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Income Tax (Transitional Provisions) Act 1997

  • - C2011C00504
  • In force - Superseded Version
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Act No. 40 of 1997 as amended, taking into account amendments up to Tax Laws Amendment (2011 Measures No. 5) Act 2011
An Act setting out application and transitional provisions for the Income Tax Assessment Act 1997
Administered by: Treasury
Registered 07 Jul 2011
Start Date 29 Jun 2011
End Date 07 Sep 2011
Table of contents.

Income Tax (Transitional Provisions) Act 1997

Act No. 40 of 1997 as amended

This compilation was prepared on 4 July 2011
taking into account amendments up to Act No. 62 of 2011

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

Chapter 1—Introduction and core provisions                                                     1

Part 1‑1—Preliminary                                                                                                         1

Division 1—Preliminary                                                                                              1

1‑1......... Short title [see Note 1]........................................................................ 1

1‑5......... Commencement................................................................................... 1

1‑7......... Administration of this Act................................................................... 1

1‑10....... Definitions and rules for interpreting this Act..................................... 1

Part 1‑3—Core Provisions                                                                                                2

Division 4—How to work out the income tax payable on your taxable income               2

4‑1......... Application of the Income Tax Assessment Act 1997.......................... 2

4‑10....... Temporary flood and cyclone reconstruction levy............................... 2

Division 5—How to work out when to pay your income tax                  4

Subdivision 5‑A—How to work out when to pay your income tax                 4

5‑5......... Application of Division 5 of the Income Tax Assessment Act 1997.... 4

5‑7......... References in tax sharing agreements to former section 204............... 4

5‑10....... General interest charge liabilities under former subsection 204(3)...... 5

5‑15....... Application of section 5‑15 of the Income Tax Assessment Act 1997. 5

Division 6—Assessable income and exempt income                                     6

6‑2......... Effect of this Division......................................................................... 6

6‑3......... Assessable income for income years before 1997‑98......................... 6

6‑20....... Exempt income for income years before 1997‑98............................... 6

Division 8—Deductions                                                                                                7

8‑2......... Effect of this Division......................................................................... 7

8‑3......... Deductions for income years before 1997‑98..................................... 7

8‑10....... No double deductions for income year before 1997‑98 and income year after 1996‑97           7

Chapter 2—Liability rules of general application                                              8

Part 2‑1—Assessable income                                                                                           8

Division 15—Some items of assessable income                                               8

15‑1....... General application provision.............................................................. 8

15‑10..... Application of section 15‑10 of the Income Tax Assessment Act 1997 to bounties and subsidies            9

15‑15..... Application of section 15‑15 of the Income Tax Assessment Act 1997 to profit‑making undertaking or plan          9

15‑20..... Application of section 15‑20 of the Income Tax Assessment Act 1997 to royalties  9

15‑30..... Application of section 15‑30 of the Income Tax Assessment Act 1997 to insurance or indemnity payments           9

15‑35..... Application of section 15‑35 of the Income Tax Assessment Act 1997 to interest on overpayments and early payments of tax....................................................................................................... 9

Division 20—Items included to reverse the effect of past deductions 10

Subdivision 20‑A—Insurance, indemnity or recoupment for deductible expenses        10

20‑1....... Application of Subdivision 20‑A of the Income Tax Assessment Act 1997             10

Subdivision 20‑B—Disposal of a car for which lease payments have been deducted   10

20‑100... Application of Subdivision 20‑B of the Income Tax Assessment Act 1997              10

20‑105... The cost of a car acquired in the 1996‑97 income year or an earlier income year     11

20‑110... The termination value of a car disposed of in the 1996‑97 income year or an earlier income year            11

20‑115... Reducing the assessable amount for the disposal of a car in the 1997‑98 income year or later if there has been an earlier disposal of it...................................................................................... 12

Part 2‑5—Rules about deductibility of particular kinds of amounts   14

Division 25—Some amounts you can deduct                                                  14

25‑1....... Application of Division 25 of the Income Tax Assessment Act 1997 14

25‑40..... Application of section 25‑40 of the Income Tax Assessment Act 1997 14

25‑45..... Application of section 25‑45 of the Income Tax Assessment Act 1997 14

25‑50..... Application of section 25‑90 of the Income Tax Assessment Act 1997 15

25‑65..... Local government election expenses................................................. 15

Division 26—Some amounts you cannot deduct, or cannot deduct in full            16

26‑1....... Application of Division 26 of the Income Tax Assessment Act 1997 16

26‑30..... Application of section 26‑30 of the Income Tax Assessment Act 1997 16

Division 30—Gifts or contributions                                                                    17

30‑1....... Application of Division 30 of the Income Tax Assessment Act 1997 17

30‑5....... Keeping in force old declarations and instruments............................ 17

30‑10..... Applications for approval of testamentary gifts not yet decided........ 18

30‑15..... Keeping in force the guidelines for deciding testamentary gifts......... 19

30‑20..... Keeping in force certificates approving testamentary gifts................. 19

30‑25..... Keeping in force the old gifts registers.............................................. 19

30‑102... Fund, authorities and institutions taken to be endorsed..................... 20

Division 32—Entertainment expenses                                                               22

32‑1....... Application of Division 32 of the Income Tax Assessment Act 1997 22

Division 34—Non‑compulsory uniforms                                                          23

34‑1....... Application of Division 34 of the Income Tax Assessment Act 1997 23

34‑5....... Things done under former section 51AL of the Income Tax Assessment Act 1936  23

Division 35—Deferral of losses from non‑commercial business activities           25

35‑10..... Deductions for certain new business investment............................... 25

35‑20..... Application of Commissioner’s decisions......................................... 25

Division 36—Tax losses of earlier income years                                         26

36‑100... Tax losses for the 1997‑98 and later income years............................ 26

36‑105... Tax losses for 1989‑90 to 1996‑97 income years............................. 26

36‑110... Tax losses for 1957‑58 to 1988‑89 income years............................. 26

Part 2‑10—Capital allowances: rules about deductibility of capital expenditure               28

Division 40—Capital allowances                                                                          28

Subdivision 40‑B—Core provisions                                                                    28

40‑10..... Plant.................................................................................................. 29

40‑12..... Plant acquired after 30 June 2001..................................................... 30

40‑13..... Accelerated depreciation for split or merged plant............................. 31

40‑15..... Recalculating effective life................................................................. 31

40‑20..... IRUs................................................................................................. 32

40‑25..... Software............................................................................................ 32

40‑30..... Spectrum licences.............................................................................. 33

40‑33..... Datacasting transmitter licences......................................................... 33

40‑35..... Mining unrecouped expenditure........................................................ 34

40‑37..... Post‑30 June 2001 mining expenditure............................................. 37

40‑38..... Mining cash bidding payments......................................................... 39

40‑40..... Transport expenditure....................................................................... 41

40‑43..... Post‑30 June 2001 transport expenditure.......................................... 43

40‑44..... No additional decline in certain cases................................................ 44

40‑45..... Intellectual property........................................................................... 45

40‑47..... IRUs................................................................................................. 45

40‑50..... Forestry roads and timber mill buildings........................................... 46

40‑55..... Environmental impact assessment..................................................... 46

40‑60..... Pooling under Subdivision 42‑L of the former Act........................... 47

40‑65..... Substituted accounting periods.......................................................... 48

40‑70..... References to amounts deducted and reductions in deductions......... 51

40‑72..... New diminishing value method not to apply in some cases.............. 52

40‑75..... Mining expenditure incurred after 1 July 2001 on an asset............... 53

40‑77..... Mining, quarrying or prospecting rights or information held before 1 July 2001     54

40‑80..... Other expenditure incurred after 1 July 2001 on a depreciating asset 56

40‑100... Commissioner’s determination of effective life................................. 57

Subdivision 40‑C—Cost                                                                                          57

40‑230... Car limit............................................................................................ 57

Subdivision 40‑D—Balancing adjustments                                                        58

40‑285... Balancing adjustments....................................................................... 58

40‑287... Disposal of pre‑1 July 2001 mining depreciating asset to associate.. 60

40‑288... Disposal of pre‑1 July 2001 mining non‑depreciating asset to associate  60

40‑289... Surrendered firearms......................................................................... 61

40‑290... Reduction of deductions under former Act etc.................................. 61

40‑295... Later year relief................................................................................. 62

40‑340... Roll‑overs......................................................................................... 62

40‑345... Balancing adjustments for depreciating assets that retain CGT indexation               66

40‑365... Involuntary disposals........................................................................ 68

Subdivision 40‑E—Low‑value and software development pools                 68

40‑420... Low‑value pools under Division 42 continue................................... 68

40‑450... Software development pools............................................................. 68

Subdivision 40‑F—Primary production depreciating assets                        68

40‑515... Water facilities, grapevines and horticultural plants........................... 69

40‑520... Special rule for water facilities you no longer hold........................... 69

40‑525... Amounts deducted for water facilities............................................... 70

Subdivision 40‑G—Capital expenditure of primary producers and other landholders               70

40‑645... Electricity supply and telephone lines................................................ 70

40‑650... Special rule for land that you no longer hold..................................... 71

40‑670... Farm consultants............................................................................... 71

Subdivision 40‑I—Capital expenditure that is deductible over time           71

40‑825... Genuine prospectors......................................................................... 71

40‑832... New method not to apply in some cases........................................... 71

Subdivision 40‑J—Ships depreciated under section 57AM of the Income Tax Assessment Act 1936       72

40‑830... Ships depreciated under section 57AM of the Income Tax Assessment Act 1936    72

Division 43—Deductions for capital works                                                    74

43‑100... Application of Division 43 to quasi‑ownership rights over land....... 74

43‑105... Application of subsections 43‑50(1) and (2) to hotel buildings and apartment buildings         74

43‑110... Application of subsection 43‑75(3)................................................... 74

Division 45—Disposal of leases and leased plant                                         75

45‑1....... Application of Division 45 of the Income Tax Assessment Act 1997 75

45‑3....... Application of Division 45 to disposals between February 1999 and September 1999            75

45‑40..... Application of Division to plant formerly owned by exempt entities 76

Part 2‑15—Exempt income                                                                                            80

Division 50—Exempt entities                                                                                  80

50‑1....... Application of Division 50 of the Income Tax Assessment Act 1997 80

Division 51—Exempt amounts                                                                               81

51‑1....... Application of Division 51 of the Income Tax Assessment Act 1997 81

Division 52—Certain pensions, benefits and allowances are exempt from income tax 82

52‑1....... Application of Division 52 of the Income Tax Assessment Act 1997 82

Division 53—Various exempt payments                                                           83

53‑1....... Application of Division 53 of the Income Tax Assessment Act 1997 83

Division 54—Exemption for certain payments made under structured settlements and structured orders                                                                                                                      84

54‑1....... Application of Division 54 of the Income Tax Assessment Act 1997 84

Division 55—Payments that are not exempt from income tax             85

55‑1....... Application of Division 55 of the Income Tax Assessment Act 1997 85

Part 2‑20—Tax offsets                                                                                                      86

Division 61—Generally applicable tax offsets                                              86

Subdivision 61‑L—Tax offset for Medicare levy surcharge (lump sum payments in arrears) 86

61‑575... Application of Subdivision 61‑L of the Income Tax Assessment Act 1997              86

Part 2‑25—Trading stock                                                                                                87

Division 70—Trading stock                                                                                     87

70‑1....... Application of Division 70 of the Income Tax Assessment Act 1997 87

70‑10..... Accounting for your disposal of items that stop being trading stock because of the change of definition                88

70‑20..... Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997.......................................................................................................... 89

70‑55..... Cost of live stock acquired by natural increase.................................. 89

70‑70..... Valuing interests in FIFs on hand at the start of 1991‑92................. 90

70‑90..... Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business......................................................... 91

70‑100... Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business............................................................................. 91

70‑105... Application of section 70‑105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997              92

70‑115... Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years....................................................................... 92

Part 2‑40—Rules affecting employees and other taxpayers receiving PAYG withholding payments   93

Division 82—Pre‑10 May 2006 entitlements to life benefit termination payments          93

Subdivision 82‑A—Application of Division                                                       93

82‑10..... Pre‑10 May 2006 entitlements—transitional termination payments. 93

Subdivision 82‑B—Transitional termination payments: general                95

82‑10A.. Recipient has reached preservation age............................................. 95

82‑10B.. Lower cap amount............................................................................. 96

82‑10C.. Recipient under preservation age....................................................... 98

82‑10D.. Upper cap amount............................................................................. 98

Subdivision 82‑C—Pre‑payment statements                                                     99

82‑10E.. Transitional termination payments—pre‑payment statements............ 99

Subdivision 82‑D—Directed termination payments made to superannuation and other entities               100

82‑10F.. Directed termination payments....................................................... 100

82‑10G.. Directed termination payments not assessable income and not exempt income        101

Subdivision 82‑E—Pre‑10 May 2006 entitlements and employment termination payments made after 1 July 2012                                                                                                       101

82‑10H.. Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012........................................................................................................ 101

Division 83A—Employee share schemes                                                        103

Subdivision 83A‑A—Application of Division 83A of the Income Tax Assessment Act 1997      103

83A‑5.... Application of Division 83A of the Income Tax Assessment Act 1997 103

Subdivision 83A‑B—Application of former provisions of the Income Tax Assessment Act 1936            106

83A‑10.. Savings—continued operation of former provisions....................... 106

83A‑15.. Indeterminate rights......................................................................... 106

Chapter 3—Specialist liability rules                                                                        108

Part 3‑1—Capital gains and losses: general topics                                         108

Division 102—Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997         108

102‑1..... Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997              108

102‑5..... Working out capital gains and capital losses................................... 108

102‑15... Applying net capital losses.............................................................. 109

102‑20... Net capital gains, capital gains and capital losses for income years before 1998‑99 110

Division 104—CGT events                                                                                    111

Subdivision 104‑C—End of a CGT asset                                                          111

104‑25... Cancellation, surrender and similar endings.................................... 111

Subdivision 104‑D—Bringing into existence a CGT asset                           111

104‑40... Granting an option.......................................................................... 111

Subdivision 104‑E—Trusts                                                                                  112

104‑70... Capital payment before 18 December 1986 for trust interest........... 112

Subdivision 104‑G—Shares                                                                                 112

104‑135. Capital payment for shares.............................................................. 113

Subdivision 104‑I—Australian residency ends                                               113

104‑165. Choices made under subsection 104‑165(2) of the Income Tax Assessment Act 1997             113

104‑166. Subsection 104‑165(1) still applies if you continue to be a short term Australian resident       113

Subdivision 104‑J—CGT events relating to roll‑overs                                114

104‑175. Company ceasing to be member of wholly‑owned group after roll‑over  114

104‑185. Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act.......................................................... 115

Subdivision 104‑K—Other CGT events                                                            115

104‑205. Partial realisation of intellectual property......................................... 115

Division 108—CGT assets                                                                                     116

Subdivision 108‑A—What a CGT asset is                                                        116

108‑5..... CGT assets...................................................................................... 116

Subdivision 108‑B—Collectables                                                                       116

108‑15... Sets of collectables.......................................................................... 116

Subdivision 108‑D—Separate CGT assets                                                       117

108‑75... Capital improvements to CGT assets for which a roll‑over may be available           117

108‑85... Improvement threshold................................................................... 117

Division 109—Acquisition of CGT assets                                                      119

Subdivision 109‑A—Operative rules                                                                 119

109‑5..... General acquisition rules................................................................. 119

Division 110—Cost base and reduced cost base                                        120

Subdivision 110‑A—Cost base                                                                            120

110‑25... Cost base of CGT asset of life insurance company or registered organisation         120

110‑35... Incidental costs................................................................................ 120

Division 112—Modifications to cost base and reduced cost base     121

Subdivision 112‑A—General rules                                                                    121

112‑20... Market value substitution rule......................................................... 121

Subdivision 112‑B—Special rules                                                                      121

112‑100. Effect of terminated gold mining exemptions.................................. 121

Division 114—Indexation of cost base                                                            123

114‑5..... When indexation relevant................................................................ 123

Division 118—Exemptions                                                                                     124

Subdivision 118‑A—General exemptions                                                        124

118‑10... Interests in collectables.................................................................... 124

118‑24A Pilot plant........................................................................................ 124

Subdivision 118‑B—Main residence                                                                 125

118‑195. Exemption—dwelling acquired from deceased estate...................... 125

Subdivision 118‑C—Goodwill                                                                             125

118‑260. Business exemption threshold......................................................... 125

Division 121—Record keeping                                                                            126

121‑15... Retaining records under Division 121............................................. 126

121‑25... Records for mergers between qualifying superannuation funds...... 126

Part 3‑3—Capital gains and losses: special topics                                          127

Division 124—Replacement‑asset roll‑overs                                               127

Subdivision 124‑C—Statutory licences                                                             127

124‑140. New statutory licence—ASGE licence etc...................................... 127

124‑141. ASGE licence etc.—cost base of ineligible part.............................. 128

124‑142. ASGE licence etc.—cost base of aquifer access licence etc............. 129

Division 125—Demerger relief                                                                            130

Subdivision 125‑B—Consequences for owners of interests                         130

125‑75... Employee share schemes................................................................. 130

Division 126—Roll‑overs                                                                                        131

Subdivision 126‑A—Merger of qualifying superannuation funds            131

126‑100. Merger of qualifying superannuation funds.................................... 131

Subdivision 126‑B—Transfer of life insurance business                             131

126‑150. Roll‑over on transfer of life insurance business.............................. 132

126‑160. Effects of roll‑over.......................................................................... 133

126‑165. References to Subdivision 126‑B of the Income Tax Assessment Act 1997             134

Division 128—Effect of death                                                                              135

128‑15... Effect on the legal personal representative or beneficiary................ 135

Division 130—Investments                                                                                    136

Subdivision 130‑A—Bonus shares and units                                                   136

130‑20... Issue of bonus shares or units......................................................... 136

Subdivision 130‑B—Rights                                                                                  137

130‑40... Exercise of rights............................................................................ 137

Subdivision 130‑C—Convertible notes                                                             137

130‑60... Shares or units acquired by converting a convertible note............... 137

Division 134—Options                                                                                             139

134‑1..... Exercise of options.......................................................................... 139

Division 136—Foreign residents                                                                         140

Subdivision 136‑A—Making a capital gain or loss                                       140

136‑25... When an asset is taxable Australian property.................................. 140

Division 140—Share value shifting                                                                   141

Subdivision 140‑A—When is there share value shifting?                            141

140‑7..... Pre‑1994 share value shifts irrelevant............................................. 141

140‑15... Off‑market buy backs..................................................................... 141

Division 149—When an asset stops being a pre‑CGT asset                142

149‑5..... Assets that stopped being pre‑CGT assets under old law............... 142

Division 152—Small business relief                                                                   143

152‑5..... Small business roll‑over chosen but no capital gain returned.......... 143

152‑10... Small business roll‑over not chosen and time remains to acquire a replacement asset              144

152‑15... Amendment of assessments............................................................ 144

Part 3‑5—Corporate taxpayers and corporate distributions                  145

Division 165—Income tax consequences of changing ownership or control of a company        145

Subdivision 165‑CA—Applying net capital losses of earlier income years 145

165‑95... Application of Subdivision 165‑CA of the Income Tax Assessment Act 1997         145

Subdivision 165‑CB—Working out the net capital gain and the net capital loss for the income year of the change                                                                                                       145

165‑105. Application of Subdivision 165‑CB of the Income Tax Assessment Act 1997         146

Subdivision 165‑CC—Change of ownership or control of company that has an unrealised net loss        146

165‑115E  Choice to use global method to work out unrealised net loss....... 146

Subdivision 165‑CD—Reductions after alterations in ownership or control of loss company   146

165‑115U  Choice to use global method to work out adjusted unrealised loss 146

165‑115ZC  When certain notices to be given................................................ 147

165‑115ZD  Adjustment (or further adjustment) for interest realised at a loss after global method has been used  148

Subdivision 165‑C—Deducting bad debts                                                        151

165‑135. Application of Subdivision 165‑C of the Income Tax Assessment Act 1997            151

Division 166—Income tax consequences of changing ownership or control of a listed public company                                                                                                                    152

Subdivision 166‑C—Deducting bad debts                                                        152

166‑40... Application of Subdivision 166‑C of the Income Tax Assessment Act 1997            152

Division 170—Treatment of company groups for income tax purposes               153

Subdivision 170‑A—Transfer of tax losses within certain wholly‑owned groups of companies                153

170‑45... Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred........................................................................................................ 153

170‑55... Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997........................................................................................................ 154

Subdivision 170‑B—Transfer of net capital losses within certain wholly‑owned groups of companies  154

170‑101. Application of Subdivision 170‑B of the Income Tax Assessment Act 1997            154

170‑145. Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred........................................................................................................ 154

170‑155. Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997........................................................................................................ 155

Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies                                     155

170‑220. Direct and indirect interests in the loss company............................. 155

170‑225. Direct and indirect interests in the gain company............................ 155

Subdivision 170‑D—Transfer of life insurance business                             155

170‑300. Transfer of life insurance business.................................................. 156

Division 175—Use of a company’s losses, deductions or bad debts to avoid income tax             157

Subdivision 175‑CA—Tax benefits from unused net capital losses of earlier income years      157

175‑40... Application of Subdivision 175‑CA of the Income Tax Assessment Act 1997         157

Subdivision 175‑CB—Tax benefits from unused capital losses of the current year     157

175‑55... Application of Subdivision 175‑CB of the Income Tax Assessment Act 1997         157

Subdivision 175‑C—Tax benefits from unused bad debt deductions        158

175‑78... Application of Subdivision 175‑C of the Income Tax Assessment Act 1997            158

Division 197—Tainted share capital accounts                                            159

Subdivision 197‑A—Definitions                                                                         159

197‑1..... Definitions...................................................................................... 159

Subdivision 197‑B—General application provision                                     159

197‑5..... Application of new Division 197.................................................... 159

Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off                                                      160

197‑10... Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off........................................................................................................ 160

197‑15... Account taken to have ceased to be tainted when old Division 7B was closed off   160

197‑20... After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting........................................................................................................ 160

197‑25... Special provisions if company chooses to untaint after introduction day  161

Part 3‑6—The imputation system                                                                             165

Division 201—Object and application of Part 3‑6                                    165

201‑1..... Estimated debits.............................................................................. 165

Division 203—Benchmark rule                                                                           166

203‑1..... Franking periods straddling 1 July 2002......................................... 166

Division 205—Franking accounts                                                                      167

205‑1..... Order of events provision............................................................... 167

205‑5..... Washing estimated debits out of the franking account before conversion 168

205‑10... Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002................................................................................................ 168

205‑15... Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002................................................................................... 169

205‑20... A late balancing company may elect to have its FDT liability determined on 30 June              171

