centre from which distances between parts of the urban centre and other places are usually measured—the distance, by the shortest practicable surface route, between that point in Zone A or Zone B and the one of those locations that is in the principal one of those parts.

          (3E)  For the purposes of this section other than this subsection, the Commissioner may, if he considers it appropriate having regard to all the circumstances, treat a point in Zone A or Zone B that is not in the special area in that Zone but is adjacent to or in close proximity to the special area in that Zone as being a point in the special area in that Zone.

           (3F)  For the purposes of this section, the census population of Nhulunbuy is taken to be less than 2,500.

             (4)  In this section:

census population, in relation to an urban centre, means the population of that urban centre specified in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1981, being the results published by the Australian Bureau of Statistics in the documents entitled “Persons and Dwellings in Local Government Areas and Urban Centres”.

prescribed allowance means:

                     (a)  so much of a payment under the Social Security Act 1991 or the Veterans’ Entitlements Act 1986 as was included in the payment by way of remote area allowance; or

                     (b)  so much of an exceptional circumstances relief payment, or a payment of farm help income support, under the Farm Household Support Act 1992 as would have been included by way of remote area allowance if it had been a payment of newstart allowance under the Social Security Act 1991 instead of an exceptional circumstances relief payment, or a payment of farm help income support.

relevant preceding year of income, in relation to a year of income, means any of the next 4 preceding years of income other than the immediately preceding year of income.

relevant rebate amount, in relation to a taxpayer in relation to a year of income, means the sum of the following rebates (if any):

                     (a)  any rebate to which the taxpayer would be entitled under section 159K, apart from subsection 159K(1A);

                    (aa)  any rebate to which the taxpayer would be entitled under section 159L, apart from subsections 159L(3A), (5A) and (5B);

                     (b)  any rebate to which the taxpayer is entitled under section 159J in respect of a dependant included in class 5 or 6 in the table in subsection 159J(2);

                   (ba)  any rebate to which the taxpayer would be entitled under section 159J in respect of a dependant included in class 2 in the table in subsection 159J(2), apart from subsections 159J(1AA), (3AA) and (3AB);

                     (c)  any rebate to which the taxpayer would, disregarding subsection 159J(1A), be entitled under section 159J in respect of a dependant included in class 3 or 4 in the table in subsection 159J(2);

                     (d)  any rebate to which the taxpayer would be entitled under section 159J in respect of a dependant included in class 1 in the table in subsection 159J(2) (ignoring subsections 159J(1AA), (3AA) and (3AB)) if subsection 159J(1B) also included a reference to any dependant included in class 1 of that table and the amount applicable to class 1 of that table were $2,440.

Note 1:       This definition lets a taxpayer include the dependent spouse rebate (without child), the child‑housekeeper rebate or the housekeeper rebate for the purpose of working out the relevant rebate amount under this section, even if the taxpayer or the taxpayer’s spouse is eligible for family tax benefit at the Part B rate for the whole or part of a year.

Note 2:       Another effect of the definition (see paragraph (d)) is to let a taxpayer include the dependent spouse rebate (with child), despite its abolition by the A New Tax System) (Consequential and Related Measures) Act (No. 1) 1999, for the purpose of working out the relevant rebate amount.

surface route means a route other than an air route.

the prescribed area means the area comprised in Zone A and Zone B.

urban centre means an area that is described as an urban centre or bounded locality in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1981, being the results published by the Australian Bureau of Statistics in the documents entitled “Persons and Dwellings in Local Government Areas and Urban Centres”.

Zone A means the area described in Part I of Schedule 2.

Zone B means the area described in Part II of Schedule 2.

79B  Rebates for members of Defence Force serving overseas

             (1)  Subject to this section, a taxpayer who, during the year of income, serves as a member of the Defence Force at an overseas locality is entitled, in his assessment in respect of income of the year of income, to a rebate of tax ascertained in accordance with this section.

          (1A)  A taxpayer is not entitled to a rebate under this section in relation to service:

                     (a)  as or under an attachè at an Australian Embassy or Legation in an overseas locality at a time as at which that locality was, or is deemed to have been, a specified locality for the purposes of this subsection; or

                     (b)  with the South‑East Asia Treaty Organization Military Planning Office.

          (1B)  Where the Chief of the Defence Force or a service chief or a person authorized by a chief of staff to give certificates under this subsection certifies, and the Treasurer is satisfied, that any service of a taxpayer in any locality was or will be performed in circumstances similar to those in which any service referred to in subsection (1A) is performed, the taxpayer is not entitled to a rebate under this section in relation to that service.

             (2)  Subject to the succeeding provisions of this section, the rebate allowable under this section in the assessment of a taxpayer in respect of income of the year of income is:

                     (a)  where the total period of service of the taxpayer at overseas localities during the year of income is more than one‑half of the year of income, or where the taxpayer dies at an overseas locality during the year of income—an amount equal to the sum of:

                              (i)  $338; and

                             (ii)  an amount equal to 50% of the concessional rebate amount; or

                     (b)  in any other case—such amount as, in the opinion of the Commissioner, is reasonable in the circumstances, being an amount not greater than the amount of the rebate to which the taxpayer would have been entitled under this section if paragraph (a) had applied to him in respect of the year of income.

             (3)  For the purposes of subsection (2), the total periods of service of the taxpayer in any year of income at overseas localities shall be deemed to include any period of service of the taxpayer as a member of the Defence Force in that year of income in the prescribed area.

          (3A)  For the purposes of subsection (2), the total periods of service of the taxpayer in any year of income at overseas localities shall be deemed not to include any period of service of the taxpayer in respect of which an exemption from income tax applies under section 23AC, 23AD or 23AG.

             (4)  The aggregate of the rebates allowable under this section and section 23AB or under this section and section 79A in the assessment of a taxpayer in respect of income of a year of income shall not exceed an amount equal to the sum of:

                     (a)  $338; and

                     (b)  an amount equal to 50% of the concessional rebate amount.

          (4A)  Where:

                     (a)  but for subsection (4) and this subsection, a rebate would be allowable under this section and a rebate would be allowable under section 79A in the assessment of a taxpayer in respect of income of a year of income; and

                     (b)  the rebate allowable under section 79A exceeds an amount equal to the sum of:

                              (i)  $338; and

                             (ii)  an amount equal to 50% of the concessional rebate amount;

the taxpayer is not entitled to a rebate under this section in that assessment and subsection (4) does not apply in relation to that assessment.

             (5)  For the purposes of this section the Treasurer may, by writing signed by him and deposited with the Commissioner, declare that a locality outside Australia specified in the declaration shall:

                     (a)  by reason of the uncongenial nature of service in that locality and the isolation of the locality, be, or be deemed to have been, as from a date, or during a period, (whether before or after the date of the declaration) specified in the declaration, a locality in relation to which this section applies; or

                     (b)  as from a date (whether before or after the date of the declaration) specified in the declaration, cease, or be deemed to have ceased, to be such a locality;

and this section shall apply, or be deemed to have applied, and shall cease to apply, or be deemed to have ceased to apply, in relation to any such locality accordingly.

          (5A)  The Treasurer may, by writing signed by him and deposited with the Commissioner, declare that an overseas locality specified in the declaration shall become, or be deemed to have become, on a specified date, or shall cease, or be deemed to have ceased, on a specified date, to be, a specified locality for the purposes of subsection (1A).

          (5B)  Nothing in section 170 prevents the amendment of an assessment at any time for the purpose of allowing a rebate to which the taxpayer has become entitled under this section after the making of the assessment.

             (6)  For the purpose of this section:

concessional rebate amount, in relation to a taxpayer in relation to a year of income, means the sum of the following rebates (if any):

                     (a)  any rebate to which the taxpayer would be entitled under section 159K, apart from subsection 159K(1A);

                    (aa)  any rebate to which the taxpayer would be entitled under section 159L, apart from subsections 159L(3A), (5A) and (5B);

                     (b)  any rebate to which the taxpayer is entitled under section 159J in respect of a dependant included in class 5 or 6 in the table in subsection 159J(2);

                   (ba)  any rebate to which the taxpayer would be entitled under section 159J in respect of a dependant included in class 2 in the table in subsection 159J(2), apart from subsections 159J(1AA), (3AA) and (3AB);

                     (c)  any rebate to which the taxpayer would, disregarding subsection 159J(1A), be entitled under section 159J in respect of a dependant included in class 3 or 4 in the table insubsection 159J(2);

                     (d)  any rebate to which the taxpayer would be entitled under section 159J in respect of a dependant included in class 1 in the table in subsection 159J(2) (ignoring subsections 159J(1AA), (3AA) and (3AB)) if subsection 159J(1B) also included a reference to any dependant included in class 1 of that table and the amount applicable to class 1 of that table were $2,440.

Note 1:       This definition lets a taxpayer include the dependent spouse rebate (without child), the child‑housekeeper rebate or the housekeeper rebate for the purpose of working out the concessional rebate amount under this section, even if the taxpayer or the taxpayer’s spouse is eligible for family tax benefit at the Part B rate for the whole or part of a year.

Note 2:       Another effect of this definition (see paragraph (d)) is to let a taxpayer include the dependent spouse rebate (with child), despite its abolition by the A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No. 1) 1999, for the purpose of working out the concessional rebate amount.

locality means an area of land or waters or an area of land and waters.

overseas locality means, in relation to service during any period or death at any time, a locality in relation to which, during that period or at that time, this section applies or is deemed to have applied; and

the prescribed area has the same meaning as that expression has in section 79A.

82  Double deductions

                   Where the profit arising from the sale of any property is included in the assessable income of any person, or where the loss arising from the sale is an allowable deduction, and any expenditure incurred by him in connexion with that property has been allowed or is allowable as a deduction under this Act, that expenditure shall not be deducted in ascertaining the amount of the profit or loss.

82A  Deductions for expenses of self‑education

             (1)  Where a deduction is, or but for this section would be, allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of a year of income in respect of expenses of self‑education, the deduction, or the aggregate of the deductions, so allowable to the taxpayer in respect of those expenses shall not be greater than the amount by which the net amount of expenses of self‑education exceeds $250.

             (2)  In this section:

educational assistance means amounts (other than amounts in the nature of an allowance for maintenance or accommodation) payable under a scheme for the provision by the Commonwealth of assistance for secondary education, technical or tertiary education or post‑graduate study.

expenses of self‑education means expenses necessarily incurred by the taxpayer for or in connection with a prescribed course of education but does not include:

                     (a)  a payment made to an institution of higher education to which Chapter 4 of the Higher Education Funding Act 1988 applies in respect of a contribution payable under that Chapter; or

                   (ab)  a payment made to the Open Learning Agency of Australia in respect of any charge payable in respect of a unit of study undertaken by the taxpayer for the purposes of an approved course of study within the meaning of Chapter 5 of the Higher Education Funding Act 1988; or

                     (b)  a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth under Chapter 5A of that Act; or

                   (ba)  a student contribution amount within the meaning of the Higher Education Support Act 2003 paid to a higher education provider (within the meaning of that Act); or

                   (bb)  a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth under Chapter 4 of that Act; or

                     (c)  a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth or to a participating corporation under Chapter 2B of the Social Security Act 1991 or Part 4A of the Student Assistance Act 1973.

net amount of expenses of self‑education means the amount ascertained by subtracting from the total amount of expenses of self‑education incurred by the taxpayer in the year of income the sum of:

                     (a)  any payment or payments of educational assistance that were capable of being claimed in the year of income by the taxpayer or by another person in respect of the taxpayer other than:

                              (i)  a payment the amount of which has been, or will be, included in the assessable income of the taxpayer of any year of income; or

                             (ii)  a payment that was capable of being claimed in a preceding year of income; and

                     (b)  any payment or payments (other than a payment the amount of which has been, or will be, included in the assessable income of the taxpayer of any year of income) received by the taxpayer, or that the taxpayer was entitled to receive, in the year of income, from the taxpayer’s employer, or from any other person, in respect of:

                              (i)  expenses of self‑education that were incurred by the taxpayer during the year of income; or

                             (ii)  expenses of self‑education in respect of which a deduction has been allowed, or is allowable, or in respect of which a rebate of tax has been allowed, or is allowable, in an assessment in respect of income derived by the taxpayer in a preceding year of income.

prescribed course of education means a course of education provided by a school, college, university or other place of education, and undertaken by the taxpayer for the purpose of gaining qualifications for use in the carrying on of a profession, business or trade or in the course of any employment.

Subdivision CBRegional Headquarters (RHQs)

82C  Object

                   The object of this Subdivision is to provide a deduction for certain expenditure incurred by approved companies in establishing a regional headquarters in Australia.

82CA  Deduction for setup costs of RHQ companies

                   RHQ setup costs incurred on or after 1 July 1994 by an RHQ company in a year of income are an allowable deduction from the assessable income of the RHQ company of the year of income.

82CB  Interpretation

             (1)  In this Subdivision:

associated company has the meaning given by section 82CC.

management related services include the following:

                     (a)  finance and treasury services;

                     (b)  business planning services;

                     (c)  marketing services;

                     (d)  accounting services;

                     (e)  research and development services.

RHQ company means a company that the Treasurer, under section 82CE, has determined to be an RHQ company.

RHQ setup costs means expenditure (whether or not of a capital nature) incurred by an RHQ company:

                     (a)  both:

                              (i)  in setting up the facilities referred to in subsection 82CD(1); and

                             (ii)  in the period starting 12 months before, and ending 12 months after, the company first derives assessable income from the provision of regional headquarters support from those facilities; or

                     (b)  in reimbursing expenditure incurred by a non‑resident associated company of the RHQ company if the latter expenditure would have been covered by paragraph (a) if it had instead been incurred by the RHQ company at the time when it was incurred by the associated company;

but does not include:

                     (c)  costs incurred in connection with feasibility studies in relation to the setting up of facilities in Australia to provide regional headquarters support; or

                     (d)  costs incurred in connection with moving facilities that provide regional headquarters support from one location in Australia to another location in Australia; or

                     (e)  the cost of depreciating assets, equipment, land, buildings or similar items.

             (2)  A company provides regional headquarters support if:

                     (a)  the company provides to an associated company that is located in a country other than Australia; or

                     (b)  a part of the company provides to another part of the company that is located in a country other than Australia;

any of the following:

                     (c)  management related services; or

                     (d)  data services; or

                     (e)  software support services.

             (3)  A reference in this section to the provision of data services to a company, or a part of a company, is a reference to:

                     (a)  the substantial input, transmission or manipulation of data; or

                     (b)  the production of information from data;

for, or on behalf of, that company or that part of that company.

             (4)  A reference in this section to the provision of software support services to a company, or a part of a company, is a reference to the provision, to clients of that company or that part of that company, of advice and assistance in relation to computer software sold by that company or that part of that company.

82CC  Associated companies

                   For the purposes of this Subdivision, a company is an associated company of another company if:

                     (a)  either company controls at least 10% of the votes in the other company (either directly or through one or more interposed companies, partnerships or trust estates); or

                     (b)  a third company is an associated company (including by one or more applications of this paragraph) of both of the companies.

82CD  Application to become an RHQ company

             (1)  A company may, in writing, apply to the Treasurer to become an RHQ company if the company intends to establish facilities in Australia mainly for the purpose of providing regional headquarters support.

             (2)  The Treasurer must publish the address to which applications must be sent.

82CE  Determination of RHQ companies

             (1)  Subject to subsection (3), the Treasurer may, on application by a company under section 82CD, determine, by legislative instrument, that the company is an RHQ company for the purposes of this Subdivision.

             (2)  The determination must:

                     (a)  specify the day when the company commences to be an RHQ company; and

                     (b)  contain any other information the Treasurer considers appropriate.

             (3)  A determination of the Treasurer under subsection (1):

                     (a)  may only be made if the Treasurer is satisfied that the company has the intention mentioned in subsection 82CD(1); and

                     (b)  must be made in accordance with guidelines determined by the Treasurer under this section.

             (4)  The Treasurer must, by legislative instrument, determine guidelines for the making of determinations under subsection (1). The guidelines may require the Treasurer to take into account:

                     (a)  specified criteria; or

                     (b)  recommendations of particular bodies; or

                     (c)  any other factors.

Subdivision DLosses and outgoings incurred under certain tax avoidance schemes

82KH  Interpretation

             (1)  In this Subdivision, unless the contrary intention appears:

additional benefit, in relation to an amount of eligible relevant expenditure, means the additional benefit, or the aggregate of the additional benefits, as the case may be, referred to in paragraph (1F)(b) in relation to that eligible relevant expenditure.

agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

associate, in relation to a taxpayer, means:

                     (a)  in the case of a taxpayer who is a natural person, other than a taxpayer in the capacity of a trustee:

                              (i)  a relative of the taxpayer;

                             (ii)  a partner of the taxpayer;

                            (iii)  if a person who is an associate of the taxpayer by virtue of subparagraph (ii) is a natural person—the spouse or a child of that person;

                            (iv)  a trustee of a trust estate where the taxpayer or another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts; or

                             (v)  a company where:

                                        (A)  the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the taxpayer, of another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph, of a company that is an associate of the taxpayer by virtue of another application of this subparagraph or of any 2 or more such persons; or

                                        (B)  the taxpayer is, the persons who are associates of the taxpayer by virtue of sub-subparagraph (A) and the preceding subparagraphs of this paragraph are, or the taxpayer and the persons who are associates of the taxpayer by virtue of that sub‑subparagraph and those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company;

                     (b)  in the case of a taxpayer being a company, other than a taxpayer in the capacity of a trustee:

                              (i)  a partner of the taxpayer;

                             (ii)  if a person who is an associate of the taxpayer by virtue of subparagraph (i) is a natural person—the spouse or a child of that person;

                            (iii)  a trustee of a trust estate where the taxpayer or another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts;

                            (iv)  another person where:

                                        (A)  the taxpayer company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person, or of that person and another person or other persons, whether those directions, instructions or wishes are communicated directly to the taxpayer company or its directors, or through any interposed companies, partnerships or trusts; or

                                        (B)  that person is, or that person and the persons who, if that person were the taxpayer, would be associates of that person by virtue of paragraph (a), by virtue of sub-subparagraph (A), by virtue of another subparagraph of this paragraph or by virtue of paragraph (c) are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the taxpayer company;

                             (v)  another company where:

                                        (A)  the other company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the taxpayer company, of a person who is an associate of the taxpayer company by virtue of another subparagraph of this paragraph, of a company that is an associate of the taxpayer company by virtue of another application of this subparagraph or of any 2 or more such persons; or

                                        (B)  the taxpayer company is, the persons who are associates of the taxpayer company by virtue of sub-subparagraph (A) and the other subparagraphs of this paragraph are, or the taxpayer company and the persons who are associates of the taxpayer company by virtue of that sub‑subparagraph and those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other company; or

                            (vi)  any other person who, if a third person who is an associate of the taxpayer company by virtue of subparagraph (iv) were the taxpayer, would be an associate of that third person by virtue of paragraph (a), by virtue of another subparagraph of this paragraph or by virtue of paragraph (c);

                     (c)  in the case of a taxpayer in the capacity of a trustee of a trust estate:

                              (i)  any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust estate, either directly or through any interposed companies, partnerships or trusts;

                             (ii)  where a person who is an associate of the taxpayer by virtue of subparagraph (i) is a natural person—any person who, if that natural person were the taxpayer, would be an associate of that natural person by virtue of paragraph (a) or this paragraph; or

                            (iii)  where a person who is an associate of the taxpayer by virtue of subparagraph (i) or (ii) is a company—any person who, if that company were the taxpayer, would be an associate of that company by virtue of paragraph (b) or this paragraph; or

                     (d)  in the case of a taxpayer being a partnership:

                              (i)  a partner in the partnership;

                             (ii)  where any partner in the partnership is a natural person—any person who, if that natural person were the taxpayer, would be an associate of that natural person by virtue of paragraph (a) or (c); or

                            (iii)  where any partner in the partnership is a company—any person who, if the company were the taxpayer, would be an associate of the company by virtue of paragraph (b) or (c).

consumable supplies means property other than:

                     (a)  trading stock; or

                     (b)  choses in action.

expected tax saving, in relation to an amount of eligible relevant expenditure incurred by a taxpayer, means:

                     (a)  where only one amount is, under subsection (1B), a tax saving amount for the purposes of the application of this definition in relation to the eligible relevant expenditure—that tax saving amount; and

                     (b)  where 2 or more amounts are, under subsection (1B), tax saving amounts for the purposes of the application of this definition in relation to the eligible relevant expenditure—the sum of those tax saving amounts.

film means an aggregate of images, or of images and sounds, embodied in any material.

market research means:

                     (a)  the undertaking of research to ascertain the location, extent, value or other characteristics of the market, or the potential market, for goods or services; and

                     (b)  the provision of information, advice or assistance in connection with the marketing of particular goods or services or of goods or services generally.

property includes a chose in action and also includes any estate, interest, right or power, whether at law or in equity, in or over property.

relevant expenditure, in relation to a taxpayer, means:

                     (a)  expenditure in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 25‑25 (Borrowing expenses) of the Income Tax Assessment Act 1997;

                     (b)  expenditure in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 25‑30 (Expenses of discharging a mortgage) of the Income Tax Assessment Act 1997;

                     (c)  a loss or outgoing incurred by the taxpayer in the purchase by the taxpayer of property (not being a chose in action) that, for the purposes of the application of this Act in relation to the taxpayer, is trading stock, to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                     (d)  a loss or outgoing incurred by the taxpayer in respect of interest to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                     (e)  a loss or outgoing incurred by the taxpayer in respect of rent to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                      (f)  a bad debt incurred by the taxpayer in respect of money lent by the taxpayer in the course of carrying on a business to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 or section 25‑35 of the Income Tax Assessment Act 1997 in respect of the bad debt;

                     (g)  a loss or outgoing incurred by the taxpayer in respect of:

                              (i)  the production, marketing or distribution of a film; or

                             (ii)  the acquisition of a copyright subsisting in a film;

                            to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                     (h)  expenditure incurred by the taxpayer in respect of a unit of industrial property, being a unit of industrial property that relates to copyright subsisting in a film, to the extent to which the amount of that expenditure is taken into account, or would, apart from subsections 124R(2) and (3), be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under section 124M or 124N in respect of the residual value of the unit of industrial property;

                   (ka)  expenditure incurred by the taxpayer in respect of an item of intellectual property (as defined in of the Income Tax Assessment Act 1997) that relates to copyright subsisting in a film, but only to the extent described at the end of this definition;

                     (k)  a loss or outgoing incurred by the taxpayer in the purchase of consumable supplies to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                    (m)  a loss or outgoing incurred by the taxpayer in respect of market research to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                     (n)  expenditure incurred by the taxpayer in respect of the acquisition of a unit of industrial property, being a licence under a copyright subsisting in computer software, to the extent to which the amount of that expenditure is taken into account, or would, apart from subsection 124R(3) be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under section 124M or 124N in respect of the residual value of the unit of industrial property;

                   (oa)  expenditure incurred by the taxpayer in respect of acquiring an item of intellectual property (as defined in of the Income Tax Assessment Act 1997) that is a licence under a copyright subsisting in computer software, but only to the extent described at the end of this definition;

                     (o)  a loss or outgoing or expenditure incurred by the taxpayer by way of commission for collecting assessable income of the taxpayer to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing or the expenditure;

                     (p)  a loss or outgoing incurred by the taxpayer in respect of the growing, care or supervision of trees on behalf of the taxpayer to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                   (pa)  a loss or outgoing incurred by the taxpayer in respect of the establishment and tending of trees for felling on behalf of the taxpayer to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 394‑10 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                     (q)  a loss or outgoing incurred by the taxpayer for the purpose of increasing the value of shares in a company, being shares held or beneficially owned by the taxpayer as trading stock, to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                      (r)  a loss or outgoing incurred by the taxpayer in respect of:

                              (i)  the production by another person of a master sound recording; or

                             (ii)  the procuration of the production by another person of a master sound recording;

                            to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;

                      (s)  calls paid by the taxpayer on shares owned by the taxpayer in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under Division 30 (which is about gifts) of the Income Tax Assessment Act 1997;

                     (v)  expenditure (other than expenditure to which a preceding paragraph of this definition applies) incurred by the taxpayer in respect of a unit of industrial property to the extent to which the amount of that expenditure is taken into account, or would, apart from subsections 124R(2) and (3), be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under section 124M or 124N in respect of the residual value of the unit of industrial property; or

                   (wa)  expenditure (unless covered by an earlier paragraph of this definition) incurred by the taxpayer in respect of an item of intellectual property (as defined in of the Income Tax Assessment Act 1997), but only to the extent described at the end of this definition;

                    (w)  a loss or outgoing (other than a loss or outgoing referred to in subsection 52A(1) or to which a preceding paragraph of this definition applies) incurred by the taxpayer to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing.

However, paragraph (ka), (oa) or (wa) only covers expenditure to the extent that:

                     (x)  it is taken into account in working out under Division 40 of the Income Tax Assessment Act 1997 the adjustable value of the item to the taxpayer in determining whether, apart from section 82KL of this Act, the taxpayer could deduct an amount under that Division for the item for a year of income; or

                     (y)  it would be so taken into account apart from item 8 in the table in subsection 40‑180(2), or item 1 in the table in subsection 40‑190(3) (both about non‑arm’s length transactions).

rent means rent in respect of land or premises.

tax avoidance agreement means an agreement that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that a person who, if the agreement had not been entered into or carried out, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than that person would have been liable to pay if the agreement had not been entered into or carried out.

unit of industrial property has the same meaning as in Division 10B.

          (1A)  In determining for the purposes of this Subdivision whether an agreement is a tax avoidance agreement, no regard shall be had to a purpose that is a merely incidental purpose.

       (1AA)  A reference in this Subdivision to the incurring by a taxpayer of a bad debt shall be read as a reference to a debt, or a part of a debt, owed to the taxpayer becoming a bad debt.

       (1AB)  A reference in:

                     (a)  subsection 82KL(2); or

                     (b)  former section 80 in relation to this Subdivision;

to the incurring by a taxpayer of a loss or outgoing shall be read as including a reference to the incurring by a taxpayer of a bad debt.

     (1ABA)  This section has the same effect in relation to an allowable deduction under section 63E in respect of the extinguishing of the whole or part of a debt as it has in respect of an allowable deduction under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 in respect of the writing off of the whole or part of a debt as bad.

       (1AC)  In this Subdivision:

                     (a)  a reference to a copyright subsisting in a film shall be read as including a reference to:

                              (i)  a licence under a copyright subsisting in a film; and

                             (ii)  an interest, whether at law or in equity, in respect of a copyright, or in respect of a licence under a copyright, subsisting in a film; and

                     (b)  a reference to a licence under a copyright subsisting in computer software shall be read as including a reference to an interest, whether at law or in equity, in a licence under a copyright subsisting in computer software.

       (1AD)  A reference in this Subdivision to a tax benefit being allowed or allowable or not being allowed or allowable in respect of relevant expenditure incurred by a taxpayer shall be read as a reference to:

                     (a)  in a case where the relevant expenditure is relevant expenditure to which paragraph (h), (n) or (v) of the definition of relevant expenditure in subsection (1) applies—a deduction being allowed or allowable or not being allowed or allowable, as the case may be, to the taxpayer under section 124M or 124N in respect of the residual value of a unit of industrial property where that residual value would be calculated by reference to the relevant expenditure; and

                     (b)  if paragraph (ka), (oa) or (wa) of the definition of relevant expenditure in subsection (1) covers the expenditure—the taxpayer deducting or being able to deduct, or not deducting or not being able to deduct, as appropriate, an amount under Division 40 of the Income Tax Assessment Act 1997 for an item of intellectual property for a year of income because the taxpayer’s adjustable value of the item would be calculated under that Division by reference to the relevant expenditure; and

                     (d)  in any other case—a deduction being allowed or allowable or not being allowed or allowable, as the case may be, to the taxpayer in respect of the relevant expenditure.

          (1B)  For the purposes of the application of the definition of expected tax saving in subsection (1) in relation to an amount of eligible relevant expenditure incurred by a taxpayer:

                     (a)  where:

                              (i)  if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would be liable to pay income tax in respect of a year of income; and

                             (ii)  if a tax benefit or tax benefits were allowable under this Act in respect of that eligible relevant expenditure, that person would be liable to pay a lesser amount of income tax in respect of that year of income;

                            the amount by which the amount of the tax referred to in subparagraph (i) exceeds the amount of the tax referred to in subparagraph (ii) is a tax saving amount; and

                     (b)  where:

                              (i)  if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would be liable to pay income tax in respect of a year of income; and

                             (ii)  if a tax benefit or tax benefits were allowable under this Act in respect of that eligible relevant expenditure, that person would not be liable to pay income tax in respect of that year of income;

                            the amount of the tax referred to in subparagraph (i) is a tax saving amount.

       (1BA)  In the application of subsection (1B) in determining whether there is a tax saving amount in relation to an amount of eligible relevant expenditure incurred by a taxpayer in a case where, if a tax benefit or tax benefits were allowable in respect of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would:

                     (a)  have a tax loss for a year of income that the person would not have; or

                     (b)  have a greater tax loss for a year of income than the person would have;

if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, apply Division 36 and Subdivision 375‑G of the Income Tax Assessment Act 1997 as if the amount were relevant expenditure but not eligible relevant expenditure.

          (1D)  Subject to subsection (1E), where, in respect of any 2 or more amounts of eligible relevant expenditure (whether incurred by one taxpayer or by 2 or more taxpayers and whether incurred in one year of income or in 2 or more years of income), the following conditions are satisfied, namely:

                     (a)  if subsection (1B) were applied in relation to one of those amounts of eligible relevant expenditure in relation to a person (whether or not that person is the person or one of the persons who incurred the eligible relevant expenditure) in relation to a year of income on the assumption that no tax benefit is or was allowable in respect of any part of the other amount of eligible relevant expenditure, or in respect of any part of any of the other amounts of eligible relevant expenditure, as the case may be, the tax saving amount determined in accordance with that subsection would be greater than the tax saving amount that would be determined in accordance with that subsection in relation to that amount of eligible relevant expenditure in relation to that person in relation to that year of income if that subsection were applied on the assumption that a tax benefit or tax benefits were allowable under this Act in respect of the other amount of eligible relevant expenditure, or in respect of each of the other amounts of eligible relevant expenditure, as the case may be; and

                     (b)  if paragraph (a) of this subsection were applied in relation to that person in relation to that year of income in relation to the other amount of eligible relevant expenditure, or in relation to each of the other amounts of eligible relevant expenditure, as the case may be, the condition specified in that paragraph would be satisfied in relation to that other amount or in relation to each of those other amounts, as the case may be;

then, in the application of subsection (1B) in calculating the tax saving amount in relation to that person in relation to the year of income in relation to any one of the amounts of eligible relevant expenditure first referred to in this subsection, it shall be assumed that no tax benefit is or was allowable in respect of any part of the other of those amounts or in respect of any part of any of the other of those amounts, as the case may be.

          (1E)  Where:

                     (a)  but for this subsection, subsection (1D) would apply to require it to be assumed, for the purposes of the application of subsection (1B) in relation to an amount of eligible relevant expenditure, that no tax benefit is or was allowable in respect of any part of another amount of eligible relevant expenditure (in this subsection referred to as the allowable relevant expenditure); and

                     (b)  section 82KL does not and will not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of the allowable relevant expenditure;

subsection (1D) shall not apply and shall be taken never to have applied so as to require it to be assumed, in the application of subsection (1B) in relation to an amount of eligible relevant expenditure other than the allowable relevant expenditure, that no tax benefit is or was allowable in respect of any part of the allowable relevant expenditure.

           (1F)  For the purposes of this Subdivision, an amount of relevant expenditure incurred by a taxpayer shall be taken to be an amount of eligible relevant expenditure if:

                     (a)  that amount of relevant expenditure was incurred after 24 September 1978 by reason of, as a result of or as part of a tax avoidance agreement entered into after that date;

                     (b)  by reason of, as a result of or as part of the tax avoidance agreement the taxpayer has obtained, in relation to that relevant expenditure being incurred, a benefit or benefits in addition to:

                              (i)  in a case to which subparagraph (ii) does not apply:

                                        (A)  the benefit in respect of which the relevant expenditure was incurred; and

                                        (B)  any benefit that resulted directly or indirectly from the benefit in respect of which the relevant expenditure was incurred and is a benefit that, in the opinion of the Commissioner, might reasonably be expected to have resulted if the benefit in respect of which the relevant expenditure was incurred had been obtained otherwise than by reason of, as a result of or as part of a tax avoidance agreement; or

                             (ii)  in a case where the relevant expenditure is relevant expenditure to which paragraph (w) of the definition of relevant expenditure in subsection (1) applies—any benefit that resulted directly or indirectly from the incurring of the relevant expenditure and is a benefit that, in the opinion of the Commissioner, might reasonably be expected to have resulted if the relevant expenditure had been incurred otherwise than by reason of, as a result of or as part of a tax avoidance agreement; and

                     (c)  in a case where the relevant expenditure is relevant expenditure to which paragraph (s), (v) or (w) of the definition of relevant expenditure in subsection (1) applies—that amount of relevant expenditure was incurred by reason of, as a result of or as part of a tax avoidance agreement entered into before 28 May 1981.

        (1FA)  For the purposes of the application of subsection (1F) in relation to an amount of relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, any benefit obtained by the taxpayer in relation to the making of the loan in respect of which the bad debt is incurred shall be taken to be a benefit obtained by the taxpayer in relation to that relevant expenditure being incurred.

          (1G)  The reference in subsection (1F) to the benefit in respect of which relevant expenditure was incurred by a taxpayer shall be read as a reference to:

                     (a)  in a case where the relevant expenditure is expenditure incurred by the taxpayer in borrowing money, being expenditure in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 25‑25 (Borrowing expenses) of the Income Tax Assessment Act 1997—the making available to the taxpayer of the money borrowed by the taxpayer;

                     (b)  in a case where the relevant expenditure is expenditure incurred by the taxpayer in connection with the discharge of a mortgage, being expenditure in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 25‑30 (Expenses of discharging a mortgage) of the Income Tax Assessment Act 1997—the discharge of the mortgage;

                     (c)  in a case where the relevant expenditure was incurred by the taxpayer in the purchase of property that, for the purposes of the application of this Act in relation to the taxpayer, is or was trading stock—the acquisition of that property by the taxpayer;

                     (d)  in a case where the relevant expenditure was incurred by the taxpayer in respect of interest—the availability to the taxpayer of the money borrowed by the taxpayer;

                     (e)  in a case where the relevant expenditure was incurred by the taxpayer in respect of rent—the use of the property in respect of which the rent was paid;

                      (f)  in a case where the relevant expenditure incurred by the taxpayer was in respect of a bad debt—any interest received or receivable by the taxpayer in respect of the loan in respect of which the bad debt was incurred;

                     (g)  in a case where the relevant expenditure was incurred by the taxpayer in respect of the production, marketing or distribution of a film or the acquisition of a copyright subsisting in a film and is relevant expenditure to which paragraph (g) of the definition of relevant expenditure in subsection (1) applies—the production, marketing or distribution of the film, or the acquisition of the copyright by the taxpayer, as the case may be;

                     (h)  in a case where the relevant expenditure was incurred by the taxpayer in respect of a unit of industrial property, being a unit of industrial property that relates to copyright subsisting in a film, and is relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies—the ownership by the taxpayer of the unit of industrial property;

                     (k)  in a case where the relevant expenditure was incurred by the taxpayer in the purchase of consumable supplies—the acquisition of those consumable supplies by the taxpayer;

                    (m)  in a case where the relevant expenditure was incurred by the taxpayer in respect of market research—the undertaking of the research, or the provision of the information, advice or assistance, in respect of which the relevant expenditure was incurred;

                     (n)  in a case where the relevant expenditure was incurred by the taxpayer in respect of the acquisition of a unit of industrial property, being a licence under a copyright subsisting in computer software—the acquisition by the taxpayer of the unit of industrial property;

                     (o)  in a case where the relevant expenditure was incurred by the taxpayer by way of commission for collecting assessable income of the taxpayer—the collection on behalf of the taxpayer of assessable income of the taxpayer;

                     (p)  in a case where the relevant expenditure was incurred by the taxpayer in respect of the growing, care or supervision of trees on behalf of the taxpayer—the growing, care or supervision of the trees on behalf of the taxpayer;

                   (pa)  in a case where the relevant expenditure was incurred by the taxpayer in respect of the establishment and tending of trees for felling on behalf of the taxpayer—the establishment and tending of trees for felling on behalf of the taxpayer;

                     (q)  in a case where the relevant expenditure was incurred by the taxpayer for the purpose of increasing the value of shares in a company, being shares held or beneficially owned by the taxpayer as trading stock—the increase in the value of those shares;

                      (r)  in a case where the relevant expenditure was incurred by the taxpayer in respect of the production of, or the procuration of the production of, a master sound recording—any amount payable to the taxpayer in respect of the master sound recording, being an amount that, in the opinion of the Commissioner, would be payable to the taxpayer as a result of the incurring by the taxpayer of the relevant expenditure if that expenditure had been incurred by reason of, as a result of or as part of an agreement other than a tax avoidance agreement;

                      (s)  in a case where the relevant expenditure consists of calls paid by the taxpayer on shares owned by the taxpayer and is relevant expenditure to which paragraph (s) of the definition of relevant expenditure in subsection (1) applies—the satisfaction of any liability of the taxpayer to pay the calls and the taxpayer’s continuing ownership of the shares; and

                     (u)  in a case where the relevant expenditure was incurred by the taxpayer in respect of a unit of industrial property and is relevant expenditure to which paragraph (v) of the definition of relevant expenditure in subsection (1) applies—the ownership by the taxpayer of the unit of industrial property.

