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Taxation Laws Amendment Act (No. 4) 1995

Act No. 171 of 1995 as amended, taking into account amendments up to Act No. 75 of 2010
An Act to amend the law relating to taxation
Administered by: Treasury
Registered 08 Oct 2010
Start Date 29 Jun 2010
End Date 10 Mar 2016
Date of repeal 10 Mar 2016
Repealed by Amending Acts 1990 to 1999 Repeal Act 2016

Taxation Laws Amendment Act (No. 4) 1995

Act No. 171 of 1995 as amended

This compilation was prepared on 8 October 2010
taking into account amendments up to Act No. 75 of 2010

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

Prepared by the Office of Legislative Drafting and Publishing,
Attorney-General’s Department, Canberra

  

  


CONTENTS

 

Section

   1.  Short title [see Note 1]

   2.  Commencement [see Note 1]

   3.  Schedules

                                  SCHEDULE 1

AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO CAPITAL GAINS TAX

PART 1 - AMENDMENTS RELATING TO DIVISION 19A OF PART IIIA

PART 2 - OTHER AMENDMENTS RELATING TO CAPITAL GAINS TAX

                                  SCHEDULE 2

     AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO

                              DIVIDEND IMPUTATION

                                  SCHEDULE 3

          AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO

             DEMUTUALISATION OF INSURANCE COMPANIES AND AFFILIATES

                                  SCHEDULE 4

          VARIOUS AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936

PART 1 - ESTABLISHMENT COSTS OF HORTICULTURAL PLANTS

PART 2 - FORESTRY

PART 3 - REGISTER OF APPROVED OCCUPATIONAL CLOTHING

PART 4 - RESEARCH AND DEVELOPMENT

                                  SCHEDULE 5

      AMENDMENTS OF THE SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT 1992

                                  SCHEDULE 6

            AMENDMENT OF THE TAXATION LAWS AMENDMENT ACT 1993


TAXATION LAWS AMENDMENT ACT (No. 4) 1995 No. 171 of 1995 - LONG TITLE

 

        An Act to amend the law relating to taxation

 

TAXATION LAWS AMENDMENT ACT (No. 4) 1995 No. 171 of 1995

- SECT 1

Short title [see Note 1]

 

  1. This Act may be cited as the Taxation Laws Amendment Act (No. 4) 1995.

 

TAXATION LAWS AMENDMENT ACT (No. 4) 1995 No. 171 of 1995

- SECT 2

Commencement [see Note 1]

 

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

receives the Royal Assent.

 

  (2) Subject to subsection (3), the amendments made by Schedule 2 are taken

to have commenced on 1 July 1995.

 

  (3) Items 1, 2 and 86 of Schedule 2 commence on the later of the following

days:

  (a)   the day on which this Act receives the Royal Assent; or

  (b)   the day on which the Taxation Laws Amendment Act (No. 3) 1995 receives

the Royal Assent.

 

  (4) Part 3 of Schedule 4 commences on 1 March 1996.

 

TAXATION LAWS AMENDMENT ACT (No. 4) 1995 No. 171 of 1995

- SECT 3

Schedules

 

  3. The Acts specified in the Schedules to this Act are amended in accordance

with the applicable items in the Schedules, and the other items in the

Schedules have effect according to their terms.

 

TAXATION LAWS AMENDMENT ACT (No. 4) 1995 No. 171 of 1995 - SCHEDULE 1

 

                           SCHEDULE 1              Section 3

    AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO

                      CAPITAL GAINS TAX

     PART 1-AMENDMENTS RELATING TO DIVISION 19A OF PART IIIA

1. Subsection 160Z(5):

Omit "subsection 160ZZRE(3)", substitute "subsection 160ZZRDJ(3) or

(4), 160ZZRDM(2) or (5), or 160ZZRE(3)".

2. Before section 160ZZRA:

Insert in Division 19A:

      "Subdivision A-Outline and interpretation

Outline of Division

  "160ZZRAAA.(1)

This Division adjusts the cost bases of shares and loans in certain

cases where assets are transferred between companies under common

ownership and the transfer is likely to reduce the value of the share

or loan.

. There are detailed rules for the circumstances in which adjustments

are made and the amount of those adjustments.

. The rules that apply to most depreciable assets are different from

the rules that apply to transfers of other assets.

. Taxpayers are able to group certain assets before applying this

Division. In some cases, this will result in no adjustment being

required and in some other cases it will result in a lesser reduction

being required. Taxpayers may also choose to group certain assets for

administrative convenience.

  "(2) The following chart shows the operative provisions that will

apply to particular assets:

                     (CHART OMITTED)

3. Section 160ZZRA (definition of indexed threshold amount):

Omit "section 160ZZRD", substitute "subsection 160ZZRE(1B).".

4. Section 160ZZRA:

Insert:

  "original cost, of an asset to a taxpayer, means the consideration

for the last acquisition of the asset by the taxpayer.

written down value, for an asset of a taxpayer at a particular time,

means the greater of:

  (a)   the depreciated value of that asset at that time as recorded

in the books of the taxpayer; and

  (b)   the depreciated value of the asset, within the meaning of

section 62, at that time.".

5. After section 160ZZRB:

Insert:

Cost base etc. of certain assets

  "160ZZRBA. For the purpose of this Division, the cost base, the

indexed cost base and the reduced cost base, at a particular time, of

an asset to which subsection 160M(6) applies are taken to be equal to

the market value of the asset at that time.

Meaning of indexed common ownership market value

  "160ZZRBB.(1) The indexed common ownership market value of an asset

is worked out by multiplying the market value of the asset at the

common ownership time by the following indexation factor:

  Index number for the CPI quarter in which the first asset disposal

                            time occurred

    Index number for the CPI quarter in which the common ownership

                            time occurred

  "(2) The indexation factor is to be worked out to 3 decimal places,

but increased by 0.001 if the 4th decimal place is 5 or more.

  "(3) Calculations under subsection (1):

  (a)   are to be made using only the index numbers published in terms

of the most recently published reference base for the Consumer Price

Index; and

  (b)   are to disregard indexation numbers that are published in

substitution for previously published index numbers (except where the

substituted numbers are published to take account of changes in the

reference base).

  "(4) In this section:

CPI quarter means a period of 3 months ending on 31 March, 30 June, 30

September or 31 December.

index number means the All Groups Consumer Price Index Number (being

the weighted average of the 8 capital cities) published by the

Australian Statistician.".

6. After section 160ZZRC:

Insert:

              "Subdivision B-Application of Division".

7. Subsection 160ZZRD(2):

Omit the subsection.

8. After section 160ZZRD:

Insert:

How Division applies to grouped assets

  "160ZZRDA.(1) Subdivision C sets out how this Division applies to

groups of assets and to assets that are in a group of assets.

  "(2) Subdivision C applies Subdivisions D and E to the assets as a

group. Those Subdivisions do not have any other operation in relation

to an asset included in a group of assets.

How Division applies to depreciable assets

  "160ZZRDB.(1) Subdivision D only applies to the disposal of the

first asset if:

  (a) the asset is a depreciable asset; and

  (b) the consideration for the disposal of the asset is less than the

written down value of the asset at the time of the disposal; and

  (c) the market value of the asset is not more than 10% greater than

the written down value of the asset at the time of the disposal; and

  (d) the original cost of the asset to the transferor was less than

$1 million; and

  (e) the asset is not a building.

Note 1:  Written down value and original cost are defined in section

160ZZRA.

Note 2:  Subdivision D also applies to some depreciable assets as part

of depreciable asset groups as a result of Subdivision C.

  "(2) Subdivision E does not have any operation in relation to an

asset to which Subdivision D applies.

Application of Subdivision E

  "160ZZRDC. Subdivision E applies in relation to assets that are

covered by this Division but not by Subdivision C or D.

Note:  Subdivision E also applies to some assets as part of pre-common

ownership groups or post-common ownership groups as a result of

Subdivision C.

Application of Subdivision F

  "160ZZRDD. Subdivision F only applies to the disposal of an asset if

Subdivision C, D or E applied in relation to that disposal.

      "Subdivision C-Grouped assets

Transferor may elect to group assets

Reason for grouping

  "160ZZRDE.(1) Grouping provides taxpayers with a simplified method

of applying this Division to 2 or more assets that are transferred

from the transferor to the transferee. It may also reduce the cases in

which adjustments have to be made to cost bases of shares or loans

under this Division and may reduce the amount of those adjustments.

The 3 kinds of groups

  "(2) There are 3 kinds of groups:

  (a) a depreciable property group (see section 160ZZRDF); and

  (b) a pre-common ownership group (see section 160ZZRDG); and

  (c) a post-common ownership group (see section 160ZZRDH).

The groups are mutually exclusive. An asset that could be included in

the depreciable property group can not be included in either of the

other groups.

  "(3) The transferor may elect to allocate assets to which this

Division applies that are transferred to a transferee to groups of

assets. All of the assets in a group must be disposed of to the same

transferee in the same year of income of the transferor.

  "(4) An election under subsection (3) must be made in writing on or

before the lodgment of the transferor's return for the year of income

in which the relevant disposals occurred. The Commissioner may allow

the election to be made at a later time.

Depreciable property groups

Assets that may be in depreciable property group

  "160ZZRDF.(1) An asset can be allocated to a depreciable property

group if:

  (a) the asset is a depreciable asset; and

  (b) the asset is the first asset to be allocated to the group or is

disposed of to the transferee in the same year of income of the

transferor as the year in which other assets in the group are disposed

of; and

  (c) the original cost of the asset to the transferor was less than

$1 million; and

  (d) the asset is not a building.

How and when Subdivision D applies to depreciable property groups

  "(2) Subdivision D applies in a way specified in subsection (3) to

all of the assets in a depreciable property group if:

  (a) the sum of the consideration for the disposal of the assets in

the group is less than the sum of the written down values of the

assets in the group; and

  (b) the sum of the market values of the assets in the group is not

more than 10% greater than the sum of the written down values of the

assets in the group.

The written down value and the market value of each asset is to be

worked out when that asset is disposed of by the transferor.

  "(3) Subdivision D applies to all of the assets in a depreciable

property group as if all of the grouped assets were one asset that:

  (a) was disposed of at the earliest first asset disposal time for

any asset in the group; and

  (b) was disposed of for consideration equal to the sum of the

consideration for the disposal of each of the assets; and

  (c) had a written down value equal to the sum of the written down

values of each of the assets.

In calculating the sums of written down values, the written down value

of each asset at the first asset disposal time for that asset is to be

used.

Pre-common ownership groups

Assets that may be in pre-common ownership group

  "160ZZRDG.(1) An asset can be allocated to a pre-common ownership

group if:

  (a) the asset was acquired by the transferor before the time at

which the transferor and the transferee last came under common

ownership; and

  (b) the asset is the first asset to be allocated to the group or is

disposed of to the transferee in the same year of income of the

transferor as the year in which that asset is disposed of; and

  (c) the original cost of the asset to the transferor was less than

$1 million; and

  (d) the asset is not land or a building.

How and when section 160ZZRF applies to pre-common ownership groups

  "(2) Section 160ZZRF applies to all of the assets in a pre-common

ownership group in the way specified in subsection (3) if the sum of

the consideration for the disposal of the assets in the group is less

than the sum of the indexed common ownership market values of the

assets in the group.

  "(3) Section 160ZZRF applies as if all of the grouped assets were

one asset that:

  (a) was acquired on or after 20 September 1985; and

  (b) was disposed of at the earliest first asset disposal time for

any asset in the group; and

  (c) was disposed of for consideration equal to the sum of the

consideration for the disposal of each of the assets; and

  (d) had a market value at the common ownership time equal to the sum

of the market values of the assets at that time.

In applying section 160ZZRF to the grouped assets the matters in

subsection (6) of that section must be used to determine what amount

is reasonable.

Post-common ownership groups

Assets that may be in post-common ownership group

  "160ZZRDH.(1) An asset can be allocated to a post-common ownership

group if:

  (a) the asset was acquired by the transferor at or after the time at

which the transferor and the transferee last came under common

ownership; and

  (b) the asset was last acquired by the transferor on or after 20

September 1985; and

  (c) the asset is the first asset to be allocated to the group or is

disposed of to the transferee in the same year of income of the

transferor as the year in which the first asset is disposed of; and

  (d) the original cost of the asset to the transferor was less than

$1 million; and

  (e) the asset is not land or a building.

How and when section 160ZZRE applies to post-common ownership groups

  "(2) Section 160ZZRE applies to all of the assets in a post-common

ownership group in the way specified in subsection (3) if the sum of

the consideration for the disposal of the assets in the group is less

than the sum of the indexed threshold amount of each asset in the

group. The indexed threshold amount of each asset is to be worked out

when that asset is disposed of by the transferor.

  "(3) Section 160ZZRE applies as if all of the grouped assets were

one asset that:

  (a) was acquired by the transferor on or after 20 September 1985;

and

  (b) was disposed of at the earliest first asset disposal time for

any asset in the group; and

  (c) was disposed of for consideration equal to the sum of the

consideration for the disposal of each of the assets; and

  (d) had an indexed threshold amount equal to the sum of the indexed

threshold amount for each of the assets; and

  (e) had a reduced threshold amount equal to the sum of the reduced

threshold amounts for each of the assets.

In calculating the sums of reduced threshold amounts, or indexed

threshold amounts, the reduced threshold amount, or indexed threshold

amount, of each asset at the first asset disposal time for that asset

is to be used.

Shares or loans created after first asset in group is disposed of

  "160ZZRDI.(1) This section applies if a share in the transferor, or

a loan to the transferor, comes into existence after the first time

(the adjustment time) in a year of income at which an asset in the

group is disposed of by the transferor but before the last time in the

year of income at which such an asset is actually disposed of.

  "(2) This section does not apply to a share that is issued to

replace a share that is, or is to be, cancelled.

  "(3) This Division applies as if:

  (a) the share or loan had been in existence immediately before the

adjustment time; and

  (b) the share or loan had all the same attributes at that time as it

had immediately after it came into existence.

      "Subdivision D-Depreciable assets

Shares in, and loans to, transferor-depreciable assets-deemed disposal

  "160ZZRDJ.(1) This section applies to each share in the transferor

acquired by a taxpayer (the second taxpayer) on or after 20 September

1985 that is held by the second taxpayer at the first asset disposal

time.

  "(2) For each share to which this section applies, the second

taxpayer is taken to have disposed of the share at the first asset

disposal time for a consideration equal to the indexed cost base to

the second taxpayer of the share.

  "(3) For the purpose of ascertaining whether a capital gain accrued

to the second taxpayer in the event of a subsequent disposal of the

share by the second taxpayer, the second taxpayer is taken to have

immediately re-acquired the share for a consideration equal to the

indexed cost base to the second taxpayer of the share, reduced by the

share reduction amount (see subsection (5)).

  "(4) For the purpose of ascertaining whether the second taxpayer

incurred a capital loss in the event of a subsequent disposal of the

share by the second taxpayer, the second taxpayer is taken to have

immediately re-acquired the share for a consideration equal to the

reduced cost base to the second taxpayer of the share, reduced by the

share reduction amount (see subsection (5)).

  "(5) The share reduction amount is worked out, immediately before

the first asset disposal time, using the formula:

    Market value of share

Total of market values of all    x   Written down value

   shares in transferor              of the first asset

                                        -        Consideration for

                                             disposal of first asset

  "(6) If the second taxpayer or another taxpayer disposed of a share

(otherwise than because of the application of this section) within 12

months after the taxpayer acquired the share (otherwise than because

of the application of this section), subsections (2) and (3) have

effect as if the references to the indexed cost base to the taxpayer

in respect of the share were a reference to the cost base to the

taxpayer in respect of the share.

Shares of different classes

  "160ZZRDK. If:

  (a) at the first asset disposal time, a taxpayer (the second

taxpayer) held a share of a particular class in the transferor that

was acquired by the second taxpayer on or after 20 September 1985 (the

post-CGT share); and

  (b) at the first asset disposal time, the second taxpayer or another

taxpayer held a share of another class in the transferor; and

  (c) the application of section 160ZZRDJ to the post-CGT share would

be unreasonable;

then, that section does not apply to the post-CGT share and the cost

base, the indexed cost base or the reduced cost base of the post-CGT

share to the second taxpayer is instead reduced by such amount (if

any) as is reasonable having regard to:

  (d) the circumstances in which the post-CGT share was acquired by

the second taxpayer; and

  (e) the extent (if any) to which the market value of the post-CGT

share was reduced as a result of the disposal of the first asset at

the first asset disposal time.

Loans to transferor-depreciable assets

  "160ZZRDL.(1) Section 160ZZRDM applies to a loan to the transferor

acquired by a taxpayer (the second taxpayer) if the 3 conditions below

are satisfied.

  "(2) The first condition is that the loan was acquired by the second

taxpayer on or after 20 September 1985 and is held by the second

taxpayer at the first asset disposal time.

  "(3) The second condition is that:

  (a) the parties to the loan were not dealing with each other at

arm's length in relation to the loan; or

  (b) the value of the loan was reduced as a result of the disposal of

the first asset.

  "(4) The third condition is that:

  (a) one or more shares in the transferor (the excess shares) are

taken, because of section 160ZZRDJ or 160ZZRDK, to have a cost base,

indexed cost base or reduced cost base of nil immediately after the

first asset disposal time; or

  (b) at the first asset disposal time, there were no shares in the

transferor that were acquired (by the second taxpayer or otherwise) on

or after 20 September 1985.

Loans to transferor-depreciable assets-deemed disposal

  "160ZZRDM.(1) If this section applies (see section 160ZZRDL), the

second taxpayer is taken to have disposed of the loan at the first

asset disposal time for a consideration equal to the indexed cost base

to the second taxpayer of the loan.

  "(2) For the purpose of ascertaining whether a capital gain accrued

to the second taxpayer in the event of a subsequent disposal of the

loan by the second taxpayer, the second taxpayer is taken to have

immediately re-acquired the loan for a consideration equal to the

indexed cost base to the second taxpayer of the loan, reduced by the

reduction (capital gain) amount.