205‑25... Franking deficit tax......................................................................... 171

205‑30... Deferring franking deficit................................................................ 172

205‑35... No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity........................................................................................................ 173

205‑70... Tax offset arising from franking deficit tax liabilities...................... 173

205‑71... Modification of franking deficit tax offset rules.............................. 177

205‑75... Working out the tax offset for the first income year........................ 178

205‑80... Application of Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936           179

Division 208—Exempting entities and former exempting entities    180

208‑111. Converting former exempting company’s exempting account balance on 30 June 2002          180

Division 210—Venture capital franking                                                         183

210‑1..... Order of events provision............................................................... 183

210‑5..... Washing estimated venture capital debits out of the old sub‑account before conversion          183

210‑10... Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002................................................................................... 184

210‑15... Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002................................................................................... 184

Division 214—Administering the imputation system                               186

214‑1..... Application...................................................................................... 186

214‑5..... Entity must give a franking return................................................... 187

214‑10... Notice to a specific corporate tax entity........................................... 187

214‑15... Effect of a refund on franking returns............................................. 187

214‑20... Franking returns for the income year.............................................. 188

214‑25... Commissioner may make a franking assessment............................ 189

214‑30... Commissioner taken to have made a franking assessment on first return 189

214‑35... Amendments within 3 years of the original assessment.................. 190

214‑40... Amended assessments are treated as franking assessments............ 190

214‑45... Further return as a result of a refund affecting a franking deficit tax liability            190

214‑50... Later amendments—on request....................................................... 191

214‑55... Later amendments—failure to make proper disclosure.................... 191

214‑60... Later amendments—fraud or evasion.............................................. 191

214‑65... Further amendment of an amended particular.................................. 192

214‑70... Other later amendments................................................................... 192

214‑75... Amendment on review etc............................................................... 192

214‑80... Notice of amendments..................................................................... 192

214‑85... Validity of assessment.................................................................... 193

214‑90... Objections....................................................................................... 193

214‑95... Evidence.......................................................................................... 193

214‑100. Due date for payment of franking tax.............................................. 193

214‑105. General interest charge.................................................................... 194

214‑110. Refunds of amounts overpaid......................................................... 195

214‑120. Record keeping............................................................................... 195

214‑125. Power of Commissioner to obtain information............................... 195

214‑135. Interpretation................................................................................... 195

Division 219—Imputation for life insurance companies                        196

219‑40... Reversing and replacing (on tax paid basis) certain franking credits that arose before 1 July 2002          196

219‑45... Reversing (on tax paid basis) certain franking debits that arose before 1 July 2002 197

Division 220—Imputation for NZ resident companies and related companies  198

220‑1..... Application to things happening on or after 1 April 2003............... 198

220‑5..... Residency requirement for income year including 1 April 2003..... 198

220‑10... NZ franking company cannot frank before 1 October 2003............ 198

220‑35... Extended time to make NZ franking choice..................................... 198

220‑501. Franking and exempting accounts of new former exempting entities 199

Part 3‑10—Financial transactions                                                                            203

Division 242—Leases of luxury cars                                                                203

242‑10... Application...................................................................................... 203

242‑20... Balancing adjustments..................................................................... 203

Division 245—Forgiveness of commercial debts                                       204

Subdivision 245‑A—Application of Division 245 of the Income Tax Assessment Act 1997        204

245‑5..... Application and saving.................................................................... 204

245‑10... Pre‑28 June 1996 arrangements etc................................................. 204

Division 247—Capital protected borrowings                                              206

Subdivision 247‑A—Interim apportionment methodology                         206

247‑5..... Interim apportionment methodology............................................... 206

247‑10... Products listed on the Australian Stock Exchange that have explicit put options      206

247‑15... Other capital protected products...................................................... 207

247‑20... The indicator method....................................................................... 208

247‑25... The percentage method.................................................................... 208

Subdivision 247‑B—Other transitional provisions                                       209

247‑75... Post‑July 2007 capital protected borrowings.................................. 209

247‑80... Capital protected borrowings in existence on 1 July 2013.............. 210

247‑85... Extensions and other changes......................................................... 211

Division 253—Financial claims scheme for account‑holders with insolvent ADIs           213

Subdivision 253‑A—Tax treatment of entitlements under financial claims scheme     213

253‑5..... Application of section 253‑5 of the Income Tax Assessment Act 1997 213

253‑10... Application of sections 253‑10 and 253‑15 of the Income Tax Assessment Act 1997              213

Part 3‑25—Particular kinds of trusts                                                                     214

Division 275—Australian managed investment trusts                            214

Subdivision 275‑A—Choice for capital treatment of MIT gains and losses 214

275‑10... Consequences of making choice—Commissioner cannot make certain amendments to previous assessments        214

Part 3‑30—Superannuation                                                                                         217

Division 290—Contributions                                                                                217

290‑10... Directed termination payments not deductible etc............................ 217

290‑15... Early balancers—deduction limits from end of 2006‑2007 income year to 1 July 2007           217

Division 292—Excess contributions tax                                                         219

292‑20... Concessional contributions cap for a financial year......................... 219

292‑25... Excess directed termination payments included in concessional contributions         220

292‑80... Application of excess non‑concessional contributions tax from 10 May 2006 to 1 July 2007 220

292‑80A Transitional release authority........................................................... 223

292‑80B Giving a transitional release authority to a superannuation provider 224

292‑80C Superannuation provider given transitional release authority must pay amount        224

292‑90... Non‑concessional contributions for a financial year........................ 225

Division 295—Taxation of superannuation entities                                 226

Subdivision 295‑B—Modifications of the Income Tax Assessment Act 1997 for 30 June 1988 assets    226

295‑75... Application of Subdivision............................................................. 226

295‑80... Meaning of 30 June 1988 asset...................................................... 226

295‑85... Cost base of 30 June 1988 asset..................................................... 227

295‑90... Market value of stock exchange listed assets.................................. 227

295‑95... Adjustment of cost base as at 30 June 1988—return of capital....... 228

295‑100. Exercise of rights............................................................................ 228

Subdivision 295‑C—Notices relating to contributions                                  229

295‑190. Deductions for personal contributions............................................ 229

Subdivision 295‑F—Exempt income                                                                 230

295‑390. Fixed interest complying ADFs—exemption of income attributable to certain 25 May 1988 deposits    230

Subdivision 295‑G—Deductions                                                                         232

295‑465. Complying funds—deductions for insurance premiums................. 233

295‑466. Complying funds—deductions for insurance premiums for disability superannuation benefits               233

295‑467. Complying funds—deductions for self‑insurance for disability superannuation benefits         234

295‑485A  Meaning of spouse and child for 2008‑2009 income year........... 236

295‑485. Deductions for increased amount of superannuation lump sum death benefit          236

Subdivision 295‑I—No‑TFN contributions income                                       236

295‑610. No‑TFN contributions income........................................................ 237

Division 301—Superannuation member benefits paid from complying plans etc.           238

301‑5..... Extended application to certain foreign superannuation funds......... 238

301‑85... Extended meaning of disability superannuation benefit for superannuation income stream     238

Division 302—Superannuation death benefits paid from complying plans etc. 239

302‑5..... Extended application to certain foreign superannuation funds......... 239

302‑195. Extended meaning of death benefits dependant for superannuation income stream  239

302‑195A  Meaning of death benefits dependant for 2008‑2009 income year 240

Division 303—Superannuation benefits paid in special circumstances  241

303‑10... Superannuation lump sum member benefit paid to member having a terminal medical condition             241

Division 304—Superannuation benefits in breach of legislative requirements etc.         242

304‑15... Excess payments from release authorities....................................... 242

Division 306—Roll‑overs etc.                                                                               243

306‑10... Roll‑over superannuation benefit—directed termination payment... 243

Division 307—Key concepts relating to superannuation benefits    244

307‑125. Treatment of tax free component of existing pension payments etc. 244

307‑290. Taxed and untaxed elements of death benefit superannuation lump sums                247

307‑345. Low rate component—Effect of rebate under the Income Tax Assessment Act 1936               247

Part 3‑32—Co‑operatives and mutual entities                                                  248

Division 316—Demutualisation of friendly society health or life insurers           248

Subdivision 316‑A—Application                                                                        248

316‑1..... Application of Division 316 of the Income Tax Assessment Act 1997 248

Part 3‑35—Insurance business                                                                                   249

Division 320—Life insurance companies                                                       249

Operative provisions                                                                                             249

Subdivision 320‑A—Preliminary                                                                       249

320‑5..... Life insurance companies that are friendly societies........................ 249

Subdivision 320‑C—Deductions and capital losses                                        250

320‑85... Deduction for increase in value of liabilities under risk components of life insurance policies 250

Subdivision 320‑D—Taxable income and tax loss of life insurance companies            250

320‑100. Savings—tax losses of previous income years............................... 251

Subdivision 320‑F—Virtual PST                                                                        251

320‑170. Transfer of part of an asset to a virtual PST.................................... 251

320‑175. Transfers of assets to virtual PST................................................... 252

Subdivision 320‑H—Segregation of assets for the purpose of discharging exempt life insurance policies            252

320‑225. Transfer of part of an asset to segregated exempt assets................. 253

320‑230. Transfers of assets to segregated exempt assets.............................. 253

Division 322—Assistance for policyholders with insolvent general insurers      255

Subdivision 322‑B—Tax treatment of entitlements under financial claims scheme     255

322‑25... Application of section 322‑25 of the Income Tax Assessment Act 1997  255

322‑30... Application of section 322‑30 of the Income Tax Assessment Act 1997  255

Part 3‑45—Rules for particular industries and occupations                   256

Division 328—Small business entities                                                               256

328‑1..... Definitions...................................................................................... 256

328‑110. Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years................................................................................... 257

328‑111. Access to certain small business concessions for former STS taxpayers that are winding up a business 257

328‑112. Working out whether you are a small business entity for certain small business concessions—entities connected with you.................................................................................................. 258

328‑115. When you stop using the STS accounting method.......................... 259

328‑120. Continuing to use the STS accounting method................................ 260

328‑125. Meaning of STS accounting method............................................... 260

328‑175. Choices made in relation to depreciating assets used in primary production business              261

328‑185. Depreciating assets allocated to STS pools..................................... 261

328‑195. Opening pool balances for 2007‑08 income year............................ 262

328‑440. Taxpayers who left the STS on or after 1 July 2005....................... 262

Division 375—Australian films                                                                            263

Subdivision 375‑G—Film losses                                                                         263

375‑100. Film component of tax loss for 1997‑98 or later income year......... 263

375‑105. Film component of tax loss for 1989‑90 to 1996‑97 income years. 263

375‑110. Film loss for 1989‑90 or later income year..................................... 263

Division 392—Long‑term averaging of primary producers’ tax liability            264

392‑1..... Application of Division 392 of the Income Tax Assessment Act 1997 264

392‑25... Transitional provision—election under section 158A of the Income Tax Assessment Act 1936               264

Division 393—Farm management deposits                                                   265

Subdivision 393‑A—Tax consequences of farm management deposits   265

393‑1..... Application of Division 393 of the Income Tax Assessment Act 1997 265

393‑5..... Unrecouped FMD deduction.......................................................... 265

393‑10... Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976.......................................................................................... 266

393‑27... Trustee may choose that a beneficiary is a chosen beneficiary of the trust                266

Subdivision 393‑B—Meaning of farm management deposit and owner 266

393‑40... The day the deposit was made for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976.......................................................................................... 267

Division 410—Copyright collecting societies                                               268

410‑1..... Application of section 51‑43 of the Income Tax Assessment Act 1997 268

Part 3‑90—Consolidated groups                                                                               269

Division 700—Application of Part 3‑90 of Income Tax Assessment Act 1997  269

700‑1..... Application of Part 3‑90 of Income Tax Assessment Act 1997....... 269

Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years               270

Subdivision 701‑A—Preliminary                                                                       270

701‑1..... Transitional group and transitional entity........................................ 270

701‑5..... Chosen transitional entity................................................................ 271

701‑7..... Working out the cost base or reduced cost base of a pre‑CGT asset after certain roll‑overs     272

701‑10... Interpretation................................................................................... 272

Subdivision 701‑B—Modified application of provisions                             273

701‑15... Tax cost and trading stock value not set for assets of chosen transitional entities     273

701‑20... Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities    274

701‑25... No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 276

701‑32... No adjustment of amount of liabilities required in working out allocable cost amount             277

701‑35... Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different..................................................... 277

701‑40... When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets.. 279

701‑45... When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 280

701‑50... Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity............................................................................................... 280

Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group     284

701A‑1.. Continuing majority‑owned entity, designated group etc................ 284

701A‑5.. Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity............................................................................................... 285

701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity.................................................... 285

Division 701B—Modified application of provisions of Income Tax Assessment Act 1997 relating to CGT event L1                                                                                                 291

701B‑1.. Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1........................................................................................................ 291

Division 701CModified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures                                       293

Subdivision 701C‑AOverview                                                                         293

701C‑1.. Overview........................................................................................ 293

Subdivision 701C‑BMembership rules allowing foreign holding         294

701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company       294

701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership       296

701C‑20 Transitional foreign‑held subsidiaries and transitional foreign‑held indirect subsidiaries         297

Subdivision 701C‑C—Modifications of tax cost setting rules                     298

Application and object                                                                                          298

701C‑25 Application and object of this Subdivision...................................... 298

Basic modification                                                                                                 299

701C‑30 Transitional foreign‑held subsidiary to be treated as part of head company              299

Other modifications                                                                                               300

701C‑35 Trading stock value not set for assets of transitional foreign‑held subsidiaries        300

701C‑40 Cost setting rules for exit cases—modification of core rules........... 300

701C‑50 Cost setting rules for exit cases—reference to modification of core rule  301

Division 701DTransitional foreign loss makers                                    302

Subdivision 701D‑AObject of this Division                                                 302

701D‑1.. Object of this Division.................................................................... 302

Subdivision 701D‑BRules allowing transitional foreign loss makers to remain outside consolidated group    302

701D‑10 Transitional foreign loss maker not member of group if certain conditions satisfied                303

701D‑15 Choice to apply transitional rules to entity....................................... 304

Division 702—Modified application of this Act to assets that an entity brings into a consolidated group                                                                                                                    306

702‑1..... Modified application of section 40‑77 of this Act to assets that an entity brings into a consolidated group             306

702‑4..... Extended operation of subsection 40‑285(3)................................... 307

702‑5..... Modified application of subsection 40‑285(6) of this Act after entity brings assets into consolidated group           308

Division 703—Consolidated groups and their members                        309

703‑30... Debt interests that are not membership interests.............................. 309

703‑35... Employee share schemes................................................................. 309

Division 705—Tax cost setting amount for assets where entities become members of consolidated groups                                                                                                                    310

Subdivision 705‑E—Expenditure relating to exploration, mining or quarrying          310

705‑300. Application and object of this Subdivision...................................... 310

705‑305. Rules affecting depreciating assets.................................................. 311

705‑310. Adjustable value of head company’s notional assets....................... 313

Division 707—Losses for head companies when entities become members etc.                315

Subdivision 707‑A—Transfer of previously unutilised losses to head company           315

707‑145. Certain choices to cancel the transfer of a loss may be revoked...... 315

Subdivision 707‑C—Amount of transferred losses that can be utilised    316

707‑325. Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 316

707‑326. Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value........................................................................................................ 319

707‑327. Choosing available fraction to apply to value donor’s loss............. 321

707‑328. Income year and conditions for possible transfer under Division 170 of the Income Tax Assessment Act 1997      323

707‑328A  Some events involving only group members not covered by rule against inflation of modified market value       324

707‑329. Modified market value at a time before 8 December 2004.............. 326

707‑350. Alternative loss utilisation regime to Subdivision 707‑C of the Income Tax Assessment Act 1997          326

707‑355. Ignore certain losses in working out when a choice can be made under this Subdivision        329

Subdivision 707‑D—Special rules about losses                                               329

707‑405. Special rules about losses referable to part of income year.............. 329

Division 709—Other rules applying when entities become subsidiary members etc.     330

Subdivision 709‑D—Deducting bad debts                                                        330

709‑200. Application of Subdivision 709‑D of the Income Tax Assessment Act 1997           330

Division 712—Certain rules for where entities cease to be subsidiary members of consolidated groups                                                                                                                    331

Subdivision 712‑E—Expenditure relating to exploration, mining or quarrying          331

712‑305. Reducing adjustable value of head company’s notional asset.......... 331

Division 713—Rules for particular kinds of entities                                332

Subdivision 713‑L—Transitional relief for certain transactions relating to life insurance companies  332

713‑500. Object of Subdivision..................................................................... 332

713‑505. When this Subdivision applies (first case)...................................... 332

713‑510. When this Subdivision applies (second case).................................. 333

713‑515. Entities must choose the relief......................................................... 334

713‑520. Conditions....................................................................................... 334

713‑525. Time of transfer............................................................................... 335

713‑530. What the relief is............................................................................. 335

713‑535. Subsequent consequences............................................................... 336

713‑540. Requirement to notify happening of new event............................... 338

713‑545. Discount capital gain in certain cases.............................................. 338

Subdivision 713‑M—General insurance companies                                     338

713‑700. Application...................................................................................... 338

Division 715—Interactions between the consolidation rules and other areas of the income tax law    339

Subdivision 715‑F—Interactions with Division 230 (financial arrangements)              339

715‑380. Exit history rule not to affect certain matters related to Division 230 financial arrangements   339

Subdivision 715‑J—Entry history rule and choices                                      340

715‑658. Application...................................................................................... 340

715‑659. Extension of time for making choice if joining time was before commencement      340

Subdivision 715‑K—Exit history rule and choices                                        340

715‑698. Application...................................................................................... 341

715‑699. Extension of time for making choice if leaving time was before commencement     341

Division 716—Miscellaneous special rules                                                    342

Subdivision 716‑G—Software development pools                                         342

716‑340. Expenditure incurred before 1 July 2001 and allocated to a software pool               342

Division 719—MEC rules                                                                                       343

Subdivision 719‑A—Modified application of Part 3‑90 to MEC groups 343

719‑2..... Modified application of Part 3‑90 to MEC groups.......................... 343

Subdivision 719‑B—MEC groups and their members                                  343

719‑5..... Debt interests that are not membership interests.............................. 344

719‑10... Effect of Division 701C.................................................................. 344

719‑15... Modified effect of subsection 701D‑10(2)...................................... 344

719‑30... Employee share schemes................................................................. 344

Subdivision 719‑C—Cost setting                                                                        345

719‑160. Transitional cost setting rules on joining have effect with modifications  345

719‑161. Modified effect of section 701‑1..................................................... 345

719‑163. Modified effect of section 701‑35................................................... 346

719‑165. Modified effect of paragraph 701‑45(1)(b)..................................... 347

Subdivision 719‑F—Losses                                                                                  347

719‑305. Available fraction for bundle of losses not affected by concessional rules               347

719‑310. Certain choices may be revoked...................................................... 347

Subdivision 719‑I—Bad debts                                                                             347

719‑450. Application of Subdivision 719‑I of the Income Tax Assessment Act 1997             348

Division 721—Liability for payment of tax where head company fails to pay on time                349

Subdivision 721‑A—Application of Division                                                  349

721‑25... References in tax sharing agreements to former table item 25......... 349

Part 3‑95—Value shifting                                                                                              350

Division 723—Direct value shifting by creating right over non‑depreciating asset       350

723‑1..... Application of Division 723............................................................ 350

Division 725—Direct value shifting affecting interests in companies and trusts              351

725‑1..... Application of Division 725............................................................ 351

Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings                                                            352

727‑1..... Application of Division 727............................................................ 352

727‑230. Transitional exclusion for certain indirect value shifts relating mainly to services    353

727‑470. Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer     354

Chapter 4—International aspects of income tax                                             355

Part 4‑5—General                                                                                                              355

Division 770—Foreign income tax offsets and foreign losses             355

Subdivision 770‑A—Transitional foreign losses (common rules)             355

Converting an overall foreign loss into a type of tax loss                           356

770‑1..... Converting a past foreign loss into a tax loss.................................. 356

770‑5..... Convertible foreign loss.................................................................. 357

770‑10... Reducing an unutilised overall foreign loss amount........................ 357

Utilising transitional foreign losses                                                                   358

770‑15... No special rules if convertible foreign losses total less than or equal to $10,000 or choice made             358

770‑20... Starting total for loss parcel............................................................. 358

770‑25... Tax loss has foreign loss component.............................................. 359

770‑30... Deduction limit for foreign loss component.................................... 359

770‑35... Offset limit to take account of deducted foreign loss component.... 360

Subdivision 770‑B—Transitional foreign losses (special rules for consolidated groups)           361

770‑80... Transferred losses taken not to be refreshed for purposes of converting overall foreign loss  361

770‑85... Deduction limit not to restrict transfer of losses.............................. 362

770‑90... Transfer of losses not restricted where part of trial year occurs before commencement year    362

770‑95... Foreign loss component and starting total retained after transfer to head company  362

770‑100. Limit where foreign loss component utilised by joining entity........ 363

770‑105. Modified operation of Subdivision 707‑C of the 1997 Act for foreign loss component          363

770‑110. Application of Subdivision to MEC groups.................................... 364

Subdivision 770‑C—Transitional foreign losses (special rules for CFCs) 364

770‑160. Converting a past CFC loss............................................................ 364

770‑165. Convertible CFC loss...................................................................... 365

770‑170. Reducing an unutilised CFC loss amount....................................... 366

Subdivision 770‑D—Transitional foreign income tax offsets (common rules)              366

770‑220. Converting excess foreign tax credits into pre‑commencement excess foreign income tax       366

770‑225. Pre‑commencement excess foreign income tax generated for a company by excess foreign tax credits relating to other income............................................................................................. 368

770‑230. Increase in the foreign income tax offset......................................... 368

Subdivision 770‑E—Transitional foreign income tax offsets (special rules for consolidated groups)    369

770‑285. Objects of this Subdivision............................................................. 369

770‑290. Transferring subsidiary member’s pre‑commencement excess foreign income tax to head company       370

770‑295. Where entity not subsidiary member for whole of income
year................................................................................................. 370

770‑300. Pre‑commencement excess foreign income tax lost on joining consolidated group  371

770‑305. Exit history rule does not treat leaving entity as having pre‑commencement excess foreign income tax   371

770‑310. Application of Subdivision to MEC groups.................................... 372

Division 820—Application of the thin capitalisation rules                    373

820‑10... Application of Division 820 of the Income Tax Assessment Act 1997 373

820‑12... Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act........................................................................................................ 373

820‑45... Transitional provision—accounting standards and prudential standards  373

Division 830—Application of the foreign hybrid rules                           375

830‑1..... Standard application........................................................................ 375

830‑15... Modified version of income tax law to apply for certain past income years             376

830‑20... Modifications of income tax law..................................................... 378

Division 840—Withholding taxes                                                                       380

Subdivision 840‑M—Managed investment trust amounts                           380

840‑805. Managed investment trust amounts................................................. 380

840‑810. Payment of tax under section 840‑805............................................ 381

Chapter 5—Administration                                                                                         382

Part 5‑35—Miscellaneous                                                                                              382

Division 909—Regulations                                                                                     382

909‑1..... Regulations..................................................................................... 382

Chapter 6—The Dictionary                                                                                         383

Part 6‑1—Concepts and topics                                                                                   383

Division 960—General                                                                                             383

Subdivision 960‑E—Entities                                                                                383

960‑100. Effect of this Subdivision................................................................ 383

960‑105. Entities, and members of entities, benefiting from the application of this Subdivision             383

960‑110. No taxation consequences to result from changes to managed investment scheme   384

960‑115. Certain entities treated as agents...................................................... 385

Subdivision 960‑M—Indexation                                                                         385

960‑262. Application of Subdivision 960‑M of the Income Tax Assessment Act 1997           385

960‑275. Indexation factor............................................................................. 386

Notes                                                                                                                                           387


An Act setting out application and transitional provisions for the Income Tax Assessment Act 1997

Chapter 1Introduction and core provisions

Part 1‑1Preliminary

Division 1Preliminary

Table of sections

1‑1            Short title

1‑5            Commencement

1‑7            Administration of this Act

1‑10          Definitions and rules for interpreting this Act

1‑1  Short title [see Note 1]

                   This Act may be cited as the Income Tax (Transitional Provisions) Act 1997.

