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Income Tax Assessment Act 1936

  • - C2008C00698
  • In force - Superseded Version
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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 3 includes:     Table of Contents
                                    Sections 124K – 202G

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

  


Contents

Part III—Liability to taxation                                                                                          i

Division 10B—Industrial property                                                                        1

124K..... Interpretation....................................................................................... 1

124KAA.................................. Division subject to Division 245 of Schedule 2C  4

124KA.. Application of Division where deduction allowable under former section 124ZAF or section 124ZAFA               4

124L...... Application.......................................................................................... 6

124M.... Annual deductions.............................................................................. 7

124N..... Deductions on the disposal or lapse of a unit of industrial property.... 8

124P...... Amount to be included in assessable income on disposal of a unit of industrial property        9

124PA... Roll‑over relief.................................................................................. 10

124Q..... Disposal of part of a unit of industrial property................................ 12

124R..... Cost of a unit of industrial property.................................................. 12

124S...... Residual value................................................................................... 15

124T...... Consideration receivable on disposal................................................ 16

124UA.. Effective life of certain units of industrial property........................... 17

124V..... Interest by licence in patent etc.......................................................... 18

124W.... Disposal of unit of industrial property on change of partnership etc. 19

124WA. Disposal of unit of industrial property where deduction allowable under former section 124ZAF or section 124ZAFA.......................................................................................................... 20

124Y..... Damages for infringement................................................................. 25

124Z...... Benefit from overseas rights............................................................. 25

Division 10BA—Australian films                                                                         26

Subdivision A—Preliminary                                                                                 26

124ZAA Interpretation..................................................................................... 26

124ZAB Provisional certificates...................................................................... 29

124ZAC Final certificates................................................................................ 31

124ZAD Determination of content of film....................................................... 32

124ZADAADelegation by Minister................................................................ 33

124ZADABReview of decisions of Minister.................................................. 33

124ZADADeclarations.................................................................................... 34

124ZADBNotification regarding non‑completion of film................................ 38

124ZAE Election that Division not apply........................................................ 38

124ZAEATransfer by way of security............................................................. 39

Subdivision B—Deductions for capital expenditure                                       39

124ZAFAASubdivision subject to Division 245 of Schedule 2C................... 39

124ZAFADeductions for capital expenditure under post 12 January
1983 contracts
................................................................................... 39

124ZAG Expenditure of contributions............................................................. 44

124ZAGASatisfaction of Commissioner as to the future application of
certain provisions
.............................................................................. 45

124ZAH Allocation of contributions expended................................................ 46

124ZAJ. Non‑arm’s length transactions.......................................................... 47

124ZAK Amounts expended in acquiring assets............................................. 48

124ZAL Deduction reduced if future copyright assigned................................ 48

124ZAM................................................ No deduction unless expenditure at risk  49

Subdivision C—Miscellaneous                                                                              51

124ZAO Limitation on deductibility of revenue expenses................................ 51

124ZAP Special provisions relating to partnerships........................................ 52

Division 10E—PDFs (pooled development funds)                                       54

Subdivision A—Shares in PDFs                                                                            54

124ZM.. Treatment distributions to shareholders in PDF................................ 54

124ZN... Exemption of income from sale of shares in a PDF.......................... 57

124ZO... Shares in a PDF are not trading stock............................................... 57

124ZQ... Effect of company becoming a PDF................................................. 57

124ZR... Effect of company ceasing to be a PDF............................................ 58

Subdivision B—The taxable income of PDFs                                                   58

124ZS... Definitions........................................................................................ 58

124ZTA Taxable income in first year as PDF if PDF component is nil.......... 59

124ZT... SME assessable income.................................................................... 59

124ZU... SME income component................................................................... 60

124ZV... Unregulated investment component.................................................. 60

Subdivision C—Adjustments of the tax treatment of capital gains and capital losses of PDFs  61

124ZW.. Definitions........................................................................................ 61

124ZX... Companies to which this Subdivision applies................................... 62

124ZY... Classes of assessable income............................................................ 62

124ZZ... Treatment of capital gains.................................................................. 63

124ZZA Allocation of gain amounts and loss amounts to classes of assessable income        63

124ZZB. Assessable income etc. in relation to capital gains............................. 64

124ZZD No net capital loss............................................................................. 64

Division 11—Interest paid by companies on bearer debentures         65

126........ Interest paid by a company on bearer debentures.............................. 65

127........ Credit for tax paid by company......................................................... 65

128........ Assessments of tax........................................................................... 66

Division 11A—Dividends, interest and royalties paid to non‑residents and to certain other persons  67

Subdivision A—General                                                                                         67

128AAA.................................... Application of Division to non‑share dividends  67

128A..... Interpretation..................................................................................... 67

128AA.. Deemed interest in respect of transfers of certain securities.............. 72

128AB.. Certificates relating to issue price of certain securities....................... 72

128AC.. Deemed interest in respect of hire‑purchase and certain other agreements                74

128AD.. Indemnification etc. agreements in relation to bills of exchange and promissory notes            77

128AE... Interpretation provisions relating to offshore banking units.............. 78

128AF... Payments through interposed entities................................................ 83

128B..... Liability to withholding tax............................................................... 84

128C..... Payment of withholding tax.............................................................. 94

128D..... Certain income not assessable........................................................... 95

128F...... Division does not apply to interest on certain publicly offered company debentures or debt interests      96

128FA... Division does not apply to interest on certain publicly offered unit trust debentures or debt interests      105

128GB.. Division not to apply to interest payments on offshore borrowings by offshore banking units               110

128NA.. Special tax payable in respect of certain securities and agreements. 110

128NB.. Special tax payable in respect of certain dealings by current and former offshore banking units              111

128NBA. Credits in respect of amounts assessed under Division 16E of Part III  113

128P...... Objections....................................................................................... 114

128Q..... Power of Commissioner to obtain information............................... 114

128R..... Informal arrangements.................................................................... 115

Division 11B—Equity investments in small‑medium enterprises       116

128TG... Summary of this Division............................................................... 116

128TH... When Division applies.................................................................... 116

128TI.... Consequences of Division applying................................................ 117

128TJ.... Acquiring a threshold interest in an SME....................................... 118

128TK... SME or small‑medium enterprise.................................................... 118

128TL... Subsidiary and direct ownership group........................................... 119

Division 11C—Payments in respect of mining operations on Aboriginal land  120

128U..... Interpretation................................................................................... 120

128V..... Liability to mining withholding tax................................................. 123

128W.... Payment of mining withholding tax................................................ 123

128X..... Power of Commissioner to obtain information............................... 124

Division 12—Oversea ships                                                                                   125

129........ Taxable income of ship‑owner or charterer..................................... 125

130........ Master or agent to make return........................................................ 125

131........ Determination by Commissioner..................................................... 125

132........ Assessment of tax........................................................................... 125

133........ Master liable to pay......................................................................... 125

134........ Notice of assessment....................................................................... 126

135........ Clearance of ship............................................................................. 126

135A..... Freights payable under certain agreements...................................... 126

Division 13—International agreements and determination of source of certain income             127

136AA.. Interpretation................................................................................... 127

136AB.. Operation of Division..................................................................... 129

136AC.. International agreements.................................................................. 129

136AD.. Arm’s length consideration deemed to be received or given........... 130

136AE... Determination of source of income etc............................................ 132

136AF... Consequential adjustments to assessable income and allowable deductions             138

Division 13A—Employee share schemes                                                        141

Subdivision A—Key principle and overview of Division                             141

139........ The key principle............................................................................. 141

139A..... Overview of Division..................................................................... 141

Subdivision B—Inclusion of discount in assessable income                        142

139B..... Discount to be included in assessable income................................. 142

139BA.. Reduction of amounts included—elections..................................... 143

Subdivision C—Key concepts: employee share scheme, discount, cessation time, qualifying shares and rights and exemption conditions                                                               143

139C..... Employee share schemes................................................................. 143

139CA.. Cessation time—shares................................................................... 144

139CB... Cessation time—rights.................................................................... 145

139CC... Calculation of discount.................................................................... 146

139CD.. Meaning of qualifying shares and qualifying rights........................ 147

139CDA Additional requirement for shares or rights acquired while engaged in foreign service            148

139CE... Exemption conditions...................................................................... 148

Subdivision D—Special provisions                                                                    149

139D..... Discount assessable to associate if share acquired by taxpayer in respect of associate’s employment      149

139DA.. Acquisition of legal interest in shares or rights—certain discounts not assessable   150

139DB.. No deduction until share or right acquired...................................... 151

139DC.. Deduction for provider of certain qualifying shares or rights.......... 151

139DD.. No benefit where rights lost............................................................ 152

139DE... Amount not assessable under other provisions............................... 153

139DF... Anti‑avoidance—certain shares and rights not qualifying shares and qualifying rights            153

139DG.. Amendment of assessments to account for reductions of amounts included in assessable income           153

Subdivision DA—Takeovers and restructures                                                154

139DP... Object of this Subdivision............................................................... 154

139DQ.. The effect of 100% takeovers and restructures on employee share schemes            154

139DR.. Conditions for the continuation of shares or rights......................... 155

139DS... Apportionment rules....................................................................... 156

Subdivision DB—Stapled securities                                                                   157

139DSA Object of this Subdivision............................................................... 157

139DSB Application of Division to stapled securities................................... 157

139DSC Discount not to be included in assessable income unless stapled security or right is qualifying               158

139DSD Division does not also apply to share part of stapled security......... 158

139DSE Modifications relating to employment............................................. 158

139DSF Modification relating to legal or beneficial interest.......................... 159

139DSG Modification relating to voting rights.............................................. 159

139DSH Cessation time when stapling arrangement ceases........................... 160

139DSI. Deduction to be apportioned........................................................... 160

Subdivision E—Elections                                                                                     161

139E...... Taxpayer may make election........................................................... 161

Subdivision F—Special provisions about the market value of a share or right             162

139F...... Meaning of market value of a share or right................................... 162

139FA... Listed shares or rights—market value............................................. 162

139FAA Listed shares—market value where public offer............................. 163

139FB... Unlisted shares—market value........................................................ 164

139FC... Unlisted rights—market value......................................................... 164

139FD... Conditions and restrictions to be disregarded.................................. 165

139FE... Value of right nil or can not be determined..................................... 165

139FF... Value of legal and beneficial interests............................................. 166

139FG... Meaning of qualified person........................................................... 166

139FI.... Provision of information about market value.................................. 166

139FJ.... Outline of remainder of Subdivision............................................... 166

139FK... Step 1—calculate the calculation percentage.................................... 166

139FL... Step 2—how to use calculation percentage..................................... 167

139FM.. Table 1 and instructions.................................................................. 167

139FN... Table 2 and instructions.................................................................. 169

Subdivision G—Definitions                                                                                 171

139G..... Meaning of acquiring or providing a share or right........................ 171

139GA.. Meaning of employee and employer................................................ 171

139GB.. Meaning of permanent employee.................................................... 172

139GBA.................................................................... Meaning of foreign service  172

139GC.. Meaning of holding company......................................................... 172

139GCA.......................................................................... Meaning of subsidiary  173

139GCB Meaning of 100% takeover............................................................. 173

139GCC Meaning of restructure................................................................... 173

139GCD...................................... Meaning of stapled security and stapled entity  173

139GD.. Meaning of approved stock exchange............................................. 173

139GE... Meaning of associate....................................................................... 174

139GF... Meaning of conducting a scheme on a non‑discriminatory basis... 174

139GG.. Meaning of provision of financial assistance.................................. 175

139GH.. Index of definitions......................................................................... 175

Division 15—Insurance with non‑residents                                                  177

141........ Interpretation................................................................................... 177

142........ Income derived by non‑resident insurer.......................................... 177

143........ Taxable income of non‑resident insurer.......................................... 178

144........ Liability of agents of insurer........................................................... 178

145........ Deduction of premiums................................................................... 178

146........ Exporter to furnish information....................................................... 178

147........ Rate of tax in special circumstances................................................ 179

148........ Reinsurance with non‑residents...................................................... 179

Division 16—Averaging of incomes                                                                  182

149........ Average income.............................................................................. 182

149A..... Capital gains, abnormal income and certain death benefits to be disregarded           182

150........ First average year............................................................................ 183

151........ First application of Division in relation to a taxpayer...................... 183

152........ Taxpayer not in receipt of assessable income.................................. 183

153........ Taxpayer with no taxable income.................................................... 183

154........ Excess of allowable deductions....................................................... 184

155........ Permanent reduction of income....................................................... 184

156........ Rebate of tax for, or complementary tax payable by, certain primary producers       184

157........ Application of Division to primary producers................................. 191

158........ Application of Division................................................................... 192

158A..... Election that Division not apply...................................................... 192

Division 16D—Certain arrangements relating to the use of property   193

159GE... Interpretation................................................................................... 193

159GEA Division applies to certain State/Territory bodies............................ 200

159GF... Residual amounts............................................................................ 200

159GG.. Qualifying arrangements................................................................. 204

159GH.. Application of Division in relation to property................................ 207

159GJ... Effect of application of Division on certain deductions etc.............. 208

159GK.. Effect of application of Division on assessability of arrangement payments            217

159GL... Special provision relating to Division 10C or 10D property........... 220

159GM. Special provision where cost of plant etc. is also eligible capital expenditure           221

159GN.. Effect of use of property under qualifying arrangement for producing assessable income       222

159GO.. Special provisions relating to partnerships...................................... 225

Division 16E—Accruals assessability etc. in respect of certain security payments        229

159GP... Interpretation................................................................................... 229

159GQ.. Tax treatment of holder of qualifying security................................. 234

159GQA....................................................................................... Accrual period  234

159GQB..................................................................................... Accrual amount  235

159GQC......................................... Implicit interest rate for fixed return security  237

159GQD.................................... Implicit interest rate for variable return security  237

159GR.. Consequences of actual payments................................................... 240

159GS... Balancing adjustments on transfer of qualifying security................ 240

159GT... Tax treatment of issuer of a qualifying security............................... 242

159GU.. Effect of Division on certain transfer profits and losses.................. 243

159GV.. Consequence of variation of terms of security................................ 244

159GW. Effect of Division in relation to non‑residents................................. 246

159GX.. Effect of Division where certain payments not assessable.............. 247

159GY.. Effect of Division where qualifying security is trading stock.......... 247

159GZ... Stripped securities........................................................................... 247

Division 16J—Effect of cancellation of subsidiary’s shares in holding company             250

159GZZZCInterpretation—general................................................................ 250

159GZZZDMeaning of eligible entity, eligible interest and
eligible proportion
.......................................................................... 251

159GZZZEShare cancellations to which this Division applies....................... 251

159GZZZFEffect on subsidiary of share cancellations to which this
Division applies
.............................................................................. 251

159GZZZGPre‑cancellation disposals of eligible interests............................. 252

159GZZZHPost‑cancellation disposals of eligible interests etc...................... 253

159GZZZIAdditional application of sections 159GZZZG and
159GZZZH to associates
................................................................ 254

Division 16K—Effect of buy‑backs of shares                                              256

Subdivision AA—Application of Division to non‑share equity interests  256

159GZZZIAApplication of Division to non‑share dividends........................ 256

Subdivision A—Interpretation                                                                            256

159GZZZJInterpretation................................................................................ 256

159GZZZKExplanation of terms.................................................................... 256

159GZZZLSpecial buy‑backs not made in ordinary course of
trading on a stock exchange
............................................................ 257

159GZZZMPurchase price in respect of buy‑back........................................ 257

Subdivision B—Company buying‑back shares                                               258

159GZZZNBuy‑back and cancellation disregarded for
certain purposes
.............................................................................. 258

Subdivision C—Off‑market purchases                                                             258

159GZZZPPart of off‑market purchase price is a dividend............................ 258

159GZZZQConsideration in respect of off‑market purchase......................... 259

Subdivision D—On‑market purchases                                                              262

159GZZZRNo part of on‑market purchase price is a dividend...................... 262

159GZZZSConsideration in respect of on‑market purchase.......................... 262

Division 16L—Tax‑exempt infrastructure borrowings                         263

159GZZZZDInterpretation............................................................................. 263

159GZZZZEInfrastructure borrowings to be non‑assessable and
non‑deductible
................................................................................. 264

159GZZZZFTax exemption to be disregarded for certain purposes............... 266

159GZZZZGRebate election.......................................................................... 266

159GZZZZHTax payable where infrastructure borrowing certificate
cancelled
.......................................................................................... 269

Division 17—Rebates                                                                                                271

Subdivision A—Concessional rebates                                                               271

159H..... Application...................................................................................... 271

159HA.. Indexation of rebate amounts in sections 159J, 159K and 159L..... 271

159J...... Rebates for dependants................................................................... 273

159K..... Sole parent rebate............................................................................ 283

159L...... Housekeeper................................................................................... 284

159M.... Double concessional rebates........................................................... 288

159N..... Rebate for certain low‑income taxpayers......................................... 288

159P...... Rebate for medical expenses........................................................... 288

Subdivision AB—Lump sum payments in arrears                                        292

159ZR... Interpretation................................................................................... 292

159ZRA Eligibility for rebate......................................................................... 294

159ZRB Calculation of rebate........................................................................ 295

159ZRC Notional tax amount for recent accrual years................................... 295

159ZRD Notional tax amount for distant accrual years.................................. 296

Subdivision B—Miscellaneous                                                                            297

160AAAATax rebate for low income aged persons...................................... 297

160AAABTax rebate for low income aged persons—trustees
assessed under section 98
............................................................... 298

160AAA................................ Rebate in respect of certain pensions, benefits etc.  299

160AAB............... Rebate in respect of amounts assessable under section 26AH  301

160AD.. Maximum amount of rebates........................................................... 303

160ADA Most tax offsets under the 1997 Assessment Act are treated as rebates  304

Part IIIB—Australian branches of foreign banks                                         305

Division 1—Preliminary                                                                                          305

160ZZVAObject............................................................................................ 305

160ZZVBApplication.................................................................................... 305

160ZZV Definitions...................................................................................... 306

160ZZW Certain provisions to apply as if Australian branch of foreign bank were a separate legal entity              307

Division 2—Provisions relating to income tax                                            309

160ZZX Income of branch to have Australian source................................... 309

160ZZZ. Notional borrowing by branch from bank....................................... 309

160ZZZANotional payment of interest by branch to bank............................. 309

160ZZZCOffshore banking units................................................................... 311

160ZZZENotional derivative transactions between branch and bank............. 311

160ZZZFNotional foreign exchange transactions between branch and bank. 311

160ZZZGLosses............................................................................................ 312

160ZZZHNet capital losses............................................................................ 312

160ZZZI Certain transactions to be disregarded............................................. 312

Division 3—Provisions relating to withholding tax                                  313

160ZZZJ............................... Withholding tax on interest paid by branch to bank  313

Division 4—Extension of Part to Australian branches of foreign financial entities        314

160ZZZKTreatment like Australian branches of foreign banks...................... 314

Part IV—Returns and assessments                                                                         315

161........ Annual returns................................................................................ 315

161A..... Form and content of returns............................................................ 315

161AA.. Contents of returns of full self‑assessment taxpayers..................... 316

161G..... Tax agent to give taxpayer copy of notice of assessment................ 316

162........ Further returns and information...................................................... 316

163........ Special returns................................................................................. 317

163A..... Late lodgement penalty—relevant entities, instalment taxpayers and full self‑assessment taxpayers        317

163AA.. General interest charge on unpaid penalty....................................... 319

163B..... Late lodgment of returns by persons other than relevant entities, instalment taxpayers and full self‑assessment taxpayers........................................................................................................ 319

164........ Returns deemed to be duly made..................................................... 322

166........ Assessment..................................................................................... 322

166A..... Deemed assessment........................................................................ 322

167........ Default assessment.......................................................................... 324

168........ Special assessment.......................................................................... 324

169........ Assessments on all persons liable to tax......................................... 324

169A..... Reliance by Commissioner on returns and statements..................... 325

170........ Amendment of assessments............................................................ 326

170C..... Power of Commissioner to reduce amount of tax payable in certain cases               338

171........ Where no notice of assessment served............................................ 338

171A..... Limited period to make assessments for nil liability returns for the 2003‑04 year of income or earlier    339

172........ Refunds of amounts overpaid......................................................... 341

173........ Amended assessment to be an assessment...................................... 342

174........ Notice of assessment....................................................................... 342

175........ Validity of assessment.................................................................... 342

175A..... Objections against assessments....................................................... 342

176........ Judicial notice of signature.............................................................. 343

177........ Evidence.......................................................................................... 343

Part IVA—Schemes to reduce income tax                                                          345

177A..... Interpretation................................................................................... 345

177B..... Operation of Part............................................................................. 346

177C..... Tax benefits..................................................................................... 346

177CA.. Withholding tax avoidance.............................................................. 351

177D..... Schemes to which Part applies........................................................ 351

177E...... Stripping of company profits.......................................................... 352

177EA... Creation of franking debit or cancellation of franking credits.......... 354

177EB... Cancellation of franking credits—consolidated groups................... 361

177F...... Cancellation of tax benefits etc........................................................ 364

177G..... Amendment of assessments............................................................ 368

Part VA—Tax file numbers                                                                                        369

Division 1—Preliminary                                                                                          369

202........ Objects of this Part.......................................................................... 369

202A..... Interpretation................................................................................... 371

202AA.. Definition of eligible PAYG payment.............................................. 375

Division 2—Issuing of tax file numbers                                                          376

202B..... Application for tax file number....................................................... 376

202BA.. Issuing of tax file numbers.............................................................. 376

202BB... Current tax file number................................................................... 377

202BC... Deemed refusal by Commissioner.................................................. 377

202BD.. Interim notices................................................................................. 377

202BE... Cancellation of tax file numbers...................................................... 378

202BF... Alteration of tax file numbers.......................................................... 378

Division 3—Quotation of tax file numbers by recipients of eligible PAYG payments   379

202C..... TFN declarations by recipients of eligible PAYG payments........... 379

202CA.. Operation of TFN declaration......................................................... 379

202CB... Quotation of tax file number in TFN declaration............................. 380

202CC... Making a replacement TFN declaration in place of an ineffective declaration           382

202CD.. Sending of TFN declaration to Commissioner................................ 382

202CE... Effect of incorrect quotation of tax file number............................... 383

202CF... Payer must notify Commissioner if no TFN declaration by recipient 384

Division 4—Quotation of tax file numbers in connection with certain investments        386

202D..... Explanation of terms: investment, investor, investment body.......... 386

202DA.. Phasing‑in period for Division........................................................ 389

202DB.. Quotation of tax file numbers in connection with investments........ 389

202DC.. Method of quoting tax file number.................................................. 390

202DD.. Investor excused from quoting tax file number in certain circumstances  390

202DDB Quotation of tax file number in connection with indirectly held investment              391

202DE... Securities dealer to inform the investment body of tax file number. 393

202DF... Effect of incorrect quotation of tax file number............................... 393

202DG.. Investments held jointly.................................................................. 394

202DH.. Tax file number quoted for superannuation or surcharge purposes taken to be quoted for purposes of the taxation of eligible termination payments.......................................................... 395

202DHA Tax file number quoted for Division 3 purposes taken to have been quoted for superannuation purposes              396

202DI.... Tax file number quoted for RSA purposes taken to be quoted for purposes of the taxation of superannuation benefits........................................................................................................ 396

202DJ... Tax file number quoted for purposes of taxation of superannuation benefits taken to be quoted for surcharge purposes........................................................................................................ 396

Division 4A—Quotation of tax file numbers in connection with farm management deposits    398

202DK.. Interpretation................................................................................... 398

202DL... Quotation of tax file number........................................................... 398

202DM. Effect of incorrect quotation of tax file number............................... 398

Division 5—Exemptions                                                                                          400

202EA... Persons receiving certain pensions etc.—employment.................... 400

202EB... Persons receiving certain pensions etc.—investments..................... 401

202EC... Entities not required to lodge income tax returns............................. 402

202EE... Non‑residents.................................................................................. 404

202EF... Territory residents etc...................................................................... 404

202EG... Manner of completing declarations................................................. 405

202EH... Declarations under this Division to be retained in certain circumstances  405

Division 6—Review of decisions                                                                         407

202F...... Review of decisions........................................................................ 407

202FA... Statements to accompany notification of decisions......................... 408

Division 7—Manner of providing information                                           409

202G..... Transmission of information in accordance with specifications...... 409


Division 10BIndustrial property

124K  Interpretation

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

Australian film means a film that is certified in writing by the Minister to be a film that:

                     (a)  has been, or is to be, made wholly or substantially in Australia or in an external Territory and has, or will have, a significant Australian content; or

                     (b)  has been, or is to be, made in pursuance of an agreement or arrangement entered into between the Government of Australia or an authority of the Government of Australia and the Government of another country or an authority of the Government of another country.

film has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

Minister means the Minister administering the Film Licensed Investment Company Act 2005.

Senior Executive Service office has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

the owner, in relation to a unit of industrial property, means the person who possesses the rights in respect of that unit of industrial property.

unit of industrial property means:

                     (a)  rights possessed by a person under a law of Australia as:

                             (ii)  the owner of a copyright; or

                            (iv)  a licensee under such a copyright;

                            and includes equitable rights in respect of such a patent, copyright or design or in respect of a licence under such a patent, copyright or design; or

                     (b)  rights possessed by a person under a law of a foreign country that are equivalent to the rights referred to in paragraph (a).

          (1A)  In considering for the purposes of the definition of Australian film in subsection (1) whether a film has or will have a significant Australian content, the Minister shall have regard to:

                     (a)  the subject‑matter of the film;

                     (b)  the place or places where the film was, or is to be, made;

                     (c)  the nationalities and places of residence of:

                              (i)  the persons who took part, or are to take part, in the making of the film (including authors, composers, actors, scriptwriters, editors, producers, directors and technicians);

                             (ii)  the persons who are, or will be, the beneficial owners of the shares or stock in the capital of any company concerned in the making of the film; and

                            (iii)  the persons who are, or will be, the beneficial owners of the copyright in the film;

                     (d)  the source from which moneys used, or to be used, in the making of the film were, or will be, derived; and

                     (e)  any other matters that he considers to be relevant.

          (1B)  The Minister may, by writing, delegate to the Secretary to the Minister’s Department, or to a person holding or performing the duties of a Senior Executive Service office in the Minister’s Department, all or any of the Minister’s powers under this section.

          (1C)  Applications may be made to the Tribunal for review of a decision:

                     (a)  to refuse to give a certificate of the kind referred to in the definition of Australian film in subsection (1); or

                     (b)  to revoke such a certificate.

          (1D)  Where the Minister makes a decision of the kind referred to in subsection (1C) and gives to a person whose interests are affected by the decision notice in writing of the decision, that notice shall:

                     (a)  in all cases—include a statement to the effect that, subject to the Administrative Appeals Tribunal Act 1975, application may be made to the Administrative Appeals Tribunal, by or on behalf of any person whose interests are affected by the decision, for review of the decision; and

                     (b)  except where subsection 28(4) of that Act applies—include a statement to the effect that a request may be made under section 28 of that Act by or on behalf of such a person for a statement setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving the reasons for the decision.

          (1E)  A failure to comply with the requirements of subsection (1D) in relation to a decision does not affect the validity of the decision.

             (2)  Subject to subsection (2A), a reference in this Division to expenditure of a capital nature does not include a reference to:

                     (a)  expenditure in respect of which a deduction has been allowed or is allowable under a provision of this Act, other than a provision of this Division, or which has been or is taken into account in ascertaining the amount of an allowable deduction under such a provision; or

                     (b)  the expenditure of moneys by a taxpayer, under a contract entered into on or after 1 October 1980, in producing, or by way of contribution to the cost of producing, a film where:

                              (i)  the expenditure of the moneys was expenditure of a capital nature;

                             (ii)  at the time when the moneys were expended, the taxpayer was a resident;

                            (iii)  at the time when the moneys were expended, a certificate under section 124ZAB or 124ZAC was in force in relation to the film;

                            (iv)  the Commissioner is satisfied, in relation to the expenditure of those moneys by the taxpayer, as mentioned in former paragraph 124ZAF(1)(c) or paragraph 124ZAFA(1)(c); and

                             (v)  the taxpayer has not made an election under section 124ZAE in relation to that film; or

                     (c)  expenditure on software (within the meaning of the Income Tax Assessment Act 1997).

          (2A)  Where a taxpayer has expended moneys as mentioned in paragraph (2)(b) and, by reason of the operation of section 124ZAM, the taxpayer is deemed, for the purposes of Division 10BA, not to have expended those moneys or not to have expended part of those moneys, paragraph (2)(b) does not apply in respect of the expenditure of those moneys or of that part of those moneys, as the case may be.

             (3)  Where a unit of industrial property is transmitted to a person by operation of law, this Division has effect as if that unit had been disposed of to that person by the last preceding owner of the unit at the time of the transmission.

             (4)  In this Division, a reference to the transmission of a unit of industrial property by operation of law includes, without limiting the generality of that expression, a reference to the transmission of a unit of industrial property to a person:

                     (a)  as trustee of the estate of the deceased owner of the unit;

                     (b)  as a beneficiary under the will or a codicil of the deceased owner of the unit or under an order of a court that varied or modified the provisions or such a will or codicil; or

                     (c)  as a beneficiary on the intestacy of the deceased owner of the unit or as a beneficiary under an order of a court that varied or modified the application, in relation to the estate of the deceased owner of the unit, of the provisions of the law relating to the distribution of the estates of persons who die intestate.

             (5)  For the purpose of this Division, disregard an acquisition or disposal of property by way of the transfer of the property for the provision or redemption of a security. Consequently this Division applies as if the person who was the owner of the property before the transfer continues to be the owner after the transfer.

124KAA  Division subject to Division 245 of Schedule 2C

                   This Division has effect subject to Division 245 of Schedule 2C.

124KA  Application of Division where deduction allowable under former section 124ZAF or section 124ZAFA

             (1)  Where:

                     (a)  a partnership has expended capital moneys in producing, or by way of contribution to the cost of producing, a film;

                     (b)  by virtue of the expenditure of those moneys by the partnership, a deduction has been allowed, or is allowable, under former section 124ZAF or section 124ZAFA to a taxpayer being a partner in the partnership;

the following provisions have effect:

                     (c)  for the purposes of this Division other than this section, the partnership shall not be taken to have incurred any expenditure of a capital nature directly in relation to producing the film; and

                     (d)  where an amount (in this paragraph referred to as the relevant amount) of moneys expended by the partnership under a contract (in this subsection referred to as the relevant contract):

                              (i)  is taken, for the purposes of subsection 124ZAP(2), to have been expended by the partnership in producing, or by way of contribution to the cost of producing, the film; or

                             (ii)  would be taken, for the purposes of that subsection, to have been expended by the partnership in producing, or by way of contribution to the cost of producing, the film if that subsection and Subdivision B of Division 10BA extended to the expenditure of moneys under contracts entered into before 1 October 1980;

                            a taxpayer, being a partner in the partnership, shall, subject to subsection 124K(2), be taken for the purposes of this Division to have expended capital moneys in producing the film of an amount equal to:

                            (iii)  so much of the relevant amount as the partners have agreed is to be borne by the taxpayer; or

                            (iv)  if the partners have not agreed as to the part of the relevant amount that is to be borne by the taxpayer—so much of the relevant amount as bears to the relevant amount the same proportion as the individual interest of the taxpayer in the net income of the partnership of the year of income in which the relevant amount was expended by the partnership bears to that net income or, as the case requires, the individual interest of the taxpayer in the partnership loss for that year of income bears to that partnership loss;

                            and the amount deemed to be expended by the taxpayer shall be deemed to have been expended under a contract entered into at the time when the relevant contract was entered into by the partnership.

             (2)  In this section, a reference to the expenditure of capital moneys is a reference to the expenditure of moneys that is expenditure of a capital nature.

124L  Application

          (1A)  For the purposes of assessments for the 1998‑99 year of income and later years of income, this Division applies to the owner of a unit of industrial property only if:

                     (a)  the unit relates to a copyright in an Australian film; and

                     (b)  a claim is not made for a tax offset in respect of the film under Division 376 of the Income Tax Assessment Act 1997 (whether in that year of income or another year of income); and

                     (c)  an application for a certificate of the kind referred to in the definition of Australian film in subsection 124K(1) in respect of the film is made before the day on which the Tax Laws Amendment (2007 Measures No. 5) Act 2007 receives the Royal Assent; and

                     (d)  the owner claims a deduction in respect of the film under this Division in relation to the 2008‑09 year of income or an earlier year of income.

Note 1:       For other kinds of intellectual property, see Division 40 of the Income Tax Assessment Act 1997.

Note 2:       Paragraph (d) means that, if a taxpayer claims a deduction in respect of a film under this Division in relation to the 2008‑09 year of income, the taxpayer can claim a deduction in respect of the film in relation to the 2009‑10 year of income as well.

             (1)  This Division applies to the owner of a unit of industrial property who:

                     (a)  became the owner of the unit by reason of being the first owner of the copyright to which the unit relates and, before the unit came into existence, incurred expenditure of a capital nature directly in relation to producing the work or other subject‑matter in which the copyright subsists; or

                     (b)  incurred expenditure of a capital nature on the purchase of the unit of industrial property; or

                     (c)  acquired the unit of industrial property by virtue of the disposal (other than a disposal by way of transmission by operation of law), in whole or in part and otherwise than for valuable consideration, of a unit of industrial property by the owner of that last‑mentioned unit in a case where a deduction under this Division in respect of that unit has been allowed or is allowable in an assessment in respect of income of that last‑mentioned owner or would have been so allowable if that unit, or the invention, work or other subject‑matter or design to which that unit relates, had been used by that owner for the purpose of producing assessable income; or

                     (d)  acquired the unit of industrial property by virtue of the transmission, in whole or in part, of a unit of industrial property by operation of law, in a case where a deduction under this Division in respect of that unit has been allowed or is allowable in an assessment in respect of income of the last preceding owner of that unit or would have been so allowable if that unit, or the invention, work or other subject‑matter or design to which that unit relates, had been used by that last preceding owner for the purpose of producing assessable income;

and, in the year of income or a previous year of income, has used the unit of industrial property of which he is the owner, or the invention, work or other subject‑matter or design to which that unit relates, for the purpose of producing assessable income.

124M  Annual deductions

             (1)  Where, at any time during the year of income, a taxpayer is the owner of a unit of industrial property to whom this Division applies, an amount equal to the residual value of the unit in relation to the taxpayer as at the end of the year of income divided by a number equal to the number of whole years in the effective life of the unit in relation to the taxpayer as at the commencement of the year of income shall, subject to this Act, be an allowable deduction in respect of the unit.

             (2)  Where the deduction allowable under subsection (1) would, but for this subsection, be less than $100, the deduction allowable shall be $100, or the amount of the residual value referred to in subsection (1), whichever is the less.

             (3)  Where:

                     (a)  at any time during the year of income a taxpayer was the owner of a unit of industrial property to whom this Division applies;

                     (b)  the effective life of the unit in relation to the taxpayer expired before the commencement of the year of income; and

                     (c)  there was a residual value of the unit in relation to the taxpayer as at the end of the year of income;

an amount equal to that residual value shall, subject to this Act, be an allowable deduction in respect of the unit in the assessment of the taxpayer in respect of income of that year of income.

             (4)  Subject to subsection (5), where, during a year of income, the owner of a unit of industrial property ceases to be the owner of the unit, a deduction under this section in respect of the unit is not allowable in his assessment in respect of income of that year of income.

             (5)  Subsection (4) extends to the case where the owner of the unit of industrial property ceases to be the owner by reason that the property ceases to exist but does not apply:

                     (a)  where the owner ceases to be the owner of the unit of industrial property by virtue of the transmission of the unit by operation of law; or

                     (b)  where the unit of industrial property was purchased or otherwise acquired by the owner for a specified period and he ceases to be the owner by reason that the specified period terminates.

             (6)  A reference in subsection (1) or (3) to the residual value of a unit of industrial property as at the end of a year of income in relation to a taxpayer who was the owner of the unit at any time during that year of income shall, in a case where the taxpayer ceased to be the owner of the unit by virtue of the transmission of the unit by operation of law, be read as a reference to the residual value of the unit in relation to the taxpayer immediately before the time of the transmission of the unit.

124N  Deductions on the disposal or lapse of a unit of industrial property

             (1)  Where, at any time during the year of income, a taxpayer who is the owner of a unit of industrial property to whom this Division applies disposes of the unit in whole and the amount of the consideration receivable in respect of the disposal is less than the residual value of the unit in relation to him at that time, the amount of the residual value, less the amount of the consideration, shall be an allowable deduction.

             (2)  Where:

                     (a)  a unit of industrial property owned by a taxpayer who is an owner to whom this Division applies ceases to exist at any time during the year of income by reason of the copyright to which the unit relates ceasing to be in force; or

                     (b)  a unit of industrial property owned by a taxpayer who is an owner to whom this Division applies and became the owner by reason of the grant, by licence, to him of an interest in a copyright ceases to exist at any time during the year of income by reason of a surrender of the licence in a case where there was no consideration receivable by the taxpayer in respect of the surrender;

and there is a residual value of the unit in relation to the taxpayer as at that time, that residual value shall be an allowable deduction.

124P  Amount to be included in assessable income on disposal of a unit of industrial property

             (1)  Where, at any time during the year of income, a taxpayer who is the owner of a unit of industrial property to whom this Division applies disposes of that unit in whole or in part (whether or not the effective life of that unit in relation to the taxpayer had expired at that time):

                     (a)  if there is a residual value of that unit in relation to the taxpayer at that time and the amount of the consideration receivable in respect of the disposal exceeds that residual value—the amount of the excess; or

                     (b)  if there is no residual value of that unit in relation to the taxpayer at that time—the amount of the consideration receivable in respect of the disposal;

shall be included in the assessable income of the taxpayer of the year of income.

             (3)  The amount which, under subsection (1), is required to be included in the assessable income of a taxpayer of a year of income in respect of a unit of industrial property shall not exceed the sum of the deductions which have been allowed or are allowable in respect of the unit under this Division in assessments of income of the taxpayer, less the sum of the amounts, if any, which have, under this section, been included in the assessable income of the taxpayer of a previous year, or previous years, of income in respect of that unit.

124PA  Roll‑over relief

          (1A)  This section does not apply in respect of a disposal in respect of which Subdivision 170‑D of the Income Tax Assessment Act 1997 applies.