          (1H)  For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:

                     (a)  an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;

                     (b)  in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, the taxpayer or an associate of the taxpayer acquires from another person the right to recover the amount of a debt that was owed to that other person; and

                     (c)  by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, no consideration was paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of that right or the amount or value of the consideration paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of that right was less than the amount of the debt;

the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit having a value equal to:

                     (d)  in a case where no consideration was paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of the right to recover the amount of the debt—the amount of the debt; and

                     (e)  in any other case—the amount by which the amount of the debt exceeds the amount or value of the consideration paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of the right to recover the amount of the debt.

           (1J)  For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:

                     (a)  an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;

                     (b)  in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement:

                              (i)  a debt becomes owing by the taxpayer or an associate of the taxpayer; or

                             (ii)  a debt became owing, before or at the time of the incurring of the relevant expenditure, by the taxpayer or an associate of the taxpayer; and

                     (c)  it may reasonably be expected that, by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, the person to whom the debt is owed will release, abandon or fail to demand repayment of the debt or of a part of the debt;

the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit of an amount equal to the amount of the debt or that part of the debt, as the case may be.

        (1JA)  For the purposes of the application of subsection (1H) in relation to an amount of relevant expenditure incurred by a taxpayer, being relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, a reference in paragraph (1H)(b) to the acquisition by the taxpayer or an associate of the taxpayer, in relation to that relevant expenditure being incurred, of the right to recover a debt shall be read as including a reference to the acquisition by the taxpayer or an associate of the taxpayer, in relation to the making by the taxpayer of the loan in respect of which the relevant expenditure was incurred, of such a right.

         (1JB)  For the purposes of the application of subsection (1J) in relation to an amount of relevant expenditure incurred by a taxpayer, being relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, a reference in paragraph (1J)(b) to a debt becoming owing, or having become owing, by the taxpayer or an associate of the taxpayer in relation to that relevant expenditure being incurred, shall be read as including a reference to a debt becoming owing, or having become owing, by the taxpayer or an associate of the taxpayer, in relation to the making by the taxpayer of the loan in respect of which the relevant expenditure was incurred.

         (1JE)  For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:

                     (a)  an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;

                     (b)  that relevant expenditure consists of calls paid by the taxpayer on shares owned by the taxpayer and is relevant expenditure to which paragraph (s) of the definition of relevant expenditure in subsection (1) applies; and

                     (c)  in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, consideration (in this subsection referred to as the relevant consideration) is paid or given to the taxpayer or an associate of the taxpayer in respect of the acquisition by any person from the taxpayer of:

                              (i)  all or any of those shares;

                             (ii)  the right to purchase all or any of those shares; or

                            (iii)  the right to require a person to vote, in a meeting of shareholders of the company, in favour of a resolution to vary the rights attached to all or any of those shares;

the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit in addition to the benefits referred to in subparagraphs (1F)(b)(i) and (ii) having a value equal to the amount or value of the relevant consideration reduced by the amount or value of the part (if any) of that relevant consideration that, in the opinion of the Commissioner, is attributable to expenditure (other than the relevant expenditure) incurred by the taxpayer in respect of the shares.

          (1K)  Where:

                     (a)  2 or more amounts of relevant expenditure are incurred by a taxpayer (whether in the same year of income or in different years of income) by reason of, as a result of or as part of the same tax avoidance agreement;

                     (b)  the same paragraph of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts; and

                     (c)  those amounts were incurred in respect of the same benefit;

those amounts shall, for the purposes of this Subdivision, be treated as together constituting one amount of relevant expenditure.

          (1L)  For the purposes of subsection (1K), 2 or more amounts of relevant expenditure shall be taken to have been incurred in respect of the same benefit if:

                     (a)  in a case where paragraph (a) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;

                     (b)  in a case where paragraph (b) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the discharge of the same mortgage;

                     (c)  in a case where paragraph (c) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in the purchase of the same property;

                     (d)  in a case where paragraph (d) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;

                     (e)  in a case where paragraph (e) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same property;

                      (f)  in a case where paragraph (f) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;

                     (g)  in a case where paragraph (g) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same film;

                     (h)  in a case where paragraph (h) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same film;

                     (k)  in a case where paragraph (k) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in the purchase of the same property;

                    (m)  in a case where paragraph (m) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same market research;

                     (n)  in a case where paragraph (n) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same unit of industrial property;

                     (o)  in a case where paragraph (o) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same source of assessable income;

                     (p)  in a case where paragraph (p) or paragraph (pa) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of trees on the same parcel of land;

                     (q)  in a case where paragraph (q) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same shares;

                      (r)  in a case where paragraph (r) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were payable to the same person;

                      (s)  in a case where paragraph (s) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were calls paid on shares in the same company;

                     (v)  in a case where paragraph (v) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same unit of industrial property; and

                    (w)  in a case where paragraph (w) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same source of assessable income or in carrying on the same business.

         (1M)  For the purposes of this Subdivision, a person who obtains a benefit by reason of an act, transaction or circumstance that occurs as part of, in connection with or as a result of a tax avoidance agreement shall be deemed to have obtained that benefit by reason of the tax avoidance agreement.

          (1N)  Where, for the purposes of the application of any provision of this Subdivision, it is required to be assumed that a tax benefit is not or was not allowable in respect of any part of an amount of eligible relevant expenditure and that expenditure is expenditure that was incurred in the acquisition of property that, for the purposes of the application of this Act in relation to the person who incurred the expenditure, is or was trading stock, it shall also be assumed, for the purposes of the application of that provision, that, for the purposes of the application of Division 70 (Trading stock) or 385 (Primary production) of the Income Tax Assessment Act 1997 in relation to that property in relation to the person who incurred the expenditure, that the cost of that property is, and at all times was, nil.

           (1P)  For the purposes of this Subdivision, any benefit that has been obtained by an associate of a taxpayer by reason of, as a result of or as part of a tax avoidance agreement, being a benefit that was obtained in relation to the incurring by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of relevant expenditure, not being relevant expenditure to which subsection (1Q) applies, shall be taken to be a benefit that was obtained by the taxpayer by reason of that tax avoidance agreement and in relation to that relevant expenditure being incurred by the taxpayer.

          (1Q)  For the purposes of this Subdivision, any benefit that has been obtained by an associate of a taxpayer by reason of, as a result of or as part of a tax avoidance agreement, being a benefit that was obtained in relation to:

                     (a)  the incurring by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies; or

                     (b)  the making by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of the loan in respect of which relevant expenditure to which that paragraph applies was incurred;

shall be taken to be a benefit that was obtained by the taxpayer by reason of that tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer or that loan being made by the taxpayer, as the case may be.

           (1S)  For the purposes of the application of this section in determining the amount of any additional benefit obtained by a taxpayer in relation to an amount of relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies being incurred, being expenditure that, by virtue of the expenditure of moneys (in this subsection referred to as the partnership moneys) by a partnership, is deemed by section 124KA to have been incurred by the taxpayer:

                     (a)  the partnership shall be taken to be an associate of the taxpayer;

                     (b)  a reference to the relevant expenditure being incurred by the taxpayer shall be read as including a reference to the partnership moneys being expended by the partnership; and

                     (c)  any benefit obtained by the partnership in relation to the partnership moneys being expended by the partnership shall be taken to have been obtained by the taxpayer in relation to the relevant expenditure being incurred by the taxpayer to such extent only as the Commissioner considers fair and reasonable.

          (1T)  Where:

                     (a)  a taxpayer expends moneys (in this subsection referred to as the film moneys) in producing, or by way of contribution to the cost of producing, a film; and

                     (b)  by virtue of the operation of subsection 124K(2), a part only of the film moneys is taken to be an amount of relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies;

for the purposes of the application of this section in determining the amount of any additional benefit obtained by the taxpayer in relation to the relevant expenditure being incurred:

                     (c)  a reference to the relevant expenditure being incurred by the taxpayer shall read as including a reference to the film moneys being expended by the taxpayer; and

                     (d)  any benefit obtained by the taxpayer in relation to the film moneys being expended by the taxpayer shall be taken to have been obtained by the taxpayer in relation to the relevant expenditure being incurred by the taxpayer to such extent only as the Commissioner considers fair and reasonable.

             (2)  A reference in this Subdivision to the supply of goods or the provision of services shall be read as not including a reference to the making available of money by way of loan.

             (3)  For the purposes of this Subdivision, an agreement shall be taken to have been entered into or carried out for a particular purpose, or for purposes that included a particular purpose, if any of the parties to the agreement entered into or carried out the agreement for that purpose, or for the purposes that included that purpose, as the case may be.

             (4)  A reference in this Subdivision to a person shall be read as including a reference to a person in the capacity of a trustee.

             (5)  A reference in this Subdivision to a provision of the Income Tax Assessment Act 1997 includes a reference to the corresponding provision of the Income Tax Assessment Act 1936.

82KJ  Deduction not allowable in respect of certain pre‑paid outgoings

                   Where:

                     (a)  a loss or outgoing in respect of which a deduction would, but for this Subdivision, be allowable, was incurred by a taxpayer after 19 April 1978 by reason of, as a result of or as part of a tax avoidance agreement;

                     (b)  having regard to the benefit in respect of which the loss or outgoing was incurred (but without regard to any benefit relating to the acquisition or possible acquisition of the property referred to in paragraph (c)), the amount of the loss or outgoing was greater than the amount (if any) that might reasonably be expected to have been incurred, at the time when the loss or outgoing was incurred, in respect of that benefit if the loss or outgoing had not been incurred by reason of, as a result of or as part of a tax avoidance agreement;

                     (c)  property has been, will be, or may reasonably be expected to be, acquired by the taxpayer or by an associate of the taxpayer as a result of, by reason of, or as part of the tax avoidance agreement; and

                     (d)  the consideration (if any) that was payable in respect of the acquisition of that property was less, or the consideration that may reasonably be expected to be payable in respect of the acquisition of that property is less, than the consideration that might reasonably be expected to have been payable, or to be payable, as the case may be, in respect of the acquisition of that property if the loss or outgoing had not been incurred;

notwithstanding any other provision of this Act, a deduction is not allowable to the taxpayer in respect of the loss or outgoing.

82KK  Schemes designed to postpone tax liability

             (1)  This section applies to a loss or outgoing incurred by a taxpayer if:

                     (a)  the loss or outgoing was incurred after 19 April 1978 and was incurred to an associate of the taxpayer;

                     (b)  a deduction is allowable to the taxpayer in respect of that loss or outgoing; and

                     (c)  the deduction allowable in respect of that loss or outgoing would, but for this section, be allowable to the taxpayer in the year of income in which the loss or outgoing was incurred and:

                              (i)  in a case where the loss or outgoing is in respect of interest that, if it had actually been paid, would be subject to withholding tax under Division 11A—the withholding tax payable in respect of the whole or a part of the interest is not payable until a time occurring in a subsequent year of income; and

                             (ii)  in any other case—the whole or a part of the amount incurred to the associate will not be included in the assessable income of the associate until a subsequent year of income.

             (2)  Notwithstanding any other provision of this Act, where:

                     (a)  a taxpayer incurs in a year of income (in this subsection referred to as the relevant year of income) a loss or outgoing (not being a loss or outgoing in respect of the supply of goods or the provision of services at a time that occurs after, or during a period that occurs after or extends beyond, the end of the relevant year of income) and the loss or outgoing is a loss or outgoing to which this section applies; and

                     (b)  the loss or outgoing was incurred by reason of, as a result of, as part of or in connection with an agreement, course of conduct or course of business that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that:

                              (i)  in a case where the loss or outgoing is in respect of interest that, if it had actually been paid, would be subject to withholding tax under Division 11A—the withholding tax payable in respect of the whole or a part of the interest will not be payable until a time occurring in a subsequent year of income; and

                             (ii)  in any other case—the whole or a part of the amount incurred to the associate would not be included in the assessable income of the associate until a subsequent year of income;

the loss or outgoing shall, for the purposes of this Act, be deemed to have been incurred by the taxpayer in the relevant year of income and in any subsequent year of income only to the extent to which the loss or outgoing represents an amount actually paid during the relevant year of income or that subsequent year of income by the taxpayer to the person to whom the loss or outgoing is incurred.

             (3)  Notwithstanding any other provision of this Act but subject to subsection (4), where:

                     (a)  a taxpayer incurs in a year of income a loss or outgoing in respect of the supply of goods or the provision of services at a time that occurs after, or during a period that occurs after or extends beyond, the end of the year of income and the loss or outgoing is a loss or outgoing to which this section applies; and

                     (b)  the loss or outgoing was incurred by reason of, as a result of or as part of an agreement that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that:

                              (i)  a deduction would be allowable to the taxpayer in a year of income in respect of the loss or outgoing; and

                             (ii)  the whole or a part of the amount of the loss or outgoing would not be included in the assessable income of the person to whom the loss or outgoing was incurred until a subsequent year of income;

that loss or outgoing shall, for the purposes of this Act, be deemed to have been incurred by the taxpayer in the year of income in which, or in the years of income in which, goods to which the loss or outgoing relates are supplied or services to which the loss or outgoing relates are provided.

             (4)  Where, by virtue of subsection (3), a loss or outgoing incurred by a taxpayer in respect of the supply of goods or the provision of services is deemed to have been incurred by the taxpayer in each of 2 or more years of income, there shall be allowable as a deduction to the taxpayer in each such year of income so much only of the amount that, apart from this section, would be allowable as a deduction in respect of the loss or outgoing as the Commissioner considers reasonable having regard to the extent to which the goods in respect of which the loss or outgoing was incurred were supplied or the services in respect of which the loss or outgoing was incurred were provided, in each of those years of income.

             (5)  In determining whether paragraph (2)(b) or (3)(b) applies in relation to a loss or outgoing, no regard shall be had to a purpose that is a merely incidental purpose.

82KL  Tax benefit not allowable in respect of certain recouped expenditure

             (1)  Where the sum of the amount or value of the additional benefit in relation to an amount of eligible relevant expenditure incurred by a taxpayer and the expected tax saving in relation to that amount of eligible relevant expenditure is equal to or greater than the amount of the eligible relevant expenditure, notwithstanding any other provision of this Act but subject to this section, a tax benefit is not and shall be deemed never to have been, allowable in respect of any part of that amount of eligible relevant expenditure.

             (2)  Where, at any time, the Commissioner is of the opinion that, apart from this subsection, subsection (1) might reasonably be expected, at a later time, to operate to deem a tax benefit not to be allowable and never to have been allowable in respect of expenditure or a loss or outgoing incurred by a taxpayer then, notwithstanding any other provision of this Act but subject to this section, a tax benefit is not allowable and shall be deemed never to have been allowable in respect of that expenditure or that loss or outgoing, as the case may be.

             (3)  Where, in the making of an assessment, subsection (2) has been applied by reason that the Commissioner was of the opinion that a particular circumstance would exist and the Commissioner later becomes satisfied that that circumstance will not exist, then, notwithstanding anything contained in section 170, the Commissioner may amend the assessment at any time for the purposes of ensuring that this Subdivision shall be taken always to have applied on the basis that that circumstance did not, and would not, exist.

             (4)  Where:

                     (a)  an amount of eligible relevant expenditure is incurred by a partnership;

                     (b)  apart from this subsection, this section would not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of that amount of eligible relevant expenditure; and

                     (c)  the Commissioner is satisfied that any partner in the partnership became a partner in the partnership by reason of or as a result of an agreement (whether or not that agreement was the agreement by virtue of which the partner became a partner in the partnership) that was entered into by any of the parties to the agreement for the purpose, or primarily for the purpose, of ensuring that this section would not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of the amount of the eligible relevant expenditure;

then, notwithstanding any other provision of this Act, a tax benefit is not allowable and shall be deemed never to have been allowable in respect of any part of that amount of eligible relevant expenditure.

             (5)  Where:

                     (a)  in the making of an assessment, this section has been applied on the basis that a taxpayer was to be taken to have obtained a benefit by reason that it was reasonable to expect that a person to whom a debt was owed by the taxpayer or an associate of the taxpayer would release, abandon or fail to demand repayment of the debt or of a part of the debt; and

                     (b)  the whole or a part of that debt or of that part of the debt is repaid;

then, notwithstanding anything contained in section 170, the Commissioner may amend the assessment at any time for the purposes of ensuring that this Subdivision shall be taken never to have applied on the basis that it was reasonable to expect that the person to whom the debt was owed would release, abandon or fail to demand repayment of the amount that was repaid.

             (6)  Where subsection (1), (2) or (4) deems a tax benefit not to be and never to have been allowable in respect of a loss or outgoing incurred by a taxpayer in the purchase of property that, for the purposes of the application of this Act and the Income Tax Assessment Act 1997 in relation to the taxpayer is or was trading stock, then, notwithstanding any other provision of this Act or that Act, the cost or cost price of that property, for the purposes of the application of (Primary production) of the Income Tax Assessment Act 1997 Subdivision B of Division 2 of Part III of this Act or Division 70 (Trading stock) or 385 in relation to that property in relation to the taxpayer, shall be taken to be, and at all times to have been, nil.

             (7)  Where, at any time after the making of an assessment in relation to a taxpayer, the taxpayer considers that the Commissioner ought to amend the assessment in accordance with subsection (3) or (5), the taxpayer may post to or lodge with the Commissioner a request in writing for an amendment of the assessment in accordance with subsection (3) or (5) or in accordance with subsections (3) and (5).

             (8)  The Commissioner shall consider the request and shall serve on the taxpayer, by post or otherwise, a written notice of his decision on the request.

             (9)  If the taxpayer is dissatisfied with the Commissioner’s decision on the request, the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.

Subdivision HPeriod of deductibility of certain advance expenditure

82KZL  Interpretation

             (1)  In this Subdivision, unless the contrary intention appears:

agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

approved stock exchange has the meaning give by section 470.

associate has the meaning given by section 318.

eligible service period, in relation to an amount of expenditure incurred under an agreement, means the period from the beginning of:

                     (a)  the day, or the first day, on which the thing to be done under the agreement in return for the amount of expenditure is required, or permitted, as the case may be, to commence being done; or

                     (b)  if the expenditure is incurred on a later day—the day on which the expenditure is incurred;

until the end of:

                     (c)  the day, or the last day, on which the thing to be done under the agreement in return for the amount of expenditure is required, or permitted, as the case may be, to cease being done; or

                     (d)  if that day or last day ends more than 10 years after the beginning of the period—10 years after the beginning of the period.

excluded expenditure means an amount of expenditure:

                     (a)  less than $1,000;

                     (b)  required to be incurred by a law, or by an order of a court, of the Commonwealth, a State or a Territory;

                     (c)  under a contract of service; or

                     (d)  to the extent that it is of a capital, private or domestic nature; or

                     (e)  that has been or is incurred after 21 September 1999 by a general insurance company in connection with the issue of a general insurance policy and was related or relates to the gross premiums derived by the company in respect of the policy; or

                      (f)  that has been or is incurred after 21 September 1999 by a general insurance company in payment of reinsurance premiums in respect of the reinsurance of risks covered by general insurance policies, other than reinsurance premiums that were or are paid in respect of a particular class of insurance business where, under the contract of reinsurance, the reinsurer agrees, in respect of a loss incurred by the company that is covered by the relevant policy, to pay only some or all of the excess over an agreed amount.

pre‑RBT obligation means a contractual obligation that:

                     (a)  exists under an agreement at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999; and

                     (b)  requires the payment of an amount for the doing of a thing under the agreement; and

                     (c)  requires the payment to be made before the doing of the thing; and

                     (d)  cannot be escaped by unilateral action by the party bound by the obligation to make the payment.

research and development activities has the meaning given by section 73B.

transfer includes assign.

             (2)  Without otherwise limiting the generality of references in this Subdivision to expenditure being incurred under an agreement in return for the doing of a thing under the agreement:

                     (a)  where expenditure incurred under an agreement consists of a payment of loan interest or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the making available or continued making available, as the case requires, of the loan principal, or other amount of a similar kind, under the agreement during the period to which the payment relates;

                     (b)  where expenditure incurred under an agreement consists of a payment of rent, a lease payment or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the making available or continued making available, as the case requires, of the thing rented or leased, or other thing of a similar kind, under the agreement during the period to which the payment relates; and

                     (c)  where expenditure incurred under an agreement consists of a payment of an insurance premium or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the provision or continued provision, as the case requires, of insurance against the risk concerned, or of a thing of a similar kind, under the agreement during the period to which the payment relates.

             (3)  This Subdivision has effect as if carrying on research and development activities were carrying on a business.

82KZLA  Subdivision does not apply to financial arrangements to which Subdivision 250‑E applies

                   To avoid doubt, this Subdivision does not apply to:

                     (a)  a financial arrangement to which Subdivision 250‑E of the Income Tax Assessment Act 1997 applies; or

                     (b)  a financial benefit (within the meaning of that Act) that is provided or received in relation to such an arrangement.

Note:          See section 250‑210 of the Income Tax Assessment Act 1997.

82KZM  Expenditure by small business entities and individuals incurring non‑business expenditure

             (1)  Where:

                     (a)  a taxpayer incurs expenditure under an agreement entered into after 25 May 1988; and

                    (aa)  at least one of the following applies:

                              (i)  the taxpayer is a small business entity for the year of income and has not chosen to apply section 82KZMD to the expenditure;

                             (ii)  the taxpayer is an individual and the expenditure is not incurred in carrying on a business;

                            (iii)  the expenditure meets a pre‑RBT obligation (see subsection 82KZL(1)); and

                     (b)  the expenditure is not excluded expenditure; and

                   (ba)  either:

                              (i)  the eligible service period for the expenditure is longer than 12 months; or

                             (ii)  the eligible service period for the expenditure is 12 months or shorter but ends after the last day of the year of income after the one in which the expenditure was incurred; and

                     (c)  a deduction under former section 51 or section 73B, 73BA, 73BH, 73QA, 73QB or former section 73Y of this Act or section 8‑1 of the Income Tax Assessment Act 1997 in respect of the expenditure would, apart from this section, be allowable from the assessable income of the taxpayer of the year of income in which the expenditure is incurred;

then, for the purposes of this Act, instead of the deduction being allowable as mentioned in paragraph (c), a proportion of the deduction is allowable from the assessable income of the taxpayer of each year of income during which the whole or part of the eligible service period in relation to the expenditure occurs, being a proportion ascertained in accordance with the formula:

where:

Period in year is the number of days in the whole or the part of the eligible service period that occurs in the year of income.

Eligible service period is the number of days in the eligible service period.

             (2)  Subsection (1) has effect subject to Division 245 of Schedule 2C.

82KZMA  Application of section 82KZMD

Overview

             (1)  Section 82KZMD sets the amount and timing of deductions for expenditure that a taxpayer incurs in a year of income (the expenditure year), if:

                     (a)  apart from those sections, the taxpayer could deduct the expenditure under section 73B, 73BA, 73BH, 73QA, 73QB or former section 73Y of this Act or section 8‑1 of the Income Tax Assessment Act 1997 for the expenditure year; and

                     (b)  the requirements in subsections (2), (3), (4) and (5) are met.

Requirements for taxpayer

             (2)  The taxpayer:

                     (a)  must:

                              (i)  carry on a business; or

                             (ii)  be a taxpayer that is not an individual and that does not carry on a business; and

                     (b)  if the taxpayer is a small business entity for the expenditure year—must, before lodging its return of income for that year or within such further time as the Commissioner allows, choose to apply section 82KZMD to the expenditure.

             (3)  The expenditure must be:

                     (a)  either:

                              (i)  incurred in carrying on a business; or

                             (ii)  incurred otherwise than in carrying on a business by a taxpayer that is not an individual; and

                     (b)  incurred under an agreement (see subsection 82KZL(1); and

                     (c)  incurred in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.

Requirement for expenditure not to be excluded expenditure

             (4)  The expenditure must not be excluded expenditure (see subsection 82KZL(1)).

Requirement for expenditure not to meet pre‑RBT obligation

             (5)  The expenditure must not meet a pre‑RBT obligation (see subsection 82KZL(1)).

Relationship with other provisions

             (6)  Section 82KZMD has effect:

                     (a)  despite section 8‑1 of the Income Tax Assessment Act 1997; and

                     (b)  subject to Division 245 of Schedule 2C to this Act.

82KZMD  Business expenditure and non‑business expenditure by non‑individual

             (2)  For each year of income containing all or part of the eligible service period for the expenditure, the taxpayer may deduct the amount worked out using the formula:

Note:          This section does not apply to expenditure incurred by a small business entity unless the small business entity chooses to apply this section to the expenditure: see paragraph 82KZMA(2)(b).

82KZME  Expenditure under some agreements

             (1)  Section 82KZMF applies to set the amount and timing of deductions for expenditure that a taxpayer incurs in a year of income (the expenditure year) if:

                     (a)  apart from section 82KZMF, the taxpayer could deduct the expenditure under section 73B, 73BA, 73BH, 73QA, 73QB or former section 73Y of this Act or section 8‑1 of the Income Tax Assessment Act 1997 for the expenditure year; and

                     (c)  the requirements of subsections (2) and (3) are met.

Note:          There are some exceptions: see subsections (5), (6), (7), (8) and (9).

General requirements for expenditure

             (2)  The expenditure must be incurred:

                     (a)  after 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999 under an agreement; and

                     (b)  in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.

Requirements for agreement

             (3)  There are these requirements for the agreement:

                     (a)  the taxpayer’s allowable deductions for the expenditure year that are attributable to the agreement must exceed the taxpayer’s assessable income (if any) for the expenditure year that is attributable to the agreement; and

                     (b)  the taxpayer does not have day to day control over the operation of the agreement (whether or not the taxpayer has the right to be consulted or give directions); and

                     (c)  at least one of these must be satisfied:

                              (i)  there is more than one participant in the agreement in the same capacity as the taxpayer;

                             (ii)  the person who manages, arranges or promotes the agreement, or an associate of that person, manages, arranges or promotes similar agreements for other taxpayers.

Activities that relate to the agreement

             (4)  Without affecting the operation of any other section in this Subdivision, an agreement referred to in this section includes all activities that relate to the agreement, including those that give rise to deductions or assessable income.

Exception 1: certain negatively geared investments

             (5)  The expenditure must not be:

                     (a)  a premium for building insurance, contents insurance or rent protection insurance; or

                     (b)  interest on money borrowed to acquire:

                              (i)  real property or an interest in real property; or

                             (ii)  shares that are listed for quotation in the official list of an approved stock exchange; or

                            (iii)  units in a trust that has at least 300 beneficiaries and is a widely held unit trust as defined in section 272‑105 in Schedule 2F;

where:

                     (c)  the taxpayer has obtained, or can reasonably be expected to obtain, rent, dividends or trust income from the agreement; and

                     (d)  the taxpayer has not obtained and will not obtain any other kind of assessable income from the agreement (except a capital gain or an insurance receipt); and

                     (e)  all aspects of the agreement have been conducted at arm’s length.

Exception 2: infrastructure borrowings

             (6)  The expenditure must not be an allowable deduction because of section 159GZZZZF in respect of an infrastructure borrowing as defined in subsection 93D(1) of the Development Allowance Authority Act 1992.

Exception 3: expenditure is excluded expenditure

             (7)  The expenditure must not be excluded expenditure (see subsection 82KZL(1)).

Exception 4: expenditure meets a pre‑existing obligation

             (8)  The expenditure by the taxpayer must not meet a contractual obligation that:

                     (a)  exists under an agreement at or before 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999; and

                     (b)  requires the payment of an amount for the doing of a thing under the agreement; and

                     (c)  requires the payment to be made before the doing of the thing; and

                     (d)  cannot be escaped by unilateral action by the taxpayer.

Exception 5: agreement to which a product ruling applies

             (9)  The expenditure must not be under an agreement to which a product ruling applies, describing expenditure under the agreement as being allowable as a deduction.

           (10)  The product ruling must be made:

                     (a)  on or before 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999; or

                     (b)  in response to an application for a product ruling where:

                              (i)  the application was received by the Commissioner on or before the time specified in paragraph (a); and

                             (ii)  the Commissioner acknowledged receiving the application.

           (11)  In this section:

product ruling means a public ruling made under Part IVAAA of the Taxation Administration Act 1953 about a particular investment product.

82KZMF  Proportional deduction

             (1)  If this section applies to expenditure incurred by a taxpayer in a year of income:

                     (a)  the taxpayer cannot deduct all of the expenditure for the expenditure year; and

                     (b)  instead, the taxpayer can deduct, for each year of income during which part of the eligible service period for the expenditure occurs, an amount worked out using this formula:

             (2)  This section has effect:

                     (a)  despite section 73B, 73BA, 73BH, 73QA, 73QB or former section 73Y of this Act or section 8‑1 of the Income Tax Assessment Act 1997; and

                     (b)  subject to Division 245 of Schedule 2C to this Act.

82KZMG  Deductions for certain forestry expenditure

             (1)  Sections 82KZMD and 82KZMF do not affect the timing of a deduction for expenditure incurred by a taxpayer in a year of income (the expenditure year) to the extent that the requirements of this section are met.

General requirements for expenditure

             (2)  There are these requirements for the expenditure:

                     (a)  it must be incurred on or after 2 October 2001 and on or before 30 June 2008 under an agreement; and

                     (b)  the eligible service period for the expenditure must be 12 months or shorter and must end on or before the last day of the year of income after the expenditure year; and

                     (c)  it must be incurred in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.

Requirements for agreement

             (3)  There are these requirements for the agreement:

                     (a)  the agreement must be for planting and tending trees for felling; and

                     (b)  the taxpayer must not have day to day control over the operation of the agreement (whether or not the taxpayer has the right to be consulted or give directions); and

                     (c)  at least one of these must be satisfied:

                              (i)  there is more than one participant in the agreement in the same capacity as the taxpayer;

                             (ii)  the person (the manager) who manages, arranges or promotes the agreement, or an associate of that person, manages, arranges or promotes similar agreements for other taxpayers.

Requirements for expenditure

             (4)  The expenditure incurred by the taxpayer must be paid for seasonally dependent agronomic activities undertaken by the manager during the establishment period for the relevant planting of trees for felling.

Example:    Examples of seasonally dependent agronomic activities include:

·         tending the seedlings prior to planting, and planting them;

·         ripping and mounding the site where the planting is to occur;

·         applying fertiliser, herbicide or pesticide in conjunction with the planting.

             (5)  The establishment period for a particular planting of trees starts on the day when the first seasonally dependent agronomic activity for that planting is done and ends on the later of:

                     (a)  the day when the last seedling is planted as part of that planting, not including replacement of seedlings already planted; and

                     (b)  the day when any fertiliser, herbicide or pesticide is applied to the seedlings in conjunction with that planting.

82KZMGA  Deductions for certain forestry expenditure

             (1)  A taxpayer cannot deduct expenditure in relation to which the requirements in section 82KZMG are met if:

                     (a)  the taxpayer holds the taxpayer’s interest in the agreement mentioned in section 82KZMG as an initial participant in the agreement; and

                     (b)  a CGT event happens in relation to that interest within 4 years after the end of the year of income in which the taxpayer first incurred expenditure under the agreement.

             (2)  Despite section 170, the Commissioner may amend the taxpayer’s assessment at any time within 2 years after the end of the year of income in which the CGT event happens, for the purpose of giving effect to this section.

82KZMGB  CGT event in relation to interest in 82KZMG agreement

             (1)  This section applies if:

                     (a)  a taxpayer holds an interest in an agreement mentioned in section 82KZMG as an initial participant in the agreement; and

                     (b)  at least one of these conditions is satisfied:

                              (i)  the taxpayer can deduct or has deducted an amount for a year of income in relation to the interest;

                             (ii)  the condition in subparagraph (i) would be satisfied if section 82KZMGA were disregarded; and

                     (c)  subsection 82KZMG(1) applies to the timing of the deduction (or would apply if section 82KZMGA were disregarded); and

                     (d)  a CGT event happens in relation to the interest, other than a CGT event that happens in respect of thinning.

             (2)  The taxpayer’s assessable income for the year of income in which the CGT event happens includes:

                     (a)  if, as a result of the CGT event, the taxpayer no longer holds the interest—the market value of the interest (worked out as at the time of the event); or

                     (b)  otherwise—the decrease (if any) in the market value of the interest as a result of the CGT event.

             (3)  Any amount that the taxpayer actually receives because of the CGT event is not included in the taxpayer’s assessable income (nor is it exempt income).

82KZN  Transfer etc. of rights under agreement

                   Where:

                     (a)  under an agreement entered into either before or after the commencement of this section, a taxpayer (in this section called the original taxpayer) incurs expenditure in return for the doing of a thing during a period after the incurring of the expenditure; and

                     (b)  either:

                              (i)  the original taxpayer transfers to another taxpayer (in this section called the recipient taxpayer) all of his or her rights under the agreement in relation to the doing of the thing during the remainder of the period; or

                             (ii)  the agreement is discharged (whether by performance or otherwise) in so far as it relates to the doing of the thing during the remainder of the period;

the following provisions have effect for the purpose of this Subdivision:

                     (c)  if the whole or part of a deduction under former section 51 of this Act or section 8‑1 of the Income Tax Assessment Act 1997 in respect of the expenditure is, because of this Subdivision, allowable from the assessable income of the original taxpayer of any year of income occurring after the year of income in which the transfer or discharge occurs—that deduction is instead allowable from the assessable income of the year of income in which the transfer, assignment or discharge occurs;

                     (d)  if the recipient taxpayer incurs expenditure in return for the transfer—the recipient taxpayer shall be taken to have incurred, under an agreement entered into at the time of the transfer, so much of that expenditure as is not of a capital, private or domestic nature in return for the doing of the thing during the remainder of the period.

82KZO  Partnership changes where entire interest in agreement rights is not transferred

                   Where:

                     (a)  under an agreement entered into after 25 May 1988, a person (in this section called the original person), or the partners in a partnership (in this section called the original partnership), incurs or incur expenditure in return for the doing of a thing during a period after the incurring of the expenditure;

                     (b)  either of the following (in this section called a partnership change) happens:

                              (i)  a partnership is formed or the original partnership is dissolved, or both; or

                             (ii)  the constitution of the original partnership, or the interests of the partners in the original partnership, is or are varied;

                            with the result that, after the partnership change:

                            (iii)  a person (in this section called the later person), or the partners in a partnership (in this section called the later partnership), holds or hold all of any rights under the agreement to have the thing done during the period after the partnership change; and

                            (iv)  the original person, or one or more of the partners in the original partnership, has an interest in the rights after the partnership change; and

                     (c)  the whole or part of a deduction under former section 51 of this Act or section 8‑1 of the Income Tax Assessment Act 1997 in respect of the expenditure (which whole or part is in this section called a spread deduction) is, because of the application of this Subdivision, allowable from the assessable income of the original person or the original partnership of the year of income in which the partnership change happens or a subsequent year of income;

the following provisions have effect:

                     (d)  if a spread deduction is allowable in relation to the year of income in which the partnership change occurs—the entitlement to the deduction shall, for the purposes of this Act but subject to any later application of this section, be apportioned between the original person or original partnership and the later person or later partnership according to the portions of the eligible service period in the year of income (or, if the case requires, of so much of the period as occurs after a partnership change resulting from a previous application of this section) that occur before and after the partnership change;

                     (e)  if a spread deduction relates to a subsequent year of income—the later person or later partnership, instead of the original person or original partnership, shall, for the purposes of this Act but subject to any later application of this section, be entitled to the deduction;

                      (f)  for the purposes of any later application of this section or section 82KZN, the later person or later partnership, instead of the original person or original partnership, shall be taken to have incurred the expenditure under the agreement.


 

Division 3AConvertible notes

82LA  Application of Division

             (1)  This Division applies only for the purposes of:

                     (a)  calculating an eligible CFC’s attributable income for the purposes of Part X; and

                     (b)  defining convertible note.

             (2)  A term used in paragraph (1)(a) has the same meaning as it has when used in Part X.

82L  Interpretation

             (1)  In this Division, unless the contrary intention appears:

attributable income has the meaning given by Division 7 of Part X.