1‑5  Commencement

                   This Act commences on 1 July 1997.

1‑7  Administration of this Act

                   The Commissioner has the general administration of this Act.

Note:          An effect of this provision is that people who acquire information under this Act are subject to the confidentiality obligations and exceptions in Division 355 in Schedule 1 to the Taxation Administration Act 1953.

1‑10  Definitions and rules for interpreting this Act

             (1)  In this Act, an expression has the same meaning as in the Income Tax Assessment Act 1997.

             (2)  Division 950 of the Income Tax Assessment Act 1997 (which contains rules for interpreting that Act) applies to this Act as if the provisions of this Act were provisions of that Act.


 

Part 1‑3Core Provisions

Division 4How to work out the income tax payable on your taxable income

Table of sections

4‑1            Application of the Income Tax Assessment Act 1997

4‑10          Temporary flood and cyclone reconstruction levy

4‑1  Application of the Income Tax Assessment Act 1997

                   The Income Tax Assessment Act 1997, as originally enacted, applies to assessments for the 1997‑98 income year and later income years.

Note:          For the application of amendments of that Act (including new provisions inserted in it), see the Acts making the amendments.

4‑10  Temporary flood and cyclone reconstruction levy

Temporary flood and cyclone reconstruction levy

             (1)  You must pay extra income tax (temporary flood and cyclone reconstruction levy) for the 2011‑12 financial year if:

                     (a)  you are an individual; and

                     (b)  your taxable income for the 2011‑12 income year exceeds $50,000.

Note:          This section will also affect the income tax payable by some trustees who are taxed as if certain trust income were income of individuals. See sections 98 and 99 of the Income Tax Assessment Act 1936.

             (2)  Subsection (1) does not apply if you are a member of a class of individuals specified in a legislative instrument made by the Minister for the purposes of this subsection.

             (3)  The Minister may only specify a class of individuals for the purposes of subsection (2) if the Minister is satisfied that the class was affected by a natural disaster that happened in Australia between:

                     (a)  1 July 2010; and

                     (b)  30 June 2012.

Amount of temporary flood and cyclone reconstruction levy

             (4)  Your temporary flood and cyclone reconstruction levy is worked out by reference to your taxable income for the 2011‑12 income year, using the rate or rates that apply to you.

Note:          See section 12B of the Income Tax Rates Act 1986.

Interaction with other provisions

             (5)  For the purpose of working out your income tax for the 2011‑12 financial year, subsection 4‑10(3) of the Income Tax Assessment Act 1997 has effect as if it stated that your income tax for the financial year is the total of:

                     (a)  the amount worked out using the method statement in that subsection; and

                     (b)  the amount of any extra tax you must pay as mentioned in subsection (1) of this section.

             (6)  To avoid doubt, temporary flood and cyclone reconstruction levy is not included in your basic income tax liability worked out in accordance with step 2 of the method statement in subsection 4‑10(3) of the Income Tax Assessment Act 1997.

Note:          You cannot apply any tax offsets against temporary flood and cyclone reconstruction levy under Part 2‑20 of the Income Tax Assessment Act 1997, because temporary flood and cyclone reconstruction levy is not included in your basic income tax liability.

             (7)  Disregard this section for the purposes of section 770‑75 of the Income Tax Assessment Act 1997 (Foreign income tax offset limit).


 

Division 5How to work out when to pay your income tax

Table of Subdivisions

5‑A       How to work out when to pay your income tax

Subdivision 5‑AHow to work out when to pay your income tax

Table of sections

5‑5            Application of Division 5 of the Income Tax Assessment Act 1997

5‑7            References in tax sharing agreements to former section 204

5‑10          General interest charge liabilities under former subsection 204(3)

5‑15          Application of section 5‑15 of the Income Tax Assessment Act 1997

5‑5  Application of Division 5 of the Income Tax Assessment Act 1997

                   Subject to section 5‑15 of this Act, Division 5 of the Income Tax Assessment Act 1997, as originally enacted, applies in relation to income tax or shortfall interest charge you must pay for:

                     (a)  the 2010‑11 financial year; or

                     (b)  a later financial year.

5‑7  References in tax sharing agreements to former section 204

             (1)  A reference in an agreement to section 204 of the Income Tax Assessment Act 1936 is taken, from the commencement of this section, to be a reference to section 5‑5 of the Income Tax Assessment Act 1997, if:

                     (a)  paragraph 721‑25(1)(a) of the Income Tax Assessment Act 1997 applies to the agreement; and

                     (b)  the agreement was in force just before the commencement of this section.

             (2)  This section applies in relation to tax to which Division 5 of the Income Tax Assessment Act 1997 applies.

5‑10  General interest charge liabilities under former subsection 204(3)

             (1)  This section applies if, just before the commencement of this section, you were liable, under subsection 204(3) (the old provision) of the Income Tax Assessment Act 1936, to pay the general interest charge on an unpaid amount (the liability) of any tax or shortfall interest charge.

             (2)  On that commencement, the old provision ceases to apply to the liability.

             (3)  From that commencement, section 5‑15 (the new provision) of the Income Tax Assessment Act 1997, as originally enacted, applies to the liability as if:

                     (a)  the liability remained unpaid at that time; and

                     (b)  so much of the charge under the old provision as remained unpaid at that time had been imposed under the new provision and remained unpaid at that time.

5‑15  Application of section 5‑15 of the Income Tax Assessment Act 1997

             (1)  Section 5‑15 of the Income Tax Assessment Act 1997 (General interest charge payable on unpaid income tax or shortfall interest charge), as originally enacted, applies to an amount of income tax or shortfall interest charge you must pay for a financial year, if the income tax or shortfall interest charge is due to be paid on or after the commencement of that section.

             (2)  For the purposes of subsection (1), it does not matter whether the financial year ended before, on or after the commencement of that section.


 

Division 6Assessable income and exempt income

Table of sections

6‑2            Effect of this Division

6‑3            Assessable income for income years before 1997‑98

6‑20          Exempt income for income years before 1997‑98

6‑2  Effect of this Division

                   This Division has effect for the purposes of the Income Tax Assessment Act 1997 and of this Act.

6‑3  Assessable income for income years before 1997‑98

                   For the 1996‑97 income year or an earlier income year, assessable income means all the amounts that under the Income Tax Assessment Act 1936 are included in the assessable income.

6‑20  Exempt income for income years before 1997‑98

                   For the 1996‑97 income year or an earlier income year, exempt income means income which is exempt from tax and includes income which is not assessable income.


 

Division 8Deductions

Table of sections

8‑2            Effect of this Division

8‑3            Deductions for income years before 1997‑98

8‑10          No double deductions for income year before 1997‑98 and income year after 1996‑97

8‑2  Effect of this Division

                   This Division has effect for the purposes of the Income Tax Assessment Act 1997 and of this Act.

8‑3  Deductions for income years before 1997‑98

                   For the 1996‑97 income year or an earlier income year, deduction means a deduction allowable under the Income Tax Assessment Act 1936.

8‑10  No double deductions for income year before 1997‑98 and income year after 1996‑97

                   If:

                     (a)  a provision of the Income Tax Assessment Act 1936 allows you a deduction in respect of an amount for the 1996‑97 income year or an earlier income year; and

                     (b)  a different provision of that Act, or a provision of the Income Tax Assessment Act 1997, allows you a deduction in respect of the same amount for the 1997‑98 income year or a later income year;

you can deduct only under the provision that is most appropriate.


 

Chapter 2Liability rules of general application

Part 2‑1Assessable income

Division 15Some items of assessable income

Table of sections

15‑1          General application provision

15‑10        Application of section 15‑10 of the Income Tax Assessment Act 1997 to bounties and subsidies

15‑15        Application of section 15‑15 of the Income Tax Assessment Act 1997 to profit‑making plans

15‑20        Application of section 15‑20 of the Income Tax Assessment Act 1997 to royalties

15‑30        Application of section 15‑30 of the Income Tax Assessment Act 1997 to insurance or indemnity payments

15‑35        Application of section 15‑35 of the Income Tax Assessment Act 1997 to interest on overpayments and early payments of tax

15‑1  General application provision

             (1)  Division 15 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.

             (2)  However, the sections of that Act listed in the table apply in accordance with the corresponding sections of this Act.

 

Application provisions for specific sections


Item

This section of the Income Tax Assessment Act 1997 ...

Applies as described in this section of this Act ...

1

15‑10

15‑10

2

15‑15

15‑15

3

15‑20

15‑20

4

15‑30

15‑30

5

15‑35

15‑35

15‑10  Application of section 15‑10 of the Income Tax Assessment Act 1997 to bounties and subsidies

                   Section 15‑10 (Bounties and subsidies) of the Income Tax Assessment Act 1997 applies to a bounty or subsidy received in the 1997‑98 income year or a later income year.

15‑15  Application of section 15‑15 of the Income Tax Assessment Act 1997 to profit‑making undertaking or plan

                   Section 15‑15 (Profit‑making undertaking or plan) of the Income Tax Assessment Act 1997 applies to a profit arising in the 1997‑98 income year or a later income year, even if the undertaking or plan was entered into, or began to be carried on or carried out, before the 1997‑98 income year.

15‑20  Application of section 15‑20 of the Income Tax Assessment Act 1997 to royalties

                   Section 15‑20 (Royalties) of the Income Tax Assessment Act 1997 applies to an amount received as or by way of royalty in the 1997‑98 income year or a later income year.

15‑30  Application of section 15‑30 of the Income Tax Assessment Act 1997 to insurance or indemnity payments

                   Section 15‑30 (Insurance or indemnity for loss of assessable income) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year as insurance or indemnity for the loss at any time of an amount that would have been assessable income under the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997.

15‑35  Application of section 15‑35 of the Income Tax Assessment Act 1997 to interest on overpayments and early payments of tax

                   Section 15‑35 (Interest on overpayments and early payments of tax) of the Income Tax Assessment Act 1997 applies to interest that is paid or applied in the 1997‑98 income year or a later income year, even if some or all of the interest became payable earlier.


 

Division 20Items included to reverse the effect of past deductions

Table of Subdivisions

20‑A     Insurance, indemnity or recoupment for deductible expenses

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

Subdivision 20‑AInsurance, indemnity or recoupment for deductible expenses

Table of sections

20‑1          Application of Subdivision 20‑A of the Income Tax Assessment Act 1997

20‑1  Application of Subdivision 20‑A of the Income Tax Assessment Act 1997

                   Subdivision 20‑A of the Income Tax Assessment Act 1997 applies to an assessable recoupment received in the 1997‑98 income year or a later income year of a loss or outgoing whenever incurred.

Subdivision 20‑BDisposal of a car for which lease payments have been deducted

Table of sections

20‑100      Application of Subdivision 20‑B of the Income Tax Assessment Act 1997

20‑105      The cost of a car acquired in the 1996‑97 income year or an earlier income year

20‑110      The termination value of a car disposed of in the 1996‑97 income year or an earlier income year

20‑115      Reducing the assessable amount for the disposal of a car in the 1997‑98 income year or later if there has been an earlier disposal of it

20‑100  Application of Subdivision 20‑B of the Income Tax Assessment Act 1997

                   Subdivision 20‑B of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.

20‑105  The cost of a car acquired in the 1996‑97 income year or an earlier income year

             (1)  If:

                     (a)  in the 1997‑98 income year or a later income year you dispose of a car that was leased to you or your associate; and

                     (b)  the lessor acquired the car in the 1996‑97 income year or an earlier income year;

the cost of the car to the lessor for the purposes of section 20‑120 of the Income Tax Assessment Act 1997 is worked out under the depreciation provisions of the Income Tax Assessment Act 1936.

Note 1:       Section 20‑120 of the Income Tax Assessment Act 1997 is about a limit on the amount to be included in your assessable income because of your disposal of the car.

Note 2:       The depreciation provisions were in Subdivision A of Division 3 of Part III of the Income Tax Assessment Act 1936.

             (2)  In working out the cost of the car to the lessor, disregard any election the lessor made under former subsection 59(2A) or (2D) of the Income Tax Assessment Act 1936 to reduce the cost of the car.

20‑110  The termination value of a car disposed of in the 1996‑97 income year or an earlier income year

                   If:

                     (a)  in the 1997‑98 income year or a later income year you dispose of a car that was leased to you or your associate; and

                     (b)  the lessor disposed of the car in the 1996‑97 income year or an earlier income year;

the car’s termination value (in respect of the disposal by the lessor) for the purposes of section 20‑120 of the Income Tax Assessment Act 1997 is the consideration receivable by the lessor for the disposal (worked out under former section 59 of the Income Tax Assessment Act 1936).

Note:          Section 20‑120 of the Income Tax Assessment Act 1997 is about a limit on the amount to be included in your assessable income because of your disposal of the car.

20‑115  Reducing the assessable amount for the disposal of a car in the 1997‑98 income year or later if there has been an earlier disposal of it

                   If:

                     (a)  section 20‑110 or 20‑125 of the Income Tax Assessment Act 1997 includes an amount in your assessable income for the 1997‑98 income year or a later income year because of your disposal of a car; and

                     (b)  in the 1996‑97 income year or an earlier income year (but after the lease period began) there was an earlier disposal of the car, or an interest in it, by you or another entity in a situation described in the following table;

each limit on the amount to be included in your assessable income is reduced as follows:

 

Reducing each limit on the amount to be included

Item

In this situation:

reduce each limit by:

1

Former section 26AAB of the Income Tax Assessment Act 1936 included an amount in your assessable income in respect of such an earlier disposal by you

that amount

2

Former section 26AAB of the Income Tax Assessment Act 1936 included an amount in another entity's assessable income in respect of such an earlier disposal by the other entity

that amount

3

Former section 26AAB of the Income Tax Assessment Act 1936 would have included an amount in your assessable income in respect of such an earlier disposal by you but for the operation of former subsection 26AAB(12) of that Act

that amount

4

Former section 26AAB of the Income Tax Assessment Act 1936 would have included an amount in another entity’s assessable income in respect of such an earlier disposal by the other entity but for the operation of former subsection 26AAB(12) of that Act

that amount

5

Former subsection 26AAB(9) of the Income Tax Assessment Act 1936 reduced the amount to be included in your assessable income in respect of such an earlier disposal by you

the amount of the reduction

6

Former subsection 26AAB(9) of the Income Tax Assessment Act 1936 reduced the amount to be included in another entity’s assessable income in respect of such an earlier disposal by the other entity

the amount of the reduction


 

Part 2‑5Rules about deductibility of particular kinds of amounts

Division 25Some amounts you can deduct

Table of sections

25‑1          Application of Division 25 of the Income Tax Assessment Act 1997

25‑40        Application of section 25‑40 of the Income Tax Assessment Act 1997

25‑45        Application of section 25‑45 of the Income Tax Assessment Act 1997

25‑50        Application of section 25‑90 of the Income Tax Assessment Act 1997

25‑65        Local government election expenses

25‑1  Application of Division 25 of the Income Tax Assessment Act 1997

                   Division 25 (Some amounts you can deduct) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years, except as provided by this Division.

25‑40  Application of section 25‑40 of the Income Tax Assessment Act 1997

                   Section 25‑40 (Loss from profit‑making undertaking or plan) of the Income Tax Assessment Act 1997 applies to a loss arising in the 1997‑98 income year or a later income year, even if the undertaking or plan was entered into, or began to be carried on or carried out, before the 1997‑98 income year.

25‑45  Application of section 25‑45 of the Income Tax Assessment Act 1997

                   Section 25‑45 (which is about deductions for losses by theft etc.) of the Income Tax Assessment Act 1997 applies to a loss discovered in the 1997‑98 income year or a later income year.

25‑50  Application of section 25‑90 of the Income Tax Assessment Act 1997

                   Section 25‑90 (which is about deductions relating to foreign exempt income) of the Income Tax Assessment Act 1997 applies to an amount incurred in an income year that begins on or after 1 July 2001.

25‑65  Local government election expenses

                   Section 25‑65 of the Income Tax Assessment Act 1997 applies to the 2006‑07 income year and later income years, in relation to expenditure whenever incurred. In relation to expenditure incurred in the 2005‑06 income year or an earlier income year, it applies as if:

                     (a)  it had applied to all income years before the 2006‑07 income year; and

                     (b)  an allowable deduction for the expenditure under section 74A of the Income Tax Assessment Act 1936 had been a deduction for the expenditure under section 25‑65 of the Income Tax Assessment Act 1997.

Note:          This section also has the result that, to the extent that a recoupment of the expenditure has been included in your assessable income by former subsections 74A(4) and (5) of the Income Tax Assessment Act 1936, the expenditure will be disregarded in applying the $1,000 per election deduction limit: see subsection 25‑65(2) of the Income Tax Assessment Act 1997.


 

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

Table of sections

26‑1          Application of Division 26 of the Income Tax Assessment Act 1997

26‑30        Application of section 26‑30 of the Income Tax Assessment Act 1997

26‑1  Application of Division 26 of the Income Tax Assessment Act 1997

                   Division 26 of the Income Tax Assessment Act 1997 (which prevents or limits deductions) applies to assessments for the 1997‑98 income year and later income years, except as provided by this Division.

26‑30  Application of section 26‑30 of the Income Tax Assessment Act 1997

                   Section 26‑30 (which denies a deduction for relative’s travel expenses) of the Income Tax Assessment Act 1997 applies to travel on or after 1 July 1997.


 

Division 30Gifts or contributions

Table of sections

30‑1          Application of Division 30 of the Income Tax Assessment Act 1997

30‑5          Keeping in force old declarations and instruments

30‑10        Applications for approval of testamentary gifts not yet decided

30‑15        Keeping in force the guidelines for deciding testamentary gifts

30‑20        Keeping in force certificates approving testamentary gifts

30‑25        Keeping in force the old gifts registers

30‑102      Fund, authorities and institutions taken to be endorsed

30‑1  Application of Division 30 of the Income Tax Assessment Act 1997

                   Division 30 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.

30‑5  Keeping in force old declarations and instruments

             (1)  This section applies to a declaration or other instrument (described in column 2 of an item in the table in this section) that is in force at the end of 30 June 1997 for the purposes of the provision of the Income Tax Assessment Act 1936 referred to in that column of the item.

             (2)  On and after 1 July 1997 the declaration or other instrument also has effect as if it were an approval or declaration (described in column 3 of the same item) made for the purposes of the provision of the Income Tax Assessment Act 1997 referred to in that column of the item.

                   Anything done on or after 1 July 1997 in relation to an approval or declaration described in column 3 of an item in the table also has effect as if it had been done in relation to the declaration or other instrument described in column 2 of that item.

 

On and after 1 July 1997


Item

This approval, declaration or other instrument:


also has effect as if it were:

1

An instrument certifying an institution to be a technical and further education institution for the purposes of item 2.1.7 of table 2 in subsection 78(4)

A declaration that the institution is a technical and further education institution for the purposes of item 2.1.7 of the table in subsection 30‑25(1)

2

An instrument certifying that purposes of an institution covered by item 2.1.7 of table 2 in subsection 78(4), or of the college covered by item 2.2.14 of that table, relate exclusively to tertiary education

A declaration (for the purposes of section 30‑30) that those purposes of the institution, or of the college, relate solely to tertiary education

3

An instrument approving an organisation, or a branch or section of an organisation, to be a marriage guidance organisation for the purposes of item 8.1.1 of table 8 in subsection 78(4)

A declaration that the organisation, or branch or section of the organisation, is a marriage guidance organisation for the purposes of item 8.1.1 of the table in subsection 30‑70(1)

4

A declaration that a public fund is an eligible fund for the purposes of item 9.1.1 of table 9 in subsection 78(4)

A declaration that the public fund is a relief fund for the purposes of item 9.1.1 of the table in subsection 30‑80(1)

5

An instrument approving a person as a valuer under subsection 78(18)

An approval of the person as a valuer under section 30‑210

6

An instrument approving an organisation as an approved organisation for the purposes of subsection 78(21)

A declaration that the organisation is an approved organisation for the purposes of section 30‑85

7

An instrument certifying a country to be a developing country for the purposes of subsection 78(21)

A declaration that the country is a developing country for the purposes of section 30‑85

30‑10  Applications for approval of testamentary gifts not yet decided

                   If, at the end of the 1996‑97 income year, the Minister for Communications and the Arts has not decided a written application that you made under subsection 78(6B) of the Income Tax Assessment Act 1936, you are taken, at the start of the 1997‑98 income year, to have made a written application to the Arts Minister under section 30‑235 of the Income Tax Assessment Act 1997.

Note:          Subsection 78(6B) of the Income Tax Assessment Act 1936, and section 30‑235 of the Income Tax Assessment Act 1997, are about applying for a certificate for approval of a gift as a testamentary gift.

30‑15  Keeping in force the guidelines for deciding testamentary gifts

             (1)  Written guidelines made by the Minister for Communications and the Arts under subsection 78(6C) of the Income Tax Assessment Act 1936 that are in force at the end of the 1996‑97 income year are taken, in the 1997‑98 income year or a later income year, to be written guidelines made by the Arts Minister under section 30‑235 of the Income Tax Assessment Act 1997.

Note:          The Arts Minister must decide an application for a certificate approving a gift as a testamentary gift in accordance with these guidelines.