Roll‑over relief where CGT roll‑over relief allowed

             (1)  This section applies to the disposal of a unit of industrial property by a taxpayer (in this section called the transferor) to another taxpayer (in this section called the transferee) if:

                     (b)  subject to subsection (6), deductions have been allowed or are allowable under this Division to the transferor in respect of the unit; and

                     (c)  no part of the cost of the unit to the transferor is attributable to expenditure covered by subsection 124K(2A) or 124KA(1); and

                     (d)  the disposal involves a CGT event; and

                     (e)  the conditions in an item in the table are satisfied.

 

CGT roll‑overs that qualify transferor for relief

Item

Type of CGT roll‑over

Conditions

1

Disposal of asset to wholly‑owned company

There is a roll‑over under Subdivision 122‑A of the Income Tax Assessment Act 1997 for the CGT event.

2

Disposal of asset by partnership to wholly‑owned company

The transferor is a partnership, the unit is partnership property, and there is a roll‑over under Subdivision 122‑B of the Income Tax Assessment Act 1997 for the disposal by the partners of the CGT assets consisting of their interests in the unit.

3

Marriage or relationship breakdown

There is a roll‑over under Subdivision 126‑A of the Income Tax Assessment Act 1997 for the CGT event.

4

Disposal of asset to another member of the same wholly‑owned group

There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 for the CGT event.

Roll‑over relief where joint election made under section 124W

             (2)  This section also applies if a joint election for roll‑over relief is made under subsection 124W(3) by both the transferor and the transferee referred to in that subsection in relation to the disposal of a unit of industrial property.

No balancing charges or deductions

             (3)  Sections 124N and 124P (which deal with balancing charges and deductions) do not apply to the disposal of the unit by the transferor.

Transferee to inherit certain characteristics from transferor

             (4)  This Division applies as if:

                     (a)  the cost of the unit of industrial property in relation to the transferee were equal to the residual value of the unit in relation to the transferor immediately before the disposal; and

                     (b)  the effective life of the unit of industrial property determined in relation to the transferor immediately before the disposal under section 124UA were the effective life of the unit of industrial property in relation to the transferee; and

                     (c)  if the transferor had not made an election under section 124UA in relation to the unit of industrial property—the transferee were not entitled to make an election under that section in relation to the unit.

Disposal by transferee where no roll‑over relief—inheritance of deductions

             (5)  If:

                     (a)  the transferee disposes of the unit of industrial property; and

                     (b)  this section does not apply to the disposal;

then, for the purposes of the application of subsection 124P(3) in relation to the disposal:

                     (c)  the total of:

                              (i)  the deductions allowed or allowable to the transferor under this Division in relation to the unit; and

                             (ii)  if there have been 2 or more prior successive applications of this section—the deductions allowed or allowable to the prior successive transferors under this Division in relation to the unit;

                            are taken to have been deductions allowed or allowable to the transferee under this Division in relation to the unit; and

                     (d)  the total of:

                              (i)  the amounts included in the transferor’s assessable income under section 124P in relation to the unit; and

                             (ii)  if there have been 2 or more prior successive applications of this section—the amounts included in the prior successive transferors’ assessable incomes under that section in relation to the unit;

                            are taken to have been included in the transferee’s assessable income under that section in relation to the unit.

Second or subsequent application of section—paragraph (1)(b) does not apply

             (6)  If, apart from this subsection, this section has applied to the disposal of the unit to the transferee, then, in working out whether this section applies to a subsequent disposal of the unit by:

                     (a)  the transferee; or

                     (b)  one or more subsequent successive transferees;

this section has effect as if paragraph (1)(b) (which deals with deductions) had not been enacted.

124Q  Disposal of part of a unit of industrial property

                   Subject to this Division, where the owner of a unit of industrial property disposes of that unit in part, that part of the unit of which he remains the owner shall, for the purposes of this Division, be deemed to be the same unit of industrial property as the unit of industrial property which he disposed of in part.

124R  Cost of a unit of industrial property

             (1)  For the purposes of this Division, the cost of a unit of industrial property to the owner of the unit shall, subject to subsection 124S(2), be taken to be:

                     (a)  in the case of an owner referred to in paragraph 124L(1)(a):

                              (i)  if subsection (2) of this section is applicable—the cost ascertained in accordance with that subsection; or

                             (ii)  if subsection (2) of this section is not applicable—the expenditure referred to in paragraph 124L(1)(a);

                     (b)  in the case of an owner referred to in paragraph 124L(1)(b):

                              (i)  if subsection (3) or (5) of this section is applicable—the cost ascertained in accordance with that subsection; or

                             (ii)  if neither of those subsections is applicable—the expenditure referred to in paragraph 124L(1)(b);

                     (c)  in the case of an owner referred to in paragraph 124L(1)(c):

                              (i)  if the owner acquired a unit of industrial property of another person in whole—the residual value of the unit in relation to the last preceding owner of the unit immediately before the time of the disposal of the unit; or

                             (ii)  in any other case—such part of that residual value as the Commissioner determines; or

                     (d)  in the case of an owner referred to in paragraph 124L(1)(d):

                              (i)  if the owner acquired a unit of industrial property of another person in whole—an amount ascertained by deducting from the residual value of the unit in relation to the last preceding owner of the unit immediately before the time of the transmission of the unit any deductions allowed or allowable under this Division in respect of the unit in an assessment in respect of income of that last preceding owner of the year of income during which the transmission took place; or

                             (ii)  in any other case—such part of that amount as the Commissioner determines.

             (2)  Where, in the case of an owner referred to in paragraph 124L(1)(a), the Commissioner is satisfied, having regard to any connection between the owner and any person who supplied goods to, or provided services for, the owner in relation to the unit of industrial property concerned or to any other relevant circumstances, that:

                     (a)  the owner and that person were not dealing with each other at arm’s length in relation to the supply of those goods or the provision of those services; and

                     (b)  the expenditure of a capital nature incurred by the owner in relation to producing the work or other subject‑matter in which the copyright subsists exceeds the expenditure of a capital nature that would have been incurred by the owner if the owner and that person had dealt with each other at arm’s length;

the cost of the unit to the owner for the purposes of this Division shall be taken to be the amount of the expenditure of a capital nature that, in the opinion of the Commissioner, would have been incurred by the owner if the owner and that person had dealt with each other at arm’s length.

             (3)  Where, in the case of an owner referred to in paragraph 124L(1)(b):

                     (a)  the Commissioner is satisfied, having regard to any connection between the owner and the person from whom the unit of industrial property concerned was purchased or to any other relevant circumstances, that the owner and that person were not dealing with each other at arm’s length in relation to the purchase; and

                     (b)  the expenditure of a capital nature incurred by the owner on the purchase of the unit of industrial property:

                              (i)  exceeds the amount that was the cost of the unit to the last preceding owner of the unit; or

                             (ii)  does not exceed the amount that was the cost of the unit to the last preceding owner of the unit but exceeds the value of the unit at the time of the purchase;

the cost of the unit to the owner for the purposes of this Division shall be taken to be the cost of the unit to the last preceding owner of the unit or the value of the unit at the time of the purchase, whichever is the less.

             (4)  References in subsection (3) to the cost of a unit of industrial property to the last preceding owner of the unit or to the value of a unit of industrial property at the time of the purchase of the unit shall, if the purchase was a purchase of a part of a unit of industrial property of another person, be construed as references to such part of that cost or of that value, as the case may be, as the Commissioner determines.

             (5)  Where, in the case of an owner referred to in paragraph 124L(1)(b), the unit of industrial property was purchased by the owner of the unit with other property and no separate price was allocated to the unit, the amount of the expenditure of a capital nature incurred by the owner on the purchase of the unit for the purposes of this Division shall be taken to be so much of the purchase price of the unit and the other property as the Commissioner determines.

124S  Residual value

             (1)  Subject to this section, the residual value of a unit of industrial property at any time in relation to the owner of the unit shall, for the purposes of this Division, be ascertained by deducting from the cost of the unit to the owner the sum of:

                     (a)  any deductions allowed or allowable under this Division in respect of the unit in assessments in respect of income of the owner of a year or years of income which ended prior to that time; and

                     (b)  the consideration receivable by the owner in respect of any disposal by him of the unit in part prior to that time.

          (1A)  The reference in paragraph (1)(a) to any deductions allowed or allowable under this Division in respect of a unit of industrial property shall, in the case of a deduction that has been or is to be reduced by reason of section 124Z, be read as a reference to the deduction that, but for that section, would have been allowed or would be allowable.

             (2)  Where the owner of a unit of industrial property has incurred expenditure of a capital nature in obtaining the surrender to him of a licence previously granted by him in respect of the copyright to which the unit relates, then, in ascertaining the residual value of the unit in relation to the owner of the unit at any time after the surrender, the cost of the unit to the owner of the unit shall be deemed to be increased by:

                     (a)  in a case to which paragraph (b) does not apply—an amount equal to the expenditure so incurred in obtaining the surrender; or

                     (b)  if:

                              (i)  the Commissioner is satisfied, having regard to any connection between the owner and the person who surrendered the licence or to any other relevant circumstances, that the owner and that person were not dealing with each other at arm’s length in relation to the surrender; and

                             (ii)  the consideration for the surrender:

                                        (A)  was greater than the value of the licence at the time of the surrender; or

                                        (B)  was not greater than that value but was greater than the expenditure of a capital nature that was incurred by the person who surrendered the licence in obtaining the grant of the licence;

                            an amount equal to that value or that expenditure, whichever is the less.

124T  Consideration receivable on disposal

             (1)  Subject to this section, for the purposes of this Division, the consideration receivable by the owner of a unit of industrial property in respect of the disposal of the unit in whole or in part shall be taken to be:

                     (a)  where the unit is sold in whole or in part (whether with or without other property) for a specified price—the sale price of the unit or part of the unit, less the expenses of the sale of the unit or part of the unit or such part of the expenses of the sale of the unit or part of the unit together with the other property as the Commissioner determines;

                     (b)  where the unit is sold in whole or in part together with other property and a specified price is not allocated to the unit or the part of the unit—such part of the sale price of the unit or part of the unit together with the other property as the Commissioner determines, less such part of the expenses of the sale of the unit or part of the unit together with the other property as the Commissioner determines; or

                     (c)  where the unit is transmitted by operation of law:

                              (i)  if the unit is transmitted in whole—an amount equal to the residual value of the unit in relation to that owner of the unit immediately before the time of the transmission of the unit; or

                             (ii)  if the unit is transmitted in part—such part of that residual value as is determined by the Commissioner.

             (2)  Where the owner of a unit of industrial property to whom this Division applies disposes of the unit in whole or in part to another person and:

                     (a)  the Commissioner is satisfied, having regard to any connection between the owner and that other person or to any other relevant circumstances, that the owner and that other person were not dealing with each other at arm’s length in relation to the disposal; and

                     (b)  there was no amount receivable by the owner in respect of the disposal or the amount receivable by the owner in respect of the disposal was less than the value of the unit or the part of the unit at the time of the disposal;

the consideration receivable by the owner in respect of the disposal for the purposes of this Division shall be taken to be the amount that was the value of the unit or the part of the unit at the time of the disposal.

             (3)  Where:

                     (a)  the owner of a unit of industrial property to whom this Division applies disposes of the unit in whole or in part; and

                     (b)  the whole or a part of the amount receivable by the owner in respect of the disposal has been included or is to be included in the assessable income of the owner of any year of income under any provision of this Act other than a provision of this Division;

then, for the purposes of this Division, the consideration receivable by the owner in respect of the disposal shall be reduced by so much of that amount as has been so included or is to be so included.

124UA  Effective life of certain units of industrial property

             (1)  Subject to this section, for the purposes of this Division, the effective life of a unit of industrial property that relates to a copyright subsisting in an Australian film shall, in relation to the owner of the unit, be deemed to have commenced at the commencement of the year of income during which the owner of the unit first used that unit, or the subject‑matter to which that unit relates, for the purpose of producing assessable income and shall end:

                     (a)  where the unit was purchased or otherwise acquired by him for a specified period—at the end of the year of income next succeeding the year of income during which the unit was first so used or at the end of the year of income during which the specified period will terminate, whichever will first occur; or

                     (b)  in any other case—at the end of the year of income next succeeding the year of income during which the unit was first so used.

             (2)  The owner of a unit of industrial property that relates to a copyright subsisting in an Australian film may elect that this Division does not apply in relation to that unit.

             (3)  An election under subsection (2) must be made on or before the last day for the furnishing of the owner’s return of income of the year of income during which the owner first used that unit, or the subject‑matter to which the unit relates, for the purpose of producing assessable income, or within such further time as the Commissioner allows.

             (4)  This section does not apply in relation to a unit of industrial property that relates to a copyright subsisting in an Australian film if the unit, or the subject‑matter to which the unit relates, was used for the purpose of producing income before 22 November 1977.

124V  Interest by licence in patent etc.

             (1)  For the purposes of this Division, the owner of a unit of industrial property who, by licence, grants to another person an interest in the copyright to which the unit relates shall, subject to subsection (2), be deemed to have disposed of the unit in part.

             (2)  For the purposes of this Division, where a person who became the owner of a unit of industrial property by reason of the grant to him, by licence, of an interest in a copyright surrenders that licence:

                     (a)  that person shall not be deemed to have disposed of the unit unless the surrender was made in consideration of the payment to him of an amount; and

                     (b)  the person to whom the licence was surrendered shall not, by reason only of the surrender, be deemed to have acquired a unit of industrial property.

             (3)  Where a unit of industrial property arises out of the grant, by licence, of an interest in a copyright, an extension of the term of that licence shall, for the purposes of this Division, be deemed to be the grant of a new licence.

124W  Disposal of unit of industrial property on change of partnership etc.

             (1)  Where, for any reason, including:

                     (a)  the formation or dissolution of a partnership; or

                     (b)  a variation in the constitution of a partnership or in the interests of the partners;

a change has occurred in the ownership of, or in the interests of persons in, a unit of industrial property and the person, or one or more of the persons, who owned the unit before the change has or have an interest in the unit after the change, then, subject to subsection 124S(2) but notwithstanding any other provision of this Division, the succeeding provisions of this section have effect.

             (2)  The provisions of this Division apply as if the person or persons who owned the unit before the change (in this section called the transferor) had, on the day on which the change occurred, disposed of the unit in whole to the person, or all the persons, by whom the unit is owned after the change (in this section called the transferee).

             (3)  Unless a joint election for roll‑over relief has been made by both the transferor and the transferee, this Division applies as if the consideration for the disposal were equal to the market value of the unit immediately before the change.

             (4)  If a joint election for roll‑over relief has been made by both the transferor and the transferee, section 124PA applies to the disposal.

             (5)  A joint election for roll‑over relief has no effect unless it:

                     (a)  is in writing; and

                     (b)  is made:

                              (i)  within 6 months after the later of the following:

                                        (A)  the end of the year of income of the transferee in which the disposal occurred;

                                        (B)  the commencement of this subsection; or

                             (ii)  within such further period as the Commissioner allows; and

                     (c)  contains such information about the transferor’s holding of the unit as will enable the transferee to work out how section 124PA will apply to the transferee’s holding of the unit.

             (6)  If a person dies before the end of the period allowed for making a joint election for roll‑over relief, the trustee of the deceased person’s estate may be a party to the election on the deceased person’s behalf.

124WA  Disposal of unit of industrial property where deduction allowable under former section 124ZAF or section 124ZAFA

             (1)  Where:

                     (a)  for any reason, including:

                              (i)  the formation or dissolution of a partnership; or

                             (ii)  a variation in the constitution of a partnership or in the interests of the partners;

                            a change has occurred in the ownership of, or in the interests of persons in, a unit of industrial property being a copyright, or an interest in a copyright, subsisting in a film;

                     (b)  the person, or one or more of the persons, who owned the unit before the change has or have an interest in the unit after the change;

                     (c)  a deduction has been allowed or is allowable under former section 124ZAF or section 124ZAFA to the person or to any of the persons who owned the unit before the change in respect of moneys expended in producing, or by way of contribution to the cost of producing, the film, being expenditure that relates to the unit; and

                     (d)  a person to whom a deduction has been allowed or is allowable as mentioned in paragraph (c) has an interest in the unit after the change;

section 124W does not apply to that change but subsections (2), (3) and (7) of this section have effect.

             (2)  Where a person (in this subsection referred to as the relevant person) who had an interest in the unit before the change:

                     (a)  did not have an interest in the unit after the change; or

                     (b)  had a lesser interest in the unit after the change;

the following provisions have effect:

                     (c)  if the relevant person did not have an interest in the unit after the change, the relevant person shall be deemed, for the purposes of this Division, to have disposed of the whole of his interest in the unit at the time when the change occurred for an amount of consideration equal to:

                              (i)  if the change occurred in pursuance of an agreement and the agreement specified, as the value of the unit for the purposes of the agreement, an amount greater than the value of the unit at the time when the change occurred—so much of the amount specified in the agreement as bears to that amount the same proportion as the value, at the time when the change occurred, of the interest disposed of bears to the value of the unit at the time when the change occurred; and

                             (ii)  in any other case—the value, at the time when the change occurred, of the interest disposed of;

                     (d)  if the relevant person had a lesser interest in the unit after the change, the relevant person shall be deemed, for the purposes of this Division, to have disposed of part of his interest in the unit at the time when the change occurred for an amount of consideration equal to:

                              (i)  if the change occurred in pursuance of an agreement and the agreement specified, as the value of the unit for the purposes of the agreement, an amount greater than the value of the unit at the time when the change occurred—so much of the amount specified in the agreement as bears to that amount the same proportion as the value, at the time when the change occurred, of the part of the interest disposed of bears to the value of the unit at the time when the change occurred; and

                             (ii)  in any other case—the value, at the time when the change occurred, of the part of the interest disposed of.

             (3)  Where a person (in this subsection referred to as the relevant person):

                     (a)  did not have an interest in the unit before the change but had an interest in the unit after the change; or

                     (b)  had an interest in the unit before the change and had an additional interest in the unit after the change;

the following provisions have effect:

                     (c)  if the relevant person did not have an interest in the unit before the change, the relevant person shall be deemed, for the purposes of this Division, to have incurred expenditure of a capital nature, on the purchase of the interest that the relevant person had after the change, of an amount equal to:

                              (i)  if the change occurred in pursuance of an agreement and the agreement specified, as the value of the unit for the purposes of the agreement, an amount less than the value of the unit at the time when the change occurred:

                                        (A)  so much of the amount specified in the agreement as bears to that amount the same proportion as the value, at the time when the change occurred, of the interest that the relevant person had after the change bears to the value of the unit at the time when the change occurred; or

                                        (B)  so much of the cost of the unit as bears to that cost the same proportion as the value, at the time when the change occurred, of the interest that the relevant person had after the change bears to the value of the unit at the time when the change occurred;

                                   whichever is the less; and

                             (ii)  in any other case:

                                        (A)  the value, at the time when the change occurred, of the interest that the relevant person had after the change; or

                                        (B)  so much of the cost of the unit as bears to that cost the same proportion as the value, at the time when the change occurred, of the interest that the relevant person had after the change bears to the value of the unit at the time when the change occurred;

                                   whichever is the less;

                     (d)  if the relevant person had an interest in the unit before the change and had an additional interest in the unit after the change, the relevant person shall be deemed, for the purposes of this Division, to have incurred expenditure of a capital nature on the purchase of that additional interest of an amount equal to:

                              (i)  if the change occurred in pursuance of an agreement and the agreement specified, as the value of the unit for the purposes of the agreement, an amount less than the value of the unit at the time when the change occurred:

                                        (A)  so much of the amount specified in the agreement as bears to that amount the same proportion as the value of the additional interest, at the time when the change occurred, bears to the value of the unit at the time when the change occurred; or

                                        (B)  so much of the cost of the unit as bears to that cost the same proportion as the value of the additional interest, at the time when the change occurred, bears to the value of the unit at the time when the change occurred;

                                   whichever is the less; and

                             (ii)  in any other case:

                                        (A)  the value of the additional interest at the time when the change occurred; or

                                        (B)  so much of the cost of the unit as bears to that cost the same proportion as the value of the additional interest, at the time when the change occurred, bears to the value of the unit at the time when the change occurred;

                                   whichever is the less.

             (4)  Where:

                     (a)  for any reason, including:

                              (i)  the formation or dissolution of a partnership; or

                             (ii)  a variation in the constitution of a partnership or in the interests of the partners;

                            a change has occurred in the ownership of, or in the interests of persons in, a unit of industrial property being a copyright, or an interest in a copyright, subsisting in a film;

                     (b)  the person, or one or more of the persons, who owned the unit before the change has or have an interest in the unit after the change;

                     (c)  a deduction has been allowed or is allowable under section 124ZAF or 124ZAFA to the person or to any of the persons who owned the unit before the change in respect of moneys expended in producing, or by way of contribution to the cost of producing, the film, being expenditure that relates to the unit; and

                     (d)  no person to whom a deduction has been allowed or is allowable as mentioned in paragraph (c) has an interest in the unit after the change;

section 124W does not apply to that change but the succeeding provisions of this section have effect.

             (5)  Any person who had an interest in the unit before the change shall, for the purposes of this Division, be deemed to have disposed of his interest in the unit in whole for an amount of consideration equal to:

                     (a)  if the change occurred in pursuance of an agreement and the agreement specified, as the value of the unit for the purposes of the agreement, an amount greater than the value of the unit at the time when the change occurred—so much of the amount specified in the agreement as bears to that amount the same proportion as the value, at the time when the change occurred, of the interest deemed to have been disposed of bears to the value of the unit at the time when the change occurred; and

                     (b)  in any other case—the value, at the time when the change occurred, of the interest disposed of.

             (6)  For the purposes of the application of this Division to the person or persons who owned the unit after the change, that person or those persons shall be deemed to have incurred expenditure of a capital nature on the purchase of the unit of an amount equal to:

                     (a)  if the change occurred in pursuance of an agreement and the agreement specified, as the value of the unit for the purposes of the agreement, an amount less than the value of the unit at the time when the change occurred—the amount specified in the agreement or the cost of the unit, whichever is the less; and

                     (b)  in any other case—the value of the unit at the time when the change occurred or the cost of the unit, whichever is the less.

             (7)  For the purposes of the application of subsection (3) or (6) in respect of a change in the ownership of, or in the interests of persons in, a unit of industrial property being a copyright, or an interest in a copyright, subsisting in a film, a reference to the cost of the unit is a reference to the cost (if any) of the unit, ascertained in accordance with section 124R, to the person or persons who owned the unit before the change increased by so much of the expenditure incurred in relation to the film in respect of which a deduction or deductions has or have been allowed or is or are allowable under former section 124ZAF or section 124ZAFA to the person or any of the persons who owned the unit before the change as is attributable to so much of the unit as, immediately before the change occurred, was owned by the person or persons to whom that deduction or those deductions has or have been allowed or is or are allowable.

124Y  Damages for infringement

                   Where, in pursuance of a judgment of a court or otherwise, an amount is paid to a person who is or has been the owner of a unit of industrial property in respect of an infringement, or an alleged infringement, of the copyright to which the unit relates, that person shall, for the purposes of this Division, be deemed to have disposed of the unit in part, at the time of payment, in consideration of the payment of that amount.

124Z  Benefit from overseas rights

                   Where the owner of a unit of industrial property has obtained or is obtaining a benefit from a right exercisable in a place outside Australia, being a right which relates to the invention, work or other subject‑matter or design to which the unit of industrial property relates, the Commissioner may determine that any deduction allowable under this Division in respect of the unit of industrial property shall be reduced by such amount as the Commissioner, having regard to that benefit, thinks fit, and the deduction shall be reduced accordingly.


 

Division 10BAAustralian films

Subdivision APreliminary

124ZAA  Interpretation

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

Australian film means a film that:

                     (a)  has been made wholly or substantially in Australia or in an external Territory and has a significant Australian content; or

                     (b)  has been made in pursuance of an agreement or arrangement entered into between the Government of Australia or an authority of the Government of Australia and the Government of another country or an authority of the Government of another country.

copyright, in relation to a film, means copyright subsisting in the film by virtue of Part IV of the Copyright Act 1968 and includes copyright subsisting in, or in relation to, the film or in any work comprised in the film, under the law of a country other than Australia.

feature film has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

film has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

film account, in relation to a film, means an account that has been opened in relation to the film in the Film Trust Fund.

Film Trust Fund means the Australian Film Industry Trust Fund in the Trust Fund referred to in section 60 of the Audit Act 1901.

final certificate means a certificate issued under section 124ZAC.

future copyright means copyright to come into existence at a future time or upon the happening of a future event.

Minister means the Minister for the Arts, Sport, the Environment, Tourism and Territories.

provisional certificate means a certificate issued under section 124ZAB.

public event includes:

                     (a)  a sporting activity;

                     (b)  a theatrical performance;

                     (c)  an artistic performance; or

                     (d)  any other activity, performance or event;

to which the public is normally admitted (whether free of charge or on payment of a charge).

qualifying Australian film means a film that is:

                     (a)  an eligible film; and

                     (b)  an Australian film.

relevant 24 month period, in relation to a film, means the period of 24 months after the end of the financial year in which capital moneys were first expended in producing, or by way of contribution to the cost of producing, the film.

television broadcasting includes transmission by means of cables.

             (2)  A reference in this Division to a film shall, unless the contrary intention appears, be read as including a reference to a proposed film.

             (3)  In this Division, a reference to the expenditure of capital moneys is a reference to the expenditure of moneys that is expenditure of a capital nature.

             (4)  Subject to subsection (5), a reference in this Division to an eligible film is a reference to a film produced wholly or principally for exhibition to the public in cinemas or by way of television broadcasting, being a feature film or a film of a like nature produced for exhibition by way of television broadcasting, a documentary or a mini‑series of television drama.

             (5)  Without extending by implication the generality of subsection (4), a reference in this Division to an eligible film does not include a reference to a film that is, or is to a substantial extent:

                     (a)  a film for exhibition as an advertising program or a commercial;

                     (b)  a film for exhibition as a discussion program, a quiz program, a panel program, a variety program or a program of a like nature;

                     (c)  a film of a public event;

                     (d)  a film forming part of a drama program series that is, or is intended to be, of a continuing nature; or

                     (e)  a training film.

             (6)  A reference in this Division to moneys expended in producing a film is a reference to moneys expended to the extent to which those moneys are expended directly in producing a film.

             (7)  For the purposes of this Division, moneys withdrawn from a film account opened in relation to a film shall be taken to be dealt with in the prescribed manner if, and only if, the moneys are expended:

                     (a)  in producing the film;

                     (b)  in payment to the Commissioner in respect of amounts paid into the film account under former paragraph 221ZN(1)(e); or

                     (c)  in payment by way of refund to a person of an amount deducted under former paragraph 221ZN(1)(a), being an amount to which former subsection 221ZN(4) applied.

             (8)  In the application of paragraph (7)(a) for the purposes of this Division, other than sections 124ZAG and 124ZAH, in determining whether moneys are expended in producing a film, sections 124ZAJ and 124ZAK shall be disregarded.

             (9)  In determining for the purposes of the definition of relevant 24 month period in subsection (1) and for the purposes of section 124ZADA and subparagraph 124ZAFA(1)(d)(iv) the meaning of references to the expenditure of capital moneys in producing, or by way of contribution to the cost of producing, a film, sections 124ZAJ, 124ZAK, 124ZAL and 124ZAM shall be disregarded.

           (10)  For the purposes of this Division:

                     (a)  where a person pays moneys to another person and that other person pays the moneys into a film account:

                              (i)  the first‑mentioned person shall be deemed to have paid the moneys into that film account at the time when the moneys were paid to the other person; and

                             (ii)  the other person shall be deemed not to have paid the moneys into the film account; and

                     (b)  where a person withdraws moneys from a film account and pays the moneys to another person:

                              (i)  the other person shall be deemed to have withdrawn the moneys from the film account at the time when the moneys were paid to that other person; and

                             (ii)  the first‑mentioned person shall be deemed not to have withdrawn the moneys from the film account.

           (11)  Where the Minister is satisfied that:

                     (a)  a proposed film, when completed, will have a significant non‑Australian content; or

                     (b)  a film has a significant non‑Australian content;

the Minister may treat the proposed film or film as not being a qualifying Australian film for the purposes of this Division.

124ZAB  Provisional certificates

             (1)  A person (in this section referred to as the applicant) may apply to the Minister for a certificate stating that a proposed film will, when completed, be a qualifying Australian film for the purposes of this Division.

             (2)  An application under subsection (1):

                     (a)  shall be in writing;

                     (b)  shall be signed by or on behalf of the applicant; and

                     (c)  shall be accompanied by such information as the Minister requires.

          (2A)  An application under subsection (1) must be made before the day on which the Tax Laws Amendment (2007 Measures No. 5) Act 2007 receives the Royal Assent.

             (3)  Where an application is made to the Minister under subsection (1) and the Minister is satisfied that:

                     (a)  the proposed film, when completed, will be a qualifying Australian film; and

                     (b)  having regard to the role of the applicant in the proposed production of the film, the applicant is an appropriate person to whom to issue a certificate under this section in respect of the proposed film;

the Minister shall issue to the applicant a certificate under this section in respect of the proposed film.

          (3A)  Where the Minister makes a decision refusing an application under subsection (1), the Minister shall, as soon as practicable, give notice in writing of the refusal to the applicant.

             (4)  A person to whom a certificate in respect of a proposed film has been issued under subsection (3) shall furnish to the Minister, within a period specified by the Minister, such information in relation to the proposed film as the Minister requests.

             (5)  Where a person to whom a certificate in respect of a proposed film has been issued under subsection (3) fails to comply with subsection (4) in respect of the proposed film, the Minister may, by writing under his hand, revoke the certificate and thereupon the certificate shall, for the purposes of this Act, be deemed never to have been in force.

             (6)  Where:

                     (a)  the Minister has issued a certificate under this section stating that a proposed film will, when completed, be a qualifying Australian film for the purposes of this Division; and

                     (b)  at any time after the issue of the certificate, the Minister becomes satisfied that:

                              (i)  the proposed film, when completed, will not be a qualifying Australian film for the purposes of this Division; or

                             (ii)  if the proposed film has been completed—the completed film is not a qualifying Australian film for the purposes of this Division;

the Minister shall, by writing under his hand, revoke the certificate and thereupon the certificate shall, for the purposes of this Act, be deemed never to have been in force.

          (6A)  The Minister may, by signed writing, revoke a certificate in respect of a proposed film that has been issued under subsection (3) if:

                     (a)  the person who applied for the certificate applies to the Minister for the revocation in the approved form; and

                     (b)  the person provides a statutory declaration stating that:

                              (i)  no taxpayer has claimed a deduction under this Division in respect of the film; and

                             (ii)  a final certificate in respect of the film has not been issued under this Division; and

                            (iii)  a taxpayer intends to claim a tax offset under Division 376 of the Income Tax Assessment Act 1997 in respect of the film; and

                            (iv)  financial assistance has not been provided by the Film Finance Corporation Australia Limited (incorporated under the Companies Act 1981 on 12 July 1988) in respect of the film.

A certificate that is revoked under this subsection is, for the purposes of this Act, taken never to have been in force.

Note:          Revocation of a certificate under this subsection allows a person to claim a tax offset under Division 376 of the Income Tax Assessment Act 1997 in respect of the film.

             (7)  Where the Minister, under subsection (5), (6) or (6A), revokes a certificate, the Minister shall, as soon as practicable, give notice in writing of the revocation to the person to whom the certificate was issued.

             (8)  The revocation of a certificate issued under this section in respect of a proposed film does not prevent the issue of a further certificate under this section in respect of that proposed film.

             (9)  Subject to subsections (5), (6), (6A) and (10), a certificate issued under this section shall be deemed to have been in force at all times before the time when it was issued.

           (10)  If an application for a final certificate in respect of a film is not made in accordance with section 124ZAC before the expiration of 6 months after the time when the film is completed, any certificate issued under this section in respect of the film shall be deemed never to have been in force.

124ZAC  Final certificates

             (1)  A person (in this section referred to as the applicant) may apply to the Minister for a certificate stating that a film that has been completed is a qualifying Australian film for the purposes of this Division.

          (1A)  The applicant cannot apply for a certificate in respect of a film under subsection (1) unless a certificate has been issued to the applicant in respect of the film under section 124ZAB.

             (2)  An application under subsection (1):

                     (a)  shall be in writing;

                     (b)  shall be signed by or on behalf of the applicant; and

                     (c)  shall be accompanied by such information as the Minister requires.

             (3)  Where an application is made to the Minister under subsection (1) and the Minister is satisfied that:

                     (a)  the film is a qualifying Australian film; and

                     (b)  having regard to the role of the applicant in the production of the film, the applicant is an appropriate person to whom to grant a certificate under this section in respect of the film; and

                     (c)  a claim has not been made for a tax offset in respect of the film under Division 376 of the Income Tax Assessment Act 1997;

the Minister shall issue to the applicant a certificate under this section in respect of the film.

             (4)  A certificate issued under this section shall be deemed to have been in force at all times before the time when it was issued.

             (5)  Where the Minister makes a decision refusing an application under subsection (1), the Minister shall, as soon as practicable, give notice in writing of the decision to the applicant.

124ZAD  Determination of content of film

                   In determining for the purposes of this Division whether a film has, or a proposed film, when completed, will have, a significant Australian content or a significant non‑Australian content, the Minister shall have regard to:

                     (a)  the subject matter of the film or proposed film;

                     (b)  the place or places where the film was, or the proposed film will be, made;

                     (c)  the nationalities and places of residence of:

                              (i)  the persons who took part, or who will take part, in the making of the film or proposed film (including authors, composers, actors, scriptwriters, editors, producers, directors and technicians);

                             (ii)  the persons who are, or who will be, the beneficial owners of shares in any company concerned in the making of the film or proposed film; and

                            (iii)  the persons who are, or who will be, the beneficial owners of the copyright in the film or proposed film;

                     (d)  the source from which moneys that were used in the making of the film were, or that are to be used in the making of the proposed film will be, derived;

                     (e)  the details of the production expenditure incurred in respect of the film or of the budgeted production expenditure to be incurred in respect of the proposed film; and

                      (f)  any other matters that the Minister considers to be relevant.

124ZADAA  Delegation by Minister

             (1)  The Minister may, by writing, delegate to the Secretary to the Minister’s Department, or to an SES employee or acting SES employee in the Minister’s Department, all or any of the Minister’s powers under this Division.

124ZADAB  Review of decisions of Minister

             (1)  Applications may be made to the Tribunal for review of a decision of the Minister under this Division (other than a decision to delegate a power under section 124ZADAA).

             (2)  Where the Minister makes a decision of the kind referred to in subsection (1) and gives to a person whose interests are affected by the decision notice in writing of the decision, that notice shall:

                     (a)  in all cases—include a statement to the effect that, subject to the Administrative Appeals Tribunal Act 1975, application may be made to the Administrative Appeals Tribunal, by or on behalf of any person whose interests are affected by the decision, for review of the decision; and

                     (b)  except where subsection 28(4) of that Act applies—include a statement to the effect that a request may be made under section 28 of that Act by or on behalf of such a person for a statement setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving the reasons for the decision.

             (3)  A failure to comply with the requirements of subsection (2) in relation to a decision does not affect the validity of the decision.

124ZADA  Declarations

             (1)  Where:

                     (a)  during a financial year (in this subsection referred to as the relevant financial year) capital moneys are expended, under a contract entered into on or after 13 January 1983, by way of contribution to the cost of producing a film; and

                     (b)  capital moneys have not been expended during any preceding financial year by way of contribution to the cost of producing the film;

a person may, after 30 June 1983 and before the expiration of 1 month after the end of the relevant financial year, or within such further time as the Commissioner allows, lodge with the Commissioner a declaration:

                     (c)  that a contract for the production of the film has been entered into under which a person has, or persons have, agreed to expend an amount that is specified in the contract as the estimated cost of producing the film;

                     (d)  specifying the items of expenditure that comprise the amount referred to in paragraph (c);

                     (e)  stating either of the following:

                              (i)  that a film account (in this section called the relevant film account) has been opened in relation to the film;

                             (ii)  that no film account has been opened in relation to the film;

                      (f)  specifying the following details:

                              (i)  the total amount of moneys received, being capital moneys expended by persons by way of contribution to the cost of producing the film, during the period (in this subsection referred to as the relevant period) commencing at the beginning of the relevant financial year and ending at the time the declaration is made;

                             (ii)  if subparagraph (e)(i) applies:

                                        (A)  the total amount of the moneys referred to in subparagraph (i) of this paragraph that were, upon receipt, paid into the relevant film account; and

                                        (B)  the total amount of the moneys referred to in subparagraph (i) of this paragraph that were not, upon receipt, paid into the relevant film account; and

                                        (C)  the total amount withdrawn from the relevant film account during the relevant period; and

                                        (D)  the total amount of the moneys referred to in sub-subparagraph (C) that were, upon being withdrawn from the relevant film account, expended in producing the film; and

                                         (E)  the total amount of the moneys referred to in sub-subparagraph (B) that were expended in producing the film; and

                            (iii)  if subparagraph (e)(ii) applies—the total amount of the moneys referred to in subparagraph (i) of this paragraph that were expended in producing the film; and

                     (h)  if subparagraph (e)(i) applies—that all moneys withdrawn from the relevant film account after the time the declaration is made will, upon withdrawal, be dealt with in the prescribed manner or paid to persons as refunds of capital moneys expended by way of contribution to the cost of producing the film.

             (2)  Where a person lodges a declaration in respect of a film under subsection (1) or (5) and furnishes to the Commissioner such information in relation to the film as the Commissioner requires, the Commissioner shall decide whether the person making the declaration is, having regard to the role of the person in the production of the film, a person whom the Commissioner considers to be an appropriate person to make the declaration in respect of the film, and shall notify the person in writing of his decision.

             (3)  Where:

                     (a)  at any time after a person has lodged a declaration under subsection (1) or (5) in respect of a film, any change occurs in the role of the person in the production of the film; and

                     (b)  before the time when the change occurs:

                              (i)  the person has not been notified of a decision of the Commissioner under subsection (2) in relation to the declaration; or

                             (ii)  the person has been notified under subsection (2) of a decision of the Commissioner that the person is an appropriate person to make the declaration and has not been notified under subsection (4) of a decision of the Commissioner in relation to the declaration;

the person shall, within 21 days after the change occurs, notify the Commissioner in writing of the change.

Penalty: 2 penalty units.