  "(3) The reduction (capital gain) amount is worked out, immediately

before the first asset disposal time, using the formula:

  Market value of loan      x    Total excess share

  Total of market values of      reduction (capital gain) amount

  all loans to transferor

  "(4) The total excess share reduction (capital gain) amount is:

  (a) if paragraph 160ZZRDL(4)(a) applies-so much of the total share

reduction amounts for the excess shares as was not applied in making

reductions to the indexed cost bases of the excess shares in

accordance with subsection 160ZZRDJ(3) or section 160ZZRDK; or

  (b) if paragraph 160ZZRDL(4)(b) applies-the amount worked out using

the formula:

Written down value of first asset  -  Consideration for

                                      disposal of first asset

  "(5) For the purpose of ascertaining whether a capital loss accrued

to the second taxpayer in the event of a subsequent disposal of the

loan by the second taxpayer, the second taxpayer is taken to have

immediately re-acquired the loan for a consideration equal to the

reduced cost base to the second taxpayer of the loan, reduced by the

reduction (capital loss) amount.

  "(6) The reduction (capital loss) amount is worked out, immediately

before the first asset disposal time, using the formula:

  Market value of loan     x    Total excess share reduction

  Total of market values of       (capital loss) amount

  all loans to transferor

  "(7) The total excess share reduction (capital loss) amount is:

  (a) if paragraph 160ZZRDL(4)(a) applies-so much of the total share

reduction amounts for the excess shares as was not applied in making

reductions to the reduced cost bases of the excess shares in

accordance with subsection 160ZZRDJ(4) or section 160ZZRDK; or

  (b) if paragraph 160ZZRDL(4)(b) applies and the written down value

of the first asset exceeds the consideration in respect of the

disposal of the first asset-the amount of the excess; or

  (c) in any other case-0.

  "(8) If the second taxpayer or another taxpayer disposed of a loan

(otherwise than because of the application of this section) within 12

months after the taxpayer acquired the loan (otherwise than because of

the application of this section), subsections (1) and (2) have effect

as if the references to the indexed cost base to the taxpayer in

respect of the loan were a reference to the cost base to the taxpayer

in respect of the loan.

More than one loan

  "160ZZRDN. If:

  (a) at the first asset disposal time, a taxpayer (the second

taxpayer) held a loan to the transferor that was acquired by the

second taxpayer on or after 20 September 1985 (the post-CGT loan); and

    (i) a share in the transferor that was acquired by that taxpayer

before 20 September 1985; or

    (ii)  another loan to the transferor; and

  (c) the application of section 160ZZRDM to the post-CGT loan would

be unreasonable;

then, that section does not apply to the post-CGT loan and the cost

base, the indexed cost base or the reduced cost base of the post-CGT

loan to the second taxpayer is instead reduced by such amount (if any)

as is reasonable having regard to:

  (d) the circumstances in which the post-CGT loan was acquired by the

second taxpayer; and

  (e) the extent (if any) to which the market value of the post-CGT

loan was reduced as a result of the disposal of the first asset at the

first asset disposal time.

                   "Subdivision E-Other assets".

9. After subsection 160ZZRE(1A):

Insert:

  "(1B) This section only applies if the consideration for the

disposal of the first asset is less than the indexed threshold amount

being the lesser of:

  (a) the indexed cost base to the transferor of the first asset, or

the amount that would have been the indexed cost base if this Part had

applied in respect of the disposal of the first asset; and

  (b) the market value of the first asset immediately before the first

asset disposal time.".

10. Subparagraph 160ZZRE(6)(b)(i):

Before "held" insert "or another taxpayer".

11. Subparagraph 160ZZRE(6)(b)(i):

Omit "by the second taxpayer", substitute "by that taxpayer".

12. Sub-subparagraph 160ZZRE(6)(b)(ii)(A):

Omit all of the words after "disposal time,", substitute "shares in

the transferor belonging to 2 or more classes were in existence;".

13. Sub-subparagraph 160ZZRE(6)(b)(ii)(B):

Omit all of the words after "disposal time,", substitute "at least one

other loan to the transferor was held by the second taxpayer, a

company related to the transferor, or a person mentioned in paragraph

160ZZRB(b) in relation to the transferor; and".

14. Subsections 160ZZRF(2) and (3):

Omit all of the words and paragraphs after "as is reasonable".

15. Section 160ZZRF:

Add at the end:

  "(4) The second taxpayer must choose whether to use the matters set

out in subsection (5) or the matters set out in subsection (6) to

determine what amount is reasonable.

  "(5) The matters in this subsection are:

  (a) the circumstances in which the share or the loan was acquired by

the second taxpayer; and

  (b) the extent (if any) to which the market value of the share or

the loan was reduced as a result of the disposal of the first asset at

the first asset disposal time; and

  (c) the extent (if any) to which any consideration paid or given by

the second taxpayer for the acquisition of the share or the loan was

attributable to the first asset.

  "(6) The matters in this subsection are:

  (a) the indexed common ownership market value of the first asset

(see section 160ZZRBB); and

  (b) the amount of the consideration for the disposal of the first

asset to the transferee.".

16. After section 160ZZRFA:

Insert:

               "Subdivision F-Other adjustments".

17. Paragraph 160ZZRH(d):

Omit all of the words after "under", substitute "Subdivision C, D or

E; and".

18. Section 160ZZRH:

Add at the end:

  "(2) The total of increases made under subsection (1) in relation to

the first asset is not to exceed the total of adjustments made in

relation to that asset under Subdivisions C, D and E.".

19. Application of amendments

The amendments made by this Part apply to disposals after 7.30 p.m.,

by legal time in the Australian Capital Territory, on 9 May 1995.

        PART 2-OTHER AMENDMENTS RELATING TO CAPITAL GAINS TAX

20. Section 160AZA (Sub Index-Roll-overs):

After the entry for "Strata title conversion" insert:

  "Trusts-change in trust deed

160ZZPJ".

21. After subsection 160B(1):

Insert:

  "(1A) Subsections (2) and (2A) define listed personal-use asset for

the purposes of this Part.".

22. Subsection 160B(2):

Omit "$100", substitute "$500".

23. After subsection 160B(2):

Insert:

  "(2A) An interest in an asset is also a listed personal-use asset if

the interest is covered by subparagraph (2)(a)(vii) and the market

value of the asset at the time when the interest is acquired is more

than $500.".

24. Subsection 160B(4):

Omit "non-listed" (wherever occurring).

25. Subsection 160Z(10):

Omit "or paragraph 99B(2)(d) or (e)", substitute ", paragraph

99B(2)(d) or (e) or section 128D".

26. Subsection 160ZA(7):

Add at the end "This subsection is subject to subsection (7A).".

27. After subsection 160ZA(7):

Insert:

  "(7A) Subsection (7) does not apply in relation to a dividend that

is exempt from tax under section 23AJ to the extent that the dividend

is:

  (a) debited against a share capital account; or

  (b) debited against a share premium account; or

  (c) debited against a reserve to the extent that it consists of

profits from the revaluation of assets of a company that have not been

disposed of by the company; or

  (d) attributable, either directly or indirectly, to amounts that

were transferred from an account or reserve of the company paying the

dividend where the account or reserve is covered by one of the above

paragraphs.

An account continues to be a share premium account for the purposes of

this subsection even if, because the thing mentioned in paragraph (a)

or (b) of the definition of share premium account in subsection 6(1)

happens, it ceases to be a share premium account for other purposes of

this Act.".

28. Subsection 160ZA(8):

Omit the subsection, substitute:

  "(8) For the purposes of subsection (4), if an eligible termination

payment (within the meaning of Subdivision AA of Division 2 of Part

III) is to be included in part in the assessable income of a taxpayer,

then the whole of the payment is taken to be so included.".

29. Section 160ZE:

Omit "5,000" (wherever occurring), substitute "10,000".

30. Section 160ZG:

Omit "5,000" (wherever occurring), substitute "10,000".

31. Paragraph 160ZZO(1)(d):

Omit the paragraph, substitute:

  "(d)   either:

    (i) subsection (1AA) (disposals giving rise to capital losses)

applies to the disposal; or

    (ii)  the transferor and the transferee have elected that this

section is to apply in relation to the disposal;".

32. After subsection 160ZZO(1):

Insert:

  "(1AA) This subsection applies to a disposal if:

  (a) assuming this Part applied to the disposal, the disposal would

give rise to a capital loss; and

  (b) the disposal is not covered by an election under subsection

(1AB).

  "(1AB) The transferor and the transferee may make an election under

this subsection in relation to a disposal if the transferor and the

transferee intend that, before the end of the year of income of the

transferor after the year in which the disposal takes place, they will

cease to be related and that the transferor, together with related

companies of the transferor, will cease to hold 50% or more of the

shares in the transferee.

  "(1AC) If a transferor and a transferee make an election under

subsection (1AB) and the transferor, together with related companies

of the transferor, does not cease to hold 50% or more of shares in the

transferee before the end of the year of income of the transferor

after the year in which the disposal occurs, no capital loss is taken

to have arisen in relation to the disposal of the asset by the

transferor.

  "(1AD) No capital loss is taken to have arisen in relation to the

disposal of the asset by the transferor if:

  (a) the transferor and transferee make an election under subsection

(1AB); and

  (b) at any time in the 4 year period after the disposal of the

asset, the asset is held by the transferor or a company that is

related to the transferor or a company where, at that time, the

transferor, together with other companies related to the transferor,

holds 50% or more of the shares in the company.

Paragraph (b) does not apply in relation to the asset being held by

the transferee in the period between the time when the asset is

disposed of by the transferor and the time when the transferor,

together with related companies of the transferor, ceases to hold 50%

or more of the shares in the transferee.".

33. After subsection 160ZZO(2D):

Insert:

  "(3) An election under this section must be made in writing on or

before the date of lodgment of the transferor's return for the year of

income in which the disposal took place. The Commissioner may allow

the election to be made at a later time.

  "(4) If:

  (a) subsection (1AA) applies to a disposal (the first disposal) of

an asset; and

  (b) the asset is an interest in a CFC or a FIF; and

  (c) the consideration in respect of the first disposal is reduced

under section 461 or 613;

then:

  (d) for the purpose of determining if a capital gain arises in

respect of the subsequent disposal of the asset by the transferee, the

indexed cost base of the asset to the transferee is to be increased,

at the time of the subsequent disposal, by so much of the attribution

surplus as was taken into account under paragraph 461(1)(c) or

613(1)(c) in relation to the first disposal; and

  (e) for the purpose of determining if a capital loss arises in

respect of the subsequent disposal of the asset by the transferee, the

reduced cost base of the asset to the transferee is to be increased,

at the time of the subsequent disposal, by so much of the attribution

surplus as was taken into account under paragraph 461(1)(c) or

613(1)(c) in relation to the first disposal.

  "(5) In subsection (4):

attribution surplus means an attribution surplus under Part X or Part

XI.

CFC has the same meaning as in Part X.

FIF has the same meaning as in Part XI.".

34. Subsection 160ZZO(9A):

After "paragraph (1)(bb)" insert "or subsection (1AC) or (1AD)".

35. Before section 160ZZQ:

Insert in Division 17:

Changes in trust deeds

When section applies

  "160ZZPJ.(1) This section applies to an asset that is disposed of as

a result of the trust deed of a trust (the first trust) being amended

or replaced where:

  (a) immediately before the disposal the asset is held by the first

trust; and

  (b) immediately after the disposal the asset is held by a trust (the

second trust) (which may or may not be the first trust); and

  (c) the assets held by, and the members of, the first trust

immediately before the disposal are identical to the assets held by,

and the members of, the second trust immediately after the disposal;

and

  (d) either:

    (i) the first trust is a complying ADF or a complying

superannuation fund and the deed was amended or replaced to comply

with the Superannuation Industry (Supervision) Act 1993; or

    (ii)  the first trust is a complying ADF and the deed was amended

or replaced so that it became a complying superannuation fund.

Part does not apply to disposal

  "(2) This Part (other than this section) does not apply in respect

of the disposal of the asset.

Asset last acquired before 20 September 1985

  "(3) If the day (the last acquisition day) on which the last

acquisition of the asset by the first trust before the disposal

occurred was before 20 September 1985, the acquisition of the asset by

the second trust is taken to have occurred before that day.

Asset last acquired on or after 20 September 1985

  "(4) Subsections (5) to (8) apply if the last acquisition day was on

or after 20 September 1985.

Trust to have acquired asset

  "(5) The second trust is taken to have acquired the asset at the

time of the disposal.

Calculating future capital gains

  "(6) For the purpose of ascertaining if a capital gain accrued to

the second trust in the event of a subsequent disposal of the asset by

the second trust, the second trust is taken to have paid, as

consideration for the acquisition of the asset, the amount that would

have been the indexed cost base to the first trust of the asset for

the purposes of this Part if this Part had applied to the disposal of

the asset by the first trust.

Calculating future capital losses

  "(7) For the purpose of ascertaining if the second trust incurred a

capital loss in the event of a subsequent disposal of the asset by the

second trust, the second trust is taken to have paid, as consideration

for the acquisition of the asset, the amount that would have been the

reduced cost base to the first trust of the asset for the purposes of

this Part if this Part had applied to the disposal of the asset by the

first trust.

Disposals within 12 months

  "(8) If the asset is disposed of by the second trust within 12

months after the last acquisition day, the reference in subsection (6)

to the indexed cost base to the second trust of the asset is to be

read as a reference to the cost base to the second trust of the asset.

Interpretation

  "(9) In this section, complying ADF and complying superannuation

fund have the same meaning as in subsection 267(1).".

36. Application of amendments to sections 160B, 160ZE and 160ZG

  (1) The amendments made by items 22, 29 and 30 apply to disposals of

assets on or after 1 July 1995.

  (2) The amendment made by item 23 applies to interests acquired after

the commencement of this item.

  (3) The amendment made by item 24 applies to articles acquired after

the commencement of this item.

37. Application of amendment to subsection 160Z(10)

  (1) Subject to subitem (2), the amendments made by item 25 apply to

disposals of assets after 7.30 p.m. on 9 May 1995.

  (2) The amendments made by item 25 and subitem (1) of this item are

to be disregarded in determining the application of Part IIIA of the

Income Tax Assessment Act 1936 in relation to disposals of assets at

or before 7.30 p.m. on 9 May 1995.

  (3) A reference in this item to 7.30 p.m. is a reference to 7.30

p.m. by legal time in the Australian Capital Territory.

38. Application of amendments to section 160ZA

The amendments made by items 26, 27, 33 and 28 apply to disposals

occurring after 7.30 p.m., by legal time in the Australian Capital

Territory, on 9 May 1995.

39. Application of amendments to section 160ZZO

The amendments made by items 31, 32 and 34 apply to disposals

occurring after 7.30 p.m., by legal time in the Australian Capital

Territory, on 9 May 1995.

40. Application of new section 160ZZPJ

The amendments made by items 20 and 35 apply to disposals of assets

occurring on or after 12 January 1994.

 

TAXATION LAWS AMENDMENT ACT (No. 4) 1995 No. 171 of 1995 - SCHEDULE 2

 

                         SCHEDULE 2                  Section 3

     AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO

                        DIVIDEND IMPUTATION

1. Paragraph 46M(3)(b):

Omit "paragraph 160AQF(1)(c) or (1AA)(c)", substitute "paragraph

160AQF(1)(c), (1AA)(c) or (1AAA)(c)".

2. Subparagraph 46M(4)(a)(ii):

Omit "paragraph 160AQF(1)(c) or (1AA)(c)", substitute "paragraph

160AQF(1)(c), (1AA)(c) or (1AAA)(c)".

3. Section 160APA (after paragraph (ba) of the definition of

applicable general company tax rate):

Insert:

  "(baa) in relation to the liability of a company to pay class C

franking deficit tax or a class C deficit deferral tax-36%;".

4. Section 160APA (definition of applicable general company  tax

rate):

Add at the end:

  "or (cb) in relation to:

    (i) the payment of a class C franked dividend to a shareholder in

a company; or

    (ii)  a trust amount or partnership amount that relates, directly

or indirectly, to the payment of a class C franked dividend to a

shareholder in a company;

36%.".

5. Section 160APA (definition of deficit deferral amount):

Omit all the words after "(see subsection 160AQJA(2))", substitute ",

a class B deficit deferral amount (see subsection 160AQJB(2)) or a

class C deficit deferral amount (see subsection 160AQJC(2)).".

6. Section 160APA (definition of deficit deferral tax):

Omit "or class B deficit deferral tax;", substitute ", class B deficit

deferral tax or class C deficit deferral tax.".

7. Section 160APA (definition of estimated debit):

Omit "or an estimated class B debit;", substitute ", an estimated

class B debit or an estimated class C debit.".

8. Section 160APA (definition of estimated debit determination):

Omit "or an estimated class B debit determination;", substitute ", an

estimated class B debit determination or an estimated class C debit

determination.".

9. Section 160APA (definition of franking account assessment):

Omit "or a class B franking account assessment;", substitute ", a

class B franking account assessment or a class C franking account

assessment.".

10. Section 160APA (definition of franking credit):

Omit "or a class B franking credit;", substitute ", a class B franking

credit or a class C franking credit.".

11. Section 160APA (definition of franking debit):

Omit "or a class B franking debit;", substitute ", a class B franking

debit or a class C franking debit.".

12. Section 160APA (definition of franking deficit tax):

Omit "or class B franking deficit tax;", substitute ", class B

franking deficit tax or class C franking deficit tax.".

13. Section 160APA (definition of franking percentage):

Omit the definition, substitute:

  "franking percentage means:

  (a) in relation to a franked dividend-the sum of:

    (i) the class A franking percentage of the dividend; and

    (ii)  the class B franking percentage of the dividend; and

    (iii)   the class C franking percentage of the dividend; or

  (b) in relation to an unfranked dividend-0%.".