CFC or controlled foreign company has the meaning given by section 340.

convertible note includes a note issued by a company that provides, whether in pursuance of or by virtue of a trust deed or otherwise:

                     (a)  that the amount of the loan to the company that is evidenced, acknowledged or created by the note or to which the note relates:

                              (i)  whether with or without interest;

                            (iii)  whether at the option of the holder or owner of the note or of some other person or not;

                            (iv)  whether in whole or in part; or

                             (v)  whether exclusively or otherwise;

                            is to be or may be converted into shares in the capital of the company or of another company or is to be or may be redeemed, repaid or satisfied by:

                            (vi)  the allotment or transfer of shares in the capital of the company or of some other company, whether to the holder or owner of the note or to some other person;

                           (vii)  the acquisition of such shares, whether by the holder or owner or by some other person, otherwise than as mentioned in subparagraph (vi); or

                          (viii)  application in or towards paying‑up, in whole or in part, the balance unpaid on shares issued or to be issued by the company or by some other company, whether to the holder or owner or to some other person; or

                     (b)  that the holder or owner of the note is to have, or may have, any right or option to have allotted or transferred to him or to some other person, or for him or some other person otherwise to acquire, shares in the capital of the company or of some other company.

foreign loan means a loan to a company raised outside Australia in a currency other than the currency of Australia.

instrument includes debenture, bond, certificate, receipt or any other document or writing.

issued includes given and executed, and issue has a corresponding meaning.

loan, in relation to a company, means:

                     (a)  a loan, advance or deposit of money to or with the company;

                     (b)  money subscribed to the company; or

                     (c)  any other form of debt or liability of the company;

whether secured or unsecured and whenever redeemable, repayable or to be satisfied.

note means a note or other instrument issued by a company that evidences, acknowledges, creates or relates to a loan to the company.

qualified person, in relation to the valuing of a share in the capital of a company, means a person registered as a company auditor under a law in force in a State or a Territory, but does not include:

                     (a)  a director, secretary or employee of the company;

                     (b)  a partner, employer or employee of a person referred to in paragraph (a); or

                     (c)  a partner or employee of an employee of a person so referred to.

the date of offer, in relation to a loan to a company means the earliest date on which, by any relevant prospectus, notice, circular, advertisement or other written invitation, any person was or persons were invited to subscribe to the loan:

                     (a)  in the case of a new loan—by the payment of money to the company; or

                     (b)  in the case of an approved replacement loan—by converting, in whole or in part, an earlier loan, or by converting, in whole or in part, an earlier loan and the payment of money to the company.

the maturity date, in relation to a loan to which a convertible note applies, means the date by which the whole of the loan is, under the terms applicable to the note, to be repaid, redeemed or satisfied.

the relevant valuation period, in relation to a share, means:

                     (a)  where neither paragraph (b) nor (c) applies in relation to the share—the period of one month ending on the date that is the valuation date in relation to the share;

                     (b)  where:

                              (i)  the share is included in a class of shares that, during the whole of the period of 2 months ending on the valuation date, was listed for quotation in the official list of a stock exchange that was a prescribed stock exchange during the whole of that period of 2 months, or in the official lists of 2 or more stock exchanges each of which was a prescribed stock exchange during the whole of that period of 2 months; and

                             (ii)  fully paid shares included in that class of shares were not recorded by that stock exchange or by any of those stock exchanges, as the case may be, as having been sold during the period of one month specified in paragraph (a) but were recorded by that stock exchange or by one or more of those stock exchanges, as the case may be, as having been sold during the period of one month immediately preceding the commencement of the period of one month so specified;

                            that preceding period of one month; or

                     (c)  where:

                              (i)  the share is included in a class of shares that, during the whole of the period of 3 months ending on the valuation date, was listed for quotation in the official list of a stock exchange that was a prescribed stock exchange during the whole of that period of 3 months, or in the official lists of 2 or more stock exchanges each of which was a prescribed stock exchange during the whole of that period of 3 months; and

                             (ii)  fully paid shares included in that class of shares were not recorded by that stock exchange or by any of those stock exchanges, as the case may be, as having been sold during the period of 2 months ending on the valuation date but were recorded by that stock exchange or by one or more of those stock exchanges, as the case may be, as having been sold during the period of one month immediately preceding the commencement of that period of 2 months;

                            that preceding period of one month.

the valuation date, in relation to a share, means the date that is earlier by 6 weeks than the date that is the date of offer in relation to the loan in respect of which the value of the share is to be ascertained.

             (2)  Where the combined effect or operation of 2 or more related instruments, whether issued at the same time or not, would have the effect or operation of a convertible note, those instruments shall, for the purposes of this Division, be deemed to be together a convertible note.

             (3)  Where:

                     (a)  a company issues a note that provides that the amount of the loan to the company that is evidenced, acknowledged or created by the note or to which the note relates:

                              (i)  whether with or without interest;

                            (iii)  whether at the option of the holder or owner of the note or of some other person or not;

                            (iv)  whether in whole or in part; or

                             (v)  whether exclusively or otherwise;

                            is to be or may be redeemed, repaid or satisfied by the issue, whether by the same company or by another company, of an instrument or a series of instruments; and

                     (b)  that instrument, or any instrument in that series of instruments, is to provide, whether in pursuance of or by virtue of a trust deed or otherwise, as mentioned in paragraph (a) or (b) of the definition of convertible note in subsection (1);

that note and the instrument, or that note and each of the instruments in the series of instruments, shall, for the purposes of this Division, be deemed to be a convertible note.

             (4)  For the purposes of this Division, a convertible note issued by a company applies to a loan to a company if it evidences, acknowledges or creates the loan.

             (5)  A reference in this Division to the terms, or a term, applicable to a convertible note shall be read as including a reference to terms, or a term, that so apply or applies in pursuance of or by virtue of a trust deed or otherwise.

82M  New loans and replacement loans

             (1)  Where:

                     (a)  a loan to a company is made, and is wholly made, by money being paid to the company at the time when the loan is made; and

                     (b)  the loan is not part of or related to a transaction, or is not one of a series of related transactions, under which the person making the loan is to receive or has received, for the purpose of enabling him to make, or of assisting him in making, the loan, any money or other property from the company, or from another company or person as a result of arrangements made with that other company or person by the first‑mentioned company;

the loan shall, for the purposes of this Division, be treated as a new loan.

             (2)  Where:

                     (a)  a loan to a company is, under subsection (1), to be treated as a new loan for the purposes of this Division;

                     (b)  the loan is not evidenced, acknowledged or created by a convertible note or is not a loan to which a convertible note otherwise applies;

                     (c)  the loan is for a fixed period;

                     (d)  the rate of interest payable in respect of the loan is the same in respect of all periods occurring before the date by which the whole of the loan is to be repaid, redeemed or satisfied; and

                     (e)  the loan is, in whole or in part, converted into another loan to the company or to another company, or the loan is, in whole or in part, converted into a part of another loan to the company or to another company and the remainder of the other loan:

                              (i)  is made by money being paid to the company or other company at the time when the loan is made; and

                             (ii)  would, if it were a separate loan, be a loan that, under subsection (1), is to be treated as a new loan for the purposes of this Division;

that other loan shall, for the purposes of this Division, be treated as an approved replacement loan.

82N  Prescribed stock exchanges

                   For the purposes of this Division, a stock exchange is a prescribed stock exchange during a particular period or at a particular time if, in the regulations as in force during that period or at that time, it is specified as a prescribed stock exchange for the purposes of this Division or if it is declared by the regulations to have been a prescribed stock exchange for the purposes of this Division during that period or a period that includes that period or to have been a prescribed stock exchange for the purposes of this Division during a period that includes that time, as the case may be.

82P  Bonus share allotments

             (1)  For the purposes of this section, the making of a bonus share allotment by a company is the allotment by the company of shares (in this section referred to as bonus shares) in the capital of the company (being shares all of which are of the same class as each other) to persons who are the holders of other shares (in this section referred to as qualifying shares) in the capital of the company or in the capital of another company (being shares all of which are of the same class as each other but which are not necessarily of the same class as the bonus shares), being an allotment made to the holders of all shares of the same class as the qualifying shares or an allotment made in pursuance of applications for the allotment of the bonus shares by the holders of the qualifying shares in accordance with an invitation to apply for the allotment of shares given to the holders of the qualifying shares and the holders of all other shares of the same class as the qualifying shares.

             (2)  Where:

                     (a)  the option to convert that exists under a convertible note is an option to have shares allotted to the holder or owner of the note; and

                     (b)  the terms applicable to the note are such that, if a bonus share allotment is made by the company that issued the note or by another company in respect of qualifying shares that are of the same class as the shares that are to be allotted to the holder or owner of the note upon the exercise of the option to convert, the holder or owner of the note is to have the right to have allotted to him shares in the capital of the company or of that other company, as the case may be, of the same class as the bonus shares on terms and conditions that are the same as or correspond with, or are no more favourable to him than, the terms and conditions on which bonus shares are allotted to any holder of qualifying shares;

that right shall, for the purposes of subparagraph 82SA(1)(d)(ii), be deemed to be an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the convertible note.

             (3)  Where:

                     (a)  the option to convert that exists under a convertible note is an option to have shares transferred to the holder or owner of the note; and

                     (b)  the terms applicable to the note are such that, if a bonus share allotment is made by the company that issued the note or by another company, being an allotment the qualifying shares relating to which include the shares that are to be transferred to the holder or owner of the note upon the exercise of the option to convert, and bonus shares allotted in respect of the qualifying shares to be so transferred are allotted to the holder of those shares on terms and conditions that are the same as or correspond with, or are no more favourable to him than, the terms and conditions on which bonus shares are allotted to any other holder of qualifying shares, the holder or owner of the note is to have the right to have the bonus shares allotted to that person transferred to him upon the payment by him, where a consideration was paid or is payable in respect of the allotment of the bonus shares to the other person, of a consideration not less than that consideration;

that right shall, for the purposes of subparagraphs 82S(1)(d)(ii) and 82SA(1)(d)(ii), be deemed to be an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the convertible note.

82Q  Classes of shares

             (1)  Shares in the capital of a company to which there are attached the same rights, including the following rights:

                     (a)  rights in respect of voting;

                     (b)  rights in respect of dividends;

                     (c)  rights in respect of distribution of share capital in consequence of a reduction of share capital;

                     (d)  rights in respect of distribution of the property of the company in the event of the winding up of the company;

constitute a class of shares for the purposes of this Division, and no other shares in the capital of the company constitute a class of shares for such purposes.

             (2)  Notwithstanding anything contained in subsection (1), a share in the capital of a company to be allotted upon the exercise of the option to convert given under the terms applicable to a convertible note shall not, for the purposes of this Division, be deemed to be a share of a different class from a share in the capital of the company already allotted by reason only that during the period of one year after the allotment of the first‑mentioned share, any dividend payable in respect of the share will or may be less than any dividend payable in respect of the second‑mentioned share.

82R  Interest on certain convertible notes not to be an allowable deduction

             (1)  Subject to section 82SA, this section applies to a convertible note issued by a company, not being:

                     (a)  a convertible note issued on or before 15 November 1960; or

                     (b)  a convertible note:

                              (i)  the terms of the issue of which were announced by the company on or before that date; or

                             (ii)  that the company was, in pursuance of an agreement made on or before that date, bound to issue.

             (2)  Where, in pursuance of the terms upon which any convertible notes were issued by a company, a person was entitled to have a convertible note issued to him by that company, the company shall, for the purposes of subsection (1), be deemed to have issued the convertible note to that person at the time when the person first became entitled to have the convertible note issued to him.

             (3)  An outgoing consisting of interest, or a payment in the nature of interest, under a convertible note to which this section applies shall be deemed not to be an allowable deduction from the assessable income of the company.

             (4)  Where a payment has been made by a person (whether under a guarantee or otherwise) that represents, in effect, a payment of interest under a convertible note to which this section applies and the company has incurred an outgoing by way of making good the first‑mentioned payment to that person, whether by way of indemnification or otherwise, the amount of that outgoing shall, for the purposes of this section, be deemed to be an outgoing consisting of interest under the convertible note.

             (5)  Section 25‑25 (Borrowing expenses) of the Income Tax Assessment Act 1997 does not apply to the expenditure incurred by the company in borrowing money by means of convertible notes to which this section applies.

82SA  Interest on certain convertible notes to be an allowable deduction—where loan made on or after 1 January 1976

             (1)  Subject to the succeeding provisions of this section, section 82R does not apply in relation to a convertible note issued by a company where:

                     (a)  the loan to the company to which the note applies is, under section 82M, to be treated as a new loan or an approved replacement loan for the purposes of this Division;

                     (b)  the loan was made on or after 1 January 1976;

                     (c)  the convertible note was issued before the expiration of 2 months after the loan was made; and

                     (d)  the terms applicable to the convertible note are, at the time the note was issued and at all subsequent times, such that:

                              (i)  an option is given to the holder or owner of the convertible note (in this Division referred to as the option to convert) to have allotted or transferred to him shares in the capital of the company or of another company;

                             (ii)  no provision is made for the allotting or transferring of shares in the capital of the company or of another company to the holder or owner of the convertible note except in pursuance of the exercise of the option to convert or except in pursuance of a right that, under section 82P, is an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the note;

                            (iii)  the convertible note would not, but for the option to convert and any right of the kind referred to in subparagraph (ii), be a convertible note;

                            (iv)  the earliest date on which the option to convert may be exercised is a date not later than 2 years after the date of offer;

                             (v)  the latest date on which the option to convert may be exercised is a date not later than the maturity date of the loan or, if the date of offer is more than 10 years earlier than the maturity date, a date not later than 10 years after the date of offer;

                            (vi)  the rate of interest payable in respect of the loan is, subject to subsection (5), the same in respect of all periods occurring before the maturity date of the loan;

                           (vii)  subject to subsection (6), the obligations and rights of the holder or owner of the convertible note (including, but without limiting the generality of the foregoing, obligations and rights with respect to the amount payable on repayment, redemption or satisfaction of the loan and the terms on which shares are to be allotted or transferred in pursuance of the exercise of the option to convert) do not vary in his favour by reason that he exercises the option, or he or the company exercises any other right in relation to the note, at a later rather than at an earlier time after the issue of the note;

                          (viii)  the rights of the holder or owner of the convertible note with respect to the amount payable on repayment, redemption or satisfaction of the loan do not vary according to whether or not he exercises the option to convert;

                            (ix)  the shares to be allotted or transferred upon the exercise of the option to convert:

                                        (A)  are to be allotted or transferred within 2 months after the exercise of the option;

                                        (B)  in the case of shares to be allotted, are, upon payment of the amount payable in respect of the allotment, to be fully paid shares or, in the case of shares to be transferred, are, at the time of transfer, to be fully paid shares; and

                                        (C)  are to be shares of the same class as shares in the capital of the company that, not later than 6 weeks before the date that is the date of offer in relation to the loan, had been allotted and were fully paid;

                             (x)  the shares to be allotted or transferred upon the exercise of the option to convert are to be shares with respect to which no provision is made (whether by the memorandum, or memorandum and articles, of the company, or other instrument constituting or defining the constitution of the company, or otherwise) for changing or converting them into shares of another class, except for the purpose of enabling, in accordance with any law relating to companies, the consolidation and division of all or any of the share capital of the company or of another company or the sub‑division of all or any of the shares in the capital of the company or of another company; and

                            (xi)  the amount payable in respect of the allotment or transfer of a share in pursuance of the exercise of the option to convert is to be paid not later than 1 month after the allotment or transfer, and is to be not less than 90% of the amount that, in accordance with section 82T, is the value as at the valuation date of a fully paid share included in the class of shares in which the share to be allotted or transferred will be, or is, included.

             (2)  Where subsection (1) ceases to have effect in relation to a convertible note by reason of a change in the terms applicable to the note (not being a change resulting from a compromise or arrangement approved by a court), subsection (1) shall be deemed never to have had effect in relation to the note.

             (3)  Where a note is a convertible note in relation to which subsection (1) has effect and the right to exercise the option to convert relating to the note becomes exercisable by a person other than the holder or owner of the note by reason of an assignment of that right, the assignment shall, for the purposes of this section, be disregarded.

             (4)  Where, in relation to a convertible note issued by a company, the company or a director of the company does any act or thing for the purpose of, or purposes that include the purpose of, and having the effect of, causing the amount that, for the purposes of subsection (1), is the minimum amount applicable to a share to be allotted or transferred in pursuance of the exercise of the option to convert relating to the note, to be less than it would otherwise have been, subsection (1) does not have effect in relation to the note.

             (5)  Where, under the terms applicable to a convertible note, the rate of interest payable in respect of the loan to which the note applies is to be varied from time to time (otherwise than with retrospective effect) in accordance with changes, or changes exceeding a specified percentage, in the rate of interest prevailing from time to time:

                     (a)  where the loan is a foreign loan, at a specified place outside Australia in respect of a specified class of transactions; or

                     (b)  where the loan is not a foreign loan, in respect of a specified class of Commonwealth securities;

the term shall, for the purposes of subparagraph (1)(d)(vi), be deemed not to be a term providing for a variation in the rate of interest payable in respect of the loan.

             (6)  For the purposes of subparagraph (1)(d)(vii), the obligations and rights of the holder or owner of a convertible note shall not be deemed to vary in a manner referred to in that subparagraph by reason only that any dividend payable in respect of a share in the capital of a company to be allotted upon the exercise of the option to convert relating to the note, being a dividend payable during the period of 1 year after the allotment of the share, will or may vary according to the time when, in relation to the period to which the dividend relates, the option to convert is exercised.

82T  Value of shares

             (1)  For the purposes of section 82SA, the value of a fully paid share as at the valuation date is:

                     (a)  where:

                              (i)  the share is included in a class of shares that, during the whole of the relevant valuation period, was listed for quotation in the official list of a stock exchange that was a prescribed stock exchange during the whole of that period, or in the official lists of 2 or more stock exchanges each of which was a prescribed stock exchange during the whole of that period; and

                             (ii)  fully paid shares included in that class of shares were recorded by that stock exchange, or by one or more of those stock exchanges, as the case may be, as having been sold during that period;

                            an amount ascertained by dividing the total consideration paid or payable in respect of those sales by the total number of shares so recorded as having been sold; and

                     (b)  in any other case—the amount that a person who is a qualified person in relation to the valuing of the share certifies that, on a true and fair view of the state of the company’s affairs, would, in respect of a sale at the end of the relevant valuation period between a willing but not anxious seller and a willing but not anxious buyer, be expected to be the consideration paid for the share, on the assumption, in a case where the class of shares in which that share is included was not, at the end of the relevant valuation period, listed for quotation in the official list of a stock exchange that, at that time, was a prescribed stock exchange, that the memorandum, or memorandum and articles, of the company, or other instrument constituting or defining the constitution of the company, satisfied, at that time, such of the requirements of a stock exchange that, at that time, was a prescribed stock exchange as it would have been necessary to satisfy to enable that class of shares to be listed for quotation in the official list of that stock exchange.


 

Division 5Partnerships

90  Interpretation

                   In this Division:

exempt income, in relation to a partnership, means the exempt income of the partnership calculated as if the partnership were a taxpayer who was a resident.

net income, in relation to a partnership, means the assessable income of the partnership, calculated as if the partnership were a taxpayer who was a resident, less all allowable deductions except deductions allowable under section 290‑150 or Division 36 of the Income Tax Assessment Act 1997.

non‑assessable non‑exempt income, in relation to a partnership, means the non‑assessable non‑exempt income of the partnership calculated as if the partnership were a taxpayer who was a resident.

partnership loss, in relation to a partnership, means the excess (if any) of the allowable deductions, other than deductions allowable under section 290‑150 or Division 36 of the Income Tax Assessment Act 1997, over the assessable income of the partnership calculated as if the partnership were a taxpayer who was a resident.

91  Liability of partnerships

                   A partnership shall furnish a return of the income of the partnership, but shall not be liable to pay tax thereon.

92  Income and deductions of partner

             (1)  The assessable income of a partner in a partnership shall include:

                     (a)  so much of the individual interest of the partner in the net income of the partnership of the year of income as is attributable to a period when the partner was a resident; and

                     (b)  so much of the individual interest of the partner in the net income of the partnership of the year of income as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.

             (2)  Subject to section 830‑45 of the Income Tax Assessment Act 1997, if a partnership loss is incurred by a partnership in a year of income, there shall be allowable as a deduction to a partner in the partnership:

                     (a)  so much of the individual interest of the partner in the partnership loss as is attributable to a period when the partner was a resident; and

                     (b)  so much of the individual interest of the partner in the partnership loss as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.

       (2AA)  However, if:

                     (a)  the partner is a limited partner in a partnership; and

                     (b)  the partnership is a VCLP, an ESVCLP, an AFOF or a VCMP during the year of income;

the amount allowable under subsection (2), in respect of the year of income, as a deduction must not exceed the amount worked out as follows:

Method statement

Step 1.   Work out the sum of the amounts that the partner has contributed (the partner’s contribution) to the partnership.

Step 2.   Subtract the sum of all the amounts (if any) of the partner’s contribution that are repaid to the partner.

Step 3.   Subtract the sum of all deductions allowed to the partner for losses of the partnership in previous years of income.

Step 4.   Subtract the sum of the amounts of all the debt interests issued by the partner to the extent that they are secured by the partner’s interest in the partnership.

Example:    A limited partner contributes $100,000 to a VCLP, having borrowed $80,000. Because the lender values the partner’s interest in the partnership at $70,000, the partner also provides, as additional security, other assets valued at $10,000.

                   If none of the partner’s contribution has been repaid and the partner has not been allowed deductions for partnership losses in previous years of income, the amount allowable to the partner for a partnership loss cannot exceed $30,000.

          (2A)  Subsection (2) does not apply to a partnership loss if the partner’s interest in the partnership at the end of the year of income is:

                     (a)  a segregated exempt asset (as defined in the Income Tax Assessment Act 1997) of a life assurance company; or

                     (b)  a segregated current pension asset (as defined in the Income Tax Assessment Act 1997) of a complying superannuation fund.

             (3)  The exempt income of a partner in a partnership shall include:

                     (a)  so much of the individual interest of the partner in the exempt income of the partnership of the year of income as is attributable to a period when the partner was a resident; and

                     (b)  so much of the individual interest of the partner in the exempt income of the partnership of the year of income as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.

             (4)  The non‑assessable non‑exempt income of a partner in a partnership shall include:

                     (a)  so much of the individual interest of the partner in the non‑assessable non‑exempt income of the partnership of the year of income as is attributable to a period when the partner was a resident; and

                     (b)  so much of the individual interest of the partner in the non‑assessable non‑exempt income of the partnership of the year of income as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.

92A  Deductions in respect of outstanding subsection 92(2AA) amounts

             (1)  If:

                     (a)  the partner is a limited partner in a partnership; and

                     (b)  the partnership is a VCLP, an ESVCLP, an AFOF or a VCMP during the year of income; and

                     (c)  the amount allowable under subsection 92(2) as a deduction to the partner for partnership losses incurred by the partnership in the year of income is not reduced because of subsection 92(2AA); and

                     (d)  the partner has an outstanding subsection 92(2AA) amount for the year of income;

there is allowable as a deduction to the partnership an amount worked out as follows:

Method statement

Step 1.   Subtract the amount allowable under subsection 92(2) as a deduction to the partner for partnership losses incurred by the partnership in the year of income from the amount worked out using the method statement in subsection 92(2AA).

Step 2.   If the amount worked out under step 1 is greater than or equal to the outstanding subsection 92(2AA) amount for the year of income, the amount of the deduction allowable under this section is the outstanding subsection 92(2AA) amount.

Step 3.   If the amount worked out under step 1 is less than the outstanding subsection 92(2AA) amount for the year of income, the amount of the deduction allowable under this section is the amount worked out under step 1.

             (2)  The partner has an outstanding subsection 92(2AA) amount for a year of income if:

                     (a)  an amount allowable under subsection 92(2) as a deduction to the partner for partnership losses incurred by the partnership in a previous year of income was reduced because of subsection 92(2AA); and

                     (b)  the difference between:

                              (i)  the sum of all reductions made under subsection 92(2AA) to amounts allowable under subsection 92(2) as deductions to the partner for partnership losses incurred by the partnership in previous years of income; and

                             (ii)  the sum of all amounts allowable under this section, in respect of previous years of income, as deductions to the partner in relation to those reductions;

                            is greater than zero.

The amount of that difference is the partner’s outstanding subsection 92(2AA) amount for the year of income.

             (3)  To avoid doubt, a partner’s outstanding subsection 92(2AA) amount for a year of income cannot form part of a tax loss for the purposes of Division 36 of the Income Tax Assessment Act 1997.

94  Partner not having control and disposal of share in partnership income

             (1)  Subject to this section, where:

                     (a)  a share in the net income of a partnership of a year of income is included in the assessable income of a partner in the partnership, not being:

                              (i)  a company;

                             (ii)  a person in the capacity of a trustee; or

                            (iii)  a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership; and

                     (b)  the partnership is so constituted or controlled, or its operations are so conducted, that the partner has not the real and effective control and disposal of that share or of a part of that share;

this section applies to that share or that part of that share, as the case may be.

             (2)  Subject to the succeeding provisions of this section, where:

                     (a)  a partnership is so constituted or controlled, or its operations are so conducted, that a partner in the partnership, being a trustee of a trust estate, has not the real and effective control and disposal of his share in the net income of the partnership of a year of income or of a part of that share (which share or part of a share, as the case may be, is in this subsection referred to as uncontrolled partnership income); and

                     (b)  in calculating in accordance with section 95 the net income of that trust estate or of any other trust estate, there is included in the assessable income of the trust estate any uncontrolled partnership income;

then:

                     (c)  if:

                              (i)  a beneficiary, not being a company or a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership, is presently entitled to the whole of the income of the trust estate otherwise than in the capacity of a trustee; or

                             (ii)  there is no part of the net income of the trust estate that is included in the assessable income of a beneficiary in pursuance of section 97 or in respect of which the trustee is assessed and liable to pay tax in pursuance of section 98;

                            this section applies to the portion of the net income of the trust estate that was derived from uncontrolled partnership income;

                     (d)  if a beneficiary, not being a company or a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership, is presently entitled to a share of the income of the trust estate otherwise than in the capacity of a trustee, this section applies to so much of that share of the net income of the trust estate as bears to that share the same proportion as the portion of the net income of the trust estate that was derived from uncontrolled partnership income bears to the net income of the trust estate; and

                     (e)  if there is a part of the net income of the trust estate that is not included in the assessable income of a beneficiary in pursuance of section 97 and in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section 98, this section applies to so much of that part of the net income of the trust estate as bears to that part the same proportion as the portion of the net income of the trust estate that was derived from uncontrolled partnership income bears to the net income of the trust estate.

             (5)  For the purposes of this section:

                     (a)  where:

                              (i)  the assessable income of a trust estate includes the net income or a share of the net income of another trust estate; and

                             (ii)  the assessable income of the other trust estate by reference to which that net income is calculated included income of a particular class (including an amount that is to be deemed by an application or applications of this paragraph to be income of a particular class);

                            the assessable income of the first‑mentioned trust estate shall be deemed to include income of that class of an amount equal to so much of the net income or share of the net income of the other trust estate that is included in the assessable income of the first‑mentioned trust estate as bears to that net income or share of that net income the same proportion as the portion of the net income of the other trust estate that was derived from income of that class bears to the net income of the other trust estate; and

                     (b)  the portion of the net income of a trust estate that is derived from income of a particular class that is included in the assessable income of the trust estate is the amount remaining after deducting from the income of that class that is included in the assessable income of the trust estate:

                              (i)  any prescribed deductions that relate exclusively to that income of that class;

                             (ii)  so much of any other prescribed deductions (other than apportionable deductions) as, in the opinion of the Commissioner, may appropriately be related to that income of that class; and

                            (iii)  the amount that bears to the prescribed deductions (being apportionable deductions) the same proportion as the amount that, but for this subparagraph, would be the portion of the net income of the trust estate that is derived from that income of that class bears to the sum of the net income of the trust estate and those last‑mentioned prescribed deductions.

             (6)  Where the assessable income of a trust estate includes, or, by virtue of paragraph (5)(a), is to be deemed to include, income of a particular class but the Commissioner is of the opinion that it would be unreasonable to treat each part or share of the net income of the trust estate that is included in the assessable income of a beneficiary, or on or in respect of which the trustee is assessed and liable to pay tax, as including a proportionate part of the portion of the net income of the trust estate that is derived from income of that class, the amount:

                     (a)  that is the amount of a part or share of the net income of the trust estate to which this section applies by virtue of paragraph (2)(d) or (e); or

                     (b)  that is, by virtue of paragraph (5)(a), the amount of the income of that class that is to be deemed to be included in the assessable income of another trust estate;

is, in lieu of the amount that, but for this subsection, would be the amount of that part or share of that net income or the amount of that income of that class, as the case may be, such amount as the Commissioner considers reasonable in the circumstances.

             (8)  Where the Commissioner is of the opinion that, by reason of special circumstances, it would be unreasonable that this section should apply to any income, this section does not apply to that income.

          (8A)  In forming an opinion for the purposes of subsection (8) as to whether it is unreasonable that this section should apply in relation to any of the net income of a trust estate, the Commissioner shall take into consideration the extent (if any) to which that net income represents income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia.

             (9)  Where the assessable income of a taxpayer, other than a taxpayer in the capacity of a trustee, includes income to which this section applies, the taxpayer shall be assessed and is liable to pay further tax, in accordance with subsection (10A) or (10B), upon the portion (in this section referred to as the eligible portion) of his taxable income that is derived from income to which this section applies.

           (10)  For the purposes of subsection (9), the portion of the taxable income of a taxpayer that is derived from income to which this section applies is the amount remaining after deducting from the income to which this section applies that is included in his assessable income:

                     (a)  any deductions allowed or allowable in his assessment that relate exclusively to the income to which this section applies that is included in his assessable income;

                     (b)  so much of any other deductions allowed or allowable in his assessment (other than apportionable deductions) as, in the opinion of the Commissioner, may appropriately be related to the income to which this section applies that is included in his assessable income; and

                     (c)  the amount that bears to the apportionable deductions allowed or allowable in his assessment the same proportion as the amount that, but for this paragraph, would be the portion of his taxable income that is derived from income to which this section applies bears to the sum of his taxable income and those apportionable deductions.

        (10A)  Where Division 392 (Long‑term averaging of primary producers’ tax liability) of the Income Tax Assessment Act 1997 does not apply in relation to the income of a taxpayer of the year of income, the taxpayer is liable to pay further tax upon the eligible portion of his taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (9) in respect of the relevant part of the taxable income.

        (10B)  Where Division 392 (Long‑term averaging of primary producers’ tax liability) of the Income Tax Assessment Act 1997 applies in relation to the income of a taxpayer of the year of income, the taxpayer is liable to pay further tax upon the relevant part of the eligible portion of his taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (9) in respect of the relevant part of the taxable income and is, in addition, liable to pay further tax upon the prescribed part of the eligible portion of his taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (9) in respect of the prescribed part of the taxable income.

        (10C)  For the purposes of subsections (10A) and (10B):

                     (a)  the prescribed part of the eligible portion of the taxable income of a taxpayer of a year of income is:

                              (i)  in a case to which subparagraph (ii) does not apply—the sum of:

                                        (A)  the amount ascertained by deducting from so much of the assessable primary production income of the taxpayer as is also income to which this section applies so much of the deductions allowable in his assessment as constitutes primary production deductions and is also deductible in accordance with subsection (10) from income to which this section applies; and

                                        (B)  the amount (if any) ascertained in accordance with the formula , where:

                                               A  is the amount shown in the following table:

 

Value of A for formula



Item

Taxpayer’s taxable non‑primary production income



Value of A

1

Nil

Nil

2

Not more than $5,000 (but more than nil)

Difference between basic taxable income and taxable primary production income

3

Between $5,000 and $10,000

$10,000 taxable non‑primary production income

4

At least $10,000

Nil

                                               B  is the number of whole dollars in the amount ascertained by deducting from the eligible portion the amount calculated in accordance with sub-subparagraph (A); and

                                               C  is the number of whole dollars in the amount ascertained by deducting from the taxable income of the taxpayer of the year of income the taxable primary production income of the taxpayer of the year of income; and

                             (ii)  in a case where the taxpayer’s primary production deductions for the year of income exceed the taxpayer’s assessable primary production income for that year—the amount ascertained in accordance with the formula , where:

                                   A  is the amount shown in the following table:

 

Value of A for formula



Item

Taxpayer’s taxable non‑primary production income



Value of A

1

Nil

Nil

2

Not more than $5,000 (but more than nil)

Basic taxable income

3               

Between $5,000 and $10,000

Non‑primary production shade‑out amount worked out under subsection 392‑90(3) of the Income Tax Assessment Act 1997

4

At least $10,000

Nil

                                   B  is the number of whole dollars in the eligible portion.

                                   C  is the number of whole dollars in the taxable income of the taxpayer of the year of income; and

                                   D  is the number of whole dollars in the difference between the taxpayer’s primary production deductions for the year of income and the taxpayer’s assessable primary production income for that year; and

                     (b)  the relevant part of the eligible portion of the taxable income of the taxpayer is the amount ascertained by deducting from the amount of that eligible portion so much of that eligible portion as is the prescribed part of that eligible portion.

           (11)  Where:

                     (a)  section 98 applies in relation to the net income of a trust estate or a share of that net income; and

                     (b)  this section applies to a portion (in this subsection referred to as the relevant portion) of that net income or of that share of that net income, as the case may be;

the trustee of the trust estate shall be assessed and is liable to pay further tax, in accordance with subsection (12A) or (12B), upon the relevant portion of that net income or of that share of that net income, as the case may be.

           (12)  Where:

                     (a)  section 99 applies in relation to the net income of a trust estate or a part of that net income; and

                     (b)  this section applies to a portion (in this section referred to as the eligible trust portion) of that net income or of that part of that net income, as the case may be;

the trustee of the trust estate shall be assessed and is liable to pay further tax, in accordance with subsection (12A) or (12B), upon the eligible trust portion.

        (12A)  Where Division 16 does not apply in respect of the net income of a trust estate of which the eligible trust portion is a portion, the trustee is liable to pay further tax upon the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (11) or (12) in respect of the relevant part of the net income of a trust estate.

        (12B)  Where Division 16 applies in respect of the net income of a trust estate of which the eligible trust portion is a portion, the trustee is liable to pay further tax upon the relevant part of the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (11) or (12) in respect of the relevant part of the net income of a trust estate and is, in addition, liable to pay further tax upon the prescribed part of the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (11) or (12) in respect of the prescribed part of the net income of a trust estate.

        (12C)  For the purposes of subsections (12A) and (12B):

                     (a)  the prescribed part of the eligible trust portion in relation to a trust estate in relation to a year of income is:

                              (i)  in a case to which subparagraph (ii) does not apply—the sum of:

                                        (A)  the amount ascertained by deducting from so much of the assessable primary production income of the trust estate of the year of income as is also income that was taken into account in determining the amount of the eligible trust portion so much of the deductions allowable in the assessment of the trustee of the trust estate as constitutes relevant primary production deductions and was also deductible in accordance with subsection (5) in determining the amount of the eligible trust portion; and

                                        (B)  the amount (if any) ascertained in accordance with the formula , where:

                                               A  is the amount of the notional net income from primary production of the trust estate of the year of income.

                                               B  is the number of whole dollars in the amount ascertained by deducting from the eligible trust portion the amount calculated in accordance with sub-subparagraph (A); and

                                               C  is the number of whole dollars in the amount ascertained by deducting from the net income of the trust estate of which the eligible trust portion is a portion the actual net income from primary production of the trust estate of the year of income; and

                             (ii)  in a case where the aggregate of the relevant primary production deductions allowable in calculating the net income of the trust estate of the year of income exceeds the assessable primary production income of the trust estate of the year of income—the amount ascertained in accordance with the formula , where:

                                   A  is the amount of the notional net income from primary production of the trust estate of the year of income.

                                   B  is the number of whole dollars in the eligible trust portion.

                                   C  is the number of whole dollars in the net income of the trust estate of which the eligible trust portion is a portion; and

                                   D  is the number of whole dollars in the amount by which the net income of the trust estate of which the eligible trust portion is a portion would have been increased if the aggregate of the relevant primary production deductions allowable in calculating the net income of the trust estate of the year of income had been equal to the assessable primary production income of the trust estate of the year of income; and

                     (b)  the relevant part of the eligible trust portion in relation to a trust estate is the amount ascertained by deducting from that eligible trust portion so much of that eligible trust portion as is the prescribed part of that eligible trust portion.

           (13)  In this section:

prescribed deductions, in relation to a trust estate, means the deductions that are allowable in calculating in accordance with section 95 the net income of the trust estate.

share in the net income of a partnership, in relation to a partner, means:

                     (a)  so much of the individual interest of the partner in the net income of the partnership and of any income derived by the partner from the partnership otherwise than as a partner as is attributable to a period when the partner was a resident; and

                     (b)  so much of the individual interest of the partner in the net income of the partnership and of any income derived by the partner from the partnership otherwise than as a partner as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.

           (14)  In this section, actual net income from primary production, assessable primary production income, notional net income from primary production and relevant primary production deductions have the same respective meanings as in section 156.

           (15)  In this section, the following terms have the same meanings that they have in Division 392 (Long‑term averaging of primary producers’ tax liability) of the Income Tax Assessment Act 1997:

                     (a)  assessable primary production income;

                     (b)  basic taxable income;

                     (c)  non‑primary production shade‑out amount;

                     (d)  primary production deductions;

                     (e)  taxable non‑primary production income;

                      (f)  taxable primary production income.


 

Division 5AIncome of certain limited partnerships

Subdivision APreliminary

94A  Object

                   The object of this Division is to provide for certain limited partnerships to be treated as companies for tax purposes.

94B  Interpretation

                   In this Division:

corporate limited partnership has the meaning given by section 94D.

income tax law means:

                     (a)  this Act (other than this Division and Division 830 of the Income Tax Assessment Act 1997); and

                     (b)  an Act that imposes any tax payable under this Act; and

                     (c)  the Income Tax Rates Act 1986; and

                     (d)  the Taxation Administration Act 1953, so far as it relates to an Act covered by paragraph (a), (b) or (c); and

                     (e)  any other Act, so far as it relates to an Act covered by paragraph (a), (b), (c) or (d); and

                      (f)  regulations under an Act covered by any of the preceding paragraphs.

year of income means (except in paragraph 94L(b)) the year of income in which 19 August 1992 occurred or a later year of income.

94C  Continuity of limited partnership not affected by changes in composition

                   For the purposes of this Division, a change in the composition of a limited partnership does not affect the continuity of the partnership.

Subdivision BCorporate limited partnerships

94D  Corporate limited partnerships

             (1)  For the purposes of this Division, a limited partnership is a corporate limited partnership in relation to a year of income of the partnership if:

                     (a)  the year of income is the 1995‑96 year of income or a later year of income; or

                     (b)  the partnership was formed on or after 19 August 1992; or

                     (c)  both:

                              (i)  the partnership was formed before 19 August 1992; and

                             (ii)  the partnership does not pass the continuity of business test set out in section 94E; or

                     (d)  all of the following apply:

                              (i)  the partnership was formed before 19 August 1992;

                             (ii)  a change in the composition of the partnership occurs during the period:

                                        (A)  beginning on 19 August 1992; and

                                        (B)  ending at the end of the year of income;

                            (iii)  the partners do not elect, in accordance with section 94F, that the partnership is not to be treated as a corporate limited partnership in relation to the year of income.