          (3A)  An offence under subsection (3) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (4)  Where, at any time (in this subsection referred to as the relevant time) after the Commissioner has notified a person under subsection (2) of his decision that the person is an appropriate person to make a declaration under subsection (1) or (5) in respect of a film, the Commissioner, having regard to the role of the person in the production of the film, decides that, if the person were to make a declaration at the relevant time as to the matter specified in paragraph (1)(h), the person would not be an appropriate person to make such a declaration, the Commissioner shall notify the person in writing of his decision.

             (5)  Where:

                    (aa)  a film account has been opened in relation to a film;

                     (a)  a declaration in relation to the film is lodged under subsection (1) or under this subsection by a person who has been notified by the Commissioner under subsection (2) that the Commissioner considers the person to be an appropriate person to make the declaration; and

                     (b)  the person dies or the Commissioner notifies the person under subsection (4) of a decision of the Commissioner under that subsection;

a person may lodge with the Commissioner, before the expiration of 1 month after the death or the notification under subsection (4), as the case may be, or within such further time as the Commissioner allows, a declaration that all moneys withdrawn from the film account after the time the declaration is made will, upon withdrawal, be dealt with in the prescribed manner or paid to persons as refunds of capital moneys expended by way of contribution to the cost of producing the film.

             (8)  For the purposes of this Division, but subject to subsection (9), a declaration made by a person under subsection (1) shall be taken to be in force at all times after it is lodged with the Commissioner.

             (9)  Where:

                    (aa)  a film account has been opened in relation to a film;

                     (a)  a declaration in relation to the film is lodged under subsection (1) or (5) by a person who has been notified by the Commissioner under subsection (2) that the Commissioner considers the person to be an appropriate person to make the declaration;

                     (b)  the person dies or the Commissioner notifies the person under subsection (4) of a decision of the Commissioner under that subsection; and

                     (c)  a further declaration is not lodged under subsection (5) in relation to the film by a person who is notified by the Commissioner under subsection (2) that the person is considered by the Commissioner to be an appropriate person to lodge the declaration;

the following provisions have effect:

                     (d)  where the declaration referred to in paragraph (a) was lodged under subsection (1)—the declaration shall be taken, for the purposes of this Division, not to be, and never to have been, in force;

                     (e)  where the declaration referred to in paragraph (a) was lodged under subsection (5)—any declaration lodged under subsection (1) in respect of the film that would, but for this subsection, be in force shall be taken, for the purposes of this Division, not to be, and never to have been, in force.

           (10)  A person who is notified of a decision of the Commissioner under subsection (2) or (4) and who is dissatisfied with the decision may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.

124ZADB  Notification regarding non‑completion of film

             (1)  Where:

                     (a)  a person has lodged a declaration under subsection 124ZADA(1) or (5) in respect of a film;

                     (b)  the Commissioner has notified the person under subsection 124ZADA(2) that the Commissioner considers the person to be an appropriate person to make the declaration and the Commissioner has not notified the person of a decision under subsection 124ZADA(4) in relation to the declaration; and

                     (c)  either of the following conditions is satisfied:

                              (i)  at the time when the person was notified as mentioned in paragraph (b), the person was satisfied that the film would not be, or was unlikely to be, completed before the expiration of the relevant 24 month period; or

                             (ii)  after the person was notified as mentioned in paragraph (b), the person becomes satisfied that the film will not be, or is unlikely to be, completed before the expiration of the relevant 24 month period;

the person shall, within 14 days after:

                     (d)  in a case to which subparagraph (c)(i) applies—the day on which the person was notified as mentioned in paragraph (b); or

                     (e)  in a case to which subparagraph (c)(ii) applies—the day on which the person becomes satisfied as mentioned in that subparagraph;

notify the Commissioner in writing that the person was so satisfied or became so satisfied, as the case may be.

Penalty: 2 penalty units.

             (2)  An offence under subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

124ZAE  Election that Division not apply

             (1)  A taxpayer may elect that this Division shall not apply in relation to the taxpayer in relation to a film and, where such an election is made, this Division does not apply in relation to the taxpayer in relation to that film.

             (2)  An election under subsection (1) in relation to a film must be made on or before the date of lodgment of the return of income of the taxpayer of the first year of income in respect of which a deduction would, but for this section, and the provisions of Subdivision B other than section 124ZAFA, be allowable to the taxpayer in relation to the film.

124ZAEA  Transfer by way of security

                   For the purpose of this Division, disregard an acquisition or disposal of property by way of the transfer of the property for the provision or redemption of a security. Consequently this Division applies as if the person who was the owner of the property before the transfer continues to be the owner after the transfer.

Subdivision BDeductions for capital expenditure

124ZAFAA  Subdivision subject to Division 245 of Schedule 2C

                   This Subdivision has effect subject to Division 245 of Schedule 2C.

124ZAFA  Deductions for capital expenditure under post 12 January 1983 contracts

             (1)  Subject to this Subdivision, where:

                     (a)  a taxpayer has, under a contract entered into on or after 13 January 1983, expended capital moneys in producing, or by way of contribution to the cost of producing, a film;

                     (b)  at the time when the moneys were expended:

                              (i)  the taxpayer was a resident; and

                             (ii)  a provisional certificate or a final certificate was in force in relation to the film;

                     (c)  the Commissioner is satisfied that, at the time when the moneys were expended:

                              (i)  the taxpayer expected to become the first owner, or one of the first owners, of the copyright in the film when that copyright came into existence; and

                             (ii)  the taxpayer intended to use that copyright, or the taxpayer’s interest in that copyright, as the case may be, for the purpose of producing assessable income from the exhibition of the film to the public in cinemas or by way of television broadcasting or from granting rights to exhibit the film to the public in cinemas or by way of television broadcasting; and

                     (d)  in a case where the moneys were expended by the taxpayer by way of contribution to the cost of producing the film:

                            (iii)  there is in force a declaration lodged in respect of the film in accordance with subsection 124ZADA(1) by a person who has been notified by the Commissioner under subsection 124ZADA(2) that the person is considered by the Commissioner to be an appropriate person to lodge the declaration in respect of the film; and

                            (iv)  before the end of the financial year in which capital moneys were first expended (whether by the taxpayer or by another person) in producing, or by way of contribution to the cost of producing, the film:

                                        (A)  a production contract was entered into (whether or not by the taxpayer) under which an amount of capital moneys specified in the production contract as the estimated cost of producing the film was to be expended in producing, or by way of contribution to the cost of producing, the film; or

                                        (B)  a production contract, and an underwriting contract or underwriting contracts, were entered into (whether or not by the taxpayer) under which an amount of capital moneys specified in the production contract as the estimated cost of producing the film was to be expended in producing, or by way of contribution to the cost of producing, the film;

an amount equal to:

                     (e)  where:

                              (i)  the moneys were expended under a contract entered into on or before 23 August 1983; and

                             (ii)  the moneys were expended by the taxpayer by way of contribution to the cost of producing the film; and

                            (iii)  the moneys were contributed before 1 July 1983; and

                            (iv)  the moneys were:

                                        (A)  expended before 1 July 1983 in producing the film; or

                                        (B)  on or before 1 July 1983, paid into a film account opened in relation to the film;

                            150%; or

                      (f)  where:

                              (i)  the moneys were expended under a contract entered into on or before 23 August 1983; and

                             (ii)  the moneys were expended by the taxpayer by way of contribution to the cost of producing the film; and

                            (iii)  the moneys were contributed after 30 June 1983; and

                            (iv)  the moneys were, upon contribution, deposited in a film account opened in relation to the film;

                            150%; or

                     (g)  where:

                              (i)  the moneys were expended under a contract entered into on or before 23 August 1983; and

                             (ii)  the moneys were expended by the taxpayer in producing the film;

                            150%; or

                     (h)  where:

                              (i)  the moneys were expended under a contract entered into after 23 August 1983 and on or before 19 September 1985; and

                             (ii)  the moneys were expended by the taxpayer by way of contribution to the cost of producing the film; and

                            (iii)  the moneys were, upon contribution, deposited in a film account opened in relation to the film;

                            133%; or

                      (j)  where:

                              (i)  the moneys were expended under a contract entered into after 23 August 1983 and on or before 19 September 1985; and

                             (ii)  the moneys were expended by the taxpayer in producing the film;

                            133%; or

                     (k)  where:

                              (i)  the moneys were expended under a contract entered into after 19 September 1985 and before 25 May 1988; and

                             (ii)  the moneys were expended by the taxpayer by way of contribution to the cost of producing the film; and

                            (iii)  the moneys were, upon contribution, deposited in a film account opened in relation to the film;

                            120%; or

                    (m)  where:

                              (i)  the moneys were expended under a contract entered into after 19 September 1985 and before 25 May 1988; and

                             (ii)  the moneys were expended by the taxpayer in producing the film;

                            120%; or

                     (n)  where the moneys were expended under a contract entered into on or after 25 May 1988—100%;

of the amount of the moneys expended shall be allowed as a deduction in the assessment of the taxpayer in respect of income of the year of income in which the moneys were expended by the taxpayer.

          (1A)  A deduction under subsection (1) is not allowable in relation to the 2009‑10 year of income or a later year of income.

             (2)  Subject to subsection (3), where a deduction has been allowed, or would, but for this subsection, be allowable, from the assessable income of a taxpayer of a year of income under subsection (1) in relation to capital moneys expended by the taxpayer in producing, or by way of contribution to the cost of producing, a film and the following conditions are not satisfied:

                     (a)  before the expiration of the relevant 24 month period:

                              (i)  the taxpayer has used the copyright in the film or the taxpayer’s interest in the copyright, as the case may be, for the purpose of producing assessable income from the exhibition of the film to the public in cinemas or by way of television broadcasting or from granting rights to exhibit the film to the public in cinemas or by way of television broadcasting; or

                             (ii)  the taxpayer has derived assessable income under an agreement entered into before the copyright in the film came into existence under which the taxpayer agreed, upon the copyright coming into existence, to grant rights to another person to exhibit the film to the public in cinemas or by way of television broadcasting; and

                     (b)  the taxpayer has, by reason of the moneys being expended, become the first owner, or one of the first owners, of the copyright in the film before the expiration of the relevant 24 month period;

the deduction shall, for the purposes of this Act, be deemed not to have been, or not to be, allowable, as the case may be.

             (3)  Subsection (2) does not apply in relation to a deduction that has been allowed, or is allowable, from the assessable income of a taxpayer of a year of income in relation to capital moneys expended by the taxpayer in producing, or by way of contribution to the cost of producing, a film where:

                     (a)  the taxpayer dies before the expiration of the relevant 24 month period; and

                     (b)  the Commissioner is satisfied that subsection (2) would not have applied in relation to the deduction if the taxpayer had not died.

             (4)  Where:

                     (a)  by reason that the Commissioner is satisfied in accordance with paragraph (3)(b) that subsection (2) would not have applied in relation to a deduction if a taxpayer had not died, subsection (2) would not, but for this subsection, apply in relation to the deduction; and

                     (b)  the Commissioner later becomes satisfied that subsection (2) would have applied in relation to the deduction if the taxpayer had not died;

subsection (2) shall, notwithstanding subsection (3), apply in relation to the deduction.

             (5)  In this section:

production contract, in relation to a film, means a contract under which a person has, or persons have, agreed to expend capital moneys in producing, or by way of contribution to the cost of producing, the film, but does not include an underwriting contract.

underwriting contract, in relation to a film, means a contract:

                     (a)  under which a person has, or persons have, conditionally agreed to expend capital moneys by way of contribution to the cost of producing the film; and

                     (b)  under which no person has agreed to expend capital moneys by way of contribution to the cost of producing the film otherwise than conditionally.

             (6)  For the purposes of this section, a person shall be taken to have conditionally agreed under a contract to expend capital moneys by way of contribution to the cost of producing a film if, under the contract, the person has agreed to expend capital moneys by way of contribution to the cost of producing the film only in the event that the aggregate of the capital moneys expended, or agreed to be expended, in producing, or by way of contribution to the cost of producing, the film is less than an amount specified in, or ascertained in accordance with, the contract.

124ZAG  Expenditure of contributions

             (1)  Where:

                     (a)  but for this section and sections 124ZAL and 124ZAM, an amount (in this subsection referred to as the relevant amount) would be taken for the purposes of this Division to have been expended by a taxpayer by way of contribution to the cost of producing a film; and

                     (b)  the whole of the relevant amount is not expended in producing the film;

the following provisions have effect:

                     (c)  where no part of the relevant amount was expended in producing the film—no part of the relevant amount shall be taken for the purposes of this Division to have been expended by the taxpayer;

                     (d)  where part only of the relevant amount was not expended in producing the film—the relevant amount shall be reduced by that part of the relevant amount that was not expended in producing the film.

             (2)  Where:

                     (a)  but for this section and sections 124ZAL and 124ZAM, an amount (in this subsection referred to as the  relevant amount) would be taken for the purposes of this Division to have been expended by a taxpayer by way of contribution to the cost of producing a film; and

                     (b)  the whole or a part of the relevant amount is included in an amount that was withdrawn from a film account opened in relation to the film and was not, upon withdrawal, dealt with in the prescribed manner;

the following provisions have effect:

                     (c)  where the whole of the relevant amount was included in the amount withdrawn from the film account—no part of the relevant amount shall be taken for the purposes of this Division to have been expended by the taxpayer;

                     (d)  where part only of the relevant amount was included in the amount withdrawn from the film account—the relevant amount shall be reduced by that part of the relevant amount that was so included.

124ZAGA  Satisfaction of Commissioner as to the future application of certain provisions

             (1)  Where:

                     (a)  the Commissioner is at any time satisfied that:

                              (i)  subsection 124ZAFA(2) will, at a later time, apply to deem a deduction not to have been, or not to be, allowable to a taxpayer in relation to capital moneys expended in producing, or by way of contribution to the cost of producing, a film; or

                             (ii)  section 124ZAG will, at a later time, apply in respect of an amount, or part of an amount, that, but for that section and sections 124ZAL and 124ZAM, would be taken for the purposes of this Division to have been expended by a taxpayer by way of contribution to the cost of producing a film; or

                     (b)  at a time after the Commissioner is satisfied in accordance with subparagraph (a)(i) or (ii), the Commissioner is satisfied that subsection 124ZAFA(2) will not apply in relation to the deduction, or that section 124ZAG will not apply in relation to the amount or the part of the amount;

the following provisions have effect:

                     (c)  in a case to which paragraph (a) applies—subsection 124ZAFA(2) or section 124ZAG, as the case may be, shall, for the purposes of this Subdivision, be taken to apply, and always to have applied, in relation to the deduction or in relation to the amount or the part of the amount, as the case may be; and

                     (d)  in a case to which paragraph (b) applies—subsection 124ZAFA(2) or section 124ZAG, as the case may be, shall, for the purposes of this Subdivision, be taken not to apply, and never to have applied, in relation to the deduction, or in relation to the amount of the part of the amount, as the case may be.

             (2)  Where, at any time after the making of an assessment in relation to a taxpayer, being an assessment in the making of which subsection 124ZAFA(2) or section 124ZAG has been applied by reason that the Commissioner was satisfied in accordance with subparagraph (1)(a)(i) or (ii) of this section, the taxpayer considers that the Commissioner ought to be satisfied in accordance with paragraph (1)(b) of this section that subsection 124ZAFA(2) or section 124ZAG, as the case may be, will not apply, the taxpayer may post to, or lodge with, the Commissioner a request in writing for an amendment of the assessment to give effect to subsection (1).

             (3)  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.

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

124ZAH  Allocation of contributions expended

             (1)  Where:

                     (a)  a taxpayer has expended capital moneys by way of contribution to the cost of producing a film; and

                     (b)  an amount of moneys has been expended in producing the film out of moneys that include the moneys expended by the taxpayer;

then, for the purposes of this Division, so much of the moneys expended by the taxpayer as the Commissioner determines shall be taken to be included in the amount referred to in paragraph (b) that has been expended in producing the film.

          (1A)  Where:

                     (a)  a taxpayer has expended capital moneys by way of contribution to the cost of producing a film;

                     (b)  an amount of moneys is withdrawn from a film account opened in relation to the film, being a film account into which the moneys expended by the taxpayer have been paid; and

                     (c)  the amount withdrawn from the film account was not, upon withdrawal, dealt with in the prescribed manner;

then, for the purposes of this Division, so much (if any) of the moneys expended by the taxpayer as the Commissioner determines shall be taken to be included in the amount withdrawn from the film account.

             (2)  Sections 124ZAJ and 124ZAK apply, for the purposes of this section, in determining whether, and the extent to which, moneys have been expended in producing a film.

124ZAJ  Non‑arm’s length transactions

             (1)  Where:

                     (a)  but for this section and sections 124ZAK, 124ZAL and 124ZAM, an amount expended by a person (in this subsection referred to as the producer) for the supply of goods or the provision of services would be taken, for the purposes of this Division, to be an amount expended in producing a film;

                     (b)  the Commissioner is satisfied, having regard to any connection between the producer and the person who supplied those goods or provided those services, or to any other relevant circumstances, that the producer and that person were not dealing with each other at arm’s length in relation to the transaction; and

                     (c)  the Commissioner is satisfied that the amount of moneys expended on the supply of those goods or the provision of those services exceeds the amount of moneys that would have been expended by the producer if the producer and the person supplying those goods or providing those services had dealt with each other at arm’s length;

then such part only of the amount of the moneys expended on the supply of those goods or the provision of those services as, in the opinion of the Commissioner, is reasonable shall be taken for the purposes of this Division to have been expended in producing the film.

             (2)  A reference in subsection (1) to an amount expended by a person, in producing a film, for the provision of services includes a reference to an amount paid by the person to another person as consideration for the other person producing, or agreeing to produce, a film or a part of a film.

124ZAK  Amounts expended in acquiring assets

                   Where:

                     (a)  but for this section and sections 124ZAL and 124ZAM, an amount would be taken for the purposes of this Division to have been expended in producing a film;

                     (b)  that amount or part of that amount was expended in the acquisition of assets for use in producing the film; and

                     (c)  those assets are subsequently disposed of or are used otherwise than in producing the film;

the amount referred to in paragraph (a) shall be reduced by such amount as the Commissioner considers reasonable.

124ZAL  Deduction reduced if future copyright assigned

             (1)  Where:

                     (a)  but for this section and section 124ZAM, an amount would be taken for the purposes of this Division to have been expended by a taxpayer in producing, or by way of contribution to the cost of producing, a film; and

                     (b)  at the time when that amount was expended, or before or after that time, the taxpayer partially assigned his future copyright in the film;

the amount referred to in paragraph (a) shall be reduced by such amount as the Commissioner considers reasonable.

             (2)  A reference in subsection (1) to an assignment by a taxpayer of future copyright in a film includes a reference to the taxpayer entering into an agreement to transfer copyright in the film to another person upon the copyright coming into existence or at any time after the coming into existence of the copyright.

124ZAM  No deduction unless expenditure at risk

             (1)  Where:

                     (a)  but for this section and sections 124ZAG, 124ZAJ, 124ZAK and 124ZAL, a taxpayer or a partnership would be taken, for the purposes of this Division, to have expended capital moneys in producing, or by way of contribution to the cost of producing, a film; and

                     (b)  but for this section, a taxpayer (in this section referred to as the relevant taxpayer), being the taxpayer referred to in paragraph (a) or a partner in the partnership, would be taken for the purposes of this Division to have expended the whole or a part of the capital moneys referred to in paragraph (a) (which whole or part is in this subsection referred to as the relevant amount) in producing, or by way of contribution to the cost of producing, the film;

then, for the purposes of this Division, the amount of the capital moneys that, by virtue of the expenditure of the moneys referred to in paragraph (a), the relevant taxpayer is to be taken to have expended in producing, or by way of contribution to the cost of producing, the film is:

                     (c)  if the Commissioner is satisfied that, at the time when the moneys referred to in paragraph (a) were expended, the relevant taxpayer was not at risk in respect of any amount by virtue of the expenditure of the moneys referred to in paragraph (a)—nil;

                     (d)  if the Commissioner is satisfied that, at the time when the moneys referred to in paragraph (a) were expended, the relevant taxpayer was, by virtue of the expenditure of the moneys referred to in paragraph (a), at risk in respect of an amount less than the relevant amount—the amount in respect of which the taxpayer was at risk; or

                     (e)  if the Commissioner is satisfied that, at the time when the moneys referred to in paragraph (a) were expended, the taxpayer was, by virtue of the expenditure of those moneys, at risk with respect to an amount equal to or greater than the relevant amount—the relevant amount.

             (2)  For the purposes of the application of subsection (1) in respect of the relevant taxpayer in relation to the moneys expended in relation to the film as mentioned in paragraph (1)(a), the taxpayer shall be taken to be at risk, by virtue of the expenditure of those moneys, in respect of an amount equal to the amount of the loss that, in the opinion of the Commissioner, would be suffered by the taxpayer by reason of the expenditure of the moneys referred to in paragraph (1)(a) if the relevant taxpayer were not to derive any income, other than excepted income, from the film or from the taxpayer’s interest in the copyright of the film.

             (3)  For the purposes of subsection (2), income derived by the relevant taxpayer from the film is excepted income if:

                     (a)  the income is derived under an agreement under which moneys were to be paid to the taxpayer or another person; and

                     (b)  the Commissioner is satisfied that the agreement was entered into for the purpose, or for purposes that included the purpose, of enabling the moneys referred to in paragraph (1)(a) to be expended as mentioned in that paragraph.

             (4)  In forming an opinion for the purpose of subsection (2) as to the amount of a loss that would be suffered by the relevant taxpayer, by virtue of the expenditure of the moneys referred to in paragraph (1)(a), if the relevant taxpayer were not to derive any income, other than excepted income, from the film or from the taxpayer’s interest in copyright in the film, the Commissioner may have regard to:

                     (a)  any act that occurred, any transaction that was entered into or any circumstance that existed before, or at the time when, the moneys referred to in paragraph (1)(a) were expended; and

                     (b)  any act that was likely to occur, any transaction that was likely to be entered into or any circumstance that was likely to exist after the time when the moneys referred to in paragraph (1)(a) were expended by reason of any act, transaction or circumstance mentioned in paragraph (a);

being an act, transaction or circumstance that had, or was likely to have, the effect of reducing or eliminating the loss that would be suffered by the relevant taxpayer, by virtue of the expenditure of the moneys referred to in paragraph (1)(a), if the relevant taxpayer were not to derive any income, other than excepted income, from the film or from the taxpayer’s interest in copyright in the film.

             (5)  In this section:

                     (a)  a reference to an agreement is a reference to 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; and

                     (b)  a reference to income derived from a film is a reference to:

                              (i)  any amount received or receivable as consideration for the use of, or the right to use, the film or any copyright or interest in copyright in the film;

                             (ii)  any amount received or receivable as consideration for the granting of a licence in respect of future copyright in the film; and

                            (iii)  any amount received or receivable as consideration in respect of the disposal of the whole or a part of any copyright or interest in copyright in the film or in respect of the assignment of any right to use the copyright or an interest in the copyright in the film or to derive income from the use of such a copyright or interest.

Subdivision CMiscellaneous

124ZAO  Limitation on deductibility of revenue expenses

             (1)  This section applies, in relation to a taxpayer in relation to a film in relation to a year of income, to:

                     (a)  any deduction that, but for this section, would be allowable to the taxpayer in the year of income in respect of expenditure (not being expenditure in respect of which a deduction is allowable under section 124ZAFA) to the extent that the expenditure is incurred by the taxpayer in relation to the film and in gaining or producing amounts to which section 26AG applies in relation to the taxpayer in relation to the film in relation to any year of income; and

                     (b)  any deduction deemed by subsection (3) to be a deduction to which this section applies in relation to the taxpayer in relation to the film in relation to the year of income.

             (2)  Where:

                     (a)  but for this subsection, a deduction or deductions to which this section applies in relation to a taxpayer in relation to a film in relation to a year of income would be allowable to the taxpayer in respect of the year of income; and

                     (b)  the amount of that deduction or of the sum of those deductions exceeds the amount, or the sum of the amounts, that would be included in the assessable income of the taxpayer of the year of income under section 26AG in relation to the film;

then, notwithstanding any other provision of this Act, the amount of that deduction shall be reduced by the amount of the excess or, as the case requires, the amount of each of those deductions shall be reduced by an amount that bears to the amount of the excess the same proportion as the amount of the deduction bears to the sum of the deductions.

             (3)  Where, by virtue of subsection (2), a deduction is not allowable to a taxpayer in a year of income in relation to a film or the amount of a deduction allowable to a taxpayer in a year of income in relation to a film is reduced, the following provisions have effect:

                     (a)  a deduction equal to the amount of the deduction or the amount of the reduction, as the case may be, is, subject to this section, allowable to the taxpayer in respect of the next succeeding year of income; and

                     (b)  the deduction that, by virtue of paragraph (a), is allowable to the taxpayer in respect of the next succeeding year of income shall be deemed to be a deduction to which this section applies in relation to the taxpayer in relation to the film in relation to the next succeeding year of income.

124ZAP  Special provisions relating to partnerships

             (1)  This Division does not apply in calculating the net income of a partnership, or a partnership loss, in accordance with section 90.

             (2)  For the purposes of the application of Subdivision B in relation to a taxpayer being a partner in a partnership, where, under a contract entered into on or after 1 October 1980, the partnership has expended capital moneys in producing, or by way of contribution to the cost of producing, a film, the taxpayer shall be deemed to have expended capital moneys in producing, or by way of contribution to the cost of producing, that film, of an amount equal to:

                     (a)  so much of the amount of the moneys expended as the partners have agreed is to be borne by the taxpayer; or

                     (b)  if the partners have not agreed as to the part of the moneys expended that is to be borne by the taxpayer—so much of the amount of the moneys expended as bears to that amount the same proportion as the individual interest of the taxpayer in the net income of the partnership of the year of income in which the moneys were expended bears to that net income or, as the case requires, the individual interest of the taxpayer in the partnership loss for that year of income bears to that partnership loss.

             (3)  Sections 124ZAG, 124ZAH, 124ZAJ and 124ZAK apply, for the purposes of subsection (2), in determining whether a partnership has expended capital moneys in producing, or by way of contribution to the cost of producing, a film and in determining the amount of any such moneys.

             (4)  Where a partnership has incurred expenditure in a year of income in respect of which a deduction is not allowable to the partnership in calculating the net income of the partnership for the purposes of section 90 but would be allowable but for subsections 26AG(9) and (10), a taxpayer being a partner in the partnership shall be deemed, for the purposes of this Act, to have incurred, at the time when that expenditure was incurred by the partnership:

                     (a)  so much of the amount of that expenditure as the partners have agreed is to be borne by the taxpayer; or

                     (b)  if the partners have not agreed as to the part of the expenditure that is to be borne by the taxpayer—so much of that amount of the expenditure as bears to that amount the same proportion as the individual interest of the taxpayer in the net income of the partnership of the year of income in which the expenditure was incurred bears to that net income or, as the case requires, the individual interest of the taxpayer in the partnership loss for that year of income bears to that partnership loss.


 

Division 10EPDFs (pooled development funds)

Subdivision AShares in PDFs

124ZM  Treatment distributions to shareholders in PDF

Unfranked part of distribution exempt from income tax

             (1)  If a company makes a distribution to a shareholder at a time when the company is a PDF, the unfranked part of the distribution is exempt from income tax.

Rest of section deals with franked part

             (2)  The rest of this section applies to the franked part of the distribution.

Usual case

             (3)  Subsection (4) applies if the assessable income of a year of income of a taxpayer who or that is:

                     (a)  a company or a natural person (other than a company or natural person in the capacity of a trustee); or

                     (b)  a corporate unit trust in relation to that year of income; or

                     (c)  a public trading trust in relation to that year of income; or

                     (d)  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 that year of income; or

                   (da)  an FHSA trust;

would (apart from subsection (4)) include:

                     (e)  the franked part of the distribution; or

                      (f)  any of the franked part of the distribution that flows indirectly to the taxpayer.

This subsection does not apply to cases dealt with in subsections (5) and (6).

             (4)  Subject to subsection (7), the following is exempt income of the taxpayer:

                     (a)  if paragraph (3)(e) applies—the franked part;

                     (b)  if paragraph (3)(f) applies—so much of the franked part of the distribution as flows indirectly to the taxpayer.

Taxpayers who qualify for venture capital franking tax offset

             (5)  If a taxpayer (other than a life assurance company) is entitled to a tax offset in relation to the distribution under section 210‑170 of the Income Tax Assessment Act 1997, then:

                     (a)  so much of the franked part of the distribution as equals the part of the distribution that is franked with a venture capital credit is exempt income of the taxpayer; and

                     (b)  if the franked part exceeds the amount so exempt—the excess is, subject to subsection (7), exempt income of the taxpayer.

             (6)  If a life assurance company is entitled to a tax offset in relation to the distribution under section 210‑170 of the Income Tax Assessment Act 1997, then:

                     (a)  so much of the franked part of the distribution as equals the amount worked out using the following formula is exempt income of the life assurance company:

                            where:

                            complying superannuation/FHSA class of taxable income is the life assurance company’s complying superannuation/FHSA class of taxable income, within the meaning of subsection 995‑1(1) of the Income Tax Assessment Act 1997, for the year of income in which the distribution is made.

                            venture capital franked part is the part of the distribution that is franked with a venture capital credit.

                            total income is the life assurance company’s assessable income for the year of income in which the distribution is made; and

                     (b)  if the franked part exceeds the amount so exempt—the excess is, subject to subsection (7), exempt income of the life assurance company.

No exemption if return prepared on basis that amount assessable

             (7)  Subsection (4) and paragraphs (5)(b) and (6)(b) do not exempt, and are taken never to have exempted, an amount if the taxpayer’s return of income of the year of income is prepared on the basis that the amount is included in the taxpayer’s assessable income of that year.

Where partner entitled to deduction for amount flowing indirectly

             (8)  If:

                     (a)  any of the franked part of the distribution flows indirectly to a taxpayer who is a partner in a partnership; and

                     (b)  apart from this subsection, the amount that flows indirectly would be allowable as a deduction from the taxpayer’s assessable income of a year of income; and

                     (c)  the taxpayer is of a kind mentioned in any of paragraphs (3)(a) to (d);

the amount that flows indirectly is not allowable as a deduction from that assessable income.

             (9)  Subsection (8) does not prevent, and is taken never to have prevented, an amount from being allowable as a deduction if the taxpayer’s return of income of the year of income is prepared on the basis that the amount is so allowable.

Where trustee assessed on amount flowing indirectly

           (10)  If:

                     (a)  any of the franked part of the distribution flows indirectly to the trustee of a trust estate; and

                     (b)  apart from this subsection, the trustee would be liable under section 98, 99 or 99A to be assessed and pay tax on the amount that flows indirectly;

the trustee is not liable under that section to be assessed and to pay tax on the amount that flows indirectly.

           (11)  Subsection (10) does not prevent, and is taken never to have prevented, the trustee from being liable under that section to be assessed and to pay tax on an amount if the trustee elects to be so liable.

           (12)  An election must be made in the trustee’s return of income of the trust estate for the year of income concerned.

Interpretation

           (13)  In this section:

flows indirectly has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

part of a distribution that is franked with a venture capital credit has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

124ZN  Exemption of income from sale of shares in a PDF

                   Income derived by a taxpayer from selling shares in a company is exempt from income tax if the company is a PDF at the time of the sale.

Note:          Any capital gain or capital loss from a disposal of shares in a PDF is disregarded: see section 118‑13 of the Income Tax Assessment Act 1997.

124ZO  Shares in a PDF are not trading stock

                   Shares in a PDF are not trading stock for the purposes of this Act.

124ZQ  Effect of company becoming a PDF

             (1)  This section applies to shares in a company that a taxpayer holds when the company becomes a PDF.

             (2)  In determining for the purposes of this Act whether an amount is or was allowable as a deduction to the taxpayer in respect of acquiring the shares, the shares are taken to have been shares in a PDF throughout the period beginning immediately before the taxpayer acquired them and ending when the company became a PDF.

             (3)  For the purposes of this Act, the shares are taken to have been trading stock of the taxpayer at no time during that period.

             (4)  Section 170 does not prevent an assessment from being amended to give effect to this section.

124ZR  Effect of company ceasing to be a PDF

             (1)  This section applies to shares in a company that a taxpayer holds when the company ceases to be a PDF.

             (2)  For the purposes of this Act (except Parts 3‑1 and 3‑3 (about CGT) of the Income Tax Assessment Act 1997), the taxpayer is taken:

                     (a)  to have sold the shares immediately before the company ceased to be a PDF; and

                     (b)  to have rebought the shares immediately after the company so ceased;

for a consideration equal to the market value of the shares immediately after the company so ceased.

             (3)  Parts 3‑1 and 3‑3 (about CGT) of the Income Tax Assessment Act 1997 apply as if the taxpayer:

                     (a)  had disposed of the CGT assets constituted by the shares, and had done so immediately before the company ceased to be a PDF; and

                     (b)  had re‑acquired those assets immediately afterwards;

for an amount equal to the shares’ market value immediately after the company so ceased.

Subdivision BThe taxable income of PDFs

124ZS  Definitions

                   In this Subdivision:

non‑CGT assessable income means an amount included in assessable income otherwise than under Part 3‑1 or 3‑3 (about CGT) of the Income Tax Assessment Act 1997 or Subdivision C of this Division.

SME investment means an investment other than an unregulated investment.

Note:          SME stands for small and medium enterprises.

unregulated investment has the same meaning as in the Pooled Development Funds Act 1992.

124ZTA  Taxable income in first year as PDF if PDF component is nil

             (1)  This section applies if:

                     (a)  a company becomes a PDF during a year of income and is still a PDF at the end of the year of income; and

                     (b)  the PDF component for the year of income is a nil amount; and

                     (c)  the year of income is the 1997‑98 year of income or a later one.

             (2)  The company’s taxable income of the year of income is the amount that, if the period (the notional year) beginning at the start of the year of income and ending immediately before the company becomes a PDF were a year of income of the company, would be the company’s taxable income of the notional year.

124ZT  SME assessable income

SME assessable income

             (1)  A company’s SME assessable income of a year of income is the sum of:

                     (a)  so much of the company’s non‑CGT assessable income of the year of income as was derived:

                              (i)  from, or from the disposal of, an SME investment of the company; and

                             (ii)  at a time when the company was a PDF; and

                     (b)  any assessable income allocated to the company’s SME assessable income under section 124ZZB.

Note:          Section 124ZZB deals with capital gains etc.

When assessable income derived

             (2)  For the purposes of paragraph (1)(a), if an amount is derived by a company during, but not at a particular time during, a year of income, the amount is taken to have been derived by the company on the last day of the year of income.

124ZU  SME income component

Full‑year PDFs

             (1)  The SME income component of a year of income of a company that is a PDF throughout the year of income is so much of the company’s taxable income of the year of income as does not exceed the amount (if any) remaining after deducting from the company’s SME assessable income of the year of income any deductions allowable to the company in relation to the year of income.

Part‑year PDFs

             (2)  The SME income component of a year of income of a company that becomes a PDF during the year of income and is still a PDF at the end of the year of income is so much of the company’s adjusted taxable income of the year of income as does not exceed the amount (if any) remaining after deducting from the company’s SME assessable income of the year of income any deductions where both of the following conditions are satisfied:

                     (a)  the deductions were allowable to the company in relation to the year of income;

                     (b)  the deductions were taken into account in working out the company’s PDF component of the year of income.

For this purpose, adjusted taxable income means so much of the company’s taxable income of the year of income as does not exceed its PDF component of the year of income.

124ZV  Unregulated investment component

Full‑year PDFs

             (1)  The unregulated investment component of a year of income of a company that is a PDF throughout the year of income is the amount (if any) remaining after deducting from the company’s taxable income of the year of income the company’s SME income component of the year of income.

Part‑year PDFs

             (2)  The unregulated investment component of a year of income of a company that becomes a PDF during the year of income and is still a PDF at the end of the year of income is the amount (if any) remaining after deducting from the company’s adjusted taxable income of the year of income the company’s SME income component of the year of income. For this purpose, adjusted taxable income means so much of the company’s taxable income of the year of income as does not exceed its PDF component of the year of income.

Subdivision CAdjustments of the tax treatment of capital gains and capital losses of PDFs

124ZW  Definitions

                   In this Subdivision:

accumulated net capital loss for a year of income (the loss year) means the amount (if any) by which the total of:

                     (a)  the total of the overall capital losses for all classes of assessable income for the loss year; and

                     (b)  any accumulated net capital loss for the last year of income before the loss year;

exceeds:

                     (c)  the total of the overall capital gains for all classes of assessable income for the loss year (before section 116GB is applied).

class, in relation to assessable income, means a class specified in section 124ZY.

company does not include a company in a capacity of trustee.

non‑CGT assessable income means an amount included in assessable income otherwise than under Part 3‑1 or 3‑3 (about CGT) of the Income Tax Assessment Act 1997 or this Subdivision.

ordinary capital gain for a CGT event means any capital gain that would (apart from this Subdivision) arise from the event.

ordinary capital loss for a CGT event means any capital loss that would (apart from this Subdivision) arise from the event.

overall capital gain for a class of assessable income means:

                     (a)  the amount by which the total ordinary capital gain for that class exceeds the total ordinary capital loss for that class; or

                     (b)  if an amount has been applied under subsection 124ZZB(2) to reduce an overall capital gain previously worked out under this definition—that gain as so reduced.

overall capital loss for a class of assessable income means the amount by which the total ordinary capital gain for that class is less than the total ordinary capital loss for that class.

residual overall capital gain means so much of an overall capital gain as remains after applying subsection 124ZZB(2).

SME assessable income has the meaning given by Subdivision B.

SME investment means an investment other than an unregulated investment.

total ordinary capital gain for a class means the total of so much of any ordinary capital gains as has been allocated to that class under section 124ZZA.

total ordinary capital loss for a class means the total of so much of any ordinary capital losses as has been allocated to that class under section 124ZZA.

unregulated investment has the same meaning as in the Pooled Development Funds Act 1992.

124ZX  Companies to which this Subdivision applies

                   This Subdivision applies to a company in relation to a year of income if:

                     (a)  the company is a PDF throughout the year of income; or

                     (b)  the company becomes a PDF during the year of income and is still a PDF at the end of the year of income.

124ZY  Classes of assessable income

Classes

             (1)  The classes of assessable income of the company are as follows:

                     (a)  SME assessable income (see section 124ZT);

                     (b)  other assessable income (see subsection(2)).