             (2)  They have effect in the 1997‑98 income year or a later income year as if a reference in them to a provision of the Income Tax Assessment Act 1936 were a reference to the corresponding provision of the Income Tax Assessment Act 1997.

30‑20  Keeping in force certificates approving testamentary gifts

                   A certificate given by the Minister for Communications and the Arts under subsection 78(6B) of the Income Tax Assessment Act 1936 that is in force at the end of the 1996‑97 income year is taken, in the 1997‑98 income year or a later income year, to be a certificate given by the Arts Minister under section 30‑235 of the Income Tax Assessment Act 1997.

Note:          Such a certificate is an approval of a gift as a testamentary gift.

30‑25  Keeping in force the old gifts registers

             (1)  On and after 1 July 1997, the register described in column 2 of an item in the table in this section (as the register existed at the end of 30 June 1997) also has effect as if it were the register described in column 3 of that item.

                   Column 2 refers to provisions of the Income Tax Assessment Act 1936. Column 3 refers to provisions of the Income Tax Assessment Act 1997.

             (2)  Anything done on or after 1 July 1997 in relation to the register described in column 3 of an item in the table also has effect as if it had been done in relation to the register described in column 2 of that item.

 

On and after 1 July 1997

Item

This register:

also has effect as if it were:

1

The register of cultural organisations kept under section 78AA

The register of cultural organisations kept under Subdivision 30‑F

2

The register of environmental organisations kept under section 78AB

The register of environmental organisations kept under Subdivision 30‑E

30‑102  Fund, authorities and institutions taken to be endorsed

             (1)  The authorities and institutions listed in this table are taken to have been endorsed by the Commissioner of Taxation for the purposes of item 12A.1.1 of the table in section 30‑102 of the Income Tax Assessment Act 1997 under paragraph 30‑120(a) of that Act.

 

Item

Fund, authority or institution

Established under legislation of the following State or Territory

1

State Emergency Service

New South Wales

2

Country Fire Authority

Victoria

3

Victoria State Emergency Service

Victoria

4

Queensland Fire and Rescue Service

Queensland

5

State Emergency Service

Queensland

6

Fire and Emergency Services Authority of Western Australia

Western Australia

7

State Emergency Service South Australia

South Australia

8

Tasmania Fire Service

Tasmania

9

State Emergency Service

Tasmania

10

ACT Rural Fire Service

Australian Capital Territory

11

ACT State Emergency Service

Australian Capital Territory

             (2)  The fund listed in this table is taken to have been endorsed by the Commissioner of Taxation for the purposes of item 12A.1.2 of section 30‑102 of the Income Tax Assessment Act 1997 under paragraph 30‑120(b) of that Act.

 

Item

Fund, authority or institution

Established under legislation of the following State or Territory

1

CFA & Brigades Donations Fund

Victoria

             (3)  The funds, authorities and institutions referred to in subsections (1) and (2) are taken to have been endorsed on the day on which Schedule 7 to the Tax Laws Amendment (2010 Measures No. 4) Act 2010 commences.


 

Division 32Entertainment expenses

Table of sections

32‑1          Application of Division 32 of the Income Tax Assessment Act 1997

32‑1  Application of Division 32 of the Income Tax Assessment Act 1997

                   Division 32 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.


 

Division 34Non‑compulsory uniforms

Table of sections

34‑1          Application of Division 34 of the Income Tax Assessment Act 1997

34‑5          Things done under former section 51AL of the Income Tax Assessment Act 1936

34‑1  Application of Division 34 of the Income Tax Assessment Act 1997

                   Division 34 (Non‑compulsory uniforms) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.

34‑5  Things done under former section 51AL of the Income Tax Assessment Act 1936

             (1)  From 1 July 1997, anything done under or in connection with a provision of former section 51AL of the Income Tax Assessment Act 1936 has effect as if it had been done under or in connection with the corresponding provision of Division 34 of the Income Tax Assessment Act 1997.

             (2)  From 1 July 1997, a thing described in column 2 of an item in the table (as that thing existed at the end of 30 June 1997) has effect as if it were the thing described in column 3 of that item.

                   Column 2 refers to provisions of the Income Tax Assessment Act 1936. Column 3 refers to provisions of the Income Tax Assessment Act 1997.

 

As from 1 July 1997

Item

This:

has effect as if it were this:

1

The Register of Approved Occupational Clothing that former subsection 51AL(5) requires the Industry Secretary to keep

The Register of Approved Occupational Clothing that section 34‑45 requires the Industry Secretary to keep

2

Approved occupational clothing guidelines in force under former subsection 51AL(7)

Approved occupational clothing guidelines made under section 34‑55

3

A delegation by the Industry Secretary under former subsection 51AL(23)

A delegation by the Industry Secretary under section 34‑65

             (3)  Subsection (2) does not limit the generality of subsection (1).


 

Division 35Deferral of losses from non‑commercial business activities

Table of sections

35‑10        Deductions for certain new business investment

35‑20        Application of Commissioner’s decisions

35‑10  Deductions for certain new business investment

                   The rule in subsection 35‑10(2) of the Income Tax Assessment Act 1997 does not apply for an income year to a business activity if:

                     (a)  apart from that rule, you could otherwise deduct amounts under Division 41 of that Act for that income year; and

                     (b)  the total of those amounts is more than or equal to the excess worked out under that subsection for the business activity for the income year.

35‑20  Application of Commissioner’s decisions

                   A decision of the Commissioner made under section 35‑55 of the Income Tax Assessment Act 1997:

                     (a)  before the commencement of Schedule 2 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009; and

                     (b)  for one or more income years;

continues to have effect, after that commencement, for those income years despite the amendments made by that Schedule.


 

Division 36Tax losses of earlier income years

Table of sections

36‑100      Tax losses for the 1997‑98 and later income years

36‑105      Tax losses for 1989‑90 to 1996‑97 income years

36‑110      Tax losses for 1957‑58 to 1988‑89 income years

36‑100  Tax losses for the 1997‑98 and later income years

                   To work out your tax loss (if any) for the 1997‑98 income year or a later income year, apply the provisions of the Income Tax Assessment Act 1997 about tax losses.

Start at Division 36 of that Act.

36‑105  Tax losses for 1989‑90 to 1996‑97 income years

             (1)  If you incurred a loss for the purposes of section 79E (General domestic losses of 1989‑90 to 1996‑97 years of income) of the Income Tax Assessment Act 1936 in any of the 1989‑90 to 1996‑97 income years, the loss is your tax loss for that income year, which is called a loss year.

             (2)  You can deduct the tax loss in the 1997‑98 or a later income year only to the extent that it has not already been deducted.

36‑110  Tax losses for 1957‑58 to 1988‑89 income years

             (1)  If you incurred a loss for the purposes of section 80AA (Primary production losses of pre‑1990 years of income) of the Income Tax Assessment Act 1936 in any of the 1957‑58 to 1988‑89 income years, the loss is your tax loss for that income year, which is called a loss year. The loss is also called a primary production loss.

             (2)  You can deduct the tax loss in the 1997‑98 or a later income year only to the extent that it has not already been deducted.

             (3)  You deduct your primary production losses (in the order in which you incurred them) before any other tax losses of the same or any other loss year, except film losses.

             (4)  A company cannot transfer any amount of a primary production loss for the 1983‑84 or an earlier income year under Subdivision 170‑A (Transfer of tax losses within wholly‑owned groups of companies) of the Income Tax Assessment Act 1997.

             (5)  For the purposes of determining how much (if any) of a primary production loss you can deduct in the 1997‑98 or a later income year, subsections 80AA(9), (10) and (11) of the Income Tax Assessment Act 1936 apply in the same way as they apply for the purposes they refer to.


Part 2‑10Capital allowances: rules about deductibility of capital expenditure

Division 40Capital allowances

Table of Subdivisions

40‑B      Core provisions

40‑C      Cost

40‑D     Balancing adjustments

40‑E      Low‑value and software development pools

40‑F      Primary production depreciating assets

40‑G     Capital expenditure of primary producers and other landholders

40‑I       Capital expenditure that is deductible over time

40‑J       Ships depreciated under section 57AM of the Income Tax Assessment Act 1936

Subdivision 40‑BCore provisions

Table of sections

40‑10        Plant

40‑12        Plant acquired after 30 June 2001

40‑13        Accelerated depreciation for split or merged plant

40‑15        Recalculating effective life

40‑20        IRUs

40‑25        Software

40‑30        Spectrum licences

40‑33        Datacasting transmitter licences

40‑35        Mining unrecouped expenditure

40‑37        Post‑30 June 2001 mining expenditure

40‑38        Mining cash bidding payments

40‑40        Transport expenditure

40‑43        Post‑30 June 2001 transport expenditure

40‑44        No additional decline in certain cases

40‑45        Intellectual property

40‑47        IRUs

40‑50        Forestry roads and timber mill buildings


40‑55        Environmental impact assessment

40‑60        Pooling under Subdivision 42‑L of the former Act

40‑65        Substituted accounting periods

40‑70        References to amounts deducted and reductions in deductions

40‑72        New diminishing value method not to apply in some cases

40‑75        Mining expenditure incurred after 1 July 2001 on an asset

40‑77        Mining, quarrying or prospecting rights or information held before 1 July 2001

40‑80        Other expenditure incurred after 1 July 2001 on a depreciating asset

40‑100      Commissioner’s determination of effective life

40‑10  Plant

             (1)  This section applies to you if:

                     (a)  you have deducted or can deduct amounts for plant under Division 42 of the Income Tax Assessment Act 1997 (the former Act) as in force just before it was amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001, or you could have deducted amounts under that Division for the plant if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day; and

                     (b)  either:

                              (i)  you hold the plant at 1 July 2001; or

                             (ii)  subparagraph (i) does not apply and you were the owner or quasi‑owner of the plant at the end of 30 June 2001.

             (2)  Division 40 of the Income Tax Assessment Act 1997 as amended by the New Business Tax System (Capital Allowances) Act 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001 (the new Act) applies to the plant on this basis:

                     (a)  the amount that was your undeducted cost at the end of 30 June 2001 becomes the plant’s opening adjustable value; and

                     (b)  you use the same cost, effective life and method that you were using under Division 42 of the former Act, or that you would have used if you had used the plant for the purpose of producing assessable income at the end of 30 June 2001; and

                     (c)  if you excluded an amount from your assessable income under section 42‑290 of the former Act for a balancing adjustment event that occurred on or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999—the cost of the plant, and its opening adjustable value, are reduced by that amount; and

                     (d)  if subparagraph (1)(b)(ii) applies to you—you are treated as the holder of the plant while you are its holder or while the circumstances under which you would have been the owner or quasi‑owner of the plant under the former Act continue.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

             (3)  If you were using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act just before 1 July 2001, or would have been using such a rate if you had used it, or had it installed ready for use, for the purpose of producing assessable income before that day, Division 40 of the new Act applies to the plant on this basis:

                     (a)  for the diminishing value method—replace the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate you were using; and

                     (b)  for the prime cost method:

                              (i)  replace the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate you were using; and

                             (ii)  increase the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001.

Note 1:       Recalculating effective life will have no practical effect for an entity to whom subsection (3) applies because the component in the relevant formula that relies on effective life has been replaced.

Note 2:       Small business entities can choose to work out the decline in value of their depreciating assets under Division 328.

40‑12  Plant acquired after 30 June 2001

             (1)  This section applies to you if:

                     (a)  you entered into a contract to acquire an item of plant before 1 July 2001 and you acquired it after 30 June 2001; or

                     (b)  you started to construct an item of plant before 1 July 2001 and you complete its construction after 30 June 2001.

             (2)  Division 40 of the new Act applies to the plant.

             (3)  If you entered into the contract, or started to construct the plant, at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, you replace the component in the formula in subsection 40‑70(1) or 40‑75(1) of the new Act that includes the plant’s effective life with the rate you would have been using if you had acquired it, or completed its construction, before 1 July 2001 and had used it, or had it installed ready for use, for the purpose of producing assessable income before that day.

40‑13  Accelerated depreciation for split or merged plant

             (1)  This section applies to a depreciating asset that is plant if:

                     (a)  you entered into a contract to acquire the plant, you otherwise acquired it or you started to construct it before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and

                     (b)  you held it at the end of 30 June 2001; and

                     (c)  on or after 1 July 2001:

                              (i)  the plant is split into 2 or more depreciating assets; or

                             (ii)  the plant is merged into another depreciating asset.

             (2)  For a case where the plant is split into 2 or more depreciating assets, the new Act applies as if you had acquired the assets into which it is split before the time mentioned in paragraph (1)(a) while you continue to hold those assets.

             (3)  For a case where the plant is merged into another depreciating asset, section 40‑125 of the new Act does not apply to the asset, or to your interest in the asset, into which it is merged while you continue to hold it.

40‑15  Recalculating effective life

                   You cannot recalculate the effective life of a depreciating asset for which:

                     (a)  you were using, just before 1 July 2001, a rate under subsection 42‑160(1) or 42‑165(1) of the former Act; or

                     (b)  you would have been using such a rate if you had used the asset, or had it installed ready for use, for the purpose of producing assessable income before that day.

40‑20  IRUs

             (1)  This section applies to you if:

                     (a)  you have deducted or can deduct an amount for an IRU under Division 44 of the former Act or you would have been able to deduct an amount for it under that Division if you had used it for the purpose of producing assessable income before 1 July 2001; and

                     (b)  you hold the IRU at 1 July 2001.

             (2)  Division 40 of the new Act applies to the IRU on this basis:

                     (a)  you use the cost, effective life and method you were using under Division 44 of the former Act or that you would have used if you had used the IRU for the purpose of producing assessable income before 1 July 2001; and

                     (b)  the amount that was your undeducted cost of the IRU at the end of 30 June 2001 becomes the IRU’s opening adjustable value.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

40‑25  Software

             (1)  Despite its repeal by this Act, Division 46 of the former Act continues to apply to expenditure on software that you incurred and that was in a software pool under that Division at the end of 30 June 2001.

             (2)  For a unit of software for which you were deducting amounts under Subdivision 46‑B of the former Act or for which you could have deducted amounts under that Subdivision if you had used the software for the purpose of producing assessable income before 1 July 2001, Division 40 of the new Act applies to the unit on this basis:

                     (a)  its cost is the amount of expenditure you incurred on the unit; and

                     (b)  you must use the prime cost method; and

                     (c)  its opening adjustable value at 1 July 2001 is its undeducted cost at the end of 30 June 2001; and

                     (d)  you must use the same effective life you were using under Subdivision 46‑B of the former Act or that you would have used if you had used the software for the purpose of producing assessable income before 1 July 2001.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

40‑30  Spectrum licences

             (1)  This section applies to you if you have deducted or can deduct an amount under Division 380 of the former Act for expenditure incurred in obtaining a spectrum licence on or before 30 June 2001 or you could have deducted an amount under that Division for that expenditure if you had used the licence for the purpose of producing assessable income on or before that day.

             (2)  Division 40 of the new Act applies to the spectrum licence on this basis:

                     (a)  its cost is your expenditure incurred in obtaining the licence; and

                     (b)  its opening adjustable value at 1 July 2001 is the amount of unrecouped expenditure for the licence at the end of 30 June 2001; and

                     (c)  its effective life is the same as it had under the former Act; and

                     (d)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

40‑33  Datacasting transmitter licences

             (1)  This section applies to you if you hold a datacasting transmitter licence at 1 July 2001.

             (2)  Division 40 of the new Act applies to the licence on this basis:

                     (a)  its cost is your expenditure incurred in obtaining the licence; and

                     (b)  its opening adjustable value at 1 July 2001 is its cost; and

                     (c)  its effective life is 15 years less any period that has elapsed from the day the licence was issued until 1 July 2001; and

                     (d)  you must use the prime cost method.

40‑35  Mining unrecouped expenditure

             (1)  This section applies to you if you have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001.

Note:          Subsection (6) also applies to a case where you did not have unrecouped expenditure at 30 June 2001: see subsection (8).

             (2)  Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:

                     (a)  it has an opening adjustable value at 1 July 2001 equal to the amount of unrecouped expenditure reduced by any deductions allowable under section 330‑80 of the former Act for your income year ending on 30 June 2001; and

                     (b)  it has a cost equal to the total amount of allowable capital expenditure under the former Act; and

                     (c)  in applying the formula in section 40‑75 of the new Act for the income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and

                     (d)  it is taken to have been used for a taxable purpose at the start of 1 July 2001; and

                     (e)  it has a remaining effective life worked out under subsection (3); and

                      (f)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

             (3)  The remaining effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is:

                     (a)  for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining is the lesser of these:

                              (i)  the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;

                             (ii)  the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or

                     (b)  for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining is the lesser of these:

                              (i)  the number equal to the difference between 10 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible;

                             (ii)  the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or

                     (c)  for an amount of unrecouped expenditure in respect of expenditure incurred in carrying on eligible quarrying operations the lesser of these:

                              (i)  the number equal to the difference between 20 and the number of income years (which may be zero) before the present income year for which an amount in respect of expenditure was deductible; and

                             (ii)  the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year.

             (4)  Sections 40‑95 and 40‑110 of the new Act do not apply to the unrecouped expenditure.

             (5)  If either:

                     (a)  both of these subparagraphs apply:

                              (i)  any of the unrecouped expenditure referred to in subsection (1) relates to a depreciating asset (the real asset);

                             (ii)  in an income year (the cessation year) you stop holding the real asset, or stop using it for a taxable purpose; or

                     (b)  both of these subparagraphs apply:

                              (i)  any of the unrecouped expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property);

                             (ii)  in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;

there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.

             (6)  If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:

                     (a)  if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or

                     (b)  if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or

                     (c)  if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or

                     (d)  if you own the other property and you stop using it for a taxable purpose—its market value at that time; or

                     (e)  if you do not own the property and you stop using it for a taxable purpose—a reasonable amount.

However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act.

             (7)  If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then:

                     (a)  if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or

                     (b)  if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it.

             (8)  Subsection (6) also applies to a case where:

                     (a)  you did not have an amount of unrecouped expenditure under Division 330 of the former Act at the end of 30 June 2001, but you had an amount of unrecouped expenditure under that Division before 30 June 2001; and

                     (b)  that expenditure relates to property that is not a depreciating asset (the other property); and

                     (c)  after that day, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose.

40‑37  Post‑30 June 2001 mining expenditure

             (1)  This section applies to you if:

                     (a)  you incur expenditure after 30 June 2001 under a contract entered into before that day; and

                     (b)  the expenditure would have been allowable capital expenditure, and you could have deducted an amount for it, under Division 330 of the former Act if you had incurred it before 1 July 2001; and

                     (c)  the expenditure does not relate to a depreciating asset.

             (2)  Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:

                     (a)  it has a cost at the time you incur the expenditure equal to the amount of the expenditure; and

                     (b)  in applying the formula in section 40‑75 of the new Act for the income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and

                     (c)  it is taken to be used for a taxable purpose when you incur the expenditure; and

                     (d)  it has an effective life worked out under subsection (3); and

                     (e)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

             (3)  The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is:

                     (a)  for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or

                     (b)  for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year; or

                     (c)  for an amount of expenditure incurred in carrying on eligible quarrying operations—the lesser of 20 and the number equal to the number of whole years in the estimated life of the quarry, or proposed quarry, on the quarrying property, or, if there is more than one such quarry, of the quarry that has the longest estimated life, as at the end of the present income year.

             (4)  Sections 40‑95 and 40‑110 of the new Act do not apply to the expenditure.

             (5)  If both of these paragraphs apply:

                     (a)  any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property);

                     (b)  in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;

there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property.

             (6)  If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:

                     (a)  if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or

                     (b)  if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or

                     (c)  if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or

                     (d)  if you own the other property and you stop using it for a taxable purpose—its market value at that time; or

                     (e)  if you do not own the property and you stop using it for a taxable purpose—a reasonable amount.

However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act.

40‑38  Mining cash bidding payments

             (1)  This section applies to expenditure you incur, under a contract entered into before 30 June 2001, if:

                     (a)  the expenditure would have been a mining cash bidding payment under Subdivision 330‑D of the former Act; and

                     (b)  either:

                              (i)  you incurred the expenditure before that day but the grant of the mining authority concerned occurred on a day (the start day) after 30 June 2001; or

                             (ii)  the grant of the mining authority concerned occurred before 30 June 2001 but you incurred the expenditure on a day (also the start day) after 30 June 2001.

             (2)  Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:

                     (a)  it has a cost at the start day equal to the amount of the expenditure; and

                     (b)  in applying the formula in section 40‑75 of the new Act for the income year in which the start day occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and

                     (c)  it is taken to be used for a taxable purpose on the start day; and

                     (d)  it has an effective life worked out under subsection (3); and

                     (e)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

             (3)  The effective life of the notional asset at the start of an income year (present income year) for which you are working out its decline in value is:

                     (a)  for an amount of expenditure incurred in carrying on eligible mining operations other than in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the mine, or proposed mine, on the mining property, or, if there is more than one such mine, of the mine that has the longest estimated life, as at the end of the present income year; or

                     (b)  for an amount of expenditure incurred in carrying on eligible mining operations in the course of petroleum mining—the lesser of 10 and the number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the present income year.

             (4)  Sections 40‑95 and 40‑110 of the new Act do not apply to the expenditure.

             (5)  If both of these paragraphs apply:

                     (a)  any of the expenditure referred to in subsection (1) relates to a depreciating asset (the real asset);

                     (b)  in an income year (the cessation year) you stop holding the real asset, or stop using it for a taxable purpose;

there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.

             (6)  If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (5) of this section, then:

                     (a)  if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (5) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or

                     (b)  if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it.

40‑40  Transport expenditure

             (1)  This section applies to you if you have deducted or can deduct an amount for transport capital expenditure in respect of a transport facility under Subdivision 330‑H of the former Act, or you could have deducted an amount for the expenditure under that Subdivision if you had started to use the facility for a qualifying purpose before 1 July 2001.

             (2)  Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:

                     (a)  it has an opening adjustable value at 1 July 2001 equal to the total amount of transport capital expenditure under the former Act less the amounts you have deducted or can deduct for that expenditure under the former Act; and

                     (b)  it has a cost equal to the total amount of transport capital expenditure under the former Act; and

                     (c)  in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and

                    (ca)  it is taken to have been used for a taxable purpose at the start of 1 July 2001; and

                     (d)  it has an effective life at the start of 1 July 2001 equal to the years remaining for the expenditure under section 330‑395 of the former Act; and

                     (e)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

             (3)  Sections 40‑95 and 40‑110 of the new Act do not apply to the expenditure.