             (2)  However, a partnership that is a VCLP, an ESVCLP, an AFOF or a venture capital management partnership cannot be a corporate limited partnership.

Note 1:       This subsection can apply without the partnership meeting the applicable registration requirements under the Venture Capital Act 2002. It must be registered under that Act in order to be a VCLP, an ESVCLP or an AFOF, but it is possible for it to remain registered while the requirements are not met.

Note 2:       VCLPs, ESVCLPs, AFOFs and VCMPs are taxed as ordinary partnerships under Division 5.

Note 3:       If the partnership’s registration as a VCLP, ESVCLP or AFOF is unconditional, some partners’ share in capital gains and losses from CGT events relating to some investments may be disregarded: see Subdivision 118‑F of the Income Tax Assessment Act 1997.

             (3)  A venture capital management partnership is a limited partnership that:

                     (a)  is a general partner of one or more of the following:

                              (i)  one or more VCLPs;

                            (ia)  one or more ESVCLPs;

                             (ii)  one or more AFOFs; and

                     (b)  only carries on activities that are related to being such a general partner.

A limited partnership ceases to be a venture capital management partnership if it ceases to meet the requirements of paragraphs (a) and (b).

Note:          In this Act, the term “venture capital management partnership” is usually abbreviated to “VCMP”.

             (4)  The place of residence of a VCMP is the place at which the partnership has its central management and control.

             (5)  A limited partnership that is a foreign hybrid limited partnership in relation to a year of income because of subsection 830‑10(1) of the Income Tax Assessment Act 1997 is not a corporate limited partnership in relation to the year of income.

Note:          As result, both the normal partnership provisions and special provisions relating to foreign hybrid limited partnerships will apply to the entity.

             (6)  If, for the purpose of applying this Act and the Income Tax Assessment Act 1997 in relation to a partner’s interest in a limited partnership, the partnership is a foreign hybrid limited partnership in relation to a year of income because of subsection 830‑10(2) of that Act, the partnership is not a corporate limited partnership in relation to the partner’s interest in relation to the year of income.

Note:          As result, both the normal partnership provisions and special provisions relating to foreign hybrid limited partnerships will apply to the entity, but only in relation to the partner’s interest.

94E  Continuity of business test

                   In determining whether a limited partnership is a corporate limited partnership in relation to a year of income, the partnership passes the continuity of business test if, and only if:

                     (a)  at all times during the period:

                              (i)  beginning on 19 August 1992; and

                             (ii)  ending at the end of the year of income;

                            the partnership carried on the same business as it carried on immediately before the beginning of that period; and

                     (b)  the partnership did not, at any time during that period, derive income from a business of a kind that it did not carry on, or from a transaction of a kind that it had not entered into in the course of its business operations, before that period.

94F  Change in composition of limited partnership—election that partnership not be treated as an eligible limited partnership

                   An election referred to in paragraph 94D(1)(d) in relation to a limited partnership and in relation to a year of income has no effect unless:

                     (a)  the partnership passes the continuity of ownership test set out in section 94G; and

                     (b)  the election is made:

                              (i)  within 6 months after the end of the later of the following years of income:

                                        (A)  the year of income to which the election relates;

                                        (B)  the year of income in which the Taxation Laws Amendment Act (No. 6) 1992 received the Royal Assent; or

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

94G  Continuity of ownership test

                   In determining whether a limited partnership is a corporate limited partnership in relation to a year of income, the partnership passes the continuity of ownership test if, and only if:

                     (a)  at all times during the period:

                              (i)  beginning on 19 August 1992; and

                             (ii)  ending at the end of the year of income;

                            more than 50% of the interests in the partnership were held by persons who, immediately before that period, held more than 50% of the interests in the partnership; or

                     (b)  the condition set out in paragraph (a) is not satisfied only because of the acquisition during so much of that period as occurred before 1 July 1993 of interests in the partnership, where the acquisitions are in response to, and in accordance with the terms of:

                              (i)  a prospectus, offer or invitation issued before 19 August 1992; or

                             (ii)  if that prospectus, offer or invitation was varied before 19 August 1992—that prospectus, offer or invitation as so varied.

 

Subdivision CCorporate tax modifications applicable to corporate limited partnerships

94H  Corporate tax modifications applicable to corporate limited partnerships

                   If a partnership is a corporate limited partnership in relation to a year of income, the income tax law has effect, in relation to the partnership and in relation to the year of income, subject to the changes set out in the following provisions of this Subdivision.

94J  Company includes corporate limited partnership

                   A reference in the income tax law (other than the definitions of dividend, and resident or resident of Australia, in section 6 of this Act) to a company or to a body corporate includes a reference to the partnership.

94K  Partnership does not include corporate limited partnership

                   A reference in the income tax law to a partnership does not include a reference to the partnership.

94L  Dividend includes distribution of corporate limited partnership

                   A reference in the income tax law to a dividend or to a dividend within the meaning of section 6:

                     (a)  includes a reference to a distribution made by the partnership, whether in money or in other property, to a partner in the partnership; and

                     (b)  does not include a reference to a distribution to the extent to which the distribution is attributable to profits or gains arising during a year of income in relation to which the partnership was not a corporate limited partnership.

94M  Drawings etc. deemed to be dividends paid out of profits

             (1)  If the partnership pays or credits an amount to a partner in the partnership:

                     (a)  against the profits or anticipated profits of the partnership; or

                     (b)  otherwise in anticipation of the profits of the partnership;

(whether or not the amount of the profits or anticipated profits is ascertainable), the amount paid or credited is taken, for the purposes of the income tax law, to be a dividend paid by the partnership to the partner out of profits derived by the partnership.

             (2)  If the partnership makes a subsequent distribution, the Commissioner must take such steps (if any) as are necessary to ensure that the partner is not subject to double taxation.

94N  Private company does not include corporate limited partnership

                   A reference in the income tax law to a private company in relation to the year of income does not include a reference to the partnership.

94P  Share includes interest in corporate limited partnership

                   A reference in the income tax law to a share includes a reference to an interest in the partnership.

94Q  Shareholder includes partner in corporate limited partnership

                   A reference in the income tax law to a shareholder includes a reference to a partner in the partnership.

94R  Liquidator may include partner in corporate limited partnership

                   For the purposes of the income tax law:

                     (a)  a reference to the liquidator of the partnership includes a reference to a partner in the partnership who carries out the winding‑up of the partnership; and

                     (b)  a reference to distributions made by a liquidator in the course of winding up the partnership includes a reference to distributions made by such a partner to himself or herself in the course of winding‑up the partnership.

94S  Continuity of corporate limited partnership not affected by changes in composition

                   For the purposes of the income tax law, a change in the composition of the partnership does not affect the continuity of the partnership.

94T  Residence of corporate limited partnership

                   For the purposes of the income tax law, the partnership is:

                     (a)  a resident; and

                     (b)  a resident within the meaning of section 6; and

                     (c)  a resident of Australia; and

                     (d)  a resident of Australia within the meaning of section 6;

if and only if:

                     (e)  the partnership was formed in Australia; or

                      (f)  either:

                              (i)  the partnership carries on business in Australia; or

                             (ii)  the partnership’s central management and control is in Australia.

94U  Incorporation

                   For the purposes of the income tax law, the partnership is taken to have been incorporated:

                     (a)  in the place where it was formed; and

                     (b)  under a law in force in that place.

94V  Obligations and offences

             (1)  The application of the income tax law to the partnership as if the partnership were a company is subject to the following changes:

                     (a)  obligations that would be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners;

                     (b)  the partners are jointly and severally liable to pay any amount that would be payable by the partnership;

                     (c)  any offence against the income tax law that would otherwise be committed by the partnership is taken to have been committed by each of the partners.

             (2)  In a prosecution of a person for an offence that the person is taken to have committed because of paragraph (1)(c), it is a defence if the person proves that the person:

                     (a)  did not aid, abet, counsel or procure the relevant act or omission; and

                     (b)  was not in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the person).

94X  Modification of loss provisions

                   Subdivisions 165‑A and 165‑B of the Income Tax Assessment Act 1997 apply in relation to the partnership as if the provisions relating to voting power had not been enacted.


 

Division 6Trust income

95  Interpretation

             (1)  In this Division:

exempt income, in relation to a trust estate, means the exempt income of the trust estate calculated as if the trustee were a taxpayer who was a resident.

Note:          See also Division 54 of the Income Tax Assessment Act 1997 (in particular, the provisions in section 54‑70 about trusts), which provides a tax exemption for certain payments under structured settlements and structured orders.

net income, in relation to a trust estate, means the total assessable income of the trust estate calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions, except deductions under Schedule 2G and except also, in respect of any beneficiary who has no beneficial interest in the corpus of the trust estate, or in respect of any life tenant, the deductions allowable under Division 36 of the Income Tax Assessment Act 1997 in respect of such of the tax losses of previous years as are required to be met out of corpus.

A trust may be required to work out its net income in a special way by Division 266 or 267 of Schedule 2F.

non‑assessable non‑exempt income, in relation to a trust estate, means the non‑assessable non‑exempt income of the trust estate calculated as if the trustee were a taxpayer who was a resident.

             (2)  For the purposes of this Division, a trust estate shall be taken to be a resident trust estate in relation to a year of income if:

                     (a)  a trustee of the trust estate was a resident at any time during the year of income; or

                     (b)  the central management and control of the trust estate was in Australia at any time during the year of income.

             (3)  In this Division, a trust estate that is not a resident trust estate in relation to a year of income is referred to as a non‑resident trust estate in relation to that year of income.

95AA  Division does not apply in relation to FHSA trust

                   This Division does not apply in relation to a trust estate that is an FHSA trust.

95A  Special provisions relating to present entitlement

             (1)  For the purposes of this Act, where a beneficiary of a trust estate is presently entitled to any income of the trust estate, the beneficiary shall be taken to continue to be presently entitled to that income notwithstanding that the income is paid to, or applied for the benefit of, the beneficiary.

             (2)  For the purposes of this Act, where a beneficiary has a vested and indefeasible interest in any of the income of a trust estate but is not presently entitled to that income, the beneficiary shall be deemed to be presently entitled to that income of the trust estate.

95B  Certain beneficiaries deemed not to be under legal disability

                   For the purposes of this Act, a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate in the capacity of a trustee of another trust estate shall, in respect of his present entitlement to that share, be deemed not to be under a legal disability.

96  Trustees

                   Except as provided in this Act, a trustee shall not be liable as trustee to pay income tax upon the income of the trust estate.

96A  Application of Division in respect of interests in non‑resident trust estates to which Part XI applies

             (1)  An amount is not to be included under section 97 in the assessable income of a year of income of a beneficiary of a trust estate if:

                     (a)  the beneficiary is a resident; and

                     (b)  the trust estate is a non‑resident trust estate in relation to that year of income; and

                     (c)  section 529 applies, or but for Division 8 or 11A of Part XI would have applied, to the beneficiary in relation to each notional accounting period of the relevant trust that ended or began in that year of income.

          (1A)  An amount, other than an amount relating to an interest in a FIF to which Division 8 of Part XI applies, that, because of subsection (1), is not included under section 97 in assessable income is nevertheless taken to have been so included for the purposes of applying sections 99, 99A and 102AAU.

             (2)  If:

                     (a)  the assessable income of the trust estate of a resident public unit trust of a year of income includes any foreign investment fund income; and

                     (b)  the sum of:

                              (i)  the values of all the interests of a beneficiary of the trust estate who is a natural person (otherwise than in the capacity of a trustee), and any associates of that beneficiary, in FIFs and resident public unit trusts; and

                             (ii)  the values of all FLPs in which that beneficiary and any associates of that beneficiary had interests;

                            at the end of the year of income did not exceed $50,000;

then:

                     (c)  in calculating the beneficiary’s share of the net income of the trust estate of the year of income, that net income is taken to be the amount that would have been that net income if that foreign investment fund income had not been included in that assessable income; and

                     (d)  in calculating the beneficiary’s share of the net income of any subsequent year of income, that net income is taken to be the amount that would have been that net income if section 23AK or section 613 applied as if no FIF attribution account credit arose for the relevant trust for the year of income mentioned in paragraph (c); and

                     (e)  in determining under sections 99 and 99A the extent (if any) to which the trustee is to be assessed and liable to pay tax on the whole or part of the net income of the trust estate of the year of income or any later year of income, paragraphs (c) and (d) of this subsection are to be disregarded.

             (3)  For the purposes of subsection (2), the value at the end of the year of income of a person’s interest in a FIF or in a resident public unit trust, or of a FLP in which a person has an interest, is taken to be:

                     (a)  the cost incurred by the person in acquiring the interest in the FIF, resident public unit trust or FLP, as the case may be; or

                     (b)  the market value of the interest in the FIF or resident public unit trust, or of the FLP, as the case may be, at the end of the year of income;

whichever is the greater amount.

          (3A)  If:

                     (a)  under section 529, the assessable income of a year of income of a CFT includes an amount of foreign investment fund income that, under Part XI, accrued to the CFT from a FIF in respect of a notional accounting period of the FIF; and

                     (b)  a statutory accounting period of a CFC coincides with that notional accounting period of the FIF; and

                     (c)  section 456 applies at the end of the statutory accounting period of the CFC to a taxpayer who is a beneficiary in the CFT; and

                     (d)  the FIF is the same entity as the CFC;

then the beneficiary’s share of the net income of the CFT of the year of income is to be calculated as if the amount of foreign investment fund income had not been included in the CFT’s assessable income.

          (3B)  If:

                     (a)  under section 529, the assessable income of a year of income of a CFT includes an amount of foreign investment fund income that, under Part XI, accrued to the CFT from a FIF in respect of a notional accounting period of the FIF; and

                     (b)  each of 2 or more statutory accounting periods of a CFC occurs partly within that notional accounting period of the FIF; and

                     (c)  section 456 applies at the end of each of these statutory accounting periods of the CFC to a taxpayer who is a beneficiary in the CFT; and

                     (d)  the FIF is the same entity as the CFC;

then the beneficiary’s share of the net income of the CFT of the year of income is to be calculated as if the amount of foreign investment fund income had not been included in the CFT’s assessable income.

             (4)  For the purposes of this section, a unit trust is a resident public unit trust in relation to a year of income if:

                     (a)  it is a public unit trust for the purposes of Division 6AAA at all times during the year of income; and

                     (b)  either of the following conditions was satisfied at any time during the year of income:

                              (i)  the central management and control of the unit trust was in Australia;

                             (ii)  a person who was a resident or persons who were residents held more than 50% of:

                                        (A)  the beneficial interests in the income of the unit trust; or

                                        (B)  the beneficial interests in the property of the unit trust.

             (5)  In this section:

CFC has the same meaning as in Part X.

CFT has the same meaning as in Part X.

interest, in relation to a resident public unit trust, means a unit in the trust or an entitlement to acquire such a unit.

statutory accounting period has the same meaning as in Part X.

             (6)  Expressions used in this section that are also used in Part XI have, unless the contrary intention appears, the same meanings as in that Part.

96B  Beneficiary of non‑resident trust estate

             (1)  If at any time during the 1992‑93 year of income or a later year of income a taxpayer had an interest (including an interest that is to arise at a future time or is contingent on the happening of an event) in a non‑resident trust estate in relation to the year of income, this section has effect for the purposes of the application of this Division to the taxpayer in relation to the trust estate in relation to the year of income.

             (2)  The taxpayer is taken to be a beneficiary of the trust estate who is presently entitled to a share of the income of the trust estate of the year of income and who is not under a legal disability.

             (3)  The taxpayer’s share of the net income of the trust estate of the year of income is the amount calculated in accordance with section 96C.

96C  Calculation of beneficiary’s share of net income of non‑resident trust estate

             (1)  If all of the income, profits or gains derived by a non‑resident trust estate during the year of income consisted of either or both of the following:

                     (a)  income, profits or gains to which beneficiaries of the trust estate were presently entitled;

                     (b)  income, profits or gains to which beneficiaries of the trust estate were not presently entitled but which were distributed to beneficiaries of the trust estate during the year of income or within 2 months after the end of the year of income;

the share of a taxpayer referred to in section 96B of the net income of the trust estate of the year of income is the amount worked out using the formula:

In the formula:

Net income means the net income of the trust estate of the year of income.

Attribution percentage means the percentage of the total income, profits and gains derived by the trust estate during the year of income to which the taxpayer was presently entitled or to which the taxpayer was not presently entitled but which was distributed to the taxpayer during the year of income or within 2 months after the end of the year of income.

             (2)  If subsection (1) does not apply in respect of a non‑resident trust estate of the year of income, the share of a taxpayer referred to in section 96B of the net income of the trust estate of the year of income is the amount determined by calculating:

                     (a)  the part of the taxpayer’s share of the net income that is attributable to any interest or interests in the trust estate that the taxpayer had in the trust estate throughout the whole of the year of income; and

                     (b)  the part or parts of the taxpayer’s share of the net income that is or are attributable to any interest or interests in the trust estate that the taxpayer had throughout a particular part or particular parts of the year of income;

and adding up the amounts so calculated.

             (3)  The part of the taxpayer’s share of the net income that is attributable to an interest or interests that the taxpayer had throughout the whole of the year of income is the amount worked out using the formula:

             (4)  The part of the taxpayer’s share of the net income that is attributable to an interest that the taxpayer had throughout a particular part of the year of income is the amount worked out using the formula:

             (5)  For the purposes of the formulas in subsections (3) and (4):

Net income means the net income of the trust estate of the year of income.

Note:          See subsection (5A).

Attribution percentage means:

                     (a)  the percentage of the income of the trust estate represented by the share of the income to which the taxpayer was entitled, or was entitled to acquire, at the test time because of:

                              (i)  the taxpayer’s interest or interests in the trust estate; and

                             (ii)  any interest or interests in the trust estate that the taxpayer was entitled to acquire; or

                     (b)  the percentage of the corpus of the trust estate represented by the share of the corpus to which the taxpayer was entitled, or was entitled to acquire, at the test time because of:

                              (i)  the taxpayer’s interest or interests in the trust estate; and

                             (ii)  any interest or interests in the trust estate that the taxpayer was entitled to acquire;

or, if those percentages differ, the greater of those percentages.

Number of days held means the number of days in the part of the year of income throughout which the taxpayer had the interest.

Total number of days means the number of days in the year of income.

the test time means:

                     (a)  if the taxpayer had an interest or interests in the trust estate at the end of the year of income—the end of the year of income; or

                     (b)  if the taxpayer ceased during the year of income to have any interest in the trust estate—the time immediately before the taxpayer ceased to have such an interest.

          (5A)  In calculating the net income of the trust estate of the year of income for the purposes of subsections (3), (4) and (5), disregard:

                     (a)  Division 974 of the Income Tax Assessment Act 1997; and

                     (b)  the operation of any provision of this Act to the extent to which that operation depends on an expression whose meaning is given by that Division.

             (6)  If, apart from this subsection, the sum of the attribution percentages at a particular time in relation to a non‑resident trust estate of all taxpayers who are residents would exceed 100%, the attribution percentage of each of those taxpayers is the percentage worked out using the formula:

where:

Individual percentage means the percentage that, apart from this subsection, would be the attribution percentage of the taxpayer concerned.

Total percentage means the sum of the percentages that, apart from this subsection, would be the attribution percentages of all taxpayers that are residents.

Note:          A temporary resident is taken not to be a resident for the purposes of this subsection: see section 768‑975 of the Income Tax Assessment Act 1997.

             (7)  For the purposes of subsection (5):

                     (a)  the percentage of the income of the trust estate represented by the share of the income to which the taxpayer was entitled, or was entitled to acquire, at the test time because of the interest or interests referred to in subparagraph (a)(i) or (ii) of the definition of attribution percentage in that subsection; or

                     (b)  the percentage of the corpus of the trust estate represented by the share of the corpus to which the taxpayer was entitled, or was entitled to acquire, at the test time because of the interest or interests referred to in subparagraph (b)(i) or (ii) of the definition of attribution percentage in that subsection;

is to be worked out by:

                     (c)  ascertaining whichever of the following is applicable:

                              (i)  the income of the trust estate for the year of income;

                             (ii)  the corpus of the trust estate as at the end of the year of income; and

                     (d)  assuming that the share to which the taxpayer was entitled, or became entitled to acquire, at the test time because of the interest or interests was the same at all other times during the year of income; and

                     (e)  ascertaining the percentage concerned:

                              (i)  if the test time is a time other than the end of the year of income—at the end of the year of income instead of at the test time; and

                             (ii)  on that assumption.

             (8)  In this section:

entitled to acquire has the same meaning as in Part XI.

             (9)  A reference in this section to income, profits or gains having been distributed to a beneficiary of a trust estate is a reference to an amount included in such income, profits or gains having been paid or credited to, or applied for the benefit of, such a beneficiary.

97  Beneficiary not under any legal disability

             (1)  Subject to Division 6D, where a beneficiary of a trust estate who is not under any legal disability is presently entitled to a share of the income of the trust estate:

                     (a)  the assessable income of the beneficiary shall include:

                              (i)  so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and

                             (ii)  so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia; and

                     (b)  the exempt income of the beneficiary shall include:

                              (i)  so much of the individual interest of the beneficiary in the exempt income of the trust estate as is attributable to a period when the beneficiary was a resident; and

                             (ii)  so much of the individual interest of the beneficiary in the exempt income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;

                            except to the extent to which the exempt income to which that individual interest relates was taken into account in calculating the net income of the trust estate; and

                     (c)  the non‑assessable non‑exempt income of the beneficiary shall include:

                              (i)  so much of the individual interest of the beneficiary in the non‑assessable non‑exempt income of the trust estate as is attributable to a period when the beneficiary was a resident; and

                             (ii)  so much of the individual interest of the beneficiary in the non‑assessable non‑exempt income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia.

Note:          If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 also affects the assessment of the beneficiary.

             (2)  A reference in this section to income of a trust estate to which a beneficiary is presently entitled shall be read as not including a reference to income of a trust estate:

                     (a)  to which a beneficiary is deemed to be presently entitled by virtue of the operation of subsection 95A(2) where the beneficiary:

                              (i)  is a natural person;

                             (ii)  is a resident at the end of the year of income;

                            (iii)  is not, in respect of that income, a beneficiary in the capacity of a trustee of another trust estate; and

                            (iv)  is not a beneficiary to whom subsection 97A(1) or (1A) applies in relation to the year of income; or

                     (b)  to which a beneficiary is presently entitled where the beneficiary:

                              (i)  is a non‑resident at the end of the year of income;

                             (ii)  is not a beneficiary to whom subsection (3) of this section or subsection 97A(1) or (1A) applies in relation to the year of income; and

                            (iii)  is not, in respect of that income, a beneficiary in the capacity of a trustee of another trust estate.

             (3)  Where:

                     (a)  a beneficiary of a trust estate is presently entitled to a share of the income of the trust estate;

                     (b)  the beneficiary is a non‑resident at the end of the year of income; and

                     (c)  the beneficiary is:

                              (i)  a body, association, fund or organization the income of which is exempt from tax by virtue of the operation of Subdivision 50‑A or section 51‑5, 51‑10 or 51‑30 of the Income Tax Assessment Act 1997; or

                             (ii)  an organization the income of which is exempt from tax by virtue of a regulation in force under the  International Organisations (Privileges and Immunities) Act 1963;

that beneficiary is, for the purposes of the application of this Division in relation to that beneficiary in relation to that year of income, a beneficiary to whom this subsection applies.

97A  Beneficiaries who are owners of farm management deposits

             (1)  Where a beneficiary who is under a legal disability:

                     (a)  is presently entitled to a share of the income of a trust estate derived during a year of income of the beneficiary;

                     (b)  is the owner of a farm management deposit made during the year of income; and

                     (c)  is a primary producer when the deposit is made;

this Division applies in relation to the beneficiary in relation to the year of income as if the beneficiary were not under any legal disability.

          (1A)  Where a beneficiary who is deemed by subsection 95A(2) to be presently entitled to any income of a trust estate derived during a year of income of the beneficiary:

                     (a)  is not under a legal disability;

                     (b)  is the owner of a farm management deposit made during the year of income; and

                     (c)  is a primary producer when the deposit is made because the trustee of the trust estate is carrying on in Australia a primary production business;

the beneficiary is, for the purposes of the application of this Division in relation to that beneficiary in relation to that year of income, a beneficiary to whom this subsection applies.

             (2)  In this section:

primary producer and owner of a farm management deposit have the same meanings as in Schedule 2G.

98  Liability of trustee

             (1)  Where a beneficiary of a trust estate who is under a legal disability is presently entitled to a share of the income of the trust estate, the trustee of the trust estate shall be assessed and liable to pay tax in respect of:

                     (a)  so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and

                     (b)  so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;

as if it were the income of an individual and were not subject to any deduction.

             (2)  Where a beneficiary of a trust estate:

                     (a)  is deemed to be presently entitled to a share of the income of the trust estate of a year of income by virtue of the operation of subsection 95A(2);

                    (aa)  is a natural person and is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate;

                     (b)  is not a beneficiary to whom subsection 97A(1) or (1A) applies in relation to the year of income; and

                     (c)  is not under a legal disability;

the trustee of the trust estate shall be assessed and liable to pay tax in respect of:

                     (d)  so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and

                     (e)  so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;

as if it were the income of an individual and were not subject to any deduction.

          (2A)  If:

                     (a)  a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate:

                              (i)  is a non‑resident at the end of the year of income; and

                             (ii)  is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate; and

                            (iii)  is not a beneficiary to whom section 97A applies in relation to the year of income; and

                            (iv)  is not a beneficiary to whom subsection 97(3) applies; and

                     (b)  the trustee of the trust estate is not assessed and is not liable to pay tax under subsection (1) or (2) in respect of any part of that share of the net income of the trust estate;

subsection (3) applies to the trustee in respect of:

                     (c)  so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and

                     (d)  so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia.

             (3)  A trustee to whom this subsection applies in respect of an amount of net income is to be assessed and is liable to pay tax:

                     (a)  if the beneficiary is not a company—in respect of the amount of net income as if it were the income of an individual and were not subject to any deduction; or

                     (b)  if the beneficiary is a company—in respect of the amount of net income at the rate declared by the Parliament for the purposes of this paragraph.

Note:          If the trust estate’s net income includes a net capital gain, and the beneficiary is a company, Subdivision 115‑C of the Income Tax Assessment Act 1997 affects the assessment of the trustee.

             (4)  If:

                     (a)  a beneficiary of a trust estate (the first trust estate) who is presently entitled to a share of the income of the first trust estate:

                              (i)  is, in respect of that share of the income of the first trust estate, a beneficiary in the capacity of a trustee of another trust estate; and

                             (ii)  is not a beneficiary to whom subsection 97(3) applies; and

                     (b)  a trustee of the other trust estate is a non‑resident at the end of the year of income;

the trustee of the first trust estate is to be assessed and is liable to pay tax in respect of so much of that share of the net income of the first trust estate as is attributable to sources in Australia at the rate declared by the Parliament for the purposes of this subsection.

Note:          If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 affects the assessment of the trustee.

98A  Non‑resident beneficiaries assessable in respect of certain income

             (1)  Where the trustee of a trust estate is assessed and is liable to pay tax in respect of the whole or a part of a share of the net income of a trust estate of a year of income in pursuance of subsection 98(3), the assessable income of the beneficiary who is presently entitled to that share of the income of the trust estate shall include:

                     (a)  so much of the individual interest of the beneficiary in the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and

                     (b)  so much of the individual interest of the beneficiary in the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia.

Note:          If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 also affects the assessment of the beneficiary.

             (2)  Where subsection (1) applies in relation to a beneficiary in relation to a year of income:

                     (a)  there shall be deducted from the income tax assessed against the beneficiary the amount (in this subsection referred to as the relevant amount) of the tax paid by the trustee in respect of the beneficiary’s interest in the net income of the trust estate (including, for a beneficiary that is a company, any tax paid in respect of that interest because of section 115‑220 of the Income Tax Assessment Act 1997); and

                     (b)  if the relevant amount is greater than the amount of the income tax assessed against the beneficiary—the Commissioner shall pay to the beneficiary an amount equal to the difference between those 2 amounts.

Note:          See Division 3A of Part IIB of, and section 105‑65 in Schedule 1 to, the Taxation Administration Act 1953 for the rules about how the Commissioner must pay the entity. Division 3 of Part IIB allows the Commissioner to apply the amount owing as a credit against tax debts that the entity owes to the Commonwealth.

             (3)  If a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate:

                     (a)  is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate; and

                     (b)  is a non‑resident at the end of the year of income;

the assessable income of the beneficiary includes so much of the individual interest of the beneficiary in the net income of the trust estate as is reasonably attributable to a part of the net income of another trust estate in respect of which the trustee of the other trust estate is assessed and is liable to pay tax under subsection 98(4).

Note:          If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 also affects the assessment of the beneficiary.

             (4)  To the extent that subsection (3) includes an amount in the assessable income of a beneficiary of a trust estate, the amount is not included by subsection (1) or section 100.

98B  Deduction from beneficiary’s tax

             (1)  This section applies to a beneficiary of a trust estate for a year of income if the assessable income of the beneficiary of the year of income includes an amount covered by subsection (2).

             (2)  This subsection covers an amount (the assessable amount) if:

                     (a)  the amount is included in the assessable income of the beneficiary under one of the following:

                              (i)  section 97;

                             (ii)  subsection 98A(3);

                            (iii)  section 100; and

                     (b)  the amount does not represent income of the trust estate to which the beneficiary is presently entitled in the capacity of a trustee of another trust estate; and

                     (c)  the amount is reasonably attributable to an amount (the taxed net income) in respect of which the trustee of another trust estate is assessed and liable to pay tax (the subsection 98(4) tax) under subsection 98(4) (including any tax paid under subsection 98(4) in respect of the taxed net income because of section 115‑222 of the Income Tax Assessment Act 1997).

             (3)  A proportion of the subsection 98(4) tax is to be deducted from the income tax assessed against the beneficiary of the year of income. That proportion is the same as the proportion of the taxed net income that gave rise to the assessable amount.

Note:          To work out the proportion of the taxed net income that gives rise to assessable income for a beneficiary of another trust estate, you would have regard to the share of the income of each interposed trust estate to which a beneficiary (including a beneficiary in the capacity of a trustee) is presently entitled.

Example:    The P Trust has two non‑resident trustee beneficiaries, the trustees of the S Trust and the H Trust. Each trustee is presently entitled to a 1/2 share of the income of the P Trust. The net income of the P Trust is $100,000. The trustee of the P Trust pays tax of $22,500 under subsection 98(4) in respect of the trustee of the S Trust’s interest and $22,500 under subsection 98(4) in respect of the trustee of the H Trust’s interest.

                   The S Trust has a non‑resident beneficiary, G, who is presently entitled to a 1/3 share of the income of the S Trust. The net income of the S Trust is $30,000. Subsection 98A(3) includes $10,000 in G’s assessable income.

                   The taxed net income of the P trust is $50,000. The proportion of that taxed net income that gave rise to the $10,000 being included in G’s assessable income is 1/3.This is because G had a 1/3 share of the income of the S Trust. $7,500 (1/3 x $22,500) is deducted from the income tax assessed against G.

                   If section 97, subsection 98A(3) or section 100 also includes amounts in the assessable income of any beneficiaries of the H Trust, each of those beneficiaries also works out the amount of the deduction against the income tax assessed against them in the same way.

             (4)  If the amount to be deducted under subsection (3) is greater than the amount of the income tax assessed against the beneficiary, the Commissioner must pay to the beneficiary an amount equal to the difference between those 2 amounts.

Note:          See Division 3A of Part IIB of, and section 105‑65 in Schedule 1 to, the Taxation Administration Act 1953 for the rules about how the Commissioner must pay the entity. Division 3A of Part IIB allows the Commissioner to apply the amount owing as a credit against tax debts that the entity owes to the Commonwealth.

99  Certain trust income to be taxed as income of an individual

             (1)  This section applies in relation to a trust estate in relation to a year of income only if section 99A does not apply in relation to that trust estate in relation to that year of income.

             (2)  Where there is no part of the net income of a resident trust estate:

                     (a)  that is included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;

                     (b)  in respect of which the trustee of the trust estate is assessed and liable to pay tax in pursuance of section 98; or

                     (c)  that represents income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia;

the trustee shall be assessed and is liable to pay tax on the net income of the trust estate as if it were the income of an individual who was a resident and were not subject to any deduction.

             (3)  Where there is a part of the net income of a resident trust estate:

                     (a)  that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;

                     (b)  in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section 98; and

                     (c)  that does not represent income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia;

the trustee shall be assessed and is liable to pay tax on that part of the net income of the trust estate as if it were the income of an individual who was a resident and were not subject to any deduction.

             (4)  Where there is no part of the net income of a trust estate that is not a resident trust estate:

                     (a)  that is included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;

                     (b)  in respect of which the trustee of the trust estate is assessed and liable to pay tax in pursuance of section 98; or

                     (c)  that is attributable to sources out of Australia;

the trustee shall be assessed and is liable to pay tax on the net income of the trust estate as if it were the income of an individual and were not subject to any deduction.

             (5)  Where there is a part of the net income of a trust estate that is not a resident trust estate:

                     (a)  that is attributable to sources in Australia;

                     (b)  that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97; and

                     (c)  in respect of which the trustee of the trust estate is not assessed and is not liable to pay tax in pursuance of section 98;

the trustee shall be assessed and is liable to pay tax on that part of the net income of the trust estate as if it were the income of an individual and were not subject to any deduction.

99A  Certain trust income to be taxed at special rate

             (2)  This section does not apply in relation to a trust estate in relation to a year of income, being a trust estate:

                     (a)  that resulted from:

                              (i)  a will, a codicil or an order of a court that varied or modified the provisions of a will or a codicil; or

                             (ii)  an intestacy or an order of a court that varied or modified the application, in relation to the estate of a deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate;

                     (b)  that consists of the property of a person who has become bankrupt, being property that has vested in The Official Receiver in Bankruptcy, or in a registered trustee, under the Bankruptcy Act 1966;

                     (c)  that is administered under Part XI of the Bankruptcy Act 1966; or

                     (d)  that consists of property of a kind referred to in paragraph 102AG(2)(c);

if the Commissioner is of the opinion that it would be unreasonable that this section should apply in relation to that trust estate in relation to that year of income.

             (3)  In forming an opinion for the purposes of subsection (2):

                     (a)  the Commissioner shall have regard to the circumstances in which and the conditions, if any, upon which, at any time, property (including money) was acquired by or lent to the trust estate, income was derived by the trust estate, benefits were conferred on the trust estate or special rights or privileges were conferred on or attached to property of the trust estate, whether or not the rights or privileges have been exercised;

                     (b)  if a person who has, at any time, directly or indirectly:

                              (i)  transferred or lent any property (including money) to, or conferred any benefits on, the trust estate; or

                             (ii)  conferred or attached any special right or privilege, or done any act or thing, either alone or together with another person or persons, that has resulted in the conferring or attaching of any special right or privilege, on or to property of the trust estate whether or not the right or privilege has been exercised;

                            has not, at any time, directly or indirectly:

                            (iii)  transferred or lent any property (including money) to, or conferred any benefits on, another trust estate; or

                            (iv)  conferred or attached any special right or privilege, or done any act or thing, either alone or together with another person or persons, that has resulted in the conferring or attaching of any special right or privilege, on or to property of another trust estate, whether or not the right or privilege has been exercised;

                            the Commissioner shall have regard to that fact; and

                     (c)  the Commissioner shall have regard to such other matters, if any, as he thinks fit.

          (3A)  For the purposes of the application of paragraph (3)(a) in relation to a trust estate of the kind referred to in paragraph (2)(a), a reference in that first‑mentioned paragraph to the trust estate shall be read as including a reference to the person as a result of whose death the trust estate arose.

             (4)  Where there is no part of the net income of a resident trust estate:

                     (a)  that is included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;

                     (b)  in respect of which the trustee of the trust estate is assessed and liable to pay tax in pursuance of section 98; or

                     (c)  that represents income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia;

the trustee shall be assessed and is liable to pay tax on the net income of the trust estate at the rate declared by the Parliament for the purposes of this section.

Note:          If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 affects the assessment of the trustee.

          (4A)  Where there is a part of the net income of a resident trust estate:

                     (a)  that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;

                     (b)  in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section 98; and

                     (c)  that does not represent income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia;

the trustee shall be assessed and is liable to pay tax on that part of the net income of the trust estate at the rate declared by the Parliament for the purposes of this section.

Note:          If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 affects the assessment of the trustee.

          (4B)  Where there is no part of the net income of a trust estate that is not a resident trust estate:

                     (a)  that is included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;

                     (b)  in respect of which the trustee of the trust estate is assessed and liable to pay tax in pursuance of section 98; or

                     (c)  that is attributable to sources out of Australia;

the trustee shall be assessed and is liable to pay tax on the net income of the trust estate at the rate declared by the Parliament for the purposes of this section.

Note:          If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 affects the assessment of the trustee.

          (4C)  Where there is a part of the net income of a trust estate that is not a resident trust estate:

                     (a)  that is attributable to sources in Australia;

                     (b)  that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97; and

                     (c)  in respect of which the trustee of the trust estate is not assessed and is not liable to pay tax in pursuance of section 98;

the trustee shall be assessed and is liable to pay tax on that part of the net income of the trust estate at the rate declared by the Parliament for the purposes of this section.

Note:          If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 affects the assessment of the trustee.

99B  Receipt of trust income not previously subject to tax

             (1)  Where, at any time during a year of income, an amount, being property of a trust estate, is paid to, or applied for the benefit of, a beneficiary of the trust estate who was a resident at any time during the year of income, the assessable income of the beneficiary of the year of income shall, subject to subsection (2), include that amount.