Other assessable income

             (2)  The company’s other assessable income of the year of income is the sum of:

                     (a)  so much of the company’s non‑CGT assessable income of the year of income as is not included in the company’s SME assessable income of the year of income; and

                     (b)  any assessable income allocated to the company’s other assessable income under section 124ZZB.

124ZZ  Treatment of capital gains

                   Nothing is to be included in the company’s assessable income of the year of income under section 102‑5 of the Income Tax Assessment Act 1997 (about net capital gains).

124ZZA  Allocation of gain amounts and loss amounts to classes of assessable income

Disposals of SME investments

             (1)  If:

                     (a)  there is an ordinary capital gain amount, or an ordinary capital loss amount, in respect of a disposal of an SME investment of the company; and

                     (b)  the company was a PDF at the time of the disposal;

the ordinary capital gain amount or ordinary capital loss amount, as the case may be, is taken into account in determining the overall capital gain or overall capital loss for the class known as SME assessable income.

Disposals of assets other than SME investments

             (2)  If:

                     (a)  there is an ordinary capital gain amount, or an ordinary capital loss amount, in respect of a disposal of an asset of the company; and

                     (b)  subsection (1) does not apply to the disposal;

the ordinary capital gain amount or the ordinary capital loss amount, as the case may be, is taken into account in determining the overall capital gain or overall capital loss for the class known as other assessable income.

124ZZB  Assessable income etc. in relation to capital gains

             (1)  The assessable income of each class includes the amount (if any) that is left over after the overall capital gain for that class has been reduced in accordance with this section.

             (2)  If there is an overall capital loss for a particular class of assessable income, the loss is to be applied in reduction of overall capital gains for the remaining class.

             (3)  Any accumulated net capital loss for the immediately preceding year of income is to be applied in reduction of residual overall capital gains for the classes of assessable income in the following order:

                     (a)  SME assessable income;

                     (b)  other assessable income.

124ZZD  No net capital loss

                   The company does not make a net capital loss for the year of income, despite section 102‑10 of the Income Tax Assessment Act 1997.


 

Division 11Interest paid by companies on bearer debentures

126  Interest paid by a company on bearer debentures

             (1)  If:

                     (a)  a company pays or credits an amount of interest in respect of a debenture payable to bearer; and

                     (b)  the interest is not, to any extent, subject to withholding tax under Division 11A; and

                     (c)  neither of sections 128F (to the extent it applies to non‑residents who are not engaged in carrying on a business in Australia at or through a permanent establishment in Australia) and 128GB applies to the interest; and

                     (d)  the interest is not interest that, because of section 159GZZZZE (which deals with infrastructure borrowings), is not included in assessable income; and

                     (e)  the company does not give the Commissioner the name and address of the holder of the debenture;

the company is liable to pay income tax, as imposed by the Income Tax (Bearer Debentures) Act 1971, on the amount paid or credited, or, if the company makes a deduction under subsection (2), the amount that otherwise would have been paid or credited.

          (1A)  Subsection (1) does not affect any other liability of the company to pay income tax.

             (2)  The company may deduct and retain for its own use from an amount payable to a person in respect of which the company is liable to pay tax in accordance with subsection (1) an amount equal to that tax.

             (3)  Where the Commissioner is satisfied that that person is not liable to furnish a return, he shall refund to him the amount of tax paid by the company in respect of his debentures.

127  Credit for tax paid by company

             (1)  Where the company pays tax under this Division on any interest, and that interest is included in the assessment of the person to whom it was paid or credited, the proportionate amount of tax paid by the company in respect of the interest shall be deducted from the total tax payable by that person.

128  Assessments of tax

                   An assessment of tax payable in accordance with this Division by a company may be an assessment of the amount of tax so payable upon interest in respect of a number of debentures, whether held by the one holder or not.


 

Division 11ADividends, interest and royalties paid to non‑residents and to certain other persons

Subdivision AGeneral

128AAA  Application of Division to non‑share dividends

             (1)  This Division:

                     (a)  applies to a non‑share equity interest in the same way as it applies to a share; and

                     (b)  applies to an equity holder in the same way as it applies to a shareholder; and

                     (c)  applies to a non‑share dividend in the same way as it applies to a dividend.

             (2)  Subsection (1) does not apply to:

                     (a)  section 128AE; and

                     (b)  section 128F; and

                   (ba)  section 128FA.

128A  Interpretation

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

ADI means a body corporate that is an ADI (authorised deposit‑taking institution) for the purposes of the Banking Act 1959.

dividend:

                     (a)  includes part of a dividend; and

                     (b)  (except when used in paragraph (d) of the definition of interest in subsection (1AB)) does not include a dividend paid in respect of a non‑equity share.

enterprise means a business or other industrial or commercial undertaking.

entity means:

                     (a)  the Commonwealth, a State or an authority of the Commonwealth or of a State;

                     (b)  a natural person;

                     (c)  a company;

                     (d)  the partners in a partnership, in their capacity as partners;

                     (e)  the persons carrying on a joint venture, in their capacity as such persons; or

                      (f)  the trustees of a trust, in their capacity as such trustees.

foreign bank means a non‑resident company that carries on a banking business.

joint venture means an enterprise carried on by 2 or more persons in common otherwise than as partners.

non‑ADI financial institution means a corporation that:

                     (a)  is a registered entity within the meaning of the Financial Sector (Collection of Data) Act 2001; and

                     (b)  is included in Category D (Money Market Corporation) in a list kept under section 11 of that Act; and

                     (c)  carries on a general business of providing finance (within the meaning of that Act) on a commercial basis.

nostro account means an account that:

                     (a)  an ADI or non‑ADI financial institution holds with a foreign bank and maintains for the sole purpose of settling international transactions; and

                     (b)  operates on the basis that:

                              (i)  amounts deposited in the account are held in the account for no more than 10 days; and

                             (ii)  amounts advanced by way of an overdraft on the account are repaid within 10 days.

       (1AA)  In this Division and in an Act imposing withholding tax:

income includes a royalty and a dividend.

       (1AB)  For the purposes of this Division:

interest includes an amount, other than an amount referred to in subsection 26C(1):

                     (a)  that is in the nature of interest; or

                     (b)  to the extent that it could reasonably be regarded as having been converted into a form that is in substitution for interest; or

                     (c)  to the extent that it could reasonably be regarded as having been received in exchange for interest in connection with a washing arrangement; or

                     (d)  that is a dividend paid in respect of a non‑equity share; or

                     (e)  if regulations under the Income Tax Assessment Act 1997 are made having the effect that instruments known as upper tier 2 capital instruments, or a class of instruments of that kind, are debt interests—that is paid on such a debt interest and is not a return of an investment;

but does not include an amount to the extent to which it is a return on an equity interest in a company.

washing arrangement means an arrangement under which the title to a security is transferred to a resident shortly before an interest payment is made where the sole or dominant purpose of the arrangement is to reduce the amount of withholding tax payable by a person.

       (1AC)  An example of an amount in the nature of interest is an amount representing a discount on a security.

       (1AD)  An example of an amount in substitution for interest is a lump sum payment made instead of payments of interest.

        (1AE)  For the purposes of this Division, if a lender assigns a loan, or the right to interest under a loan, any payment from the borrower to the assignee that represents an amount that would have been interest if the assignment had not taken place is taken to be a payment of interest.

        (1AF)  For the purposes of this Division, if a person acquires a security, or the right to interest under a security, any payment from the issuer of the security to that person that represents an amount that would have been interest if the acquisition had not taken place is taken to be a payment of interest.

          (1A)  Subject to subsection (1B), for the purposes of this subsection and sections 128AA, 128AB, 128AD, 128C, 128NA and 128NBA:

                     (a)  a reference to the reduced issue price of a security that has been partially redeemed on one or more occasions is a reference to the issue price of the security reduced by the amount of the partial redemption or the sum of the amounts of the partial redemptions, as the case may be;

                     (b)  expressions used in this subsection or those sections that are also used in Division 16E have the same respective meanings as in that Division; and

                     (c)  sections 159GV (other than subsection 159GV(2)) and 159GZ apply as if references in those sections to “this Division” were references to “subsection 128A(1A) and sections 128AA, 128AB, 128AD, 128C, 128NA and 128NBA”.

          (1B)  Subsection (1A) applies as if:

                     (a)  paragraph (c) of the definition of qualifying security in subsection 159GP(1) were omitted; and

                     (b)  paragraph (a) of the definition of security in that subsection included a reference to debt interests.

             (2)  For the purposes of this Division, interest or a royalty shall be deemed to have been paid by a person to another person although it is not actually paid over to the other person but is reinvested, accumulated, capitalized, carried to any reserve, sinking fund or insurance fund however designated, or otherwise dealt with on behalf of the other person or as the other person directs.

             (3)  For the purposes of this Division, a beneficiary who is presently entitled to a dividend, to interest or to a royalty included in the income of a trust estate shall be deemed to have derived income consisting of that dividend, interest or royalty at the time when he became so entitled.

             (4)  In section 260, income tax or tax includes withholding tax.

             (5)  For the purposes of this Division:

                     (a)  the borrowing of moneys by a company by means of the issue of a number of debentures or debt interests in one borrowing operation shall be deemed to be the raising of a loan;

                     (b)  subject to paragraph (a), each receipt of moneys by a borrower under a contract under which moneys are to be, or may be, advanced by way of loan shall be deemed to be the raising of a loan; and

                     (c)  the moneys received by the raising of a loan, less the expenses of borrowing, shall be deemed to be the loan moneys in respect of the loan.

             (6)  A reference in this Division to beneficial interests in relation to an entity shall be read:

                     (a)  in the case of an entity being a company or the partners in a partnership—as a reference to beneficial interests in respect of the capital of, and in respect of any profits or income of, the company or partnership;

                     (b)  in the case of an entity being persons carrying on a joint venture—as a reference to beneficial interests in respect of the enterprise; and

                     (c)  in the case of an entity being the trustees of a trust—as a reference to beneficial interests under the trust.

             (7)  A reference in this Division to the use of moneys for the purposes of an enterprise shall be read as not including use of those moneys in the course of carrying on an enterprise:

                     (a)  by way of providing capital for another enterprise; or

                     (b)  by way of the making of loans.

             (9)  For the purposes of this Division:

                     (a)  a reference to particular loan moneys (including the reference in paragraph (b)) includes a reference to moneys that, in the opinion of the Commissioner, represent those loan moneys; and

                     (b)  without limiting the generality of paragraph (a):

                              (i)  moneys received by way of repayment of a loan made out of particular loan moneys; and

                             (ii)  moneys received in respect of shares in the capital of a company, being shares purchased or subscribed for by the expenditure of particular loan moneys, upon a sale of the shares, a return of capital by the company or liquidation of the company;

                            shall be deemed to represent those loan moneys.

           (10)  For the purposes of this Division, the trustee of a provident, benefit, superannuation or retirement fund is a non‑resident at a particular time if, and only if, the fund is a foreign superannuation fund at that time.

           (11)  If, apart from this subsection, there is, in relation to a fund, no person who is a trustee of the fund for the purposes of this Division, the person, or each of the persons, who manages the fund is taken, for the purposes of this Division, to be the trustee, or a trustee, as the case requires, of the fund.

128AA  Deemed interest in respect of transfers of certain securities

             (1)  Where:

                     (a)  a person transfers a qualifying security; and

                     (b)  the transfer price of the security exceeds the issue price or, where the security has been partially redeemed, the reduced issue price of the security;

so much of the transfer price as equals the excess referred to in paragraph (b) shall, for the purposes of this Division, be deemed to be income that consists of interest.

             (2)  For the purposes of references to the transfer price, issue price or reduced issue price of a qualifying security in subsection (1), any application of subsection 159GP(2) shall be disregarded.

128AB  Certificates relating to issue price of certain securities

             (1)  Where:

                     (a)  a qualifying security is or was transferred either before or after the commencement of this section; and

                     (b)  at the time of transfer either:

                              (i)  the transferor is or was a resident; or

                             (ii)  the transferor is or was a non‑resident and the transfer price is or was derived from a source in Australia;

the transferee may at any time after the transfer (including a time after the transferee ceases to be the holder of the security) apply to the Commissioner for the issue of a certificate under this section.

             (2)  An application under subsection (1) shall be in accordance with the form required by the Commissioner, by notice in writing published in the Gazette, for the purposes of applications under that subsection.

             (3)  Where the Commissioner is satisfied that the requirements of paragraph (1)(b) are satisfied in relation to the transfer of the qualifying security to which an application under subsection (1) relates and that the security was transferred on a particular date and for a particular consideration to the applicant, the Commissioner shall issue to the applicant a certificate that:

                     (a)  is expressed to be issued under this section;

                     (b)  identifies the security to which it relates;

                     (c)  specifies that date as the date of transfer;

                     (d)  specifies that consideration, or, where subsection 159GP(2) applies, the amount that is taken under that subsection to be the consideration for the transfer, as the transfer price; and

                     (e)  specifies the name of the applicant as the transferee.

             (4)  Where the Commissioner issues a certificate under this section in relation to a qualifying security that has been transferred to a person, the following provisions have effect:

                     (a)  for the purposes of the application of this Division in relation to the first subsequent transfer (if any) of the qualifying security by the person:

                              (i)  the amount specified in the certificate shall be taken to be the issue price of the security; and

                             (ii)  where the security was partially redeemed before the transfer to the person—any such partial redemption shall be taken not to have occurred;

                     (b)  if the security is redeemed or partially redeemed without having been subsequently transferred by the person—in determining for the purposes of the application of this Division the extent (if any) to which the redemption payment comprises an amount that is interest by reason only of the definition of interest in subsection 128A(1AB):

                              (i)  the amount specified in the certificate as the transfer price shall be taken to be the issue price of the security; and

                             (ii)  where the security was partially redeemed before the transfer to the person—any such partial redemption shall be taken not to have occurred.

             (5)  If the Commissioner refuses an application under subsection (1), the Commissioner shall serve on the applicant, by post or otherwise, notice in writing that the application has been refused.

128AC  Deemed interest in respect of hire‑purchase and certain other agreements

             (1)  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.

attributable agreement payment, in relation to a relevant agreement, means so much of any payment made or liable to be made under the agreement as represents consideration for the use, sale or disposal of the relevant agreement property.

carry forward interest, in relation to an attributable agreement payment in relation to a relevant agreement, means so much (if any) of the notional interest in relation to the payment as exceeds the amount of the payment.

eligible value, in relation to the relevant agreement property in relation to a relevant agreement, means the market value of the property at the time at which the agreement commences or commenced to apply in relation to the property.

formula interest, in relation to an attributable agreement payment in relation to a relevant agreement, means the amount ascertained in accordance with the formula , where:

A is the total interest in relation to the relevant agreements.

B is the total number of attributable agreement payments liable to be made under the relevant agreements; and

C is the number that is B, reduced by the number of attributable agreement payments made under the relevant agreement before the attributable agreement payment concerned.

notional interest, in relation to an attributable agreement payment in relation to a relevant agreement, means the sum of the formula interest (if any) in relation to the payment and the carry forward interest (if any) in relation to the immediately preceding attributable agreement payment in relation to the relevant agreement.

relevant agreement means an agreement entered into after 16 December 1984, being:

                     (a)  a hire‑purchase agreement; or

                     (b)  a lease or any other agreement relating to the use by a person of property owned by another person, being a lease or agreement under which:

                              (i)  the lessee or person using the property is entitled to purchase or require the transfer of the lease property or property subject to the agreement on the termination or expiration of the lease or agreement; or

                             (ii)  the lease term or term of the agreement is for all, or substantially all, of the effective life of the lease property or property subject to the agreement.

relevant agreement property, in relation to a relevant agreement, means:

                     (a)  in the case of a hire‑purchase agreement—the property that is the subject of the agreement; and

                     (b)  in any other case—the property in relation to which subparagraph (b)(i) or (ii) of the definition of relevant agreement applies.

total interest, in relation to a relevant agreement, means the sum of all of the attributable agreement payments liable to be made under the relevant agreement, reduced by the eligible value of the relevant agreement property.

             (2)  Where an agreement (including a hire‑purchase agreement and a lease) relates to the use by a person of 2 or more items of property owned by another person, this section applies as if, instead of the single agreement, there were separate agreements relating to the use of each of the items of property having such of the terms of the first‑mentioned agreement as are relevant.

             (3)  Where a variation is or was made in the terms of, or liability to make payments under, a relevant agreement, then, for the purposes of the application of this section:

                     (a)  the relevant agreement shall be taken to be, or to have been, terminated at the time at which the variation has effect; and

                     (b)  a new relevant agreement shall be taken to be, or to have been, entered into at the time at which the variation has effect and on the terms of the first‑mentioned relevant agreement as so varied.

             (4)  Where any right or option under an agreement to extend the term of, or otherwise vary the effect of, the agreement is or was exercised, then, for the purposes of this section, the exercise of that right or option shall be taken to be a variation of the terms of the agreement to provide for the extension or other effect.

             (5)  Where an attributable agreement payment in relation to a relevant agreement is made, so much of the attributable agreement payment as does not exceed the notional interest in relation to the payment shall, for the purposes of this Division, be deemed to be income that consists of interest.

             (6)  Where:

                     (a)  a relevant agreement is entered into after the commencement of this section; and

                     (b)  at the time at which the relevant agreement is entered into, the total interest in relation to the relevant agreement exceeds the sum of all amounts that, if all of the attributable agreement payments liable to be made under the relevant agreement were made, would, disregarding this subsection, be deemed to be income that consists of interest under subsection (5) in relation to the relevant agreement;

the amount of the notional interest in relation to the first attributable agreement payment in relation to the relevant agreement shall, for the purposes of this section, be increased by an amount equal to the excess referred to in paragraph (b).

             (7)  For the purposes of section 128D, where withholding tax is payable on a part of an attributable agreement payment that is taken under subsection (5) of this section to be an amount of interest, the withholding tax shall be taken to be payable on the whole of the attributable agreement payment.

128AD  Indemnification etc. agreements in relation to bills of exchange and promissory notes

             (1)  Where:

                     (a)  the drawer of a bill of exchange issued after the day on which this section comes into operation pays an amount (in this subsection referred to as the indemnification amount) to the acceptor of the bill to indemnify, reimburse or otherwise compensate the acceptor in respect of the whole or a part of an amount (which whole or part is in this subsection referred to as the eligible presentment amount) that the acceptor has, or will, become liable to pay to the payee under the bill on presentment of the bill;

                     (b)  no part of the indemnification amount is, or will be, included in the assessable income of the acceptor of any year of income; and

                     (c)  the whole or a part (in this subsection referred to as the eligible presentment interest) of the eligible presentment amount consists or will consist of interest;

so much of the indemnification amount as indemnifies, reimburses or otherwise compensates the acceptor in respect of the eligible presentment interest shall, for the purposes of this Division, be deemed to be income that consists of interest.

             (2)  Where:

                     (a)  a person (in this subsection referred to as the indemnifier) pays an amount (in this subsection referred to as the indemnification amount) to the issuer of a promissory note issued after the day on which this section comes into operation to indemnify, reimburse or otherwise compensate the issuer in respect of the whole or a part of an amount (which whole or part is in this subsection referred to as the eligible presentment amount) that the issuer has, or will, become liable to pay to the payee under the note on presentment of the note;

                     (b)  no part of the indemnification amount is, or will be, included in the assessable income of the issuer of any year of income; and

                     (c)  the whole or a part (in this subsection referred to as the eligible presentment interest) of the eligible presentment amount consists or will consist of interest;

so much of the indemnification amount as indemnifies, reimburses or otherwise compensates the issuer in respect of the eligible presentment interest shall, for the purposes of this Division, be deemed to be income that consists of interest.

128AE  Interpretation provisions relating to offshore banking units

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

borrow includes raise finance by the issue of a security.

lend includes provide finance by the purchase of a security.

OB activity has the same meaning as in section 121D.

offshore banking unit has the meaning given by this section.

offshore borrowing means:

                     (a)  a borrowing in any currency, by a person who is or has been an offshore banking unit, from a non‑resident who is not a related person (within the meaning of Division 9A); or

                     (b)  a borrowing in a currency other than Australian currency, by a person who is or has been an offshore banking unit, from a resident or a related person (within the meaning of Division 9A).

offshore gold borrowing means borrowing gold from an offshore person within the meaning of section 121E.

prevailing borrowing rate, in relation to a person who is or has been an offshore banking unit, in relation to a particular time, means the effective annual interest rate that the Commissioner considers was payable by the person on borrowings at or about that time or, where there were none, by offshore banking units generally at or about that time.

prevailing borrowing term, in relation to a person who is or has been an offshore banking unit, in relation to a particular time, means the period that the Commissioner considers was the usual term of borrowings by the person at or about that time or, where there were none, by offshore banking units generally at or about that time.

security means a bond, debenture, debt interest, bill of exchange, promissory note or other security or similar instrument.

tax exempt gold means gold that is tax exempt gold under this section.

tax exempt loan money means an amount that is tax exempt loan money under this section.

transfer to a person includes apply an amount for the benefit of a person.

             (2)  The Treasurer may, by notice published in the Gazette, declare a person being:

                     (a)  a body corporate that is an ADI (authorised deposit‑taking institution) for the purposes of the Banking Act 1959; or

                     (b)  a public authority constituted by a law of a State, being a public authority that carries on the business of State banking; or

                   (ba)  a company in which all of the equity interests are beneficially owned by an offshore banking unit (other than one to which paragraph (c) applies); or

                     (c)  a person whom the Treasurer is satisfied is appropriately authorised to carry on business as a dealer in foreign exchange; or

                     (d)  a life insurance company registered under the Life Insurance Act 1995; or

                     (e)  a company incorporated under the Corporations Act 2001 that provides funds management services on a commercial basis (other than solely to related persons):

                              (i)  that is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations; or

                             (ii)  all of the shares which are beneficially owned by a company covered by subparagraph (i); or

                            (iii)  a financial services licensee (as defined by section 761A of the Corporations Act 2001) whose licence covers dealing in securities (as defined by subsection 92(3) of the Corporations Act 2001), providing financial advice in relation to such securities or operating a managed investment scheme (as defined by section 9 of the Corporations Act 2001); or

                      (f)  a company that the Treasurer determines, in writing, to be an OBU under subsection (2AA);

to be an offshore banking unit for the purposes of this Division.

       (2AA)  The Treasurer may, on written application by a company, make a written determination that the company is an OBU.

       (2AB)  The determination must:

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

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

       (2AC)  A determination of the Treasurer under subsection (2AA) must be made in accordance with guidelines determined by the Treasurer under subsection (2AD).

       (2AD)  The Treasurer must, by legislative instrument, determine guidelines for the making of determinations under subsection (2AA). The guidelines may require the Treasurer to take into account:

                     (a)  specified criteria; or

                     (b)  recommendations of particular bodies; or

                     (c)  any other factors.

          (2A)  If a person who is an offshore banking unit for the purposes of this Division:

                     (a)  is convicted of an offence against section 8L, 8N, 8Q, 8T or 8U of the Taxation Administration Act 1953, or against Division 136 or 137 of the Criminal Code in relation to a taxation law (within the meaning of the Taxation Administration Act 1953); or

                     (b)  incurs a tax liability, within the meaning of that Act, by way of a penalty equal to 90% of an amount;

the Treasurer may declare, by notice published in the Gazette, that the person is no longer an offshore banking unit for the purposes of this Division.

          (2B)  If the Treasurer makes such a declaration in respect of a company that is an offshore banking unit only because of paragraph (2)(ba), the offshore banking unit mentioned in that paragraph, and in any previous application of that paragraph that was necessary for it to apply to the company, is no longer an offshore banking unit from the time when the declaration comes into force.

          (2C)  If a person who is an offshore banking unit ceases to be a person of a kind mentioned in any of paragraphs (2)(a), (b), (ba) and (c), the Treasurer must declare, by notice published in the Gazette, that the person is no longer an offshore banking unit for the purposes of this Division.

          (2D)  Except as mentioned in subsection (2A), (2B) or (2C), a person does not cease to be an offshore banking unit for the purposes of this Division.

             (3)  A declaration under subsection (2), (2A) or (2C) shall not come into force before the day on which the notice containing the declaration is published in the Gazette.

             (4)  Where:

                     (a)  a person who is an offshore banking unit makes an offshore borrowing or offshore gold borrowing; and

                     (b)  the lender would, but for section 128GB, be liable to pay withholding tax on income consisting of interest on the offshore borrowing or offshore gold borrowing;

then, for the purposes of this Division, the amount borrowed is tax exempt loan money or tax exempt gold of the person.

             (5)  Where:

                     (a)  a person who is or has been an offshore banking unit makes a loan of tax exempt loan money or tax exempt gold where the loan is an OB activity or would be if the person were an OBU; and

                     (b)  the loan is repaid;

the amount repaid is, for the purposes of this Division, deemed to be tax exempt loan money or tax exempt gold of the person.

             (7)  Where a person who is or has been an offshore banking unit transfers an amount of tax exempt loan money or tax exempt gold to another person, the following provisions have effect for the purposes of this Division:

                     (a)  subject to subsections (10) and (11), the amount transferred ceases to be tax exempt loan money or tax exempt gold of the person; and

                     (b)  the amount transferred does not become tax exempt loan money or tax exempt gold of the other person.

             (8)  Where a person who is or has been an offshore banking unit transfers to another person an amount of money or gold that, in the opinion of the Commissioner, includes tax exempt loan money or tax exempt gold, so much of the amount transferred as the Commissioner considers was tax exempt loan money or tax exempt gold is deemed, for the purposes of this Division, to have been tax exempt loan money or tax exempt gold of the person.

             (9)  Where a person who is or has been an offshore banking unit deals with an amount of tax exempt loan money or tax exempt gold of the person under the person’s internal accounting arrangements in such a way that the amount becomes available for possible transfer to other persons (other than by way of payment in carrying on an OB activity, or what would be an OB activity if the person were an OBU, or repayment of an offshore borrowing or an offshore gold borrowing), the following provisions have effect for the purposes of this Division:

                     (a)  the person is, when the amount so becomes available, deemed to make a transfer of the amount to another person, other than by way of payment in carrying on an OB activity (or what would be an OB activity if the person were an OBU) or repayment of an offshore borrowing or an offshore gold borrowing;

                     (b)  any actual transfer of the amount by the person to another person shall be disregarded.

           (10)  For the purposes of this Division, where a person who is or has been an offshore banking unit transfers tax exempt loan money to another person in exchange for an equivalent amount in a different currency:

                     (a)  the amount received in exchange shall be taken to be the same money as was transferred; and

                     (b)  the transfer shall be taken not to have occurred.

           (11)  For the purposes of this Division, where a person who is or has been an offshore banking unit transfers tax exempt loan money or tax exempt gold to another person by way of a deposit for the purposes of temporary safe‑keeping pending the making of an offshore loan or repayment of an offshore borrowing or an offshore gold borrowing:

                     (a)  the amount held on deposit and upon being repaid shall be taken to be the same money as was transferred; and

                     (b)  the transfer shall be taken not to have occurred.

           (12)  For the purposes of this section, an amount:

                     (a)  deposited in an account with a bank or other financial institution; or

                     (b)  paid by way of consideration for the issue of a security;

shall be taken to have been lent to, and borrowed by, the bank, financial institution or issuer of the security.

           (13)  If an offshore banking unit consists of:

                     (a)  one or more permanent establishments in Australia at or through which the offshore banking unit carries on what are OB activities within the meaning of Division 9A; and

                     (b)  one or more other permanent establishments either in Australia or outside Australia;

then this section and section 128NB apply as if:

                     (c)  the offshore banking unit consisted only of the permanent establishments referred to in paragraph (a); and

                     (d)  the permanent establishments referred to in paragraph (b) were separate persons.

128AF  Payments through interposed entities

             (1)  This section applies if:

                     (a)  a payment received by a non‑resident through one or more interposed companies, partnerships, trusts or other persons is attributable to an amount of dividends, interest or royalties paid by a resident; and

                     (b)  one or more of the interposed companies, partnerships, trusts or other persons is exempt from tax.

             (2)  If this section applies, the amount of dividends, interest or royalties paid by a resident is taken, for the purposes of this Division, to have been paid by the resident directly to the non‑resident.

             (3)  For the purposes of this section, a person is exempt from tax if, at the time at which the payment was received by the non‑resident, all income of the person was exempt from tax.

128B  Liability to withholding tax

          (1A)  In this section, a reference to a person to whom this section applies is a reference to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person who is, or persons at least 1 of whom is, a resident.

             (1)  Subject to subsections (3), (3A), (3D) and (3E), this section applies to income that:

                     (a)  is derived, on or after 1 January 1968, by a non‑resident; and

                     (b)  consists of a dividend paid by a company that is a resident.

Note:          An amount declared to be conduit foreign income is an amount to which this section does not apply: see sections 802‑15 and 802‑17 of the Income Tax Assessment Act 1997.

             (2)  Subject to subsection (3), this section also applies to income that:

                     (a)  is derived, on or after 1 January 1968, by a non‑resident; and

                     (b)  consists of interest that:

                              (i)  is paid to the non‑resident by a person to whom this section applies and is not an outgoing wholly incurred by that person in carrying on business in a country outside Australia at or through a permanent establishment of that person in that country; or

                             (ii)  is paid to the non‑resident by a person who, or by persons each of whom, is not a resident and is, or is in part, an outgoing incurred by that person or those persons in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia.

Note:          An amount of interest paid to a person by a temporary resident is an amount to which this section does not apply: see section 768‑980 of the Income Tax Assessment Act 1997.

          (2A)  Subject to subsection (3), where income:

                     (a)  is, or has, after 2 July 1973, been, derived, or derived in part, by a person to whom this section applies in carrying on business in a country outside Australia at or through a permanent establishment of the person in that country; and

                     (b)  consists of interest that:

                              (i)  is or has been paid to the person by another person to whom this section applies and is not an outgoing wholly incurred by that other person in carrying on business in a country outside Australia at or through a permanent establishment of that other person in that country; or

                             (ii)  is or has been paid to the first‑mentioned person by a person who is, or by persons each of whom is, not a resident and is, or is in part, an outgoing incurred by that last‑mentioned person or those last‑mentioned persons in carrying on business in Australia at or through a permanent establishment of that last‑ mentioned person or those last‑mentioned persons in Australia;

this section also applies to that income or to the part of that income so derived, as the case may be.

Note:          An amount of interest paid to a person by a temporary resident is an amount to which this section does not apply: see section 768‑980 of the Income Tax Assessment Act 1997.

          (2B)  Subject to subsection (3), this section also applies to income that:

                     (a)  is derived by a non‑resident:

                              (i)  during the 1993‑94 year of income of the non‑resident; or

                             (ii)  during a later year of income of the non‑resident; and

                     (b)  consists of a royalty that:

                              (i)  is paid to the non‑resident by a person to whom this section applies and is not an outgoing wholly incurred by that person in carrying on business in a foreign country at or through a permanent establishment of that person in that country; or

                             (ii)  is paid to the non‑resident by a person who, or by persons each of whom, is not a resident and is, or is in part, an outgoing incurred by that person or those persons in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia.

          (2C)  Subject to subsection (3), where income:

                     (a)  is derived, or derived in part, by a person (the recipient) to whom this section applies in carrying on business in a country outside Australia at or through a permanent establishment of the person in that country; and

                     (b)  consists of a royalty that:

                              (i)  is paid to the recipient by another person (the payer) to whom this section applies and is not an outgoing wholly incurred by the payer in carrying on business in a country outside Australia at or through a permanent establishment of the payer in that country; or

                             (ii)  is paid to the recipient by one or more persons (the non‑resident payers), each of whom is not a resident, and is, or is in part, an outgoing incurred by the non‑resident payers in carrying on business in Australia at or through a permanent establishment of the non‑resident payers in Australia;

this section also applies to that income or to the part of that income mentioned in paragraph (a).

          (2D)  Subsections (2B) and (2C) do not apply to income to the extent to which it is a return on an equity interest in a company.

             (3)  This section does not apply to:

                  (aaa)  income that consists of a non‑share dividend that is unfrankable under section 215‑10 of the Income Tax Assessment Act 1997; or

                     (a)  income derived by a non‑resident that is:

                              (i)  exempt from income tax because of section 50‑5 (other than because of item 1.5A, 1.5B or 1.6 in the table in that section) or 50‑10, item 6.1 or 6.2 of the table in section 50‑30, section 50‑40 or item 9.1 or 9.2 of the table in section 50‑45 of the Income Tax Assessment Act 1997; and

                             (ii)  exempt from income tax in the country in which the non‑resident resides; or

                    (aa)  income derived by a non‑resident that is an overseas charitable institution (within the meaning of section 121C) where the income is exempt under subsection 121ELA(1); or

                   (ab)  income that is exempt from income tax because of item 9.4 of the table in section 50‑45 of the Income Tax Assessment Act 1997 (which exempts income derived by the Commonwealth Games Federation); or

                   (ba)  income that is exempt from income tax because of section 124ZM (which exempts dividends paid by PDFs); or

                   (bb)  income that is not included in assessable income because of section 159GZZZZE; or

                     (d)  income in respect of which a trustee is liable to be assessed under section 99 or section 99A; or

                     (e)  income that is derived by a trustee, being a trustee in relation to a trust created by a person who, at the time the income is derived, is a resident and in respect of which the Commissioner is empowered, under section 102, to assess the trustee to pay income tax; or

                    (ga)  income that consists of:

                              (i)  the franked part of a dividend; or

                             (ii)  in relation to a dividend that is paid by a former exempting entity (within the meaning of the Income Tax Assessment Act 1997) on a share acquired under an employee share scheme (within the meaning of that Act)—the part of the dividend that is franked with an exempting credit; or

                            (iii)  in relation to a dividend that is paid by a former exempting entity (within the meaning of the Income Tax Assessment Act 1997) to an eligible continuing substantial member (within the meaning of that Act)—the part of the dividend that is franked with an exempting credit;

                            other than a dividend in respect of which a determination is made under paragraph 204‑30(3)(c) of the Income Tax Assessment Act 1997 or a dividend or a part of a dividend in respect of which a determination is made under paragraph 177EA(5)(b) of this Act; or

                   (gb)  income that consists of a dividend derived from assets included in the insurance funds of a life assurance company that carries on business in Australia at or through a permanent establishment of the life assurance company in Australia; or

                    (gc)  income that consists of interest derived on a nostro account by a non‑resident that is a foreign bank; or

                     (h)  income that consists of:

                             (ii)  interest derived by a non‑resident in carrying on business in Australia at or through a permanent establishment of the non‑resident in Australia (except interest derived by a limited partner in a VCLP, ESVCLP or AFOF as such a partner);

                            (iv)  interest to which section 128F, 128FA or 128GB applies; or

                      (j)  income in respect of which a taxpayer is liable to be assessed under Division 9C; or

                    (jb)  income that:

                              (i)  is derived by a non‑resident that is a superannuation fund for foreign residents; and

                             (ii)  consists of interest, or consists of dividends or non‑share dividends paid by a company that is a resident; and

                            (iii)  is exempt from income tax in the country in which the non‑resident resides; or

                     (k)  income that is not included in assessable income because of subsection 271‑105(1); or

                      (l)  income derived by a trustee that, because of paragraph 102UK(2)(b) or 102UM(2)(b), is not included in the assessable income of a trustee beneficiary of the trust estate.

          (3A)  Paragraph (3)(ga) does not apply to income consisting of a dividend, or a part of a dividend, that is derived by the trustee of a trust, or a partnership, to the extent (if any) to which any amount paid to, or applied for the benefit of, a taxpayer (being a beneficiary in the trust or a partner in the partnership) that:

                     (a)  was attributable to the dividend; and

                     (b)  was paid or applied:

                              (i)  in respect of an interest in the trust or partnership that was acquired, or was acquired for a period that was extended, at or after the commencing time; or

                             (ii)  under a financing arrangement (including an arrangement extending an earlier arrangement) entered into at or after the commencing time;

may reasonably be regarded as equivalent to the payment of interest on a loan.

          (3B)  In subsection (3A):

commencing time means 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997.

financing arrangement has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.

          (3C)  In determining for the purposes of subsection (3A) the extent (if any) to which an amount may reasonably be regarded as equivalent to the payment of interest on a loan, regard is to be had to:

                     (a)  the way in which the amount was calculated; and

                     (b)  the conditions applying to the payment or application of the amount; and

                     (c)  any other relevant matters.

          (3D)  This section does not apply to a demerger dividend to which section 45B does not apply.

          (3E)  This section does not apply to income that consists of a dividend that:

                     (a)  is paid to a person who is a non‑resident carrying on business in Australia at or through a permanent establishment of the person in Australia; and

                     (b)  is attributable to the permanent establishment; and

                     (c)  is not paid to the person in the person’s capacity as trustee.

Note:          This subsection not only ensures that this section does not apply to that income to make withholding tax payable on it, but also (as a result) ensures that none of that income is non‑assessable non‑exempt income under section 128D. Subsection 44(1) makes that income assessable income.

           (3F)  In subsection (3E):

permanent establishment of a person:

                     (a)  has the same meaning as in a double tax agreement (as defined in Part X) that relates to a foreign country and affects the person; or

                     (b)  has the meaning given by subsection 6(1), if there is no such agreement.

             (4)  A person who derives income to which this section applies that consists of a dividend is liable to pay income tax upon that income at the rate declared by the Parliament in respect of income to which this subsection applies.

             (5)  A person who derives income to which this section applies that consists of interest is, subject to subsections (6) and (7), liable to pay income tax upon that income at the rate declared by the Parliament in respect of income to which this subsection applies.

          (5A)  A person who derives income to which this section applies that consists of a royalty is liable to pay income tax upon that income at the rate declared by the Parliament in respect of income to which this subsection applies.

             (6)  Where:

                     (a)  income to which this section applies consists of interest and is paid to the person by whom it is derived by a person to whom this section applies; and

                     (b)  the interest is, in part only, an outgoing incurred by that person to whom this section applies in carrying on business in a country outside Australia at or through a permanent establishment of that person to whom this section applies in that country;

income tax is payable under subsection (5) upon so much only of the income as is attributable to so much of the interest as is not an outgoing so incurred.

             (7)  Where:

                     (a)  income to which this section applies consists of interest and is paid to the person by whom it is derived by a person who, or by persons each of whom, is not a resident; and

                     (b)  the interest is, in part only, an outgoing incurred by the person or persons by whom it is paid in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia;

income tax is payable under subsection (5) upon so much only of the income as is attributable to so much of the interest as is an outgoing so incurred.