14. Section 160APA:

Insert the following definitions:

  "class C deficit deferral tax means tax payable in accordance with

section 160AQJC.

class C flow-on franking amount means an amount that would be a flow-on

franking amount if:

  (a) a reference in the definition of flow-on franking amount to a

franked dividend were, by express provision, confined to a class C

franked dividend; and

  (b) a reference in that definition to the flow-on franking amount

were, by express provision, confined to a class C flow-on franking

amount.

class C franked amount, in relation to a dividend, means so much of

the dividend as has been franked in accordance with subsection

160AQF(1AAA).

class C franked dividend means a dividend the whole or a part of which

has been franked in accordance with subsection 160AQF(1AAA).

class C franking account assessment means the ascertainment of the

class C franking account balance and of any class C franking deficit

tax payable.

class C franking account balance, in relation to a company, means:

  (a) if the company has a class C franking surplus-the amount of that

surplus; or

  (b) if the company has a class C franking deficit-the amount of that

deficit; or

  (c) in any other case-nil.

class C franking deficit means a deficit calculated under subsection

160APJ(4).

class C franking deficit tax means tax payable in accordance with

subsection 160AQJ(1B).

class C franking percentage means:

  (a) in relation to a class C franked dividend-the percentage

specified in the declaration made under subsection 160AQF(1AAA) in

relation to the dividend; or

  (b) in relation to a dividend (including a dividend that is not a

frankable dividend) no part of which has been franked in accordance

with subsection 160AQF(1AAA)-0%.

class C franking surplus means a surplus calculated under subsection

160APJ(1B).

class C potential rebate amount means an amount that would be a

potential rebate amount if:

  (a) each reference in the definition of potential rebate amount to a

franked dividend were, by express provision, confined to a class C

franked dividend; and

  (b) each reference in that definition to a flow-on franking amount

were, by express provision, confined to a class C flow-on franking

amount; and

  (c) each reference in that definition to a potential rebate amount

were, by express provision, confined to a class C potential rebate

amount.

class C conversion time has the meaning given by section 160ASF.

estimated class C debit means an estimated class C debit specified in

an estimated class C debit determination.

estimated class C debit determination means a determination made by

the Commissioner under subsection 160AQDAA(1).".

15. After section 160APA:

Insert:

Reduction of adjusted amount

  "160APAAA.(1) In working out the adjusted amount of an amount (the

basic amount), the basic amount is reduced by any reduction amount

that arises in relation to the basic amount.

  "(2) The reduction amount in relation to a basic amount that is

attributable to a payment of tax is the whole, or any part, of the

payment that arises as a result of the application or operation of:

  (a) subsection 136AD(1), (2) or (3) or 136AE(1), (2) or (3); or

  (b) paragraph 1 or 2 of Article 9 of the Vietnamese agreement or a

provision of any other double taxation agreement that corresponds to

either of those paragraphs.

  "(3) The reduction amount in relation to a basic amount that is

attributable to:

  (a) an amount received as a refund of a payment of tax; or

  (b) an amount credited under paragraph 221AZM(1)(a) or (c) against a

liability of the company; or

  (c) an amount applied by the Commissioner against a liability of the

company; or

  (d) a reduction mentioned in section 160APZ;

is the whole, or any part, of the amount or reduction that is

attributable to a payment, or a part of a payment, of tax in relation

to which subsection (2) gave rise to a reduction amount.

  "(4) In this section:

double taxation agreement means an agreement within the meaning of the

International Tax Agreements Act 1953.

the Vietnamese agreement has the same meaning as in the International

Tax Agreements Act 1953.".

16. After section 160APB:

Insert:

References to franking year

  "160APBA. A reference in this Part to a franking year preceded by a

figure referring to 2 years (for example 1995-96 franking year) is a

reference to the franking year of the company:

  (a) if the franking year of the company is covered by paragraph (a)

or (b) of the definition of franking year-that begins on or after 1

January in the first year referred to in the figure but before 1

January in the second year referred to in that figure; or

  (b) if the franking year of the company is covered by paragraph (c)

of that definition-that begins on 1 July of the first year referred to

in the figure.".

17. After subsection 160APJ(1A):

Insert:

  "(1B) The class C franking surplus of a company at a particular time

in a franking year is the amount by which the total of the class C

franking credits of the company arising in the franking year and

before that time exceeds the total of the class C franking debits of

the company arising in the franking year and before that time.".

18. Section 160APJ:

Add at the end:

  "(4) The class C franking deficit of a company at a particular time

in a franking year is the amount by which the total of the class C

franking debits of the company arising in the franking year and before

that time exceeds the total of the class C franking credits of the

company arising in the franking year and before that time.".

19. Section 160APL:

Add at the end:

  "(3) If a company has a class C franking surplus at the end of a

franking year, there arises at the beginning of the next franking year

a class C franking credit of the company equal to that class C

franking surplus.".

20. Section 160APM:

Repeal the section, substitute:

Payment of company tax instalment

  "160APM. If, on a particular day, a company tax instalment payable

under section 221AZK is paid in respect of a year of income, there

arises on that day whichever of the following is applicable:

  (a) if the year of income is the 1994-95 year of income-a class B

franking credit of the company equal to the adjusted amount in

relation to the amount paid;

  (b) if the year of income is the 1995-96 year of income or a later

year of income-a class C franking credit of the company equal to the

adjusted amount in relation to the amount paid.".

21. Section 160APMAA:

Repeal the section, substitute:

Payment of additional amount on upwards estimate

  "160APMAA. If, on a particular day, an amount payable under

subsection 221AZR(1) is paid in respect of a year of income, there

arises on that day whichever of the following is applicable:

  (a) if the year of income is the 1994-95 year of income-a class B

franking credit of the company equal to the adjusted amount in

relation to the amount paid;

  (b) if the year of income is the 1995-96 year of income or a later

year of income-a class C franking credit of the company equal to the

adjusted amount in relation to the amount paid.".

22. Section 160APMAB:

Add at the end:

  "(3) If a company receives a refund in relation to which a class C

deficit deferral amount arises (see subsection 160AQJC(2)) on a

particular day, a class C franking credit of the company equal to the

adjusted amount in relation to the class C deficit deferral tax

payable in relation to the refund (see subsection 160AQJC(3)) arises

on that day.".

23. Paragraph 160APMD(d):

Omit "a later year of income", substitute "the 1994-95 year of

income".

24. Section 160APMD:

Add at the end:

        "; (e) if the year of income is the 1995-96 year of income

or a later year of income-a class C franking credit of the company

equal to the adjusted amount in relation to the amount of that

payment.".

25. After subsection 160APP(1A):

Insert:

  "(1B) Subject to this section, if:

  (a) on a particular day, a class C franked dividend is paid to a

shareholder being a company; and

  (b) the company is a resident at the time the dividend is paid;

there arises on that day a class C franking credit of the company

equal to the class C franked amount of the dividend.".

26. Subsection 160APP(3):

Omit "subsection (1) or (1A)", substitute "subsection (1), (1A) or

(1B)".

27. Subsection 160APP(3) (definition of FC):

Omit "subsections (1) and (1A)", substitute "subsections (1), (1A) and

(1B)".

28. Subsection 160APP(5):

Omit "subsection (1) or (1A)", substitute "subsection (1), (1A) or

(1B)".

29. After subsection 160APQ(1A):

Insert:

  "(2) Subject to this section, if:

  (a) a trust amount or partnership amount is included in, or a

partnership amount is allowed as a deduction from, the assessable

income of a company; and

  (b) there is a class C flow-on franking amount in relation to the

trust amount or the partnership amount;

there arises, at the end of the year of income of the trustee or

partnership to which the trust amount or partnership amount relates, a

class C franking credit of the company equal to the amount worked out

using the formula:

     Potential rebate amount  x  1-Company tax rate

                                   Company tax rate

where:

Potential rebate amount means the class C potential rebate amount in

relation to the trust amount or partnership amount.

Company tax rate means the applicable general company tax rate.".

30. Subsection 160APQ(3):

Omit "subsection (1) or (1A)", substitute "subsection (1), (1A) or

(2)".

31. Paragraph 160APQA(d):

Omit "a later year of income", substitute "the 1994-95 year of

income".

32. Section 160APQA:

Add at the end:

        "; (e) if the offset relates to company tax for the

1995-96 year of income or a later year of income-a class C franking

credit of the company equal to the adjusted amount in relation to the

amount of the payment.".

33. Paragraph 160APQB(d):

Omit "a later year of income", substitute "the 1994-95 year of

income".

34. Section 160APQB:

Add at the end:

  "; (e) if the year of income is the 1995-96 year of income or a

later year of income-a class C franking credit of the company equal to

the adjusted amount in relation to the amount of that payment.".

35. Section 160APU:

Add at the end:

  "(3) On the day on which the termination time in relation to an

estimated class C debit of a company occurs, there arises a class C

franking credit of the company equal to the estimated class C debit.".

36. Section 160APV:

Add at the end:

  "(3) If, on a particular day, the Commissioner serves on a company a

notice of an estimated class C debit determination that is in

substitution for an earlier determination, there arises on that day a

class C franking credit of the company equal to the amount of the

class C franking debit that arose because of the earlier

determination.".

37. After subsection 160APVA(1):

Insert:

  "(1A) If:

  (a) on a particular day, a class C franking debit of a life

assurance company arises under section 160APY in relation to a refund

received by the company in respect of an instalment for a year of

income (the current year of income); and

  (b) a notice of an original company tax assessment for the current

year of income has not been served, or been taken to have been served,

on the company on or before that day;

then a class C franking credit of the company worked out under

subsection (2) of this section arises on that day.".

38. After subsection 160APVA(3):

Insert:

  "(3A) If:

  (a) on a particular day a class C franking debit of a life assurance

company arises:

    (i) under section 160APY in relation to a refund received by the

company in respect of an instalment for a year of income (the current

year of income); or

    (ii)  under section 160APYA in relation to a refund received by

the company, or an amount credited against a liability of the company,

in respect of an instalment for a year of income (also the current

year of income); and

  (b) either:

    (i) before that day, a notice of an original company tax

assessment for the current year of income has been served, or is taken

to have been served, on the company; or

    (ii)  on or after that day, a notice of an original company tax

assessment for the current year of income is served, or taken to be

served, on the company;

then a class C franking credit of the company worked out under

subsection (4) of this section arises on the later of the particular

day and the day on which the notice is served or taken to be served.".

39. Section 160APVB:

Add at the end:

  "(2) If:

  (a) on a particular day, a class C franking debit of a life

assurance company arises under subsection 160AQCCA(1A) in relation to:

    (i) an instalment that the company is required to pay under

section 221AZK in respect of a year of income (the current year of

income); or

    (ii)  an amount that the company is required to pay under

subsection 221AZR(1) in respect of a year of income (also the current

year of income); and

  (b) on or after that day, a notice of an original company tax

assessment for the current year of income is served, or taken to be

served, on the company;

then a class C franking credit of the company equal to the amount of

the class C franking debit arises on the day on which the notice is

served, or taken to be served.".

Note:  The heading to section 160APVB is altered by inserting "or

160AQCCA(1A)" after "subsection 160AQCCA(1)".

40. Paragraph 160APVBA(1)(b):

Omit "a later year of income", substitute "the 1994-95 year of

income".

41. Subsection 160APVBA(1):

Add at the end:

        "; (c) if the year of income is the 1995-96 year of income

or a later year of income-a class C franking credit of the company

worked out under subsection (2) of this section.".

42. Subsection 160APVBA(2) (paragraph (b) of the definition of

Statutory factor):

After "class B franking credit" insert "or a class C franking credit".

43. Paragraph 160APVBB(1)(b):

Omit "a later year of income", substitute "the 1994-95 year of

income".

44. Subsection 160APVBB(1):

Add at the end:

  "; (c) if the year of income is the 1995-96 year of income or a

later year of income-a class C franking credit of the company worked

out under subsection (2) of this section.".

45. Subsection 160APVBB(2) (paragraph (b) of the definition of

Statutory factor):

After "class B franking credit" insert "or a class C franking credit".

46. Section 160APVD:

Add at the end:

  "(3) If, on a particular day, a class C franking debit of a life

assurance company arises under section 160APZ in relation to a

reduction in the company tax of the company for a year of income,

there arises on that day a class C franking credit of the company

equal to the adjusted amount in relation to the amount worked out

using the formula:

  Statutory factor  x  Overall reduction  -  Non-fund component

                                                of reduction

where:

Statutory factor means 1.0.

Overall reduction means the amount of the reduction.

Non-fund component of reduction means so much of the amount of the

reduction as is attributable to the non-fund component.".

47. Paragraph 160APVH(3)(a):

After "of that subsection" insert ", or under subsection 160AQCN(2AA)

because of paragraph (a) of that subsection,".

48. Section 160APVH:

Add at the end:

  "(4) If, on a particular day, a class C franking debit of a life

assurance company arises under any of the following provisions:

  (a) subsection 160AQCCA(1A);

  (b) subsection 160AQCCA(3A);

  (c) section 160AQCK;

  (d) section 160AQCL;

there arises on that day a class A franking credit of the company

equal to the amount that would have been the amount of that class C

franking debit if the assumptions set out in subsection (5) were made.

  "(5) The assumptions are as follows:

  (a) the assumption that the class C franking debit had been

calculated using a statutory factor of 0.2 instead of 1.0;

  (b) the assumption that the class C franking debit had been

calculated by reference to the special life company tax rate for the

year of tax concerned instead of by reference to the general company

tax rate for the year of tax concerned.".

49. After subsection 160APX(1A):

Insert:

  "(1B) If:

  (a) the class C required franking amount for a frankable dividend

paid by a company on a particular day is not less than 10% of the

amount of the dividend; and

  (b) that class C required franking amount exceeds the class C

franked amount of the dividend;

there arises on that day a class C franking debit of the company equal

to the excess referred to in paragraph (b).".

50. Section 160APY:

Repeal the section, substitute:

Refunds of company tax instalment

  "160APY. If a company receives an amount as a refund under

subsection 221AZL(2) or 221AZQ(1):

  (a) if the refund is in respect of the 1994-95 year of income-a

class B franking debit of the company equal to the adjusted amount in

relation to the amount received arises on the day on which the company

receives the amount; or

  (b) if the refund is in respect of the 1995-96 year of income or a

later year of income-a class C franking debit of the company equal to

the adjusted amount in relation to the amount received arises on the

day on which the company receives the amount.".

51. Section 160APYA:

Repeal the section, substitute:

Refunds of company tax

  "160APYA. If:

  (a) a company makes a payment covered by section 160APM or 160APMAA

in respect of a year of income; and

  (b) either:

    (i) the company receives an amount as a refund of that payment

(not being a refund covered by section 160APY); or

    (ii)  the Commissioner credits the payment under paragraph

221AZM(1)(b) or (c) against a liability of the company; and

  (c) the amount refunded or credited, as the case may be, is not

attributable to a reduction of company tax covered by section 160APZ;

then:

  (d) if the payment is in respect of the 1994-95 year of income-a

class B franking debit of the company equal to the adjusted amount in

relation to the amount received or credited arises on the day on which

the company receives the refund or on the day on which that payment is

credited; or

  (e) if the payment is in respect of the 1995-96 year of income or a

later year of income-a class C franking debit of the company equal to

the adjusted amount in relation to the amount received or credited

arises on the day on which the company receives the refund or on the

day on which that payment is credited.".

52. Paragraph 160APYBA(e):

Omit "a later year of income", substitute "the 1994-95 year of

income".

53. Section 160APYBA:

Add at the end:

  "; (f) if the payment mentioned in paragraph (a) is in respect

of the 1995-96 year of income or a later year of income-a class C

franking debit of the company equal to the adjusted amount in relation

to the amount received or applied, as the case requires.".

54. Paragraph 160APYBB(d):

Omit "a later year of income", substitute "the 1994-95 year of

income".

55. Section 160APYBB:

Add at the end:

  "; (e) if the foreign tax credit was allowable in respect of tax

paid or payable by the company in respect of income derived in the

1995-96 year of income or a later year of income-the class C franking

debit of the company equal to the adjusted amount in relation to the

amount paid or applied, as the case requires.".

56. Paragraph 160APZ(d):

Omit "a later year of income", substitute "the 1994-95 year of

income".

57. Section 160APZ:

Add at the end:

  "; (e) if the year of income is the 1995-96 year of income or a

later year of income-a class C franking debit of the company equal to

the adjusted amount in relation to the amount of the reduction.".

58. Section 160AQB:

Add at the end:

  "(3) If, on a particular day, a company pays a class C franked

dividend, there arises on that day a class C franking debit of the

company equal to the class C franked amount of the dividend.".

59. Section 160AQC:

Add at the end:

  "(3) If, on a particular day, the Commissioner serves on a company

notice of an estimated class C debit determination, there arises on

that day a class C franking debit of the company equal to the

estimated class C debit specified in the notice.".

60. Section 160AQCA:

Add at the end:

  "(3) If:

  (a) a class C franking credit of a life assurance company arose

under section 160APP or 160APQ at a particular time during a year of

income of the company; and

  (b) after that time and during the year of income:

    (i) if section 160APP applied-the asset of the company from which

the dividend referred to in subsection (1B) of that section was

derived; or

    (ii)  if section 160APQ applied-the asset of the company to which

the trust amount or partnership amount referred to in subsection (2)

of that section is attributable;

becomes part of the insurance funds of the company;

there arises, on the day on which the asset becomes part of the

insurance funds, a class C franking debit of the company equal to the

class C franking credit.".

61. Subsection 160AQCB(1):

Add at the end:

  "; and (e) a class C franking debit of the debit company equal to

the amount worked out using the following formula, as reduced by the

amount (if any) of the class C franking debit of the company arising

under section 160AQB in respect of the payment of the scheme dividend:

  Scheme dividend  x  Substituted class C franking percentage

where:

Scheme dividend means the amount of the scheme dividend.

Substituted class C franking percentage means the actual or proposed

class C franking percentage, or the greatest actual or proposed class

C franking percentage, of the substituted dividends.".

62. Subsection 160AQCB(2):

Add at the end:

  "; and (e) a class C franking debit of the debit company equal to

the actual or proposed class C franked amount, or the sum of the

actual or proposed class C franked amounts, of the substituted

dividends.".

63. Subsection 160AQCB(3):

Add at the end:

  "; and (e) a class C franking debit of the debit company equal to

the amount worked out using the formula:

  Linked dividend  x  Substituted class C franking percentage

where:

Linked dividend means the amount of the linked dividend.

Substituted class C franking percentage means the actual or proposed

class C franking percentage, or the greatest actual or proposed class

C franking percentage, of the substituted dividends.".

64. Paragraph 160AQCB(4)(a):

Omit "on a particular day after 30 June 1990, a company (in this

subsection called the "debit company") pays", substitute "a company

(the debit company) pays, on a particular day after 30 June 1990 and

before the day on which the class C conversion time of the company

occurs,".