             (2)  The amount that, but for this subsection, would be included in the assessable income of a beneficiary of a trust estate under subsection (1) by reason that an amount, being property of the trust estate, was paid to, or applied for the benefit of, the beneficiary shall be reduced by so much (if any) of the amount, as represents:

                     (a)  corpus of the trust estate (except to the extent to which it is attributable to amounts derived by the trust estate that, if they had been derived by a taxpayer being a resident, would have been included in the assessable income of that taxpayer of a year of income);

                     (b)  an amount that, if it had been derived by a taxpayer being a resident, would not have been included in the assessable income of that taxpayer of a year of income;

                   (ba)  an amount that is non‑assessable non‑exempt income of the beneficiary because of section 802‑17 of the Income Tax Assessment Act 1997;

                     (c)  an amount:

                              (i)  that is or has been included in the assessable income of the beneficiary in pursuance of section 97; or

                             (ii)  in respect of which the trustee of the trust estate is or has been assessed and liable to pay tax in pursuance of section 98, 99 or 99A; or

                            (iii)  that is reasonably attributable to a part of the net income of another trust estate in respect of which the trustee of the other trust estate is assessed and is liable to pay tax under subsection 98(4);

                     (d)  an amount that is or has been included in the assessable income of any taxpayer (other than a company) under section 102AAZD; or

                     (e)  if the beneficiary is a company—an amount that is or has been included in the assessable income of the beneficiary under section 102AAZD.

          (2A)  An amount that is not included in a beneficiary’s assessable income because of paragraph (2)(d) or (e) is not assessable income and is not exempt income.

             (3)  In paragraphs (2)(d) and (e):

company means a company other than a company in the capacity of a trustee.

99C  Determining whether property is applied for benefit of beneficiary

             (1)  In determining for the purposes of section 99B whether any amount has been applied for the benefit of a beneficiary of a trust estate, regard shall be had to all benefits that have accrued at any time to the beneficiary (whether or not the beneficiary had rights at law or in equity in or to those benefits) as a result of the derivation of, or in relation to, that amount, irrespective of the nature or form of the benefits.

             (2)  Without limiting the generality of subsection (1), an amount shall be taken, for the purposes of section 99B, to have been applied for the benefit of a beneficiary if:

                     (a)  whether by re‑investment, accumulation, capitalization or otherwise, and whether directly or indirectly, the amount has been so dealt with that it will, at a future time, and whether in the form of income or not, enure for the benefit of the beneficiary;

                     (b)  the derivation of the amount has operated to increase the value to the beneficiary of any property or rights of any kind held by or for the benefit of the beneficiary;

                     (c)  the beneficiary has received or become entitled to receive any benefit (including a loan or a repayment, in whole or in part, of a loan, or any other payment of any kind) provided directly or indirectly out of that amount or out of property or money that was available for the purpose by reason of the derivation of the amount;

                     (d)  the beneficiary has power, by means of the exercise by the beneficiary of any power of appointment or revocation or otherwise, to obtain, whether with or without the consent of any other person, the beneficial enjoyment of the amount; or

                     (e)  the beneficiary has directly or indirectly assigned to another person his interest in the amount or is able, in any manner whatsoever, and whether directly or indirectly, to control the application of that interest.

99D  Refund of tax to non‑resident beneficiary

             (1)  Where:

                     (a)  a trustee of a trust estate has been assessed and was liable to pay tax in pursuance of subsection 99(2) or (3) or subsection 99A(4) or (4A) in respect of the net income or a part of the net income of the trust estate of a year of income (in this subsection referred to as the relevant year of income), being the year of income that commenced on 1 July 1978 or a subsequent year of income;

                     (b)  the amount (in this subsection referred to as the relevant tax amount) of the tax so assessed in respect of that net income or that part of that net income has been paid;

                     (c)  the trustee of the trust estate has, in accordance with the terms of the trust, paid an amount (in this subsection referred to as the distributed amount) of the income of the trust estate of the relevant year of income to a beneficiary of the trust estate;

                     (d)  before the expiration of 60 days after the date on which the payment was made, or within such further period as the Commissioner allows, the beneficiary, by writing signed by or on behalf of the beneficiary, makes an application to the Commissioner for a refund under this section in relation to the distributed amount; and

                     (e)  the beneficiary satisfies the Commissioner that the whole or a part (which whole or part, as the case may be, is in this subsection referred to as the non‑Australian distributed amount) of the distributed amount:

                              (i)  is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia;

                             (ii)  was taken into account in calculating the net income of the trust estate of the relevant year of income; and

                            (iii)  is not income that, by the operation of section 100A, is deemed not to have been paid to or applied for the benefit of the beneficiary or to be income to which the beneficiary is not presently entitled;

the Commissioner shall, subject to subsection (2), refund to the beneficiary so much (if any) of the relevant tax amount as is attributable to the non‑Australian distributed amount, reduced by so much of any refund or credit to which the trustee is or was entitled in respect of the relevant tax amount as is attributable to the non‑Australian distributed amount.

             (2)  The Commissioner may refuse to make a refund of tax in relation to an amount paid to a beneficiary of a trust estate if the Commissioner considers that the whole or a part of that amount was paid to the beneficiary by the trustee for the purpose or for purposes that included the purpose of enabling the beneficiary to become entitled to a refund of tax under this section in relation to that amount.

99E  Later trust not taxed on income already taxed under subsection 98(4)

                   Sections 98, 99 and 99A do not apply to so much of the net income of a trust estate of a year of income as is reasonably attributable to a part of the net income of another trust estate in respect of which the trustee of the other trust estate is assessed and is liable to pay tax under subsection 98(4).

99G  Amounts covered by withholding requirement

                   Subsection 98(4) does not apply to so much of the net income of a trust estate as represents income to which a beneficiary is presently entitled and gives rise to an amount from which an entity is required to withhold an amount under Subdivision 12‑H in Schedule 1 to the Taxation Administration Act 1953.

99H  Late payments

             (1)  This section applies if:

                     (a)  a beneficiary of a trust estate that is a managed investment trust is presently entitled to a share of the income of the trust estate of a year of income; and

                     (b)  the beneficiary is a non‑resident at the end of the year of income; and

                     (c)  all or part of that share of the net income of the trust estate (the late amount) has not been paid to the beneficiary by the end of the period applicable under subsection 12‑400(4) in Schedule 1 to the Taxation Administration Act 1953; and

Note:       That subsection requires payments to be made before the end of 3 months after the end of the relevant year of income or within a longer period allowed by the Commissioner.

                     (d)  if the late amount had been paid to the beneficiary within that period, the payment would have been a fund payment made by the trustee of the managed investment trust.

             (2)  This Division applies as if that portion of the beneficiary’s income that represents the late amount were income to which no beneficiary was presently entitled.

             (3)  In working out the net income of the trust estate for the year of income for the purposes of subsection (1), disregard these amounts (excluded amounts):

                     (a)  a dividend (as defined in Division 11A of Part III) that is subject to, or exempted from, a requirement to withhold under Subdivision 12‑F in Schedule 1 to the Taxation Administration Act 1953;

                     (b)  interest (as so defined) that is subject to, or exempted from, such a requirement;

                     (c)  a royalty that is subject to, or exempted from, such a requirement;

                     (d)  a capital gain or capital loss from a CGT event that happens in relation to a CGT asset that is not taxable Australian property;

                     (e)  amounts that are not from a source in Australia;

and disregard deductions relating to excluded amounts.

100  Beneficiary assessable in respect of certain trust income

             (1)  The assessable income of any beneficiary who:

                     (a)  is under a legal disability or is deemed to be presently entitled to any of the income of a trust estate by virtue of the operation of subsection 95A(2); and

                     (b)  is a beneficiary in more than one trust estate or derives income from any other source;

shall include:

                     (c)  so much of the individual interest of the beneficiary in the net income of the trust estate or of each of the trust estates as is attributable to a period when the beneficiary was a resident; and

                     (d)  so much of the individual interest of the beneficiary in the net income of the trust estate or of each of the trust estates as is attributable to a period when the beneficiary was not a resident and is also attributed to sources in Australia.

Note 1:       If the net income of one or more of the trust estates includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 also affects the assessment of the beneficiary.

Note 2:       An amount is not included in assessable income under this section to the extent that subsection 98A(3) already includes it: see subsection 98A(4).

          (1A)  If:

                     (a)  a beneficiary in a trust estate is under a legal disability or is deemed to be presently entitled to any of the income of the trust estate by virtue of the operation of subsection 95A(2); and

                     (b)  the beneficiary is not a beneficiary in any other trust estate and does not derive income from any other source; and

                     (c)  the beneficiary would receive a refund of tax offsets under Division 67 of the Income Tax Assessment Act 1997 for a particular year of income if the following amounts were included in the assessable income of the beneficiary for that year:

                              (i)  so much of the individual interest of the beneficiary in the net income of the trust estate for that year as is attributable to a period when the beneficiary was a resident;

                             (ii)  so much of the individual interest of the beneficiary in the net income of the trust estate for that year as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;

then those amounts are included in the assessable income of the beneficiary for that year.

          (1B)  If a beneficiary in a trust estate who is under a legal disability or is deemed to be presently entitled to any of the income of the trust estate by virtue of the operation of subsection 95A(2):

                     (a)  is a resident at the end of the year of income; and

                     (b)  is not a beneficiary in any other trust estate and does not derive income from any other source;

the assessable income of the beneficiary includes so much of the individual interest of the beneficiary in the net income of the trust estate as is reasonably attributable to a part of the net income of another trust estate in respect of which the trustee of the other trust estate is assessed and is liable to pay tax under subsection 98(4).

Note 1:       If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 also affects the assessment of the beneficiary.

Note 2:       A credit is available under section 98B for an appropriate part of the subsection 98(4) tax.

Note 3:       An amount is not included in assessable income under this section to the extent that subsection 98A(3) already includes it: see subsection 98A(4).

          (1C)  If a beneficiary in a trust estate who is under a legal disability or is deemed to be presently entitled to any of the income of the trust estate by virtue of the operation of subsection 95A(2):

                     (a)  is a resident at the end of the year of income; and

                     (b)  is not a beneficiary in any other trust estate and does not derive income from any other source;

the assessable income of the beneficiary includes so much of the individual interest of the beneficiary in the net income of the trust estate as is represented by or reasonably attributable to a payment from which an entity was required to withhold an amount under Subdivision 12‑H in Schedule 1 to the Taxation Administration Act 1953.

Note:          A credit is available under section 18‑50 in Schedule 1 to the Taxation Administration Act 1953 for an appropriate part of the amount withheld.

             (2)  There shall be deducted from the income tax assessed against a beneficiary to whom subsection (1) or (1A) applies the tax paid or payable by any trustee in respect of that beneficiary’s interest in the net income of the trust estate.

             (3)  However, an amount of tax is not to be deducted under subsection (2) from the income tax assessed against a beneficiary to the extent that the amount is deducted under section 98B from the income tax assessed against the beneficiary.

100A  Present entitlement arising from reimbursement agreement

             (1)  Where:

                     (a)  apart from this section, a beneficiary of a trust estate who is not under any legal disability is presently entitled to a share of the income of the trust estate; and

                     (b)  the present entitlement of the beneficiary to that share or to a part of that share of the income of the trust estate (which share or part, as the case may be, is in this subsection referred to as the relevant trust income) arose out of a reimbursement agreement or arose by reason of any act, transaction or circumstance that occurred in connection with, or as a result of, a reimbursement agreement;

the beneficiary shall, for the purposes of this Act, be deemed not to be, and never to have been, presently entitled to the relevant trust income.

             (2)  Where:

                     (a)  apart from this section, a beneficiary of a trust estate who is not under any legal disability would, by reason that income of the trust estate was paid to, or applied for the benefit of, the beneficiary, be deemed to be presently entitled to income of the trust estate; and

                     (b)  that income or a part of that income (which income or part, as the case may be, is in this subsection referred to as the relevant trust income) was paid to, or applied for the benefit of, the beneficiary as a result of a reimbursement agreement or as a result of any act, transaction or circumstance that occurred in connection with, or as a result of, a reimbursement agreement;

the relevant trust income shall, for the purposes of this Act, be deemed not to have been paid to, or applied for the benefit of, the beneficiary.

             (3)  In the preceding provisions of this section:

                     (a)  a reference to income of a trust estate to which a beneficiary is, apart from this section, presently entitled shall be read as not including a reference to:

                              (i)  income of the trust estate to which the beneficiary is presently entitled in the capacity of a trustee of another trust estate, being income that was paid to, or applied for the benefit of, the beneficiary before 6 March 1980; or

                             (ii)  income that was paid to, or applied for the benefit of, the beneficiary before 12 June 1978; and

                     (b)  a reference to income of a trust estate that was paid to, or applied for the benefit of, a beneficiary of the trust estate shall be read as not including a reference to:

                              (i)  income of the trust estate that, before 6 March 1980, was paid to, or applied for the benefit of, the beneficiary in the capacity of a trustee of another trust estate; or

                             (ii)  income of the trust estate that was paid to, or applied for the benefit of, the beneficiary before 12 June 1978.

          (3A)  Where:

                     (a)  apart from this section, a beneficiary (in this subsection referred to as the trustee beneficiary) of a trust estate is presently entitled to a share of the income of the trust estate in the capacity of a trustee of another trust estate (in this subsection referred to as the interposed trust estate);

                     (b)  apart from this subsection, the trustee beneficiary would, by virtue of subsection (1), be deemed not to be, and never to have been, presently entitled to that share or a part of that share of the income of the first‑mentioned trust estate (which share or part is in this subsection referred to as the relevant trust income); and

                     (c)  apart from this section, a beneficiary of the interposed trust estate is or was, or beneficiaries of the interposed trust estate are or were, presently entitled, or deemed to be presently entitled, to any income of the interposed trust estate (in this subsection referred to as the distributable trust income) that is attributable to the relevant trust income;

subsection (1) does not apply, and shall be deemed never to have applied, in relation to the trustee beneficiary, in relation to any part of the relevant trust income to which the distributable trust income is attributable.

          (3B)  Where:

                     (a)  apart from this section, a beneficiary (in this subsection referred to as the trustee beneficiary) of a trust estate would, by reason that income of the trust estate was paid to, or applied for the benefit of, the trustee beneficiary, be deemed to be presently entitled to income of the trust estate in the capacity of a trustee of another trust estate (in this subsection referred to as the interposed trust estate);

                     (b)  apart from this subsection, that income or a part of that income (which income or part is in this subsection referred to as the relevant trust income) would, by virtue of subsection (2), be deemed not to have been paid to, or applied for the benefit of, the trustee beneficiary; and

                     (c)  apart from this section, a beneficiary of the interposed trust estate is or was, or beneficiaries of the interposed trust estate are or were, presently entitled, or deemed to be presently entitled, to any income of the interposed trust estate (in this subsection referred to as the distributable trust income) that is attributable to the relevant trust income;

subsection (2) does not apply, and shall be deemed never to have applied, in relation to the trustee beneficiary, in relation to any part of the relevant trust income to which the distributable trust income is attributable.

          (3C)  A reference in paragraph (3A)(c) or (3B)(c) to a beneficiary of a trust estate shall be read as not including a reference to a beneficiary who is under a legal disability.

             (4)  Where subsection (1) or (2) applies in relation to any income of a trust estate of a year of income:

                     (a)  in the application of this Division in relation to the trust estate in relation to the year of income, section 99A shall be read as if subsections (2), (3) and (3A) of that section were omitted; and

                     (b)  for the purposes of any application of section 99A in relation to the trust estate in relation to the year of income, the trust estate shall be deemed to be a resident trust estate.

             (5)  For the purposes of subsection (1), but without limiting the generality of that subsection, where:

                     (a)  a reimbursement agreement was entered into at or after the time when a person became a beneficiary of a trust estate (whether the person became a beneficiary of the trust estate before or after the commencement of this section); and

                     (b)  the amount (in this subsection referred to as the increased amount) of the share of the income of the trust estate to which the beneficiary is presently entitled exceeds the amount (in this subsection referred to as the original amount) of the income of the trust estate to which the beneficiary would have been, or could reasonably be expected to have been, presently entitled if the reimbursement agreement had not been entered into or if an act, transaction or circumstance that occurred in connection with, or as a result of, the reimbursement agreement had not occurred;

the present entitlement of the beneficiary to so much of the increased amount as exceeds the original amount shall be taken to have arisen out of the reimbursement agreement.

             (6)  For the purposes of subsection (2), but without limiting the generality of that subsection, where:

                     (a)  a reimbursement agreement was entered into at or after the time when a person became a beneficiary of a trust estate (whether the person became a beneficiary of the trust estate before or after the commencement of this section); and

                     (b)  income of the trust estate was paid to, or applied for the benefit of, the beneficiary and the amount (in this subsection referred to as the increased amount) of that income exceeds the amount (in this subsection referred to as the original amount) that would have been, or could reasonably be expected to have been, paid to, or applied for the benefit of, the beneficiary if the reimbursement agreement had not been entered into or if an act, transaction or circumstance that occurred in connection with, or as a result of, the reimbursement agreement had not occurred;

so much of the increased amount as exceeds the original amount shall be taken to be income of the trust estate that was paid to, or applied for the benefit of, the beneficiary as a result of the reimbursement agreement.

          (6A)  Where:

                     (a)  subsection (1) or (2) applies, or would but for subsection (3A) or (3B) apply, in relation to a beneficiary of a trust estate in relation to a reimbursement agreement in relation to any income of the trust estate; and

                     (b)  as part of, under or in connection with the reimbursement agreement, the beneficiary incurred or incurs a loss or outgoing after 5 March 1980 in respect of which a deduction has been allowed or would, but for this subsection, be allowable;

then, notwithstanding any other provision of this Act, a deduction shall be deemed not to have been, or not to be, allowable, as the case may be, in respect of that loss or outgoing.

          (6B)  Where subsection (6A) deems a deduction not to have been, or not to be, allowable in respect of a loss or outgoing incurred by a taxpayer in the acquisition of property that, for the purposes of the application of this Act and the Income Tax Assessment Act 1997 in relation to the taxpayer is or was trading stock, then, notwithstanding any other provision of this Act or that Act, the cost or cost price of that property, for the purposes of the application of Subdivision B of Division 2 of Part III of this Act or Division 70 (Trading stock) or 385 (Primary production) of the Income Tax Assessment Act 1997 in relation to that property in relation to the taxpayer, shall be taken to be, and at all times to have been, nil.

             (7)  Subject to subsection (8), a reference in this section, in relation to a beneficiary of a trust estate, to a reimbursement agreement shall be read as a reference to an agreement, whether entered into before or after the commencement of this section, that provides for the payment of money or the transfer of property to, or the provision of services or other benefits for, a person or persons other than the beneficiary or the beneficiary and another person or other persons.

             (8)  A reference in subsection (7) to an agreement shall be read as not including a reference to an agreement that was not entered into for the purpose, or for purposes that included the purpose, of securing that a person who, if the agreement had not been entered into, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than that person would have been liable to pay if the agreement had not been entered into.

             (9)  For the purposes of subsection (8), an agreement shall be taken to have been entered into for a particular purpose, or for purposes that included a particular purpose, if any of the parties to the agreement entered into the agreement for that purpose, or for purposes that included that purpose, as the case may be.

           (10)  A reference in subsection (7) to the payment of money to a person or persons shall be read as including a reference to the payment of money to a person or persons by way of loan.

           (11)  A reference in this section to a person shall be read as including a reference to a person in the capacity of a trustee.

           (12)  For the purposes of this section, an agreement that provides for a person to release, abandon, fail to demand payment of or postpone payment of, a debt owed by another person shall be deemed to be an agreement that provides for the payment of money to that other person.

           (13)  In this section:

agreement means any agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings, but does not include an agreement, arrangement or understanding entered into in the course of ordinary family or commercial dealing.

Note:          Section 960‑255 of the Income Tax Assessment Act 1997 may be relevant to determining family relationships for the purposes of the definition of agreement.

property includes a chose in action and also includes an estate, interest, right or power, whether at law or in equity, in or over property.

101  Discretionary trusts

                   For the purposes of this Act, where a trustee has a discretion to pay or apply income of a trust estate to or for the benefit of specified beneficiaries, a beneficiary in whose favour the trustee exercises his discretion shall be deemed to be presently entitled to the amount paid to him or applied for his benefit by the trustee in the exercise of that discretion.

101A  Income of deceased received after death

             (1)  Where in the year of income, the trustee of the estate of a deceased person receives any amount which would have been assessable income in the hands of the deceased person if it had been received by him during his lifetime, that amount shall be included in the assessable income of that year of the trust estate and shall be deemed to be income to which no beneficiary is presently entitled.

             (2)  Subsection (1) does not apply in relation to an amount received by the trustee of the estate of a deceased person to the extent to which, if it had been received by the deceased person during his lifetime, it would have been included in the assessable income of that person by virtue of section 83‑10 or 83‑80 of the Income Tax Assessment Act 1997.

             (3)  To avoid doubt, if in the year of income an amount is included in the assessable income of a deceased taxpayer under Division 82 or 302 of the Income Tax Assessment Act 1997 in respect of a payment received by the trustee of the estate of the deceased taxpayer, that amount shall be included in the assessable income of that year of income of the trust estate.

             (4)  This section does not apply in relation to any amount received by the trustee of the estate of a deceased person if the amount is a farm management deposit (within the meaning of Schedule 2G), of which the deceased person was the owner, that has become repayable.

102  Revocable trusts

             (1)  Where a person has created a trust in respect of any income or property (including money) and:

                     (a)  he has power, whenever exercisable, to revoke or alter the trusts so as to acquire a beneficial interest in the income derived by the trustee during the year of income, or the property producing that income, or any part of that income or property; or

                     (b)  income is, under that trust, in the year of income, payable to or accumulated for, or applicable for the benefit of a child or children of that person who is or are under the age of 18 years;

the Commissioner may assess the trustee to pay income tax, under this section, and the trustee shall be liable to pay the tax so assessed.

             (2)  The amount of the tax payable in pursuance of this section shall be the amount by which the tax actually payable on his own taxable income by the person who created the trust is less than the tax which would have been payable by him if he had received, in addition to any other income derived by him, so much of the net income of the trust estate as:

                     (a)  is attributable to the property in which he has power to acquire the beneficial interest;

                     (b)  represents the income, or the part of the income, in which he has power to acquire the beneficial interest; or

                     (c)  is payable to or accumulated for, or applicable for the benefit of, a child or children of that person who is or are under the age of 18 years.

          (2A)  Where any property the subject of a trust has been converted into other property, this section shall apply in the same way as if the trust had originally been created in respect of that other property.

          (2B)  In the application of subsection (2) in determining the amount of tax that is payable by a trustee of a trust estate in pursuance of this section, the reference in that subsection to the net income of the trust estate shall be read as a reference to that net income reduced by:

                     (a)  so much (if any) of that net income as is attributable to a period when the person who created the trust was not a resident and is also attributable to sources out of Australia; and

                     (b)  so much (if any) of that net income as is not covered by paragraph (a) and represents an amount included in the assessable income of any taxpayer under section 102AAZD.

             (3)  Where this section is applied to the assessment of the income of a trust estate or part thereof derived in the year of income, no beneficiary shall be assessed in his individual capacity in respect of his individual interest in the income or part to which this section has been so applied, and the trustee shall not be assessed in respect of that income or part otherwise than under this section.


 

Division 6AAASpecial provisions relating to non‑resident trust estates etc.

Subdivision APreliminary

102AAA  Object of Division

                   The object of this Division is to set out rules relating to the following:

                     (a)  the payment of interest on distributions from certain non‑resident trust estates (Subdivision B);

                     (b)  the winding‑up of certain non‑resident trust estates in existence on 12 April 1989 (Subdivision C);

                     (c)  an accruals system of taxation of certain non‑resident trust estates (Subdivision D).

102AAB  Interpretation

                   In this Division, unless the contrary intention appears:

1 July 1990 net worth, in relation to a trust estate, means the market value, as at the beginning of 1 July 1990, of the assets of the trust estate, reduced by the liabilities of the trust estate as at the beginning of that day.

accounts has the same meaning as in Part X.

actual transfer, in relation to property or services, means a transfer of the property or services other than a transfer that is taken to have been made because of subsection 102AAK(1), (2), (5), (6), (8), (10) or (11).

arm’s length amount, in relation to an actual transfer of property or services to a trust estate, means the amount that the trustee could reasonably be expected to have been required to pay to obtain the property or the services concerned from the transferor under a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction.

associate has the same meaning as in Part X.

attributable income, in relation to a trust estate, has the meaning given by section 102AAU.

attributable taxpayer has the meaning given by section 102AAT.

attribution account payment has the same meaning as in Part X.

attribution debit has the same meaning as in Part X.

Australian entity has the same meaning as in Part X.

Australian trust has the same meaning as in Part X.

base interest rate for a day has the same meaning as in section 8AAD of the Taxation Administration Act 1953.

CFC has the same meaning as in Part X.

controlled foreign trust has the same meaning as in Part X.

corporate unit trust, in relation to a year of income, means a unit trust that is a corporate unit trust in relation to the year of income for the purposes of Division 6B.

de facto relationship means:

                     (a)  a relationship between 2 persons (whether of the same sex or different sexes) that is registered under a law of a State or Territory prescribed for the purposes of section 22B of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; or

                     (b)  a relationship between 2 persons (whether of the same sex or different sexes) who, although not legally married to each other, live with each other on a genuine domestic basis in a relationship as a couple.

depreciation provision means:

                     (a)  any provision of Division 40 of the Income Tax Assessment Act 1997 (other than Subdivision 40‑E); or

                     (b)  any provision of Division 43 of that Act.

designated concession income has the same meaning as in Part X.

discretionary trust estate means a trust estate where:

                     (a)  both of the following conditions are satisfied:

                              (i)  a person (who may include the trustee) is empowered (either unconditionally or on the fulfilment of a condition) to exercise any power of appointment or other discretion;

                             (ii)  the exercise of the power or discretion, or the failure to exercise the power or discretion, has the effect of determining, to any extent, either or both of the following:

                                        (A)  the identities of those who may benefit under the trust;

                                        (B)  how beneficiaries are to benefit, as between themselves, under the trust; or

                     (b)  one or more of the beneficiaries under the trust have a contingent or defeasible interest in some or all of the corpus or income of the trust estate; or

                     (c)  the trustee of another trust estate, being a trust estate where both of the conditions in paragraph (a) are satisfied, benefits, or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the first‑mentioned trust estate.

eligible designated concession income has the same meaning as in Part X.

entity means any of the following:

                     (a)  a company;

                     (b)  a partnership;

                     (c)  a person in the capacity of trustee;

                     (d)  any other person.

exempt income, in relation to a trust estate, means the exempt income of the trust estate calculated as if the trustee were a taxpayer who was a resident.

IP time means 7.30 p.m., by standard time in the Australian Capital Territory, on 12 April 1989.

listed country has the same meaning as in Part X.

listed country trust estate has the meaning given by section 102AAE.

net income, in relation to a trust estate, in relation to a year of income, means:

                     (a)  if the trust estate is a corporate unit trust in relation to the year of income—the net income (within the meaning of Division 6B) of the corporate unit trust of the year of income; or

                     (b)  if the trust estate is a public trading trust in relation to the year of income—the net income (within the meaning of Division 6C) of the public trading trust of the year of income; or

                     (c)  in any other case—the net income (within the meaning of Division 6) of the trust estate.

non‑attributable year of income, in relation to a trust estate, means a non‑resident year of income of the trust estate where no amount calculated by reference to the attributable income of the trust estate of that year of income is included in the assessable income of any taxpayer under subsection 102AAZD(1).

non‑discretionary trust estate means a trust estate other than a discretionary trust estate.

non‑resident family trust has the meaning given by section 102AAH.

non‑resident trust estate (except in section 102AAA), in relation to a year of income, means a trust estate that is not a resident trust estate in relation to the year of income.

non‑resident year of income, in relation to a trust estate, means a year of income in relation to which the trust estate is a non‑resident trust estate.

profits includes gains, whether of an income or capital nature.

property includes money.

public trading trust, in relation to a year of income, means a unit trust that is a public trading trust in relation to the year of income for the purposes of Division 6C.

public unit trust has the meaning given by section 102AAF.

resident trust estate, in relation to a year of income, means:

                     (a)  a resident trust estate in relation to the year of income within the meaning of Division 6; or

                     (b)  a unit trust that is a corporate unit trust, or a public trading trust, in relation to the year of income; or

                     (c)  a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust in relation to the year of income.

scheme means:

                     (a)  any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

                     (b)  any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved.

services includes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a benefit, right, privilege, service or facility that is, or is to be, provided under:

                     (a)  an arrangement for or in relation to:

                              (i)  the performance of work (including work of a professional nature), whether with or without the provision of property; or

                             (ii)  the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

                            (iii)  the conferring of benefits, rights or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or

                     (b)  a contract of insurance; or

                     (c)  an arrangement for or in relation to the lending of money.

subject to tax has the same meaning as in Part X.

tax accounting period has the same meaning as in Part X.

tax law, in relation to a listed country or an unlisted country, has the same meaning as in Part X.

tax offset has the same meaning as in the Income Tax Assessment Act 1997.

transfer:

                     (a)  in relation to property—includes dispose of (whether by assignment, declaration of trust or otherwise) or provide; and

                     (b)  in relation to services—includes allow, confer, give, grant, perform or provide.

trust estate, in relation to a transfer of property or services, means the trust estate or, as the case requires, the trustee of the trust estate.

underlying transfer, in relation to a transfer of property or services to a trust estate, means:

                     (a)  if that transfer was an actual transfer—the actual transfer; or

                     (b)  if that transfer was taken to have been made because of subsection 102AAK(1)—the actual transfer referred to in that subsection; or

                     (c)  if that transfer was taken to have been made because of subsection 102AAK(2)—the actual transfer referred to in paragraph 102AAK(2)(d); or

                     (d)  if that transfer was taken to have been made because of subsection 102AAK(5)—the actual transfer referred to in paragraph 102AAK(5)(b); or

                     (e)  if that transfer was taken to have been made because of the application of subsection 102AAK(6) or (8) to an actual transfer—the actual transfer; or

                      (f)  if that transfer was taken to have been made because of the application of subsection 102AAK(6) or (8) to a transfer that was taken to have been made because of subsection 102AAK(1)—the actual transfer referred to in subsection 102AAK(1); or

                     (g)  if that transfer was taken to have been made because of the application of subsection 102AAK(6) or (8) to a transfer that was taken to have been made because of subsection 102AAK(5)—the actual transfer referred to in paragraph 102AAK(5)(b); or

                     (h)  if that transfer was taken to have been made because of subsection 102AAK(10)—the actual transfer referred to in paragraph 102AAK(10)(b); or

                      (j)  if that transfer was taken to have been made because of one or more applications of subsection 102AAK(11) to an actual transfer—the actual transfer; or

                     (k)  if that transfer was taken to have been made because of one or more applications of subsection 102AAK(11) to a transfer (in this paragraph called the deemed transfer) that was taken to have been made because of subsection 102AAK(1), (2), (5), (6), (8) or (10)—the actual transfer that, under a preceding paragraph of this definition, is the underlying transfer in relation to the deemed transfer.

underlying transferor, in relation to a transfer of property or services to a trust estate, means the entity who made the underlying transfer concerned.

unlisted country has the same meaning as in Part X.

weighted statutory interest rate, in relation to a year of income, means:

                     (a)  if there is only one base interest rate in relation to the year of income—that rate; or

                     (b)  if there are 2 or more base interest rates in relation to the year of income—the weighted average of the base rates for the year of income.

102AAC  Each listed country and unlisted country to be treated as a separate foreign country

                   For the purposes of the application of section 6AB to this Division, each listed country and each unlisted country is to be treated as a separate foreign country.

102AAD  Subject to tax—application of subsection 324(2)

                   Subsection 324(2) applies in relation to this Division in a corresponding way to the way in which it applies in relation to Part X.

102AAE  Listed country trust estates

             (1)  For the purposes of this Division, a trust estate is taken to be a listed country trust estate in relation to a year of income if, and only if, either of the following paragraphs applies to each item of income or profit derived by the trust estate in the year of income:

                     (a)  the income or profit is either:

                              (i)  subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

                             (ii)  designated concession income in relation to any listed country;

                     (b)  both of the following conditions are satisfied:

                              (i)  a part of the income or profit is either:

                                        (A)  subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

                                        (B)  designated concession income in relation to any listed country;

                             (ii)  the remaining part, or each of the remaining parts, of the income or profit:

                                        (A)  is subject to tax in another listed country or in different listed countries, as the case may be, in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

                                        (B)  is designated concession income in relation to any listed country.

             (2)  For the purposes of the application of subparagraph (1)(b)(ii) to a trust estate, if a particular part of an item of income or profit (which part is in this subsection called the item part) derived by the trust estate is included, or would apart from Subdivision 50‑A or section 51‑5, 51‑10 or 51‑30 of the Income Tax Assessment Act 1997 be included, in the assessable income of the trust estate of a year of income (in this subsection called the trust’s year of income) and one of the following paragraphs applies:

                     (a)  both of the following conditions are satisfied:

                              (i)  the trustee of the trust estate is liable to be assessed and pay tax under section 98, 99 or 99A in respect of a part of, or a share in, the net income of the trust estate of the trust’s year of income;

                             (ii)  the whole or a part of the part or share of the net income is attributable to the item part;

                     (b)  all of the following conditions are satisfied:

                              (i)  an amount is included in the assessable income of another taxpayer of the trust’s year of income or the next following year of income (which taxpayer is in this subsection called the actual taxpayer) under subsection 92(1) or section 97, 98A or 100;

                             (ii)  the actual taxpayer is:

                                        (A)  a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

                                        (B)  the trustee of a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust in relation to the year of income concerned; or

                                        (C)  the trustee of a corporate unit trust in relation to the year of income concerned; or

                                        (D)  the trustee of a public trading trust in relation to the year of income concerned; or

                                         (E)  the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99A in respect of a part of, or a share in, the net income of a trust estate;

                            (iii)  if sub-subparagraph (ii)(A), (B), (C) or (D) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the item part;

                            (iv)  if sub-subparagraph (ii)(E) applies—the whole or a part of the part or share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the item part;

                     (c)  both of the following conditions are satisfied:

                              (i)  trustee beneficiary non‑disclosure tax is payable under Division 6D on the whole or part (the net income amount) of a share of the net income of the trust estate of the trust’s year of income;

                             (ii)  the whole or part of the net income amount is attributable to the item part;

the item part is to be treated as if it were subject to tax in a listed country in a tax accounting period ending before the end of the trust’s year of income.

             (3)  For the purposes of this section, where a part of a particular item of income or profits derived by an entity would, if it were a separate item of income or profits, be taken to be subject to tax in a listed country in a particular tax accounting period, that part is taken to be subject to tax in that listed country in that tax accounting period.

102AAF  Public unit trusts

             (1)  Subject to this section, for the purposes of this Division, a unit trust is a public unit trust at all times during a year of income if either of the following conditions are satisfied:

                     (a)  at any time during the year of income:

                              (i)  any of the units in the unit trust were listed for quotation in the official list of a stock exchange in Australia or elsewhere; or

                             (ii)  any of the units in the unit trust were offered to the public;

                     (b)  at all times during the year of income, the units in the unit trust were held by not fewer than 50 persons.

             (2)  In determining whether a unit trust is a public unit trust at all times during a year of income for the purposes of this Division, subsections 102G(2) to (8) (inclusive) and (10) apply:

                     (a)  as if a reference in those subsections to Division 6B were a reference to this Division; and

                     (b)  as if a reference in those subsections to subsection 102G(1) were a reference to subsection (1) of this section; and

                     (c)  as if a reference in those subsections to a public unit trust in relation to a year of income were a reference to a public unit trust at all times during a year of income.

             (3)  In determining whether a unit trust (in this subsection called the first unit trust) is a public unit trust at all times during a year of income for the purposes of this Division, the following provisions have effect:

                     (a)  the following entities are taken to be one person:

                              (i)  an entity, whether or not it holds units in the first unit trust; and

                             (ii)  the entity or entities who are the associate or associates of the entity;

                     (b)  where any units in the first unit trust are held by the trustee of another trust that, apart from this paragraph, is a public unit trust at all times during the year of income—a person who has a beneficial interest in property of that other trust that consists of those units is taken to hold those units;

                     (c)  where any units in the first unit trust are held by the trustee of another trust that:

                              (i)  apart from paragraph (b); or

                             (ii)  by virtue of the application of paragraph (b);

                            is a public unit trust at all times during the year of income—a person who has a beneficial interest in the property of that other trust that consists of those units (whether or not that beneficial interest is taken to be held by virtue of the application of this paragraph) is taken to hold those units.

102AAG  When entity is in a position to control a trust estate

             (1)  For the purposes of this Division, an entity is taken to be in a position to control a trust estate if, and only if:

                     (a)  a group in relation to the entity had the power by means of the exercise by the group of any power of appointment or revocation or otherwise, to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust estate; or

                     (b)  a group in relation to the entity was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust estate; or

                     (c)  a group in relation to the entity was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (a) or (b); or

                     (d)  a trustee of the trust estate was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the entity; or

                     (e)  a group in relation to the entity was able to remove or appoint the trustee, or any of the trustees, of the trust estate.

             (2)  In subsection (1), a reference to a group in relation to an entity is a reference to:

                     (a)  the entity acting alone; or

                     (b)  an associate of the entity acting alone; or

                     (c)  the entity and one or more associates of the entity acting together; or

                     (d)  2 or more associates of the entity acting together.

102AAH  Non‑resident family trusts

             (1)  Subject to subsections (4) and (5), for the purposes of this Division, a trust estate is a non‑resident family trust in relation to a natural person at a particular time if, and only if, at that time:

                     (a)  the trust estate is either:

                              (i)  a post‑marital or post‑relationship family trust in relation to the natural person; or

                             (ii)  a family relief trust in relation to the natural person; and

                     (b)  the trust is constituted by:

                              (i)  a deed of trust or other instrument; or

                             (ii)  an order or declaration of a court.