             (8)  For the purposes of subparagraphs (2)(b)(i) and (2A)(b)(i) and paragraph (6)(b), where:

                     (a)  interest is paid, or has, after 2 July 1973, been paid, to a person by another person, being a person to whom this section applies, carrying on business in a country outside Australia; and

                     (b)  the interest or a part of the interest:

                              (i)  is interest incurred by the other person in gaining or producing income that is derived by the other person otherwise than in carrying on business in a country outside Australia at or through a permanent establishment of the other person in that country or is interest incurred by the other person for the purpose of gaining or producing income to be so derived; or

                             (ii)  is interest incurred by the other person in carrying on business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the other person otherwise than in so carrying on business at or through a permanent establishment of the other person in a country outside Australia;

the interest or the part of the interest, as the case may be, is not an outgoing incurred by the other person in carrying on business in a country outside Australia at or through a permanent establishment of the other person in that country.

             (9)  For the purposes of subparagraphs (2)(b)(ii) and (2A)(b)(ii) and paragraph (7)(b), where:

                     (a)  interest is paid, or has, after 2 July 1973, been paid, to a person by another person or other persons (in this subsection referred to as the borrower), being:

                              (i)  another person who is or was carrying on business in Australia and is not or was not a resident; or

                             (ii)  other persons who are or were carrying on business in Australia and each of whom is not or was not a resident; and

                     (b)  the interest or a part of the interest:

                              (i)  is interest incurred by the borrower in gaining or producing income that is derived by the borrower in carrying on business in Australia at or through a permanent establishment of the borrower in Australia or is interest incurred by the borrower for the purpose of gaining or producing income to be so derived; or

                             (ii)  is interest incurred by the borrower in carrying on a business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the borrower in so carrying on business at or through a permanent establishment of the borrower in Australia;

the interest or the part of the interest, as the case may be, is an outgoing incurred by the borrower in carrying on business in Australia at or through a permanent establishment of the borrower in Australia.

          (9A)  For the purposes of subparagraphs (2B)(b)(i) and (2C)(b)(i), where:

                     (a)  a royalty is paid, to a person by another person, being a person to whom this section applies, carrying on business in a country outside Australia; and

                     (b)  the royalty, or a part of the royalty:

                              (i)  is a royalty incurred by the other person in gaining or producing income that is derived by the other person otherwise than in carrying on business in a country outside Australia at or through a permanent establishment of the other person in that country or is a royalty incurred by the other person for the purpose of gaining or producing income to be so derived; or

                             (ii)  is a royalty incurred by the other person in carrying on business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the other person otherwise than in so carrying on business at or through a permanent establishment of the other person in a country outside Australia;

the royalty or the part of the royalty, as the case may be, is not an outgoing incurred by the other person in carrying on business in a country outside Australia at or through a permanent establishment of the other person in that country.

          (9B)  For the purposes of subparagraphs (2B)(b)(ii) and (2C)(b)(ii), where:

                     (a)  a royalty is paid to a person by another person or other persons (the licensee), being:

                              (i)  another person who is or was carrying on business in Australia and is not or was not a resident; or

                             (ii)  other persons who are or were carrying on business in Australia and each of whom is not or was not a resident; and

                     (b)  the royalty or a part of the royalty:

                              (i)  is a royalty incurred by the licensee in gaining or producing income that is derived by the licensee in carrying on business in Australia at or through a permanent establishment of the licensee in Australia or is a royalty incurred by the licensee for the purpose of gaining or producing income to be so derived; or

                             (ii)  is a royalty incurred by the licensee in carrying on a business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the licensee in so carrying on business at or through a permanent establishment of the licensee in Australia;

the royalty or the part of the royalty, as the case may be, is an outgoing incurred by the licensee in carrying on business in Australia at or through a permanent establishment of the licensee in Australia.

          (9C)  If:

                     (a)  apart from this subsection, tax would be payable under subsection 126(1) on an amount of interest paid to a person; and

                     (b)  section 128F would apply to the interest, assuming that paragraph (1)(e) of that section had not been enacted;

then:

                     (c)  despite anything else in this section, the interest is taken, for the purposes of this Division, to be income derived by the person and to be income to which this section applies; and

Note:       As a result of this paragraph, the interest will not be subject to tax under subsection 126(1): see paragraph 126(1)(b).

                     (d)  in addition to the effect of any credit arising under section 18‑30 in Schedule 1 to the Taxation Administration Act 1953 in respect of the interest, the total tax payable by the person, other than under this section, is reduced by the amount of any tax payable under this section on the interest; and

                     (e)  tax paid under this section on the interest is not an allowable deduction.

           (10)  Income tax payable by a person in accordance with this section is in addition to any other income tax payable by him upon income to which this section does not apply.

           (11)  Income tax payable by a person in accordance with this section upon income to which this section applies by virtue of subsection (2A) or (2C) is in addition to, and shall not be taken into account in arriving at the amount of, any other income tax payable by him in respect of that income.

128C  Payment of withholding tax

             (1)  Withholding tax is due and payable by the person liable to pay the tax at the expiration of 21 days after the end of the month in which the income to which the tax relates was derived by the person.

             (3)  If any of the withholding tax which a person is liable to pay remains unpaid after the time by which it is due to be paid, the person is liable to pay the general interest charge on the unpaid amount for each day in the period that:

                     (a)  started at the beginning of the day by which the withholding tax was due to be paid; and

                     (b)  finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:

                              (i)  the withholding tax;

                             (ii)  general interest charge on any of the withholding tax.

Note:          The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953.

       (4AA)  If:

                     (a)  a person is liable to pay the general interest charge on an amount of withholding tax which is payable on an amount that, by virtue of the application of section 128AA, is taken to consist of interest paid in relation to the transfer of a qualifying security;

                     (b)  the Commissioner is satisfied that:

                              (i)  before the security was transferred, a notice expressed to be issued under subsection 265B(4) identifying the security was given by the person, in connection with the transfer, to the transferee;

                             (ii)  one or more of the statements made in the notice is incorrect; and

                            (iii)  the person did not know of the circumstance referred to in subparagraph (ii) at the time of transfer of the security; and

                     (c)  the proper amount of the withholding tax liability of the person exceeds the amount that would have been the amount of the withholding tax liability if it were determined on the basis that the statements made in the notice were correct;

the Commissioner shall remit so much of the amount of the general interest charge as bears to that amount the same proportion as the amount of the excess referred to in paragraph (c) bears to the amount of withholding tax.

             (6)  The ascertainment of the amount of any withholding tax shall not be deemed to be an assessment within the meaning of any of the provisions of this Act.

             (7)  The Commissioner may serve on a person, by post or otherwise, a notice in which is specified:

                     (a)  the amount of any withholding tax that the Commissioner has ascertained is payable by that person; and

                     (b)  the date on which that tax became due and payable.

             (8)  The production of a notice served under subsection (7), or of a document under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of such a notice, is evidence that the amount of withholding tax specified in the notice became due and payable by the person on whom the notice was served on the date so specified.

128D  Certain income not assessable

                   Income other than income to which section 128B applies by virtue of subsection (2A), (2C) or (9C) of that section upon which withholding tax is payable, or upon which withholding tax would, but for paragraph 128B(3)(ga) or (jb), section 128F, section 128FA or section 128GB, be payable, is not assessable income and is not exempt income of a person.

Note:          An amount of interest paid to a person by a temporary resident is non‑assessable non‑exempt income: see section 768‑980 of the Income Tax Assessment Act 1997.

128F  Division does not apply to interest on certain publicly offered company debentures or debt interests

Interest to which this section applies

             (1)  This section applies to interest paid by a company in respect of a debenture or debt interest in the company if:

                     (a)  the company was a resident of Australia when it issued the debenture or debt interest; and

                     (b)  the company is a resident of Australia when the interest is paid; and

                     (c)  for a debt interest other than a debenture—the debt interest:

                              (i)  is a non‑equity share; or

                             (ii)  consists of 2 or more related schemes (within the meaning of the Income Tax Assessment Act 1997) where one or more of them is a non‑equity share; or

                            (iii)  is a syndicated loan; or

                            (iv)  is prescribed by the regulations for the purposes of this section; and

                     (d)  either:

                              (i)  the issue of the debenture or debt interest satisfies the public offer test set out in subsection (3) or (4); or

                             (ii)  for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test set out in subsection (3A).

          (1A)  This section also applies to interest paid by a company in respect of a debenture or debt interest in the company if:

                     (a)  the company was a non‑resident when it issued the debenture or debt interest; and

                     (b)  the company is a non‑resident when the interest is paid; and

                     (c)  the debenture or debt interest was issued, and the interest is paid, by the company in carrying on business at or through a permanent establishment in Australia; and

                     (d)  for a debt interest other than a debenture—the debt interest:

                              (i)  is a non‑equity share; or

                             (ii)  consists of 2 or more related schemes (within the meaning of the Income Tax Assessment Act 1997) where one or more of them is a non‑equity share; or

                            (iii)  is a syndicated loan; or

                            (iv)  is prescribed by the regulations for the purposes of this section; and

                     (e)  either:

                              (i)  the issue of the debenture or debt interest satisfies the public offer test set out in subsection (3) or (4); or

                             (ii)  for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test set out in subsection (3A).

          (1B)  If:

                     (a)  some or all of the transfer price (within the meaning of section 128AA) of a debenture or debt interest is taken under that section to be income that consists of interest; and

                     (b)  for a debt interest other than a debenture—the debt interest:

                              (i)  is a non‑equity share; or

                             (ii)  consists of 2 or more related schemes (within the meaning of the Income Tax Assessment Act 1997) where one or more of them is a non‑equity share; or

                            (iii)  is a syndicated loan; or

                            (iv)  is prescribed by the regulations for the purposes of this section; and

                     (c)  either:

                              (i)  the issue of the debenture or debt interest satisfies the public offer test set out in subsection (3) or (4); or

                             (ii)  for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test set out in subsection (3A);

this section applies to the interest.

Note:          Subsection (6) does not apply to the interest because that subsection deals only with interest paid on a debenture or debt interest by the issuing company.

Tax not payable

             (2)  Tax is not payable under this Division in respect of interest to which this section applies.

Public offer test

             (3)  The issue of a debenture or debt interest by a company satisfies the public offer test if the issue resulted from the debenture or debt interest being offered for issue:

                     (a)  to at least 10 persons each of whom:

                              (i)  was carrying on a business of providing finance, or investing or dealing in securities, in the course of operating in financial markets; and

                             (ii)  was not known, or suspected, by the company to be an associate (see subsection (9)) of any of the other persons covered by this paragraph; or

                     (b)  to at least 100 persons whom it was reasonable for the company to have regarded as either:

                              (i)  having acquired debentures or debt interests in the past; or

                             (ii)  being likely to be interested in acquiring debentures or debt interests; or

                     (c)  as a result of being accepted for listing on a stock exchange, where the company had previously entered into an agreement with a dealer, manager or underwriter, in relation to the placement of debentures or debt interests, requiring the company to seek such listing; or

                     (d)  as a result of negotiations being initiated publicly in electronic form, or in another form, that was used by financial markets for dealing in debentures or debt interests; or

                     (e)  to a dealer, manager or underwriter, in relation to the placement of debentures or debt interests, who, under an agreement with the company, offered the debenture or debt interest for sale within 30 days in a way covered by any of paragraphs (a) to (d).

          (3A)  An invitation to become a lender under a syndicated loan facility by a company satisfies the public offer test if the invitation was made:

                     (a)  to at least 10 persons each of whom:

                              (i)  was carrying on a business of providing finance, or investing or dealing in securities, in the course of operating in financial markets; and

                             (ii)  was not known, or suspected, by the company to be an associate (see subsection (9)) of any of the other persons covered by this paragraph; or

                     (b)  publicly in electronic form, or in another form, that was used by financial markets for dealing in debentures or debt interests; or

                     (c)  to a dealer, manager or underwriter, in relation to the placement of debentures or debt interests, who, under an agreement with the company, made the invitation to become a lender under the facility within 30 days in a way covered by paragraph (a) or (b).

Global bonds

             (4)  The issue of a debenture or debt interest by a company also satisfies the public offer test if the debenture or debt interest is a global bond (see subsection (10)).

Issues and invitations that always fail the public offer test

             (5)  The issue of a debenture or debt interest by a company does not satisfy the public offer test if, at the time of the issue, the company knew, or had reasonable grounds to suspect, that:

                     (a)  the debenture, an interest in the debenture or the debt interest was being, or would be, acquired either directly or indirectly by an associate of the company; and

                     (b)  either:

                              (i)  the associate is a non‑resident and the debenture or interest, or the debt interest, was not being, or would not be, acquired by the associate in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or

                             (ii)  the associate is a resident of Australia and the debenture or interest, or the debt interest, was being, or would be, acquired by the associate in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and

                     (c)  the debenture or interest, or the debt interest, was not being, or would not be, acquired by the associate in the capacity of:

                              (i)  a dealer, manager or underwriter in relation to the placement of the debenture or debt interest; or

                             (ii)  a clearing house, custodian, funds manager or responsible entity of a registered scheme.

       (5AA)  An invitation to become a lender under a syndicated loan facility is taken never to have satisfied the public offer test if, at the time the invitation is made, the company knew, or had reasonable grounds to suspect, that:

                     (a)  an associate of the company is or will become a lender under the facility; and

                     (b)  either:

                              (i)  the associate is a non‑resident and the associate is not or would not become a lender under the facility in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or

                             (ii)  the associate is a resident of Australia and the associate is or would become a lender under the facility in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and

                     (c)  the associate is not or would not become a lender under the facility in the capacity of:

                              (i)  a dealer, manager or underwriter in relation to the invitation; or

                             (ii)  a clearing house, custodian, funds manager or responsible entity of a registered scheme.

Central borrowing authorities

          (5A)  This section does not apply in relation to a debenture or debt interest issued in Australia by a company that is covered by subsection (7) or is a central borrowing authority of a State or Territory. A central borrowing authority is a body established for the purpose of raising finance for the State or Territory. The following are examples of central borrowing authorities:

                     (a)  the Tasmanian Public Finance Corporation;

                     (b)  the Queensland Treasury Corporation;

                     (c)  the South Australian Government Financing Authority;

                     (d)  the Western Australian Treasury Corporation;

                     (e)  the New South Wales Treasury Corporation;

                      (f)  the Treasury Corporation of Victoria;

                     (g)  the Northern Territory Treasury Corporation.

          (5B)  Subsection (5A) does not apply to a bond issued in Australia by a central borrowing authority of a State or Territory. In this subsection bond includes debenture stock and notes.

No exemption for interest paid to certain associates of the issuing company

             (6)  This section does not apply to interest paid by the company to a person in respect of the debenture or debt interest if, at the time of the payment, the company knows, or has reasonable grounds to suspect, that:

                     (a)  the person is an associate of the company; and

                     (b)  either:

                              (i)  the associate is a non‑resident and the payment is not received by the associate in respect of a debenture or debt interest that the associate acquired in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or

                             (ii)  the associate is a resident of Australia and the payment is received by the associate in respect of a debenture or debt interest that the associate acquired in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and

                     (c)  the associate does not receive the payment in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered scheme.

Australian public bodies are treated as Australian resident companies

             (7)  This section applies in relation to a debenture or debt interest issued by:

                     (a)  an authority of the Commonwealth; or

                     (b)  a State or an authority of a State;

as if the authority or State were a company and a resident of Australia.

Debentures or debt interests issued through certain non‑resident subsidiaries can also get the exemption

             (8)  If:

                     (a)  a company (the parent company) beneficially owns all of the issued equity interests in the capital of a company (the subsidiary) that is not a resident of Australia; and

                     (b)  the subsidiary’s only business is raising finance for the purposes of the parent company; and

                     (c)  the subsidiary raises finance in a country specified in the regulations (but not Australia) by issuing a debenture or debt interest in that country; and

                     (d)  when the debenture or debt interest is issued, the subsidiary is treated as a resident of that country for the purposes of the tax law (see subsection (9)) of the country;

then this section has effect as if the parent company had raised the finance and issued the debenture or debt interest.

Definitions

             (9)  In this section:

associate has the meaning given by section 318, except that paragraphs (1)(b), (2)(a) and (4)(a) of that section must be disregarded.

clearing house means a person who operates a facility that is used by financial markets for investing in or dealing in securities.

company includes a company in the capacity of trustee of a resident trust estate if:

                     (a)  the trust is not established by a will, or instrument of trust, for public charitable purposes; and

                     (b)  the only person who is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust is a company other than a company in the capacity of trustee.

debenture, without affecting its meaning elsewhere in this Act, includes a promissory note or a bill of exchange (in addition to the things mentioned in the definition of debenture in subsection 6(1)).

global bond has the meaning given by subsection (10).

registered scheme has the same meaning as in the Corporations Act 2001.

responsible entity, of a registered scheme, has the same meaning as in the Corporations Act 2001.

syndicated loan means a loan or other form of financial accommodation that is provided under a syndicated loan facility, being a facility that has 2 or more lenders.

syndicated loan facility has the meaning given by subsections (11), (12) and (13).

tax law, in relation to a country other than Australia, means:

                     (a)  if the country has federal foreign tax—the law of the country that imposes the federal foreign tax; or

                     (b)  in any other case—the law of the country that imposes foreign tax.

Global bond

           (10)  A debenture or debt interest issued by a company is a global bond if:

                     (a)  it describes itself as a global bond or a global note; and

                     (b)  it is issued to a clearing house (see subsection (9)) or to a person as trustee or agent for, or otherwise on behalf of, one or more clearing houses; and

                     (c)  in connection with the issue, the clearing house or houses:

                              (i)  confer rights in relation to the debenture or debt interest on other persons; and

                             (ii)  record the existence of the rights; and

                     (d)  before the issue:

                              (i)  the company; or

                             (ii)  a dealer, manager or underwriter, in relation to the placement of debentures or debt interests, on behalf of the company;

                            announces that, as a result of the issue, such rights will be able to be created; and

                     (e)  the announcement is made in a way or ways covered by any of paragraphs (3)(a) to (e) (reading a reference in those paragraphs to “debentures or debt interests” as if it were a reference to such a right, and a reference to the “company” as if it included a reference to the dealer, manager or underwriter); and

                      (f)  under the terms of the debenture or debt interest, interests in the debenture or debt interest are able to be surrendered, whether or not in particular circumstances, in exchange for other debentures or debt interests issued by the company that are not themselves global bonds.

           (11)  A written agreement is a syndicated loan facility if:

                     (a)  the agreement describes itself as a syndicated loan facility or syndicated facility agreement; and

                     (b)  the agreement is between one or more borrowers and at least 2 lenders; and

                     (c)  under the agreement each lender severally, but not jointly, agrees to lend money to, or otherwise provide financial accommodation to, the borrower or borrowers; and

                     (d)  the amount to which the borrower or borrowers will have access at the time the first loan or other form of financial accommodation is to be provided under the agreement is at least $100,000,000 (or a prescribed amount).

           (12)  A written agreement is also a syndicated loan facility if:

                     (a)  the agreement describes itself as a syndicated loan facility or syndicated facility agreement; and

                     (b)  the agreement is between one or more borrowers and one lender where the agreement provides for the addition of other lenders; and

                     (c)  the agreement provides that, when other lenders are added, each lender severally, but not jointly, agrees to lend money to, or otherwise provide financial accommodation to, the borrower or borrowers; and

                     (d)  the amount to which the borrower or borrowers will have access at the time the first loan or other form of financial accommodation is to be provided under the agreement is at least $100,000,000 (or a prescribed amount).

           (13)  However, an agreement under which there are 2 or more borrowers is a syndicated loan facility only if all of them are:

                     (a)  members of the same wholly‑owned group (within the meaning of the Income Tax Assessment Act 1997); or

                     (b)  parties to the same joint venture; or

                     (c)  associates of each other.

           (14)  For the purposes of this section, a change (including by novation) to the lenders under a syndicated loan facility does not result in a different agreement.

           (15)  For a debt interest that consists of 2 or more related schemes (within the meaning of the Income Tax Assessment Act 1997) where one or more of them is a non‑equity share, this section applies only to interest paid in respect of the non‑equity share.

Note:          Subsection 128A(1AB) defines interest for the purposes of this Division. Under that subsection, dividends paid in respect of a non‑equity share are treated as being interest.

           (16)  The rule in subsection (15) does not apply to the extent that interest in respect of the other related scheme or schemes would be interest to which this section applies in respect of a debenture or debt interest.

128FA  Division does not apply to interest on certain publicly offered unit trust debentures or debt interests

Interest to which this section applies

             (1)  This section applies to interest paid by the trustee of an eligible unit trust in respect of a debenture or debt interest issued by the trustee if:

                     (a)  for a debt interest other than a debenture—the debt interest:

                              (i)  is a syndicated loan; or

                             (ii)  is prescribed by the regulations for the purposes of this section; and

                     (b)  either:

                              (i)  the issue of the debenture or debt interest satisfies the public offer test set (see subsection (6)); or

                             (ii)  for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test (see subsection (6A)).

             (2)  If:

                     (a)  some or all of the transfer price (within the meaning of section 128AA) of a debenture or debt interest issued by the trustee of an eligible unit trust is taken under that section to be income that consists of interest; and

                     (b)  for a debt interest other than a debenture—the debt interest:

                              (i)  is a syndicated loan; or

                             (ii)  is prescribed by the regulations for the purposes of this section; and

                     (c)  either:

                              (i)  the issue of the debenture or debt interest satisfies the public offer test set (see subsection (6)); or

                             (ii)  for a syndicated loan—the invitation to become a lender under the relevant syndicated loan facility satisfies the public offer test (see subsection (6A));

this section applies to the interest.

Note:          Subsection (4) does not apply to the interest because that subsection deals only with interest paid on a debenture or debt interest by the issuing eligible unit trust.

Tax not payable

             (3)  Tax is not payable under this Division in respect of interest to which this section applies.

No exemption for interest paid to certain associates of the issuing trustee

             (4)  This section does not apply to interest paid by the trustee of an eligible unit trust to a person in respect of the debenture or debt interest if, at the time of the payment, the trustee knows, or has reasonable grounds to suspect, that:

                     (a)  the person is an associate of the trustee; and

                     (b)  either:

                              (i)  the associate is a non‑resident and the payment is not received by the associate in respect of a debenture or debt interest that the associate acquired in carrying on a business in Australia at or through a permanent establishment of the associate in Australia; or

                             (ii)  the associate is a resident of Australia and the payment is received by the associate in respect of a debenture or debt interest that the associate acquired in carrying on a business in a country outside Australia at or through a permanent establishment of the associate in that country; and

                     (c)  the associate does not receive the payment in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered scheme.

Debentures or debt interests issued through certain non‑resident subsidiaries can also get the exemption

             (5)  If:

                     (a)  the trustee of an eligible unit trust holds all of the issued equity interests in the capital of a company that is not a resident of Australia; and

                     (b)  the company’s only business is raising finance for the purposes of the eligible unit trust; and

                     (c)  the company raises finance in a country specified in the regulations (but not Australia) by issuing a debenture or debt interest in that country; and

                     (d)  when the debenture or debt interest is issued, the company is treated as a resident of that country for the purposes of the tax law (see subsection (8)) of the country;

then this section has effect as if the trustee had raised the finance and issued the debenture or debt interest.

Public offer test

             (6)  For the purposes of working out under this section whether the issue of a debenture or debt interest by the trustee of an eligible unit trust satisfies the public offer test, subsections 128F(3) to (5) apply to the trustee of the eligible unit trust in a corresponding way to the way in which those subsections apply to a company, subject to subsection (7) of this section.

          (6A)  For the purposes of working out under this section whether an invitation to become a lender under a syndicated loan facility satisfies the public offer test, subsections 128F(3A) and (5AA) apply to the trustee of the eligible unit trust in a corresponding way to the way in which those subsections apply to a company, subject to subsection (7) of this section.

             (7)  For the purposes of applying subsection 128F(3), (3A), (4), (5) or (5AA) as mentioned in subsection (6) or (6A) of this section:

                     (a)  a reference in any of those subsections to a company knowing, suspecting or having reasonable grounds to suspect something, or it being reasonable for a company to have regarded something, is taken to be a reference to the trustee of the eligible unit trust knowing, suspecting or having reasonable grounds to suspect that thing, or it being reasonable for the trustee of the eligible unit trust to have regarded that thing; and

                     (b)  a reference in any of those subsections to an associate is taken to be a reference to an associate within the meaning of this section; and

                     (c)  a reference in any of those subsections to a global bond is taken to be a reference to a global bond within the meaning of subsection 128F(10).

          (7A)  For the purposes of this section, a change (including by novation) to the lenders under a syndicated loan facility does not result in a different agreement.

Definitions

             (8)  In this section:

associate has the meaning given by section 318, except that:

                     (a)  paragraphs (1)(b), (2)(a) and (4)(a) of that section must be disregarded; and

                     (b)  subsection (5) of that section applies to a unit trust mentioned in paragraph (b) of the definition of eligible unit trust in this subsection in the same way as that subsection applies in relation to a public unit trust.

clearing house has the same meaning as in section 128F.

company has the same meaning as in section 128F.

debenture:

                     (a)  in relation to the trustee of an eligible unit trust, includes debenture stock, bonds, promissory and other notes, bills of exchange and any other securities issued by the trustee, whether constituting a charge on the assets of the eligible unit trust or not; and

                     (b)  in relation to a company, has the same meaning as in section 128F.

eligible unit holder means:

                     (a)  the trustee of a public unit trust; or

                     (b)  the trustee (within the meaning of the Income Tax Assessment Act 1997) of a complying superannuation fund that has 50 or more members; or

                     (c)  the trustee of a pooled superannuation trust within the meaning of the Income Tax Assessment Act 1997; or

                     (d)  the trustee (within the meaning of the Income Tax Assessment Act 1997) of a complying approved deposit fund; or

                     (e)  a life insurance company within the meaning of the Income Tax Assessment Act 1997; or

                      (f)  a public company within the meaning of section 103A; or

                     (g)  the trustee of a unit trust in which all of the issued units are held by 2 or more entities that are eligible unit holders because of:

                              (i)  the application of another paragraph of this definition (whether or not the same paragraph); or

                             (ii)  a previous application of this paragraph; or

                            (iii)  any combination of subparagraphs (i) and (ii).

eligible unit trust means:

                     (a)  a public unit trust; or

                     (b)  a unit trust in which all of the issued units are held by 2 or more eligible unit holders.

public unit trust has the same meaning as in section 102G.

registered scheme has the same meaning as in section 128F.

responsible entity has the same meaning as in section 128F.

syndicated loan has the same meaning as in section 128F.

syndicated loan facility has the same meaning as in section 128F.

tax law has the same meaning as in section 128F.

             (9)  For the purposes of this section, a trust or fund of a kind mentioned in any of paragraphs (a) to (d) of the definition of eligible unit holder in subsection (8) in relation to a year of income is taken to be a trust or fund of that kind at all times during the year of income.

128GB  Division not to apply to interest payments on offshore borrowings by offshore banking units

             (1)  This section applies to:

                     (a)  interest paid by a person in respect of an offshore borrowing of the person; or

                     (b)  interest consisting of gold paid by a person in respect of an offshore gold borrowing of the person;

if, when the borrowing took place, the person was an offshore banking unit (whether or not the person is still an offshore banking unit when the interest is paid).

             (2)  Tax is not payable in accordance with this Division in respect of interest to which this section applies.

128NA  Special tax payable in respect of certain securities and agreements

             (1)  Where, but for subsection 128AA(2):

                     (a)  the transferor of a qualifying security who is not liable to pay withholding tax in relation to the transfer of the qualifying security would be liable to pay withholding tax in relation to the transfer; or

                     (b)  the transferor of a qualifying security who is liable to pay withholding tax in relation to the transfer of the qualifying security would be liable to pay additional withholding tax in relation to the transfer;

then, for the purposes of this section, there shall be taken to be an avoided withholding tax amount in relation to the person who is the transferee of the qualifying security of an amount equal to the withholding tax or the additional withholding tax, as the case may be, that the person would be so liable to pay.

             (2)  Where:

                     (a)  an attributable agreement payment or attributable agreement payments were made by a person under a relevant agreement before the commencement of section 128AC; and

                     (b)  the Commissioner is of the opinion that the payment or payments were made before the commencement of that section, or that the payment or payments were of a greater amount than they would otherwise have been, for the sole or dominant purpose of securing the result that the total amount (in this subsection referred to as the actual withholding tax) of withholding tax payable under that section in relation to all attributable agreement payments made under the relevant agreement after the commencement of that section would be less than the amount (in this subsection referred to as the notional withholding tax) that would otherwise have been payable;

then, for the purposes of this section, there shall be taken to be an avoided withholding tax amount in relation to the person of an amount equal to the amount by which the notional withholding tax exceeds the actual withholding tax.

             (3)  For the purposes of subsection (2), expressions used in that subsection that are also used in section 128AC have the same respective meanings in that subsection as in that section.

             (4)  Where there is an avoided withholding tax amount in relation to a person under this section, the person is liable to pay income tax, as imposed by the Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Act 1986, in respect of the avoided withholding tax amount.

128NB  Special tax payable in respect of certain dealings by current and former offshore banking units

             (1)  Where a person who is or has been an offshore banking unit transfers to another person an amount of tax exempt loan money or tax exempt gold, other than by way of:

                     (a)  payment in carrying on an OB activity or what would be an OB activity if the person were an OBU; or

                     (b)  repayment of an offshore borrowing or offshore gold borrowing;

the person is liable to pay income tax, as imposed by the Income Tax (Offshore Banking Units) (Withholding Tax Recoupment) Act 1988, on the lost withholding tax amount in respect of the transfer.

             (2)  For the purposes of subsection (1), the lost withholding tax amount in respect of the transfer is an amount ascertained in accordance with the formula:

where:

IWT rate is the rate declared by the Parliament in respect of income to which subsection 128B(5) applies.

PB rate is the prevailing borrowing rate in relation to the person at the time of the transfer.

PB term is the number of years in the prevailing borrowing term in relation to the person at the time of the transfer; and

TA is the amount of tax exempt loan money or tax exempt gold transferred.

             (3)  Tax under this section is due and payable by the person liable to pay the tax at the end of:

                     (a)  21 days after the end of the month in which the transfer to which it relates takes place; or

                     (b)  such further period as the Commissioner, in special circumstances, allows.

Application

          (3A)  The Commissioner must not exercise his or her power under paragraph (3)(b) on or after 1 July 2000.

Note:          For provisions about collection and recovery of tax on or after 1 July 2000, see Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953.

             (4)  Section 128C (other than subsections (1) and (4AA)) applies, in addition to its application apart from this subsection, as if references in that section to withholding tax were references to tax payable under this section.

             (5)  The Commissioner may remit the whole or part of an amount of tax payable under this section in relation to the transfer of an amount of tax exempt loan money or tax exempt gold to another person if:

                     (a)  the Commissioner is satisfied that:

                              (i)  the liability to pay the amount of tax arose because the person mistakenly believed, on reasonable grounds, that the other person was a non‑resident or an offshore banking unit, that interest payable to the person in respect of the amount transferred would be an outgoing of a particular kind or that the amount transferred was not tax exempt loan money or tax exempt gold; and

                             (ii)  the person had taken reasonable steps to ascertain the matter to which the mistaken belief related; or

                     (b)  the Commissioner is satisfied that there are special circumstances justifying the remission of the whole or part of the amount of tax.

128NBA  Credits in respect of amounts assessed under Division 16E of Part III

When section applies

             (1)  This section applies if:

                     (a)  the amount of any withholding tax that has become payable by a taxpayer on a payment of interest under, or in relation to the transfer of, a qualifying security has been paid; and

                     (b)  there is a net Division 16E amount (see subsection (5)) in relation to the taxpayer in relation to:

                              (i)  if the payment of interest is a payment in relation to the transfer of the qualifying security—the security; or

                             (ii)  if the payment of interest is such a payment by virtue of the application of section 128AC in relation to an attributable agreement payment within the meaning of that section—the attributable agreement payment; or

                            (iii)  in any other case—the payment of interest; and

                     (c)  the amount of the withholding tax payable on the interest exceeds the amount that would have been payable on the interest if the interest were reduced by the net Division 16E amount.

Entitlement to apply for credit

             (2)  The taxpayer may apply to the Commissioner for a credit of an amount equal to the excess.

Requirements for application

             (3)  The application must be in the approved form.

Entitlement to credit

             (4)  If the Commissioner is satisfied as to the matters mentioned in paragraphs (1)(a), (b) and (c), the applicant is entitled to a credit of an amount equal to the excess.

Net Division 16E amount

             (5)  For the purposes of this section, if:

                     (a)  the sum of all amounts (if any) included in the assessable income of the taxpayer of any years of income in relation to the qualifying security, attributable agreement payment or payment of interest under section 159GQ;

exceeds:

                     (b)  the sum of all amounts (if any) allowable as deductions from the assessable income of the taxpayer of any years of income in relation to the security or the payment, as the case may be, under that section;

there is a net Division 16E amount equal to the excess.

128P  Objections

                   If an applicant for a certificate under this Division is dissatisfied with a decision of the Commissioner:

                     (a)  in any case—to refuse to issue the certificate; or

                     (b)  in the case of a certificate under section 128AB—to specify a particular amount in the certificate;

the applicant may object against the decision in the manner set out in Part IVC of the Taxation Administration Act 1953.

128Q  Power of Commissioner to obtain information

                   Section 264 applies, for the purposes of this Division, as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division.

128R  Informal arrangements

                   For the purposes of this Division, the Commissioner may have regard to arrangements, understandings and practices not having legal force in the same manner as if they had legal force.


 

Division 11BEquity investments in small‑medium enterprises

128TG  Summary of this Division

             (1)  The following is a summary of this Division.

             (2)  If, in connection with a money‑lending business, a taxpayer is issued shares in a small‑medium enterprise, any profit or loss the taxpayer makes when it disposes of certain shares that would be dealt with under section 6‑5 or 8‑1 of the Income Tax Assessment Act 1997 is, to the extent that it relates to the period after the issue, instead dealt with under Parts 3‑1 and 3‑3 (about CGT) of the Income Tax Assessment Act 1997.

             (3)  For this to apply, the taxpayer must, after the issue, hold shares representing at least 10% of the value of the small‑medium enterprise.

128TH  When Division applies

                   This Division applies if:

                     (a)  a taxpayer acquires a threshold interest in an SME (see section 128TJ); and

                     (b)  afterwards, the taxpayer disposes of ordinary shares, or an interest in ordinary shares, in the SME that were issued to the taxpayer (whether before, at the time of, or after acquiring the threshold interest); and

                   (ba)  the disposal takes place:

                              (i)  in any case—in the course of the taxpayer carrying on a business of lending money or otherwise in connection with such a business of the taxpayer; or

                             (ii)  if the taxpayer is a company that is a subsidiary of another company—while the one or more members of the direct ownership group of the taxpayer (see subsection 128TL(3)) are each carrying on a business of lending money; and

                     (c)  the shares are not trading stock of the taxpayer; and

                     (d)  apart from this section:

                              (i)  any profit on the disposal would be included in the taxpayer’s assessable income of a year of income under section 6‑5 of the Income Tax Assessment Act 1997; and

                             (ii)  any loss on the disposal would be allowable as a deduction from the taxpayer’s assessable income of a year of income under section 8‑1 of that Act.

128TI  Consequences of Division applying

                   If this Division applies:

                     (a)  no profit on the disposal is included in the taxpayer’s assessable income of any year of income under section 6‑5 of the Income Tax Assessment Act 1997; and

                     (b)  no loss on the disposal is allowable as a deduction from the taxpayer’s assessable income of any year of income under section 8‑1 of that Act; and

                     (c)  the taxpayer is taken:

                              (i)  to have disposed of the shares, at the time of acquiring the threshold interest in the SME, for a consideration equal to their market value at the time; and

                             (ii)  to have re‑acquired the shares immediately afterwards (for the purposes of this section, as if they had been issued to the taxpayer) for an amount equal to that consideration; and

                     (d)  any profit or loss on the disposal that is taken to have happened by subparagraph (c)(i) is included in the taxpayer’s assessable income under section 6‑5 of that Act, or is an allowable deduction under section 8‑1 of that Act, in the year of income in which the shares are actually (disregarding that subparagraph) disposed of, and not in any other year of income.

Note:          As a result of this section, the tax consequences of the actual disposal will be dealt with under section 6‑5 or 8‑1 of that Act in respect of any period of holding before the acquisition of the threshold interest and under Parts 3‑1 and 3‑3 (about CGT) of the Income Tax Assessment Act 1997 in respect of any period after the acquisition of that interest.

128TJ  Acquiring a threshold interest in an SME

                   A taxpayer acquires a threshold interest in an SME if:

                     (a)  ordinary shares in an SME (see section 128TK) are issued to the taxpayer; and

                     (b)  the shares are issued:

                              (i)  in any case—in the course of the taxpayer carrying on a business of lending money or otherwise in connection with such a business of the taxpayer; or

                     (ii)  if the taxpayer is a company that is a subsidiary of another company—while the one or more members of the direct ownership group of the taxpayer (see subsection 128TL(3)) are each carrying on a business of lending money; and

                     (c)  immediately after the shares, and any other ordinary shares forming part of the same issue, are issued to the taxpayer and any other persons, the percentage of the value of the SME represented by ordinary shares issued to the taxpayer (whether before or as part of the threshold share issue) is at least 10%; and

                     (d)  no previous issue of shares to the taxpayer had resulted in the taxpayer acquiring a threshold interest in the SME.

128TK  SME or small‑medium enterprise

             (1)  An SME or small‑medium enterprise is a company the total value of whose assets, as determined under this section, is no more than $50 million.

             (2)  The total value of the company’s assets is the total value of its assets (both current and non‑current) as shown in the last audited accounts prepared in relation to the company for the purposes of Division 4 of Part 3.6 of the Corporations Act 2001 before the investment is made.

             (3)  If:

                     (a)  no such audited accounts have been prepared within the 12 months ending when the shares are issued; or

                     (b)  the last such audited accounts prepared relate to a period that ended more than 18 months before the shares are issued;

then the company is not an SME unless:

                     (c)  before the shares are issued, the taxpayer gets an audited statement (see subsection (4)) showing the total value of the company’s assets as at a time no more than 12 months before the shares are issued; and

                     (d)  that value is no more than $50 million.