65. After subsection 160AQCB(4):

Insert:

  "(4A) If:

  (a) a company (the debit company) pays, on a particular day on or

after the day on which the class C conversion time of the company

occurs, one or more franked dividends (the scheme dividends) to one or

more shareholders in the debit company; and

  (b) the scheme dividends were paid:

    (i) under a dividend streaming arrangement in relation to the

debit company; and

    (ii)  in substitution, in whole or in part, for the payment, or

proposed payment, by another company of one or more unfranked

dividends (the substituted dividends) to one or more shareholders in

that other company;

there arises on that day a class C franking debit of the debit company

equal to the sum of the following amounts:

  (c) to the extent that the substituted dividends comprise the whole

or a part of a common issue of shares covered by paragraph (c) of the

definition of dividend in subsection 6(1)-the sum of the actual or

proposed amounts of the dividends to which that common issue relates;

  (d) to the extent that the substituted dividends:

    (i) do not consist of shares issued by the other company; and

    (ii)  comprise the whole or a part of a common series of

distributions covered by paragraph (a) of the definition of dividend

in subsection 6(1);

the sum of the actual or proposed amounts of the dividends to which

those distributions relate;

  (e) to the extent that paragraph (d) of this subsection does not

apply and the substituted dividends comprise the whole or a part of a

common series of credits covered by paragraph (b) of the definition of

dividend in subsection 6(1)-the sum of the actual or proposed amounts

of the dividends to which those credits relate.".

66. Subsection 160AQCC(4):

Omit "subsection 160AQDB(2)", substitute "subsection 160AQDB(2) or

160AQDB(3)".

67. Section 160AQCC:

Add at the end:

  "(5) There arises on the day of an on-market purchase by a company

of a share a class C franking debit of the company equal to the amount

calculated under subsection (6).

  "(6) The amount is the amount that would be calculated under

subsection 160AQDB(4) or 160AQDB(5) (whichever is applicable) as the

class C required franking amount for a dividend paid on that day to a

shareholder in the company if that and any other on-market purchase by

the company had been an off-market purchase.".

68. After subsection 160AQCCA(1):

Insert:

  "(1A) If:

  (a) on a particular day, a class C franking credit of a life

assurance company arises:

    (i) under section 160APM in relation to an instalment that the

company is required to pay under section 221AZK in respect of a year

of income (the current year of income); or

    (ii)  under section 160APMAA in relation to an amount that the

company is required to pay under subsection 221AZR(1) in respect of a

year of income (also the current year of income); and

  (b) a notice of an original company tax assessment for the current

year of income has not been served, or been taken to have been served,

on the company on or before that day;

then a class C franking debit of the company worked out under

subsection (2) of this section arises on that day.".

69. After subsection 160AQCCA(3):

Insert:

  "(3A) If:

  (a) on a particular day, a class C franking credit of a life

assurance company arises under:

    (i) section 160APM in relation to an instalment that the company

is required to pay under section 221AZK in respect of a year of income

(the current year of income); or

    (ii)  under section 160APMAA in relation to an amount that the

company is required to pay under subsection 221AZR(1) in respect of a

year of income (also the current year of income); and

  (b) either:

    (i) before that day, a notice of an original company tax

assessment for the current year of income has been served, or is taken

to have been served, on the company; or

    (ii)  on or after that day, a notice of an original company tax

assessment for the current year of income is served, or taken to be

served, on the company;

then a class C franking debit of the company worked out under

subsection (4) of this section arises on the later of the particular

day and the day on which the notice is served or taken to be served.".

70. Section 160AQCCB:

Add at the end:

  "(2) If:

  (a) on a particular day, a class C franking credit of a life

assurance company arises under subsection 160APVA(1A) in relation to a

refund received by the company in respect of an instalment for a year

of income (the current year of income); and

  (b) on or after that day, a notice of an original company tax

assessment for the current year of income is served, or taken to be

served, on the company;

then a class C franking debit of the company equal to the amount of

the class C franking credit arises on the day on which the notice is

served, or taken to be served.".

Note:  The heading to section 160AQCCB is altered by inserting "or

160APVA(1A)" after "subsection 160APVA(1)".

71. Paragraph 160AQCK(1)(b):

Omit "a later year of income", substitute "the 1994-95 year of

income".

72. Subsection 160AQCK(1):

Add at the end:

  "; (c) if the year of income is the 1995-96 year of income or a

later year of income-a class C franking debit of the company worked

out under subsection (2) of this section.".

73. Subsection 160AQCK(2) (paragraph (b) of the definition of

Statutory factor):

After "class B franking debit" insert "or a class C franking debit".

74. Paragraph 160AQCL(1)(b):

Omit "a later year of income", substitute "the 1994-95 year of

income".

75. Subsection 160AQCL(1):

Add at the end:

  "; (c) if the year of income is the 1995-96 year of income or a

later year of income-a class C franking debit of the company worked

out under subsection (2) of this section.".

76. Subsection 160AQCL(2) (paragraph (b) of the definition of

Statutory factor):

After "class B franking debit" insert "or a class C franking debit".

77. After subsection 160AQCN(2):

Insert:

Life assurance companies-statutory fund component

  "(2AA) If, on a particular day, a class C franking credit of a

company arises under any of the following provisions:

  (a) subsection 160APVA(1A);

  (b) subsection 160APVA(3A);

  (c) section 160APVBA;

  (d) section 160APVBB;

  (e) subsection 160APVD(3);

there arises on that day a class A franking debit of the company equal

to the amount that would have been the amount of that class C franking

credit if the assumptions set out in subsection (2AB) were made.

  "(2AB) The assumptions are as follows:

  (a) the assumption that the class C franking credit had been

calculated using a statutory factor of 0.2 instead of 1.0;

  (b) the assumption that the class C franking credit had been

calculated by reference to the special life company tax rate for the

year of tax concerned instead of by reference to the general company

tax rate for the year of tax concerned.".

78. Paragraph 160AQCN(2A)(a):

After "of that subsection" insert ", or under subsection 160APVH(4)

because of paragraph (a) of that subsection,".

79. After section 160AQDA:

Insert:

Determination of estimated class C debit

  "160AQDAA.(1) If a company:

  (a) has taken liability reduction action; or

  (b) has paid a company tax instalment;

the company may lodge an application with the Commissioner for:

  (c) the determination of an estimated class C debit in relation to

the liability reduction action or the company tax instalment; or

  (d) the determination of such an estimated class C debit in

substitution for an earlier determination.

  "(2) An estimated class C debit in relation to a company tax

instalment must relate to the refund of that instalment under section

221AZL or 221AZQ.

  "(3) The application must:

  (a) be made before the termination time; and

  (b) be in the approved form; and

  (c) specify the amount of the estimated class C debit applied for.

  "(4) The Commissioner:

  (a) may determine an estimated class C debit not greater than the

amount specified in the application; and

  (b) must serve notice of any such determination on the company.

  "(5) If:

  (a) a company lodges an application with the Commissioner on a

particular day (the application day); and

  (b) at the end of the 21st day after the application day, the

Commissioner has neither:

    (i) served notice of an estimated class C debit determination on

the company; nor

    (ii)  refused to make an estimated class C debit determination;

the Commissioner is taken, on the 22nd day after the application day,

to have:

  (c) determined an estimated class C debit in accordance with the

application; and

  (d) served notice of the determination on the company.

  "(6) A notice of an estimated class C debit determination has no

effect if it is served after the termination time.".

80. Subsection 160AQDB(2):

After "For the purposes of this Part," insert "if the beginning of the

reckoning day is before the company's class C conversion time,".

81. Subsection 160AQDB(2):

Omit "a company", substitute "the company".

82. Section 160AQDB:

Add at the end:

  "(3) For the purposes of this Part, if the beginning of the

reckoning day is after the company's class C conversion time, the

class B required franking amount for a dividend paid to a shareholder

in the company is nil.

  "(4) For the purposes of this Part, if the beginning of the

reckoning day is after the company's class C conversion time, the

class C required franking amount for a dividend paid to a shareholder

in the company is worked out using the formula:

  Gross required franking amount  -  Class A required franking amount

where:

Gross required franking amount means the required franking amount for

the dividend.

Class A required franking amount means the class A required franking

amount for the dividend.

  "(5) For the purposes of this Part, if the beginning of the

reckoning day is before the company's class C conversion time, the

class C required franking amount for a dividend paid to a shareholder

in the company is nil.".

83. Subsection 160AQE(2) (sub-subparagraph (a)(i)(A) of the

definition of SD):

Omit "subsection 160ACQB(4) (which deals", substitute "subsection

160AQCB(4) or (4A) (which deal".

84. Subsection 160AQE(6):

Add at the end:

  "; and (c) the class C franking surplus (if any) of the company as

at that time.".

85. After subsection 160AQF(1AA):

Insert:

  "(1AAA) If:

  (a) a frankable dividend (the current dividend) is paid to a

shareholder in a company; and

  (b) the company is a resident at the time of payment; and

  (c) if the current dividend is paid under a resolution:

    (i) before the reckoning day for the current dividend, the company

makes a declaration that each dividend to which the resolution relates

is a class C franked dividend to the extent of a percentage (not

exceeding 100%) specified in the declaration in relation to the

dividend; and

    (ii)  the percentage so specified is the same for each of the

dividends to which the resolution relates; and

  (d) if the current dividend is not paid under a resolution-the

company makes a declaration before the reckoning day for the current

dividend that the current dividend is a class C franked dividend to

the extent of a percentage (not exceeding 100%) specified in the

declaration;

the current dividend is taken to have been class C franked to the

extent of the amount worked out using the formula:

  Current dividend  x  Specified percentage

where:

Current dividend means the amount of the current dividend.

Specified percentage means the percentage specified in the declaration

in relation to the dividend.".

86. Subsection 160AQF(1AAA):

Add at the end:

  "Note:  Because of subsection 46L(3) and paragraph 46L(4)(a),

paragraph (c) of this subsection does not apply to dividends that are

taken by subsection 46L(3) or paragraph 46L(4)(a) not to be frankable

dividends.".

87. After subsection 160AQF(1AB):

Insert:

  "(1AC) Despite subsections (1) and (1AAA), a dividend is taken not

to have been class A franked or class C franked if the sum of:

  (a) the class A franked amount of the dividend; and

  (b) the class C franked amount of the dividend;

exceeds the amount of the dividend.".

88. Subparagraph 160AQH(b)(i):

Omit the subparagraph, substitute:

  "(i)   the class A franked amount of the dividend (if any), the

class B franked amount of the dividend (if any) and the class C

franked amount of the dividend (if any); and".

89. Subparagraph 160AQH(b)(ii):

Omit "and the class B franked amount of the dividend", substitute "(if

any), the class B franked amount of the dividend (if any) and the

class C franked amount of the dividend (if any)".

90. After subparagraph 160AQH(b)(iv):

Insert:

  "(iva) if the dividend is a class C franked dividend-the amount

worked out in relation to the dividend using the formula in subsection

160AQT(1AB) (whether or not that subsection applies to the dividend);

and".

91. Subparagraph 160AQH(b)(v):

Omit "subparagraphs (iii) and (iv)", substitute "subparagraphs (iii),

        (iv) and (iva)".

92. After subsection 160AQJ(1A):

Insert:

  "(1B) If a company has a class C franking deficit at the end of a

franking year, the company is liable to pay tax equal to the amount

worked out using the formula:

  Franking deficit  x  Company tax rate

                       1-Company tax rate

where:

Franking deficit means the amount of the class C franking deficit.

Company tax rate means the applicable general company tax rate.".

93. Paragraph 160AQJB(1)(a):

Omit "a year of income", substitute "the 1994-95 year of income".

94. After section 160AQJB:

Insert in Subdivision BA of Division 5 of Part IIIAA:

Class C deficit deferral tax

  "160AQJC.(1) If:

  (a) during a franking year (the first franking year) a company pays

one or more instalments under section 221AZK for the 1995-96 year of

income or a later year of income; and

  (b) at a particular time during the next franking year (the second

franking year) the company receives a refund of the whole or a part of

the instalment, or one or more of the instalments, under section

221AZL or 221AZQ; and

  (c) assuming that the refund, together with any previous refund of

one or more instalments for the year of income, had been received by

the company on the last day of the first franking year, the company

would have had a class C franking deficit, or an increased class C

franking deficit, at the end of the first franking year;

a class C deficit deferral amount (defined in subsection (2)) arises

in relation to the company and the refund.

  "(2) The class C deficit deferral amount is the amount of the class

C franking deficit, or the amount of the increase in the class C

franking deficit, referred to in paragraph (1)(c).

  "(3) If a class C deficit deferral amount arises in relation to a

company and a refund, the company is liable to pay class C deficit

deferral tax in relation to the refund. The amount of the tax is the

gross class C deficit deferral amount (see subsection (4)) reduced by

any class C deficit deferral tax already payable by the company in

relation to refunds received in the second franking year.

  "(4) The gross class C deficit deferral amount is worked out using

the formula:

  Class C deficit deferral amount  x  36/64

  "(5) If an amount is paid under subsection 221AZR(1) in the same

year as the instalment mentioned in that subsection, then, for the

purposes of this section, the amount is to be treated as being part of

the instalment.".

95. After subparagraph 160AQK(1)(a)(ii):

Insert:

  "(iia) class C franking deficit tax for a franking year; or".

96. After subparagraph 160AQK(1)(a)(iv):

Insert:

  "or (v) class C deficit deferral tax in relation to the refund of

one or more instalments paid during a franking year;".

97. Paragraph 160AQK(1)(c):

After "the class B franking deficit tax," insert "the class C franking

deficit tax,".

98. Paragraph 160AQK(1)(c):

Omit "and the class B deficit deferral tax", substitute ", the class B

deficit deferral tax and the class C deficit deferral tax".

99. After subsection 160AQT(1AA):

Insert:

  "(1AB) If:

  (a) a class C franked dividend is paid in a year of income to a

shareholder in a company; and

  (b) the shareholder is:

    (i) a natural person who is a resident at the time of payment of

the dividend; or

    (ii)  a trustee; or

    (iii)   a partnership; or

    (iv)  a registered organisation; and

  (c) the dividend is not exempt income of the shareholder; and

  (d) the dividend was not paid as part of a dividend stripping

operation;

the assessable income of the shareholder of the year of income

includes the amount worked out using the formula:

  Franked amount  x  Company tax rate

                     1-Company tax rate

where:

Franked amount means the class C franked amount of the dividend.

Company tax rate means the applicable general company tax rate.".

100. After subsection 160AQT(1B):

Insert:

  "(1C) If:

  (a) a class C franked dividend is paid in a year of income to a

shareholder in a company; and

  (b) the shareholder is a life assurance company; and

  (c) the dividend is not exempt income of the shareholder; and

  (d) the dividend was not paid as part of a dividend stripping

operation; and

  (e) the assets of the shareholder from which the dividend was

derived were included in insurance funds of the shareholder at any

time during the period:

    (i) starting at the beginning of the year of income of the

shareholder in which the dividend was paid; and

    (ii)  ending at the time the dividend was paid;

the assessable income of the shareholder of the year of income

includes the amount worked out using the formula:

  Franked amount  x  Company tax rate

                     1-Company tax rate

where:

Franked amount means the class C franked amount of the dividend.

Company tax rate means the applicable general company tax rate.".

101. Paragraph 160AQX(c):

Omit "is either or both", substitute "are one or more".

102. Paragraph 160AQX(c):

Add at the end:

  "(iii) a class C flow-on franking amount in relation to the

trust amount;".

103. After paragraph 160AQX(e):

Insert:

  "(ea)    if only subparagraph (c)(iii) applies-the class C potential

rebate amount in relation to the trust amount;".

104. Paragraph 160AQX(f):

Omit "both".

105. Section 160AQX:

Add at the end:

  "; (g) if subparagraphs (c)(i) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the trust

amount; and

    (ii)  the class C potential rebate amount in relation to the trust

amount;

  (h) if subparagraphs (c)(ii) and (iii) apply-the sum of:

    (i) the class B potential rebate amount in relation to the trust

amount; and

    (ii)  the class C potential rebate amount in relation to the trust

amount;

    (i) if subparagraphs (c)(i), (ii) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the trust

amount; and

    (ii)  the class B potential rebate amount in relation to the trust

amount; and

    (iii) the class C potential rebate amount in relation to the trust

amount.".

106. Paragraph 160AQY(b):

Omit "is either or both", substitute "are one or more".

107. Paragraph 160AQY(b):

Add at the end:

  "(iii) a class C flow-on franking amount in relation to the trust

amount;".

108. After paragraph 160AQY(d):

Insert:

  "(da) if only subparagraph (b)(iii) applies-the class C potential

rebate amount in relation to the trust amount;".

109. Paragraph 160AQY(e):

Omit "both".

110. Section 160AQY:

Add at the end:

  "; (f) if subparagraphs (b)(i) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the trust

amount; and

    (ii)  the class C potential rebate amount in relation to the trust

amount;

  (g) if subparagraphs (b)(ii) and (iii) apply-the sum of:

    (i) the class B potential rebate amount in relation to the trust

amount; and

    (ii)  the class C potential rebate amount in relation to the trust

amount;

  (h) if subparagraphs (b)(i), (ii) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the trust

amount; and

    (ii)  the class B potential rebate amount in relation to the trust

amount; and

    (iii) the class C potential rebate amount in relation to the trust

amount.".

111. Paragraph 160AQYA(1)(c):

Omit "is either or both", substitute "are one or more".

112. Paragraph 160AQYA(1)(c):

Add at the end:

  "(iii) a class C flow-on franking amount in relation to the trust

amount;".

113. After paragraph 160AQYA(1)(e):

Insert:

  "(ea) if only subparagraph (c)(iii) applies-the class C potential

rebate amount in relation to the trust amount;".

114. Paragraph 160AQYA(1)(f):

Omit "both".

115. Subsection 160AQYA(1):

Add at the end:

  "; (g) if subparagraphs (c)(i) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the trust

amount; and

    (ii)  the class C potential rebate amount in relation to the trust

amount;

  (h) if subparagraphs (c)(ii) and (iii) apply-the sum of:

    (i) the class B potential rebate amount in relation to the trust

amount; and

    (ii)  the class C potential rebate amount in relation to the trust

amount;

    (i) if subparagraphs (c)(i), (ii) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the trust

amount; and

    (ii)  the class B potential rebate amount in relation to the trust

amount; and

    (iii) the class C potential rebate amount in relation to the trust

amount.".