             (2)  For the purposes of this section, a trust estate is a post‑marital or post‑relationship family trust in relation to a natural person at a particular time if:

                     (a)  either of the following conditions is satisfied:

                              (i)  the trust was created pursuant to:

                                        (A)  a decree or order of dissolution or annulment of marriage, being a dissolution or annulment that, because of the Family Law Act 1975, has effect, or continues to have effect in Australia or is recognised as valid in Australia; or

                                        (B)  a decree or order of judicial separation or a similar decree or order;

                             (ii)  the trust was created in consequence of the break‑down of a de facto relationship; and

                     (b)  at that time, the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the primary potential beneficiaries) are natural persons who:

                              (i)  are non‑residents at that time; and

                             (ii)  are covered by any of the following categories:

                                        (A)  the spouse or former spouse of the natural person;

                                        (B)  a child of the natural person;

                                        (C)  a child of the former spouse of the natural person, being a child who was such a child at a time when the former spouse was the spouse of the natural person;

                                        (D)  a child of the spouse of the natural person.

             (3)  For the purposes of this section, a trust estate is a family relief trust in relation to a natural person at a particular time (in this subsection called the test time) if:

                     (a)  the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the primary potential beneficiaries) are natural persons who:

                              (i)  are identified by name in the trust deed or instrument, or in the court order or declaration, constituting the trust; and

                             (ii)  are non‑residents at that time; and

                            (iii)  are covered by any of the following categories:

                                        (A)  the spouse or former spouse of the natural person;

                                        (B)  a parent of the natural person or of the natural person’s spouse or former spouse;

                                        (C)  a child of the natural person or of the natural person’s spouse or former spouse;

                                        (D)  a grandparent of the natural person;

                                         (E)  a grandchild of the natural person;

                                         (F)  a brother or sister of the natural person or of the natural person’s spouse or former spouse;

                                        (G)  a child of a brother or sister mentioned in sub-subparagraph (F); and

                     (b)  the trust was established, and is operated, for the relief of persons who are in necessitous circumstances; and

                     (c)  any of the following conditions is satisfied:

                              (i)  at the test time, the assets of the trust are not excessive having regard to the requirements, or likely requirements, of the primary potential beneficiaries;

                             (ii)  no transfers of property or services to the trust estate were made during the period (in this paragraph called the test period) commencing at the IP time and ending at the test time;

                            (iii)  immediately after each transfer of property or services to the trust estate made during the test period, the assets of the trust were not excessive having regard to the requirements, or likely requirements, of the beneficiaries at the time of the transfer.

Note:          Section 960‑255 of the Income Tax Assessment Act 1997 may be relevant to determining relationships for the purposes of subparagraph (3)(a)(iii).

             (4)  Subsection (1) does not prevent a trust estate from being a non‑resident family trust in relation to a natural person at a particular time if, in the event of the death of a particular primary potential beneficiary at that time, one or more natural persons (which persons are in subsection (5) called the secondary potential beneficiaries) who:

                     (a)  are non‑residents at that time; and

                     (b)  are children of the primary potential beneficiary;

would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.

             (5)  Subsections (1) and (4) do not prevent a trust estate from being a non‑resident family trust in relation to a natural person at a particular time if, in the event of the death of all of the primary potential beneficiaries and all of the secondary potential beneficiaries at that time, there are one or more funds, authorities or institutions in Australia covered by an item in any of the tables in Subdivision 30‑B of the Income Tax Assessment Act 1997, or item 2 of the table in section 30‑15 of that Act, that would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.

             (6)  For the purposes of this section, if, at a particular time, an entity holds an interest in, or right to benefit under, a trust that is dependent on the death of one or more natural persons, then, the entity is taken to be an entity who, in the event of the death of that natural person or those natural persons immediately after that time, would benefit under the trust.

             (7)  A reference in this section to a natural person does not include a reference to a natural person in the capacity of a trustee.

102AAJ  Transfer of property or services

             (1)  A reference in this Division to the transfer of property or services to a trust estate includes a reference to the transfer of such property or services by way of the creation of the trust estate.

             (2)  For the purposes of this Division, where an entity acquires property that did not previously exist, the property is taken to have existed immediately before the acquisition and to have been transferred by the entity who created the property.

             (3)  For the purposes of this Division, property or services are taken to have been transferred to an entity if the property or services have been applied for the benefit of, or in accordance with the directions of, the entity.

             (4)  Without limiting the generality of subsection (3), a reference in that subsection to the application of property or services for the benefit of an entity includes a reference to the application of property or services in the discharge, in whole or in part, of a debt due by the entity.

             (5)  Unless the contrary intention appears, a reference in this Division to a transfer of property or services includes a reference to a transfer made before the commencement of this Division.

             (6)  A reference in this Division to a transfer of property or services made before the IP time includes a reference to a transfer made at the IP time.

102AAK  Deemed transfers of property or services to trust estate

             (1)  For the purposes of this Division, where an entity (in this subsection called the prime entity) causes another entity to actually transfer property or services to a trust estate, the prime entity is taken to have transferred the property or services (instead of the other entity).

             (2)  For the purposes of this Division, where:

                     (a)  the trustee of a trust estate issues units in the trust to an entity (in this subsection called the first entity) in the first entity’s capacity as a manager, underwriter or dealer in relation to the marketing or placement of the units; and

                     (b)  in the course of the marketing or placement of the units, the units are disposed of by the first entity to another entity (in this subsection called the second entity); and

                     (c)  at a particular time (in this subsection called the second entity’s transfer time), the second entity transfers property or services to the first entity as consideration for the acquisition of the units; and

                     (d)  the first entity has actually transferred, or actually transfers, property or services (in this subsection called the original property or services) to the trust estate for the sole purpose of acquiring the units;

the second entity is taken to have transferred the original property or services (instead of the first entity) at the second entity’s transfer time.

             (3)  A reference in subsection (2) to a unit in a trust estate is a reference to an interest (however described) in any of the income or property of the trust estate.

             (4)  Subsections (1) and (2) do not limit the operation of subsection (5).

             (5)  Where, under a scheme:

                     (a)  an entity (in this subsection called the scheme entity) actually transfers property or services to another entity; and

                     (b)  property or services are actually transferred to a trust estate at a particular time otherwise than by the scheme entity;

the Commissioner may, for the purposes of this Division, treat the property or services mentioned in paragraph (b) as having been transferred by the scheme entity to the trust estate (instead of by any other entity) at that time to such extent as the Commissioner considers reasonable.

             (6)  For the purposes of this Division, if (apart from subsections (8), (10) and (11)) an entity, being a partnership, transfers property or services to a trust estate at a particular time:

                     (a)  each partner in the partnership is taken to have transferred a part of the property or services to the trust estate at that time; and

                     (b)  the market value of the part transferred by a particular partner is calculated using the formula:

                            where:

Market value means the market value, immediately before the transfer, of the property or services transferred by the partnership.

Partner’s interest means:

                              (i)  the partner’s percentage interest in the profits of the partnership as at that time; or

                             (ii)  the partner’s percentage interest in the property of the partnership as at that time;

                            or, if they are different, whichever is the higher.

             (7)  Nothing in paragraph (6)(a) affects the application of this Division to the transfer made by the partnership concerned.

             (8)  For the purposes of this Division, if:

                     (a)  apart from this subsection, subsections (6), (10) and (11), an entity being the trustee of a trust estate (in this subsection called the transferor trust estate) transfers property or services (in this subsection called the transferred property or services) to another trust estate (in this subsection called the transferee trust estate) at a particular time (in this subsection called the transfer time); and

                     (b)  the transferor trust estate was an Australian trust, or a controlled foreign trust, at the transfer time; and

                     (c)  the transferor trust estate was a discretionary trust estate at the transfer time; and

                     (d)  apart from this subsection, subsections (6), (10) and (11), one or more other entities transferred property or services to the transferor trust estate at or before the transfer time;

each of those other entities is taken to have transferred the transferred property or services to the transferee trust estate at the transfer time.

             (9)  Nothing in subsection (8) affects the application of this Division to the transfer mentioned in paragraph (8)(a).

           (10)  For the purposes of this Division, where:

                     (a)  any of the following subparagraphs applies:

                              (i)  any of the following events occurs in relation to a company (which company is in this subsection called the transferor):

                                        (A)  the company passes a resolution for its winding‑up;

                                        (B)  an order is made for the winding‑up of the company;

                                        (C)  any similar event;

                             (ii)  a partnership (in this subsection also called the transferor) ceases to exist for the purposes of this Act;

                            (iii)  either of the following sub‑subparagraphs applies in relation to the trustee of a trust estate (in this subsection also called the transferor):

                                        (A)  the trust estate commences to be wound‑up;

                                        (B)  the trust estate ceases to exist for the purposes of this Act; and

                     (b)  an actual transfer of property or services is made to a trust estate (in this subsection called the transferee) as a consequence of the transferor being wound‑up or ceasing to exist;

the transferor is taken to have transferred to the transferee the property or services concerned.

           (11)  For the purposes of this Division, where:

                     (a)  the following subparagraphs apply to an entity (in this subsection called the defunct entity):

                              (i)  the defunct entity is a company, a partnership or the trustee of a trust estate;

                             (ii)  the defunct entity transferred property or services to a trust estate (including a transfer that was taken to have been made because of another application or other applications of this subsection) at a particular time;

                            (iii)  if the defunct entity is a company—any of the following events occurs:

                                        (A)  the company passes a resolution for its winding‑up;

                                        (B)  an order is made for the winding‑up of the company;

                                        (C)  any similar event;

                            (iv)  if the defunct entity is a partnership—the partnership ceases to exist for the purposes of this Act;

                             (v)  if the defunct entity is a trustee of a trust estate—either of the following sub‑subparagraphs applies:

                                        (A)  the trust estate commences to be wound‑up;

                                        (B)  the trust estate ceases to exist for the purposes of this Act; and

                     (b)  the Commissioner is satisfied that another entity (in this subsection called the successor entity) has benefited or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting (either directly or indirectly through one or more interposed companies, partnerships or trusts) by, or as a result of:

                              (i)  a transfer of property or services made by the defunct entity; or

                             (ii)  a transfer of property or services made as a consequence of the defunct entity being wound‑up or ceasing to exist; and

                     (c)  the Commissioner is of the opinion that it is appropriate to apply this subsection to the successor entity;

the assessable income of the successor entity of the year of income in which the event, or the earliest event, mentioned in subparagraph (a)(iii), (iv) or (v) occurred and of each subsequent year of income is to be determined as if the successor entity had transferred to the trust estate mentioned in subparagraph (a)(ii), at the time mentioned in that subparagraph:

                     (d)  the whole of the property or services mentioned in that subparagraph; or

                     (e)  if the Commissioner thinks it appropriate—a part of the property or services referred to in that subparagraph.

102AAL  Division not to apply to transfers by trustees of deceased estates

                   A reference in this Division to a transfer of property or services to a trust estate does not include a reference to a transfer made by the trustee of the estate of a deceased person under:

                     (a)  the terms of the deceased person’s will or codicil; or

                     (b)  an order of a court that varied or modified the provisions of the deceased person’s will or codicil;

unless:

                     (c)  the transfer was made in or as the result of the exercise (by the trustee or any other person) of a power of appointment or any other discretion; or

                     (d)  under subsection 102AAK(1), the property or services are taken to have been transferred by an entity other than the trustee, instead of by the trustee; or

                     (e)  under subsection 102AAK(5), the Commissioner treats the property or services as having been (to any extent) transferred by an entity other than the trustee, instead of by the trustee.

Subdivision BPayment of interest by taxpayer on distributions from certain non‑resident trust estates

102AAM  Payment of interest by taxpayer on distributions from certain non‑resident trust estates

             (1)  For the purposes of this section, if:

                     (a)  an amount is included in the assessable income of a taxpayer of a year of income (which year of income is in this section called the current year of income), being the year of income commencing on 1 July 1990 or a subsequent year of income, under section 99B in relation to a trust estate; and

                     (b)  the whole or a part of the amount so included in the taxpayer’s assessable income (which whole or part is in this section called the distributed amount) is attributable to:

                              (i)  if the trust estate was a listed country trust estate in relation to a particular non‑resident year of income of the trust estate (in this section called the non‑resident trust’s year of income)—so much of the income and profits of the trust estate of the non‑resident trust’s year of income as represents eligible designated concession income in relation to any listed country in relation to the non‑resident trust’s year of income; or

                             (ii)  if the trust estate was not a listed country trust estate in relation to a particular non‑resident year of income of the trust estate (in this section also called the non‑resident trust’s year of income)—so much of the income and profits of the trust estate of the non‑resident trust’s year of income as has not been subject to tax in any listed country in a tax accounting period:

                                        (A)  ending before the end of the non‑resident trust’s year of income; or

                                        (B)  commencing during the non‑resident trust’s year of income;

then:

                     (c)  the distributed amount is the distributed amount of the non‑resident trust’s year of income; and

                     (d)  the taxpayer is the original taxpayer in relation to the distributed amount of the non‑resident trust’s year of income.

          (1A)  For the purposes of subsection (1), unless the contrary is established by the taxpayer:

                     (a)  a distributed amount in relation to a listed country trust estate in relation to a non‑resident trust’s year of income is taken to be wholly attributable to income and profits of the trust estate of that year of income that represent eligible designated concession income in relation to a listed country; and

                     (b)  a distributed amount in relation to a trust estate that was not a listed country trust estate in relation to a non‑resident trust’s year of income is taken to be wholly attributable to income and profits of the trust estate of that year of income that have not been subject to tax in any listed country in a tax accounting period.

          (1B)  This section does not apply to a distributed amount that is attributable to income or profits of the estate of a deceased person if the amount was paid to, or applied for the benefit of, the taxpayer within 3 years after the death of that person.

          (1C)  This section does not apply to a distributed amount that was included in the assessable income of a taxpayer of a year of income under section 99B in relation to a trust estate if, at all times during the year of income, the trust:

                     (a)  was a public unit trust; and

                     (b)  was not a controlled foreign trust.

             (2)  Subject to this section, if the original taxpayer in relation to the distributed amount of the non‑resident trust’s year of income is:

                     (a)  a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

                     (b)  the trustee of a corporate unit trust in relation to the current year of income; or

                     (c)  the trustee of a public trading trust in relation to the current year of income; or

                     (d)  the trustee of a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust in relation to the current year of income;

the taxpayer is liable to pay interest to the Commissioner in respect of the distributed amount of the non‑resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Distributed amount means the distributed amount of the non‑resident trust’s year of income.

Applicable rate of tax has the meaning given by subsection (10).

FITO (Foreign income tax offset) means so much of any tax offset under Division 770 of the Income Tax Assessment Act 1997 to which the taxpayer is entitled as is attributable to the distributed amount of the non‑resident trust’s year of income.

             (3)  Subject to this section, if:

                     (a)  the original taxpayer in relation to the distributed amount of the non‑resident trust’s year of income is the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99A in respect of a part of, or a share in, the net income of the trust estate; and

                     (b)  the whole or a part (which whole or part is in this subsection called the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income) of the part or share of the net income is attributable to the distributed amount of the non‑resident trust’s year of income;

the taxpayer is liable to pay interest to the Commissioner in respect of the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Taxpayer’s portion of the distributed amount means the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income.

Applicable rate of tax has the meaning given by subsection (10).

FITO (Foreign income tax offset) means so much of any tax offset under Division 770 of the Income Tax Assessment Act 1997 to which the taxpayer is entitled as is attributable to the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income.

             (4)  Subject to this section, if:

                     (a)  the original taxpayer in relation to the distributed amount of the non‑resident trust’s year of income is the trustee of a trust estate or a partnership; and

                     (b)  the following conditions are satisfied in relation to another taxpayer (in this subsection called the actual taxpayer):

                              (i)  an amount is included in the assessable income of the actual taxpayer of a year of income under subsection 92(1) or section 97, 98A or 100;

                             (ii)  the actual taxpayer is:

                                        (A)  a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

                                        (B)  the trustee of a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust in relation to the year of income; or

                                        (C)  the trustee of a corporate unit trust in relation to the year of income; or

                                        (D)  the trustee of a public trading trust in relation to the year of income; or

                                         (E)  the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99A in respect of a part of, or a share in, the net income of a trust estate;

                            (iii)  if sub-subparagraph (ii)(A), (B), (C) or (D) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the distributed amount of the non‑resident trust’s year of income;

                            (iv)  if sub-subparagraph (ii)(E) applies—the whole or a part (which whole or part is in this subsection also called the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income) of the part or share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the distributed amount of the non‑resident trust’s year of income;

the actual taxpayer is liable to pay interest to the Commissioner in respect of the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Taxpayer’s portion of the distributed amount means the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income.

Applicable rate of tax has the meaning given by subsection (10).

FITO (Foreign income tax offset) means so much of any tax offset under Division 770 of the Income Tax Assessment Act 1997 to which the taxpayer is entitled as is attributable to the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income.

          (4A)  If:

                     (a)  paragraph 102UK(2)(b) or 102UM(2)(b) has the effect that the whole or a part of a share of the net income of a trust estate (the first trust estate) is not included in the assessable income of the trustee of another trust estate (the second trust estate); and

                     (b)  the whole or the part of the share (which whole or part is in this subsection called the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the distributed amount of the non‑resident trust’s year of income; and

                     (c)  if paragraph 102UK(2)(b) or 102UM(2)(b) were ignored, the second trust estate would be an interposed trust mentioned in applying subparagraph (4)(b)(iii) or (iv) of this section; and

                     (d)  this subsection does not also apply to the trustee of a trust interposed between the first trust estate and the non‑resident trust;

the trustee of the first trust estate is liable to pay interest to the Commissioner in respect of the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

applicable rate of tax has the meaning given by subsection (10).

FITO (Foreign income tax offset) means so much of any tax offset under Division 770 of the Income Tax Assessment Act 1997 to which the trustee of the first trust would be entitled, in respect of the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income, if the taxpayer’s portion of the distributed amount of the non‑resident trust’s income were an amount in respect of which the trustee were liable to be assessed and to pay tax under section 99A.

taxpayer’s portion of the distributed amount means the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income.

             (5)  Interest payable by a taxpayer under this section is to be calculated:

                     (a)  in respect of the period commencing at whichever of the following times is the latest:

                              (i)  the beginning of the first year of income of the taxpayer that begins after the end of the non‑resident trust’s year of income;

                             (ii)  the beginning of the year of income of the taxpayer commencing on 1 July 1990;

                            (iii)  if the taxpayer is a natural person (other than a natural person in the capacity of a trustee) who first commenced to be a resident of Australia at a time (in this subparagraph called the first residence time) on or after 1 July 1990—the beginning of the year of income of the taxpayer next following the year of income of the taxpayer in which the first residence time occurred;

                            and ending at the end of the assessment year of income; and

                     (b)  at the base interest rate.

             (6)  Where the assessable income of a taxpayer of a year of income includes one or more of the following amounts in relation to one or more non‑resident years of income of a particular trust estate (which amounts are in this subsection called the principal amounts):

                     (a)  the distributed amount of the non‑resident trust’s year of income;

                     (b)  the taxpayer’s portion of the distributed amount of the non‑resident trust’s year of income;

the aggregate of the interest payable by the taxpayer in respect of the principal amounts is not to exceed the difference between:

                     (c)  the aggregate of the principal amounts; and

                     (d)  so much of the tax payable in respect of the year of income as is attributable to the aggregate of the principal amounts (ignoring any tax offset under Part 3‑6 of the Income Tax Assessment Act 1997).

             (7)  For the purposes of this section, the extent to which an amount (in this subsection called the section 99B amount) included in the assessable income of a taxpayer of a year of income under section 99B in relation to a trust estate is attributable to an amount (in this subsection called the trust amount) covered by subparagraph (1)(b)(i) or (ii) is to be determined in accordance with the following paragraphs:

                     (a)  in all cases—distributions of income and profits of the trust estate are to be taken to have been made in the following order:

                              (i)  first, from income and profits of the earliest non‑resident year of income;

                             (ii)  then, successively from income and profits of successive subsequent years of income;

                     (b)  if subparagraph (1)(b)(i) applies—the extent to which the amount (in this paragraph called the adjusted section 99B amount), being so much of the section 99B amount as is attributable to the income and profits of the trust estate of the non‑resident trust’s year of income, represents eligible designated concession income in relation to any listed country in relation to the non‑resident trust’s year of income is calculated using the formula:

                            where:

Adjusted section 99B amount means the adjusted section 99B amount.

Eligible designated concession income means the number of dollars in the amount, being so much of the income and profits of the trust estate of the non‑resident trust’s year of income as represents eligible designated concession income in relation to any listed country in relation to the non‑resident trust’s year of income.

Total income means the number of dollars in the income and profits of the trust estate of the non‑resident trust’s year of income.

                     (c)  if subparagraph (1)(b)(ii) applies—the extent to which the amount (in this paragraph called the adjusted section 99B amount), being so much of the section 99B amount as is attributable to the income and profits of the trust estate of the non‑resident trust’s year of income, represents income and profits that have not been subject to tax in a listed country in a tax accounting period mentioned in that subparagraph is calculated using the formula:

                            where:

Adjusted section 99B amount means the adjusted section 99B amount.

Untaxed income means the number of dollars in the amount, being so much of the income and profits of the trust estate of the non‑resident trust’s year of income as is not subject to tax in any listed country in a tax accounting period mentioned in that subparagraph.

Total income means the number of dollars in the income and profits of the trust estate of the non‑resident trust’s year of income.

             (8)  For the purposes of subsection (7), an amount of income or profits of a trust estate is to be taken to be distributed if the amount is paid to, or applied for the benefit of (within the meaning of section 99B), a beneficiary of the trust estate.

             (9)  Where, apart from this subsection, the amount of interest that would be payable under this section by a taxpayer in respect of the distributed amount of a non‑resident trust’s year of income, or in respect of the taxpayer’s portion of the distributed amount of a non‑resident trust’s year of income, is less than 50 cents, interest is not payable by the taxpayer under this section.

           (10)  For the purposes of this section, the applicable rate of tax in relation to a taxpayer is:

                     (a)  if the taxpayer is a company (other than a company in the capacity of a trustee)—the corporate tax rate for the year of tax to which the assessment year of income relates; or

                     (b)  in any other case—the maximum rate specified in the table in Part I of Schedule 7 of the Income Tax Rates Act 1986 that applies for the assessment year of income.

           (11)  For the purposes of the application of this section to a taxpayer, the assessment year of income is:

                     (a)  if subsection (2) or (3) applies—the current year of income; or

                     (b)  if subsection (4) applies—the year of income referred to in subparagraph (4)(b)(i).

           (12)  For a taxpayer who is not a full self‑assessment taxpayer for the assessment year of income, the Commissioner must make an assessment of the interest payable by the taxpayer under this section.

           (13)  Nothing in this Act precludes notice of an assessment made in respect of a taxpayer under subsection (12) from being incorporated in a notice of any other assessment made in respect of the taxpayer under this Act.

        (13A)  If:

                     (a)  a taxpayer is a full self‑assessment taxpayer for the assessment year of income; and

                     (b)  the taxpayer lodges a return for that year;

then:

                     (c)  the Commissioner is taken to have made an assessment of the interest payable by the taxpayer under this section for the year, equal to the amount specified in the return as the interest so payable; and

Note:       If any interest is so payable, the return must specify the amount: see section 161AA.

                     (d)  the assessment is taken to have been made on the day on which the return is lodged; and

                     (e)  the return is taken to be a notice of that assessment given to the taxpayer by the Commissioner on that day.

           (14)  Unless the contrary intention appears, in sections 170, 172, 174, 204, 254 and 255, but not in any other section of this Act, income tax or tax includes interest payable under this section.

Subdivision DAccruals system of taxation of certain non‑resident trust estates

102AAS  Object of Subdivision

                   The object of this Subdivision is to set out rules relating to the following:

                     (a)  the determination of attributable taxpayer status (section 102AAT);

                     (b)  the calculation of the attributable income of a trust estate (sections 102AAU to 102AAZC (inclusive));

                     (c)  the inclusion of amounts in assessable income (sections 102AAZD, 102AAZE and 102AAZF);

                     (d)  the keeping of associated records (section 102AAZG).

102AAT  Accruals system of taxation—attributable taxpayer

             (1)  Subject to this Division, for the purposes of this Division, an entity is an attributable taxpayer in relation to a year of income of the entity (which year of income is in this section called the entity’s current year of income) and in relation to a particular trust estate if, and only if:

                     (a)  either of the following subparagraphs applies:

                              (i)  all of the following conditions are satisfied:

                                        (A)  the trust estate was a discretionary trust estate at any time during the entity’s current year of income;

                                        (B)  the trust estate was not a public unit trust at all times during the entity’s current year of income;

                                        (C)  the entity has transferred property or services to the trust estate at a time (in this subparagraph called the transfer time) before or during the entity’s current year of income;

                                        (D)  if the underlying transfer was made in the course of carrying on a business—it is not the case that, at or about the time of the underlying transfer, identical or similar property or services were transferred by the underlying transferor in the ordinary course of business to ordinary clients or customers under arm’s length transactions and in similar circumstances and subject to identical or similar terms and conditions as those that applied in relation to the underlying transfer of the property or services concerned;

                                         (E)  if the underlying transfer was made under an arm’s length transaction otherwise than in the course of carrying on a business—the entity was in a position, at any time after the transfer time and before the end of the entity’s current year of income, to control the trust estate;

                                         (F)  if the transfer was made before the IP time and the trust estate was in existence, and was a discretionary trust estate, at the IP time—the entity was in a position, at any time after the IP time and before the end of the entity’s current year of income, to control the trust estate;

                             (ii)  all of the following conditions are satisfied:

                                        (A)  the trust estate was a non‑discretionary trust estate, or a public unit trust, at all times during the entity’s current year of income when the trust estate was in existence;

                                        (B)  the entity has transferred property or services to the trust estate after the IP time and before or during the entity’s current year of income;

                                        (C)  the underlying transfer was made for no consideration or for a consideration less than the arm’s length amount in relation to the underlying transfer;

                                        (D)  it is not the case that the sole purpose of the underlying transfer was the acquisition of units in the trust estate where the parties to the underlying transfer were at arm’s length with each other in relation to the underlying transfer and the trust estate was a public unit trust at all times during the entity’s current year of income when the trust estate was in existence; and

                     (b)  if the entity is a natural person (other than a natural person in the capacity of a trustee):

                              (i)  if:

                                        (A)  the natural person first commenced to be a resident of Australia at a time (in this subparagraph called the first residence time) after the IP time and before the end of the entity’s current year of income; and

                                        (B)  the transfer, or each of the transfers, covered by paragraph (a) was made before the first residence time;

                                   the trust estate was not a non‑resident family trust in relation to the natural person at all times:

                                        (C)  after the beginning of the first year of income of the natural person after the first residence time; and

                                        (D)  before the end of the entity’s current year of income;

                                   when the trust estate was in existence; or

                             (ii)  in any other case—the trust estate was not a non‑resident family trust in relation to the natural person at all times after the beginning of the year of income of the taxpayer commencing on 1 July 1990 and before the end of the entity’s current year of income when the trust estate was in existence; and

                     (c)  it is not the case that:

                              (i)  the entity is a natural person (other than a natural person in the capacity of a trustee) who first commenced to be a resident of Australia at a time (in this paragraph called the first residence time) after the IP time and before the end of the entity’s current year of income; and

                             (ii)  the transfer was made before the first residence time; and

                            (iii)  the entity was not in a position to control the trust estate at any time during the period:

                                        (A)  commencing at the beginning of the first year of income of the entity after the first residence time; and

                                        (B)  ending at the end of the entity’s current year of income.

             (2)  For the purposes of this section, if:

                     (a)  an entity (in this subsection called the transferor) being a partnership is an attributable taxpayer in relation to the entity’s current year of income and in relation to a particular trust estate (in this subsection called the transferee trust estate) because of one or more transfers (being actual transfers or transfers taken to have been made because of subsection 102AAK(1), (2) or (5)) of property or services made by the transferor to the transferee trust estate; or

                     (b)  an entity (in this subsection also called the transferor) being a trust estate is an attributable taxpayer in relation to the entity’s current year of income and in relation to another trust estate (in this subsection also called the transferee trust estate) because of one or more transfers (being actual transfers or transfers taken to have been made because of subsection 102AAK(1), (2) or (5)) of property or services made by the transferor to the transferee trust estate;

the question whether any other entity is an attributable taxpayer in relation to the same year of income and in relation to the transferee trust estate is to be determined as if:

                     (c)  if paragraph (a) applies—subsection 102AAK(6) did not apply in relation to any of the transfers mentioned in that paragraph; or

                     (d)  if paragraph (b) applies—subsection 102AAK(8) did not apply in relation to any of the transfers mentioned in that paragraph.

            (3)        If:

                     (a)  apart from this subsection, an entity, being a natural person (other than a natural person in the capacity of a trustee), is not an attributable taxpayer in relation to the entity’s current year of income and in relation to a trust estate; and

                     (b)  apart from paragraph (1)(b), the entity would have been such an attributable taxpayer; and

                     (c)  apart from subparagraph 102AAH(2)(b)(i) or (3)(a)(ii), the trust estate was not a non‑resident family trust in relation to the natural person at some time after the entity’s current year of income when the natural person was alive and the trust estate was in existence;

the following provisions have effect:

                     (d)  subsection (1) has effect as if paragraph (1)(b) had applied;

                     (e)  section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

             (4)  If:

                     (a)  apart from this subsection, an entity is not an attributable taxpayer in relation to the entity’s current year of income and in relation to a trust estate; and

                     (b)  apart from sub-subparagraph (1)(a)(i)(E) or (F) or paragraph (1)(c), the entity would have been such an attributable taxpayer; and

                     (c)  the entity was in a position to control the trust estate at some time after the entity’s current year of income when the trust estate was in existence;

the following provisions have effect:

                     (d)  subsection (1) has effect as if sub-subparagraph (1)(a)(i)(E) or (F) or paragraph (1)(c), as the case may be, had applied;

                     (e)  section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

102AAU  Attributable income of a trust estate

             (1)  Subject to this Subdivision, the attributable income of a non‑resident trust estate of a year of income is:

                     (a)  if the non‑resident trust estate is not a listed country trust estate in relation to the year of income—the net income of the non‑resident trust estate of the year of income; or

                     (b)  if the non‑resident trust estate is a listed country trust estate in relation to the year of income—the amount that would have been the net income of the non‑resident trust estate of the year of income if the exempt income of the trust estate included all income and profits of the trust estate other than:

                              (i)  eligible designated concession income in relation to any listed country in relation to the year of income; or

                             (ii)  amounts included under section 529 in the assessable income of the trust estate of the year of income;

reduced by:

                     (c)  so much (if any) of the amount covered by paragraph (a) or (b) as represents:

                              (i)  an amount:

                                        (A)  that is or has been included in the assessable income of a beneficiary under section 97; or

                                        (B)  in respect of which the trustee of the non‑resident trust estate is or has been assessed and liable to pay tax under section 98, 99 or 99A; or

                                        (C)  on which trustee beneficiary non‑disclosure tax is payable under Division 6D; or

                             (ii)  an amount:

                                        (A)  that is paid to a beneficiary, being a resident of a listed country, during the period of 13 months commencing at the beginning of the year of income; and

                                        (B)  subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

                            (iii)  an amount that consists of, or is attributable to, the franked part of a distribution, or the part of a distribution that has been franked with an exempting credit; or

                            (iv)  an amount that is included in the assessable income of the trustee of the trust estate under subsection 207‑35(1) or (3) of the Income Tax Assessment Act 1997; or

                             (v)  if an amount is or has been included in the assessable income of any taxpayer under section 102AAZD because the taxpayer is an attributable taxpayer in relation to any year of income (in this subparagraph called the taxpayer’s year of income) and in relation to a trust estate other than the non‑resident trust estate—so much of an amount paid to the trustee of the non‑resident trust estate as represents the attributable income of that other trust estate of the taxpayer’s year of income; or

                           (vii)  if:

                                        (A)  an attribution account payment is made to the trustee of the trust estate during the year of income; and

                                        (B)  the making of the attribution account payment gives rise to an attribution debit, in relation to any taxpayer, for the entity making the payment;

                                   the amount of the attribution debit; or

                          (viii)  an amount of income or profits of the trust estate:

                                        (A)  that is subject to tax in any listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; and

                                        (B)  that is not eligible designated concession income in relation to any listed country in relation to the year of income; or

                            (ix)  an excluded foreign investment fund income amount (see subsections (7) and (8)); and

                     (d)  so much of any foreign tax or Australian tax paid by the trustee or a beneficiary as is attributable to so much of the amount covered by paragraph (a) or (b), as the case requires, as remains after the reduction or reductions covered by paragraph (c).

             (2)  The attributable income of a resident trust estate of a year of income is 0.

             (3)  For the purposes of sub-subparagraph (1)(c)(ii)(A), a beneficiary is to be taken to be a resident of a listed country if, and only if, the beneficiary is treated as a resident of the listed country for the purposes of the tax law of the listed country.

             (4)  If the tax law of a listed country adopts some criterion other than treatment as a resident as the criterion for applying a worldwide source tax base to a beneficiary, then, subsection (3) has effect, in relation to that tax law, as if that criterion were the same as treatment as a resident of the listed country for the purposes of that tax law.

             (5)  For the purposes of this section, where, because of section 101, a beneficiary is presently entitled to a particular amount, the amount is taken to have been paid to the beneficiary.

             (6)  For the purposes of this section, the extent to which an amount referred to in subparagraph (1)(c)(i) or (ii) (in this subsection called the taxed amount) represents the amount covered by paragraph (1)(b) (in this subsection called the listed country trust amount) is calculated using the formula:

where:

Listed country trust amount means the number of dollars in the listed country trust amount.

Taxed amount means the taxed amount.

Net income means the number of dollars in the net income of the non‑resident trust estate concerned of the year of income concerned.

             (7)  For the purposes of subparagraph (1)(c)(ix), if:

                     (a)  the non‑resident trust estate concerned is a CFT; and

                     (b)  under section 529, the assessable income of a year of income of the CFT includes an amount of foreign investment fund income that, under Part XI, accrued to the CFT from a FIF in respect of a notional accounting period of the FIF; and

                     (c)  a statutory accounting period of a CFC coincides with that notional accounting period of the FIF; and

                     (d)  wholly or partly because of the holding of an attribution tracing interest in the CFT, section 456 applies at the end of the statutory accounting period of the CFC to the attributable taxpayer in relation to whom the attributable income is being calculated; and

                     (e)  the FIF is the same entity as the CFC;

then the amount of foreign investment fund income is an excluded foreign investment fund income amount for the purpose of calculating the attributable income in relation to the attributable taxpayer.

             (8)  For the purposes of subparagraph (1)(c)(ix), if:

                     (a)  the non‑resident trust estate concerned is a CFT; and

                     (b)  under section 529, the assessable income of a year of income of a CFT includes an amount of foreign investment fund income that, under Part XI, accrued to the CFT from a FIF in respect of a notional accounting period of the FIF; and

                     (c)  each of 2 or more statutory accounting periods of a CFC occurs partly within that notional accounting period of the FIF; and

                     (d)  wholly or partly because of the holding of an attribution tracing interest in the CFT, section 456 applies at the end of each of these statutory accounting periods of the CFC to the attributable taxpayer in relation to whom the attributable income is being calculated; and

                     (e)  the FIF is the same entity as the CFC;

then the amount of foreign investment fund income is an excluded foreign investment fund income amount for the purpose of calculating the attributable income in relation to the attributable taxpayer.

             (9)  In subsections (7) and (8):

attribution tracing interest has the same meaning as in Part X.

CFT has the same meaning as in Part X.

FIF has the same meaning as in Part XI.

notional accounting period has the same meaning as in Part XI.

statutory accounting period has the same meaning as in Part X.

102AAV  Double tax agreements to be disregarded

                   In calculating the attributable income of a trust estate, the International Tax Agreements Act 1953 is to be disregarded, except for the purpose of references in this Act to that Act.

102AAW  Certain provisions to be disregarded in calculating attributable income

             (1)  For the purpose of applying this Act in calculating the attributable income of a trust estate, sections 23AI, 128D, 456, 457, and 459A of this Act and section 802‑15 of the Income Tax Assessment Act 1997 are to be disregarded.

             (2)  For the purpose of applying this Act in calculating the attributable income of a trust estate:

                     (a)  Division 974 of the Income Tax Assessment Act 1997; and

                     (b)  the operation of any provision of this Act to the extent to which that operation depends on an expression whose meaning is given by that Division;

are to be disregarded.

102AAY  Modified application of trading stock provisions

                   When applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of the trust estate, Division 70 of the Income Tax Assessment Act 1997 has effect as if the cost of the item of trading stock were the value to be taken into account at the start of the year of income.

102AAZ  Modified application of depreciation provisions

             (1)  For the purpose of determining the attributable income of a trust estate of a year of income (in this section called the attributable year of income), where property has been held by the trustee of the trust estate in a non‑attributable year of income before the attributable year of income, then, in relation to the application of a depreciation provision to the property, subsection (2) applies.

             (2)  Such amount as the Commissioner considers appropriate to take account of the holding of the property as mentioned in subsection (1) is, under the depreciation provision:

                     (a)  an allowable deduction to the trustee of the trust estate; or

                     (b)  included in the assessable income of the trust estate;

as the case requires, for the attributable year of income in substitution for any amount that would otherwise be so included or allowable.

             (4)  For the purpose of exercising the Commissioner’s power under subsection (2) in relation to deductions allowable under Division 40 of the Income Tax Assessment Act 1997, the Commissioner must assume that the property was used by the trustee of the trust estate during any non‑attributable year of income wholly and exclusively for a taxable purpose (within the meaning of that Division).