             (4)  If either:

                     (a)  both of these subparagraphs apply:

                              (i)  any of the transport capital expenditure referred to in subsection (1) relates to a depreciating asset (the real asset);

                             (ii)  in an income year (the cessation year) you stop holding the real asset, or stop using it for a taxable purpose; or

                     (b)  both of these subparagraphs apply:

                              (i)  any of the transport capital expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property);

                             (ii)  in the cessation year, the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;

there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the real asset or the other property and has not been taken into account in working out the amount of a balancing adjustment in relation to the real asset.

             (5)  If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:

                     (a)  if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or

                     (b)  if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or

                     (c)  if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or

                     (d)  if you own the other property and you stop using it for a taxable purpose—its market value at that time; or

                     (e)  if you do not own the property and you stop using it for a taxable purpose—a reasonable amount.

However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act.

             (6)  If section 40‑115 of the new Act applies, or section 40‑125 of the new Act would, apart from this subsection, apply, to the real asset referred to in subsection (4) of this section, then:

                     (a)  if the real asset is split into 2 or more depreciating assets and you stop holding, or stop using for a taxable purpose, one or more but not all of the assets into which it is split—subsection (4) does not apply to that asset or assets into which it is split that you continue to hold and continue to use for a taxable purpose; or

                     (b)  if the real asset is merged into another depreciating asset—section 40‑125 does not apply to the asset into which it is merged while you continue to hold it.

40‑43  Post‑30 June 2001 transport expenditure

             (1)  This section applies to you if:

                     (a)  you incur expenditure after 30 June 2001 under a contract entered into before that day; and

                     (b)  the expenditure would have been transport capital expenditure in respect of a transport facility, and you could have deducted an amount for it, under Subdivision 330‑H of the former Act if you had incurred it before 1 July 2001 and you had started to use the facility for a qualifying purpose before 1 July 2001; and

                     (c)  the expenditure does not relate to a depreciating asset.

             (2)  Division 40 of the new Act applies to the expenditure as if it were a depreciating asset (the notional asset) you hold on this basis:

                     (a)  it has a cost at the time you incur the expenditure equal to the amount of the expenditure; and

                     (b)  in applying the formula in section 40‑75 of the new Act for your income year in which you incur the expenditure—you use the adjustments in subsection 40‑75(3) of the new Act; and

                     (c)  it is taken to have been used for a taxable purpose when you incur the expenditure; and

                     (d)  it has an effective life when you incur the expenditure equal to the years remaining for the expenditure under section 330‑395 of the former Act; and

                     (e)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

             (3)  Sections 40‑95 and 40‑110 of the new Act do not apply to the expenditure.

             (4)  If both of these paragraphs apply:

                     (a)  any of the expenditure referred to in subsection (1) relates to property that is not a depreciating asset (the other property);

                     (b)  in an income year (the cessation year), the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose;

there is an additional decline in value of the notional asset for the cessation year equal to so much of the notional asset’s adjustable value as relates to the other property.

             (5)  If the other property is disposed of, lost or destroyed, or you stop using it for a taxable purpose, you must include in your assessable income:

                     (a)  if the other property is sold for a price specific to that property—that price, less the expenses of the sale (to the extent the expenses are reasonably attributable to selling that particular property); or

                     (b)  if the other property is sold with additional property without a specific price being allocated to it—the part of the total sale price, less the reasonably attributable expenses of the sale, that is reasonably attributable to selling the other property; or

                     (c)  if the other property is lost or destroyed—the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction; or

                     (d)  if you own the other property and you stop using it for a taxable purpose—its market value at that time; or

                     (e)  if you do not own the property and you stop using it for a taxable purpose—a reasonable amount.

However, the amount included is reduced to the extent (if any) that it is also included under subsection 40‑830(6) of the new Act.

40‑44  No additional decline in certain cases

             (1)  Despite subsections 40‑35(5), 40‑38(5) and 40‑40(4), there is no additional decline in the value of the notional asset referred to in those subsections if:

                     (a)  apart from this section, subsection 40‑35(5), 40‑38(5) or 40‑40(4) would apply because the real asset referred to in that subsection is disposed of; and

                     (b)  roll‑over relief is chosen under subsection 40‑340(3) of the Income Tax Assessment Act 1997 for the disposal.

             (2)  Instead, the cost to the transferee of that real asset is the sum of:

                     (a)  the adjustable value of that real asset; and

                     (b)  the adjustable value of the notional asset referred to in subsection 40‑35(5), 40‑38(5) or 40‑40(4);

just before the disposal.

40‑45  Intellectual property

             (1)  This section applies to you if:

                     (a)  at the end of 30 June 2001, you hold an item of intellectual property referred to in the table in section 373‑35 of the former Act; and

                     (b)  you have deducted or can deduct an amount for expenditure on the asset under Division 373 of the former Act or you could have deducted an amount under that Division for that expenditure if you had used the asset for the purpose of producing assessable income on or before that day.

             (2)  Division 40 of the new Act applies to the item on this basis:

                     (a)  it has an opening adjustable value at 1 July 2001 equal to its unrecouped expenditure under the former Act at the end of 30 June 2001; and

                     (b)  its cost is its original unrecouped expenditure under the former Act; and

                     (c)  its effective life is the same as it had under the former Act; and

                     (d)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

40‑47  IRUs

             (1)  Division 40 of the new Act does not apply to an IRU to the extent to which expenditure on the IRU was incurred at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999 (the IRU time).

             (2)  Division 40 of the new Act does not apply to an IRU over an international telecommunications submarine cable system if the system had been used for telecommunications purposes at or before the IRU time.

40‑50  Forestry roads and timber mill buildings

             (1)  This section applies to you if:

                     (a)  you have deducted or can deduct an amount under Subdivision 387‑G of the former Act for an amount (the qualifying amount) of expenditure on a forestry road or timber mill building or could have deducted an amount under that Subdivision if you had used the road or building for the purpose of producing assessable income; and

                     (b)  you hold the road or building at the end of 30 June 2001.

             (2)  Division 40 of the new Act applies to the asset on this basis:

                     (a)  it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act; and

                     (b)  in applying the formula in section 40‑75 of the new Act for your income year in which 1 July 2001 occurs—you use the adjustments in subsection 40‑75(3) of the new Act; and

                     (c)  its cost is the qualifying amount; and

                     (d)  it has an effective life equal to the remaining life you last estimated for it under the former Act; and

                     (e)  you can recalculate its effective life if you conclude that your estimate is no longer accurate (except that the effective life cannot exceed 25 years); and

                      (f)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

40‑55  Environmental impact assessment

             (1)  This section applies to you if you have deducted or can deduct an amount under Subdivision 400‑A of the former Act for an amount (the qualifying amount) of expenditure on or before 30 June 2001 on evaluating the impact on the environment of a project under Subdivision 400‑A of the former Act.

             (2)  Division 40 of the new Act applies to the qualifying amount as if it were a depreciating asset on this basis:

                     (a)  it has an opening adjustable value at 1 July 2001 equal to the qualifying amount less any amounts you have deducted or can deduct for it under the former Act or the Income Tax Assessment Act 1936; and

                     (b)  it has a cost equal to the qualifying amount; and

                     (c)  it has an effective life equal to the number of years for which you could deduct for the qualifying amount worked out under subsection 400‑15(3) of the former Act; and

                     (d)  you must use the prime cost method.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

40‑60  Pooling under Subdivision 42‑L of the former Act

             (1)  Units of plant that you had allocated to a pool under Subdivision 42‑L of the former Act and that were allocated to the pool by 30 June 2001 are treated as a single depreciating asset for the purposes of Division 40 of the new Act.

             (2)  Division 40 of the new Act applies to the single depreciating asset on this basis:

                     (a)  its cost and opening adjustable value at 1 July 2001 is the closing balance of the pool for your income year in which 30 June 2001 occurred; and

                     (b)  you must use the diminishing value method; and

                     (c)  in applying the formula in section 40‑70 of the new Act for your income year in which 1 July 2001 occurs—it has a base value equal to that opening adjustable value; and

                     (d)  you replace the component in the formula in subsection 40‑70(1) of the new Act that includes an asset’s effective life with the pool percentage you were using for the pool; and

                     (e)  if an item of plant is removed from the pool because a balancing adjustment event occurs for the item or because of subsection (3) of this section, section 40‑115 of the new Act applies so that you are treated as having split the single depreciating asset into the removed asset and the remaining assets in the pool; and

                      (f)  if an amount is included in the second element of the cost of a depreciating asset in the pool, Division 40 of the new Act applies as if that amount had been included in the second element of the cost of the single asset.

Note:          There are special rules for entities that have substituted accounting periods: see section 40‑65.

             (3)  An item of plant in the pool is automatically removed from the pool if you stop using it wholly for taxable purposes (except because a balancing adjustment event occurs for the item).

Note 1:       You work out the decline in value of an item removed under this subsection under Subdivision 40‑B of the new Act, using the cost for it worked out under section 40‑205 of the new Act.

Note 2:       There are special rules for entities that have substituted accounting periods: see section 40‑65.

40‑65  Substituted accounting periods

             (1)  This section sets out special rules for the application of Division 40 of the new Act to an entity that:

                     (a)  has a substituted accounting period; and

                     (b)  because of a provision of this Subdivision, uses Division 40 of the new Act to work out the decline in value of an asset, or of something that is treated as an asset.

             (2)  The entity works out its deductions for its income year that includes 1 July 2001 (the calculation year) in this way:

                     (a)  the entity works out its deductions for that asset under the former Act as from the start of its calculation year up to the end of 30 June 2001 as if that period were an income year; and

                     (b)  the entity works out the decline in value of the asset under Division 40 of the new Act from 1 July 2001 until the end of its calculation year as if that period were an income year in accordance with the following provisions of this section.

             (3)  The asset’s opening adjustable value for the purposes of Division 40 of the new Act is:

                     (a)  for a unit of plant (including IRUs and expenditure on software that is not pooled)—its undeducted cost at the end of 30 June 2001; or

                     (b)  for expenditure on eligible mining or quarrying operations, an item of intellectual property or a spectrum licence—the amount of unrecouped expenditure for the expenditure, item or licence under the former Act at the end of 30 June 2001 reduced, in the case of eligible mining or quarrying operations, by an amount you have deducted or can deduct for the calculation year under the former Act and not yet taken into account in calculating unrecouped expenditure; or

                     (c)  for transport capital expenditure—the entity’s amount of transport capital expenditure under the former Act at the end of 30 June 2001 less any amounts the entity has deducted or can deduct for it under the former Act up to that time; or

                     (d)  for expenditure on a forestry road, a timber mill building, a horticultural plant or a grapevine—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or

                     (e)  for expenditure on evaluating the impact on the environment of a project—the amount of that expenditure less any amounts the entity has deducted or can deduct for it under the former Act up to 30 June 2001; or

                      (f)  for assets that were pooled under Subdivision 42‑M or 42‑L of the former Act—the closing balance of the pool at the end of 30 June 2001.

             (4)  The asset’s base value for applying the formula in section 40‑70 of the new Act for the diminishing value method is that opening adjustable value.

             (5)  The decline in value for the assets referred to in this subsection is worked out using the prime cost method without the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:

                     (a)  for an item of plant for which you were using the prime cost method—using the rules in section 40‑10 of this Act; and

                     (b)  for an IRU for which you were using the prime cost method—using the rules in section 40‑20 of this Act; and

                     (c)  for a unit of software for which the entity was deducting amounts under Subdivision 46‑B of the former Act—using the rules in subsection 40‑25(2) of this Act; and

                     (d)  for a spectrum licence—using the rules in section 40‑30 of this Act; and

                     (e)  for an item of intellectual property—using the rules in section 40‑45 of this Act; and

                      (f)  for an amount of expenditure on evaluating the impact on the environment of a project—using the rules in section 40‑55 of this Act.

             (6)  The decline in value for the assets referred to in this subsection is worked out using the prime cost method using the adjustments in subsection 40‑75(3) of the new Act, and the opening adjustable value specified in subsection (3) of this section, in this way:

                     (a)  for an amount of unrecouped expenditure under Division 330 of the former Act—using the rules in section 40‑35 of this Act; and

                     (b)  for an amount of transport capital expenditure under Division 330 of the former Act—using the rules in section 40‑40 of this Act; and

                     (c)  for a forestry road or timber mill building—using the rules in section 40‑50 of this Act.

             (7)  The entity must work out the decline in value of each of the assets for later income years under Division 40 of the new Act.

             (8)  The entity must, in working out its deductions under this section for the calculation year for:

                     (a)  allowable capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑C of the former Act; or

                     (b)  transport capital expenditure for which the entity had deducted or can deduct an amount under Subdivision 330‑H of the former Act; or

                     (c)  a water facility for which the entity had deducted or can deduct an amount under Subdivision 387‑B of the former Act; or

                     (d)  expenditure on connecting power to land or upgrading the connection for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act; or

                     (e)  expenditure on a telephone line on or extending to land for which the entity had deducted or can deduct an amount under Subdivision 387‑E of the former Act;

reduce its deductions for each of the periods referred to in paragraphs (2)(a) and (b) by multiplying the deduction for that period by the number of days in that period and dividing the result by 365.

             (9)  The entity cannot deduct anything for an asset referred to in this section under the former Act for any part of its calculation year after 30 June 2001.

           (10)  You are entitled to a further deduction for a depreciating asset for which you are using the diminishing value method if the sum of the deductions worked out under paragraphs (2)(a) and (b) (the sum amount) is less than the deduction to which you would have been entitled for the asset if the former Act had continued to apply to the whole of the calculation year (the former Act amount).

           (11)  You increase the amount worked out under paragraph (2)(b) by the difference between the former Act amount and the sum amount.

40‑70  References to amounts deducted and reductions in deductions

             (1)  A reference in the new Act to an amount that you have deducted or can deduct for a depreciating asset under Division 40 of the new Act includes a reference to an amount that you have deducted or can deduct for a capital allowance relating to the asset under the former Act or the Income Tax Assessment Act 1936.

             (2)  An amount you have deducted or can deduct for a water facility under Subdivision 387‑B of the former Act or former section 75B of the Income Tax Assessment Act 1936 is taken to have been deducted under Subdivision 40‑F of the new Act.

             (3)  A reference in the new Act to a reduction in your deduction for a depreciating asset includes a reference to amounts by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936.

40‑72  New diminishing value method not to apply in some cases

             (1)  If:

                     (a)  you are taken to start holding a depreciating asset on or after 10 May 2006 because of section 40‑115 (about splitting a depreciating asset) or 40‑125 (about merging depreciating assets) of the Income Tax Assessment Act 1997; and

                     (b)  it is reasonable to conclude that you split the asset or merged the assets for the main purpose of ensuring that the decline in value of the asset or assets (after the splitting or merging) would be worked out under section 40‑72 of that Act;

that Act applies to you as if you had started to hold the split or merged asset or assets before 10 May 2006.

             (2)  The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset before 10 May 2006 if:

                     (a)  you had actually started to hold it before that day; and

                     (b)  on or after 10 May 2006, you stop holding the depreciating asset; and

                     (c)  it is reasonable to conclude that you did this for the main purpose of ensuring that the decline in value of the asset would be worked out under section 40‑72 of that Act.

             (3)  The Income Tax Assessment Act 1997 applies to you as if you had started to hold a depreciating asset (the substituted asset) before 10 May 2006 if:

                     (a)  you started to hold the substituted asset on or after that day under an arrangement; and

                     (b)  the substituted asset is identical to or has a purpose similar to another depreciating asset that another entity acquired from you on or after that day under that arrangement; and

                     (c)  you did not deal with the other entity at arm’s length; and

                     (d)  it is reasonable to conclude that you entered into the arrangement for the main purpose of ensuring that the decline in value of the substituted asset would be worked out under section 40‑72 of that Act.

40‑75  Mining expenditure incurred after 1 July 2001 on an asset

             (1)  This section applies to you if:

                     (a)  you hold a depreciating asset (except a mining, quarrying or prospecting right that you started to hold before 1 July 2001) that you:

                              (i)  started to hold under a contract entered into before 1 July 2001; or

                             (ii)  constructed where the construction started before that day; or

                            (iii)  started to hold in some other way before that day; and

                     (b)  your expenditure on the asset, whenever incurred, would have been allowable capital expenditure, transport capital expenditure or expenditure on exploration or prospecting within the meaning of Division 330 of the former Act if it had been incurred before 1 July 2001.

             (2)  If you incur expenditure on the asset after 30 June 2001 that forms part of the cost of the asset, you can deduct the expenditure for the income year in which you incur it if it would have been expenditure on exploration or prospecting within the meaning of Division 330 of the former Act.

             (3)  Otherwise, Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001, and an effective life on that day or at its start time, whichever is the later, worked out under subsection (4) of this section.

             (4)  The effective life of the depreciating asset is the shorter of its effective life worked out under Division 40 and:

                     (a)  if the expenditure on the asset was incurred in relation to eligible mining operations other than in the course of petroleum mining—the shorter of:

                              (i)  10 years; and

                             (ii)  the number of whole years in the estimated life of the mine or proposed mine to which the expenditure relates or, if there is more than one such mine, of the mine that has the longest estimated life; or

                     (b)  if the expenditure on the asset was incurred in relation to eligible mining operations in the course of petroleum mining—the shorter of:

                              (i)  10 years; and

                             (ii)  the number of whole years in the estimated life of the petroleum field or proposed petroleum field to which the expenditure relates; or

                     (c)  if the expenditure on the asset was incurred in relation to eligible quarrying operations—the shorter of:

                              (i)  20 years; or

                             (ii)  the number of whole years in the estimated life of the quarry or proposed quarry to which the expenditure relates or, if there is more than one such quarry, of the quarry that has the longest estimated life.

40‑77  Mining, quarrying or prospecting rights or information held before 1 July 2001

             (1)  Division 40 of the new Act does not apply to a mining, quarrying or prospecting right that you started to hold before 1 July 2001.

Note:          If you incur expenditure relating to assets of that kind, you cannot deduct it under Division 40. However, the expenditure may be taken into account in calculating a capital gain or capital loss under Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997.

          (1A)  Division 40 of the new Act does not apply to a renewal or extension of a mining, quarrying or prospecting right that you started to hold before 1 July 2001.

          (1B)  Subsection (1) applies to a mining, quarrying or prospecting right (the new right) that you start to hold on or after 1 July 2001 as if you had started to hold the new right before that day if:

                     (a)  you started to hold another mining, quarrying or prospecting right before that day; and

                     (b)  the other right ends on or after that day; and

                     (c)  the new right and the other right relate to the same area, or any difference in area is not significant.

          (1C)  Division 40 of the new Act does not apply to a mining, quarrying or prospecting right if:

                     (a)  a company (the original holder) started to hold the right before 1 July 2001; and

                     (b)  the right is transferred after that day to another company where:

                              (i)  the other company is a member of the same wholly‑owned group as the original holder and was a member of that group just before that day; and

                             (ii)  the right was held in the period between that day and the time of the transfer by a company or companies that were members of that group on that day and at the time of the transfer.

             (2)  If, after 30 June 2001:

                     (a)  you dispose of a mining, quarrying or prospecting right that you started to hold before 1 July 2001 to an associate of yours (except a company that is a member of the same wholly‑owned group); or

                     (b)  you enter into an arrangement in relation to such a right under which you maintain, in essence, the economic ownership of the right but not its legal ownership;

the cost of the right to the purchaser is limited, for the purposes of Division 40 of the new Act, to a maximum of the costs that would have been deductible for the right under Division 330 of the former Act.

             (3)  An amount that would be included in your assessable income under section 15‑40 or subsection 40‑285(1) of the new Act in respect of mining, quarrying or prospecting information you started to hold before 1 July 2001 is reduced (but not below zero) by so much of the capital cost of acquiring the information that you incurred before that day and that:

                     (a)  you have not deducted and cannot deduct (either immediately or over time) under the former Act; and

                     (b)  did not form part of allowable capital expenditure under the former Act; and

                     (c)  did not entitle you to a deduction under section 330‑235 of the former Act;

but only to the extent that you have not already applied the amount under this section.

             (4)  Your assessable income includes an amount if:

                     (a)  after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and

                     (b)  you have deducted or can deduct an amount for it under Subdivision 330‑C in relation to Subdivision 330‑D or 330‑E of the former Act.

The amount included is the amount you have deducted or can deduct.

             (5)  Your assessable income also includes an amount if:

                     (a)  after 1 July 2001, you stop holding a mining, quarrying or prospecting right that you started to hold before that day; and

                     (b)  because of section 40‑35 or 40‑38 of this Act, you have deducted or can deduct an amount for a notional asset that relates to expenditure on the right under Division 40 of the new Act.

The amount included is the amount you have deducted or can deduct.

             (6)  Division 110 of the new Act applies as if an amount included in assessable income under subsection (4) or (5) of this section were the reversal of a deduction under a provision of the new Act outside Parts 3‑1 and 3‑3 and Division 243.

             (7)  An amount that would be included in your assessable income under subsection 40‑285(1) of the new Act in respect of a mining, quarrying or prospecting right is reduced by an amount worked out under subsection (8) if:

                     (a)  you acquired the right from an associate (except a company that is a member of the same wholly‑owned group) on or after 1 July 2001; and

                     (b)  the associate started to hold the right before that day.

             (8)  The amount is reduced (but not below zero) by the difference between the capital cost that you incurred after that day and the amount to which the cost of the right is limited under subsection (2) of this section.

40‑80  Other expenditure incurred after 1 July 2001 on a depreciating asset

             (1)  This section applies to you if:

                     (a)  you incur expenditure after 30 June 2001 that forms part of the cost of a depreciating asset; and

                     (b)  the depreciating asset is one that you:

                              (i)  started to hold under a contract entered into before 1 July 2001; or

                             (ii)  constructed where the construction started before that day; or

                            (iii)  started to hold in some other way before that day; and

                     (c)  if you had incurred the expenditure before 1 July 2001, and had satisfied any relevant requirement for deductibility, you would have been able to deduct an amount for it under Division 44, 373 or 380, or Subdivision 46‑B or 387‑G, of the former Act.

             (2)  Subdivision 40‑B of the new Act applies to the asset on the basis that it has a cost, and an adjustable value, of zero at the start of 1 July 2001.

40‑100  Commissioner’s determination of effective life

                   A determination by the Commissioner of the effective life of an asset that was made under section 42‑110 of the former Act and that was in force at the end of 30 June 2001 has effect as if it had been made under section 40‑100 of the new Act.

Subdivision 40‑CCost

Table of sections

40‑230      Car limit

40‑230  Car limit

             (1)  Division 40 of the new Act applies as if references in that Division to the car limit included references to:

                     (a)  the car depreciation limit under Division 42 of the former Act; and

                     (b)  the motor vehicle depreciation limit under former section 57AF of the Income Tax Assessment Act 1936.