116. Paragraph 160AQYA(2)(c):

Omit "is either or both", substitute "are one or more".

117. Paragraph 160AQYA(2)(c):

Add at the end:

  "(iii) a class C flow-on franking amount in relation to the

partnership amount;".

118. After paragraph 160AQYA(2)(e):

Insert:

  "(ea) if only subparagraph (c)(iii) applies-the class C potential

rebate amount in relation to the partnership amount;".

119. Paragraph 160AQYA(2)(f):

Omit "both".

120. Subsection 160AQYA(2):

Add at the end:

  "; (g) if subparagraphs (c)(i) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the

partnership amount; and

    (ii)  the class C potential rebate amount in relation to the

partnership amount;

  (h) if subparagraphs (c)(ii) and (iii) apply-the sum of:

    (i) the class B potential rebate amount in relation to the

partnership amount; and

    (ii)  the class C potential rebate amount in relation to the

partnership amount;

    (i) if subparagraphs (c)(i), (ii) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the

partnership amount; and

    (ii)  the class B potential rebate amount in relation to the

partnership amount; and

    (iii) the class C potential rebate amount in relation to the

partnership amount.".

121. Paragraph 160AQZ(c):

Omit "is either or both", substitute "are one or more".

122. Paragraph 160AQZ(c):

Add at the end:

  "(iii) a class C flow-on franking amount in relation to the

partnership amount;".

123. After paragraph 160AQZ(e):

Insert:

  "(ea) if only subparagraph (c)(iii) applies-the class C potential

rebate amount in relation to the partnership amount;".

124. Paragraph 160AQZ(f):

Omit "both".

125. Section 160AQZ:

Add at the end:

  "; (g) if subparagraphs (c)(i) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the

partnership amount; and

    (ii)  the class C potential rebate amount in relation to the

partnership amount;

  (h) if subparagraphs (c)(ii) and (iii) apply-the sum of:

    (i) the class B potential rebate amount in relation to the

partnership amount; and

    (ii)  the class C potential rebate amount in relation to the

partnership amount;

    (i) if subparagraphs (c)(i), (ii) and (iii) apply-the sum of:

    (i) the class A potential rebate amount in relation to the

partnership amount; and

    (ii)  the class B potential rebate amount in relation to the

partnership amount; and

    (iii) the class C potential rebate amount in relation to the

partnership amount.".

126. Section 160AQZA:

Repeal the section, substitute:

Franking rebate for certain life assurance companies

  "160AQZA.(1) If:

  (a) a class A franking credit of a taxpayer arises or, but for

section 160APKA would arise, under subsection 160APQ(1) in respect of:

    (i) a trust amount or partnership amount that is included in; or

    (ii)  a partnership amount that is allowed as a deduction from;

the assessable income of the taxpayer of a year of income; and

  (b) subsection 160APQ(3) applies or, but for section 160APKA, it

would apply;

the taxpayer is entitled to a rebate of tax in the taxpayer's

assessment in respect of income of the year of income of an amount

equal to the class A potential rebate amount in relation to the trust

amount or partnership amount.

  "(2) If:

  (a) a class B franking credit of a taxpayer arises or, but for

section 160APKA would arise, under subsection 160APQ(1A) in respect

of:

    (i) a trust amount or partnership amount that is included in; or

    (ii)  a partnership amount that is allowed as a deduction from;

the assessable income of the taxpayer of a year of income; and

  (b) subsection 160APQ(3) applies or, but for section 160APKA, it

would apply;

the taxpayer is entitled to a rebate of tax in the taxpayer's

assessment in respect of income of the year of income of an amount

equal to the class B potential rebate amount in relation to the trust

amount or partnership amount.

  "(3) If:

  (a) a class C franking credit of a taxpayer arises or, but for

section 160APKA  would arise, under subsection 160APQ(2) in respect

of:

    (i) a trust amount or partnership amount that is included in; or

    (ii)  a partnership amount that is allowed as a deduction from;

the assessable income of the taxpayer of a year of income; and

  (b) subsection 160APQ(3) applies or, but for section 160APKA, it

would apply;

the taxpayer is entitled to a rebate of tax in the taxpayer's

assessment in respect of income of the year of income of an amount

equal to the class C potential rebate amount in relation to the trust

amount or partnership amount.".

127. After paragraph 160AR(1)(b):

Insert:

  "and (c) subsection 160APQ(3) does not apply;".

128. After paragraph 160AR(1A)(b):

Insert:

  "and (c) subsection 160APQ(3) does not apply;".

129. After subsection 160AR(1A):

Insert:

  "(1B) If:

  (a) a trust amount is included in the assessable income of a company

of a year of income; and

  (b) a class C franking credit arises under section 160APQ in

relation to the trust amount; and

  (c) subsection 160APQ(3) does not apply;

an amount equal to so much of the class C potential rebate amount in

relation to the trust amount as does not exceed the trust amount is

allowable as a deduction from the assessable income of the company of

the year of income.".

130. After paragraph 160AR(2)(b):

Insert:

  "and (c) subsection 160APQ(3) does not apply;".

131. After paragraph 160AR(3)(b):

Insert:

  "and (c) subsection 160APQ(3) does not apply;".

132. Section 160AR:

Add at the end:

  "(4) If:

  (a) a partnership amount is included in, or allowable as a deduction

from, the assessable income of a company of a year of income; and

  (b) a class C franking credit arises under section 160APQ in

relation to the partnership amount; and

  (c) subsection 160APQ(3) does not apply;

the class C potential rebate amount in relation to the partnership

amount is allowable as a deduction from the assessable income of the

company of the year of income.".

133. Paragraph 160ARA(e):

Omit the paragraph, substitute:

  "(e) the amount that would be the potential rebate amount in

relation to the trust amount if section 128D did not apply.".

134. Section 160ARB:

Omit "sum of the class A potential rebate amount and the class B

potential rebate amount", substitute "potential rebate amount".

135. Section 160ARC:

Add at the end:

  "(3) If:

  (a) a trustee is liable to be assessed under subsection 98(3) on a

trust amount; and

  (b) there is a class C flow-on franking amount in relation to the

trust amount;

the trust amount is to be reduced by so much of the class C potential

rebate amount in relation to the trust amount as does not exceed the

trust amount.".

136. Section 160ARD:

Omit "sum of the class A potential rebate amount and the class B

potential rebate amount", substitute "potential rebate amount".

137. Section 160AREA:

Omit "or a class B deficit deferral amount (see subsection

160AQJB(2))", substitute ", a class B deficit deferral amount (see

subsection 160AQJB(2)) or a class C deficit deferral amount (see

subsection 160AQJC(2))".

138. Section 160ARH:

Add at the end:

  "(3) If:

  (a) at a particular time (the return time), a return (the first

return) under this Part in relation to a company in relation to a

franking year is lodged; and

  (b) before the return time, no return has been lodged, and no class

C franking account assessment has been made, in relation to the

company in relation to the franking year;

the following provisions have effect:

  (c) the Commissioner is taken at the return time to have made an

assessment (the deemed assessment) of:

    (i) the class C franking account balance of the company for the

franking year; and

    (ii)  any class C franking deficit tax payable by the company for

the franking year;

being those respective amounts as specified in the first return;

  (d) the first return is taken to be a notice of the deemed

assessment and to be signed by the Commissioner;

  (e) the notice referred to in paragraph (d) is taken to have been

served on the company at the return time.".

139. After subsection 160ARJ(1A):

Insert:

  "(1B) The Commissioner may at any time make an assessment of the

class C franking account balance of a company at a particular time

during a franking year and, if the company has a class C franking

deficit at that time, of the class C franking deficit tax payable by

the company.".

140. Subsection 160ARJ(2):

Omit "subsection (1) or (1A)", substitute "subsection (1), (1A) or

(1B)".

141. After subsection 160ARK(2):

Insert:

  "(2A) If a company has not lodged a return in respect of a franking

year, the Commissioner may make an assessment of:

  (a) the class C franking account balance of the company at the end

of the franking year; and

  (b) any class C franking deficit tax payable by the company for the

franking year.".

142. Subparagraphs 160ARN(10)(a)(i) and (ii):

Omit the subparagraphs, substitute:

  "(i) increasing a class A franking surplus, a class B franking

surplus or a class C franking surplus (including an increase from a

nil class A franking account balance, a nil class B franking account

balance or a nil class C franking account balance);

    (ii)  reducing a class A franking deficit, a class B franking

deficit or a class C franking deficit (including a reduction resulting

in a nil class A franking account balance, a nil class B franking

account balance or a nil class C franking account balance) and the

franking deficit tax payable in respect of the franking deficit;".

143. Subparagraphs 160ARN(10)(b)(i) and (ii):

Omit the subparagraphs, substitute:

  "(i) reducing a class A franking surplus, a class B franking surplus

or a class C franking surplus (including a reduction resulting in a

nil class A franking account balance, a nil class B franking account

balance or a nil class C franking account balance);

    (ii)  increasing a class A franking deficit, a class B franking

deficit or a class C franking deficit (including an increase from a

nil class A franking account balance, a nil class B franking account

balance or a nil class C franking account balance) and the franking

deficit tax payable in respect of the franking deficit; and".

144. Subsection 160ARXA(1) (definition of deficit deferral tax

shortfall):

Omit "or class B deficit deferral tax shortfall;", substitute ", class

B deficit deferral tax shortfall or class C deficit deferral tax

shortfall.".

145. Subsection 160ARXA(1) (subparagraph (a)(ii) of the definition of

franking tax shortfall):

Omit "; and", substitute "; or".

146. Subsection 160ARXA(1) (paragraph (a) of the definition of

franking tax shortfall):

Add at the end:

  "(iii) the class C franking tax shortfall in relation to the company

and the franking year; and".

147. Subsection 160ARXA(1) (paragraph (b) of the definition of

franking tax shortfall):

Add at the end:

  "or (iii)  the class C deficit deferral tax shortfall in relation to

the company and the refund.".

148. Subsection 160ARXA(1) (definition of statement deficit deferral

tax):

Omit "or class B statement deficit deferral tax;", substitute ", class

B statement deficit deferral tax or class C statement deficit deferral

tax.".

149. Subsection 160ARXA(1) (definition of statement franking tax):

Add at the end:

  "or (c) the class C statement franking tax in relation to the

company, the franking year and the time.".

150. Subsection 160ARXA(1):

Insert the following definitions:

  "class C deficit deferral tax shortfall, in relation to a company

and a refund, means any amount by which the company's class C

statement deficit deferral tax for that refund at the time at which it

was lowest is less than the company's class C proper deficit deferral

tax for that refund.

class C franking tax shortfall, in relation to a company and a

franking year, means the amount (if any) by which the company's class

C statement franking tax for that year at the time at which it was

lowest is less than the company's class C proper franking tax for that

year.

class C proper deficit deferral tax, in relation to a company and a

refund, means the class C deficit deferral tax properly payable by the

company in relation to the refund.

class C proper franking tax, in relation to a company and a franking

year, means the class C franking deficit tax properly payable by the

company in respect of that year.

class C statement deficit deferral tax, in relation to a company, a

refund and a time, means the class C deficit deferral tax that would

have been payable by the company in relation to the refund if the tax

were assessed at that time taking into account taxation statements by

the company.

class C statement franking tax, in relation to a company, a franking

year and a time, means the class C franking deficit tax that would

have been payable by the company in respect of that year if the tax

were assessed at that time taking into account taxation statements by

the company.".

151. Section 160ARX:

Add at the end:

  "(3) If:

  (a) the class C franking deficit of a company at the end of a

franking year is more than 10% of the total of the class C franking

credits arising during the franking year; and

  (b) the class C franked amount of a dividend paid during the

franking year to a shareholder in the company exceeded the class C

required franking amount for that dividend;

the company is liable to pay, by way of penalty, additional tax equal

to 30% of the class C franking deficit tax that is payable by the

company for the franking year.".

152. After section 160ARYB:

Insert:

Class C deficit deferral tax-penalty

  "160ARYC. A company is liable to pay, by way of penalty, additional

tax equal to 30% of the class C deficit deferral tax that is payable

by the company in relation to a refund if the class C deficit deferral

amount that arises under subsection 160AQJC(2) in relation to the

refund is greater than the amount worked out using the formula:

  0.1  x  Total of class C franking  -  The adjusted amount in

          credits that arose in         relation to refunds referred

          the first franking year       to in paragraph

                                        160AQJC(1)(c)".

153. Subsection 160ARZ(1):

Add at the end:

  "; and (c) the class C franking deficit tax (if any) payable by the

company for the franking year.".

154. After sub-subparagraph 160ARZD(1)(c)(ii)(B):

Insert:

  "(BA) if the shortfall is a class C franking tax shortfall-the class

C franking deficit tax that would have been payable by the company for

that year if the tax were assessed on the basis of the company's

return under subsection 160ARE(1) or 160ARF(1) in relation to that

year;".

155. Sub-subparagraph 160ARZD(1)(c)(ii)(D):

Omit "and".

156. Subparagraph 160ARZD(1)(c)(ii):

Add at the end:

  "(E) if the shortfall is a class C deficit deferral tax shortfall-

the class C deficit deferral tax that would have been payable by the

company in relation to that refund if the tax were assessed on the

basis of the company's return under section 160AREA in relation to

that refund; and".

157. Paragraph 160ASC(b):

Omit "or the class B franking account balance", substitute ", the

class B franking account balance or the class C franking account

balance".

158. After Division 12 of Part IIIAA:

Insert:

        "Division 13-Transitional provisions arising from the

               introduction of class C franking credits and

                          class C franking debits

Class C conversion time of a company

  "160ASF.(1) The class C conversion time of a company is the earliest

of the following times:

  (a) the time when the first class C franking credit of the company

arises;

  (b) the time immediately before the end of the 1995-96 franking year

of the company;

  (c) the nominated class C conversion time (see subsection (2)).

  "(2) A company may, at any time before the earlier of the times

mentioned in paragraphs (1)(a) and (b), make an irrevocable written

election that that time, or a time that is after that time, is that

company's nominated class C conversion time.

Conversion of class A franking account balance to class C franking

account balance

Conversion of class A franking surplus

  "160ASG.(1) If, at a company's class C conversion time:

  (a) the company is not a life assurance company; and

  (b) the company has a class A franking surplus;

then, immediately after the company's class C conversion time:

  (c) a class A franking debit of the company arises equal to that

class A franking surplus; and

  (d) a class C franking credit of the company also arises that is

worked out using the formula:

  Amount of class A franking surplus  x  39/61  x  64/36

Conversion of class A franking deficit

  "(2) If, at a company's class C conversion time:

  (a) the company is not a life assurance company; and

  (b) the company has a class A franking deficit;

then, immediately after the company's class C conversion time:

  (c) a class A franking credit of the company arises equal to that

class A franking deficit; and

  (d) a class C franking debit of the company also arises that is

worked out using the formula:

  Amount of class A franking deficit  x  39/61  x  64/36

Conversion of class B franking account balance to class C franking

account balance

Conversion of class B franking surplus

  "160ASH.(1) If a company has a class B franking surplus at the class

C conversion time then, immediately after that time:

  (a) a class B franking debit of the company arises equal to that

class B franking surplus; and

  (b) a class C franking credit of the company also arises that is

worked out using the formula:

  Amount of class B franking surplus  x  33/67  x  64/36

Conversion of class B franking deficit

  "(2) If a company has a class B franking deficit at the class C

conversion time then, immediately after that time:

  (a) a class B franking credit of the company arises equal to that

class B franking deficit; and

  (b) a class C franking debit of the company also arises that is

worked out using the formula:

  Amount of class B franking deficit  x  33/67  x  64/36

Changes to franking account balances after a company's class C

conversion time

Class A franking credit arising after class C conversion time

  "160ASI.(1) If, at a particular time after a company's class C

conversion time:

  (a) the company is not a life assurance company; and

  (b) a class A franking credit of the company arises under this Part

(apart from under this section, subsection 160ASG(2), subsection

160ASJ(2) or subsection 160ASK(1));

then, at that time:

  (c) a class A franking debit arises equal to the amount of the class

A franking credit; and

  (d) a class C franking credit also arises equal to the amount worked

out using the formula:

  Amount of class A franking credit  x  39/61  x  64/36

Class A franking debit arising after class C conversion time

  "(2) If, at a particular time after a company's class C conversion

time:

  (a) the company is not a life assurance company; and

  (b) a class A franking debit of the company arises under this Part

(apart from under this section, subsection 160AQB(1), subsection

160ASG(1), subsection 160ASJ(1) or subsection 160ASK(1));

then, at that time:

  (c) a class A franking credit arises equal to the amount of the

class A franking debit; and

  (d) a class C franking debit also arises equal to the amount worked

out using the formula:

  Amount of class A franking debit  x  39/61  x  64/36

Class B franking credit arising after class C conversion time

  "(3) If, at a particular time after a company's class C conversion

time, a class B franking credit of a company arises under this Part

(apart from under this section, subsection 160ASH(2) or subsection

160ASK(2)):

  (a) a class B franking debit arises at that time equal to the amount

of the class B franking credit; and

  (b) a class C franking credit also arises at that time equal to the

amount worked out using the formula:

  Amount of class B franking credit  x  33/67  x  64/36

Class B franking debit arising after class C conversion time under

provisions other than subsection 160AQB(2)

  "(4) If, at a particular time after a company's class C conversion

time, a class B franking debit of a company arises under this Part

(apart from under this section, subsection 160AQB(2), subsection

160ASH(1) or subsection 160ASK(2)):

  (a) a class B franking credit arises at that time equal to the

amount of the class B franking debit; and

  (b) a class C franking debit also arises at that time equal to the

amount worked out using the formula:

  Amount of class B franking debiit  x  33/67  x  64/36

Note:  Subsection (5) deals with class B debits arising from the

payment of class B franked dividends.

Class B franking debit arising under subsection 160AQB(2) after  class

C conversion time

  "(5) If, at a particular time after the company's class C conversion

time, a class B franking debit of a company arises under subsection

160AQB(2) (and subsection 160ASK(2) does not apply), a class B

franking credit and a class C franking debit of the company each equal

to the amount of the class B franking debit arise at that time.