             (4)  In subsection (3), an audited statement is a statement audited by a person or firm:

                     (a)  who is appointed as the company’s auditor in accordance with the Corporations Act 2001; or

                     (b)  who is eligible to consent to being so appointed.

128TL  Subsidiary and direct ownership group

             (1)  A company (the first company) is a subsidiary of another company (the second company) if all the shares in the first company are beneficially owned by:

                     (a)  the second company; or

                     (b)  a company that is, or 2 or more companies each of which is, a subsidiary of the second company; or

                     (c)  the second company and a company that is, or 2 or more companies each of which is, a subsidiary of the second company.

             (2)  For the purposes of subsection (1), if a company is a subsidiary of another company (including a company that is such a subsidiary because of a previous application or applications of this subsection), every company that is a subsidiary of the first‑mentioned company is taken to be a subsidiary of that other company.

             (3)  The one or more companies in whichever of paragraph (1)(a), (b) or (c) applies are the direct ownership group of the first company.


 

Division 11CPayments in respect of mining operations on Aboriginal land

128U  Interpretation

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

Aboriginal means a person who is:

                     (a)  a member of the Aboriginal race of Australia; or

                     (b)  a member of the race to which Torres Strait Islanders belong.

Aboriginal land means any estate or interest in land that, under provisions of a law of the Commonwealth or of a State or Territory that relate to Aboriginals, is held for the use or benefit of Aboriginals.

Aboriginals Benefit Account means the Aboriginals Benefit Account continued in existence by section 62 of the Aboriginal Land Rights (Northern Territory) Act 1976.

distributing body means:

                     (a)  an Aboriginal Land Council established by or under the Aboriginal Land Rights (Northern Territory) Act 1976;

                     (b)  a corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006; or

                     (d)  any other incorporated body that:

                              (i)  is established by or under provisions of a law of the Commonwealth or of a State or Territory that relate to Aboriginals; and

                             (ii)  is empowered or required (whether under that law or otherwise) to pay moneys received by the body to Aboriginals or to apply such moneys for the benefit of Aboriginals, either directly or indirectly.

mineral royalties means royalties payable in respect of the mining of minerals.

minerals means:

                     (a)  gold, silver, copper, tin and other metals;

                     (b)  coal, shale, petroleum (within the meaning of the Income Tax Assessment Act 1997) and valuable earths and substances;

                     (c)  mineral substances;

                     (d)  gems and precious stones; and

                     (e)  ores and other substances containing minerals;

whether suspended in water or not, and includes water.

miner’s right means a miner’s right or other authority issued or granted under a law of the Commonwealth or of a State or Territory relating to mining of minerals, being a right or authority that empowers the holders to take possession of, mine or occupy land or take any other action in relation to land for any purpose in connection with mining.

mining includes the obtaining of minerals from alluvial or surface deposits.

mining interests, in relation to any land, means any lease or other interest in the land (including a right to prospect or explore for minerals in or on the land) issued or granted under a law of the Commonwealth or of a State or Territory relating to mining of minerals.

mining payment means a payment made to a distributing body or made to, or applied for the benefit of, an Aboriginal or Aboriginals, being:

                     (a)  a payment made on or after 1 July 1979 and before the day that the Financial Management Legislation Amendment Act 1999 commenced, out of the Aboriginals Benefit Reserve to the extent that the payment represents money paid into the Aboriginals Benefit Reserve on or after 1 July 1979 in pursuance of subsection 63(2) or (4) of the Aboriginal Land Rights (Northern Territory) Act 1976; and

                    (aa)  a payment made on or after the day that the Financial Management Legislation Amendment Act 1999 commenced by the Commonwealth in respect of a debit from the Aboriginals Benefit Account to the extent that the payment represents an amount credited to the Aboriginals Benefit Account in pursuance of subsection 63(1) or (4) of the Aboriginal Land Rights (Northern Territory) Act 1976; and

                     (b)  any payment made on or after 1 July 1979 that is of the kind referred to in subsection 44 (1) or (2) of the Aboriginal Land Rights (Northern Territory) Act 1976; and

                     (c)  any other payment made on or after 1 July 1979 under provisions of a law of the Commonwealth or of a State or Territory that relate to Aboriginals or under an agreement made in accordance with such provisions, being a payment made:

                              (i)  in consideration of the issuing, granting or renewal of a miner’s right or mining interest in respect of Aboriginal land;

                             (ii)  in consideration of the granting of permission to a person to enter or remain on Aboriginal land or to do any act on Aboriginal land in relation to prospecting or exploring for, or mining of, minerals; or

                            (iii)  by way of payment of mineral royalties payable in respect of the mining of minerals on Aboriginal land or by way of payment of an amount determined by reference to an amount of mineral royalties received by the Commonwealth, a State or the Northern Territory in respect of the mining of minerals on Aboriginal land;

but does not include a payment made by a distributing body.

             (2)  In section 260, income tax or tax includes mining withholding tax.

             (3)  For the purposes of this Division, a mining payment is taken to include any amount that has been, or purports to have been, withheld from the mining payment for the purposes of section 12‑320 in Schedule 1 to the Taxation Administration Act 1953.

             (4)  For the purposes of the succeeding provisions of this Division, where a mining payment (in this subsection referred to as the relevant mining payment) is made to, or applied for the benefit of, 2 or more persons, there shall be deemed to have been made to, or applied for the benefit of, each of those persons, a mining payment of an amount equal to so much of the relevant mining payment as bears to the relevant mining payment the same proportion as 1 bears to the number of persons to whom the relevant mining payment was made or for whose benefit the relevant mining payment was applied, as the case may be.

128V  Liability to mining withholding tax

             (1)  Where a mining payment is made to, or applied for the benefit of, a person, that person is liable to pay income tax on the amount of the mining payment at the rate declared by the Parliament for the purposes of this section.

             (2)  Income tax payable by a person in accordance with this section is in addition to other income tax payable by that person upon amounts that are not mining payments.

128W  Payment of mining withholding tax

             (1)  Mining withholding tax is due and payable by a person liable to pay the tax at the expiration of 21 days after the end of the month in which the payment of the amount to which the tax relates was made, or of such further period as the Commissioner, in special circumstances, allows.

             (2)  Mining withholding tax, when it becomes due and payable, is a debt due to the Queen on behalf of the Commonwealth and payable to the Commissioner.

             (3)  Any unpaid mining withholding tax may be sued for and recovered in a court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name.

             (4)  The ascertainment of the amount of any mining withholding tax shall not be deemed to be an assessment within the meaning of any of the provisions of this Act.

             (5)  The Commissioner may serve on a person liable to pay mining withholding tax, by post or otherwise, a notice in which is specified:

                     (a)  the amount of any mining withholding tax that the Commissioner has ascertained is payable by that person; and

                     (b)  the date on which that tax became due and payable.

             (6)  The production of a notice served under subsection (5), or of a document under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of such a notice, is evidence that the amount of mining withholding tax specified in the notice became due and payable by the person on whom the notice was served on the date specified in the notice as the date on which that tax became due and payable.

Application

             (7)  Subsections (2) and (3) do not apply in relation to any mining withholding tax that becomes due and payable on or after 1 July 2000.

Note:          For provisions about collection and recovery of mining withholding tax and other amounts on or after 1 July 2000, see Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953.

128X  Power of Commissioner to obtain information

                   Section 264 applies, for the purposes of this Division, as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division.


 

Division 12Oversea ships

129  Taxable income of ship‑owner or charterer

                   Where a ship belonging to or chartered by a person whose principal place of business is out of Australia carries passengers, live‑stock, mails or goods shipped in Australia, 5% of the amount paid or payable to him in respect of such carriage, whether that amount is payable in or out of Australia, shall be deemed to be taxable income derived by him in Australia.

130  Master or agent to make return

                   The master of the ship, or the agent or other representative in Australia of the owner or charterer, shall, when called upon by the Commissioner by notice in the Gazette or by any other notice to him, make a return of the amounts so paid or payable.

131  Determination by Commissioner

                   If such return is not made, or if the Commissioner is not satisfied with the return, he may determine the amount so paid or payable.

132  Assessment of tax

                   The master, agent or representative, as agent for the owner or charterer, may be assessed upon the taxable income and shall be liable to pay the tax assessed.

133  Master liable to pay

             (1)  Where the assessment is made on the agent or representative, and the tax is not paid forthwith upon receipt of notice of the assessment, the master shall be liable to pay the tax.

             (2)  This section shall not, so long as any tax for which the master becomes liable under this section remains unpaid, relieve any other person to whom the notice of assessment has been given in respect of that tax, from liability to pay the tax remaining unpaid.

134  Notice of assessment

                   Where any person is liable to pay tax under this Division, the Commissioner shall give notice to him of the assessment, and he shall forthwith pay the tax.

135  Clearance of ship

                   A collector or officer of customs for any State or Territory shall not grant a clearance to the ship until he is satisfied that any tax which has been or may be assessed under this Division has been paid, or that arrangements for its payment have been made to the satisfaction of the Commissioner.

135A  Freights payable under certain agreements

                   Where goods are shipped in pursuance of an agreement of the kind specified in section 7C of the Australian Industries Preservation Act 1906‑1937, the amount paid or payable to the owner or charterer of the ship in respect of the carriage of those goods shall, for the purposes of this Division, be deemed to be the amount remaining after deducting from the amount which would be payable according to the gross rate of freight specified in the agreement the amount of any rebate allowed in pursuance of the agreement or any payment, whenever made, by the owner or charterer, or out of funds provided by the owner or charterer, to any person or persons being the owner or shipper of the goods or the agent of either of them in respect of the shipment.


 

Division 13International agreements and determination of source of certain income

136AA  Interpretation

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

acquire includes:

                     (a)  acquire by way of purchase, exchange, lease, hire or hire‑purchase; and

                     (b)  obtain, gain or receive.

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

area covered by an international tax sharing treaty has the meaning given by subsection (4).

derive includes gain or produce.

expenditure includes loss or outgoing.

income includes any amount that is, or may be, included in assessable income or taken into account in calculating an amount that is, or may be, included in assessable income.

permanent establishment, in relation to a taxpayer, means:

                     (a)  a place that is a permanent establishment of the taxpayer by virtue of the definition of permanent establishment in section 6; or

                     (b)  a place at which any property of the taxpayer is manufactured or processed for the taxpayer, whether by the taxpayer or another person.

property includes:

                     (a)  a chose in action;

                     (b)  any estate, interest, right or power, whether at law or in equity, in or over property;

                     (c)  any right to receive income; and

                     (d)  services.

right to receive income means a right of a person to have income that will or may be derived (whether from property or otherwise) paid to, or applied or accumulated for the benefit of, the person.

services includes any rights, benefits, privileges or facilities and, without limiting the generality of the foregoing, includes the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under:

                     (a)  an agreement for or in relation to:

                              (i)  the performance of work (including work of a professional nature);

                             (ii)  the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction;

                            (iii)  the conferring of rights, benefits or privileges for which consideration is payable in the form of a royalty, tribute, levy or similar exaction; or

                            (iv)  the carriage, storage or packaging of any property or the doing of any other act in relation to property;

                     (b)  an agreement of insurance;

                     (c)  an agreement between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or

                     (d)  an agreement for or in relation to the lending of moneys.

supply includes:

                     (a)  supply by way of sale, exchange, lease, hire or hire‑purchase; and

                     (b)  provide, grant or confer.

taxpayer includes a partnership and a taxpayer in the capacity of a trustee.

             (2)  The definition of taxpayer in subsection (1) shall not be taken to affect in any way the interpretation of that expression where it is used in this Act other than this Division.

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

                     (a)  a reference to the supply or acquisition of property includes a reference to agreeing to supply or acquire property;

                     (b)  a reference to consideration includes a reference to property supplied or acquired as consideration and a reference to the amount of any such consideration is a reference to the value of the property;

                     (c)  a reference to the arm’s length consideration in respect of the supply of property is a reference to the consideration that might reasonably be expected to have been received or receivable as consideration in respect of the supply if the property had been supplied under an agreement between independent parties dealing at arm’s length with each other in relation to the supply;

                     (d)  a reference to the arm’s length consideration in respect of the acquisition of property is a reference to the consideration that might reasonably be expected to have been given or agreed to be given in respect of the acquisition if the property had been acquired under an agreement between independent parties dealing at arm’s length with each other in relation to the acquisition; and

                     (e)  a reference to the supply or acquisition of property under an agreement includes a reference to the supply or acquisition of property in connection with an agreement.

             (4)  If, under an international tax sharing treaty, Australia and another country share tax revenues from activities undertaken in an area identified by or under the agreement, that area is referred to in this Division as the area covered by the international tax sharing treaty.

136AB  Operation of Division

             (1)  Nothing in the provisions of this Act other than this Division shall be taken to limit the operation of this Division.

             (2)  In the application of this Division, the operation of section 70‑20 of the Income Tax Assessment Act 1997 shall be disregarded.

136AC  International agreements

                   For the purposes of this Division, an agreement is an international agreement if:

                     (a)  a non‑resident supplied or acquired property under the agreement otherwise than in connection with a business carried on in Australia by the non‑resident at or through a permanent establishment of the non‑resident in Australia; or

                     (b)  a resident carrying on a business outside Australia supplied or acquired property under the agreement, being property supplied or acquired in connection with that business; or

                     (c)  a taxpayer:

                              (i)  supplied or acquired property under the agreement in connection with a business; and

                             (ii)  carries on that business in an area covered by an international tax sharing treaty.

136AD  Arm’s length consideration deemed to be received or given

             (1)  Where:

                     (a)  a taxpayer has supplied property under an international agreement;

                     (b)  the Commissioner, having regard to any connection between any 2 or more of the parties to the agreement or to any other relevant circumstances, is satisfied that the parties to the agreement, or any 2 or more of those parties, were not dealing at arm’s length with each other in relation to the supply;

                     (c)  consideration was received or receivable by the taxpayer in respect of the supply but the amount of that consideration was less than the arm’s length consideration in respect of the supply; and

                     (d)  the Commissioner determines that this subsection should apply in relation to the taxpayer in relation to the supply;

then, for all purposes of the application of this Act in relation to the taxpayer, consideration equal to the arm’s length consideration in respect of the supply shall be deemed to be the consideration received or receivable by the taxpayer in respect of the supply.

             (2)  Where:

                     (a)  a taxpayer has supplied property under an international agreement;

                     (b)  the Commissioner, having regard to any connection between any 2 or more of the parties to the agreement or to any other relevant circumstances, is satisfied that the parties to the agreement, or any 2 or more of those parties, were not dealing at arm’s length with each other in relation to the supply;

                     (c)  no consideration was received or receivable by the taxpayer in respect of the supply; and

                     (d)  the Commissioner determines that this subsection should apply in relation to the taxpayer in relation to the supply;

then, for all purposes of the application of this Act in relation to the taxpayer, consideration equal to the arm’s length consideration in respect of the supply shall be deemed to have been received and receivable by the taxpayer in respect of the supply at the time when the property was supplied or, as the case requires, any of the property was first supplied, or at such later time or times as the Commissioner considers appropriate.

             (3)  Where:

                     (a)  a taxpayer has acquired property under an international agreement;

                     (b)  the Commissioner, having regard to any connection between any 2 or more of the parties to the agreement or to any other relevant circumstances, is satisfied that the parties to the agreement, or any 2 or more of those parties, were not dealing at arm’s length with each other in relation to the acquisition;

                     (c)  the taxpayer gave or agreed to give consideration in respect of the acquisition and the amount of that consideration exceeded the arm’s length consideration in respect of the acquisition; and

                     (d)  the Commissioner determines that this subsection should apply in relation to the taxpayer in relation to the acquisition;

then, for all purposes of the application of this Act in relation to the taxpayer, consideration equal to the arm’s length consideration in respect of the acquisition shall be deemed to be the consideration given or agreed to be given by the taxpayer in respect of the acquisition.

             (4)  For the purposes of this section, where, for any reason (including an insufficiency of information available to the Commissioner), it is not possible or not practicable for the Commissioner to ascertain the arm’s length consideration in respect of the supply or acquisition of property, the arm’s length consideration in respect of the supply or acquisition shall be deemed to be such amount as the Commissioner determines.

136AE  Determination of source of income etc.

             (1)  Where:

                     (a)  by the application of section 136AD in relation to a taxpayer other than a partnership or trustee, the arm’s length consideration in respect of the supply or acquisition of property by the taxpayer is deemed to have been received or receivable or received and receivable, or to have been given or agreed to be given, as the case may be; and

                     (b)  a question arises whether, and if so, as to the extent to which:

                              (i)  any income, being that consideration, is derived by the taxpayer from sources in Australia or sources out of Australia;

                             (ii)  any income in the calculation of which that consideration is taken into account is derived by the taxpayer from sources in Australia or sources out of Australia; or

                            (iii)  that consideration is expenditure incurred by the taxpayer in deriving income from sources in Australia or sources out of Australia;

the income or expenditure shall be deemed, for all purposes of this Act, to have been derived or to have been incurred in deriving income, as the case may be, from such source, or from such sources and in such proportions, as the Commissioner determines.

             (2)  Where:

                     (a)  by the application of section 136AD in relation to a taxpayer being a partnership, the arm’s length consideration in respect of the supply or acquisition of property by the taxpayer is deemed to have been received or receivable or received and receivable, or to have been given or agreed to be given, as the case may be; and

                     (b)  in determining the net income, exempt income or partnership loss of the taxpayer or the extent to which the individual interest of a partner in the net income, exempt income or partnership loss of the taxpayer is attributable to sources in Australia, a question arises whether, and if so, as to the extent to which:

                              (i)  any income, being that consideration, is derived by the taxpayer from sources in Australia or sources out of Australia;

                             (ii)  any income in the calculation of which that consideration is taken into account is derived by the taxpayer from sources in Australia or sources out of Australia; or

                            (iii)  that consideration is expenditure incurred by the taxpayer in deriving income from sources in Australia or sources out of Australia;

the income or expenditure shall be deemed, for all purposes of this Act, to have been derived or to have been incurred in deriving income, as the case may be, from such source, or from such sources and in such proportions, as the Commissioner determines.

             (3)  Where:

                     (a)  by the application of section 136AD in relation to a taxpayer being the trustee of a trust estate, the arm’s length consideration in respect of the supply or acquisition of property by the taxpayer is deemed to have been received or receivable or received and receivable, or to have been given or agreed to be given, as the case may be; and

                     (b)  in determining the net income or exempt income of the trust estate or the extent to which the share of a beneficiary of the net income or exempt income of the trust estate is attributable to sources in Australia, a question arises whether, and if so, as to the extent to which:

                              (i)  any income, being that consideration, is derived by the taxpayer from sources in Australia or sources out of Australia;

                             (ii)  any income in the calculation of which that consideration is taken into account is derived by the taxpayer from sources in Australia or sources out of Australia; or

                            (iii)  that consideration is expenditure incurred by the taxpayer in deriving income from sources in Australia or sources out of Australia;

the income or expenditure shall be deemed, for all purposes of this Act, to have been derived or to have been incurred in deriving income, as the case may be, from such source, or from such sources and in such proportions, as the Commissioner determines.

             (4)  Where:

                     (a)  a taxpayer (other than a partnership or trustee):

                              (i)  is a resident and carries on a business in a country other than Australia at or through a permanent establishment of the taxpayer in that other country; or

                             (ii)  is a resident and carries on a business in an area covered by an international tax sharing treaty; or

                            (iii)  is a non‑resident and carries on a business in Australia at or through a permanent establishment of the taxpayer in Australia; or

                            (iv)  is a non‑resident and carries on a business in an area covered by an international tax sharing treaty and also carries on a business somewhere else in Australia at or through a permanent establishment of the taxpayer in Australia; and

                     (b)  a question arises whether, and if so, as to the extent to which:

                              (i)  any income derived by the taxpayer is derived from sources in Australia or sources out of Australia; or

                             (ii)  any expenditure incurred by the taxpayer is incurred in deriving income from sources in Australia or sources out of Australia;

                     (c)  none of the preceding provisions of this section applies in relation to the determination of that question;

                     (d)  that question, if determined on the basis of the return furnished by the taxpayer, would have a tax result more favourable to the taxpayer than the result that would occur if that question were determined in accordance with this subsection; and

                     (e)  in the Commissioner’s opinion, the derivation of the income or the incurring of the expenditure is attributable, in whole or in part, to activities carried on by the taxpayer:

                              (i)  at or through the permanent establishment that is referred to in subparagraph (a)(i) or (iii); or

                             (ii)  in the area covered by the international tax sharing treaty that is referred to in paragraph (a)(ii) or (iv);

the income or expenditure shall be deemed, for all purposes of this Act, to have been derived or to have been incurred in deriving income, as the case may be, from such source, or from such sources and in such proportions, as the Commissioner determines.

             (5)  Where:

                     (a)  a taxpayer:

                              (i)  is a partnership and carries on a business in a country other than Australia at or through a permanent establishment of the taxpayer in that other country; or

                             (ii)  is a partnership and carries on a business in an area covered by an international tax sharing treaty; or

                            (iii)  carries on a business in Australia at or through a permanent establishment of the taxpayer in Australia and is a partnership in which any of the partners is a non‑resident; or

                            (iv)  carries on a business in an area covered by an international tax sharing treaty and also carries on a business somewhere else in Australia at or through a permanent establishment of the taxpayer in Australia and is a partnership in which any of the partners is a non‑resident; and

                     (b)  in determining the net income, exempt income or partnership loss of the taxpayer or the extent to which the individual interest of a partner in the net income, exempt income or partnership loss of the taxpayer is attributable to sources in Australia, a question arises whether, and if so, as to the extent to which:

                              (i)  any income derived by the taxpayer is derived from sources in Australia or sources out of Australia; or

                             (ii)  any expenditure incurred by the taxpayer is incurred in deriving income from sources in Australia or sources out of Australia;

                     (c)  none of the preceding provisions of this section applies in relation to the determination of that question;

                     (d)  that question, if determined on the basis of the return furnished by the taxpayer, would have a tax result more favourable to a taxpayer than the result that would occur if that question were determined in accordance with this subsection; and

                     (e)  in the Commissioner’s opinion, the derivation of the income or the incurring of the expenditure is attributable, in whole or in part, to activities carried on by the taxpayer:

                              (i)  at or through the permanent establishment that is referred to in subparagraph (a)(i) or (iii); or

                             (ii)  in the area covered by the international tax sharing treaty that is referred to in paragraph (a)(ii) or (iv);

the income or expenditure shall be deemed, for all purposes of this Act, to have been derived or to have been incurred in deriving income, as the case may be, from such source, or from such sources and in such proportions, as the Commissioner determines.

             (6)  Where:

                     (a)  a taxpayer:

                              (i)  is the trustee of a trust estate and carries on a business in a country other than Australia at or through a permanent establishment of the taxpayer in that other country; or

                             (ii)  is the trustee of a trust estate and carries on a business in an area covered by an international tax sharing treaty; or

                            (iii)  carries on a business in Australia at or through a permanent establishment of the taxpayer in Australia and is the trustee of a trust estate of which any of the beneficiaries is a non‑resident; or

                            (iv)  carries on a business in an area covered by an international tax sharing treaty and also carries on a business somewhere else in Australia at or through a permanent establishment of the taxpayer in Australia and is the trustee of a trust estate of which any of the beneficiaries is a non‑resident; and

                     (b)  in determining the net income or exempt income of the trust estate or the extent to which the share of a beneficiary of the net income or exempt income of the trust estate is attributable to sources in Australia, a question arises whether, and if so, as to the extent to which:

                              (i)  any income derived by the taxpayer is derived from sources in Australia or sources out of Australia; or

                             (ii)  any expenditure incurred by the taxpayer is incurred in deriving income from sources in Australia or sources out of Australia;

                     (c)  none of the preceding provisions of this section applies in relation to the determination of that question;

                     (d)  that question, if determined on the basis of the return furnished by the taxpayer, would have a tax result more favourable to a taxpayer than the result that would occur if that question were determined in accordance with this subsection; and

                     (e)  in the Commissioner’s opinion, the derivation of the income or the incurring of the expenditure is attributable, in whole or in part, to activities carried on by the taxpayer:

                              (i)  at or through the permanent establishment that is referred to in subparagraph (a)(i) or (iii); or

                             (ii)  in the area covered by the international tax sharing treaty that is referred to in paragraph (a)(ii) or (iv);

the income or expenditure shall be deemed, for all purposes of this Act, to have been derived or to have been incurred in deriving income, as the case may be, from such source, or such sources and in such proportions, as the Commissioner determines.

             (7)  In the application of the preceding provisions of this section in determining the source or sources of any income derived by a taxpayer or the extent to which expenditure incurred by the taxpayer was incurred in deriving income from a particular source or sources, the Commissioner shall have regard to:

                     (a)  the nature and extent of any relevant business carried on by the taxpayer and the place or places at which the business is carried on;

                     (b)  if any relevant business carried on by the taxpayer is carried on at or through a permanent establishment—the circumstances that would have, or might reasonably be expected to have, existed if the permanent establishment were a distinct and separate entity dealing at arm’s length with the taxpayer and other persons; and

                     (c)  such other matters as the Commissioner considers relevant.

             (8)  A reference in this section to expenditure incurred by a taxpayer in deriving income includes a reference to expenditure incurred by the taxpayer in carrying on a business for the purpose of deriving income.

          (8A)  In this section:

                     (a)  a reference to income being derived from a source in Australia is to be read as including a separate reference to income being derived from a source in an area in Australia that is covered by an international tax sharing treaty; and

                     (b)  a reference to expenditure being incurred in deriving income from a source in Australia is to be read as including a separate reference to expenditure being incurred in deriving income from a source in an area in Australia that is covered by an international tax sharing treaty.

Note:          This means that the following are the 3 different kinds of sources referred to in this section:

(a)           a source in Australia (but not in an area covered by an international tax sharing treaty);

(b)           a source in an area in Australia that is covered by an international tax sharing treaty;

(c)           a source out of Australia.

136AF  Consequential adjustments to assessable income and allowable deductions

             (1)  Where, by reason of the application of section 136AD in relation to the supply or acquisition of property by a taxpayer, an amount is included in the assessable income of the taxpayer of a year of income or a deduction is not allowable or is not, in part, allowable, to the taxpayer in respect of a year of income, the Commissioner may, in relation to any taxpayer (in this subsection referred to as the relevant taxpayer):

                     (a)  if, in the opinion of the Commissioner:

                              (i)  there has been included, or would but for this subsection be included, in the assessable income of the relevant taxpayer of a year of income an amount that would not have been included or would not be included, as the case may be, in the assessable income of the relevant taxpayer of that year of income if the property had been supplied or acquired, as the case may be, under an agreement between independent parties dealing at arm’s length with each other in relation to the supply or acquisition; and

                             (ii)  it is fair and reasonable that that amount or a part of that amount should not be included in the assessable income of the relevant taxpayer of that year of income;

                            determine that that amount or that part of that amount, as the case may be, should not have been included or shall not be included, as the case may be, in the assessable income of the relevant taxpayer of that year of income; and

                     (b)  if, in the opinion of the Commissioner:

                              (i)  an amount would have been allowed or would be allowable to the relevant taxpayer as a deduction in relation to a year of income if the property had been supplied or acquired, as the case may be, under an agreement between independent parties dealing at arm’s length with each other in relation to the supply or acquisition, being an amount that was not allowed or would not, but for this subsection, be allowable, as the case may be, as a deduction to the relevant taxpayer in relation to that year of income; and

                             (ii)  it is fair and reasonable that that amount or a part of that amount should be allowable as a deduction to the relevant taxpayer in relation to that year of income;

                            determine that that amount or that part of that amount, as the case may be, should have been allowed or shall be allowable, as the case may be, as a deduction to the relevant taxpayer in relation to that year of income;

and the Commissioner shall take such action as he considers necessary to give effect to any such determination.

          (1A)  Subsection (1) also has the effect that it would have if the reference in that subsection to the application of section 136AD in relation to a taxpayer included references to:

                     (a)  the application of section 136AD in accordance with section 102AAZA for the purpose of calculating the attributable income of a trust estate; and

                     (b)  the application of section 136AD in accordance with section 400 for the purpose of calculating the attributable income of a CFC.

             (2)  Where the Commissioner makes a determination under subsection (1) by virtue of which an amount is allowed as a deduction to a taxpayer in relation to a year of income, that amount shall be deemed to be so allowed as a deduction by virtue of such provision of this Act as the Commissioner determines.

             (3)  Where:

                     (a)  by reason of the application of section 136AD in relation to the supply or acquisition of property by a taxpayer, an amount is included in the assessable income of the taxpayer of a year of income or a deduction is not allowable or is not, in part, allowable, to the taxpayer in respect of a year of income;

                     (b)  in the opinion of the Commissioner, an amount of withholding tax has become payable and has been paid in respect of interest or royalties paid to a taxpayer (in this subsection referred to as the relevant taxpayer), being withholding tax that would not have become payable if the property had been supplied or acquired by the first‑mentioned taxpayer under an agreement between independent parties dealing at arm’s length with each other in relation to the supply or acquisition; and

                     (c)  in the opinion of the Commissioner, it is fair and reasonable that that amount of withholding tax or part of that amount of withholding tax should not have become payable by the relevant taxpayer;

the Commissioner may determine that that amount of withholding tax or that part of that amount of withholding tax, as the case may be, should not have become payable by the relevant taxpayer and the Commissioner shall take such action as he considers necessary to give effect to any such determination.

             (4)  Where, at any time, a taxpayer considers that the Commissioner ought to make a determination under subsection (1) or (3) in relation to the taxpayer, the taxpayer may post to or lodge with the Commissioner a request in writing for the making by the Commissioner of a determination under the subsection concerned.

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

             (6)  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.


 

Division 13AEmployee share schemes

Subdivision AKey principle and overview of Division

139  The key principle

This Division provides for the taxation treatment of shares and rights acquired under employee share schemes.

Any discount from the market price of the shares or rights is assessable. However, 2 alternative concessions are available for shares or rights provided under schemes that satisfy certain requirements.

The first concession is that the discount will not be included in the employee’s assessable income until a later year of income.

The second concession is that the employee may make an election that reduces the amount assessed. Additional requirements must be satisfied to obtain this concession.

139A  Overview of Division

                   The following table summarises the contents of this Division:

 

OVERVIEW

Subdivision

Coverage

A

Key principle and overview

B

The basic requirement that the discount be included in assessable income

C

Key concepts: employee share scheme, discount, cessation time, qualifying shares, qualifying rights and exemption conditions

D

Special provisions

DA

Takeovers and restructures

DB

Stapled securities

E

Elections

F

Special provisions about the market value of a share or right

G

Definitions (including a list of all terms defined in the Division)

Subdivision BInclusion of discount in assessable income

139B  Discount to be included in assessable income

             (1)  If a taxpayer has acquired a share or right under an employee share scheme, the assessable income of the taxpayer includes the discount given in relation to the share or right.

Note:          Employee share scheme is defined in section 139C.

          (1A)  However, for any period during which the taxpayer is a non‑resident, the discount is not included under subsection (1) in the assessable income of the taxpayer to the extent that the discount is given in respect of, or for or in relation directly or indirectly to, the taxpayer’s engagement in foreign service that relates to the acquisition of the share or right.

Note:          Foreign service is defined in section 139GBA.

When the discount is to be included

             (2)  Unless subsection (2A) or (3) applies, the discount is included in the taxpayer’s assessable income of the year of income in which the share or right is acquired.

          (2A)  Unless subsection (3) applies, if the taxpayer:

                     (a)  acquired the share or right while the taxpayer was not an employee; and

                     (b)  subsequently became an employee while holding the share or right;

the discount is included in the taxpayer’s assessable income in the year of income in which, after the acquisition, the taxpayer first becomes an employee in respect of employment or services that affect the acquisition or holding of the share or right.

Note:          Subsection 139GA(2) limits the meaning of employee in this subsection, so that engagement in foreign service is not of itself sufficient.

             (3)  If the share or right is a qualifying share or right and the taxpayer has not made an election under section 139E covering the share or right, the discount is included in the taxpayer’s assessable income of the year of income in which the cessation time (see sections 139CA and 139CB) occurs.

139BA  Reduction of amounts included—elections

             (1)  This section applies if a taxpayer has made an election under section 139E for a year of income and the exemption conditions (see section 139CE) are satisfied in relation to shares or rights covered by the election. It applies to the total amount otherwise included in a taxpayer’s assessable income for the year of income under section 139B in respect of those shares or rights.

             (2)  The total amount is only included in the assessable income to the extent that it is greater than $1,000.

Subdivision CKey concepts: employee share scheme, discount, cessation time, qualifying shares and rights and exemption conditions

139C  Employee share schemes

             (1)  A taxpayer acquires a share or right under an employee share scheme if the share or right is acquired by the taxpayer in respect of, or for or in relation directly or indirectly to, any employment of the taxpayer or an associate of the taxpayer.

             (2)  A taxpayer acquires a share or right under an employee share scheme if the share or right is acquired by the taxpayer in respect of, or for or in relation directly or indirectly to, any services provided by the taxpayer or an associate of the taxpayer.

             (3)  The taxpayer does not acquire a share or right under an employee share scheme if the consideration for the acquisition is equal to, or more than, the market value of the share or right at the time that it is acquired.

             (4)  The taxpayer does not (except for the purposes of Subdivision DA) acquire a share under an employee share scheme if the taxpayer acquires the share as the result of exercising a right that the taxpayer acquired under an employee share scheme.

             (5)  The taxpayer does not acquire a share or right under an employee share scheme if the taxpayer is the trustee of a trust whose sole activities are obtaining shares, or rights to acquire shares, and providing those shares or rights to employees of a company or to associates of those employees.

139CA  Cessation time—shares

             (1)  The cessation time for a share is the time when the taxpayer acquires the share if:

                     (a)  there is no restriction preventing the taxpayer from disposing of the share before a particular time; and

                     (b)  the scheme under which the share was acquired did not have any conditions that could result in the taxpayer forfeiting ownership of the share.

             (2)  If subsection (1) does not apply, the cessation time for a share is the earliest of the following:

                     (a)  the time when the taxpayer disposes of the share;

                     (b)  subject to subsection (4), the later of:

                              (i)  the time when any restriction preventing the taxpayer from disposing of the share ceases to have effect; and

                             (ii)  the time when any condition that could result in the taxpayer forfeiting ownership of shares ceases to have effect;

                     (c)  the time when the employment in respect of which the share was acquired ceases;

                     (d)  the end of the 10 year period starting when the taxpayer acquired the share.

             (3)  For the purposes of subsection (2), a taxpayer only ceases the employment in respect of which the share was acquired when the taxpayer is no longer employed by any of the following:

                     (a)  the employer of the taxpayer in that employment;

                     (b)  a holding company of the employer;

                     (c)  a subsidiary of the employer or of a holding company of the employer.

             (4)  Paragraph (2)(b) does not apply in relation to a share that, because of section 139DQ, is treated, for the purposes of this Division, as if it were a continuation of a share acquired under an employee share scheme.

Note:          Subdivision DA can affect whether the taxpayer is treated as having disposed of a share or ceased employment.

139CB  Cessation time—rights

             (1)  The cessation time for a right is the earliest of the following:

                     (a)  the time when the taxpayer disposes of the right (other than by exercising it);

                     (b)  the time when the employment in respect of which the right was acquired ceases;

                     (c)  subject to subsection (3), if the right is exercised and there is a restriction preventing the taxpayer from disposing of the share acquired as a result of the exercise of the right or a condition that could result in the taxpayer forfeiting ownership of the share—the time when the last such restriction or condition ceases to have effect;

                     (d)  subject to subsection (3), if the right is exercised and there is no such restriction or condition—the time when the right is exercised;

                   (da)  if subsection (3) applies—the time when the taxpayer disposes of the share referred to in paragraph (3)(b);

                     (e)  the end of the 10 year period starting when the taxpayer acquired the right.

             (2)  For the purposes of subsection (1), a taxpayer only ceases the employment in respect of which the right was acquired when the taxpayer is no longer employed by any of the following:

                     (a)  the employer of the taxpayer in that employment;

                     (b)  a holding company of the employer;

                     (c)  a subsidiary of the employer or of a holding company of the employer.

Note:          Subdivision DA can affect whether the taxpayer is treated as having disposed of a right or ceased employment.

             (3)  Paragraphs (1)(c) and (d) do not apply in relation to a right if:

                     (a)  a share has been or is acquired as a result of the exercise of the right; and

                     (b)  because of section 139DQ, another share is treated, for the purposes of this Division, as if it were a continuation of that share.

139CC  Calculation of discount

             (1)  This section sets out how to calculate the discount given in relation to a share or right.

Case 1—discount covered by subsection 139B(2) or (2A)

             (2)  If subsection 139B(2) or (2A) applies to the discount, the discount is the market value of the share or right at the time when it was acquired by the taxpayer less any consideration paid or given by the taxpayer as consideration for the acquisition of the share or right.

Case 2—discount covered by subsection 139B(3)—share or right disposed of at arm’s length within 30 days

             (3)  If subsection 139B(3) applies to the discount, and the share or right (or any share acquired as a result of the exercise of the right) is disposed of by the taxpayer in an arm’s length transaction at the cessation time or within 30 days after the cessation time, the discount is:

                     (a)  the amount or value of any consideration received by the taxpayer for the disposal;

reduced by:

                     (b)  the amount or value of any consideration paid or given by the taxpayer as consideration for the acquisition of the share or right; and

                     (c)  for a right that has been exercised—the amount or value of any consideration paid or given to exercise the right.

Case 3—discount covered by subsection 139B(3)—share or right not disposed of at arm’s length within 30 days

             (4)  If subsection 139B(3) applies to the discount, and the share or right (or any share acquired as a result of the exercise of the right) is not disposed of by the taxpayer in an arm’s length transaction at the cessation time or within 30 days after the cessation time, the discount is:

                     (a)  the market value of the share or right (or the share acquired as a result of the exercise of the right) at the cessation time;

reduced by:

                     (b)  the amount of any consideration paid or given by the taxpayer as consideration for the acquisition of the share or right; and

                     (c)  for a right that has been exercised—the amount of any consideration paid or given by the taxpayer to exercise the right.

Note:          Section 139DS can affect the amount of consideration that the taxpayer is treated as having paid or given.