102AAZA  Modified application of Division 13 of Part III

                   In calculating the attributable income of a trust estate of a year of income:

                     (a)  for the purposes of section 136AC, if the trust estate is a non‑resident trust estate in relation to the year of income—the trustee is taken to be a non‑resident, within the meaning of that section, without regard to the assumption about the trustee’s residence that is made in whichever of the following provisions is applicable:

                              (i)  the definition of net income in subsection 95(1);

                             (ii)  the definition of net income in subsection 102D(1);

                            (iii)  the definition of net income in section 102M;

                            (iv)  section 295‑10 of the Income Tax Assessment Act 1997; and

                     (b)  section 136AF applies as if:

                              (i)  the reference in subsection 136AF(1) to the application of section 136AD in relation to a taxpayer were a reference both to:

                                        (A)  the application of that section in relation to any trust estate in calculating its attributable income or in relation to any CFC in calculating its attributable income under Division 7 of Part X; and

                                        (B)  the actual application of that section in relation to any taxpayer in calculating the taxable income of the taxpayer apart from this Division; and

                             (ii)  the references in paragraphs 136AF(1)(a) and (b) to assessable income or allowable deductions in relation to the relevant taxpayer were references to assessable income, or to allowable deductions, taken into account in calculating the attributable income of the trust estate.

102AAZB  General modifications—CGT

                   For the purposes of applying this Act in calculating the attributable income of a trust estate, Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about CGT) apply as if:

                     (a)  sections 118‑12 (about assets used to produce non‑assessable income) and 855‑50 (about a trust becoming a resident trust) were disregarded; and

                     (b)  the trust estate were a resident trust for CGT purposes.

102AAZBA  Modified application of CGT—effect of certain changes of residence

                   For the purposes of applying this Act in calculating the attributable income of a trust estate of a year of income (in this section called the attributable income year), where:

                     (a)  disregarding the assumption in paragraph 102AAZB(b), at any time (in this section called the residence‑change time) during the attributable income year or an earlier year of income, the trust estate ceased to be a resident trust for CGT purposes and became a non‑resident trust estate; and

                     (b)  the trust estate owned a CGT asset at the residence‑change time; and

                     (c)  a CGT event happens in relation to the asset during the attributable income year; and

                     (d)  section 104‑170 of the Income Tax Assessment Act 1997 (CGT event I2) applies to the asset in respect of the change of residence for the purposes of the application of this Act apart from this Subdivision;

then sections 411 to 414 (inclusive) apply to the asset as if:

                     (e)  those sections had effect for the purposes of calculating attributable income under this Subdivision instead of Part X; and

                      (f)  any reference in those sections to an eligible CFC were a reference to the trust estate; and

                     (g)  any reference in those sections to a commencing day asset were a reference to the asset; and

                     (h)  any reference in those sections relating to the eligible CFC’s commencing day or the day following the eligible CFC’s commencing day were a reference relating respectively to the residence‑change time or a time immediately after the residence‑change time; and

                      (j)  subsections 412(2) and (3), and paragraphs 414(3)(b) and (4)(b), referred only to the market value of the asset concerned.

102AAZC  Modified application of loss provisions—pre‑1990‑91 losses

                   In calculating the attributable income of a trust estate of a year of income, no deductions are allowable under Division 36 of the Income Tax Assessment Act 1997 in respect of tax losses of a year of income earlier than the year of income commencing on 1 July 1990.

102AAZD  Assessable income of attributable taxpayer to include attributable income of trust estate to which taxpayer has transferred property or services

             (1)  Subject to section 102AAZE and to this section, if:

                     (a)  an entity is an attributable taxpayer:

                              (i)  in relation to the year of income of the taxpayer commencing on 1 July 1990 (which year of income is in this section called the taxpayer’s current year of income) or in relation to a subsequent year of income of the taxpayer (which year of income is in this section also called the taxpayer’s current year of income); and

                             (ii)  in relation to a trust estate; and

                     (b)  any part of a non‑resident year of income of the trust estate occurs during the taxpayer’s current year of income; and

                     (c)  the taxpayer is a resident at any time during the taxpayer’s current year of income;

the assessable income of the taxpayer of the taxpayer’s current year of income includes:

                     (d)  if the taxpayer is a resident at all times during the taxpayer’s current year of income—the whole of the notional attributable income of the trust estate of the taxpayer’s current year of income; or

                     (e)  if the taxpayer is a resident for only part of the taxpayer’s current year of income—the amount calculated using the formula:

                            where:

Notional attributable income means the notional attributable income of the trust estate of the taxpayer’s current year of income.

Days in residency period means the number of whole days during the taxpayer’s current year of income when the taxpayer was a resident.

Days in year of income means the number of whole days in the taxpayer’s current year of income.

             (2)  A reference in subsection (1) to the notional attributable income of the trust estate of the taxpayer’s current year of income is a reference to:

                     (a)  if there is a year of income of the trust estate that begins at the same time as the beginning of the taxpayer’s current year of income—the attributable income of the trust estate of that year of income; or

                     (b)  in any other case—the amount obtained:

                              (i)  by calculating, for each year of income of the trust estate (in this paragraph called the trust’s year of income) any part of which occurs during the taxpayer’s current year of income, the amount calculated using the formula:

                                   where:

Attributable income means the attributable income of the trust estate of the trust’s year of income.

Days in overlapping period means the number of whole days in the trust’s year of income that occurred during the taxpayer’s current year of income.

Days in trust’s year of income means the number of whole days in the trust’s year of income; and

                             (ii)  by adding together the amounts calculated under subparagraph (i).

             (3)  If:

                     (a)  an amount is included in the assessable income of an attributable taxpayer of the taxpayer’s current year of income under subsection (1); and

                     (b)  before or during the taxpayer’s current year of income, one or more entities other than the taxpayer have transferred property or services to the trust estate concerned; and

                     (c)  the taxpayer gives to the Commissioner, in accordance with the approved form, such information in connection with the operation of this Division as is required by the form to be set out;

the Commissioner may reduce the amount included in the taxpayer’s assessable income of the taxpayer’s current year of income under subsection (1) having regard to:

                     (d)  the extent to which the attributable income of the trust estate is, in the opinion of the Commissioner, attributable to property or services transferred by the taxpayer; and

                     (e)  such other matters as the Commissioner considers relevant.

             (4)  If:

                     (a)  apart from this subsection, an amount would be included in the assessable income of an attributable taxpayer of the taxpayer’s current year of income under subsection (1) in relation to a particular trust estate; and

                     (b)  the taxpayer could not reasonably be expected to obtain the information required to determine the attributable income of the trust estate;

the following provisions have effect:

                     (c)  no amount is to be included in the assessable income of the taxpayer of the taxpayer’s current year of income under subsection (1) in relation to the trust estate;

                     (d)  the assessable income of the taxpayer of the taxpayer’s current year of income includes the amount obtained:

                              (i)  if any of the transfers that were taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s current year of income and in relation to the trust estate were made by the taxpayer to the trust estate after the IP time—by calculating, for each such transfer, the amount calculated using the formula:

                                   where:

Adjusted value of the transfer has the meaning given by subsection (5).

Weighted statutory interest rate means the weighted statutory interest rate in relation to the taxpayer’s current year of income; and

                             (ii)  if any of the transfers that were taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s current year of income and in relation to the trust estate were made by the taxpayer to the trust estate before the IP time—the amount calculated using the formula:

                                   where:

Adjusted net worth of trust estate has the meaning given by subsection (6).

Weighted statutory interest rate means the weighted statutory interest rate in relation to the taxpayer’s current year of income; and

                            (iii)  by adding together the amounts calculated under subparagraphs (i) and (ii).

             (5)  For the purposes of subsection (4), the adjusted value of a transfer of property or services made by an attributable taxpayer to a trust estate is:

                     (a)  if the transfer occurred during the taxpayer’s current year of income—the amount calculated using the formula:

                            where:

Market value of transferred property or services means the market value, immediately before the transfer, of the property or services.

Days after transfer means the number of whole days in the taxpayer’s current year of income after the day on which the transfer took place.

Days in year of income means the number of whole days in the taxpayer’s current year of income; or

                     (b)  if the transfer of the property or services occurred before the taxpayer’s current year of income—the sum of:

                              (i)  the market value, immediately before the transfer, of the property or services; and

                             (ii)  the amount obtained:

                                        (A)  by calculating, in respect of the transfer, for each year of income preceding the taxpayer’s current year of income, the amount ascertained using the formula in subparagraph (4)(d)(i); and

                                        (B)  by adding together the amounts calculated under sub-subparagraph (A).

             (6)  For the purposes of the application of subsection (4) in relation to a transfer of property or services made by an attributable taxpayer to a trust estate, the adjusted net worth of the trust estate is:

                     (a)  if the taxpayer’s current year of income is the year of income commencing on 1 July 1990—the 1 July 1990 net worth of the trust estate; or

                     (b)  in any other case—the sum of:

                              (i)  the 1 July 1990 net worth of the trust estate; and

                             (ii)  the amount obtained:

                                        (A)  by calculating, in respect of the transfer, for each year of income preceding the taxpayer’s current year of income, the amount ascertained using the formula in subparagraph (4)(d)(ii); and

                                        (B)  by adding together the amounts calculated under sub-subparagraph (A).

             (7)  If:

                     (a)  subsection (4) applies to an attributable taxpayer in relation to the taxpayer’s current year of income; and

                     (b)  any of the transfers taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s year of income and in relation to the trust estate concerned were made before the IP time; and

                     (c)  the taxpayer gives to the Commissioner, in accordance with the approved form, such information in connection with the operation of this Division as is required by the form to be set out;

the Commissioner may reduce the amount included in the taxpayer’s assessable income of the taxpayer’s current year of income under subsection (4) having regard to:

                     (d)  the extent to which the market value, as at the beginning of the taxpayer’s current year of income, of the assets of the trust estate is, in the opinion of the Commissioner, attributable to property or services transferred by the taxpayer before the IP time; and

                     (e)  such other matters as the Commissioner considers relevant.

102AAZE  Accruals system of taxation does not apply to small amounts

                   An amount is not to be included in the assessable income of the taxpayer of a year of income under section 102AAZD in relation to a trust estate that is a listed country trust estate in relation to the year of income if the amount obtained by:

                     (a)  identifying each trust estate in relation to which the taxpayer is an attributable taxpayer in relation to the year of income; and

                     (b)  calculating the attributable income of the year of income of each such trust estate; and

                     (c)  adding the amounts calculated under paragraph (b);

does not exceed the lesser of the following amounts:

                     (d)  $20,000;

                     (e)  10% of the total of the net incomes of each of those trust estates of the year of income.

102AAZF  Only resident partners, beneficiaries etc. liable to be assessed as a result of attribution

                   Section 460 applies to an amount included in the assessable income of a taxpayer under section 102AAZD in a corresponding way to the way in which section 460 applies to an amount included in the assessable income of a taxpayer under section 456 or 457 and, for the purposes of that corresponding application, references in sections 336, 338 and 460 to a Part X Australian resident are to be read as references to a resident within the meaning of section 6.

102AAZG  Keeping of records

             (1)  Subject to this section, a person who is an attributable taxpayer:

                     (a)  in relation to the year of income of the person commencing on 1 July 1990 or in relation to a subsequent year of income of the person; and

                     (b)  in relation to a particular trust estate;

must keep records (in Australia or elsewhere) containing particulars of:

                     (c)  the acts, transactions and other circumstances that resulted in the person being an attributable taxpayer in relation to that year of income and in relation to that trust estate; and

                     (d)  except where subsection 102AAZD(4) applies in relation to the trust estate and in relation to the year of income of the person—the basis of the calculation of the attributable income of the trust estate for each year of income of the trust estate any part of which occurred during the year of income of the person; and

                     (e)  the basis of the calculation of the amounts (including nil amounts) included in the assessable income of the person of the year of income of the person under section 102AAZD.

Note:          There is an administrative penalty if you do not keep or retain records as required by this section: see section 288‑25 in Schedule 1 to the Taxation Administration Act 1953.

             (2)  A person who contravenes subsection(1) is guilty of an offence punishable on conviction by a fine not exceeding 30 penalty units.

Note:          See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

          (2A)  An offence under subsection (2) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (3)  A person who is required by this section to keep records must:

                     (a)  keep the records in writing in the English language or so as to enable the records to be readily accessible and convertible into writing in the English language; and

                     (b)  keep the records so as to enable the person’s liability under this Act to be readily ascertained.

             (4)  This section does not require a person to keep a record of information if:

                     (a)  the person did not know, and had no reasonable grounds to suspect, that the person was an attributable taxpayer of the kind mentioned in subsection (1); or

                     (b)  the person did not know that, and made all reasonable efforts to ascertain whether, the person was an attributable taxpayer as mentioned in subsection (1); or

                     (c)  the person did not know, and made all reasonable efforts to obtain, the information.

Note:          A defendant bears an evidential burden in relation to the matters in subsection (4), see subsection 13.3(3) of the Criminal Code.

             (5)  Subject to subsections (6) and (7), the following provisions apply to a partnership as if the partnership were a person:

                     (a)  subsections (1) to (4) (inclusive) of this section;

                     (b)  subsections 262A(4) and (5), in so far as those subsections apply to records kept under or for the purposes of this section;

                     (c)  Part III of the Taxation Administration Act 1953, in so far as that Part of that Act relates to the provisions covered by paragraph (a) or (b) of this subsection.

             (6)  Where, by virtue of subsection (5), an offence is taken to have been committed by a partnership, that offence is taken to have been committed by each of the partners.

             (7)  In a prosecution of a person for an offence by virtue of subsection (6), it is a defence if the person proves that the person:

                     (a)  did not aid, abet, counsel or procure the act or omission by virtue of which the offence was taken to have been committed; and

                     (b)  was not in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, an act or omission by virtue of which the offence is taken to have been committed.

Note 1:       The defence under subsection (7) does not apply in relation to offences under Part 2.4 of the Criminal Code.

Note 2:       A defendant bears a legal burden in relation to the matters in subsection (7), see section 13.4 of the Criminal Code.


 

Division 6AAIncome of certain children

102AA  Interpretation

             (1)  In this Division, unless the contrary intention appears:

agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

occupation includes any office, employment, trade, business, profession, vocation or calling, but does not include a course of education at a school, college, university or similar institution.

property means property whether real or personal, and includes money.

             (2)  In this Division:

                     (a)  a reference to the derivation by a person of assessable income shall be read as including a reference to the inclusion of an amount in the assessable income of the person; and

                     (b)  a reference to the derivation by a person of any assessable income from particular property shall be read as including a reference to the inclusion of an amount in the assessable income of the person in respect of that property.

             (3)  In this Division, a reference to the share of a beneficiary of the net income of a trust estate shall be read as a reference to a share of the beneficiary of the net income of a trust estate:

                     (a)  that is included in the assessable income of the beneficiary under section 97 or 100; or

                     (b)  in respect of which the trustee of the trust estate is liable to be assessed and to pay tax in pursuance of section 98.

             (4)  A reference in this Division to income that is derived from particular property shall be read as including a reference to income that is derived from property that, in the opinion of the Commissioner, represents that property.

102AB  Application of Division

                   This Division applies in relation to the year of income that commenced on 1 July 1979 and in relation to all subsequent years of income.

102AC  Persons to whom Division applies

             (1)  For the purposes of this Division, a person is a prescribed person in relation to a year of income if:

                     (a)  the person is less than 18 years of age on the last day of the year of income; and

                     (b)  the person is not an excepted person in relation to the year of income.

             (2)  Subject to this section, a person (in this subsection referred to as the minor) is an excepted person in relation to a year of income for the purposes of this Division if, and only if:

                     (b)  the minor was engaged in a full‑time occupation on the last day of the year of income;

                     (c)  the minor is a person:

                              (i)  in respect of whom a carer allowance under the Social Security Act 1991 was payable in respect of a period that included the last day of the year of income;

                             (ii)  to whom a disability support pension under that Act was payable in respect of a period that included the last day of the year of income; or

                            (iii)  to whom a rehabilitation allowance under that Act was payable in respect of a period that included the last day of the year of income and who, immediately before becoming eligible to receive that allowance, was eligible to receive an invalid pension under that Act;

                     (d)  the Commissioner:

                              (i)  has received a certificate issued by a legally qualified medical practitioner certifying that the minor is:

                                        (A)  a disabled child, or a disabled adult, within the meaning of Part 2.19 of the Social Security Act 1991; or

                                        (B)  a person who has a continuing inability to work within the meaning of Part 2.3 of the  Social Security Act 1991 or is permanently blind; and

                             (ii)  is satisfied that, on the last day of the year of income, the minor was a person of the kind mentioned in sub-subparagraph (i)(A) or (B);

                     (e)  a double orphan pension was payable in respect of the minor under the Social Security Act 1991 in respect of a period that included the last day of the year of income;

                      (f)  but for section 1003 of the Social Security Act 1991, a double orphan pension would have been payable in respect of the minor under that Act in respect of a period that included the last day of the year of income; or

                     (g)  the Commissioner:

                              (i)  has received a certificate issued by a legally qualified medical practitioner certifying that the minor is a person who, by reason of a permanent disability, is unlikely to be able to engage in a full‑time occupation; and

                             (ii)  is satisfied that, on the last day of the year of income, the minor was such a person.

             (3)  Where:

                     (a)  a double orphan pension was payable, or would, but for section 1003 of the Social Security Act 1991, have been payable, in respect of a person under that Act in respect of a period during a year of income, being a period that included the last day of the year of income; and

                     (b)  during the whole of the period referred to in paragraph (a), the person was wholly or substantially dependent for support on a relative or relatives of the person;

that person shall not be taken by virtue of paragraph (2)(e) or (f) to be an excepted person in relation to the year of income.

             (4)  Where:

                     (a)  the Commissioner is of the opinion that, during a period during a year of income, being a period that included the last day of the year of income, a person was a person who, by reason of a permanent disability, was unlikely to be able to engage in a full‑time occupation; and

                     (b)  during the whole of the period referred to in paragraph (a), the person was wholly or substantially dependent for support on a relative or relatives of the person;

that person shall not be taken, by virtue of paragraph (2)(g), to be an excepted person in relation to the year of income.

             (5)  For the purposes of subsections (3) and (4), a person shall be taken to have been wholly or substantially dependent for support on a relative or relatives of the person during any period during which that person resided with a relative or relatives of the person unless the contrary is established to the satisfaction of the Commissioner.

             (6)  Subject to this section, a person shall be taken, for the purposes of subsection (2), to have been engaged in a full‑time occupation on the last day of a year of income if, and only if:

                     (a)  the person was, on the last day of the year of income, a person engaged in a full‑time occupation; or

                     (b)  in a case to which paragraph (a) does not apply—the person was engaged in a full‑time occupation during the year of income for a period of not less than 3 months or for periods the aggregate of which is not less than 3 months.

             (7)  Where:

                     (a)  during a period during a year of income, a person was engaged in a full‑time occupation; and

                     (b)  during the year of income and after the expiration of that period, the person was engaged in a course of full‑time education at a school, college, university or similar institution;

no regard shall be had to that period in determining whether the person is to be taken, by virtue of paragraph (6)(b), to have been engaged in a full‑time occupation on the last day of the year of income.

             (8)  A person shall not be taken to have been engaged in a full‑time occupation on the last day of a year of income unless the Commissioner is satisfied that, on that day:

                     (a)  the person had the intention of engaging in a full‑time occupation or full‑time occupations during the whole or a substantial part of the next succeeding year of income; and

                     (b)  the person did not have the intention of engaging in a course of full‑time education at a school, college, university or similar institution at any time during the next succeeding year of income.

102AD  Taxable income to which Division applies

                   The eligible taxable income of a year of income of a person who is a prescribed person in relation to the year of income is the amount (if any) remaining after deducting from the eligible assessable income of the person of the year of income:

                     (a)  any deductions allowable to the person in relation to the year of income that relate exclusively to that eligible assessable income;

                     (b)  so much of any other deductions (other than apportionable deductions) allowable to the person in relation to the year of income as, in the opinion of the Commissioner, may appropriately be related to that eligible assessable income; and

                     (c)  the amount that bears to the apportionable deductions allowable to the person in relation to the year of income the same proportion as the amount that, but for this paragraph, would be the eligible taxable income of the person of the year of income bears to the sum of:

                              (i)  the taxable income of the person of the year of income; and

                             (ii)  the apportionable deductions allowable to the person in relation to the year of income.

102AE  Eligible assessable income

             (1)  For the purposes of this Division, the eligible assessable income of a year of income of a person is so much of the assessable income of the person of the year of income as is not excepted assessable income.

             (2)  Subject to this section, an amount included in the assessable income of a person (in this subsection referred to as the minor) is excepted assessable income to the extent to which the amount:

                     (a)  is employment income or business income;

                     (b)  is derived by the minor from the investment of any property transferred to the minor:

                              (i)  by way of, or in satisfaction of a claim for, damages in respect of:

                                        (A)  loss by the minor of parental support; or

                                        (B)  personal injury to the minor, any disease suffered by the minor or any impairment of the minor’s physical or mental condition;

                             (ii)  pursuant to any law relating to worker’s compensation;

                            (iii)  pursuant to any law relating to the payment of compensation in respect of criminal injuries;

                            (iv)  directly as the result of the death of another person and under the terms of a life assurance policy;

                             (v)  directly as the result of the death of another person and out of a provident, benefit, superannuation or retirement fund;

                            (vi)  directly as the result of the death of another person by an employer of the deceased person;

                           (vii)  out of a public fund established and maintained exclusively for the relief of persons in necessitous circumstances; or

                          (viii)  as the result of a family breakdown (see section 102AGA);

                     (c)  is derived by the minor from the investment of any property:

                              (i)  that devolved upon the minor from the estate of a deceased person;

                             (ii)  that was transferred to the minor by another person out of property that devolved upon that other person from the estate of a deceased person and was so transferred within 3 years after the date of the death of the deceased person; or

                            (iii)  that was acquired by the minor as the beneficial owner of a verifiable prize in a legally authorized and conducted lottery;

                     (d)  not being business income, is included in the assessable income of the minor under section 92;

                     (e)  is included in the assessable income of the minor under section 97 or 100; or

                      (f)  is derived by the minor from the investment of any property that, in the opinion of the Commissioner, represents accumulations of:

                              (i)  excepted assessable income derived by the minor during a year of income in relation to which this Division applies;

                             (ii)  assessable income derived by the minor during a year of income in relation to which this Division does not apply, being assessable income that would, in the opinion of the Commissioner, have been excepted assessable income if this Division were applicable in relation to the year of income during which the assessable income was derived; or

                            (iii)  exempt income derived by the minor to which subparagraph (i) or (ii) would, in the opinion of the Commissioner, apply if that exempt income had been assessable income.

             (3)  A reference in paragraph (2)(d) to an amount (not being business income) that is included in the assessable income of a person under section 92 in respect of the individual interest of the person in the net income of a partnership shall be read as a reference to so much of an amount so included in that assessable income as, in the opinion of the Commissioner, is attributable to so much of the assessable income of the partnership as would, in the opinion of the Commissioner, have been excepted assessable income if the assessable income of the partnership had been derived by that person.

             (4)  A reference in paragraph (2)(e) to an amount included in the assessable income of a person under section 97 or 100 shall be read as not including a reference to any part to which this Division applies of an amount included in that assessable income under either of those sections.

             (5)  Subject to subsections (6) and (7), a reference in paragraph (2)(a), in relation to a person (in this subsection referred to as the minor), to business income shall, in relation to any business income derived by the minor during a year of income from the carrying on of a business, be read as a reference to:

                     (a)  in a case where during the year of income, the business was carried on by the minor either alone or in partnership with another person who was, or other persons each of whom was, under the age of 18 years on the first day of the year of income—so much of that business income as the Commissioner considers fair and reasonable having regard to:

                              (i)  the extent to which, during the year of income, the minor had the real and effective conduct and control of the business and participated in the operations and activities of the business;

                             (ii)  the extent to which the minor had the real and effective control over the disposal of income derived by the minor from the business during the year of income;

                            (iii)  the extent to which the capital of the business consisted of property contributed by the minor, being property the income from which would, in the opinion of the Commissioner, be excepted assessable income in relation to the minor; and

                            (iv)  such other matters (if any) as the Commissioner thinks fit; and

                     (b)  in any other case—the amount that, in the opinion of the Commissioner, is reasonable remuneration by way of salary or wages for any services rendered by the minor during the year of income in the production of assessable income of the business increased by such amount (if any) as, in the opinion of the Commissioner, is reasonable, having regard to the extent to which the capital of the business consisted of property contributed by the minor the income from which would, in the opinion of the Commissioner, be excepted assessable income in relation to the minor.

             (6)  Subject to subsection (7), if any 2 or more parties to:

                     (a)  the derivation of the excepted assessable income mentioned in subsection (2); or

                     (b)  any act or transaction directly or indirectly connected with the derivation of that excepted assessable income;

were not dealing with each other at arm’s length in relation to the derivation, or in relation to the act or transaction, the excepted assessable income is only so much (if any) of that income as would have been derived if they had been dealing with each other at arm’s length in relation to the derivation, or in relation to the act or transaction.

             (7)  Subsection (2) does not apply in relation to assessable income derived by a person directly or indirectly under or as a result of an agreement that was entered into or carried out by any person (whether before or after the commencement of this subsection) for the purpose, or for purposes that included the purpose, of securing that that assessable income would not be eligible assessable income.

             (8)  In determining whether subsection (7) applies in relation to an agreement, no regard shall be had to a purpose that is a merely incidental purpose.

             (9)  Where:

                     (a)  any assessable income is derived by a person from the investment of any property transferred to the person by way of, or in satisfaction of a claim for, damages in respect of:

                              (i)  loss by the person of parental support; or

                             (ii)  personal injury to the person, any disease suffered by the person or any impairment of the person’s physical or mental condition; and

                     (b)  that property was transferred to that person otherwise than in pursuance of an order of a court;

paragraph (2)(b) applies only to so much (if any) of that assessable income as the Commissioner considers fair and reasonable.

           (10)  Where:

                     (a)  the assessable income of a person (in this subsection referred to as the minor) of a year of income:

                              (i)  includes an amount derived by the minor from property that:

                                        (A)  was transferred to the minor by another person out of property that devolved upon that other person from the estate of a deceased person; and

                                        (B)  was so transferred within 3 years after the date of the death of the deceased person;

                                   but does not include any amount that:

                                        (C)  was derived by the minor from property that devolved upon the minor from the estate of that deceased person; or

                                        (D)  is included in the assessable income of the minor under section 97 or 100 in respect of the share of the minor of the net income of a trust estate that resulted from a will or codicil of that deceased person, an order of a court that varied or modified the provisions of a will or codicil of that deceased person, a partial intestacy of that deceased person or an order of a court that varied or modified the application, in relation to the estate of that deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate; or

                             (ii)  includes an amount derived by the minor from property that:

                                        (A)  was transferred to the minor by another person out of property that devolved upon that other person from the estate of a deceased person; and

                                        (B)  was so transferred within 3 years after the date of death of the deceased person;

                                   and also includes an amount or amounts to which sub-subparagraph (i)(C) or (D) applies; and

                     (b)  the amount to which subparagraph (a)(i) applies or the sum of the amounts to which subparagraph (a)(ii) applies, as the case may be, exceeds the amount that, in the opinion of the Commissioner, would have been included in the assessable income of the minor of the year of income in respect of an amount or amounts derived by the minor from property that, in the opinion of the Commissioner, would have devolved upon or for the benefit of the minor from the estate of that deceased person if that deceased person had died intestate;

the amount of the assessable income of the minor of the year of income that would, apart from this subsection, have been excepted assessable income by virtue of subparagraph (2)(c)(ii) shall be reduced by the amount of that excess.

102AF  Employment income and business income

             (1)  A reference in this Division to employment income is to be read as a reference to:

                     (a)  work and income support related withholding payments and benefits; and

                     (b)  payments made for services rendered or to be rendered; and

                     (c)  compensation, sickness or accident payments:

                              (i)  made to an individual because of the individual’s or another’s incapacity for work; and

                             (ii)  calculated at a periodical rate.

             (3)  In this Division, a reference, in relation to a person in relation to a year of income, to business income shall be read as a reference to income derived by the person during the year of income from carrying on of a business either alone or together with another person or other persons.

102AG  Trust income to which Division applies

             (1)  Where a beneficiary of a trust estate is a prescribed person in relation to a year of income, this Division applies to so much of the share of the beneficiary of the net income of the trust estate of the year of income as, in the opinion of the Commissioner, is attributable to assessable income of the trust estate that is not, in relation to that beneficiary, excepted trust income.

             (2)  Subject to this section, an amount included in the assessable income of a trust estate is excepted trust income in relation to a beneficiary of the trust estate to the extent to which the amount:

                     (a)  is assessable income of a trust estate that resulted from:

                              (i)  a will, codicil or an order of a court that varied or modified the provisions of a will or codicil; or

                             (ii)  an intestacy or an order of a court that varied or modified the application, in relation to the estate of a deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate;

                     (b)  is employment income;

                     (c)  is derived by the trustee of the trust estate from the investment of any property transferred to the trustee for the benefit of the beneficiary:

                              (i)  by way of, or in satisfaction of a claim for, damages in respect of:

                                        (A)  loss by the beneficiary of parental support; or

                                        (B)  personal injury to the beneficiary, any disease suffered by the beneficiary or any impairment of the beneficiary’s physical or mental condition;

                             (ii)  pursuant to any law relating to worker’s compensation;

                            (iii)  pursuant to any law relating to the payment of compensation in respect of criminal injuries;

                            (iv)  directly as the result of the death of a person and under the terms of a policy of life insurance;

                             (v)  directly as the result of the death of a person and out of a provident, benefit, superannuation or retirement fund;

                            (vi)  directly as the result of the death of a person by an employer of the deceased person;

                           (vii)  out of a public fund established and maintained exclusively for the relief of persons in necessitous circumstances; or

                          (viii)  as the result of a family breakdown (see section 102AGA);

                     (d)  is derived by the trustee of the trust estate from the investment of any property:

                              (i)  that devolved for the benefit of the beneficiary from the estate of a deceased person;

                             (ii)  that was transferred to the trustee for the benefit of the beneficiary by another person out of property that devolved upon that other person from the estate of a deceased person and was so transferred within 3 years after the date of the death of the deceased person; or

                            (iii)  being a verifiable prize in a legally authorized and conducted lottery and being a prize of which the beneficiary is the beneficial owner; or

                     (e)  is derived by the trustee of the trust estate from the investment of any property that, in the opinion of the Commissioner, represents accumulations of:

                              (i)  assessable income derived by the trustee during a year of income in relation to which this Division applies, being assessable income that, in relation to the beneficiary, is excepted trust income;

                             (ii)  assessable income derived by the trustee during a year of income in relation to which this Division does not apply, being assessable income that would, in the opinion of the Commissioner, have been excepted trust income in relation to the beneficiary if this Division were applicable in relation to the year of income during which the assessable income was derived; or

                            (iii)  exempt income derived by the trustee to which subparagraph (i) or (ii) would, in the opinion of the Commissioner, apply if that exempt income had been assessable income.

          (2A)  Paragraph (2)(c) or subparagraph (2)(d)(ii) does not apply unless the beneficiary of the trust concerned will, under the terms of the trust, acquire the trust property (other than as a trustee) when the trust ends.

             (3)  Subject to subsection (4), if any 2 or more parties to:

                     (a)  the derivation of the excepted trust income mentioned in subsection (2); or

                     (b)  any act or transaction directly or indirectly connected with the derivation of that excepted trust income;

were not dealing with each other at arm’s length in relation to the derivation, or in relation to the act or transaction, the excepted trust income is only so much (if any) of that income as would have been derived if they had been dealing with each other at arm’s length in relation to the derivation, or in relation to the act or transaction.

             (4)  Subsection (2) does not apply in relation to assessable income derived by a trustee directly or indirectly under or as a result of an agreement that was entered into or carried out by any person (whether before or after the commencement of this subsection) for the purpose, or for purposes that included the purpose, of securing that that assessable income would be excepted trust income.

             (5)  In determining whether subsection (4) applies in relation to an agreement, no regard shall be had to a purpose that is a merely incidental purpose.

          (5A)  In the application of paragraph 102AF(1)(b) for the purposes of the application of paragraph (2)(b) of this section in relation to a beneficiary of a trust estate, payments made for services rendered or to be rendered shall not be taken to be employment income unless the services are rendered or to be rendered by the beneficiary.

             (6)  Where:

                     (a)  any assessable income is derived by a trustee of a trust estate from the investment of any property transferred to the trustee for the benefit of a beneficiary of the trust estate by way of, or in satisfaction of a claim for, damages in respect of:

                              (i)  loss by the beneficiary of parental support; or

                             (ii)  personal injury to the beneficiary, any disease suffered by the beneficiary or any impairment of the beneficiary’s physical or mental condition; and

                     (b)  that property was transferred to the trustee otherwise than in pursuance of an order of a court;

paragraph (2)(c) applies only to so much (if any) of that assessable income as the Commissioner considers fair and reasonable.

             (7)  Where:

                     (a)  any assessable income is derived by a trustee of a trust estate from the investment of any property transferred to the trustee for the benefit of a beneficiary of the trust estate by another person out of property that devolved upon that other person from the estate of a deceased person and was so transferred to the trustee within 3 years after the date of death of the deceased person; and

                     (b)  the amount referred to in paragraph (a) or, if the assessable income of that beneficiary of the year of income includes any amount that:

                              (i)  was derived by the beneficiary from property that was transferred to the beneficiary by another person out of property that devolved upon that other person from the estate of that deceased person and was so transferred within 3 years after the date of death of that deceased person;

                             (ii)  was derived by the beneficiary from property that devolved upon the beneficiary from the estate of that deceased person; or

                            (iii)  is included in that assessable income under section 97 or 100 in respect of the share of that beneficiary of the net income of another trust estate, being a trust estate that resulted from a will or codicil of that deceased person, an order of a court that varied or modified the provisions of a will or codicil of that deceased person, a partial intestacy of that deceased person or an order of a court that varied or modified the application, in relation to the estate of that deceased person, of the provisions of the law relating to the distribution of estates of persons who die intestate;

                            the sum of the amount referred to in paragraph (a) and the amount or amounts applicable by virtue of subparagraphs (i), (ii) and (iii) of this paragraph, exceeds the amount that, in the opinion of the Commissioner, would have been included in the assessable income of the beneficiary of the year of income in respect of an amount or amounts derived by the beneficiary from property that, in the opinion of the Commissioner, would have devolved directly upon that beneficiary if that deceased person had died intestate;

the amount of the assessable income of the trust estate that would, apart from this subsection, have been excepted trust income in relation to that beneficiary by virtue of subparagraph (2)(d)(ii) shall be reduced by the amount of that excess.

             (8)  For the purposes of this section, where:

                     (a)  any property is transferred to the trustee of a trust estate; and

                     (b)  the trustee has a discretion to pay or apply the income derived from that property to or for the benefit of specified beneficiaries or beneficiaries included in a specified class of beneficiaries;

that property shall be taken to have been transferred to the trustee for the benefit of each of those specified beneficiaries or for each of the beneficiaries in that specified class of beneficiaries, as the case may be.

102AGA  Transfer of property as the result of a family breakdown

             (1)  For the purposes of subparagraph 102AE(2)(b)(viii) or 102AG(2)(c)(viii), the transfer of property (the subject property) by a person (the transferor):

                     (a)  to the minor mentioned in subparagraph 102AE(2)(b)(viii); or

                     (b)  to the trustee mentioned in subparagraph 102AG(2)(c)(viii) for the benefit of the beneficiary mentioned in that subparagraph;

is as the result of a family breakdown if the requirements of subsection (2) or (3) of this section are met.

             (2)  The transfer will be as the result of a family breakdown if:

                     (a)  a person ceases to live with another person as the spouse of that person; and

                     (b)  at least one of the persons:

                              (i)  is the parent; or

                            (iv)  has legal custody or guardianship;

                            of the minor or the beneficiary; and

                     (c)  an order, determination or assessment of a court, person or body (whether or not in Australia) is made wholly or partly because the person has ceased to live as the spouse of the other person; and

                     (d)  the effect of the order, determination or assessment is that a person (whether one of the spouses, the transferor or any other person) becomes subject to a legal obligation to maintain, transfer property to, or do some other thing for the benefit of, the minor or beneficiary or one of the spouses; and

                     (e)  the transferor transfers the subject property to the minor, or to the trustee for the benefit of the beneficiary, in giving effect to the legal obligation (including in discharging the legal obligation if it falls on someone else, and whether or not the legal obligation could have been given effect in some other way).

             (3)  The transfer will also be as a result of a family breakdown if:

                     (a)  when the minor or beneficiary is born, his or her parents are not living together as spouses; and

                     (b)  an order, determination or assessment of a court, person or body (whether or not in Australia) is made wholly or partly because the parents are not living together as mentioned in paragraph (a); and

                     (c)  the effect of the order, determination or assessment is that a person (whether one of the parents, the transferor or any other person) becomes subject to a legal obligation to maintain, transfer property to, or do some other thing for the benefit of, the minor or beneficiary or one of the parents of the minor or beneficiary; and

                     (d)  the transferor transfers the subject property to the minor, or to the trustee for the benefit of the beneficiary, in giving effect to the legal obligation (including in discharging the legal obligation if it falls on someone else, and whether or not the legal obligation could have been given effect in some other way).