             (2)  If you:

                     (a)  have a substituted accounting period; and

                     (b)  start to hold a car in your 2001‑02 income year but before 1 July 2001;

you must use as the car limit the car depreciation limit under section 42‑80 of the former Act for the 2000‑01 financial year.

Subdivision 40‑DBalancing adjustments

Table of sections

40‑285      Balancing adjustments

40‑287      Disposal of pre‑1 July 2001 mining depreciating asset to associate

40‑288      Disposal of pre‑1 July 2001 mining non‑depreciating asset to associate

40‑289      Surrendered firearms

40‑290      Reduction of deductions under former Act etc.

40‑295      Later year relief

40‑340      Roll‑overs

40‑345      Balancing adjustments for depreciating assets that retain CGT indexation

40‑365      Involuntary disposals

40‑285  Balancing adjustments

             (1)  Paragraphs 40‑285(1)(a) and (2)(a) of the new Act have effect in relation to a depreciating asset that you held at 1 July 2001 as if amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936 were part of the asset’s decline in value under Division 40.

             (2)  You are entitled to a further deduction under subsection (3) if:

                     (a)  you are entitled to a deduction under subsection 40‑285(2) of the new Act for a balancing adjustment event happening to a depreciating asset:

                              (i)  to which Division 58 of the former Act applied; or

                             (ii)  to which former section 61A of the Income Tax Assessment Act 1936 applied, or for which the transition time under Division 57 in Schedule 2D to that Act occurred before 1 July 2001; and

                     (b)  you would have been entitled to a further deduction under section 42‑197 of the former Act.

             (3)  The amount of the further deduction is the amount worked out under section 42‑197 of the former Act.

             (4)  Division 40 of the new Act applies to a balancing adjustment event that occurs on or after 1 July 2001 for a depreciating asset you hold if you held the asset on that day.

             (5)  The amount included in your assessable income under subsection 40‑285(1) or section 40‑370 of the new Act for a balancing adjustment event happening to a depreciating asset is reduced if:

                     (a)  the asset is either:

                              (i)  a depreciating asset that is not plant and that you started to hold under a contract entered into before 1 July 2001, you constructed where the construction started before that day or you started to hold in some other way before that day; or

                             (ii)  plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; and

                     (b)  any capital gain or capital loss would be disregarded (if Part 3‑1 of the new Act applied):

                              (i)  because of section 118‑5 (about cars, motor cycles and valour decorations); or

                             (ii)  because of section 118‑10 (about collectables); or

                            (iii)  because of section 118‑12 (about plant used to produce exempt income); or

                            (iv)  because the asset was a pre‑CGT asset at the time of the balancing adjustment event.

             (6)  The reduction is:

where:

sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose.

total decline is the decline in value of the depreciating asset since you started to hold it.

             (7)  Section 118‑24 of the new Act applies to CGT event A1 (disposal of a CGT asset) happening to a depreciating asset if the event happens:

                     (a)  if the depreciating asset is plant—at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or

                     (b)  if the depreciating asset is not plant—before 1 July 2001;

where:

                     (c)  the time of the event is when you entered into the contract for the disposal of the asset; and

                     (d)  the change in ownership constituting the disposal occurred after the applicable time mentioned in paragraph (a) or (b).

40‑287  Disposal of pre‑1 July 2001 mining depreciating asset to associate

             (1)  This section applies if:

                     (a)  on or after 1 July 2001, a company (the transferor) disposes of a depreciating asset to another company; and

                     (b)  the companies are members of the same linked group at the time of the disposal; and

                     (c)  apart from this section, the disposal would have resulted in:

                              (i)  an amount (the included amount) being included in the assessable income of the transferor under subsection 40‑285(1) of the Income Tax Assessment Act 1997; and

                             (ii)  the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act; and

                     (d)  the included amount is more than the deductible amount.

             (2)  Subsection 40‑35(5), 40‑38(5) or 40‑40(4) of this Act does not apply to the disposal.

             (3)  The amount that is included in the transferor’s assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997 is the included amount reduced by the deductible amount.

40‑288  Disposal of pre‑1 July 2001 mining non‑depreciating asset to associate

             (1)  This section applies if:

                     (a)  on or after 1 July 2001, a company (the transferor) disposes of property that is not a depreciating asset to another company; and

                     (b)  the companies are members of the same linked group at the time of the disposal; and

                     (c)  apart from this section, the disposal would have resulted in the transferor having an additional decline in value (the deductible amount) under subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) of this Act; and

                     (d)  the sum of:

                              (i)  the money the transferor receives, or is entitled to receive, in respect of the disposal; and

                             (ii)  the market value of any other property the transferor receives, or is entitled to receive, in respect of the disposal;

                            is more than the deductible amount.

             (2)  There is no additional decline in value of the notional asset referred to in subsection 40‑35(5), 40‑37(5), 40‑40(4) or 40‑43(4) as a result of the disposal.

             (3)  Any amount that would be included in the transferor’s assessable income under subsection 40‑35(6), 40‑37(6), 40‑38(6), 40‑40(5) or 40‑43(5) of this Act, or subsection 40‑830(6) of the Income Tax Assessment Act 1997, as a result of the disposal is reduced by the deductible amount.

40‑289  Surrendered firearms

                   If a balancing adjustment event for a firearm that you hold occurs because you surrender it after the commencement of this section under firearms surrender arrangements, any amount by which its termination value exceeds its adjustable value is not included in your assessable income under subsection 40‑285(1) of the Income Tax Assessment Act 1997.

40‑290  Reduction of deductions under former Act etc.

                   Subsection 40‑290(2) of the new Act has effect in relation to a depreciating asset that you held at 1 July 2001 as if:

                     (a)  any amount by which your deductions for the asset were reduced under the former Act or the Income Tax Assessment Act 1936 because you did not use it for a particular purpose were an amount by which your deductions for the asset were reduced under section 40‑25 of the new Act; and

                     (b)  the total decline element of the formula in that subsection included all amounts you have deducted or can deduct for the asset under the former Act or the Income Tax Assessment Act 1936.

40‑295  Later year relief

             (1)  You may exclude an amount that has been included in your assessable income for plant as a result of a balancing adjustment event that occurred in your 1999‑2000 or 2000‑01 income year to the extent that you choose under section 42‑290 of the former Act to treat that amount as an amount you have deducted for the decline in value of replacement plant.

             (2)  You can only make this choice for the replacement plant if:

                     (a)  you acquire it:

                              (i)  within 2 income years after the end of the income year in which the balancing adjustment event occurred; and

                             (ii)  in your 2001‑02 or 2002‑2003 income year; and

                     (b)  at the end of the income year in which you acquired it, you used it, or had it installed ready for use, wholly for the purpose of producing assessable income; and

                     (c)  you can deduct an amount for its decline in value; and

                     (d)  you had not made a choice under section 42‑285 or 42‑293 of the former Act for the balancing adjustment event.

             (3)  The adjustable value of the replacement plant is reduced by the amount covered by the choice as at the first day of the income year in which you acquired it.

40‑340  Roll‑overs

             (1)  This section applies to an entity (the transferee) if:

                     (a)  there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to plant; and

                     (b)  the transferor referred to in that section was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act.

Plant acquired before 21 September 1999

             (2)  The transferee works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if:

                     (a)  the transferor started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or

                     (b)  the transferor constructed it and the construction started at or before that time; or

                     (c)  the transferor acquired it in some other way at or before that time; or

                     (d)  the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and paragraph (a), (b) or (c) of this subsection applied to that entity or to the earliest successive transferor.

Small business taxpayers

             (3)  The transferee also works out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act using the same method as the transferor if:

                     (a)  the plant was not acquired as mentioned in subsection (2); and

                     (b)  the transferor, or an earlier successive transferor, was using a rate for the plant under subsection 42‑160(1) or 42‑165(1) of the former Act; and

                     (c)  the conditions set out in this table are satisfied:

 

Conditions for small business taxpayers retaining accelerated rates

Item

Condition

1

The transferee must have been a small business taxpayer for the income year (the start year) that includes the time when the entity first used the plant, or first had it installed ready for use.

2

At that time, at least 50% of the transferee’s intended use of the plant must be in carrying on a business for the purpose of producing assessable income.

3

At that time, neither of these applies:

(a) it could reasonably be expected that, because of the plant’s use, whether in connection with another asset or not, the transferee would not be a small business taxpayer for the income year following the start year or for either of the next 2 income years;

(b) the plant is being or is intended to be let predominantly on a lease of a kind specified in subsection (5).

             (4)  For the purposes of item 2 in the table in subsection (3), an entity is treated as if it is not carrying on a business in relation to the activities of a partnership in which the entity is a partner unless the entity is connected with the partnership.

             (5)  A lease of plant referred to in item 3 of the table in subsection (3) is an agreement (including a renewal of an agreement) under which the holder of the plant grants a right to use the plant to another entity, but not a hire purchase agreement or a short‑term hire agreement.

             (6)  The transferee works out the decline in value of the plant by:

                     (a)  for the diminishing value method—replacing the component in the formula in subsection 40‑70(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; or

                     (b)  for the prime cost method:

                              (i)  replacing the component in the formula in subsection 40‑75(1) of the new Act that includes the plant’s effective life with the rate the transferor, or the earliest successive transferor, was using; and

                             (ii)  increasing the plant’s cost under Division 42 of the former Act by any amounts included in the second element of the plant’s cost after 30 June 2001.

Meaning of small business taxpayer

             (7)  An entity is a small business taxpayer for an income year if:

                     (a)  the entity carries on a business in that year; and

                     (b)  the entity’s average turnover for that year is less than $1,000,000.

Note:          An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).

Meaning of average turnover

             (8)  An entity’s average turnover for an income year (the current year) is:

where:

number of averaging years is:

                     (a)  3; or

                     (b)  if the entity did not carry on a business in each of the current year and the 2 years before the current year, the number of those income years in which the entity carried on a business.

Note:          An entity is treated as carrying on a business if it is winding up a business and it was previously a small business taxpayer: see subsection (11).

sum of relevant group turnovers is the sum of:

                     (a)  the entity’s group turnover for the current year; and

                     (b)  the entity’s group turnover (if any) for the 2 preceding income years.

Meaning of group turnover

             (9)  The group turnover of an entity (the primary entity) for an income year is the sum of:

                     (a)  the value of the business supplies the primary entity made in the income year; and

                     (b)  the value of the business supplies entities connected with the primary entity made in the income year;

reduced by:

                     (c)  that part of the value of the business supplies the primary entity made in the income year that is attributable to supplies it made during the year to entities connected with it when they were connected with it; and

                     (d)  that part of the value of the business supplies entities connected with the primary entity made in the income year that is attributable to supplies the connected entities made during the year to the primary entity when they were connected with it; and

                     (e)  that part of the value of the business supplies another entity made in the income year that is attributable to supplies the other entity made to a third entity at a time when both the other entity and third entity were connected with the primary entity.

Value of business supplies

           (10)  The value of the business supplies an entity makes in an income year is the sum of:

                     (a)  for taxable supplies (if any) the entity makes during the year in the course of carrying on a business—the value (as defined by section 9‑75 of the GST Act) of the supplies; and

                     (b)  for other supplies the entity makes during the year in the course of carrying on a business—the prices (as defined by section 9‑75 of the GST Act) of the supplies.

Winding up a business

           (11)  Subsections (7) and (8) apply to an entity as if it carried on a business in an income year if:

                     (a)  in that year the entity was winding up a business it previously carried on; and

                     (b)  the entity was a small business taxpayer for the income year in which it stopped carrying on that business.

40‑345  Balancing adjustments for depreciating assets that retain CGT indexation

             (1)  The amount included in your assessable income under subsection 40‑285(1) or 104‑240(1) of the new Act as a result of a balancing adjustment event occurring for:

                     (a)  plant that you acquired at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or

                     (b)  a depreciating asset that is not plant and that you acquired before 1 July 2001;

is reduced (but not below nil) if:

                     (c)  for a paragraph (a) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event; or

                     (d)  for a paragraph (b) case—there would have been a reduction under subsection 42‑192(2) of the former Act as a result of that event if the asset were plant.

             (2)  The amount of the reduction is the amount worked out under subsection 42‑192(2) of the former Act.

             (3)  There is no reduction under subsection (1) to an amount included in your assessable income under subsection 104‑240(1) if the balancing adjustment event results in a discount capital gain under Division 115.

             (4)  However, you can choose not to make a reduction under subsection (1) and instead take advantage of the discount capital gain.

             (5)  Subsection (6) applies to an entity (the transferee) if there is roll‑over relief under section 40‑340 of the new Act as a result of a balancing adjustment event happening to a depreciating asset held by the transferee.

             (6)  Subsections (1), (2), (3) and (4) apply also to the transferee if:

                     (a)  for a depreciating asset that is plant:

                              (i)  the transferor referred to in section 40‑340 of the new Act started to hold the plant under a contract entered into at or before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or

                             (ii)  the transferor constructed it and the construction started at or before that time; or

                            (iii)  the transferor acquired it in some other way at or before that time; or

                            (iv)  the transferor acquired it from an entity that was working out the decline in value of the plant under subsection 40‑10(3) or 40‑12(3) of this Act and subparagraph (i), (ii) or (iii) of this paragraph applied to that entity or to the earliest successive transferor; or

                     (b)  for a depreciating asset that is not plant:

                              (i)  the transferor started to hold the asset under a contract entered into before 1 July 2001; or

                             (ii)  the transferor constructed it and the construction started at or before that day; or

                            (iii)  the transferor acquired it in some other way before that day.

40‑365  Involuntary disposals

                   Section 40‑365 of the new Act applies to a case where:

                     (a)  a balancing adjustment event occurred for plant in the circumstances mentioned in subsection 42‑293(2) of the former Act before 1 July 2001; and

                     (b)  you start to hold a replacement asset or assets after that day; and

                     (c)  the conditions in subsections 40‑365(3) and (4) of the new Act are satisfied.

Subdivision 40‑ELow‑value and software development pools

Table of sections

40‑420      Low‑value pools under Division 42 continue

40‑450      Software development pools

40‑420  Low‑value pools under Division 42 continue

             (1)  A low‑value pool you created under Subdivision 42‑M of the former Act continues under the new Act as if it had been created under Subdivision 40‑E of the new Act.

             (2)  For the purposes of working out the decline in value of depreciating assets in such a pool for your income year in which 1 July 2001 occurs, step 3 of the method statement in subsection 40‑440(1) of the new Act applies to the pool closing balance, worked out under section 42‑470 of the former Act, for the income year before that year.

40‑450  Software development pools

                   Subsection 40‑450(2) of the new Act has effect as if the reference to expenditure being allocated to a software development pool included a reference to expenditure being allocated to a software pool under Division 46 of the former Act.

Subdivision 40‑FPrimary production depreciating assets

Table of sections

40‑515      Water facilities, grapevines and horticultural plants

40‑520      Special rule for water facilities you no longer hold

40‑525      Amounts deducted for water facilities

40‑515  Water facilities, grapevines and horticultural plants

             (1)  This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on any of these (the primary production asset):

                     (a)  the construction, manufacture, installation or acquisition of a water facility; or

                     (b)  the establishment of horticultural plants; or

                     (c)  the establishment of grapevines;

and you would have been able to deduct amounts for the qualifying amount for the income year in which 1 July 2001 occurs under the former Act if it had continued to apply.

             (2)  Subdivision 40‑F of the new Act applies to the primary production asset on this basis:

                     (a)  the qualifying amount is taken to be:

                              (i)  for a water facility—the amount of capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility; or

                             (ii)  for a horticultural plant or a grapevine—the amount of capital expenditure incurred that is attributable to the establishment of the plant or grapevine; and

                     (b)  for horticultural plants, you use the effective life determined under section 387‑175 of the former Act; and

                     (c)  amounts that have been deducted or can be deducted for the qualifying amount under the former Act or the Income Tax Assessment Act 1936 are taken to be a decline in value under Subdivision 40‑F of the new Act.

40‑520  Special rule for water facilities you no longer hold

             (1)  This section applies to you if:

                     (a)  you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on a water facility; and

                     (b)  you do not hold the water facility at the start of 1 July 2001.

             (2)  Subdivision 40‑F of the new Act applies to the water facility on the basis specified in subsection 40‑515(2) of this Act, and no other taxpayer can deduct amounts for it under the new Act.

40‑525  Amounts deducted for water facilities

                   The reference in subsection 40‑555(1) of the new Act to a person having deducted or being able to deduct an amount under Subdivision 40‑F of the new Act for expenditure on a water facility includes a reference to the person having deducted or being able to deduct an amount for it under:

                     (a)  Subdivision 387‑B of the former Act; or

                     (b)  former section 75B of the Income Tax Assessment Act 1936.

Subdivision 40‑GCapital expenditure of primary producers and other landholders

Table of sections

40‑645      Electricity supply and telephone lines

40‑650      Special rule for land that you no longer hold

40‑670      Farm consultants

40‑645  Electricity supply and telephone lines

             (1)  This section applies to you if you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on:

                     (a)  connecting or upgrading the supply of mains electricity to land; or

                     (b)  a telephone line on land;

and you hold the land to which the electricity or telephone line relates at the start of 1 July 2001.

             (2)  You deduct amounts for the qualifying amount under Subdivision 40‑G of the new Act in the same way you were writing it off under Division 387 of the former Act.

             (3)  A reference in subsection 40‑650(4), (5) or (7) of the new Act to an amount being deducted under Subdivision 40‑G of that Act includes a reference to an amount being deducted under:

                     (a)  Subdivision 387‑F of the former Act; or

                     (b)  former section 70 of the Income Tax Assessment Act 1936.

40‑650  Special rule for land that you no longer hold

             (1)  This section applies to you if:

                     (a)  you have deducted or can deduct an amount under Division 387 of the former Act for an amount (the qualifying amount) of expenditure on connecting or upgrading the supply of mains electricity to land or a telephone line on land; and

                     (b)  you do not hold the land to which the electricity or telephone line relates at the start of 1 July 2001.

             (2)  Subdivision 40‑G of the new Act applies to the qualifying amount on the basis specified in that Subdivision, and no other taxpayer can deduct amounts for it under the new Act.

40‑670  Farm consultants

                   A person approved as a farm consultant under Subdivision 387‑A of the former Act is taken to be approved as a farm consultant under section 40‑670 of the new Act.

Subdivision 40‑ICapital expenditure that is deductible over time

Table of sections

40‑825      Genuine prospectors

40‑832      New method not to apply in some cases

40‑825  Genuine prospectors

                   The exemption provided by section 330‑60 of the former Act continues to apply to ordinary income derived before 20 August 2001.

40‑832  New method not to apply in some cases

                   If:

                     (a)  on or after 10 May 2006 you abandon, sell or otherwise dispose of a project; and

                     (b)  you have deducted or can deduct amounts for project amounts in relation to that project; and

                     (c)  on or after that day, you start to operate that project again; and

                     (d)  it is reasonable to conclude that you did this for the main purpose of ensuring that deductions for project amounts in relation to that project would be worked out under section 40‑832 of that Act;

the Income Tax Assessment Act 1997 applies to you as if the project had started to operate before 10 May 2006.

Subdivision 40‑JShips depreciated under section 57AM of the Income Tax Assessment Act 1936

Table of sections

40‑830      Ships depreciated under section 57AM of the Income Tax Assessment Act 1936

40‑830  Ships depreciated under section 57AM of the Income Tax Assessment Act 1936

             (1)  This section applies if:

                     (a)  you have deducted or can deduct amounts for a ship under section 57AM of the Income Tax Assessment Act 1936 as in force before its repeal by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006; and

                     (b)  you hold the ship when this section commences.

             (2)  Division 40 of the Income Tax Assessment Act 1997 applies to the ship after the commencement of this section.

             (3)  For the purposes of that application:

                     (a)  the cost of the ship when this section commences is its cost under the Income Tax Assessment Act 1936 just before that time; and

                     (b)  the ship’s adjustable value when this section commences is its depreciated value under the Income Tax Assessment Act 1936 just before that time; and

                     (c)  paragraphs 40‑285(1)(a) and (2)(a) have effect as if amounts you have deducted or can deduct under section 57AM of the Income Tax Assessment Act 1936, as in force before its repeal, are taken to be part of the ship’s decline in value under Subdivision 40‑B of the Income Tax Assessment Act 1997.

Division 43Deductions for capital works

Table of sections

43‑100      Application of Division 43 to quasi‑ownership rights over land

43‑105      Application of subsections 43‑50(1) and (2) to hotel buildings and apartment buildings

43‑110      Application of subsection 43‑75(3)

43‑100  Application of Division 43 to quasi‑ownership rights over land

                   Division 43 of the Income Tax Assessment Act 1997 applies to quasi‑ownership rights over land granted in respect of:

                     (a)  capital works being a hotel building or an apartment building begun after 30 June 1997; and

                     (b)  other capital works begun after 26 February 1992.

43‑105  Application of subsections 43‑50(1) and (2) to hotel buildings and apartment buildings

                   Subsections 43‑50(1) and (2) of the Income Tax Assessment Act 1997 do not apply to capital works being a hotel building or an apartment building begun before 1 July 1997.

43‑110  Application of subsection 43‑75(3)

                   Subsection 43‑75(3) of the Income Tax Assessment Act 1997 does not apply to capital works being a hotel building or an apartment building begun before 1 July 1997.


 

Division 45Disposal of leases and leased plant

Table of sections

45‑1          Application of Division 45 of the Income Tax Assessment Act 1997

45‑3          Application of Division 45 to disposals between February 1999 and September 1999

45‑40        Application of Division to plant formerly owned by exempt entities

45‑1  Application of Division 45 of the Income Tax Assessment Act 1997

                   Division 45 of the Income Tax Assessment Act 1997 applies to assessments for the income year in which 22 February 1999 occurs and later income years.

45‑3  Application of Division 45 to disposals between February 1999 and September 1999

             (1)  For disposals of plant or interests in plant on or after 22 February 1999 and before 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999, Division 45 of the Income Tax Assessment Act 1997 applies with the modifications specified in this section.

             (2)  That Division applies as if subsection 45‑5(2) were replaced by this provision:

             (2)  The amount included is the lesser of:

                     (a)  the excess referred to in paragraph (1)(e); and

                     (b)  the amounts you have deducted or can deduct for depreciation of the plant or, if you disposed of an interest in the plant, so much of those amounts as is attributable to that interest.

It is included for the income year in which the disposal occurred.

             (3)  That Division applies as if paragraph 45‑5(5)(a) were replaced by this provision:

                     (a)  it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or

             (4)  That Division applies as if subsection 45‑10(2) were replaced by this provision:

             (2)  The amount included is the lesser of:

                     (a)  the excess referred to in paragraph (1)(f); and

                     (b)  that part of the amounts the partnership has deducted or can deduct for depreciation of the plant that has been or would be reflected in your interest in the partnership net income or partnership loss (your partnership amount) or, if you disposed of part of your interest in the plant, so much of your partnership amount as is attributable to that part of that interest.