139CD  Meaning of qualifying shares and qualifying rights

             (1)  For the purposes of this Division:

                     (a)  a share in a company is a qualifying share if:

                              (i)  the 6 conditions below are satisfied; and

                             (ii)  in the case of a share that a taxpayer has acquired while engaged in foreign service—section 139CDA applies to the share; and

                     (b)  a right to acquire a share in a company is a qualifying right if:

                              (i)  the first, second, third, fifth and sixth of the 6 conditions below are satisfied; and

                             (ii)  in the case of a right that a taxpayer has acquired while engaged in foreign service—section 139CDA applies to the right.

Note 1:       Section 139DF excludes certain shares from being qualifying shares.

Note 2:       Foreign service is defined in section 139GBA.

             (2)  The first condition is that the share or right is acquired by a taxpayer under an employee share scheme.

             (3)  The second condition is that the company is the employer of the taxpayer or a holding company of the employer of the taxpayer.

             (4)  The third condition is that all the shares available for acquisition under the scheme are ordinary shares and all the rights available for acquisition under the scheme are rights to acquire ordinary shares.

             (5)  The fourth condition is that, at the time the share was acquired, at least 75% of the permanent employees of the employer were, or at some earlier time had been, entitled to acquire:

                     (a)  shares or rights under the scheme; or

                     (b)  shares or rights in the employer, or a holding company of the employer, under another employee share scheme.

             (6)  The fifth condition is that, immediately after the acquisition of the share or right, the taxpayer does not hold a legal or beneficial interest in more than 5% of the shares in the company.

             (7)  The sixth condition is that, immediately after the acquisition of the share or right, the taxpayer is not in a position to cast, or control the casting of, more than 5% of the maximum number of votes that might be cast at a general meeting of the company.

             (8)  The Commissioner may determine that the fourth condition (see subsection (5)) is taken to have been satisfied in relation to a share if the Commissioner considers that the employer has done everything reasonably practicable to ensure that the condition was satisfied.

139CDA  Additional requirement for shares or rights acquired while engaged in foreign service

                   This section applies to a share in a company, or a right to acquire a share in a company, if the taxpayer in question first becomes an employee, in respect of employment or services that affect the acquisition or holding of the share or right, before the cessation time for the share or right.

Note:          Subsection 139GA(2) limits the meaning of employee in this section, so that engagement in foreign service is not of itself sufficient.

139CE  Exemption conditions

             (1)  This section sets out the 3 exemption conditions that, subject to subsection (3A), must be satisfied for section 139BA to apply to a share or right acquired under an employee share scheme.

             (2)  The first condition is that the scheme did not have any conditions that could result in any recipient forfeiting ownership of shares or rights acquired under it.

             (3)  The second condition is that the scheme was operated so that no recipient would be permitted to dispose of a share or right (the scheme share or scheme right) acquired under it, or of a share acquired as a result of a scheme right, before the earlier of the following times:

                     (a)  the end of the period of 3 years after the time of the acquisition of the scheme share or scheme right;

                     (b)  the time when the taxpayer ceased, or first ceased, to be employed by the employer.

          (3A)  Subsection (3) does not apply in relation to a share or right that, because of section 139DQ, is treated, for the purposes of this Division, as if it were a continuation of a share or right acquired under an employee share scheme.

             (4)  The third condition is that both the employee share scheme and any scheme for the provision of financial assistance in respect of acquisitions of shares or rights under the employee share scheme are operated on a non‑discriminatory basis (see section 139GF).

             (5)  For the purposes of subsection (3), a taxpayer only ceases the employment in respect of which the share or right was acquired when the taxpayer is no longer employed by any of the following:

                     (a)  the employer of the taxpayer in that employment;

                     (b)  a holding company of the employer;

                     (c)  a subsidiary of the employer or of a holding company of the employer.

Subdivision DSpecial provisions

139D  Discount assessable to associate if share acquired by taxpayer in respect of associate’s employment

             (1)  This section applies if:

                     (a)  a taxpayer has acquired a share or right under an employee share scheme; and

                     (b)  the share or right was acquired by the taxpayer in respect of, or for or in relation directly or indirectly to, any employment of, or services rendered by, an associate of the taxpayer; and

                     (c)  apart from this section, an amount:

                              (i)  would be included in respect of the acquisition in the assessable income of the taxpayer of a year of income under this Division; or

                             (ii)  would have been so included if the taxpayer had been a resident at the time of the acquisition.

             (2)  Subject to subsection (3), if this section applies, the amount is included in the associate’s assessable income of the year of income instead of in the taxpayer’s assessable income.

             (3)  If:

                     (a)  this section applies; and

                     (b)  the taxpayer acquired the share or right while the associate was not an employee; and

                     (c)  the associate subsequently became an employee while the taxpayer was holding the share or right;

the amount is included in the associate’s assessable income in the year of income in which, after the acquisition, the associate first becomes an employee in respect of employment or services that affect the acquisition or holding of the share or right.

Note:          Subsection 139GA(2) limits the meaning of employee in this subsection, so that engagement in foreign service is not of itself sufficient.

139DA  Acquisition of legal interest in shares or rights—certain discounts not assessable

                   If:

                     (a)  a taxpayer has acquired the legal interest in a share or right; and

                     (b)  the taxpayer, or an associate of the taxpayer, is required to include an amount under section 139B in the taxpayer’s or the associate’s assessable income as a result of the acquisition; and

                     (c)  the taxpayer, or the associate, is, or would apart from section 139BA be, required to include an amount under section 139B in his or her assessable income as a result of the acquisition of the beneficial interest in the share or right;

the taxpayer, or the associate, is not required to include the amount mentioned in paragraph (b).

139DB  No deduction until share or right acquired

                   If, at a particular time, a person (the provider) provides another person with money or other property:

                     (a)  under an arrangement; and

                     (b)  for the purpose of enabling another person (the ultimate beneficiary) to acquire, directly or indirectly, a share or right, under an employee share scheme;

then, for the purpose of determining when any deduction is allowable to the provider in respect of provision of the money or other property, the provider is taken to have provided it not before the time when the ultimate beneficiary acquires the share or right.

Note:          The amount included in assessable income for the acquisition of an interest in a share is the same as for the acquisition of the share—see Subdivision F and section 139G.

139DC  Deduction for provider of certain qualifying shares or rights

             (1)  A taxpayer is entitled to an allowable deduction in the taxpayer’s assessment in respect of income of a year of income (the benefit year) if the taxpayer provides one or more qualifying shares or qualifying rights to another person in the benefit year that satisfy the following conditions:

                     (a)  the exemption conditions (see section 139CE);

                     (b)  the condition that no amount has been allowed, is allowable, or will be allowable, as a deduction in the assessment of the taxpayer in respect of income of any year of income in respect of expenditure incurred in providing the share or right.

             (2)  The amount of the deduction in respect of the shares or rights provided by the taxpayer to the person in the benefit year is the lesser of:

                     (a)  $1,000; and

                     (b)  the sum of the market values, at the time that the share or right is provided, of each qualifying share or qualifying right that satisfies the conditions in subsection (1) reduced by the sum of any amounts paid by the person as consideration for those shares or rights.

Note:          Only one deduction is allowable under this section in respect of each person to whom the taxpayer provided shares or rights in a year.

139DD  No benefit where rights lost

             (1)  For the purposes of this Division, a right to acquire a share in a company is never acquired by a taxpayer if the following 2 requirements are satisfied.

             (2)  The first requirement is that the taxpayer loses the right without having exercised it.

          (2A)  To avoid doubt:

                     (a)  the taxpayer does not lose the right if, because of section 139DQ, another right is treated, for the purposes of this Division, as if it were a continuation of that right; but

                     (b)  the taxpayer loses the right if the taxpayer loses the other right without having exercised it.

             (3)  The second requirement is that the company was, at the time the right was acquired, the employer of the taxpayer or a holding company of the employer of the taxpayer.

          (3A)  To avoid doubt, the company does not cease to be the employer of the taxpayer or a holding company of the employer of the taxpayer if, because of section 139DQ, the taxpayer’s employment by another company is treated, for the purposes of this Division, as if it were a continuation of that employment.

          (3B)  If, but for subsection 139DR(2), rights acquired by the taxpayer would, because of section 139DQ, be treated for the purposes of this Division as a continuation of other rights, the rights are to be treated for the purposes of this section as if they were a continuation of the other rights.

             (4)  Section 170 does not prevent the amendment of an assessment at any time for the purpose of giving effect to this section.

139DE  Amount not assessable under other provisions

                   Section 21A of this Act and section 15‑2 of the Income Tax Assessment Act 1997 do not apply to:

                     (a)  a share or right that a taxpayer acquires under an employee share scheme; or

                     (b)  any share acquired by a taxpayer as a result of a right covered by paragraph (a).

139DF  Anti‑avoidance—certain shares and rights not qualifying shares and qualifying rights

             (1)  Despite any other provision of this Part, a share in a company, or a right to acquire a share in a company, acquired by a taxpayer is not a qualifying share or right if:

                     (a)  the predominant business of the company (whether or not stated in its constituent documents) is the acquisition, sale or holding of shares, securities or other investments (whether directly or indirectly through one or more companies, partnerships or trusts); and

                     (b)  the taxpayer is employed by the company and is also employed by another company; and

                     (c)  the company and the other company are members of the same company group.

             (2)  A company is a member of the same company group as another company if one of the companies is a holding company of the other or if another company is a holding company of both companies.

139DG  Amendment of assessments to account for reductions of amounts included in assessable income

             (1)  If:

                     (a)  an amount has been included in a taxpayer’s assessable income of a particular year of income; and

                     (b)  that amount is reduced or increased because of a change in the extent (if any) of the application of section 23AF or 23AG or subsection 139B(1A) in relation to the amount during a subsequent year of income;

section 170 does not prevent the amendment of an assessment, for the purpose of giving effect to the reduction or increase, at any time during the period of 4 years starting immediately after the income year during which the period of employment or service relating to the acquisition of the share or right in question ends.

             (2)  In paragraph (1)(b):

                     (a)  the reference to an amount being reduced includes a reference to the amount being reduced to a nil amount; and

                     (b)  the reference to an amount being increased includes a reference to the amount being increased from a nil amount.

Subdivision DATakeovers and restructures

139DP  Object of this Subdivision

                   The object of this Subdivision is to allow this Division to continue to apply, in appropriate circumstances, to 100% takeovers or restructures of companies that have employee share schemes.

139DQ  The effect of 100% takeovers and restructures on employee share schemes

Treating acquisitions as continuations of existing shares etc.

             (1)  To the extent that:

                     (a)  a taxpayer acquires:

                              (i)  shares in a company (the new company) that can reasonably be regarded as matching shares in another company (the old company) that the taxpayer had acquired under an employee share scheme; or

                             (ii)  rights in a company (the new company) that can reasonably be regarded as matching rights in another company (the old company) that the taxpayer had acquired under an employee share scheme; and

                     (b)  the acquisition occurs in connection with a 100% takeover, or a restructure, of the old company; and

                     (c)  as a result of the takeover or restructure, the taxpayer ceased to hold the shares or rights in the old company;

then, if the conditions in section 139DR are met, the matching shares or rights are treated, for the purposes of this Division and Subdivision 768‑R of the Income Tax Assessment Act 1997, as if they were a continuation of the shares or rights in the old company.

Note:          In determining to what extent something can reasonably be regarded as matching shares or rights in the old company, one of the factors to consider is the respective market values of that thing and of those shares or rights.

Treating acquisitions as disposals of existing shares etc.

             (2)  However, to the extent that, in connection with the takeover or restructure, the taxpayer acquires anything that:

                     (a)  can reasonably be regarded as matching shares or rights in the old company that the taxpayer had acquired under an employee share scheme; but

                     (b)  is not a matching share or right to which subsection (1) applies;

the taxpayer is treated, for the purposes of this Division and Subdivision 768‑R of the Income Tax Assessment Act 1997, as having disposed of shares, or disposed of rights (other than by exercising them), that the taxpayer held, under an employee share scheme, in the old company immediately before the takeover or restructure.

Treating new employment as continuation of existing employment

             (3)  If subsection (1) applies, any employment of the taxpayer in:

                     (a)  the new company; or

                     (b)  a holding company of the new company; or

                     (c)  a subsidiary of the new company or of a holding company of the new company;

is treated, for the purposes of this Division and Subdivision 768‑R of the Income Tax Assessment Act 1997, as a continuation of the employment in respect of which he or she acquired the shares or rights in the old company or in a subsidiary of the old company.

139DR  Conditions for the continuation of shares or rights

             (1)  The first condition is that, immediately before the takeover or restructure, the taxpayer held shares or rights in the old company under an employee share scheme.

             (2)  The second condition is that, if the taxpayer has not made an election under section 139E covering the share or right, the taxpayer is, at or about the time the taxpayer acquires the matching shares or rights, an employee of:

                     (a)  the new company; or

                     (b)  a holding company of the new company; or

                     (c)  a subsidiary of the new company or of a holding company of the new company.

             (3)  The third condition is that:

                     (a)  to the extent that the matching shares or rights are shares, they are ordinary shares; or

                     (b)  to the extent that the matching shares or rights are rights, they are rights to acquire ordinary shares.

             (5)  The fourth condition is that, at the time the taxpayer acquires the matching shares or rights, the taxpayer does not hold a legal or beneficial interest in more than 5% of the shares of the new company.

             (6)  The fifth condition is that, at that time, the taxpayer is not in a position to cast, or control the casting of, more than 5% of the maximum number of votes that may be cast at a general meeting of the new company.

139DS  Apportionment rules

             (1)  If:

                     (a)  subsection 139DQ(1) applies to shares or rights that the taxpayer has acquired; and

                     (b)  the taxpayer had paid or given consideration (the original consideration) for an acquisition, under an employee share scheme, of any of the shares or rights in the old company (the original shares or rights);

the taxpayer is treated as having paid or given, for any of the apportionable assets for the original shares or rights, consideration of an amount worked out by spreading the original consideration proportionately among all the apportionable assets according to their market values immediately after the takeover or restructure.

Note:          Subsection 139FA(4) alters the meaning of market value of a share or right for the purposes of this section.

             (2)  The apportionable assets for the original shares or rights are:

                     (a)  all matching shares or rights held by the taxpayer that are treated because of this Division as a continuation of the original shares or rights; and

                     (b)  anything else that the taxpayer acquired in connection with the takeover or restructure and that can reasonably be regarded as matching the original shares or rights; and

                     (c)  in the case of a restructure—any shares or rights in the old company that the taxpayer held immediately before, and continues to hold immediately after, the restructure and that can reasonably be regarded as matching the original shares or rights.

Subdivision DBStapled securities

139DSA  Object of this Subdivision

                   The object of this Subdivision is to allow this Division to apply to stapled securities that include an ordinary share and are listed for quotation on the stock market operated by ASX Limited, and to rights to acquire such stapled securities.

139DSB  Application of Division to stapled securities

             (1)  This Division (except this Subdivision) applies, with the modifications set out in this Subdivision, in relation to a stapled security in the same way as it applies in relation to a share (including an ordinary share) in a company.

Note 1:       For the definition of stapled security, see subsection 139GCD(1).

Note 2:       This means the Division also applies to rights to acquire a stapled security in the same way it applies to rights to acquire a share.

Example:    Subsection 139CD(4) will be satisfied if all the securities available for acquisition under the scheme are stapled securities, and all the rights available for acquisition are rights to acquire stapled securities.

             (2)  For the purposes of the application of this Division (except this Subdivision) in relation to a stapled security or right to acquire a stapled security, a company, the shares in which are the subject of this Division, is taken to include (as part of the company) each stapled entity for the stapled security.

Note 1:       For the definition of stapled entity, see subsection 139GCD(2).

Note 2:       There are some modifications to this rule in this Subdivision.

Note 3:       This rule has the effect that the company is treated as having all the interests in another entity that stapled entities for the stapled security have.

Example:    The condition in subsection 139CD(3) will be satisfied if the company would be a holding company of the employer if all those stapled entities’ interests in the employer were counted together.

139DSC  Discount not to be included in assessable income unless stapled security or right is qualifying

                   Section 139B includes a discount given in relation to a stapled security or right to acquire a stapled security in the assessable income of the taxpayer only if the stapled security or right to acquire a stapled security is treated as a qualifying share or qualifying right because of this Subdivision.

139DSD  Division does not also apply to share part of stapled security

             (1)  If a stapled security or right to acquire a stapled security is treated as a qualifying share or qualifying right because of this Subdivision, this Division does not also apply separately in relation to a share that is a part of the stapled security.

             (2)  However, if a stapled security is not treated as a qualifying share because of this Subdivision, the rest of this Division applies separately in relation to each share that is a part of the stapled security. To avoid doubt, section 139DSC does not prevent a discount given in relation to such a share from being included in the assessable income of a taxpayer.

139DSE  Modifications relating to employment

Proportion of permanent employees of employer

             (1)  Subsection 139DSB(2) does not affect a provision setting out a condition relating to a specified proportion of the permanent employees of a stapled entity that is the employer.

Example:    In applying subsection 139CD(5), the employer of the taxpayer is not taken to include any other stapled entities. The condition in that subsection will be satisfied if it is satisfied for the employing entity alone.

             (2)  The reference in paragraph 139CD(5)(b) to a holding company of an employer includes a reference to the stapled entities for the stapled security if:

                     (a)  the employer is not a stapled entity for the stapled security; and

                     (b)  a company that included the stapled entities as parts of the company would be a holding company of the employer.

Cessation of employment

             (3)  For the purposes of working out the time when a taxpayer ceases to be employed by the employer of the taxpayer, that employer is taken to include (as part of it) each other stapled entity for the stapled security.

Note:          This rule affects the operation of subsections 139CA(2), 139CB(1) and 139CE(3).

139DSF  Modification relating to legal or beneficial interest

                   A taxpayer is taken to satisfy a condition that the taxpayer not hold a legal or beneficial interest in more than 5% of the shares in a company at a time only if the taxpayer does not hold a legal or beneficial interest in more than 5% of any of the following at that time:

                     (a)  the shares in any company that is a stapled entity for the stapled security;

                     (b)  the units in any unit trust that is a stapled entity for the stapled security.

Note:          This rule affects the operation of subsections 139CD(6) and 139DR(5).

139DSG  Modification relating to voting rights

                   A taxpayer is taken to satisfy a condition that the taxpayer not be in a position to cast, or control the casting of, more than 5% of the maximum number of votes that might be cast at a general meeting of a company only if the taxpayer is not in a position to control the casting of more than 5% of the maximum number of votes that might be cast at a general meeting of:

                     (a)  a company that is a stapled entity for the stapled security because an ordinary share in the company is part of the stapled security; or

                     (b)  if more than one company is a stapled entity for the stapled security because an ordinary share in the company is part of the stapled security—each of those companies.

Note:          This rule affects the operation of subsections 139CD(7) and 139DR(6).

139DSH  Cessation time when stapling arrangement ceases

                   The cessation time for a stapled security or right to acquire a stapled security is the earlier of:

                     (a)  the time when any of the interests forming the stapled security cease to be stapled together; and

                     (b)  the time when the stapled security ceases to be listed for quotation in the official list of ASX Limited;

if that time is earlier than:

                     (c)  in the case of a stapled security where subsection 139CA(1) does not apply—the earliest time when an event described in any of paragraphs 139CA(2)(a) to (d) happens; and

                     (d)  in the case of a right to acquire a stapled security—the earliest time when an event described in any of paragraphs 139CB(1)(a) to (e) happens.

Note:          The times mentioned in paragraphs (a) and (b) are additional to the times mentioned in subsections 139CA(2) and 139CB(1). The actual cessation time is the time that is the earliest, unless subsection 139CA(1) applies (when the cessation time is the time of acquisition).

139DSI  Deduction to be apportioned

             (1)  If a stapled security is jointly provided by 2 or more taxpayers to another person in a year of income, each of those taxpayers is entitled to an allowable deduction in respect of income of the year of income under section 139DC if, because of this Subdivision:

                     (a)  the stapled security is treated as a qualifying share; and

                     (b)  the conditions in subsection 139DC(1) are satisfied for the stapled security.

             (2)  The amount of the deduction worked out under subsection 139DC(2) in respect of the stapled security must be apportioned between each of the taxpayers on a reasonable basis.

Subdivision EElections

139E  Taxpayer may make election

             (1)  A taxpayer may make an election under this section that subsection 139B(2) applies for a year of income. The election covers each qualifying share or qualifying right acquired in that year (the acquisition year) by the taxpayer.

             (2)  An election under subsection (1) in relation to each such share or right must be made in the taxpayer’s return of income for the acquisition year.

          (2A)  The Commissioner may, after receiving a request made by the taxpayer in the approved form, allow the election to be made at a later time.

          (2B)  This Act applies to a taxpayer as if the taxpayer had made an election under subsection (1) for a year of income if:

                     (a)  the total discount for the taxpayer for the year of income is $1,000 or less; and

                     (b)  the exemption conditions (see section 139CE) are satisfied in relation to the relevant shares or rights.

             (3)  If:

                     (a)  a taxpayer becomes an employee during a year of income (the employment year); and

                     (b)  before the employment year, the taxpayer had acquired a qualifying share or qualifying right, being an acquisition that occurred:

                              (i)  while the taxpayer was not an employee; and

                             (ii)  after the year of income (if any) in which the taxpayer last became an employee;

the taxpayer may make an election under this section that subsection 139B(2A) applies for each of the years of income before the employment year and after the year referred to in paragraph (b). The election covers each qualifying share or qualifying right acquired in any of those years by the taxpayer.

Note:          Subsection 139GA(2) limits the meaning of employee in this subsection, so that engagement in foreign service is not of itself sufficient.

             (4)  An election under subsection (3) must be made in the taxpayer’s return of income for the employment year.

             (5)  The Commissioner may, after receiving a request made by the taxpayer in the approved form, allow the election to be made at a later time.

Subdivision FSpecial provisions about the market value of a share or right

139F  Meaning of market value of a share or right

                   This Subdivision sets out how to determine the market value of a share or right to acquire a share on a particular day.

139FA  Listed shares or rights—market value

             (1)  If the share or right is quoted on a stock market of an approved stock exchange on that day, the market value is:

                     (a)  if there was at least one transaction on that stock market in shares or rights of that class during the one week period up to and including that day—the weighted average of the prices at which those shares or rights were traded on that stock market during the one week period up to and including that day; or

                     (b)  if there were no transactions on that stock market in that one week period in such shares and rights:

                              (i)  the last price at which an offer was made on that stock market in that period to buy such a share or right; or

                             (ii)  if, in the case of a share, no such offer has been made—the value of the share that would have been determined under section 139FB if that section applied to the share; or

                            (iii)  if, in the case of a right, no such offer has been made—the value of the right that would have been determined under section 139FC if that section applied to the right.

             (2)  If a share or right is quoted on 2 or more approved stock markets on that day, the market value is the value determined under subsection (1) in respect of whichever of those the taxpayer chooses.

             (3)  This section does not apply to a share if section 139FAA applies to the share.

             (4)  This section applies for the purposes of section 139DS as if references in this section to the one week period up to and including that day were references to the period consisting of that day.

139FAA  Listed shares—market value where public offer

             (1)  This section applies to a share in a company if:

                     (a)  the share is acquired within the period starting 7 days before and ending 7 days after the day on which shares are first acquired under a public offer of shares in the company; and

                     (b)  the following rights attached to the share are the same as those attached to the shares acquired under the public offer:

                              (i)  rights in respect of voting;

                             (ii)  rights in respect of dividends;

                            (iii)  rights in respect of distribution of share capital in consequence of a reduction of share capital;

                            (iv)  rights in respect of distribution of the property of the company in the event of the winding up of the company; and

                     (c)  there is at least one price at which shares were sold under the public offer that satisfies the following requirements:

                              (i)  1,000 Australian residents (other than residents who are employees of the company or who held shares in the company immediately before the offer was made) acquired shares at the price;

                             (ii)  the total cost of shares acquired by such Australian residents at the price was at least $1,000,000; and

                     (d)  the company has been a listed public company for at least 6 months immediately before the share is acquired.

However, this section does not apply if subsection 139CC(4) applies to the share.

             (2)  The market value of a share is the lowest price that satisfies the requirements of subparagraphs (1)(c)(i) and (ii) at which shares were sold under the public offer.

What is a public offer?

             (3)  A public offer of shares is an offer of shares in a company where:

                     (a)  the offer is by the company or by a person who, immediately before the offer is made, owns at least 20% of the shares with rights in respect of voting in the company; and

                     (b)  the offer is made to at least 10,000 Australian residents (other than residents who are employees of the company or who held shares in the company immediately before the offer was made).

139FB  Unlisted shares—market value

             (1)  If the share is not quoted on an approved stock exchange on that day, the market value is the arm’s length value of the share:

                     (a)  as specified in a written report, in a form approved by the Commissioner, given to the person from whom the taxpayer acquires the share by a person who is a qualified person in relation to valuing the share (see section 139FG); or

                     (b)  as calculated in accordance with any other method approved in writing by the Commissioner as a reasonable method of calculating the arm’s length value of unlisted shares.

Partly paid unlisted shares

             (2)  Without limiting the factors that must be taken into account in valuing, under paragraph (1)(a), a share that is partly paid, the qualified person must take into account:

                     (a)  the amount unpaid on the share; and

                     (b)  the amount and timing of future calls; and

                     (c)  rights to dividends that arise from holding the share.

139FC  Unlisted rights—market value

             (1)  If the right is not quoted on an approved stock exchange on that day, the market value is the greater of:

                     (a)  the market value, on the particular day, of the share that may be acquired by exercising the right, less the lowest amount that must be paid to exercise the right to acquire the share; and

whichever of the following applies:

                     (b)  if the right can not be exercised more than 10 years after the day when the right was acquired—subject to section 139FE, the value determined in accordance with regulations for the purpose of this paragraph or, if no such regulations are in force, the value determined in accordance with sections 139FJ to 139FN;

                     (c)  if the right can be exercised more than 10 years after the day when the right was acquired—the greater of:

                              (i)  the arm’s length value of the right as specified in a written report, in a form approved by the Commissioner, given to the person from whom the taxpayer acquires the right by a suitably qualified valuer; and

                             (ii)  the value that would have been determined under paragraph (b) if the right could be exercised 10 years after the particular day.

             (2)  In calculating, for the purpose of subsection (1), the market value of the share that may be acquired by exercising the right, subsection 139FAA(1) applies as if the share were acquired on the particular day.

139FD  Conditions and restrictions to be disregarded

                   In determining the market value of a share or right under section 139FB or 139FC, the share or right, and any share that may be acquired as a consequence of the exercise or operation of the right, is taken not to be subject to any conditions or restrictions.

139FE  Value of right nil or can not be determined

             (1)  If the lowest amount that must be paid to exercise a right to acquire a share is nil or can not be determined, the market value of the right on a particular day is the same as the market value of the share on that day.

             (2)  In calculating, for the purpose of subsection (1), the market value of the share that may be acquired by exercising the right, subsection 139FAA(1) applies as if the share were acquired on the particular day.

139FF  Value of legal and beneficial interests

                   To avoid doubt, if a person acquires either the beneficial interest or the legal interest in a share or right, the value that is applicable for the purposes of this Division is the value of the share or right, not the value of the interest in the share or right.

Notes:  1.   It is the value of the share or right that is relevant because the taxpayer is taken to have acquired the share or right—see section 139G.

             2.   Double taxation is avoided by section 139DA.

139FG  Meaning of qualified person

                   A person is a qualified person in relation to valuing a share in a company if the person is registered as a company auditor under a law in force in a State or a Territory, and is not:

                     (a)  a director, secretary or employee of the company; or

                     (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.

139FI  Provision of information about market value

                   If a taxpayer requests the person from whom he or she acquired a share or right to provide information necessary for the taxpayer to calculate the market value of the share or right at a particular time, the person must take all reasonable steps to provide that information within 60 days after the request.

139FJ  Outline of remainder of Subdivision

                   The remainder of this Subdivision sets out the method of calculating, for the purposes of paragraph 139FC(b), the market value, on a particular day, of a right to acquire a share.

139FK  Step 1—calculate the calculation percentage

             (1)  Apply the following formula. The result is the calculation percentage.

             (2)  In calculating, for the purpose of subsection (1), the market value of the share that is the subject of the right, subsection 139FAA(1) applies as if the share were acquired on the particular day.

139FL  Step 2—how to use calculation percentage

If calculation percentage is less than 50%

             (1)  If the calculation percentage is less than 50%, the market value of the right is nil.

If calculation percentage is equal to or greater than 50% but less than 110%

             (2)  If the calculation percentage is equal to, or greater than, 50% but less than 110%, go to the instructions for using Table 1 in section 139FM that are set out below that Table.

If calculation percentage is equal to or greater than 110%

             (3)  If the calculation percentage is equal to, or greater than, 110%, go to the instructions for using Table 2 in section 139FN that are set out below that Table.

139FM  Table 1 and instructions

Table 1

             (1)  The following is Table 1:

 

Calculation percentage

Exercise

 

 

 

 

 

 

 

 

period (months)

50% to 60%

60% to 70%

70% to 75%

75% to 80%

80% to 85%

85% to 90%

90% to 92.5%

92.5% to 95%

108 to 120

0.6%

2.1%

4.8%

6.7%

8.9%

11.4%

14.1%

15.5%

96 to 108

0.4%

1.5%

4.0%

5.8%

7.9%

10.3%

13.0%

14.5%

84 to 96

0.2%

1.1%

3.2%

4.8%

6.8%

9.2%

11.8%

13.3%

72 to 84

0.1%

0.7%

2.4%

3.8%

5.6%

7.9%

10.5%

11.9%

60 to 72

0.0%

0.4%

1.6%

2.8%

4.4%

6.5%

9.0%

10.4%

48 to 60

0.0%

0.1%

0.9%

1.8%

3.1%

4.9%

7.3%

8.6%

36 to 48

0.0%

0.0%

0.4%

0.9%

1.9%

3.3%

5.4%

6.6%

24 to 36

0.0%

0.0%

0.1%

0.3%

0.8%

1.8%

3.4%

4.4%

18 to 24

0.0%

0.0%

0.0%

0.1%

0.4%

1.0%

2.3%

3.2%

12 to 18

0.0%

0.0%

0.0%

0.0%

0.1%

0.4%

1.3%

2.0%

9 to 12

0.0%

0.0%

0.0%

0.0%

0.0%

0.2%

0.8%

1.3%

6 to 9

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.3%

0.7%

3 to 6

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.2%

0 to 3

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

 

 

Calculation percentage

Exercise
period (months)


95% to 97.5%


97.5% to 100%


100% to 102.5%


102.5% to 105%


105% to 107.5%


107.5% to 110%

108 to 120

16.9%

18.4%

20.0%

21.5%

23.1%

24.7%

96 to 108

15.9%

17.5%

19.0%

20.6%

22.2%

23.9%

84 to 96

14.8%

16.3%

17.9%

19.5%

21.2%

22.9%

72 to 84

13.4%

15.0%

16.6%

18.2%

19.9%

21.7%

60 to 72

11.8%

13.4%

15.0%

16.7%

18.5%

20.3%

48 to 60

10.1%

11.6%

13.2%

14.9%

16.7%

18.6%

36 to 48

8.0%

9.5%

11.1%

12.9%

14.7%

16.5%

24 to 36

5.7%

7.1%

8.7%

10.4%

12.2%

14.1%

18 to 24

4.4%

5.7%

7.2%

8.9%

10.8%

12.7%

12 to 18

2.9%

4.1%

5.6%

7.3%

9.1%

11.2%

9 to 12

2.2%

3.3%

4.7%

6.3%

8.2%

10.3%

6 to 9

1.4%

2.3%

3.6%

5.3%

7.2%

9.4%

3 to 6

0.5%

1.2%

2.4%

4.1%

6.1%

8.4%

0 to 3

0.1%

0.4%

1.3%

3.0%

5.3%

7.8%

 

Instructions for using Table 1

             (2)  From Table 1, select the percentage (the Table 1 percentage) that corresponds to:

                     (a)  the period, in months, from the particular day until the last day on which the right may be exercised (the exercise period); and

                     (b)  the calculation percentage;

and then multiply the amount, or lowest amount, that must be paid to exercise the right by the Table 1 percentage. The result is the market value of the right.

139FN  Table 2 and instructions

Table 2

             (1)  The following is Table 2:

 

Exercise period (months)

Column 1

Column 2

108 to 120

24.7%

0.6%

96 to 108

23.9%

0.6%

84 to 96

22.9%

0.7%

72 to 84

21.7%

0.7%

60 to 72

20.3%

0.7%

48 to 60

18.6%

0.7%

36 to 48

16.5%

 0.8%

24 to 36

14.1%

0.8%

18 to 24

12.7%

0.8%

12 to 18

11.2%

0.9%

9 to 12

10.3%

0.9%

6 to 9

9.4%

0.9%

3 to 6

8.4%

0.9%

0 to 3

7.8%

1.0%

Instructions for using Table 2—calculating the base percentage

             (2)  From column 1 of Table 2, select the percentage that corresponds to the period, in months, from the particular day until the last day on which the right may be exercised (the exercise period). This percentage is called the base percentage.

Instructions for using Table 2—calculating the additional percentage

             (3)  From column 2 of Table 2, select the percentage that corresponds to the exercise period. This percentage is called the additional percentage.

Instructions for using Table 2—calculating the excess

             (4)  Work out the result of the following formula. Disregard any fraction. The result is called the excess.

Instructions for using Table 2—calculating the market value

             (5)  The market value of the right is the amount worked out using the following formula:

Note:          If:

(a)           the exercise period; or

(b)           the calculation percentage in relation to a particular right;

                   is the top of one range in Table 1 or 2 and is also the bottom of another range in that Table, it is taken to be in the lower range and not in the higher range.

Subdivision GDefinitions

139G  Meaning of acquiring or providing a share or right

                   A person acquires a share or right if:

                     (a)  another person transfers the share or right to that person (other than, in the case of a share, by issuing the share to that person); or

                     (b)  in the case of a share—another person allots the share to that person; or

                     (c)  in the case of a right—another person creates the right in that person; or

                     (d)  the person otherwise acquires a legal interest in the share or right from another person; or

                     (e)  the person acquires a beneficial interest in the share or right from another person.

In those circumstances, the other person provides the share or right.

139GA  Meaning of employee and employer

             (1)  The expression employee means:

                     (a)  a person who receives, or is entitled to receive, work and income support related withholding payments and benefits; or

                     (b)  a person who is engaged in foreign service.

             (2)  However:

                     (a)  subsection (1) does not apply in relation to section 139GBA; and

                     (b)  paragraph (1)(b) does not apply in relation to subsection 139B(2A), section 139CDA or subsection 139D(3), 139E(3) or 139GB(1).

             (3)  The expression employer means:

                     (a)  a person who pays, or is liable to pay, work and income support related withholding payments and benefits; or

                     (b)  a person who engages another person in foreign service.

139GB  Meaning of permanent employee

             (1)  Subject to subsections (2) and (3), permanent employee of an employer is:

                     (a)  a full‑time employee of the employer; or

                     (b)  a permanent part‑time employee of the employer;

with at least 36 months service (whether continuous or non‑continuous).

Note:          Subsection 139GA(2) limits the meaning of employee in this subsection, so that engagement in foreign service is not of itself sufficient.

             (2)  A person is not a permanent employee of an employer that is a company at any time when the person is a director of the company.

             (3)  A person is not a permanent employee at any time when the person:

                     (a)  is a temporary resident within the meaning of the Income Tax Assessment Act 1997; or

                     (b)  is not a resident; or

                     (c)  is not physically present in Australia.

             (4)  For the purposes of subsection (1), the length of a person’s service includes any period when the person is, in accordance with the terms and conditions of that service:

                     (a)  absent on recreation leave; or

                     (b)  absent from work because of accident or illness.

             (5)  In paragraph (4)(a), recreation leave does not include:

                     (a)  long service leave, furlough, extended leave or leave of a similar kind (however described); or

                     (b)  leave without pay or on reduced pay.

139GBA  Meaning of foreign service

                   Foreign service is service in a foreign country as the holder of an office or in the capacity of an employee.

139GC  Meaning of holding company

                   The expression “holding company” has the same meaning as in the Corporations Act 2001.

139GCA  Meaning of subsidiary

                   The expression subsidiary has the same meaning as in the Corporations Act 2001.

139GCB  Meaning of 100% takeover

                   A 100% takeover of a company by another company is an arrangement that is intended to result in the company becoming a 100% subsidiary of the other company, or of a holding company or subsidiary of the other company.

139GCC  Meaning of restructure

                   A restructure of a company is a change in the ownership, or the structure of the ownership, of the company as a result of which some or all shares or rights held in the company under an employee share scheme immediately before the change:

                     (a)  are replaced; or

                     (b)  could reasonably be regarded as having been replaced;

wholly or partly by shares or rights in one or more other companies.

139GCD  Meaning of stapled security and stapled entity

             (1)  A security consisting of 2 or more interests is a stapled security if:

                     (a)  each interest is either a share in a company or a unit in a unit trust; and

                     (b)  at least one of the interests is an ordinary share; and

                     (c)  all the interests are stapled together; and

                     (d)  the security is listed for quotation in the official list of ASX Limited.

             (2)  A stapled entity for a stapled security is a company or a unit trust covered by subsection (1) for the stapled security.

139GD  Meaning of approved stock exchange

                   A stock exchange is an approved stock exchange if:

                     (a)  the stock exchange is named in regulations made for the purposes of this section; or

                     (b)  if no such regulations are in force—the stock exchange is an approved stock exchange within the meaning of Part XI.

139GE  Meaning of associate

                   The expression associate has the same meaning as it would have in section 318 if references in that section to subsection (1) included a reference to subsection (1A) and the following subsection were inserted before subsection (1):

          (1A)  For the purposes of this Part, if an entity holds (whether directly or indirectly through one or more interposed companies, partnerships or trusts) a share in a company, or a right to acquire a share in a company, the company is an associate of the entity.

139GF  Meaning of conducting a scheme on a non‑discriminatory basis

             (1)  This section sets out the conditions that must be satisfied for the employee share scheme mentioned in subsection 139CE(4) or a scheme for the provision of financial assistance in respect of acquisitions of shares or rights under the employee share scheme to be operated on a non‑discriminatory basis.

Non‑discriminatory employee share scheme

             (2)  The employee share scheme is operated on a non‑discriminatory basis if, and only if, the following conditions are satisfied in relation to all offers to acquire shares or rights under the scheme:

                     (a)  participation in the scheme is open to at least 75% of permanent employees of the employer;

                     (b)  the time for acceptance of each offer is reasonable;

                     (c)  the essential features of each offer are the same for at least 75% of permanent employees of the employer.