Provisions relating to companies that cease to be life assurance

companies

Conversion of class A franking surplus

  "160ASJ.(1) If:

  (a) a company is a life assurance company at the company's class C

conversion time; and

  (b) at a particular time (the transition time) after the company's

class C conversion time, the company ceases to be a life assurance

company (other than by ceasing to be a company); and

  (c) at the transition time the company has a class A franking

surplus;

then, immediately after the transition time:

  (d) a class A franking debit of the company equal to that class A

franking surplus arises; and

  (e) a class C franking credit of the company also arises that is

worked out using the formula:

  Amount of class A franking surplus  x  39/61  x  64/36

Conversion of class A franking deficit

  "(2) If:

  (a) a company is a life assurance company at the company's class C

conversion time; and

  (b) at a particular time (the transition time) after the company's

class C conversion time, the company ceases to be a life assurance

company (other than by ceasing to be a company); and

  (c) at the transition time the company has a class A franking

deficit;

then, immediately after the transition time:

  (d) a class A franking credit of the company arises equal to that

class A franking deficit; and

  (e) a class C franking debit of the company also arises that is

worked out using the formula:

  Amount of class A franking deficit  x  39/61  x  64/36

Provisions relating to companies with class A or class B required

franking amounts

Class A required franking amounts

  "160ASK.(1) If:

  (a) a company, other than a life assurance company, pays a dividend

at a particular time after the class C conversion time of the company;

and

  (b) the beginning of the reckoning day for the dividend is before

the class C conversion time for the company; and

  (c) a class A franking debit arises from the payment of the

dividend;

then, at that time:

  (d) a class A franking credit arises equal to the amount of the

class A franking debit; and

  (e) a class C franking debit also arises that is worked out using

the formula:

  Amount of class A franking debit  x  39/61  x  64/36

Class B required franking amounts

  "(2) If:

  (a) a company pays a dividend at a particular time after the class C

conversion time of the company; and

  (b) the beginning of the reckoning day for the dividend is before

the class C conversion time for the company; and

  (c) a class B franking debit arises from the payment of the

dividend;

then, at that time:

  (d) a class B franking credit arises equal to the amount of the

class B franking debit; and

  (e) a class C franking debit also arises that is worked out using

the formula:

  Amount of class B franking debit  x  33/67  x  64/36

Required franking amounts in certain cases covered by  subsection

160AQE(2)

When section applies

  "160ASL.(1) This section applies in relation to a dividend paid by a

company to a shareholder if:

  (a) the beginning of the reckoning day for the dividend is after the

company's class C conversion time; and

  (b) the dividend is the current dividend under subsection 160AQE(2);

and

  (c) the beginning of the reckoning day for the earlier dividend

mentioned in that subsection is before the company's class C

conversion time.

Effect on required franking amount-companies other than  life

assurance companies

  "(2) If the company is not a life assurance company at the beginning

of the reckoning day for the current dividend then, for the purposes

of the definition of RFS in subsection 160AQE(2):

  (a) the amount that will be the franked amount in relation to the

earlier dividend is taken to be the amount worked out using the

formula:

Amount (if any) that will be the class A

franked amount of the earlier dividend      x    39/61 x 64/36

                                +  Amount (if any) that will be the

                                   class B franked amount of the

                                   earlier dividend

                                            x    33/67 x 64/36

        (b) the required franking amount in relation to the earlier

dividend is taken to be the amount worked out using the formula:

Class A required franking amount

(if any) of the earlier dividend    x   39/61 x 64/36

                                +  Class B required franking amount

                                   (if any) of the earlier dividend

                                            x    33/67 x 64/36

Effect on required franking amount-life assurance companies

  "(3) If the company is a life assurance company at the beginning of

the reckoning day for the current dividend then, for the purposes of

the definition of RFS in subsection 160AQE(2):

  (a) the amount that will be the franked amount in relation to the

earlier dividend is taken to be the amount worked out using the

formula:

Amount (if any) that will be the class A

franked amount of the earlier dividend

                                    +   Amount (if any) that will

                                        be the class B franked

                                        amount of the earlier

                                        dividend    x 33/67 x 64/36

        (b) the required franking amount in relation to the earlier

dividend is taken to be the amount worked out using the formula:

Class A required franking

amount (if any) of the

earlier dividend                +   Class B required franking

                                    amount (if any) of the

                                    earlier dividend

                                              x   33/67 x 64/36

Required franking amounts in certain cases covered by  subsection

160AQE(3)

When section applies

  "160ASM.(1) This section applies in relation to a dividend paid by a

company to a shareholder if:

  (a) the beginning of the reckoning day for the dividend is after the

company's class C conversion time; and

  (b) the dividend is the current dividend under subsection 160AQE(3);

and

  (c) the beginning of the earlier reckoning day mentioned in that

subsection is before the company's class C conversion time.

Effect on required franking amount-companies other than  life

assurance companies

  "(2) If the company is not a life assurance company at the beginning

of the reckoning day for the current dividend then, for the purposes

of the definition of EFA in subsection 160AQE(3), the amount that is

the franked amount in relation to the earlier franked dividend is

taken to be the amount worked out using the formula:

Amount (if any) that is

the class A franked amount

of the earlier franked       x  39/61 x 64/36

dividend                             +  Amount (if any) that

                                        is the class B franked amount

                                        of the earlier franked

                                        dividend

                                                 x  33/67 x 64/36

Effect on required franking amount-life assurance companies

  "(3) If the company is a life assurance company at the beginning of

the reckoning day for the current dividend then, for the purposes of

the definition of EFA in subsection 160AQE(3), the amount that is the

franked amount in relation to the earlier dividend is taken to be the

amount worked out using the formula:

Amount (if any) that is the

class A franked amount of the

earlier franked dividend         +  Amount (if any) that

                                    is the class B franked

                                    amount of the earlier

                                    franked dividend

                                             x  33/67 x 64/36

Variation of certain declarations under section 160AQF

  "160ASN.(1) A declaration that is made before a company's class C

conversion time in relation to a dividend, or dividends, paid by the

company where the beginning of the reckoning day for at least one of

the dividends is after that time may, despite subsection 160AQF(2), be

varied, before the reckoning day, to take account of the introduction

of class C franking credits and debits.

  "(2) If:

  (a) a company pays more than one dividend under a resolution; and

  (b) the beginning of the reckoning day for at least one of the

dividends is before the class C conversion time for the company; and

        (c) the beginning of the reckoning day for at least one of the

dividends is after the class C conversion time for the company; and

        (d) the franked amount of each of the dividends covered by

paragraph (b) is substantially similar (taking into account the

different classes of franking credits) to the franked amount of each

of the dividends covered by paragraph (c);

the company is taken, for the purposes of subparagraphs

160AQF(1)(c)(ii), (1AA)(c)(ii) and (1AAA)(c)(ii) to have specified the

same percentage for each of the dividends to which the resolution

relates.".

159. Transitional

Liability to franking deficit tax

  (1) A company is taken to be liable to pay tax under subsection

160AQJ(1) of the Income Tax Assessment Act 1936 in respect of its

1995-96 franking year if:

  (a) at the company's class C conversion time the company is not a

life assurance company; and

  (b) at the company's class C conversion time the company has a class

A franking deficit; and

  (c) the company would have been liable to pay tax under subsection

160AQJ(1) of the Income Tax Assessment Act 1936 for its 1995-96 franking

year on the following assumptions:

    (i)  the amendments made by this Schedule did not apply in respect of the

company for its 1995-96 franking year; and

    (ii) no class A franking debit of the company arose under subsection

160AQB(1) of the Income Tax Assessment Act 1936 after the class C conversion

time of the company.

  (2) If a company is taken to be liable to pay tax as a result of the

application of subsection (1), a class C franking credit of the

company arises at the end of the company's 1995-96 franking year

worked out using the formula:

  Amount of the tax  x  64/36

Liability to penalty for over-franking

  (3) A company is taken to be liable to pay tax under subsection

160ARX(1) of the Income Tax Assessment Act 1936 in respect of its

1995-96 franking year if:

  (a) at the company's class C conversion time the company is not a

life assurance company; and

  (b) at the company's class C conversion time the company has a class

A franking deficit; and

  (c) the company would have been liable to pay tax under subsection

160ARX(1) of the Income Tax Assessment Act 1936 for its 1995‑96 franking

year on the following assumptions:

    (i)  the amendments made by this Schedule did not apply in respect of the

company for its 1995-96 franking year; and

    (ii) no class A franking debit of the company arose under subsection

160AQB(1) of the Income Tax Assessment Act 1936 after the class C conversion

time of the company.

159A  Transitional — companies may defer or decline certain franking credits

  (1) This item applies if, apart from this item, a class C franking credit

of a company would arise on a particular day in the 1995-96 franking year of

the company because:

  (a) a class C franked dividend is paid to the company on that day; or

  (b) there is a class C flow-on franking amount in relation to a trust amount

or partnership amount that is included in, or a partnership amount that is

allowed as a deduction from, the assessable income of the company.

  (2) The company may elect that:

  (a) the class C franking credit does not arise; or

  (b) the class C franking credit does not arise on that day but arises on a

later day nominated by the company.

  (3) If the company nominates a later day:

  (a) the later day must be within 14 days (or within such longer period as the

Commissioner allows) of the day on which the class C franking credit would have

arisen; and

  (b) the later day must be before the end of the 1995-96 franking year of the

company.

  (4) Any election or nomination under subitem (2):

  (a) must be in writing; and

  (b) is irrevocable.

  (5) This item does not apply where a class C franking credit arises on a

particular day as the result of a previous operation of this item.

160. Application

  (1) The amendments made by item 15 apply to basic amounts that are

attributable to payments of tax that become payable as a result of

assessments issued after 7.30 p.m. by legal time in the Australian

Capital Territory on 9 May 1995.

  (2) The amendment made by item 126 applies in relation to:

  (a) dividends paid to a shareholder in a company during the

company's 1993-94 franking year or an earlier franking year as if

subsections 160AQZA(2) and (3) of the Income Tax Assessment Act 1936

were omitted and all references to class A (wherever occurring) were

omitted from subsection (1) of that section; and

  (b) dividends paid to a shareholder in a company during the

company's 1994-95 franking year as if subsection 160AQZA(3) of the

Income Tax Assessment Act 1936 were omitted; and

  (c) dividends paid to a shareholder in a company during the

company's 1995-96 franking year or a later franking year.

  (3) Subject to subitem (5), the amendments made by items 127 and 130

apply in relation to a trust amount or partnership amount received

during the first franking year of the company that commences after 6

December 1990 and each later franking year.

  (4) Subject to subitem (5), the amendments made by items 128 and 131

apply in relation to a trust amount or partnership amount received

during the company's 1994-95 franking year and each later franking

year.

  (5) If in relation to a year of income which commenced after 6

December 1990:

  (a) a company furnished a return of income, or applied to have an

assessment amended, before 28 September 1995; and

  (b) the return or application (as the case may be) includes a claim

for a deduction under section 160AR in relation to a trust amount or

partnership amount to which subsection 160APQ(3) applies;

then the amendments made by items 127, 128, 130 and 131 do not apply

in relation to any trust amount or partnership amount received by the

company before 28 September 1995 and to which subsection 160APQ(3)

applies.

 

TAXATION LAWS AMENDMENT ACT (No. 4) 1995 No. 171 of 1995 - SCHEDULE 3

 

                           SCHEDULE 3           Section 3

   AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO

        DEMUTUALISATION OF INSURANCE COMPANIES AND AFFILIATES

1. After Division 9 of Part III:

Insert the following Division:

      "Division 9AA-Demutualisation of insurance companies and

                         affiliates

          "Subdivision A-What this Division is about

What this Division is about

  "121AA.

Basically, if an insurance company demutualises and its policyholders

or members dispose of their listed shares in the company, for tax

purposes the acquisition cost of the shares is based on the lesser of:

  (a) the embedded value or net tangible asset value of the company;

and

  (b) the value of the company based on the total first trading day

price of all shares in the company.

Other tax consequences result from disposals of other interests and

from other events in connection with the demutualisation.

      "Subdivision B-Key concepts and related definitions

Insurance company definitions

  "121AB.(1) A mutual insurance company is an insurance company:

  (a) whose profits are divisible only among its policyholders; or

  (b) that satisfies all of the following conditions:

    (i) it is limited by guarantee;

    (ii)  it did not divide its profits among its members during the

10 years ending on 9 May 1995;

    (iii) on a winding-up, its profits are not divisible among its

members.

  "(2) An insurance company is a life insurance company or a general

insurance company.

  "(3) A life insurance company is a company registered under the Life

Insurance Act 1995.

  "(4) A general insurance company is a company whose sole or

principal business is insurance business within the meaning of

subsection 3(1) of the Insurance Act 1973, but does not include a life

insurance company.

Mutual affiliate company

  "121AC. A mutual affiliate company is a company that satisfies the

following conditions:

  (a) it is limited by guarantee;

  (b) it is not an insurance company;

  (c) at least 75% of the policyholders of a mutual insurance company

are members of it;

  (d) it did not divide its profits among its members during the 10

years ending on 9 May 1995;

  (e) on a winding-up, its profits are not divisible among its members

in their capacity as such.

Demutualisation and demutualisation resolution day

  "121AD.(1) A mutual insurance company demutualises if it ceases to

be a mutual insurance company:

  (a) in any case-other than by ceasing to be an insurance company; or

  (b) if it is a life insurance company-because the whole of its life

insurance business is transferred to another company under a scheme

confirmed by the Federal Court of Australia.

  "(2) A mutual affiliate company demutualises if it ceases to be a

mutual affiliate company other than by ceasing to be a company.

  "(3) The demutualisation resolution day, in relation to the

demutualisation of a company, is:

  (a) if paragraph (b) does not apply-the day on which the resolution

to proceed with the demutualisation is passed; or

  (b) if paragraph (1)(b) applies to the demutualisation-the day on

which the transfer of the whole of the company's life insurance

business takes place.

Demutualisation methods, the policyholder/member group and the listing

period

Demutualisation methods 1 to 6

  "121AE.(1) There are 6 methods by which the demutualisation of a

mutual insurance company, where a mutual affiliate company is not also

demutualised, may be implemented that are relevant for the purposes of

this Division. They are described in sections 121AF to 121AK as

demutualisation methods 1 to 6.

Demutualisation method 7

  "(2) There is one method by which the demutualisation of both a

mutual insurance company and a mutual affiliate company may be

implemented that is relevant for the purposes of this Division. It is

described in section 121AL as demutualisation method 7.

Demutualisation methods

  "(3) Each of the methods described in sections 121AF to 121AL is a

demutualisation method.

Policyholder/member group

  "(4) The policyholder/member group, in relation to the

demutualisation of a mutual insurance company under any of

demutualisation methods 1 to 6, consists of the following persons:

  (a) in the case of a mutual insurance company covered by paragraph

121AB(1)(a)-policyholders (other than trustees covered by paragraph

        (d) or (e)) in the company immediately before the demutualisation;

  (b) in the case of any other mutual insurance company-members (other

than trustees covered by paragraph (d) or (e)) of the company

immediately before the demutualisation;

  (c) in any case-any of the following who, in connection with the

demutualisation, are entitled to the same rights to shares or the

proceeds of the sale of shares as the policyholders (in a paragraph

        (a) case) or the members (in a paragraph (b) case):

    (i) employees of the company or a wholly-owned subsidiary of the

company;

    (ii)  persons who ceased to be such policyholders or members

before the demutualisation;

    (iii) charities;

    (iv)  persons who are entitled to the rights because of the death

of the policyholders or members;

  (d) in any case-each person who satisfies the following

requirements:

    (i) the person is a member of a regulated superannuation fund (as

defined by section 19 of the Superannuation Industry (Supervision) Act

1993), other than a standard employer-sponsored member (as defined by

subsection 16(5) of that Act);

         (ii) the trustee of the fund holds a policy or policies in

the mutual insurance company;

    (iii) the trustee of the fund is a company that is a wholly-owned

subsidiary of the mutual insurance company;

         (iv) the person's benefits in the fund consist solely of the

proceeds of the policy or policies;

          (v) in connection with the demutualisation, the person,

rather than the trustee, has the right to shares or the proceeds of

the sale of shares in respect of the policy or policies held by the

trustee;

  (e) in any case-each person who satisfies the following

requirements:

   (i) the person is the member of a single-member superannuation

fund;

         (ii) the trustee of the fund holds a policy or policies in

the mutual insurance company;

    (iii) in connection with the demutualisation, the person, rather

than the trustee, has the right to shares or the proceeds of the sale

of shares in respect of the policy or policies held by the trustee.

  "(5) The policyholder/member group, in relation to the

demutualisation of a mutual insurance company and a mutual affiliate

company under demutualisation method 7, consists of the following

persons:

  (a) if the mutual insurance company is covered by paragraph

121AB(1)(a)-policyholders (other than trustees covered by paragraph

        (e) or (f)) in the mutual insurance company immediately before the

demutualisation;

  (b) in the case of any other mutual insurance company-members (other

than trustees covered by paragraph (e) or (f)) of the company

immediately before the demutualisation;

  (c) members (other than trustees covered by paragraph (e) or (f)) of

the mutual affiliate company immediately before the demutualisation;

  (d) any of the following who, in connection with the

demutualisation, are entitled to the same rights to shares or the

proceeds of the sale of shares as the members:

        (i) employees of the mutual insurance company, the mutual

affiliate company or a wholly-owned subsidiary of either company;

    (ii)  persons who ceased to be such members before the

demutualisation;

    (iii) charities;

    (iv)  persons who are entitled to the rights because of the death

of members;

  (e) in any case-each person who satisfies the following

requirements:

    (i) the person is a member of a regulated superannuation fund (as

defined by section 19 of the Superannuation Industry (Supervision) Act

1993), other than a standard employer-sponsored member (as defined by

subsection 16(5) of that Act);

    (ii) the trustee of the fund holds a policy or policies in the

mutual insurance company;

    (iii) the trustee of the fund is a company that is a wholly-owned

subsidiary of the mutual insurance company;

    (iv) the person's benefits in the fund consist of the proceeds of

the policy or policies;

    (v) in connection with the demutualisation, the person, rather

than the trustee, has the right to shares or the proceeds of the sale

of shares in respect of the policy or policies held by the trustee;

  (f) in any case-each person who satisfies the following

requirements:

    (i) the person is the member of a single-member superannuation

fund;

    (ii) the trustee of the fund holds a policy or policies in the

mutual insurance company;

    (iii) in connection with the demutualisation, the person, rather

than the trustee, has the right to shares or the proceeds of the sale

of shares in respect of the policy or policies held by the trustee.