It is included for the income year in which the disposal occurred.

             (5)  That Division applies as if paragraph 45‑10(5)(a) were replaced by this provision:

                     (a)  it is included in that assessable income under a provision of this Act outside this Division and Parts 3‑1 and 3‑3 (about capital gains and losses); or

             (6)  That Division applies as if this section were added at the end of that Division:

45‑40  Application of Division to plant formerly owned by exempt entities

             (1)  There are the consequences set out in this table for a transition entity that disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3).

 

Consequences for transition entities

Item

In this situation:

There are these consequences:

1

The entity chooses, under section 58‑20, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant

(a) section 45‑5 has effect as if paragraph 45‑5(2)(b) were omitted and replaced by paragraph 58‑85(8)(a); and

(b) section 45‑10 has effect as if paragraph 45‑10(2)(b) operated on that part of the amount worked out under paragraph 58‑85(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.

2

The entity chooses, under section 58‑20, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre‑existing audited book value of plant

(a) section 45‑5 has effect as if paragraph 45‑5(2)(b) were omitted and replaced by paragraph 58‑145(8)(a); and

(b) section 45‑10 has effect as if paragraph 45‑10(2)(b) operated on that part of the amount worked out under paragraph 58‑145(8)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.

             (2)  There are the consequences set out in this table for an entity that:

                     (a)  acquired the plant from a tax exempt vendor in connection with the acquisition of a business; and

                     (b)  disposes of the plant, interest in plant or interest (or part) in a partnership to an entity specified in subsection (3).

 

Consequences for transition entities

Item

In this situation:

There are these consequences:

1

The entity chooses, under section 58‑155, that depreciation deductions and balancing adjustments are to be calculated by reference to the notional written down value of plant

(a) section 45‑5 has effect as if paragraph 45‑5(2)(b) were omitted and replaced by paragraph 58‑215(3)(a); and

(b) section 45‑10 has effect as if paragraph 45‑10(2)(b) operated on that part of the amount worked out under paragraph 58‑215(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.

2

The entity chooses, under section 58‑155, that depreciation deductions and balancing adjustments are to be calculated by reference to the undeducted pre‑existing audited book value of plant

(a) section 45‑5 has effect as if paragraph 45‑5(2)(b) were omitted and replaced by paragraph 58‑270(3)(a); and

(b) section 45‑10 has effect as if paragraph 45‑10(2)(b) operated on that part of the amount worked out under paragraph 58‑270(3)(a) that has been or would be reflected in the entity’s interest in the partnership net income or partnership loss if that amount were an amount deducted for depreciation of the plant.

             (3)  The entities are:

                     (a)  an exempt entity; or

                     (b)  the trustee of a complying superannuation fund; or

                     (c)  the trustee of a complying approved deposit fund; or

                     (d)  the trustee of a pooled superannuation trust; or

                     (e)  an entity that is not an Australian resident; or

                      (f)  an entity that is a State/Territory body for the purposes of Division 1AB of Part III of the Income Tax Assessment Act 1936 and whose income is exempt under that Division.

Apportionment

             (4)  If the entity concerned disposed of an interest in the plant rather than the plant (for a paragraph 45‑5(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that interest.

             (5)  If the entity concerned disposed of part of its interest in the plant rather than all of it (for a paragraph 45‑10(2)(b) case), instead of the amount worked out under the table in subsection (1) or (2), the entity uses so much of that amount as is attributable to that part of that interest.


 

Part 2‑15Exempt income

Division 50Exempt entities

Table of sections

50‑1          Application of Division 50 of the Income Tax Assessment Act 1997

50‑1  Application of Division 50 of the Income Tax Assessment Act 1997

                   Division 50 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.


 

Division 51Exempt amounts

Table of sections

51‑1          Application of Division 51 of the Income Tax Assessment Act 1997

51‑1  Application of Division 51 of the Income Tax Assessment Act 1997

                   Division 51 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.


 

Division 52Certain pensions, benefits and allowances are exempt from income tax

Table of sections

52‑1          Application of Division 52 of the Income Tax Assessment Act 1997

52‑1  Application of Division 52 of the Income Tax Assessment Act 1997

                   Division 52 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.


 

Division 53Various exempt payments

Table of sections

53‑1          Application of Division 53 of the Income Tax Assessment Act 1997

53‑1  Application of Division 53 of the Income Tax Assessment Act 1997

                   Division 53 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.


 

Division 54Exemption for certain payments made under structured settlements and structured orders

Table of sections

54‑1          Application of Division 54 of the Income Tax Assessment Act 1997

54‑1  Application of Division 54 of the Income Tax Assessment Act 1997

             (1)  Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years.

             (2)  However, the Division does not apply unless the date of the settlement or order is 26 September 2001 or a later date.


 

Division 55Payments that are not exempt from income tax

Table of sections

55‑1          Application of Division 55 of the Income Tax Assessment Act 1997

55‑1  Application of Division 55 of the Income Tax Assessment Act 1997

                   Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.


 

Part 2‑20Tax offsets

Division 61Generally applicable tax offsets

Table of Subdivisions

61‑L      Tax offset for Medicare levy surcharge (lump sum payments in arrears)

Subdivision 61‑LTax offset for Medicare levy surcharge (lump sum payments in arrears)

Table of Sections

61‑575      Application of Subdivision 61‑L of the Income Tax Assessment Act 1997

61‑575  Application of Subdivision 61‑L of the Income Tax Assessment Act 1997

                   Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years.


 

Part 2‑25Trading stock

Division 70Trading stock

Table of sections

70‑1          Application of Division 70 of the Income Tax Assessment Act 1997

70‑10        Accounting for your disposal of items that stop being trading stock because of the change of definition

70‑20        Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997

70‑55        Cost of live stock acquired by natural increase

70‑70        Valuing interests in FIFs on hand at the start of 1991‑92

70‑90        Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business

70‑100      Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business

70‑105      Application of section 70‑105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997

70‑115      Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years

70‑1  Application of Division 70 of the Income Tax Assessment Act 1997

             (1)  Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.

             (2)  However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act.

 

Application provisions for specific sections


Item

This section of the Income Tax Assessment Act 1997 ...

Applies as described in this provision of this Act ...

1

70‑20

70‑20

2

70‑55

70‑55(1)

3

70‑70

70‑70

4

70‑90

70‑90

5

70‑95

70‑90

6

70‑100

70‑100

7

70‑105

70‑105

8

70‑115

70‑115

70‑10  Accounting for your disposal of items that stop being trading stock because of the change of definition

             (1)  This section explains how to account for your disposal of an item during or after the 1997‑98 income year if:

                     (a)  just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and

                     (b)  at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997.

Example:    This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year.

If the disposal is outside the ordinary course of business

             (2)  If:

                     (a)  the disposal occurred on or after 1 July 1997; and

                     (b)  former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997;

sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997).

Note:          This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock.

Additional rule for early balancers

             (3)  If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997.

Note:          See the note to subsection (2).

Deduction for closing value at end of 1996‑97

             (4)  If:

                     (a)  former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and

                     (b)  the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936;

you can deduct for the income year of the disposal the item’s value as so taken into account.

Note:          This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal.

70‑20  Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997

                   Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997.

70‑55  Cost of live stock acquired by natural increase

             (1)  Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year.

             (2)  For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936.

             (3)  For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year:

                     (a)  if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners;

                     (b)  if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed.

Note 1:       Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year.

Note 2:       Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year.

70‑70  Valuing interests in FIFs on hand at the start of 1991‑92

             (1)  If:

                     (a)  an interest in a FIF was an item of your trading stock on hand at the start of the 1991‑92 income year; and

                     (b)  that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year;

the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year.

             (2)  This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act.

Effect of election under former subsection 31(5) of the Income Tax Assessment Act 1936 on valuation of interests in FIFs

             (3)  If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2).

70‑90  Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business

                   Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997.

70‑100  Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business

Basic application

             (1)  Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997.

Transitional provision if that section affects an assessment for 1996‑97

             (2)  The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if:

                     (a)  that section affects an assessment for the 1996‑97 year of income under the Income Tax Assessment Act 1936; and

                     (b)  an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity.

Note:          Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997.

70‑105  Application of section 70‑105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997

             (1)  Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997.

Transitional provision if that section affects an assessment for 1996‑97

             (2)  The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if:

                     (a)  that section affects an assessment for the 1996‑97 year of income under the Income Tax Assessment Act 1936; and

                     (b)  an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value.

Note:          Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997.

70‑115  Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years

                   Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year.


 

Part 2‑40Rules affecting employees and other taxpayers receiving PAYG withholding payments

Division 82Pre‑10 May 2006 entitlements to life benefit termination payments

Table of Subdivisions

82‑A     Application of Division

82‑B      Transitional termination payments: general

82‑C      Pre‑payment statements

82‑D     Directed termination payments made to superannuation and other entities

82‑E      Pre‑10 May 2006 entitlements and employment termination payments made after 1 July 2012

Subdivision 82‑AApplication of Division

Table of sections

82‑10        Pre‑10 May 2006 entitlements—transitional termination payments

82‑10  Pre‑10 May 2006 entitlements—transitional termination payments

             (1)  This Division applies in relation to a life benefit termination payment received by you on or after 1 July 2007 if:

                     (a)  the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and

                     (b)  the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006.

             (2)  However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E).

             (3)  This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment.

             (4)  For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following:

                     (a)  by a method or formula for working out the amount;

                     (b)  by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection.

Example:    For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company.

Note:          Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given).

             (5)  To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act).

             (6)  In this Division:

transitional termination payment means:

                     (a)  a life benefit termination payment to which this Division applies; or

                     (b)  if this Division applies to only part of a life benefit termination payment—that part of the payment.

Subdivision 82‑BTransitional termination payments: general

Table of sections

82‑10A     Recipient has reached preservation age

82‑10B      Lower cap amount

82‑10C      Recipient under preservation age

82‑10D     Upper cap amount

82‑10A  Recipient has reached preservation age

Application

             (1)  This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment.

Note 1:       You do not pay income tax on directed termination payments: see section 82‑10G.

Note 2:       Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age.

Tax free component

             (2)  The tax free component of the payment is not assessable income and is not exempt income.

Taxable component

             (3)  The taxable component of the payment is assessable income.

             (4)  You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%.

             (5)  You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%.

Note:          The remaining part is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

             (6)  The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B.

             (7)  The middle rate part is so much of the taxable component of the payment as:

                     (a)  exceeds your low rate part (if any); and

                     (b)  does not exceed the amount worked out as follows:

Note:          If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997).

82‑10B  Lower cap amount

Initial lower cap amount is the ETP cap for the income year

             (1)  Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section.

Note:          For the ETP cap amount, see section 82‑160 of the Income Tax Assessment Act 1997.

Reduction of lower cap amount in relation to each payment

             (2)  Reduce your lower cap amount in relation to the payment (but not below zero):

                     (a)  by the amount (if any) (the cap excess) worked out under subsection (3); and

                     (b)  by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4).

             (3)  For paragraph (2)(a), the cap excess is worked out using this method:

Method statement

Step 1.   Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age.

Step 2.   Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later.

Step 3.   Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies.

Step 4.   The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3.

Directed termination payments—time of receipt when received by entity to which they are directed

             (4)  For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment.

ETP cap not to be reduced under section 82‑10 of the Income Tax Assessment Act 1997

             (5)  For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997.

82‑10C  Recipient under preservation age

Application

             (1)  This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment.

Note:          You do not pay income tax on directed termination payments: see section 82‑10G.

Tax free component

             (2)  The tax free component of the payment is not assessable income and is not exempt income.

Taxable component

             (3)  The taxable component of the payment is assessable income.

             (4)  You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%.

Note:          The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986.

             (5)  The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D.

Note:          If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997).

82‑10D  Upper cap amount

Initial upper cap amount is $1,000,000

             (1)  Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section.

Reduction of upper cap amount for each payment

             (2)  Reduce your upper cap amount in relation to the payment (but not below zero):

                     (a)  by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and

                     (b)  by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year).

Directed termination payments—time of receipt when received by entity to which they are directed

             (3)  For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment.

Subdivision 82‑CPre‑payment statements

Table of sections

82‑10E      Transitional termination payments—pre‑payment statements

82‑10E  Transitional termination payments—pre‑payment statements

             (1)  This section applies if an entity (the payer) proposes to pay a transitional termination payment to an individual.

             (2)  The payer must give the individual a statement (a pre‑payment statement) meeting the requirements of this section.

             (3)  The statement must include the following information:

                     (a)  the amount (if any) that would be the tax free component of the transitional termination payment;

                     (b)  the amount (if any) that would be the taxable component of the transitional termination payment;

                     (c)  any other information specified in the regulations.

             (4)  The statement must also include details of the opportunity to make a choice in accordance with section 82‑10F.

Subdivision 82‑DDirected termination payments made to superannuation and other entities

Table of sections

82‑10F      Directed termination payments

82‑10G     Directed termination payments not assessable income and not exempt income

82‑10F  Directed termination payments

             (1)  A transitional termination payment (or part of such a payment) is a directed termination payment if:

                     (a)  the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and

                     (b)  the payment (or part of the payment) is made on the individual’s behalf as directed.

Choice to make payment

             (2)  An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual:

                     (a)  to a complying superannuation plan; or

                     (b)  to purchase a superannuation annuity.

             (3)  To make the choice, the individual must:

                     (a)  make it in the approved form; and

                     (b)  give the completed form to the payer.

             (4)  The payer must, immediately after receiving a completed form under subsection (3):

                     (a)  give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and

                     (b)  comply with the direction (or directions) in the form.

82‑10G  Directed termination payments not assessable income and not exempt income

                   A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income.

Note 1:       Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F.

Note 2:       The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997.

Note 3:       In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997.

Subdivision 82‑EPre‑10 May 2006 entitlements and employment termination payments made after 1 July 2012

Table of sections

82‑10H     Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012

82‑10H  Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012

             (1)  This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012.

             (2)  For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies.

             (3)  The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act.


 

Division 83AEmployee share schemes

Table of Subdivisions

83A‑A   Application of Division 83A of the Income Tax Assessment Act 1997

83A‑B   Application of former provisions of the Income Tax Assessment Act 1936

Subdivision 83A‑AApplication of Division 83A of the Income Tax Assessment Act 1997

Table of sections

83A‑5       Application of Division 83A of the Income Tax Assessment Act 1997

83A‑5  Application of Division 83A of the Income Tax Assessment Act 1997

             (1)  Division 83A of the Income Tax Assessment Act 1997 applies in relation to an ESS interest if:

                     (a)  the interest was acquired on or after 1 July 2009; and

                     (b)  the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009.

             (2)  Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if:

                     (a)  all of the following subparagraphs apply:

                              (i)  at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest;

                             (ii)  the interest was acquired (within the meaning of former Division 13A) before 1 July 2009;

                            (iii)  the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or

                     (b)  all of the following subparagraphs apply:

                              (i)  at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest;

                             (ii)  the interest was acquired (within the meaning of former section 26AAC) before 1 July 2009;

                            (iii)  an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009.

          (2A)  To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time.

Note:          Section 139CDA was about shares or rights acquired while engaged in foreign service.

             (3)  Subsection (2) applies despite section 83A‑105 of the Income Tax Assessment Act 1997.

             (4)  If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2):

                     (a)  do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and

                     (b)  subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being:

                              (i)  if paragraph (2)(a) of this section applies—the cessation time mentioned in subparagraph (2)(a)(iii); or

                             (ii)  if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and

                     (c)  treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and

                     (d)  treat the requirements in paragraphs 83A‑310(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if:

                              (i)  if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or

                             (ii)  if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and

                     (e)  Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and

                      (f)  if paragraph (2)(a) applies:

                              (i)  for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and

                             (ii)  for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and

                     (g)  if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest.

Subdivision 83A‑BApplication of former provisions of the Income Tax Assessment Act 1936

Table of sections

83A‑10     Savings—continued operation of former provisions

83A‑15     Indeterminate rights

83A‑10  Savings—continued operation of former provisions

             (1)  This section applies if:

                     (a)  at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced:

                              (i)  Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or

                             (ii)  section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and

                     (b)  if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5.

             (2)  If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right.

             (3)  If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right.

83A‑15  Indeterminate rights

             (1)  This section applies if:

                     (a)  you acquired a beneficial interest in a right before 1 July 2009; and

                     (b)  on or after 1 July 2009, the right becomes a right to acquire a beneficial interest in a share.

             (2)  Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share.

Amendment of assessments

             (3)  Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section.


 

Chapter 3Specialist liability rules

Part 3‑1Capital gains and losses: general topics

Division 102Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997

Table of sections

102‑1        Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997

102‑5        Working out capital gains and capital losses

102‑15      Applying net capital losses

102‑20      Net capital gains, capital gains and capital losses for income years before 1998‑99

102‑1  Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997

                   Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years.

102‑5  Working out capital gains and capital losses

General rule

             (1)  In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision.

Note 1:       This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision).

Note 2:       In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936).

Note 3:       Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997.

Roll‑overs

             (2)  If:

                     (a)  an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and

                     (b)  the entity owned the asset just before the start of that income year; and

                     (c)  a CGT event happens in relation to the asset in that income year or a later one;

the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936.

102‑15  Applying net capital losses

             (1)  In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936.

             (2)  If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997.

Note:          The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997.

             (3)  If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year.

102‑20  Net capital gains, capital gains and capital losses for income years before 1998‑99

                   For the 1997‑98 income year or an earlier income year:

capital gain has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.

capital loss has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.

net capital gain has the meaning given by former Part IIIA of the Income Tax Assessment Act 1936.


 

Division 104CGT events

Table of Subdivisions

104‑C    End of a CGT asset

104‑D   Bring into existence a CGT asset

104‑E    Trusts

104–G   Shares

104-I     Australian residency ends

104‑J     CGT events relating to roll‑overs

104‑K   Other CGT events

Subdivision 104‑CEnd of a CGT asset

Table of sections

104‑25      Cancellation, surrender and similar endings

104‑25  Cancellation, surrender and similar endings

                   The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year.

Subdivision 104‑DBringing into existence a CGT asset

Table of sections

104‑40      Granting an option

104‑40  Granting an option

                   A capital gain or capital loss is disregarded if:

                     (a)  you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and

                     (b)  the other entity exercises the option in the 1998‑99 income year or a later income year.

Subdivision 104‑ETrusts

Table of sections

104‑70      Capital payment before 18 December 1986 for trust interest

104‑70  Capital payment before 18 December 1986 for trust interest

             (1)  Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied:

                     (a)  CGT event E4 happens in relation to the unit; and

                     (b)  you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and

                     (c)  some or all of the payment (the non‑assessable part) was not included in your assessable income; and

                     (d)  some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works).

             (2)  The cost base of the unit or interest is also reduced by the attributable part.

             (3)  Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936.

Subdivision 104‑GShares

Table of sections

104‑135    Capital payment for shares

104‑135  Capital payment for shares

                   Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936.

Subdivision 104‑IAustralian residency ends

Table of sections

104‑165    Choices made under subsection 104‑165(2) of the Income Tax Assessment Act 1997

104‑166    Subsection 104‑165(1) still applies if you continue to be a short term Australian resident

104‑165  Choices made under subsection 104‑165(2) of the Income Tax Assessment Act 1997

             (1)  This section applies if:

                     (a)  a choice was made under subsection 104‑165(2) of the Income Tax Assessment Act 1997; and

                     (b)  because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006.

             (2)  To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement.

Note:          This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement.

104‑166  Subsection 104‑165(1) still applies if you continue to be a short term Australian resident

                   Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual:

                     (a)  who is in Australia on the day on which that item receives the Royal Assent; and

                     (b)  who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her.

Subdivision 104‑JCGT events relating to roll‑overs

Table of sections

104‑175    Company ceasing to be member of wholly‑owned group after roll‑over

104‑185    Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act

104‑175  Company ceasing to be member of wholly‑owned group after roll‑over

             (1)  Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee).

             (2)  If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year:

                     (a)  former section 160ZZOA of that Act; or

                     (b)  former paragraphs 160ZZO(1)(g) and (h) of that Act.

             (3)  In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection.

104‑185  Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act

                   Section 104‑185 of the Income Tax Assessment Act 1997 applies to a replacement asset for a roll‑over under:

                     (a)  Division 17A of former Part IIIA of the Income Tax Assessment Act 1936; or

                     (b)  Division 123 of the Income Tax Assessment Act 1997;

in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997.

Subdivision 104‑KOther CGT events

Table of sections

104‑205    Partial realisation of intellectual property

104‑205  Partial realisation of intellectual property

                   Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936.


 

Division 108CGT assets

Table of Subdivisions

108‑A   What a CGT asset is

108‑B    Collectables

108‑D   Separate CGT assets

Subdivision 108‑AWhat a CGT asset is

Table of sections

108‑5        CGT assets

108‑5  CGT assets

                   If:

                     (a)  an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and

                     (b)  that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936;

the thing is not a CGT asset.

Subdivision 108‑BCollectables

Table of sections

108‑15      Sets of collectables

108‑15  Sets of collectables

                   Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995.

Note:          That section has special rules for the separate disposal of collectables that are a set.

Subdivision 108‑DSeparate CGT assets

Table of sections

108‑75      Capital improvements to CGT assets for which a roll‑over may be available

108‑85      Improvement threshold

108‑75  Capital improvements to CGT assets for which a roll‑over may be available

             (1)  Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997.

             (2)  Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997.

             (3)  Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997.

             (4)  Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997.

Note:          This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one.

108‑85  Improvement threshold

                   Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year:

                     (a)  before the beginning of that year; or

                     (b)  within a reasonable time after the beginning of that year.


 

Division 109Acquisition of CGT assets

Table of Subdivisions

109‑A   Operative rules

Subdivision 109‑AOperative rules

Table of sections

109‑5        General acquisition rules

109‑5  General acquisition rules

             (1)  If:

                     (a)  the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and

                     (b)  the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year;

the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994.

             (2)  The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994.


 

Division 110Cost base and reduced cost base

Table of Subdivisions

110‑A   Cost base

Subdivision 110‑ACost base

Table of sections

110‑25      Cost base of CGT asset of life insurance company or registered organisation

110‑35      Incidental costs

110‑25  Cost base of CGT asset of life insurance company or registered organisation

                   For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation.

110‑35  Incidental costs

                   Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset.


 

Division 112Modifications to cost base and reduced cost base

Table of Subdivisions

112‑A   General rules

112‑B    Special rules

Subdivision 112‑AGeneral rules

Table of sections

112‑20      Market value substitution rule

112‑20  Market value substitution rule

                   In working out the cost base and reduced cost base of a CGT asset:

                     (a)  that you acquired before 16 August 1989; and

                     (b)  to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section);

disregard subsections 112‑20(2) and (3) of that Act.