Essential features of offer

             (3)  The essential features of an offer for an employee share scheme are:

                     (a)  the consideration for the acquisition of the share or right concerned (whether that consideration is determined by reference to the value of the share or right or otherwise); and

                     (b)  the number of shares or rights, the minimum number of shares or rights or the maximum number of shares or rights, offered to each employee, as the case may be; and

                     (c)  the time for acceptance of the offer; and

                     (d)  the steps taken for the circulation of information about the offer.

Non‑discriminatory financial assistance schemes

             (4)  The scheme for the provision of financial assistance in respect of acquisitions of shares or rights under the employee share scheme is operated on a non‑discriminatory basis if, and only if, the following conditions are satisfied in relation to all financial assistance provided under the scheme:

                     (a)  the time for taking up each offer of assistance is reasonable;

                     (b)  the essential features of each offer of assistance are the same for at least 75% of permanent employees of the employer.

Essential features of offer of financial assistance

             (5)  The essential features of an offer of financial assistance are:

                     (a)  the terms and conditions of the offer; and

                     (b)  the amount, the minimum amount, or the maximum amount, of assistance offered to each employee, as the case may be.

             (6)  The Commissioner may determine that the condition mentioned in paragraph (2)(a), (2)(c) or (4)(b) is taken to have been satisfied in relation to a scheme if the Commissioner considers that the employer has done everything reasonably practicable to ensure that the condition was satisfied.

139GG  Meaning of provision of financial assistance

                   The expressionprovision of financial assistance” includes the making of a loan, giving of a guarantee, provision of security, release of an obligation and forgiving of a debt.

139GH  Index of definitions

                   The following table lists the definitions in this Division and shows their location:

 

Definition

Provision

100% takeover

139GCB

Acquiring a share or right

139G

Approved stock exchange

139GD

Associate

139GE

Cessation time‑rights

139CB

Cessation time‑shares

139CA

Discount

139CC

Employee

139GA

Employee share scheme

139C

Employer

139GA

Exemption conditions

139CE

Financial assistance

139GG

Foreign service

139GBA

Holding company

139GC

Market value of a share or right

Subdivision F

Non‑discriminatory schemes

139GF

Permanent employee

139GB

Providing a share or right

139G

Qualified person

139FG

Qualifying shares and qualifying rights

139CD

Restructure

139GCC

Stapled entity

139GCD

Stapled security

139GCD

Subsidiary

139GCA


 

Division 15Insurance with non‑residents

141  Interpretation

                   In this Division:

insurance contract means a contract or guarantee whereby liability is undertaken, contingent upon the happening of any specified event, to pay any money or make good any loss or damage, but does not include a contract of life assurance.

insured event means an event upon the happening of which the liability under an insurance contract arises.

insured person means a person with whom any insurance contract is entered into by an insurer.

insured property means the property the subject of an insurance contract made or given by an insurer.

insurer means any non‑resident who undertakes liability under an insurance contract.

142  Income derived by non‑resident insurer

             (1)  Where an insured person, whether a resident or non‑resident, has entered into an insurance contract with an insurer, and the insured property at the time of the making of the contract is situated in Australia, or the insured event is one which can happen only in Australia, the premium paid or payable under the contract shall be included in the assessable income of the insurer, and shall be deemed to be derived by him from sources in Australia, and, unless the contract was made by a principal office or branch established by the insurer in Australia, this Division shall apply to that premium.

             (2)  Where an insured person who is a resident has entered into an insurance contract with an insurer, and an agent or representative in Australia of the insurer was in any way instrumental in inducing the entry of the insured person into that contract, any premium paid or payable under the contract shall, wherever the insured property is situate, or the insured event may happen, be included in the assessable income of the insurer and shall be deemed to be derived by him from sources in Australia, and, unless the contract was made by a principal office or branch established by the insurer in Australia, this Division shall apply to that premium.

143  Taxable income of non‑resident insurer

                   The insurer shall be deemed to have derived in any year, in respect of the premiums paid or payable in that year under such contracts, a taxable income equal to 10% of the total amount of such premiums:

Provided that, where the actual profit or loss derived or made by the insurer in respect of such premiums is established to the satisfaction of the Commissioner, the taxable income of the insurer in respect thereof, or the amount of the loss so made by him shall, subject to this Act, be calculated by reference to receipts and expenditure taken into account in calculating that profit or loss.

144  Liability of agents of insurer

                   The insured person and any person in Australia acting on behalf of the insurer shall be the agents of the insurer, and shall be jointly and severally liable as such for all purposes of this Act. If either of those persons pays or credits to the insurer any amount in respect of the insurance contract before arrangements have been made to the satisfaction of the Commissioner for the payment of any income tax which has been or may be assessed under this Division in respect of that amount, that person shall be personally liable to pay that tax.

145  Deduction of premiums

                   Notwithstanding any other provision of this Act, no such premium shall be an allowable deduction to the insured person unless arrangements have been made to the satisfaction of the Commissioner for the payment of any income tax which has been or may be assessed in respect of that premium.

146  Exporter to furnish information

                   Every person who exports any goods from Australia shall furnish to the Collector of Customs for transmission to the Commissioner a copy of the customs entry for such goods, and shall show thereon such information as is prescribed regarding the insurance of such goods.

147  Rate of tax in special circumstances

                   Where the insurer satisfies the Commissioner that, on account of special circumstances, it is necessary that the rate of tax payable by him under this Division should be ascertained at the time when premiums are paid to him, the Commissioner may direct that the tax so payable in respect of premiums paid during any financial year shall be calculated at the rate which would have been payable if an assessment had been made in respect of those premiums at the date when they were paid.

148  Reinsurance with non‑residents

             (1)  Notwithstanding anything contained in this Act other than section 177F, but subject to this section, where a person carrying on the business of insurance in Australia reinsures out of Australia the whole or part of any risk with a non‑resident:

                     (a)  the premiums paid or credited in respect of the reinsurance shall not be:

                              (i)  an allowable deduction to the person carrying on the business of insurance in Australia; or

                             (ii)  included in the assessable income of the non‑resident; and

                     (b)  the income of the person carrying on the business of insurance in Australia shall not include sums recovered from that non‑resident in respect of a loss on any risk so reinsured.

             (2)  A person carrying on the business of insurance in Australia who reinsures out of Australia the whole or part of any risk with a non‑resident may elect, in accordance with this section, that the provisions of subsection (1) shall not be applied in arriving at his taxable income, and thereupon:

                     (a)  those provisions shall not apply in arriving at his taxable income of a year of income to which the election applies; and

                     (b)  that person shall be liable to furnish returns, and to pay tax, in accordance with the succeeding provisions of this section, as agent for all non‑residents with whom he so reinsures.

             (3)  Where a person makes an election under subsection (2), he shall, subject to subsection (5), be assessed and liable to pay tax as agent, on an amount equal to 10% of the sum of the gross amounts of the premiums paid or credited by him in the year of income (being a year of income to which the election applies) to non‑residents in respect of all such reinsurances, as if that amount were the taxable income of a non‑resident company (not being a private company) not carrying on business in Australia by means either of a principal office or a branch.

             (4)  A person who has made an election under this section shall, as agent, furnish to the Commissioner, within the prescribed time, or within such further time as the Commissioner allows, in respect of every year of income to which the election applies:

                     (a)  a return showing the gross amounts of the premiums paid or credited by him to non‑residents in respect of all such reinsurances; or

                     (b)  2 returns, of which:

                              (i)  one shall show the gross amounts of such premiums paid or credited by him to non‑residents which are companies; and

                             (ii)  the other shall show the gross amounts of such premiums paid or credited by him to non‑residents who are not companies.

             (5)  Where returns are furnished by a person in accordance with paragraph (4)(b), there shall be excluded from the amount on which that person shall be assessed and liable to pay tax as agent in pursuance of subsection (3) an amount equal to 10% of the sum of the gross premiums properly shown in the return specified in subparagraph (4)(b)(ii), and that person shall, in addition to any other tax which he is liable under this section to pay as agent, be assessed and liable to pay tax as agent on the amount so excluded as if it were the taxable income of a non‑resident company (being a private company) not carrying on business in Australia by means either of a principal office or a branch.

             (6)  An election for the purposes of this section shall:

                     (c)  be made on or before the last day for the furnishing of the taxpayer’s return of income of the year of income in respect of which the election is first to apply, or within such further time as the Commissioner allows;

                     (d)  first apply in respect of a year of income which shall be specified in the election; and

                     (e)  apply in respect of all subsequent years of income.

             (7)  An assessment for the purposes of subsection (3) or (5) shall be made and notified separately from any other assessment.

             (8)  Where a person is liable, in pursuance of an assessment for the purposes of this section, to pay tax, in respect of any premiums, as agent for more than one non‑resident, the amount which he shall be liable to pay as agent for any one of those non‑residents shall be so much of the tax so payable as bears to the whole of that tax the same proportion as the total amount of such of those premiums as were paid to that non‑resident bears to the total amount of those premiums.

             (9)  Where a person is or may become liable under this section to pay tax as agent for a non‑resident in respect of any premium paid or credited by him to that non‑resident:

                     (a)  he shall, for the purposes of section 254, be deemed to have received the premium in his representative capacity immediately before it was so paid or credited; and

                     (b)  if he pays or credits the premium before arrangements have been made to the satisfaction of the Commissioner for the payment of any tax which may be assessed in respect of that premium, he shall be personally liable to pay that tax.

Application to a life assurance company

           (10)  This section applies to a life assurance company in relation to the whole or a part of a risk if, and only if, the risk or that part of the risk:

                     (a)  is covered by a disability policy as defined in subsection 995‑1(1) of the Income Tax Assessment Act 1997; and

                     (b)  relates to a benefit that is payable in an event mentioned in that definition.

Division 16Averaging of incomes

149  Average income

             (1)  For the purposes of the application of this Division in relation to a taxpayer in relation to a year of income, a reference in this Division to the average income of the taxpayer shall be construed as a reference to the average of the taxable incomes of the taxpayer of the years of income (in this Division referred to as average years) beginning with the first average year and ending with the first‑mentioned year of income.

149A  Capital gains, abnormal income and certain death benefits to be disregarded

             (1)  For the purposes of this Division (including the purpose of determining whether this Division applies to the income of a taxpayer):

                     (a)  references in this Division to the assessable income of a taxpayer shall be read as references to the amount that would have been the assessable income if the assessable income did not include any net capital gain and did not include any amount under section 82‑65, 82‑70 or 302‑145 of the Income Tax Assessment Act 1997; and

                     (b)  references in this Division to the taxable income of a taxpayer shall be read as references to the amount that would have been the taxable income if:

                              (i)  the assessable income did not include any net capital gain and did not include any amount under section 82‑65, 82‑70 or 302‑145 of the Income Tax Assessment Act 1997; and

                             (ii)  the taxable income were reduced by so much of the taxable income as consists of above‑average special professional income within the meaning of the Income Tax Assessment Act 1997.

             (2)  A reference in subsection (1) to the assessable income or taxable income of a taxpayer of a year of income shall, in relation to a taxpayer in the capacity of trustee of a trust estate, be read as a reference to the assessable income or net income, as the case may be, of the trust estate of the year of income.

150  First average year

                   Subject to this Division, the first average year shall be the fourth year before the year of income. A year the income of which was subject to assessment under the previous Act shall be capable of being a first or subsequent average year.

151  First application of Division in relation to a taxpayer

             (1)  For the purposes of the first application of this Division in determining the tax payable by a taxpayer, the first average year shall be the first year which is otherwise capable of being an average year, and in which the taxable income is not greater than that of the next succeeding year. No year prior to that first average year shall, for the purposes of any application of this Division in determining the tax payable by a taxpayer, be capable of being an average year.

             (2)  Any year in which the taxpayer was not carrying on business and was not in receipt of a taxable income shall not be counted as a first average year for the purposes of the first application of this Division in determining the tax payable by a taxpayer.

             (3)  This section shall not apply to a taxpayer whose income has been or is liable to be assessed at an average rate of tax determined under the provisions of the previous Act.

152  Taxpayer not in receipt of assessable income

                   Any year in which the taxpayer was not carrying on business and was not in receipt of assessable income shall not be counted as an average year, and the provisions of this Division shall apply to the income thereafter derived by him as if he had never been a taxpayer before that year.

153  Taxpayer with no taxable income

                   Any year in which the taxpayer was carrying on business but had no taxable income shall be capable of being an average year.

154  Excess of allowable deductions

                   Any excess of allowable deductions over the assessable income of the taxpayer in any average year shall not be taken into account in calculating the average income.

155  Permanent reduction of income

             (1)  Where a taxpayer establishes that, owing to his retirement from his occupation, or from any other cause (but not including a change in the investment of assets from which assessable income was derived into assets from which the taxpayer derives income which is not liable to be assessed under this Act), his taxable income has been permanently reduced to an amount which is less than two‑thirds of his average taxable income, he shall be assessed, and the provisions of this Division shall apply to the income thereafter derived by him, as if he had never been a taxpayer before that year.

             (2)  For the purposes of the application of subsection (1) in relation to a taxpayer in relation to a year of income, a reference in that subsection to the average taxable income of the taxpayer shall be construed as a reference to the amount that would be the average income of the taxpayer in relation to that year of income ascertained in accordance with section 149 if there were excluded from the assessable income of the taxpayer of the average years any income received by him from sources from which he does not usually receive income.

156  Rebate of tax for, or complementary tax payable by, certain primary producers

             (1)  In this section:

actual taxable income from primary production, in relation to a taxpayer in relation to a year of income, means the amount (if any) remaining after deducting from the assessable primary production income of the taxpayer of the year of income so much of the aggregate of the relevant primary production deductions of the taxpayer of the year of income as does not exceed that assessable income.

assessable primary production income, in relation to a taxpayer in relation to a year of income, means so much of the assessable income of the taxpayer of the year of income as was derived from the carrying on of a primary production business by the taxpayer or was included in the assessable income of the taxpayer of the year of income in consequence of the carrying on of a primary production business by the taxpayer.

deemed taxable income from primary production, in relation to a taxpayer in relation to a year of income, means:

                     (a)  if the taxpayer did not have a non‑primary production profit in relation to the year of income—the taxable income of the taxpayer; and

                     (b)  in any other case—the sum of the actual taxable income from primary production of the taxpayer of the year of income and the notional taxable income from primary production of the taxpayer of the year of income.

notional taxable income from primary production, in relation to a taxpayer in relation to a year of income, being a taxpayer who had a non‑primary production profit in relation to the year of income, means:

                     (a)  where the taxpayer did not incur a primary production loss in relation to the year of income:

                              (i)  in a case to which subparagraph (ii) does not apply—the amount ascertained by deducting from the taxable income of the taxpayer of the year of income the actual taxable income from primary production of the taxpayer of the year of income; and

                             (ii)  where the taxable income of the taxpayer of the year of income exceeds the actual taxable income from primary production of the taxpayer of the year of income and that excess is greater than $5,000—$5,000 reduced by $1 for each whole dollar by which the amount of that excess exceeds $5,000; and

                     (b)  where the taxpayer incurred a primary production loss in relation to the year of income:

                              (i)  in a case where the sum of the taxable income of the taxpayer of the year of income and the amount of the primary production loss is less than or equal to $5,000—the taxable income of the taxpayer of the year of income; and

                             (ii)  in a case where the sum of the taxable income of the taxpayer of the year of income and the amount of the primary production loss (which sum is in this subparagraph referred to as the non‑farm income) exceeds $5,000—an amount ascertained by deducting from $5,000 one dollar for each whole dollar by which so much of the non‑farm income as does not exceed $10,000 exceeds $5,000 and deducting from the resultant amount so much (if any) of the amount of the primary production loss as does not exceed that resultant amount.

relevant primary production deductions, in relation to a taxpayer in relation to a year of income, means:

                     (a)  any deductions allowed or allowable in his assessment in respect of income of the year of income that relate exclusively to assessable primary production income of the taxpayer of a year of income;

                     (b)  so much of any other deductions (other than apportionable deductions) allowed or allowable in his assessment in respect of income of the year of income as, in the opinion of the Commissioner, may appropriately be related to assessable primary production income of the taxpayer of a year of income; and

                     (c)  the amount that bears to the apportionable deductions allowed or allowable in his assessment the same proportion as the amount ascertained by deduction from the assessable primary production income of the taxpayer of the year of income any deductions allowable from that assessable income in accordance with paragraphs (a) and (b) bears to the sum of the taxable income of the taxpayer of the year of income and the apportionable deductions.

             (2)  For the purposes of subsection (1), a taxpayer shall be taken to have a non‑primary production profit in relation to a year of income if the assessable income of the taxpayer of the year of income other than assessable primary production income exceeds the aggregate of the deductions (other than relevant primary production deductions) allowable to the taxpayer in respect of the year of income.

             (3)  For the purposes of subsection (1), a taxpayer shall be taken to have incurred a primary production loss in relation to a year of income if the aggregate of the relevant primary production deductions in relation to the year of income exceeds the assessable primary production income of the taxpayer of the year of income, and the amount of that loss shall be taken to be the amount of the excess.

             (5)  Where:

                     (a)  this Division applies to a share of the net income of a trust estate of a year of income in respect of which a trustee is liable to be assessed and to pay tax in pursuance of subsection 98(1) or (2) or to the net income or a part of the net income of a trust estate of a year of income in respect of which a trustee is liable to be assessed and to pay tax in pursuance of section 99 (which share, net income or part, as the case may be, is in this subsection referred to as the eligible net income); and

                     (b)  the amount of tax that would, apart from this section, section 94, Division 6AA and Part VIIB and but for any rebate or credit to which the trustee is entitled, be payable by the trustee in respect of the eligible net income exceeds the amount of tax that would, apart from this section, section 94, Division 6AA and Part VIIB and but for any rebate or credit to which the trustee is entitled, be payable by the trustee in respect of the eligible net income if the notional rates declared by the Parliament for the purposes of this section were the rates of tax payable by the trustee in respect of the eligible net income;

the trustee is entitled, in his assessment in respect of the eligible net income, to a rebate of tax of an amount ascertained in accordance with the formula , where:

A  is the number of whole dollars in the amount of the deemed net income from primary production.

B  is the excess referred to in paragraph (b); and

C  is the number of whole dollars in the eligible net income.

          (5A)  Where:

                     (a)  this Division applies to a share of the net income of a trust estate of a year of income in respect of which a trustee is liable to be assessed and to pay tax in pursuance of subsection 98(1) or (2) or to the net income or a part of the net income of a trust estate of a year of income in respect of which a trustee is liable to be assessed and to pay tax in pursuance of section 99 (which share, net income or part, as the case may be, is in this subsection referred to as the eligible net income); and

                     (b)  the amount of tax that would, apart from this section, section 94, Division 6AA and Part VIIB and but for any rebate or credit to which the trustee is entitled, be payable by the trustee in respect of the eligible net income if the notional rates declared by the Parliament for the purposes of this section were the rates of tax payable by the trustee in respect of the eligible net income exceeds the amount of tax that would, apart from this section, section 94, Division 6AA and Part VIIB and but for any rebate or credit to which the trustee is entitled, be payable by the trustee in respect of the eligible net income;

the trustee is liable to pay complementary tax, at the rate declared by the Parliament for the purposes of this subsection, on so much of the net income of the trust estate as is equal to the deemed net income from primary production.

             (6)  For the purposes of the application of this section in relation to a share of the net income of a trust estate of a year of income in respect of which a trustee is liable to be assessed and to pay tax in pursuance of subsection 98(1) or (2) or in relation to the net income or a part of the net income of a trust estate of a year of income in respect of which a trustee is liable to be assessed and to pay tax in pursuance of section 99 (which share, net income or part, as the case may be, is in this subsection referred to as the eligible net income):

actual net income from primary production means so much of the net income from primary production of the trust estate as is included in the eligible net income.

assessable primary production income means so much of the assessable income of the trust estate of the year of income as was derived from the carrying on of a primary production business by the trustee or was included in the assessable income of the trust estate of the year of income in consequence of the carrying on of a primary production business by the trustee.

deemed net income from primary production means:

                     (a)  if the trust estate did not have a non‑primary production profit in relation to the year of income—the eligible net income; and

                     (b)  in any other case—the sum of the actual net income from primary production of the trust estate of the year of income and the notional net income from primary production of the trust estate of the year of income.

eligible part of the primary production loss, in relation to a primary production loss incurred by the trust estate in the year of income, means so much of the primary production loss as is equal to the amount by which the eligible net income would have been increased if the aggregate of the relevant primary production deductions allowable in calculating the amount of 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.

net income from primary production means the amount (if any) remaining after deducting from the assessable primary production income of the trust estate of the year of income so much of the aggregate of the relevant primary production deductions allowable in calculating the net income of the trust estate as does not exceed that assessable primary production income.

notional net income from primary production means:

                     (a)  where the trust estate had a non‑primary production profit in relation to the year of income and did not incur a primary production loss in relation to the year of income:

                              (i)  in a case to which subparagraph (ii) does not apply—the amount ascertained by deducting from the eligible net income the actual net income from primary production (if any); and

                             (ii)  where the eligible net income exceeds the actual net income from primary production in relation to the year of income and that excess is greater than $5,000—$5,000 reduced by $1 for each whole dollar by which the amount of that excess exceeds $5,000; and

                     (b)  where the trust estate had a non‑primary production profit in relation to the year of income and incurred a primary production loss in relation to the year of income:

                              (i)  in a case where the sum of the eligible net income and the eligible part of the primary production loss is less than or equal to $5,000—the eligible net income; and

                             (ii)  in a case where the sum of the eligible net income and the eligible part of the primary production loss (which sum is in this subparagraph referred to as the  non‑farm income) exceeds $5,000—an amount ascertained by deducting from $5,000 one dollar for each whole dollar by which so much of the non‑farm income as does not exceed $10,000 exceeds $5,000 and deducting from the resultant amount so much (if any) of the eligible part of the primary production loss as does not exceed that resultant amount.

relevant primary production deductions means:

                     (a)  any deductions allowed or allowable in calculating the amount of the net income of the trust estate of the year of income that relate exclusively to assessable primary production income of a year of income;

                     (b)  so much of any other deductions (other than apportionable deductions) allowed or allowable in calculating the amount of that net income as, in the opinion of the Commissioner, may appropriately be related to assessable primary production income of the trust estate of a year of income; and

                     (c)  the amount that bears to the apportionable deductions allowed or allowable in calculating the amount of that net income the same proportion as the amount ascertained by deducting from the assessable primary production income of the trust estate of the year of income any deductions allowable from that assessable primary production income in accordance with paragraphs (a) and (b) bears to the sum of the net income of the trust estate and the apportionable deductions.

             (7)  For the purposes of subsection (6), a trust estate shall be taken to have incurred a primary production loss in relation to a year of income if the aggregate of the relevant primary production deductions allowable in calculating the amount of 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, and the amount of that loss shall be taken to be the amount of the excess.

             (8)  For the purposes of subsection (6), a trust estate shall be taken to have a non‑primary production profit in relation to a year of income if the assessable income of the trust estate of the year of income other than assessable primary production income exceeds the aggregate of the deductions (other than relevant primary production deductions) allowable in calculating the amount of the net income of the trust estate of the year of income.

157  Application of Division to primary producers

             (1)  In respect of income derived during the year ending on 30 June 1938 and during any subsequent year or during any accounting period adopted in lieu of any such year, the foregoing provisions of this Division shall not apply except in respect of income derived by a primary producer.

             (2)  For the purposes of this section, primary producer means a person who carries on in Australia a primary production business.

             (3)  Subject to subsection (3A), for the purposes only of determining whether a person is carrying on a primary production business, a beneficiary in a trust estate shall, to the extent to which he is presently entitled to the income or part of the income of that estate, be deemed to be carrying on the business carried on by the trustees of the estate which produces that income.

          (3A)  Subsection (3) does not operate to deem a beneficiary in a trust estate who is presently entitled to the income or a part of the income of that estate to be carrying on the business carried on by the trustees of the trust estate in a year of income unless:

                     (a)  the share of the income of that trust estate of the year of income to which the beneficiary is presently entitled is not less than $1,040; or

                     (b)  the Commissioner is satisfied that the interest of the beneficiary in the trust estate was not acquired by, or granted to, the beneficiary for the purpose, or primarily for the purpose, of enabling the provisions of this Division to apply in respect of income derived by the beneficiary.

             (4)  If in any year in respect of which this Division applies only to taxpayers who are primary producers, a taxpayer was not carrying on business as a primary producer, that year shall not be counted as an average year and the provisions of this Division shall apply to the income thereafter derived by him as if he had never been a taxpayer before that year.

158  Application of Division

                   This Division shall not apply in any case where there are not at least 2 average years or where the taxpayer is assessed in accordance with section 99A in respect of the year of income, and shall not apply to the taxable income of a company except income in respect of which it is assessable as a trustee.

158A  Election that Division not apply

             (1)  A taxpayer may elect that this Division shall not apply in relation to income of the taxpayer of a year of income specified in the election and of all subsequent years of income.

             (2)  An election in pursuance of subsection (1) shall be made in writing and lodged with the Commissioner on or before the date of lodgment of the return of income of the taxpayer for the year of income specified in the election or within such further time as the Commissioner allows.

             (3)  Where a taxpayer makes an election under subsection (1), this Division shall not apply in relation to income of the taxpayer of the year of income specified in the election or of any subsequent year of income.


 

Division 16DCertain arrangements relating to the use of property

159GE  Interpretation

             (1)  In this Division:

arrangement includes:

                     (a)  any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

                     (b)  any scheme, plan, proposal, action, course of action or course of conduct whether unilateral or otherwise.

arrangement payment, in relation to an arrangement relating to the use, or the control of the use, of an item of property, means so much of any payment liable to be made under the arrangement as represents consideration for any one or more of the following:

                     (a)  the use of the item;

                     (b)  the control of the use of the item;

                     (c)  the sale or disposal of the item.

arrangement period, in relation to an item of eligible property that is, or is included in, arrangement property in relation to an arrangement at a particular time, means the period that is at that time the total period during which the arrangement is likely to be in force in relation to that item of eligible property (including any period before that time when the arrangement was in force in relation to that item of eligible property).

arrangement property means property that is, or is to be, used, or the use of which is, or is to be, controlled, under an arrangement.

assessable arrangement payment means an arrangement payment that, apart from this Division, would be included in whole or in part in the assessable income of a taxpayer of a year of income.

associate means, in relation to a person other than an exempt public body, any person who is an associate, within the meaning of section 318, in relation to the person or, in relation to an exempt public body:

                     (a)  a partner of the exempt public body or a partnership in which the exempt public body is a partner; or

                     (b)  if a partner of the exempt public body is a natural person otherwise than in the capacity of trustee—the spouse or a child of that partner; or

                     (c)  a trustee of a trust where the exempt public body, or another entity that is an associate of the exempt public body because of paragraph (a), (b) or (d), benefits under the trust; or

                     (d)  a company where:

                              (i)  the company is sufficiently influenced by:

                                        (A)  the exempt public body; or

                                        (B)  another entity that is an associate of the exempt public body because of paragraph (a), (b) or (c); or

                                        (C)  another company that is an associate of the exempt public body because of another application of this paragraph; or

                                        (D)  2 or more entities covered by the preceding sub‑subparagraphs; or

                             (ii)  a majority voting interest in the company is held by:

                                        (A)  the exempt public body; or

                                        (B)  the entities that are associates of the primary entity because of subparagraph (i) of this paragraph and paragraphs (a), (b) and (c); or

                                        (C)  the exempt public body and the entities that are associates of the exempt public body because of subparagraph (i) of this paragraph and because of paragraphs (a), (b) and (c).

Subsections 318(6) and (7) apply for the purposes of paragraphs (a) to (d) in the same way as those subsections apply for the purposes of section 318.

capital expenditure deduction means a deduction:

                     (a)  under the former Division 10, 10AAA, 10AA, 10A, 10C or 10D of this Part; or

                     (b)  under Subdivision 40‑B of the Income Tax Assessment Act 1997 for a depreciating asset that is a forestry road or timber mill building; or

                     (c)  under Division 43 of that Act; or

                     (d)  under section 40‑830 of that Act for an amount that is a project amount under subsection 40‑840(1) (about mining capital expenditure and transport capital expenditure); or

                     (e)  under the former Subdivision 330‑C, 330‑H or 387‑G of that Act.

control means effectively control.

depreciation deduction means a deduction:

                     (a)  in respect of depreciation under Division 3 of this Act or the former Division 42 of the Income Tax Assessment Act 1997; or

                     (b)  for the decline in value of a depreciating asset under Division 40 of the Income Tax Assessment Act 1997.

Division 10, 10AA or 10A property means property in relation to which there has been incurred:

                     (a)  allowable capital expenditure within the meaning of the former Division 10 or 10AA of this Part or the former Subdivision 330‑C of the Income Tax Assessment Act 1997 or mining capital expenditure within the meaning of section 40‑860 of that Act;

                     (b)  expenditure taken into account in ascertaining an amount of residual capital expenditure specified in the former paragraph 122C(1)(a); or

                     (c)  capital expenditure specified in the former subsection 124F(1) or 124JA(1) of this Act or the former section 387‑460 of the Income Tax Assessment Act 1997; or

                     (d)  capital expenditure on a forestry road in connection with a timber operation, or capital expenditure for the construction or acquisition of a timber mill building.

Division 10AAA property means property in relation to which there has been incurred capital expenditure to which the former Division 10AAA of this Part applies or transport capital expenditure within the meaning of the former Subdivision 330‑H, or section 40‑865 of the Income Tax Assessment Act 1997.

Division 10C or 10D property means property in relation to which there has been incurred qualifying expenditure within the meaning of the former Division 10C or 10D or for which there is a pool of construction expenditure within the meaning of Division 43 of the Income Tax Assessment Act 1997.

effective life, in relation to an item of eligible property at a particular time, means the period (if any) that the Commissioner estimates will be, or would be, at that time the effective life of the property after that time assuming that it is or would be maintained in reasonably good order and condition.

eligible amount, in relation to an item of eligible property, means:

                     (a)  where the item is an item of eligible depreciation property—the amount that:

                              (i)  was the cost of the item of property within the meaning of Division 40, or the former Division 42, of the Income Tax Assessment Act 1997 to the taxpayer who holds it; or

                             (ii)  would have been the cost of the item of property to the taxpayer for the purposes of that Division if that Division had applied in relation to the item of property; and

                     (b)  where the item is an item of eligible capital expenditure property—any amount of eligible capital expenditure in relation to the item of property.

eligible capital expenditure, in relation to an item of eligible capital expenditure property, means expenditure by reason of which the item of property is eligible capital expenditure property.

eligible capital expenditure property means Division 10, 10AA or 10A property, Division 10AAA property, Division 10C or 10D property or eligible spectrum licences.

eligible depreciation property means:

                     (a)  plant or articles within the meaning of the former section 54 of this Act; or

                     (b)  plant within the meaning of the former section 42‑18 of the Income Tax Assessment Act 1997 or plant within the meaning of section 45‑40 of that Act; or

                     (c)  a depreciating asset within the meaning of Division 40 of that Act.

eligible property means:

                     (a)  eligible depreciation property;

                     (b)  Division 10, 10AA or 10A property;

                     (c)  Division 10AAA property;

                     (d)  Division 10C or 10D property; or

                     (e)  eligible spectrum licences.

eligible real property, means eligible property that is:

                     (a)  a building or a part of a building; or

                     (b)  a structure that is a fixture or a part of such a structure.

eligible spectrum licence means a spectrum licence within the meaning of the Income Tax Assessment Act 1997.

exempt public body means:

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

                    (aa)  an STB (within the meaning of Division 1AB) the income of which is wholly exempt from tax; or

                     (b)  a municipal corporation or other local governing body, the income of which is wholly exempt from tax; or

                     (c)  a public authority:

                              (i)  that is constituted by or under a law of the Commonwealth, a State or a Territory; and

                             (ii)  the income of which is wholly exempt from tax.

payment portion, in relation to an arrangement payment in relation to an eligible amount in relation to an item of eligible property, means so much of the arrangement payment as the Commissioner considers is attributable to the eligible amount in relation to the item of eligible property.

person includes an exempt public body.

total notional principal, in relation to an eligible amount in relation to an item of eligible property in relation to an application period, means the sum of all notional principal amounts (if any) in relation to payment portions of arrangement payments in relation to the eligible amount in relation to the application period.

Note:          This Division applies to deductions under Division 40 (Capital allowances) and Division 43 (Capital works) of the Income Tax Assessment Act 1997 as if you were the owner of an asset you hold (under that Division) instead of any other person: see section 40‑135 of that Act.

             (2)  For the purposes of the definition of  arrangement period in subsection (1), a reference in that definition to the total period during which an arrangement is, at a particular time, likely to be in force in relation to an item of eligible property that at that time is, or is included in, arrangement property in relation to the arrangement is a reference to:

                     (a)  where at that time the total period during which the arrangement was, or is, to be in force in relation to that item of eligible property (including any period before that time when the arrangement was in force in relation to that item) was or is specified in or ascertainable in accordance with the arrangement—that period; and

                     (b)  in any other case—such period as would have been, or is, at that time the period during which the arrangement would be, or is, likely to be in force in relation to the item of property (including any period before that time when the arrangement was in force in relation to the item), having regard to the provisions of the arrangement and any other relevant circumstances in relation to the arrangement, or in relation to the item of property.

             (3)  Nothing in this Division prevents an item of eligible property from being an item of eligible property by reason of the application of 2 or more paragraphs of the definition of eligible property in subsection (1).

             (4)  For the purposes of the definition of total notional principal in subsection (1), where:

                     (a)  under section 159GK there is an interest amount within the meaning of that section in relation to a payment portion (not being a notional final payment portion within the meaning of that section) in relation to an arrangement payment; and

                     (b)  the interest amount is less than the amount of the payment portion;

there shall be taken to be a notional principal amount in relation to the payment portion of an amount equal to the difference between the interest amount and the amount of the payment portion.

             (5)  Where:

                     (a)  under 2 or more successive arrangements relating to the use by a person, or the control by a person of the use, of property owned by another person, the same property is used by, or the use of the same property is controlled by, the same person or by persons who, in relation to each other, are associates; and

                     (b)  the Commissioner considers that the arrangements should be taken, for the purposes of this Division, to be a single arrangement;

the arrangements shall, for the purposes of this Division, be deemed to be a single arrangement entered into at the same time as the first of the arrangements, coming into force at the same time as the first of the arrangements and continuing in force until the expiration of the second or last, as the case requires, of the arrangements.

             (6)  A reference in subsection (5) to successive arrangements includes a reference to:

                     (a)  where the arrangement periods of 2 or more arrangements overlap—those arrangements; and

                     (b)  where there is a period between the expiration of an arrangement and the commencement of another arrangement and the Commissioner considers that the arrangements should be taken to be successive arrangements for the purposes of that subsection—those arrangements.

             (7)  Where this Division applies in relation to an item of eligible property in relation to a qualifying arrangement, a reference in this Division to the application period in relation to that application of this Division in relation to the item of eligible property is a reference to the period commencing at the time at which this Division in that application commences to apply and ending at the time at which this Division in that application ceases to apply.

             (8)  For the purposes of this Division, where one or more of the partners in a partnership uses, or controls the use of, an item of property, each of the partners in the partnership shall be taken to use, or to control the use of, the item of property and the partnership shall be taken not to use, or to control the use of, the item of property.

           (10)  For the purpose of this Division, disregard an acquisition or disposal of property by way of the transfer of the property for the provision or redemption of a security. Consequently this Division applies as if the person who was the owner of the property before the transfer continues to be the owner after the transfer.

159GEA  Division applies to certain State/Territory bodies

                   In addition to any other operation that this Division has, this Division operates as if the references to an exempt public body included a reference to a prescribed excluded STB (within the meaning of Division 1AB).

159GF  Residual amounts

             (1)  Subject to subsection 159GJ(1), in this Division a reference to the residual amount at a particular time (in this subsection referred to as the relevant time) in relation to the eligible amount by reason of which an item of property is eligible depreciation property at the relevant time is a reference to the eligible amount reduced by:

                     (a)  where the item of property was not dealt with by the taxpayer who holds the item in the prescribed manner at any time during the period (in this subsection referred to as the relevant period) before the relevant time when it was held by the taxpayer (within the meaning of Division 40 of the Income Tax Assessment Act 1997)—the total amount of deductions for depreciation or decline in value that would, but for any deduction denying provision, have been allowable to the taxpayer under this Act or the Income Tax Assessment Act 1997 in respect of that item of property for the relevant period if:

                              (i)  at all times during the relevant period the taxpayer had wholly and exclusively dealt with the item of property in the prescribed manner; and

                             (ii)  those deductions were calculated using the diminishing value method; and

                            (iii)  section 57AG, as in force immediately before the commencement of section 1 of the Taxation Laws Amendment Act 1992, did not apply in relation to the item of property;

                     (b)  where the item of property was wholly and exclusively dealt with by the taxpayer who held the item in the prescribed manner at all times during the relevant period—the total amount of deductions for depreciation or decline in value that were or, but for any deduction denying provision, would have been, allowed or allowable to the taxpayer in respect of the item of property for that period under this Act or the Income Tax Assessment Act 1997; and

                     (c)  in any other case—the total amount of deductions for depreciation or decline in value that, but for any deduction denying provision, would have been allowable to the taxpayer who holds the item of property in respect of the item under this Act or the Income Tax Assessment Act 1997 for the relevant period if:

                              (i)  the taxpayer had wholly and exclusively dealt with the item of property in the prescribed manner at all times during the relevant period; and

                             (ii)  in respect of any part of the relevant period for which deductions for depreciation or decline in value were or, but for any deduction denying provision, would have been allowed or allowable under this Act or the Income Tax Assessment Act 1997—the deductions were allowable on the same basis and at the same percentage as was or would have been allowed or allowable for that part of the relevant period; and

                            (iii)  in respect of any other part (in this subparagraph referred to as the relevant part) of the relevant period—the deductions were allowable:

                                        (A)  where the relevant part was immediately succeeded by another part of the relevant period in respect of which deductions for depreciation or decline in value were or, but for any deduction denying provision, would have been allowed or allowable under this Act or the Income Tax Assessment Act 1997—on the same basis and at the same percentage as was or would have been allowed or allowable in respect of that other part; and