 

Division 6AAlienation of income

102A  Interpretation

             (1)  In this Division:

associate, in relation to a person, means any person who is an associate, within the meaning of section 318, in relation to the person.

interest, in relation to property, means any legal or equitable estate or interest in the property.

property means any property whether real or personal.

right to receive income from property means a right to have income that will or may be derived from property paid to, or applied or accumulated for the benefit of, the person owning the right.

the prescribed date, in relation to a person who transfers to another person a right to receive income from property, means the day preceding the seventh anniversary of the date on which income from the property is first paid to, or applied or accumulated for the benefit of, the other person by reason of the transfer.

             (2)  A reference in this Division to a transfer of an interest in property or of a right to receive income from property shall be read as a reference to any such transfer, whether made for valuable consideration or not.

             (3)  For the purposes of this Division, any income that will or may be derived by a trust estate from a business carried on by the trustee of the trust estate shall be deemed to be income that will or may be derived from property.

             (4)  For the purposes of this Division:

                     (a)  where a person:

                              (i)  declares that he holds a right to receive income from property upon trust for another person; or

                             (ii)  transfers such a right to a trustee to be held upon trust for another person;

                            the right shall be deemed to be transferred to that other person; and

                     (b)  where a person:

                              (i)  declares that he holds a right to receive income from property upon trust for 2 or more other persons in succession; or

                             (ii)  transfers such a right to, or to a trustee to be held upon trust for, 2 or more other persons in succession;

                            the right shall be deemed to be separately transferred to each of those other persons for the respective periods for which the right is held upon trust for, or transferred to, those persons.

             (5)  Where an interest in property or a right to receive income from property is transferred by 2 or more persons jointly, each of those persons shall, for the purposes of this Division, be deemed to have transferred an interest in that property or a right to receive income from that property, as the case may be.

             (6)  In this Division, unless the contrary intention appears:

                     (a)  a reference to the arm’s length consideration in respect of a transfer of a right to receive income from property is a reference to the consideration that might reasonably be expected to have been received or receivable in respect of the transfer if the right had been transferred under an agreement between independent parties dealing at arm’s length with each other in relation to the agreement and transfer; and

                     (b)  a reference to the amount of consideration is, in a case where consideration is paid or given otherwise than in cash, a reference to the money value of the consideration.

102B  Certain income transferred for short periods to be included in assessable income of transferor

             (1)  Subject to this section, where a right to receive income from property is transferred, otherwise than by a will or codicil, by a person (in this subsection referred to as the transferor) to an associate of the transferor for a period that will, or may for any reason other than the death of any person or the associate becoming under a legal disability, terminate before the prescribed date, any income that:

                     (a)  is derived from the property;

                     (b)  is paid to, or applied or accumulated for the benefit of:

                              (i)  the associate; or

                             (ii)  any other associate of the transferor to whom a right to receive income from the property has been transferred (whether by the first‑mentioned associate or any other person) after the first‑mentioned transfer; and

                     (c)  would, if the first‑mentioned transfer had not been made, have been included in the assessable income of the transferor;

shall be treated for the purposes of this Act as if the first‑mentioned transfer had not been made.

             (2)  Subsection (1) (other than subparagraph (1)(b)(ii)) does not apply in relation to a transfer of a right to receive income from property where:

                     (a)  the right was not a right that arose from the ownership by the transferor of an interest in the property;

                     (b)  the right arose from the ownership by the transferor of an interest in the property and, before or at the time of the first‑mentioned transfer, the transferor transferred that interest to the transferee or another person; or

                     (c)  consideration has been received or is receivable in respect of the transfer and the amount of that consideration is not less than the arm’s length consideration in respect of the transfer.

             (3)  Where, on a particular day, a person who has transferred to another person a right to receive income from property:

                     (a)  in any case—transfers to the other person or to a third person an interest in the property, being the interest from the ownership of which by the transferor the right arose;

                     (b)  in the case of a natural person—dies; or

                     (c)  in the case of a company—ceases to exist;

subsection (1) (other than subparagraph (1)(b)(ii)) does not apply, in relation to the transfer of the right to receive income, in relation to income that is derived from the property after that day.

             (4)  Subsection (1) does not apply in relation to income derived by a person in pursuance of a transfer to that person of a right to receive income from property where, by reason of subsection 51‑50(3) of the Income Tax Assessment Act 1997, the income so derived by the person is not exempt from tax under section 51‑30 of that Act.

          (4A)  Where:

                     (a)  subsection (1) (other than subparagraph (1)(b)(ii)) applies in relation to a transfer by a person of a right to receive income from property; and

                     (b)  consideration has been received or is receivable in respect of the transfer;

then, notwithstanding any other provision of this Act (other than a provision of Part IVA), the amount of the consideration shall not be included in the assessable income of the person of a year of income.

             (5)  Nothing in any other provision of this Act prevents the amendment of an assessment at any time for the purpose of excluding from the assessable income of a person income that is, by virtue of subsection (1), to be included in the assessable income of another person.

             (6)  Where there is excluded from the assessable income of a person an amount that, in pursuance of subsection (1) was previously treated as assessable income of that person, nothing in any other provision of this Act prevents the amendment of any assessment at any time to give effect to the inclusion in the assessable income of another person of an amount that, in pursuance of that subsection, was treated as not being so included for the purposes of the assessment.

102C  Effect of certain transfers of rights to receive income from property

                   Where:

                     (a)  any income is paid to, or applied or accumulated for the benefit of, a person (in this section referred to as the transferee) by reason of the transfer to the person of a right to receive income from property; and

                     (b)  the income so paid, applied or accumulated is, by virtue of section 102B, to be included in the assessable income of another person (in this section referred to as the transferor);

then:

                     (c)  for the purposes of the application of this Act other than this Division in relation to the transferor, an amount equal to the income so paid, applied or accumulated:

                              (i)  shall be deemed to have been paid by the transferor to the transferee at the time at which the income was paid to, or applied or accumulated for the benefit of, the transferee; and

                             (ii)  shall be deemed to have been so paid for the purpose for which the right was transferred; and

                     (d)  where, if the right had not been transferred, but the transferor had paid to the transferee, at the time at which the income was so paid to, or applied or accumulated for the benefit of, the transferee and for the purpose for which the right was transferred, an amount (in this paragraph referred to as the notional amount) equal to the amount of the income so paid, applied or accumulated, the notional amount or a part of the notional amount would have been included in the assessable income of the transferee—there shall be included in that assessable income an amount equal to the notional amount or that part of the notional amount, as the case may be.

102CA  Consideration in respect of transfer to be included in assessable income of transferor in certain cases

             (1)  Subject to this section, where:

                     (a)  a right to receive income from property is transferred, otherwise than by a will or codicil, by a person to another person;

                     (b)  consideration has been received or is receivable in respect of the transfer; and

                     (c)  immediately after the transfer, subsection 102B(1) (other than subparagraph 102B(1)(b)(ii)) does not apply in relation to the transfer;

the assessable income of the transferor of the year of income in which the right is transferred shall include the amount of the consideration.

             (2)  Subsection (1) does not apply in relation to a transfer of a right to receive income from property where:

                     (a)  the right was not a right that arose from the ownership by the transferor of an interest in the property; or

                     (b)  the right arose from the ownership by the transferor of an interest in the property and, before or at the time of the first‑mentioned transfer, the transferor transferred that interest to the transferee.

             (3)  Where, by reason of subsection 51‑50(3) of the Income Tax Assessment Act 1997, income derived by a person pursuant to a transfer to the person of a right to receive income from property is not exempt from tax under section 51‑30 of that Act, subsection (1) does not apply in relation to the transfer.


 

Division 6BIncome of certain unit trusts

102D  Interpretation

             (1)  In this Division, unless the contrary intention appears:

arrangement means an agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

net income, in relation to a corporate unit trust, means the total assessable income of the corporate unit trust calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions.

A corporate unit trust may be required to work out its net income
in a special way by Division 266 or 267 of Schedule 2F.

prescribed trust estate means a trust estate that is, or has been, a corporate unit trust in relation to any year of income.

property includes a chose in action and also includes any estate, interest, right or power, whether at law or in equity, in or over property.

relevant year of income means the year of income that commenced on 1 July 1980 or a subsequent year of income.

unit, in relation to a prescribed trust estate, includes a beneficial interest, however described, in any of the income or property of the trust estate.

unitholder, in relation to a prescribed trust estate, means the holder of a unit or units in the prescribed trust estate.

unit trust dividend means:

                     (a)  any distribution made by the trustee of a prescribed trust estate, whether in money or in other property, to a unitholder; and

                     (b)  any amount credited by the trustee of a prescribed trust estate to a unitholder as a unitholder;

but does not include:

                     (c)  moneys paid or credited, or property distributed, by the trustee of a prescribed trust estate to the extent to which the moneys are attributable, or the property is attributable, to profits arising during a year of income in relation to which the prescribed trust estate was not a corporate unit trust; or

                     (d)  moneys paid or credited, or property distributed, by the trustee of a prescribed trust estate in respect of the cancellation, extinguishment or redemption of a unit to the extent to which:

                              (i)  the moneys paid or credited or the property distributed represent or represents moneys paid to, or property transferred to, the trustee for the purpose of the creation or issue of that unit; and

                             (ii)  the amount of the moneys paid or credited or the value of the property distributed, as the case may be, does not exceed the amount of the moneys paid to the trustee, or the value, at the time of transfer, of the property transferred to the trustee, for the purpose of the creation or issue of that unit.

             (2)  A reference in this Division to an associate of a company or of the trustee of a unit trust (which company or trustee is in this subsection referred to as the primary entity) shall be read as a reference to a company or the trustee of a trust estate (which company or trustee is in this subsection referred to as the associate) where:

                     (a)  the affairs or operations of the primary entity are, or are able to be, controlled, either directly or indirectly, by the associate;

                     (b)  the affairs or operations of the associate are, or are able to be, controlled, either directly or indirectly, by the primary entity; or

                     (c)  the operations of the primary entity are, or are able to be, controlled, either directly or indirectly, by a person who controls or is able to control, or by persons who control or are able to control, either directly or indirectly, the operations of the associate.

             (3)  A reference in subsection (2) to the affairs or operations of a primary entity or of an associate, shall, in a case where the primary entity or the associate is a trustee, include a reference to the administration of the trust estate by the trustee.

102E  Prescribed arrangements

             (1)  A reference in this Division, in relation to a unit trust, to an arrangement that is a prescribed arrangement in relation to a company is a reference to an arrangement under which:

                     (a)  a shareholder in the company was, by reason of being a shareholder in the company, to be granted a right or an option to acquire, either directly or indirectly through any interposed companies or trusts, a unit or units in the unit trust; and

                     (b)  the units in the unit trust were to be held or dealt with, or the income or property of the unit trust was to be applied, during any year of income, in such a way that, in the opinion of the Commissioner, if section 102G were applied in relation to the unit trust in relation to the year of income, the unit trust would be a public unit trust in relation to the year of income.

             (2)  Without limiting the generality of subsection (1), a reference in that subsection to an arrangement under which a shareholder in a company was, by reason of being a shareholder in the company, to be granted a right or an option to acquire a unit or units in a unit trust includes a reference to an arrangement under which a shareholder in the company was, by reason of being a shareholder in the company, to be given a preference or advantage in relation to:

                     (a)  the allocation of a unit or units in the unit trust or the acceptance of moneys by any person in relation to the allocation of a unit or units in the unit trust; or

                     (b)  the acquisition of a unit or units in the unit trust.

             (3)  A reference in this Division, in relation to a unit trust (in this subsection and subsection (4) referred to as the second unit trust), to an arrangement that is a prescribed arrangement in relation to another unit trust (in this subsection and subsection (4) referred to as the first unit trust) is a reference to an arrangement under which:

                     (a)  a unitholder in the first unit trust was, by reason of being a unitholder in the first unit trust, to be granted a right or an option to acquire, either directly or indirectly through any interposed companies or trusts, a unit or units in the second unit trust; and

                     (b)  the units in the second unit trust were to be held or dealt with, or the property of the second unit trust was to be applied, during any year of income, in such a way that, in the opinion of the Commissioner, if section 102G were applied in relation to the second unit trust in relation to the year of income, the second unit trust would be a public unit trust in relation to the year of income.

             (4)  Without limiting the generality of subsection (3), a reference in that subsection to an arrangement under which a unitholder in the first unit trust was, by reason of being a unitholder in the first unit trust, to be granted a right or an option to acquire a unit or units in the second unit trust includes a reference to an arrangement under which a unitholder in the first unit trust was, by reason of being a unitholder in the first unit trust, to be given a preference or advantage in relation to:

                     (a)  the allocation of a unit or units in the second unit trust or the acceptance of moneys by any person in relation to the allocation of a unit or units in the second unit trust; or

                     (b)  the acquisition of a unit or units in the second unit trust.

102F  Eligible unit trusts

             (1)  For the purposes of this Division, a unit trust is an eligible unit trust in relation to a year of income if:

                     (a)  property that, at any time during the year of income or a preceding year of income, was property of the unit trust became property of the unit trust in pursuance of an arrangement that is a prescribed arrangement in relation to a company and, at any time before the property became property of the unit trust, the property was the property of the company or an associate of the company; or

                     (b)  in pursuance of an arrangement that is a prescribed arrangement in relation to a company, the trustee of the unit trust has, at any time during the year of income or a preceding year of income, carried on a business that, at any time before that time, had been carried on by the company or an associate of the company.

             (2)  For the purposes of this Division, a unit trust (in this subsection referred to as the relevant unit trust) is also an eligible unit trust in relation to a year of income if:

                     (a)  property that, at any time during the year of income or a preceding year of income, was property of the relevant unit trust became property of the relevant unit trust in pursuance of an arrangement that is a prescribed arrangement in relation to another unit trust and, at any time before the property became the property of the relevant unit trust, the property was the property of that other unit trust or of an associate of the trustee of that other unit trust; or

                     (b)  in pursuance of an arrangement that is a prescribed arrangement in relation to another unit trust, the trustee of the relevant unit trust has, at any time during the year of income or a preceding year of income, carried on a business that, at any time before that time, had been carried on by the trustee of that other unit trust or an associate of the trustee of that other unit trust;

and that other unit trust is in relation to the year of income, or was in relation to a preceding year of income, an eligible unit trust.

             (3)  A reference in subsection (1) or (2), in relation to a company or trustee of a unit trust, to the property of an associate shall, in a case where the associate is the trustee of a trust estate, be read as a reference to property of that trust estate.

             (4)  Ownership interests in a unit trust or a company that is part of a scheme for reorganising the affairs of stapled entities referred to in Subdivision 124‑Q of the Income Tax Assessment Act 1997 is not property for the purposes of applying subsections (1) and (2).

102G  Public unit trusts

             (1)  For the purposes of this Division, but subject to the succeeding provisions of this section, a unit trust is a public unit trust in relation to a year of income if, at any time during the year of income:

                     (a)  any of the units in the unit trust were listed for quotation in the official list of a stock exchange in Australia or elsewhere;

                     (b)  any of the units in the unit trust were offered to the public; or

                     (c)  the units in the unit trust were held by not fewer than 50 persons.

             (2)  A unit trust shall not be taken to be a public unit trust in relation to a year of income by reason that units in the unit trust were offered to the public at any time during the year of income if the Commissioner is of the opinion that any of those units were offered to the public for the purpose, or for purposes that included the purpose, of enabling the unit trust to be treated as a public unit trust for the purposes of this Division in relation to the year of income.

             (3)  Notwithstanding subsection (1) but subject to subsection (4), a unit trust that, but for this subsection and subsection (6), would be a public unit trust in relation to a year of income shall be deemed not to be a public unit trust in relation to the year of income if, at any time during the year of income, one person or persons not more than 20 in number held, or had the right to acquire or become the holder or holders of, a unit or units in the unit trust that entitled the holder or holders thereof to not less than 75% of:

                     (a)  the beneficial interests in the income of the unit trust; or

                     (b)  the beneficial interests in the property of the unit trust.

             (4)  Subject to subsection (6), where by virtue of subsection (3), a unit trust would, but for this subsection, be deemed not to be a public unit trust in relation to a year of income by reason that, at any time during the year of income, one person or persons not more than 20 in number held, or had the right to acquire or become the holder or holders of, the unit or units referred to in subsection (3) and the Commissioner is of the opinion that, having regard to:

                     (a)  the length of the period or the aggregate of the lengths of the periods in the year of income during which one person or persons not more than 20 in number held, or had the right to acquire or become the holder or holders of, the unit or units referred to in subsection (3); and

                     (b)  any other matters that the Commissioner considers relevant;

it is reasonable that the unit trust should be treated as a public unit trust in relation to the year of income, the unit trust shall be deemed to be a public unit trust in relation to the year of income.

             (5)  For the purposes of subsections (3) and (4), a person (in this subsection referred to as the transferee) to whom a right to acquire or become the holder of a unit in a unit trust is granted or transferred shall be deemed not to have such a right if the Commissioner is of the opinion, having regard to the financial circumstances of the transferee and to any other matters that the Commissioner considers relevant, that it was not intended by the person who granted or transferred the right to the transferee that the right would be exercised by the transferee.

             (6)  Notwithstanding any of the preceding provisions of this section but subject to subsection (7), a unit trust that, but for this subsection, would be a public unit trust in relation to a year of income, shall be deemed not to be a public unit trust in relation to that year of income if:

                     (a)  not less than 75% of the total of moneys paid or credited by the trustee of the unit trust during the year of income to unitholders as unitholders, was paid or credited to one person or persons not more than 20 in number; or

                     (b)  the Commissioner is of the opinion that, by reason of:

                              (i)  any provision in the instrument by which the trust was created, or any contract, agreement or instrument authorizing the variation or abrogation of the rights attaching to any of the units in the unit trust or relating to the conversion, cancellation, extinguishment or redemption of any such units;

                             (ii)  any contract, agreement, option or instrument under which a person has power to acquire a unit or units in the unit trust; or

                            (iii)  any power, authority, or discretion in a person in relation to the rights attaching to any of the units in the unit trust;

                            the rights attaching to any of the units in the unit trust were, at any time during the year of income, capable of being varied or abrogated in such a manner (notwithstanding that they were not in fact varied or abrogated in that manner) that:

                            (iv)  units in the unit trust that entitled the holder or holders thereof to not less than 75% of:

                                        (A)  the beneficial interests in the income of the unit trust; or

                                        (B)  the beneficial interests in the property of the unit trust;

                                   would have been held by one person or persons not more than 20 in number;

                             (v)  not less than 75% of the total of moneys paid or credited by the trustee of the unit trust during the year of income to unitholders as unitholders would have been paid or credited to one person or persons not more than 20 in number; or

                            (vi)  in the case where no moneys were paid or credited by the trustee of the unit trust during the year of income to unitholders as unitholders—if moneys had been so paid or credited by the trustee of the unit trust during the year of income, not less than 75% of the amount of those moneys would have been paid or credited to one person or persons not more than 20 in number.

             (7)  A unit trust shall not be deemed by subsection (6) not to be a public unit trust in relation to a year of income by reason that rights attaching to any of the units in the unit trust were, at any time during the year of income, capable of being varied in the manner mentioned in paragraph (6)(b) if the Commissioner is of the opinion that the person or persons who were able to vary the rights in that manner intended not to vary the rights in that manner during the year of income.

             (8)  For the purposes of subsections (1) and (2), units in a unit trust shall be taken to be offered to the public if and only if:

                     (a)  an offer is made to the public or to a section of the public to subscribe for or purchase the units; or

                     (b)  an invitation is issued to the public or to a section of the public to make offers to subscribe for or purchase the units.

             (9)  For the purposes of this section, where any units in a unit trust are held by the trustee of another trust estate, a person who has a beneficial interest in property of that other trust estate that consists of those units (whether or not that beneficial interest is deemed to be held by virtue of the application of this subsection) shall be deemed to hold those units.

           (10)  For the purposes of this section, a distribution of property of a unit trust to a unitholder shall be taken to be a payment of money to the unitholder of an amount equal to the value of the property.

           (11)  For the purposes of this section:

                     (a)  a person, whether or not he holds units in the unit trust concerned;

                     (b)  his relatives; and

                     (c)  in relation to any units in respect of which they are such nominees, his nominees and the nominees of any of his relatives;

shall be deemed to be one person.

102H  Resident unit trusts

                   For the purposes of this Division, a unit trust is a resident unit trust in relation to a year of income if, at any time during the year of income:

                     (a)  either of the following conditions was satisfied:

                              (i)  any property of the unit trust was situated in Australia;

                             (ii)  the trustee of the unit trust carried on business in Australia; and

                     (b)  either of the following conditions was satisfied:

                              (i)  the central management and control of the unit trust was in Australia;

                             (ii)  a person who was a resident or persons who were residents held more than 50% of:

                                        (A)  the beneficial interests in the income of the unit trust; or

                                        (B)  the beneficial interests in the property of the unit trust.

102J  Corporate unit trusts

             (1)  A unit trust is a corporate unit trust in relation to a relevant year of income if:

                     (a)  where the relevant year of income is the year of income that commenced on 1 July 1980, the year of income that commenced on 1 July 1981 or the year of income commencing on 1 July 1982:

                              (i)  the unit trust was established after 11 July 1980;

                             (ii)  the unit trust is an eligible unit trust in relation to the relevant year of income;

                            (iii)  the unit trust is a public unit trust in relation to the relevant year of income; and

                            (iv)  either of the following conditions is satisfied:

                                        (A)  the unit trust is a resident unit trust in relation to the relevant year of income;

                                        (B)  the unit trust was a corporate unit trust in relation to a year of income preceding the relevant year of income; or

                     (b)  where the relevant year of income is the year of income commencing on 1 July 1983 or a subsequent year of income:

                              (i)  the unit trust is an eligible unit trust in relation to the relevant year of income;

                             (ii)  the unit trust is a public unit trust in relation to the relevant year of income; and

                            (iii)  either of the following conditions is satisfied:

                                        (A)  the unit trust is a resident unit trust in relation to the relevant year of income;

                                        (B)  the unit trust was a corporate unit trust in relation to a year of income preceding the relevant year of income.

             (2)  Where a unit trust that was established on or before 11 July 1980 is an eligible unit trust in relation to the year of income that commenced on 1 July 1980, the year of income that commenced on 1 July 1981, or the year of income commencing on 1 July 1982 by virtue of a prescribed arrangement in relation to a company or unit trust that was entered into or carried out after 11 July 1980 then, whether or not the unit trust is also an eligible unit trust in relation to any of those years of income by virtue of a prescribed arrangement in relation to a company or unit trust that was entered into or carried out on or before 11 July 1980, the unit trust shall be taken, for the purposes of subparagraph (1)(a)(i), to have been established after 11 July 1980.

102K  Taxation of net income of corporate unit trust

                   The trustee of a unit trust that is a corporate unit trust in relation to a relevant year of income shall be assessed and is liable to pay tax on the net income of the corporate unit trust of the relevant year of income at the rate declared by the Parliament for the purposes of this section.

102L  Modified application of Act in relation to certain unit trusts

             (1)  For the purpose of the application of this Act in relation to the imposition, assessment and collection of tax in respect of:

                     (a)  the net income of a corporate unit trust; and

                     (b)  the income or assessable income of a unitholder in a prescribed trust estate;

the following provisions of this section have effect.

Note:          Under Subdivision 713‑C of the Income Tax Assessment Act 1997, this Act applies differently in relation to a corporate unit trust that chooses to form a consolidated group.

             (3)  For the purposes of the application of sections 46A and 46B in accordance with subsection (2), the Commissioner may be satisfied, in relation to a unit trust dividend, that a transaction, operation, undertaking, scheme or arrangement was by way of dividend stripping or similar to a transaction, operation, undertaking, scheme or arrangement by way of dividend stripping if the Commissioner would have been satisfied, had the unit trust dividend been a dividend paid by a company, that the transaction, operation, undertaking, scheme or arrangement would have been a transaction, operation, undertaking, scheme or arrangement by way of dividend stripping or, as the case requires, would have been similar to a transaction, operation, undertaking, scheme or arrangement by way of dividend stripping.

          (3A)  For the purposes of subsections (2) and (3):

                     (a)  the reference in paragraph (2)(a) to a prescribed trust estate includes a reference to a trust estate that is a prescribed trust estate for the purposes of Division 6C;

                     (b)  the reference in paragraph (2)(b) to a corporate unit trust includes a reference to a unit trust that is a public trading trust for the purposes of Division 6C; and

                     (c)  references in those subsections to a unit trust dividend include references to a unit trust dividend within the meaning of Division 6C.

          (3B)  Section 67AA applies, mutatis mutandis, in relation to the trustee of a corporate unit trust.

             (5)  For the purposes of the application of the definition of year of income in subsection 6(1), the reference in that definition to a company (except a company in the capacity of a trustee) shall be read as including a reference to a corporate unit trust or, as the context requires, to the trustee of a corporate unit trust.

             (6)  A reference in the definition of person in subsection 6(1) to a company shall be read as including a reference to a corporate unit trust or, as the context requires, to the trustee of a corporate unit trust.

             (7)  The reference in section 158 to the taxable income of a company except income in respect of which it is assessable as trustee shall be read as including a reference to the net income of a corporate unit trust.

           (10)  A reference in subsection 44(1) or section 128B of this Act, in subsection 840‑805(3) of the Income Tax Assessment Act 1997, in Subdivision 12‑F in Schedule 1 to the Taxation Administration Act 1953 (except section 12‑225) or in subsection 12‑390(10) in that Schedule, to a company or to a company that is a resident shall be read as including a reference to a prescribed trust estate or, as the context requires, to the trustee of a prescribed trust estate.

           (11)  A reference in the definition of paid in subsection 6(1) or in subsection 44(1), section 128A or section 128B of this Act, or in Subdivision 12‑F in Schedule 1 to the Taxation Administration Act 1953 (except section 12‑225), to a dividend shall be read as including a reference to a unit trust dividend.

        (12A)  Subdivision 12‑F in Schedule 1 to the Taxation Administration Act 1953 applies in respect of units in a prescribed trust estate in the same way as it applies in respect of shares.

           (13)  A reference in subsection 44(1) to a shareholder in relation to a company shall be read as including a reference to a unitholder in a prescribed trust estate.

           (15)  A reference in section 6B, Division 6 or subsection 128A(3) or 157(3) of this Act, Subdivision 840‑M of the Income Tax Assessment Act 1997 or Subdivision 12‑H in Schedule 1 to the Taxation Administration Act 1953 to a trust estate or to a trustee shall be read as not including a reference to a trust estate that is a corporate unit trust or to the trustee of a corporate unit trust, as the case may be.

           (18)  For the purposes of subsection 44(1), a unit trust dividend paid by the trustee of a prescribed trust estate out of corpus of the trust estate shall, to the extent to which the unit trust dividend is attributable to profits derived by the trustee, be taken to be paid out of those profits.

           (19)  For the purposes of section 128B, a unit trust dividend paid to a unitholder in a prescribed trust estate shall be deemed to be income derived by the unitholder at the time at which the unit trust dividend is paid.

Non‑unit dividend

           (20)  Subsections (2), (3), (3A) and (19) apply as if references in those subsections to a unit trust dividend included a reference to a non‑unit dividend.

           (21)  For the purposes of subsection 44(1), a non‑unit dividend paid by the trustee of a prescribed trust estate out of corpus of the trust estate is taken, to the extent to which the non‑unit dividend is attributable to a source in Australia, to be derived from a source in Australia.

        (21A)  For the purposes of subsection 44(1), a non‑unit dividend paid by the trustee of a prescribed trust estate out of corpus of the trust estate is taken, to the extent to which the non‑unit dividend is attributable to a source outside Australia, to be derived from a source outside Australia.

           (22)  If a provision of this Act that applies to a dividend:

                     (a)  is taken under this section to apply to a unit trust dividend; and

                     (b)  applies to a non‑share dividend in the same way as it applies to a dividend;

that provision also applies to a non‑unit dividend in the same way as it applies to a dividend.

Non‑unit equity interest

           (23)  If a provision of this Act that applies to a share:

                     (a)  is taken under this section to apply to a unit in a corporate unit trust; and

                     (b)  applies to a non‑share equity interest in a company in the same way as it applies to a share;

that provision also applies to a non‑unit equity interest in a corporate unit trust in the same way as it applies to a share.

Equity holder

           (24)  Subsections (1), (2), (17) and (19) apply as if references in those subsections to a unitholder included a reference to an equity holder who is not a unitholder.

           (25)  If a provision of this Act that applies to a shareholder:

                     (a)  is taken because of this section to apply to a unitholder in a corporate unit trust; and

                     (b)  applies to an equity holder in a company who is not a shareholder in the same way as it applies to a shareholder;

that provision also applies to an equity holder in a corporate unit trust who is not a unitholder in the same way as it applies to a shareholder.

Definitions

           (26)  In this section:

equity holder in a prescribed trust estate means the holder of an equity interest in the prescribed trust estate.

equity interest in a prescribed trust estate means:

                     (a)  a unit in the prescribed trust estate; or

                     (b)  any other interest that would be an equity interest in the prescribed trust estate if references in Division 974 of the Income Tax Assessment Act 1997 to a company included references to a prescribed trust estate or, as the context requires, to the trustee of a prescribed trust estate.

non‑unit dividend means a unit trust distribution that is not a unit trust dividend.

non‑unit equity interest in a prescribed trust estate means an equity interest in the prescribed trust estate that is not a unit in the prescribed trust estate.

unit trust distribution means a distribution, or an amount credited, that would be a unit trust dividend if references in the definition of unit trust dividend in subsection 102D(1) to a unitholder were references to an equity holder.


 

Division 6CIncome of certain public trading trusts

102M  Interpretation

                   In this Division, unless the contrary intention appears:

arrangement has the same meaning as in the Income Tax Assessment Act 1997.

eligible investment business means one or more of:

                     (a)  investing in land for the purpose, or primarily for the purpose, of deriving rent; or

                     (b)  investing or trading in any or all of the following:

                              (i)  secured or unsecured loans (including deposits with a bank or other financial institution);

                             (ii)  bonds, debentures, stock or other securities;

                            (iii)  shares in a company, including shares in a foreign hybrid company (as defined in the Income Tax Assessment Act 1997);

                            (iv)  units in a unit trust;

                             (v)  futures contracts;

                            (vi)  forward contracts;

                           (vii)  interest rate swap contracts;

                          (viii)  currency swap contracts;

                            (ix)  forward exchange rate contracts;

                             (x)  forward interest rate contracts;

                            (xi)  life assurance policies;

                           (xii)  a right or option in respect of such a loan, security, share, unit, contract or policy;

                          (xiii)  any similar financial instruments; or

                     (c)  investing or trading in financial instruments (not covered by paragraph (b)) that arise under financial arrangements, other than arrangements excepted by section 102MA.

eligible policy means:

                     (a)  an exempt life insurance policy (as defined in the Income Tax Assessment Act 1997); or

                     (b)  a complying superannuation/FHSA life insurance policy (as defined in that Act).

excluded rent means rent worked out by reference to the profits or receipts of an entity that uses any of the relevant land under an arrangement that is designed to result in the transfer of all, or substantially all, of what would otherwise be the profits of the entity to another party to the arrangement.

exempt entity, means:

                     (a)  a body or association to which item 1.1, 1.2, 1.3, 1.4 or 1.7 of the table in section 50‑5 or section 50‑10, 50‑15, 50‑25, 50‑30, 50‑40 or 50‑45 of the Income Tax Assessment Act 1997 applies;

                    (aa)  an STB (within the meaning of Division 1AB) the income of which is wholly exempt from tax;

                     (b)  the trustee of:

                              (i)  an exempt life assurance fund;

                             (ii)  a fund to which item 1.5 or 1.6 of the table in section 50‑5 or item 4.1 of the table in section 50‑20 of the Income Tax Assessment Act 1997 applies; or

                            (iii)  a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust;

                   (ba)  an organisation that is exempted from income tax by regulations under the International Organisations (Privileges and Immunities) Act 1963;

                     (c)  a person or body that, by virtue of a provision of an Act other than this Act, is not liable to income tax; or

                     (d)  a government, or an authority of a government, that is not liable to income tax.

exempt life assurance fund means a fund maintained by a life assurance company solely in respect of a class of life assurance business that consists of business of, or in relation to, the issuing of, or the undertaking of liability under, eligible policies.

financial arrangement has the same meaning as in the Income Tax Assessment Act 1997.

land includes an interest in land and fixtures on land.

net income, in relation to a public trading trust, means the total assessable income of the trust calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions.

A public trading trust may be required to work out its net income
in a special way by Division 266 or 267 of Schedule 2F.

prescribed trust estate means a trust estate that is, or has been, a public trading trust in relation to any year of income.

property includes a chose in action and also includes any estate, interest, right or power, whether at law or in equity, in or over property.

relevant year of income means the year of income that commenced on 1 July 1985 or a subsequent year of income.

trading business means a business that does not consist wholly of eligible investment business.

trustee, in relation to a fund referred to in paragraph (b) of the definition of exempt entity, means the person in whom the assets of the fund are vested, whether or not as trustee.

unit, in relation to a prescribed trust estate, includes a beneficial interest, however described, in any of the income or property of the trust estate.

unitholder, in relation to a prescribed trust estate, means the holder of a unit or units in the prescribed trust estate.

unit trust dividend means:

                     (a)  any distribution made by the trustee of a prescribed trust estate, whether in money or in other property, to a unitholder; and

                     (b)  any amount credited by the trustee of a prescribed trust estate to a unitholder as a unitholder;

but does not include:

                     (c)  money paid or credited, or property distributed, by the trustee of a prescribed trust estate to the extent to which the money or property is attributable to profits arising during a year of income in relation to which the prescribed trust estate was not a public trading trust; or

                     (d)  money paid or credited, or property distributed, by the trustee of a prescribed trust estate in respect of the cancellation, extinguishment or redemption of a unit to the extent to which:

                              (i)  the money paid or credited or the property distributed represents money paid to, or property transferred to, the trustee for the purpose of the creation or issue of that unit; and

                             (ii)  the amount of the money paid or credited or the value of the property distributed, as the case may be, does not exceed the amount of the money paid to the trustee, or the value, at the time of transfer, of the property transferred to the trustee, for the purpose of the creation or issue of that unit.

102MA  Arrangements not covered

             (1)  For the purposes of paragraph (c) of the definition of eligible investment business in section 102M, the excepted arrangements are those specified in this section.

Note:          This section does not affect an arrangement that satisfies paragraph (a) or (b) of that definition.

Leasing or property arrangement

             (2)  A right or obligation arising under:

                     (a)  an arrangement to which Division 42A (about leases of luxury cars) in Schedule 2E applies; or

                     (b)  an arrangement to which Division 240 of the Income Tax Assessment Act 1997 (about arrangements treated as a sale and loan) applies; or

                     (c)  a financial arrangement in the form of a loan that is taken to exist by subsection 250‑155(1) of the Income Tax Assessment Act 1997; or

                     (d)  an arrangement that, in substance or effect, depends on the use of a specific asset that is:

                              (i)  real property; or

                             (ii)  goods or a personal chattel (other than money or a money equivalent); or

                            (iii)  intellectual property;

                            and gives a right to control the use of the asset; or

                     (e)  an arrangement that is a licence to use:

                              (i)  real property; or

                             (ii)  goods or a personal chattel (other than money or a money equivalent); or

                            (iii)  intellectual property.

Interest in partnership or trust estate

             (3)  A right carried by an interest in a partnership or a trust estate, or an obligation that corresponds to such a right, if:

                     (a)  there is only one class of interest in the partnership or trust estate; or

                     (b)  the interest is an equity interest in the partnership or trust estate; or

                     (c)  for a right or obligation relating to a trust estate—the trust estate is managed by a funds manager or custodian, or a responsible entity (as defined in the Corporations Act 2001) of a registered scheme (as so defined).

General insurance policies

             (4)  A right or obligation under a general insurance policy.

Guarantees and indemnities

             (5)  A right or obligation under a guarantee or indemnity unless:

                     (a)  the financial arrangement is one where:

                              (i)  its value changes in response to changes in a specified variable or variables (such as an interest rate, foreign exchange rate, credit rating, index or commodity or financial instrument price); and

                             (ii)  there is no requirement for a net investment, or there is such a requirement but the net investment is smaller than would be required for other types of financial arrangement that would be expected to have a similar response to changes in market factors; or

                     (b)  the guarantee or indemnity is given or entered into in relation to a financial arrangement.

Superannuation and pension income

             (6)  A right to receive, or an obligation to provide, a financial benefit (as defined in the Income Tax Assessment Act 1997) if the right or obligation arises from a person’s membership of a superannuation or pension scheme.

Retirement village arrangements

             (7)  A right or obligation arising under:

                     (a)  a contract that gives rise to a right to occupy residential premises in a retirement village (as defined in the A New Tax System (Goods and Services Tax) Act 1999); or

                     (b)  a contract under which a resident of such a retirement village is provided with general or personal services in the retirement village.

102MB  Investing in land

Moveable property

             (1)  For the purposes of this Division, investments in moveable property, being property that is:

                     (a)  incidental to and relevant to the renting of land; and

                     (b)  customarily supplied or provided in connection with the renting of land; and

                     (c)  ancillary to the ownership and use of land;

are taken to be investments in land.

Safe harbour rule

             (2)  For the purposes of this Division, an entity’s investments in land are taken to be for the purpose, or primarily for the purpose, of deriving rent during a year of income if:

                     (a)  each of those investments is for purposes (other than the purpose of trading) that include a purpose of deriving rent; and

                     (b)  at least 75% of the gross revenue from those investments for the year of income consists of rent (except excluded rent); and

                     (c)  none of the remaining gross revenue from those investments for the year of income is:

                              (i)  excluded rent; or

                             (ii)  from the carrying on of a business that is not incidental and relevant to the renting of the land.

             (3)  In working out the gross revenue referred to in paragraph (2)(b), payments for the provision of services that:

                     (a)  are incidental to and relevant to the renting of land; and<