  "(6) The listing period is the period ending 2 years after the

demutualisation resolution day, or at such later time as the

Commissioner, before the end of the 2 years, allows.

Replacement of policyholders by persons exercising certain rights

  "121AEA. If, as a result of the exercise of any power under the

articles of association of an insurance company, persons are entitled

to exercise rights in place of policyholders, then, to the extent that

the Commissioner considers it appropriate, the persons are treated for

the purposes of this Division as replacing the policyholders.

Demutualisation method 1

  "121AF.(1) Under demutualisation method 1, in connection with the

implementation of the demutualisation:

  (a) all membership rights in the mutual insurance company are

extinguished; and

  (b) shares (the ordinary shares) of only one class in the mutual

insurance company are issued to each person in the policyholder/member

group; and

  (c) the ordinary shares are listed within the listing period.

Note:  Other things may also happen in connection with the

implementation of the demutualisation.

  "(2) The following diagram shows, where this demutualisation method

is used, the issue of the shares to the policyholder/member group.

                   Demutualisation method 1

                    (FLOW CHART OMITTED)

Demutualisation method 2

"121AG.(1) Under demutualisation method 2, in connection with the

implementation of the demutualisation:

  (a) all membership rights in the mutual insurance company are

extinguished; and

  (b) not more than 10 shares (the special shares) in the mutual

insurance company are issued to a trustee to hold for the benefit of

the policyholder/member group, where:

    (i) the issue takes place before the issue of the ordinary shares

mentioned in paragraph (c); and

    (ii)  on the issue of all the ordinary shares, the rights

attaching to the special shares become the same as those attaching to

the ordinary shares; and

  (c) a greater number of shares (the ordinary shares) of only one

class in the mutual insurance company are either:

    (i) issued, at the election of each person in the

policyholder/member group, to the person or to a trustee to sell on

behalf of the person; or

    (ii)  issued to a trustee, at the election of each person in the

policyholder/member group, to distribute to the person or to sell on

behalf of the person; and

  (d) the trustee sells the ordinary shares and distributes the

proceeds to the person, or distributes the ordinary shares to the

person; and

  (e) the ordinary shares are listed within the listing period.

Note:  Other things may also happen in connection with the

implementation of the demutualisation.

  "(2) The following diagram shows the main events, where this

demutualisation method is used involving an election covered by

subparagraph (1)(c)(ii).

                  Demutualisation method 2

                    (FLOW CHART OMITTED)

Demutualisation method 3

  "121AH.(1) Under demutualisation method 3, in connection with the

implementation of the demutualisation:

  (a) all membership rights in the mutual insurance company are

extinguished; and

  (b) shares in the mutual insurance company are issued to another

company (the holding company); and

  (c) shares (the ordinary shares) of only one class in:

    (i) the holding company; or

    (ii)  another company (the ultimate holding company) of which the

holding company is a wholly-owned subsidiary, either directly or

through one or more other wholly-owned subsidiaries (each of which is

an interposed holding company);

are issued to each person in the policyholder/member group; and

  (d) the ordinary shares are listed within the listing period.

Note:  Other things may also happen in connection with the

implementation of the demutualisation.

  "(2) The following diagram shows the main events, where this

demutualisation method is used.

                     Demutualisation method 3

                        (FLOW CHART OMITTED)

Demutualisation method 4

  "121AI.(1) Under demutualisation method 4, in connection with the

implementation of the demutualisation:

  (a) all membership rights in the mutual insurance company are

extinguished; and

  (b) shares in the mutual insurance company are issued to another

company (the holding company); and

  (c) not more than 10 shares (the special shares) in:

    (i) the holding company; or

    (ii)  another company (the ultimate holding company) of which the

holding company is a wholly-owned subsidiary, either directly or

through one or more other wholly-owned subsidiaries (each of which is

an interposed holding company);

are issued to a trustee to hold for the benefit of the

policyholder/ member group; and

  (d) the issue of the special shares takes place before the issue of

the ordinary shares mentioned in paragraph (e), and on the issue of

all the ordinary shares, the rights attaching to the special shares

become the same as those attaching to the ordinary shares; and

  (e) a greater number of shares (the ordinary shares) of only one

class in the holding company or ultimate holding company are either:

    (i) issued, at the election of each person in the

policyholder/ member group, to the person or to a trustee to sell on

behalf of the person; or

    (ii)  issued to a trustee, at the election of each person in the

policyholder/member group, to distribute to the person or to sell on

behalf of the person; and

  (f) the trustee sells the ordinary shares and distributes the

proceeds of sale to the person, or distributes the ordinary shares to

the person; and

  (g) the ordinary shares are listed within the listing period.

Note:  Other things may also happen in connection with the

implementation of the demutualisation.

  "(2) The following diagram shows the main events, where this

demutualisation method is used involving 2 trustees and an election

covered by subparagraph (1)(e)(ii).

                      Demutualisation method 4

                        (FLOW CHART OMITTED)

Demutualisation method 5

  "121AJ.(1) Under demutualisation method 5, in connection with the

implementation of the demutualisation:

  (a) all membership rights in the mutual insurance company are

extinguished; and

  (b) shares in the mutual insurance company are issued to another

company (the holding company); and

  (c) shares (the ordinary shares) of only one class in:

    (i) the holding company; or

    (ii)  another company (the ultimate holding company) of which the

holding company is a wholly-owned subsidiary, either directly or

through one or more other wholly-owned subsidiaries (each of which is

an interposed holding company);

are either:

    (iii) issued, at the election of each person in the

policyholder/ member group, to the person or to a trustee to sell on

behalf of the person; or

    (iv)  issued to a trustee, at the election of each person in the

policyholder/member group, to distribute to the person or to sell on

behalf of the person; and

  (d) the trustee sells the ordinary shares and distributes the

proceeds of sale to the person, or distributes the ordinary shares to

the person; and

  (e) the ordinary shares are listed within the listing period.

Note:  Other things may also happen in connection with the

implementation of the demutualisation.

  "(2) The following diagram shows the main events, where this

demutualisation method is used involving an election covered by

subparagraph (1)(c)(iv).

                      Demutualisation method 5

                        (FLOW CHART OMITTED)

Demutualisation method 6

  "121AK.(1) Under demutualisation method 6, in connection with the

implementation of the demutualisation of a life insurance company:

  (a) all membership rights in the company are extinguished; and

  (b) the whole of the life insurance business of the company is,

under a scheme confirmed by the Federal Court of Australia,

transferred to another company formed for the purpose; and

  (c) shares (the ordinary shares) of only one class in the other

company are:

    (i) issued, at the election of each person in the

policyholder/ member group, to the person or to a trustee to sell on

behalf of the person; or

    (ii)  issued to a trustee, at the election of each person in the

policyholder/member group, to distribute to the person or to sell on

behalf of the person; and

  (d) the trustee sells the ordinary shares and distributes the

proceeds of sale to the person or distributes the ordinary shares to

the person; and

  (e) the ordinary shares are listed within the listing period.

Note:  Other things may also happen in connection with the

implementation of the demutualisation.

  "(2) The following diagram shows the main events, where this

demutualisation method is used.

                       Demutualisation method 6

                        (FLOW CHART OMITTED)

Demutualisation method 7

  "121AL.(1) Under demutualisation method 7, in connection with the

implementation of the demutualisation of both a mutual insurance

company and a mutual affiliate company:

  (a) all membership rights in both companies are extinguished; and

  (b) shares in the mutual insurance company and the mutual affiliate

company are issued to another company (the holding company); and

  (c) shares (the ordinary shares) of only one class in:

    (i) the holding company; or

    (ii)  another company (the ultimate holding company) of which the

holding company is a wholly-owned subsidiary, either directly or

through one or more other wholly-owned subsidiaries (each of which is

an interposed holding company);

are either:

    (iii) issued, at the election of each person in the

policyholder/ member group to the person or to a trustee to sell on

behalf of the person; or

    (iv)  issued to a trustee, at the election of each person in the

policyholder/member group, to distribute to the person or to sell on

behalf of the person; and

  (d) the trustee sells the ordinary shares and distributes the

proceeds of the sale to the person, or distributes the ordinary shares

to the person; and

  (e) the ordinary shares are listed within the listing period.

Note:  Other things may also happen in connection with the

implementation of the demutualisation.

  "(2) The following diagram shows the main events, where this

demutualisation method is used involving an election covered by

subparagraph (1)(c)(iv).

                     Demutualisation method 7

                        (FLOW CHART OMITTED)

Embedded value of a mutual life insurance company

  "121AM.(1) The embedded value of a mutual life insurance company

that demutualises using a demutualisation method is, in accordance

with this section, the sum of its existing business value and its

adjusted net worth on the applicable accounting day (see subsection

(3)).

Eligible actuary and Australian actuarial practice

  "(2) The sum is to be worked out by an eligible actuary (see

subsection 121AO(3)) according to Australian actuarial practice.

Applicable accounting day

  "(3) The applicable accounting day is:

  (a) if an accounting period of the company ends on the

demutualisation resolution day-that day; or

  (b) in any other case-the last day of the most recent accounting

period of the company ending before the demutualisation resolution

day.

Adjustment for changes after applicable accounting day

  "(4) In a case covered by paragraph (3)(b), if any significant

change in the amount of the existing business value or adjusted net

worth occurs between the applicable accounting day and the

demutualisation resolution day, the amount is to be adjusted to take

account of the change.

Continued business assumption

  "(5) In working out the existing business value or the adjusted net

worth, it is to be assumed:

  (a) that after the applicable accounting day the company will

continue to conduct its life insurance business and any other activity

in the same way as it did before that day, and that it will not

conduct any different business or other activity; and

  (b) that the demutualisation will not occur.

Discount rate assumption

  "(6) In working out the existing business value or adjusted net

worth, the annual discount rate to be used in respect of each future

accounting period is worked out using the formula:

  10 year Treasury bond rate  +  4.5%  +  Capital reserve adequacy

                                            shortfall percentage

where:

10 year Treasury bond rate means the Treasury bond rate (see

subsection 121AO(1)) for the applicable accounting day in respect of

bonds with a 10 year term.

Capital reserve adequacy shortfall percentage means:

  (a) if, for any future accounting period, the capital reserves of

the company are projected to fall below the capital reserve adequacy

level (see subsection 121AO(2)) by 1% or more at both the beginning

and end of the accounting period-the percentage worked out by

averaging the percentages worked out under each of the following

subparagraphs:

    (i) 0.2% for each 1% by which the capital reserves are projected

to fall below the level at the beginning of the period;

    (ii)  0.2% for each 1% by which the capital reserves are projected

to fall below the level at the end of the period; or

  (b) in any other case-nil.

Annual inflation rate assumption

  "(7) In working out the existing business value, the annual

inflation rate to be applied is worked out using the formula:

  10 year Treasury bond rate   -    4%

    (see subsection (6))

Expenditure assumption

  "(8) In working out the existing business value, it is to be assumed

that expenditure that the company will incur, in conducting its life

insurance business, on recurring items after the demutualisation

resolution day will be of the same kinds and amounts (increased to

take account of any inflation, using the annual inflation rate in

subsection (7)) as the company incurred in the accounting period, or

part of an accounting period, ending on the demutualisation resolution

day.

Investment return assumption

  "(9) In working out the existing business value or the adjusted net

worth, it is to be assumed that the annual rate of return on each

investment of the company is:

  (a) if the investment is a security with a term less than 2 years or

is cash-the Treasury bond rate (see subsection 121AO(1)) for the

applicable accounting day in respect of bonds with a 26 week term; or

  (b) if the investment is any other kind of security-the Treasury

bond rate for the applicable accounting day in respect of bonds with a

10 year term; or

  (c) in any other case-the rate mentioned in paragraph (b), plus 3%.

Future distributable profits assumption

  "(10) In working out the existing business value or the adjusted net

worth, the future distributable profits are to be determined on the

assumption that the company:

  (a) will not distribute its profits so as to cause its capital

reserves to fall below the capital reserve adequacy level (see

subsection 121AO(2)) applicable to the company; and

  (b) will distribute all of its profits except to the extent

necessary for its capital reserves not to fall below the capital

reserve adequacy level.

Net tangible asset value of a general insurance company or mutual

affiliate company

  "121AN.(1) The net tangible asset value of a general insurance

company, or a mutual affiliate company, that demutualises using a

demutualisation method is, in accordance with this section:

  (a) the amount of its assets on the applicable accounting day (see

subsection (4));

reduced by:

  (b) the amount of its liabilities (including future liabilities)

arising from its business conducted before that day.

Australian accounting practice

  "(2) The amount of the company's assets and liabilities (other than

future liabilities) is to be worked out according to Australian

accounting practice.

Eligible actuary and Australian actuarial practice

  "(3) The amount of the company's future liabilities is to be worked

out by an eligible actuary (see subsection 121AO(3)) according to

Australian actuarial practice.

Applicable accounting day

  "(4) The applicable accounting day is:

  (a) if an accounting period of the company ends on the

demutualisation resolution day-that day; or

  (b) in any other case-the last day of the most recent accounting

period of the company ending before the demutualisation resolution

day.

Adjustment for changes after applicable accounting day

  "(5) In a case covered by paragraph (4)(b), if any significant

change in the amount of the company's assets or liabilities occurs

between the applicable accounting day and the demutualisation

resolution day, that amount is to be adjusted to take account of the

change.

Continued business assumption

  "(6) In working out the net tangible asset value, it is to be

assumed:

  (a) that after the applicable accounting day the company will

continue to conduct its business and any other activity in the same

way as it did before that day, and that it will not conduct any

different business or other activity; and

  (b) that the demutualisation will not occur.

Treasury bond rate, capital reserve adequacy level, eligible actuary

and security

Treasury bond rate

  "121AO.(1) The Treasury bond rate for the applicable accounting day

in respect of bonds with a particular term is:

  (a) if any Treasury bonds with that term were issued on the

applicable accounting day-the annual yield on those bonds; or

  (b) in any other case-the annual yield on Treasury bonds with that

term, as published by the Reserve Bank of Australia and applicable to

the accounting day.

Capital reserve adequacy level

  "(2) The capital reserve adequacy level for a life insurance company

that demutualises is:

  (a) if, after 1 July 1995 and before the applicable accounting day

mentioned in subsection 121AM(3) or 121AN(4), the Life Insurance

Actuarial Standards Board established under the Life Insurance Act

1995 issued a capital reserve adequacy standard applicable to the

company-the level of capital reserves required by that standard; or

  (b) in any other case-the level of capital reserves required to

provide adequate capital for the conduct of the life insurance

business and other activities of the company.

Eligible actuary

  "(3) An eligible actuary is a Fellow or Accredited Member of the

Institute of Actuaries of Australia who is not an employee of:

  (a) the mutual insurance company or, where demutualisation method 7

applies, the mutual insurance company or the mutual affiliate company;

or

  (b) a subsidiary of that company or, where demutualisation method 7

applies, of either company.

Security

  "(4) A security is:

  (a) a bond, debenture, certificate of entitlement, bill of exchange

or promissory note; or

  (b) a deposit with a bank, building society or other financial

institution; or

  (c) a secured or unsecured loan.

Subsidiary and wholly-owned subsidiary

Subsidiary

  "121AP.(1) A company (the test company) is a subsidiary of another

company (the holding company) if at least half of the shares in the

test company are beneficially owned by:

  (a) the holding company; or

  (b) a company that is, or 2 or more companies each of which is, a

subsidiary of the holding company; or

  (c) the holding company and a company that is, or 2 or more

companies each of which is, a subsidiary of the holding company.

  "(2) If a company is a subsidiary of another company (including

because of this subsection), every company that is a subsidiary of the

first-mentioned company is a subsidiary of the other company.

Wholly-owned subsidiary

  "(3) A company is a wholly-owned subsidiary of another company if it

would, under subsection (1) or (2), be a subsidiary of the other

company assuming that the reference in subsection (1) to at least half

of the shares were instead a reference to all of the shares.

Other definitions

  "121AQ. In this Division:

annuity has the same meaning as in section 27A.

ETP means an eligible termination payment within the meaning of

section 27A.

first trading day price, in relation to a listed share, means the

price on the Australian stock exchange, as published by that exchange,

at which the share was last traded on the trading day on which it was

listed.

general insurance business means insurance business (within the

meaning of the Insurance Act 1973) other than life insurance business.

life insurance business has the same meaning as in the Life Insurance

Act 1995.

listed means listed for quotation in the official list of the

Australian stock exchange.

superannuation pension means a pension payable from a superannuation

fund within the meaning of section 27A.

undeducted contributions has the same meaning as in section 27A.

undeducted purchase price has the same meaning as in section 27A.

List of definitions

  "121AR. The following table lists the expressions defined in this

Division and shows the provisions in which they are defined:

  Definition                          Provision

annuity                               121AQ

applicable accounting day             121AM(3) and 121AN(4)

capital reserve adequacy level        121AO(2)

eligible actuary                      121AO(3)

embedded value                        121AM(1)

ETP                                   121AQ

demutualise                           121AD(1) and (2)

demutualisation method                121AE(3)

demutualisation method 1 to           121AF to

demutualisation method 7              121AL

demutualisation resolution day        121AD(3)

first trading day price               121AQ

general insurance business            121AQ

general insurance company             121AB(4)

insurance company                     121AB(2)

life insurance business               121AQ

life insurance company                121AB(3)

listed                                121AQ

listing period                        121AE(6)

mutual affiliate company              121AC

mutual insurance company              121AB(1)

net tangible asset value              121AN(1)

policyholder/member group             121AE(4) and (5)

security                              121AO(4)

subsidiary                            121AP(1) and (2)

superannuation pension                121AQ

Treasury bond rate                    121AO(1)

undeducted contributions              121AQ

undeducted purchase price             121AQ

wholly-owned subsidiary               121AP(3)

         "Subdivision C-Tax consequences of demutualisation

Part IIIA consequences of demutualisation

  "121AS. The table below sets out modifications of the application of

Part IIIA in respect of events that are described in, or relate to

events that are described in, particular demutualisation methods.

               TABLE 1-MODIFICATIONS OF PART IIIA

Item    Event                Modifications

1       Any demutualisation method:

        Extinguishment of membership rights as mentioned in paragraph

(1)(a) of sections 121AF to 121AL.

                             Part IIIA does not apply to any disposal

constituted by the extinguishment.

2       Demutualisation method 6:

        The whole of the life insurance business of the life insurance

company is transferred to the other company as mentioned in paragraph

121AK(1)(b).

                             For the purposes of applying section

160ZZO, the other company is taken to be related to the life insurance

company.

3       Any demutualisation method:

        A person (the disposer) in the policyholder/member group

disposes of a right to have ordinary shares issued or distributed to

the person, or the proceeds of sale of ordinary shares distributed to

the person, as mentioned in paragraph 121AF(1)(b), 121AG(1)(c) or (d),

121AH(1)(c), 121AI(1)(e) or (f), 121AJ(1)(c) or (d), 121AK(1)(c) or

        (d) or 121AL(1)(c) or (d).

                             1.  The disposer does not incur a capital

loss in respect of the disposal if the disposal takes place before the

demutualisation listing day (see note 4 to this table).

                             2.  For the purpose of working out

whether a capital gain accrued to the disposer, or a capital loss was

incurred by the disposer (where modification 1 does not apply), in

respect of the disposal, he or she is taken:

                             (a) to have paid, as consideration for

the acquisition of the right disposed of, an amount worked out using

the following formula:

                 Right disposed of          Applicable company

                 Total of all rights    x   valuation amount

                  of the same kind         (see note 1 to this table)

        (b) to have paid the amount in paragraph (a), and to have

acquired the right disposed of, on the demutualisation resolution day.

4       Demutualisation method 2, 4, 5, 6 or 7:

        A person (the disposer) in the policyholder/member group

disposes of an asset consisting of all or part of the person's

interest in the trust property of the trustee mentioned in paragraph

121AG(1)(b) or (c), 121AI(1)(c) or (e), 121AJ(1)(c), 121AK(1)(c) or

121AL(1)(c).

                              1.  The disposer does not incur a

capital loss in respect of the disposal if the disposal takes place

before the demutualisation listing day (see note 4 to this table).

                              2.  For the purpose of working out

whether a capital gain accrued to the disposer, or a capital loss was

incurred by the disposer (where modification 1 does not apply), in

respect of the disposal, he or she is taken:

                              (a) to have paid, as consideration for

the acquisition of the interest disposed of, an amount worked out

using the following formula:

                 Amount of interest              Applicable company

                   disposed of                   valuation amount

               Total amount of all interests  x  (see note 1 to this

                 in the trust property                 table)

                                                               ; and

        (b) to have paid the amount in paragraph (a), and to have

acquired the interest disposed of, on the demutualisation resolution

day.

5       Demutualisation method 3, 4 or 5

        After the issue of the shares (each of which is a

demutualisation share) in the mutual insurance company as mentioned in

paragraph 121AH(1)(b), 121AI(1)(b) or 121AJ(1)(b), the holding company

(the disposer) disposes of an asset consisting of:

        (a) a demutualisation share, or an interest in such a share;

or

        (b) another share (a non-demutualisation bonus share) in the

mutual insurance company, or an interest in such a share, where the

share is a bonus share mentioned in Division 8 of Part IIIA and any of

the demutualisation shares are the original shares mentioned in that

Division.

        (For the purposes of the modifications relating to this item,

if any of the original shares mentioned in Division 8 of Part IIIA is

a demutualisation share, it is called a demutualisation original

share.)

                              1.  The disposer does not incur a

capital loss in respect of the disposal of the demutualisation share

or interest in such a share, if the disposal takes place before the

demutualisation listing day (see note 4 to this table).

                              2.  If the disposal is of a

demutualisation share (other than a demutualisation original share) or

an interest in such a share then, for the purpose of working out

whether a capital gain accrued to the disposer, or a capital loss was

incurred by the disposer (where modification 1 does not apply), in

respect of the disposal, the disposer is taken:

                              (a) to have paid as consideration for

the acquisition of the share or interest both:

                              (i) the amount worked out using the

formula:

       Share or amount of             Applicable company valuation

       interest disposed of                   amount

   Total demutualisation shares   x   (see note 1 to this table)

   or amount of interests in

           such shares

                              (ii)  any consideration actually paid or

given for the acquisition; and

                              (b) to have paid the amount in

subparagraph (a)(i) on the demutualisation resolution day and the

amount in subparagraph (a)(ii) when it was actually paid; and

                              (c) to have acquired the share or

interest on the demutualisation resolution day.

                              3.  If the disposal is of either:

                              (a) a demutualisation original share, or

an interest in such a share; or

                              (b) a non-demutualisation bonus share,

or an interest in such a share;

then, for the purpose of working out whether a capital gain accrued to

the disposer, or a capital loss was incurred by the disposer (where

modification 1 does not apply), in respect of the disposal:

                              (c) for the purposes of applying

Division 8 of Part IIIA, the consideration for the acquisition of all

of the demutualisation original shares to be taken into account under

that Division is taken to consist of both:

                              (i) if the disposal and all previous

disposals of the demutualisation original shares and the non-demutualisation

bonus shares, or interests in them, take place after

the demutualisation listing day--the amount worked out using the

formula:

   Number of demutualisation       Listing day company

      original shares          x   valuation amount

       Number of                   (see note 3 to this table)

   demutualisation shares

                                                              ; and

                              (ii)  if subparagraph (i) does not

apply-the amount worked out using the formula:

     Number of demutualisation       Pre-listing day company

      original shares          x   valuation amount

       Number of                   (see note 2 to this table)

   demutualisation shares

                                                             ; and

                              (iii) any consideration actually paid or

given for the acquisition of the share or interest disposed of; and

                              (d) if the disposal is of a

demutualisation original share or an interest in such a share, the

disposer is taken:

                              (i) to have paid the amount in

subparagraph (c)(i) or (ii) on the demutualisation resolution day and

the amount in subparagraph (c)(iii) when it was actually paid; and

                              (ii)  to have acquired the share or

interest on the demutualisation resolution day.

6       Demutualisation method 7:

        After the issue of the shares (each of which is a

demutualisation share ) in the mutual insurance company and the mutual

affiliate company as mentioned in paragraph 121AL(1)(b), the holding

company (the disposer) disposes of an asset consisting of:

        (a) a demutualisation share, or an interest in such a share;

or

        (b) another share (a non-demutualisation bonus share) in the

mutual insurance company or the mutual affiliate company, or an

interest in such a share, where the share is a bonus share mentioned

in Division 8 of Part IIIA and any of the demutualisation shares are

the original shares mentioned in that Division.

(For the purposes of the modifications relating to this item, if any

of the original shares mentioned in Division 8 of Part IIIA is a

demutualisation share, it is called a demutualisation original share.)

                              1.  The disposer does not incur a

capital loss in respect of the disposal of the demutualisation share

or interest in such a share, if the disposal takes place before the

demutualisation listing day (see note 4 to this table).

                              2.  If the disposal is of a

demutualisation share (other than a demutualisation original share) or

an interest in such a share then, for the purpose of working out

whether a capital gain accrued to the disposer, or a capital loss was

incurred by the disposer (where modification 1 does not apply), in

respect of the disposal, the disposer is taken:

                              (a) to have paid as consideration for

the acquisition of the share or interest both:

                              (i) the amount worked out using the

formula:

  Share or amount of interest

  disposed of                      Net tangible asset value of

  Total demutualisation         x  the company concerned

  shares or amount of

  interests in such shares

  in the company concerned

                                                             ; and

                              (ii)  any consideration actually paid or

given for the acquisition; and

                              (b) to have paid the amount in

subparagraph (a)(i) on the demutualisation resolution day and the

amount in subparagraph (a)(ii) when it was actually paid; and

                              (c) to have acquired the share or

interest on the demutualisation resolution day.

                              3.  If the disposal is of either:

                              (a) a demutualisation original share, or

an interest in such a share; or

                              (b) a non-demutualisation bonus share,

or an interest in such a share;

then, for the purpose of working out whether a capital gain accrued to

the disposer, or a capital loss was incurred by the disposer (where

modification 1 does not apply), in respect of the disposal:

                              (c) for the purposes of applying

Division 8 of Part IIIA, the consideration for the acquisition of all

of the demutualisation original shares to be taken into account under

that Division is taken to consist of both:

                              (i) the amount worked out using the

formula:

  Number of demutualisation       Pre-listing day company

     original shares          x     valuation amount

      Number of

  demutualisation shares

                              (ii)  any consideration actually paid or

given for the acquisition of the share or interest disposed of; and

                              (d) if the disposal is of a share

connected with the demutualisation or interest in such a share, the

disposer is taken:

                              (i) to have paid the amount in

subparagraph (c)(i) on the demutualisation resolution day and the

amount in subparagraph (c)(ii) when it was actually paid; and

                              (ii)  to have acquired the share or

interest on the demutualisation resolution day.

7       Demutualisation method 3, 4, 5 or 7:

        After the issue of the shares in the mutual insurance company

to the holding company as mentioned in paragraph 121AH(1)(b),

121AI(1)(b), 121AJ(1)(b), or in the mutual insurance company and the

mutual affiliate company as mentioned in paragraph 121AL(1)(b):

        (a) the ultimate holding company (the disposer) disposes of an

asset consisting of either of the following shares in the holding

company or an interposed holding company:

        (i) a share (a demutualisation share) acquired before the

issue of the shares in the mutual insurance company, or an interest in

such a share; or

        (ii)  another share (a non-demutualisation bonus share), or an

interest in such a share, where the share is a bonus share mentioned

in Division 8 of Part IIIA and any of the demutualisation shares

(whether or not disposed of at the time) are the original shares

mentioned in that Division; or

        (b) the interposed holding company, or any of the interposed

holding companies, (the disposer) disposes of an asset consisting of

either of the following shares in the holding company or an interposed

holding company:

        (i) a share (a demutualisation share) acquired before the

issue of the shares in the mutual insurance company, or an interest in

such a share; or

        (ii)  another share (a non-demutualisation bonus share), or an

interest in such a share, where the share is a bonus share mentioned

in Division 8 of Part IIIA and any of the demutualisation shares

(whether or not disposed of at the time) are the original shares

mentioned in that Division.

(For the purposes of the modifications relating to this item, if any

of the original shares mentioned in Division 8 of Part IIIA is a

demutualisation share, it is called a demutualisation original share.)

(The ultimate holding company and interposed holding company are those

mentioned in paragraph 121AH(1)(c), 121AI(1)(c), 121AJ(1)(c) or

121AL(1)(c)).

                              The same modifications apply as for item

                              5.

8       Demutualisation method 2 or 4:

        The rights attaching to the special shares held by the trustee

become the same as those attaching to the ordinary shares as mentioned

in subparagraph 121AG(1)(b)(ii) or paragraph 121AI(1)(d).

                              Part IIIA does not apply to any disposal

constituted by the change in the rights.

9       Demutualisation method 2, 4, 5, 6 or 7:

        The trustee (the disposer):

        (a) sells an ordinary share (a demutualisation share) in the

company as mentioned in paragraph 121AG(1)(d), 121AI(1)(f),

121AJ(1)(d), 121AK(1)(d) or 121AL(1)(d); or

        (b) sells another share (a non-demutualisation bonus share),

where the share is a bonus share mentioned in Division 8 of Part IIIA

and any of the demutualisation shares (whether or not sold at the

time) are the original shares mentioned in that Division.

(For the purposes of the modifications relating to this item, if any

of the original shares mentioned in Division 8 of Part IIIA is a

demutualisation share, it is called a demutualisation original share.)

                              1.  The person in the

policyholder/member group, instead of the trustee, is taken:

                              (a) to have sold the demutualisation

share or non-demutualisation bonus share; and

                              (b) to have paid, given and received any

consideration that was paid, given or received by the trustee in

respect of either share; and

                              (c) to have done any other act in

relation to either share that was done by the trustee.

                              2.  The modifications in item 5 apply to

the sale of the demutualisation share or non-demutualisation bonus

share in the same way as they do to the disposal of such shares

covered by that item.

10      Demutualisation method 2, 4, 5, 6 or 7:

        The trustee distributes an ordinary share as mentioned in

paragraph 121AG(1)(d), 121AI(1)(f), 121AJ(1)(d), 121AK(1)(d) or

121AL(1)(d).

                              Part IIIA does not apply to any disposal

constituted by the distribution.

11      Any demutualisation method:

        A person (the disposer) in the policyholder/member group

disposes of an asset consisting of:

        (a) a share (a demutualisation share), or an interest in such

a share, issued or distributed to the person as mentioned in paragraph

121AF(1)(b), 121AG(1)(c) or (d), 121AH(1)(c), 121AI(1)(e) or (f),

121AJ(1)(c) or (d), 121AK(1)(c) or (d) or 121AL(1)(c) or (d); or

        (b) another share (a non-demutualisation bonus share) in the

same company, or an interest in such a share, where the share is a

bonus share mentioned in Division 8 of Part IIIA and any of the

demutualisation shares (whether or not disposed of at the time) are

the original shares mentioned in that Division.

(For the purposes of the modifications relating to this item, if any

of the original shares mentioned in Division 8 of Part IIIA is a

demutualisation share, it is called a demutualisation original share.)

                              The same modifications apply as for item

                              5.

12      Various demutualisation methods

        A disposal of an asset takes place before the demutualisation

listing day, where:

        (a) modification 1 of item 3, 4, 5, 6, 7 or 11 of this table

applies to the disposal; and

        (b) a roll-over provision (see note 5 to this table) applies

to the disposal.

                              1.  If the person who is taken to

acquire the asset under the roll-over provision disposes of it before

the demutualisation listing day, the person does not incur a capital

loss in respect of that disposal.

                              2.  If the person disposes of the asset

on or after the demutualisation listing day, then for the purposes of

applying the roll-over provision to that disposal, the modifications

in the item in this table apply as if modification 1 were not made.

Notes:

1. For the purposes of the table, the applicable company valuation

amount, in relation to the disposal of an asset or the allocation of

an amount to a member in the records of a superannuation fund, is:

        (a) if the asset is disposed of, or the amount is allocated,

before the demutualisation listing day-the pre-listing day company

valuation amount; or

        (b) in any other case-the listing day company valuation

amount.

2. The pre-listing day company valuation amount is:

        (a) in relation to demutualisation methods 1 to 6, where the

mutual insurance company is a life insurance company-the embedded

value of the company; or

        (b) in relation to demutualisation methods 1 to 6, where the

mutual insurance company is a general insurance company-the net

tangible asset value of the company; or

        (c) in relation to demutualisation method 7-the sum of the net

tangible asset values of the general insurance company and the mutual

affiliate company.

3. The listing day company valuation amount is the lesser of:

        (a) the pre-listing day company valuation amount; and

        (b) the amount worked out using the formula:

First trading day price of a listed

ordinary share mentioned in the

demutualisation method concerned   x  Total number of ordinary shares

                                      issued or distributed to, or to

                                      be sold  on behalf of, persons

                                      in the policyholder/member group

4. The demutualisation listing day is the day on which the ordinary

shares mentioned in the demutualisation method concerned are listed.

5. A roll-over provision is section 160X or any provision of Division

17 of Part IIIA.

Other tax consequences of demutualisation

  "121AT.  The table below sets out modifications of the application

of this Act (other than Part IIIA) in respect of events that are

described in, or relate to events that are described in, particular

demutualisation methods.

       TABLE 2-MODIFICATIONS OF THE ACT (OTHER THAN PART IIIA)

Item      Event               Modifications

1      Event described in item 1 of Table 1.

                              No amount is included in, or allowable

as a deduction from, assessable income in respect of the

extinguishment.

2      Event described in item 3 or 4 of Table 1.

                              1.  If the disposal takes place before

the demutualisation listing day (see note 4 to Table 1):

                              (a) no loss is allowable as a deduction

from the disposer's assessable income in respect of the disposal; and

                              (b) any deduction allowable from the

disposer's assessable income in respect of the acquisition of the

right or interest does not exceed the amount included in the

disposer's assessable income in respect of the disposal.

                              2.  Paragraphs 2(a) and (b) of the

modifications column for item 3 or 4 in Table 1 apply for the purposes

of working out:

                              (a) the amount of any profit included in

the disposer's assessable income in respect of the disposal; or

                              (b) the amount of any deduction

allowable from the disposer's assessable income in respect of the

acquisition of the right or interest.

3      Event that would be described in item 5 of Table 1 if the

references in that item to bonus shares and original shares mentioned

in Division 8 of Part IIIA were instead references to bonus shares and

original shares mentioned in section 6BA.

                              1.  If the disposal is of a

demutualisation share, or interest in such a share, and the disposal

takes place before the demutualisation listing day:

                              (a) no loss is allowable as a deduction

from the disposer's assessable income in respect of the disposal; and

                              (b) any deduction allowable from the

disposer's assessable income in respect of the acquisition of the

share or interest does not exceed the amount included in the

disposer's assessable income in respect of the disposal.

                              2.  If the disposal is of a

demutualisation share (other than a demutualisation original share),

or an interest in such a share, then paragraphs 2(a) to (c) of the

modifications column for item 5 in Table 1 apply for the purposes of

working out:

                              (a) the amount of any profit included

in, or loss (where modification 1 does not apply) allowable as a

deduction from, the disposer's assessable income in respect of the

disposal; or

                              (b) the amount of any deduction

allowable (where modification 1 does not apply) from the disposer's

assessable income in respect of the acquisition of the share or

interest.

                              3.  If the disposal is of either:

                              (a) a demutualisation original share, or

an interest in such a share; or

                              (b) a non-demutualisation bonus share,

or an interest in such a share;

then paragraphs 3(c) and (d) of the modifications column for item 5 in

Table 1 apply for the purpose of working out:

                              (c) the amount of any profit included

in, or loss (where modification 1 does not apply) allowable as a

deduction from, the disposer's assessable income in respect of the

disposal; or

                              (d) the amount of any deduction

allowable (where modification 1 does not apply) from the disposer's

assessable income in respect of the acquisition of the share or