Note:          This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply.

Subdivision 112‑BSpecial rules

Table of sections

112‑100    Effect of terminated gold mining exemptions

112‑100  Effect of terminated gold mining exemptions

             (1)  This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if:

                     (a)  before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and

                     (b)  you owned the asset continuously from the end of 31 December 1990 until the CGT event.

Capital gain

             (2)  For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value.

Capital loss

             (3)  The rest of this section has effect for the purposes of working out a capital loss you make from the CGT event.

             (4)  If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value.

             (5)  In applying section 110‑55 of the Income Tax Assessment Act 1997 (about reduced cost base):

                     (a)  treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and

                     (b)  disregard the effect of former sections 159GZZO and 159GZZZ of that Act.


 

Division 114Indexation of cost base

Table of sections

114‑5        When indexation relevant

114‑5  When indexation relevant

                   Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997.


 

Division 118Exemptions

Table of Subdivisions

118‑A   General exemptions

118‑B    Main residence

118‑C    Goodwill

Subdivision 118‑AGeneral exemptions

Table of sections

118‑10      Interests in collectables

118‑24A   Pilot plant

118‑10  Interests in collectables

             (1)  This section applies to a collectable you own that:

                     (a)  is an interest in:

                              (i)  artwork, jewellery, an antique or a coin or medallion; or

                             (ii)  a rare folio, manuscript or book; or

                            (iii)  a postage stamp or first day cover; and

                     (b)  you last acquired before 16 December 1995.

             (2)  A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less.

118‑24A  Pilot plant

             (1)  Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in subsection 73B(1) of the Income Tax Assessment Act 1936:

                     (a)  if the CGT event happens after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999; or

                     (b)  if:

                              (i)  the CGT event is CGT event A1 (disposal of a CGT asset); and

                             (ii)  the time of the event is when you entered into the contract for the disposal of the CGT asset; and

                            (iii)  the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999.

             (2)  However, subsection (1) does not apply to assessments for the 2001‑2002 income year and later income years.

Subdivision 118‑BMain residence

Table of sections

118‑195    Exemption—dwelling acquired from deceased estate

118‑195  Exemption—dwelling acquired from deceased estate

             (1)  This section applies to an entity:

                     (a)  that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or

                     (b)  to whom an ownership interest in a dwelling passed as a beneficiary in a deceased estate on or before that time.

             (2)  Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period.

             (3)  Section 118‑192 and subsections 118‑190(4) and 118‑200(4) do not apply to the entity in relation to the dwelling.

Subdivision 118‑CGoodwill

Table of sections

118‑260    Business exemption threshold

118‑260  Business exemption threshold

                   Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year:

                     (a)  before the beginning of that year; or

                     (b)  within a reasonable time after the beginning of that year.


 

Division 121Record keeping

Table of sections

121‑15      Retaining records under Division 121

121‑25      Records for mergers between qualifying superannuation funds

121‑15  Retaining records under Division 121

                   If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997.

121‑25  Records for mergers between qualifying superannuation funds

             (1)  A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002.

             (2)  A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset.

Note:          The full list of CGT events is in section 104‑5 of the Income Tax Assessment Act 1997.

Maximum penalty: 30 penalty units.

             (3)  Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required.


 

Part 3‑3Capital gains and losses: special topics

Division 124Replacement‑asset roll‑overs

Table of Subdivisions

124‑C    Statutory licences

Subdivision 124‑CStatutory licences

Table of sections

124‑140    New statutory licence—ASGE licence etc.

124‑141    ASGE licence etc.—cost base of ineligible part

124‑142    ASGE licence etc.—cost base of aquifer access licence etc.

124‑140  New statutory licence—ASGE licence etc.

             (1)  Sections 124‑141 and 124‑142 apply if:

                     (a)  there are one or more roll‑overs under section 124‑140 of the Income Tax Assessment Act 1997 where:

                              (i)  your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and

                             (ii)  you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and

                     (b)  if there was only one original licence—that licence is covered under subsection (2); and

                     (c)  if there was more than one original licence—at least one of the original licences was covered under subsection (2); and

                     (d)  if there is only one new licence—that licence is covered under subsection (3); and

                     (e)  if there is more than one new licence—only one of the new licences is covered under subsection (3); and

                      (f)  the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997).

             (2)  A licence is covered under this subsection if it is:

                     (a)  a bore licence issued under the Water Act 1912 of New South Wales; or

                     (b)  a licence of a kind specified in the regulations.

             (3)  A licence is covered under this subsection if it is:

                     (a)  an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or

                     (b)  a licence of a kind specified in the regulations.

124‑141  ASGE licence etc.—cost base of ineligible part

             (1)  For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula:

where:

total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part.

value of new licence is:

                     (a)  if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or

                     (b)  otherwise—the value of the new licence worked out in accordance with the regulations.

             (2)  The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section.

             (3)  For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1).

124‑142  ASGE licence etc.—cost base of aquifer access licence etc.

             (1)  The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences.

Note:          For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997.

             (2)  The cost base and reduced cost base of any new licence that is not covered under subsection 124‑140(3) is nil.

             (3)  Subsections (4) and (5) apply if:

                     (a)  there was more than one original licence; and

                     (b)  some of the original licences were acquired before 20 September 1985; and

                     (c)  subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets).

             (4)  For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act.

             (5)  Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act.


 

Division 125Demerger relief

Table of Subdivisions

125‑B    Consequences for owners of interests

Subdivision 125‑BConsequences for owners of interests

Table of sections

125‑75      Employee share schemes

125‑75  Employee share schemes

                   Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement.


 

Division 126Roll‑overs

Table of Subdivisions

126‑A   Merger of qualifying superannuation funds

126‑B    Transfer of life insurance business

Subdivision 126‑AMerger of qualifying superannuation funds

Table of sections

126‑100    Merger of qualifying superannuation funds

126‑100  Merger of qualifying superannuation funds

             (1)  This section applies to a CGT asset of a superannuation fund (the transferee) if:

                     (a)  the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and

                     (b)  the transferee owned the asset just before the start of the 1998‑99 income year; and

                     (c)  CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset in that income year or a later one.

Note:          The full list of CGT events is in section 104‑5 of the Income Tax Assessment Act 1997.

             (2)  The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time.

             (3)  The reduced cost base of the asset in the hands of the transferee is worked out similarly.

Subdivision 126‑BTransfer of life insurance business

Table of sections

126‑150    Roll‑over on transfer of life insurance business

126‑160    Effects of roll‑over

126‑165    References to Subdivision 126‑B of the Income Tax Assessment Act 1997

126‑150  Roll‑over on transfer of life insurance business

             (1)  There may be a roll‑over if:

                     (a)  a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company):

                              (i)  in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or

                             (ii)  under the Financial Sector (Transfers of Business) Act 1999; and

                     (b)  the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and

                     (c)  one of these happens:

                              (i)  a CGT asset (the original asset) of the originating company becomes an asset of the recipient company; or

                             (ii)  a CGT asset of the originating company ends and the recipient company acquires an equivalent replacement asset; or

                            (iii)  the originating company creates a CGT asset in the recipient company; and

                     (d)  the transfer takes place:

                              (i)  before 30 June 2004; or

                             (ii)  if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs.

             (2)  The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer.

             (3)  If:

                     (a)  the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and

                     (b)  the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest;

the other asset cannot become trading stock of the recipient company just after the recipient company acquired it.

126‑160  Effects of roll‑over

             (1)  A capital gain or capital loss the originating company makes from the CGT event is disregarded.

             (2)  The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event.

             (3)  The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly.

             (4)  For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly.

 

Creating a CGT asset

CGT event
number

Applicable amount

D1

the incidental costs the originating company incurred that relate to the CGT event

D2

the expenditure the originating company incurred to grant the option

D3

the expenditure the originating company incurred to grant the right

F1

the expenditure the originating company incurred on the grant, renewal or extension of the lease

                   The expenditure can include giving property: see section 103‑5 of the Income Tax Assessment Act 1997.

             (5)  If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day.

126‑165  References to Subdivision 126‑B of the Income Tax Assessment Act 1997

                   A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision.

Example:    Examples of the operation of this provision include:

(a)           CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and

(c)           an allocable cost amount may be affected under section 705‑93 because of a roll‑over under this Subdivision.


 

Division 128Effect of death

Table of sections

128‑15      Effect on the legal personal representative or beneficiary

128‑15  Effect on the legal personal representative or beneficiary

                   The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996.


 

Division 130Investments

Table of Subdivisions

130‑A   Bonus shares and units

130‑B    Rights

130‑C    Convertible notes

Subdivision 130‑ABonus shares and units

Table of sections

130‑20      Issue of bonus shares or units

130‑20  Issue of bonus shares or units

             (1)  This section modifies some of the rules in section 130‑20 of the Income Tax Assessment Act 1997 if:

                     (a)  you own shares in a company or units in a unit trust (the original equities); and

                     (b)  on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities.

             (2)  If the bonus equities are shares and they were issued on or before 30 June 1987:

                     (a)  subsection 130‑20(2) of the Income Tax Assessment Act 1997 does not apply to you; and

                     (b)  you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend.

             (3)  The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities.

Subdivision 130‑BRights

Table of sections

130‑40      Exercise of rights

130‑40  Exercise of rights

             (1)  The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company.

             (2)  The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred.

             (3)  The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company.

Subdivision 130‑CConvertible notes

Table of sections

130‑60      Shares or units acquired by converting a convertible note

130‑60  Shares or units acquired by converting a convertible note

             (1)  The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of:

                     (a)  what you paid or gave to acquire the note; and

                     (b)  any amount you paid in relation to the conversion;

if that sum is more than the market value of the shares or units (at the time of conversion).

             (2)  The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of:

                     (a)  the market value of the note at the time of the conversion; and

                     (b)  what you paid or gave in relation to the conversion.

             (3)  Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note.


 

Division 134Options

Table of sections

134‑1        Exercise of options

134‑1  Exercise of options

             (1)  The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised.

             (2)  This section does not apply to an option if:

                     (a)  it has been renewed or extended; and

                     (b)  the last renewal or extension occurred on or after 20 September 1985.


 

Division 136Foreign residents

Table of Subdivisions

136‑A   Making a capital gain or loss

Subdivision 136‑AMaking a capital gain or loss

Table of sections

136‑25      When an asset is taxable Australian property

136‑25  When an asset is taxable Australian property

                   A CGT asset a company owns is taxable Australian property if:

                     (a)  the company acquired the asset after 28 January 1988 and on or before 25 May 1988; and

                     (b)  it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and

                     (c)  that disposal was by:

                              (i)  an entity that was not a trustee, and not a resident of Australia for the purposes of that Act; or

                             (ii)  an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act.


 

Division 140Share value shifting

Table of Subdivisions

140‑A   When is there share value shifting?

Subdivision 140‑AWhen is there share value shifting?

Table of sections

140‑7        Pre‑1994 share value shifts irrelevant

140‑15      Off‑market buy backs

140‑7  Pre‑1994 share value shifts irrelevant

                   You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994.

140‑15  Off‑market buy backs

             (8)  A share value shift is disregarded under subsection 140‑15(8) of the Income Tax Assessment Act 1997 only if:

                     (a)  the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and

                     (b)  the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996.


 

Division 149When an asset stops being a pre‑CGT asset

Table of sections

149‑5        Assets that stopped being pre‑CGT assets under old law

149‑5  Assets that stopped being pre‑CGT assets under old law

             (1)  This section applies to a CGT asset that:

                     (a)  an entity last acquired before 20 September 1985; and

                     (b)  the entity owned just before the start of the 1998‑99 income year; and

                     (c)  the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936.

             (2)  In applying Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 to the entity:

                     (a)  the entity is taken to have acquired the asset on the acquisition day; and

                     (b)  the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936.


 

Division 152Small business relief

Table of sections

152‑5        Small business roll‑over chosen but no capital gain returned

152‑10      Small business roll‑over not chosen and time remains to acquire a replacement asset

152‑15      Amendment of assessments

152‑5  Small business roll‑over chosen but no capital gain returned

             (1)  This section applies if:

                     (a)  you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and

                     (b)  you did not include the capital gain in working out your net capital gain for that year; and

                     (c)  assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over.

             (2)  The capital gain is disregarded for the purposes of the Income Tax Assessment Act 1997.

             (3)  If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total.

             (4)  However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded.

             (5)  The Commissioner may extend the replacement asset period.

152‑10  Small business roll‑over not chosen and time remains to acquire a replacement asset

             (1)  This section applies if:

                     (a)  you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and

                     (b)  you included the capital gain in working out your net capital gain for that year; and

                     (c)  at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and

                     (d)  assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act.

             (2)  The capital gain is disregarded for the purposes of the Income Tax Assessment Act 1997.

             (3)  If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total.

             (4)  However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded.

             (5)  The Commissioner may extend the replacement asset period.

152‑15  Amendment of assessments

                   Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division.


 

Part 3‑5Corporate taxpayers and corporate distributions

Division 165Income tax consequences of changing ownership or control of a company

Table of Subdivisions

165‑CA Applying net capital losses of earlier income years

165‑CB Working out the net capital gain and the net capital loss for the income year of the change

165‑CC Change of ownership or control of company that has an unrealised net loss

165‑CD Reductions after alterations in ownership or control of loss company

165‑C    Deducting bad debts

Subdivision 165‑CAApplying net capital losses of earlier income years

Table of sections

165‑95      Application of Subdivision 165‑CA of the Income Tax Assessment Act 1997

165‑95  Application of Subdivision 165‑CA of the Income Tax Assessment Act 1997

                   Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years.

Subdivision 165‑CBWorking out the net capital gain and the net capital loss for the income year of the change

Table of sections

165‑105    Application of Subdivision 165‑CB of the Income Tax Assessment Act 1997

165‑105  Application of Subdivision 165‑CB of the Income Tax Assessment Act 1997

                   Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years.

Subdivision 165‑CCChange of ownership or control of company that has an unrealised net loss

Table of sections

165‑115E  Choice to use global method to work out unrealised net loss

165‑115E  Choice to use global method to work out unrealised net loss

                   A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if:

                     (a)  that time is before that day; and

                     (b)  subsection 165‑115E(4) of that Act would otherwise require the choice to be made before the end of those 6 months.

Subdivision 165‑CDReductions after alterations in ownership or control of loss company

Table of sections

165‑115U    Choice to use global method to work out adjusted unrealised loss

165‑115ZC  When certain notices to be given

165‑115ZD Adjustment (or further adjustment) for interest realised at a loss after global method has been used

165‑115U  Choice to use global method to work out adjusted unrealised loss

                   A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if:

                     (a)  that time is before that day; and

                     (b)  subsection 165‑115U(1D) of that Act would otherwise require the choice to be made before the end of those 6 months.

165‑115ZC  When certain notices to be given

             (1)  A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day.

             (2)  If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice.

             (3)  The further notice:

                     (a)  must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and

                     (b)  must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and

                     (c)  must otherwise be given in accordance with that section.

Special rules for consolidatable groups and potential MEC groups

             (4)  Subsections (5) and (6) have effect if:

                     (a)  the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and

                     (b)  apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and

                     (c)  just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group.

             (5)  Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004.

             (6)  Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection.

             (7)  Subsections (1) and (3) have effect subject to subsections (5) and (6).

165‑115ZD  Adjustment (or further adjustment) for interest realised at a loss after global method has been used

             (1)  This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss):

                     (a)  would be realised for income tax purposes by a realisation event that happens to the equity or debt; or

                     (b)  would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions);

and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time:

                     (c)  that happened for the company, before the realisation event; and

                     (d)  immediately before which the equity or debt was, or was part of:

                              (i)  if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or

                             (ii)  otherwise—what would have been such an interest if the company had been a loss company at that alteration time;

and these conditions are satisfied:

                     (e)  that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and

                      (f)  the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and

                     (g)  the choice is made on or before the latest of these:

                              (i)  the last day of the period of 6 months after the day referred to in paragraph (c) of this subsection;

                             (ii)  the day on which the entity lodges its income tax return for the income year in which the realisation event occurred;

                            (iii)  such later day as the Commissioner allows.

If the entity makes that choice, this section applies accordingly instead of that section.

             (2)  In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if:

                     (a)  the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these:

                              (i)  a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset;

                             (ii)  a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and

                     (b)  the company were therefore a loss company at that time; and

                     (c)  that adjusted unrealised loss were the company’s overall loss at that time.

             (3)  For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act.

             (4)  To avoid doubt:

                     (a)  a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and

                     (b)  this section does not affect the requirements that apply to a notice that otherwise must be given under that section.

             (5)  If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of:

                     (a)  the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and

                     (b)  the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset.

Subdivision 165‑CDeducting bad debts

Table of sections

165‑135    Application of Subdivision 165‑C of the Income Tax Assessment Act 1997

165‑135  Application of Subdivision 165‑C of the Income Tax Assessment Act 1997

                   Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years.


 

Division 166Income tax consequences of changing ownership or control of a listed public company

Table of Subdivisions

166‑C    Deducting bad debts

Subdivision 166‑CDeducting bad debts

Table of sections

166‑40      Application of Subdivision 166‑C of the Income Tax Assessment Act 1997

166‑40  Application of Subdivision 166‑C of the Income Tax Assessment Act 1997

                   Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years.


 

Division 170Treatment of company groups for income tax purposes

Table of Subdivisions

170‑A   Transfer of tax losses within certain wholly‑owned groups of companies

170‑B    Transfer of net capital losses within certain wholly‑owned groups of companies

170‑C    Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies

170‑D   Transfer of life insurance business

Subdivision 170‑ATransfer of tax losses within certain wholly‑owned groups of companies

Table of sections

170‑45      Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred

170‑55      Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997

170‑45  Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred

                   In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act:

                     (a)  section 707‑325 (which lets the available fraction for a bundle of losses be greater than it would otherwise be);

                     (b)  section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases);

                     (c)  section 707‑350 (which sets the limit on utilising certain losses in a bundle).

170‑55  Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997

                   If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1).

Subdivision 170‑BTransfer of net capital losses within certain wholly‑owned groups of companies

Table of sections

170‑101    Application of Subdivision 170‑B of the Income Tax Assessment Act 1997

170‑145    Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred

170‑155    Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997

170‑101  Application of Subdivision 170‑B of the Income Tax Assessment Act 1997

                   Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years.

170‑145  Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred

                   In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act:

                     (a)  section 707‑325 (which lets the available fraction for a bundle of losses be greater than it would otherwise be);

                     (b)  section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases);

                     (c)  section 707‑350 (which sets the limit on utilising certain losses in a bundle).

170‑155  Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997

                   If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1).

Subdivision 170‑CProvisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies

Table of sections

170‑220    Direct and indirect interests in the loss company

170‑225    Direct and indirect interests in the gain company

170‑220  Direct and indirect interests in the loss company

                   Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997.

170‑225  Direct and indirect interests in the gain company

                   Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997.

Subdivision 170‑DTransfer of life insurance business

Table of sections

170‑300    Transfer of life insurance business

170‑300  Transfer of life insurance business

                   If:

                     (a)  all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company):

                              (i)  in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or

                             (ii)  under the Financial Sector (Transfers of Business) Act 1999; and

                     (b)  the originating company makes a capital loss from a CGT asset as a result of the transfer; and

                     (c)  that capital loss is disregarded because of Subdivision 126‑B of this Act;

Subdivision 170‑C of the Income Tax Assessment Act 1997 has effect as if:

                     (d)  that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and

                     (e)  the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place.


 

Division 175Use of a company’s losses, deductions or bad debts to avoid income tax

Table of Subdivisions

175‑CA Tax benefits from unused net capital losses of earlier income years

175‑CB Tax benefits from unused capital losses of the current year

175‑C    Tax benefits from unused bad debt deductions

Subdivision 175‑CATax benefits from unused net capital losses of earlier income years

Table of sections

175‑40      Application of Subdivision 175‑CA of the Income Tax Assessment Act 1997

175‑40  Application of Subdivision 175‑CA of the Income Tax Assessment Act 1997

                   Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years.

Subdivision 175‑CBTax benefits from unused capital losses of the current year

Table of sections

175‑55      Application of Subdivision 175‑CB of the Income Tax Assessment Act 1997

175‑55  Application of Subdivision 175‑CB of the Income Tax Assessment Act 1997

                   Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years.

Subdivision 175‑CTax benefits from unused bad debt deductions

Table of sections

175‑78      Application of Subdivision 175‑C of the Income Tax Assessment Act 1997

175‑78  Application of Subdivision 175‑C of the Income Tax Assessment Act 1997

                   Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years.


 

Division 197Tainted share capital accounts

Table of Subdivisions

197‑A   Definitions

197‑B    General application provision

197‑C    Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off

Subdivision 197‑ADefinitions

Table of sections

197‑1        Definitions

197‑1  Definitions

                   In this Part:

introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament.

new Division 197 means Division 197 of the Income Tax Assessment Act 1997.

old Division 7B means Division 7B of Part IIIAA of the Income Tax Assessment Act 1936.

old Division 7B close‑off day means 1 July 2002.

Subdivision 197‑BGeneral application provision

Table of sections

197‑5        Application of new Division 197

197‑5  Application of new Division 197

                   Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day.

Subdivision 197‑CSpecial provisions about companies whose share capital accounts were tainted when old Division 7B was closed off

Table of sections

197‑10      Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off

197‑15      Account taken to have ceased to be tainted when old Division 7B was closed off

197‑20      After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting

197‑25      Special provisions if company chooses to untaint after introduction day

197‑10  Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off

                   This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B.

197‑15  Account taken to have ceased to be tainted when old Division 7B was closed off

             (1)  The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day.

             (2)  No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted.

197‑20  After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting

             (1)  Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if:

                     (a)  the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and

                     (b)  none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount.

             (2)  No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount.

197‑25  Special provisions if company chooses to untaint after introduction day

             (1)  This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account.

Working out the amount of section 197‑60 untainting tax

             (2)  For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of:

                     (a)  the amounts (the old Division 7B tainting amount components) that made up the old Division 7B tainting amount; and

                     (b)  any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made.

Note 1:       The company will not be liable to untainting tax if it is covered by subsection (5).

Note 2:       If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60.

             (3)  For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)).

             (4)  For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:

where:

class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component.

class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component.

             (5)  The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if:

                     (a)  during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and

                     (b)  the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section.

             (6)  If:

                     (a)  the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and

                     (b)  during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197);

then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components.

Working out the amount of section 197‑65 franking debit

             (7)  For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of:

                     (a)  the amounts (the old Division 7B tainting amount components) that made up the old Division 7B tainting amount; and

                     (b)  any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made.

Note:          In relation to amounts described in paragraph (b), section 197‑65 applies without any notional modifications.

             (8)  Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it:

                     (b)  the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component.

             (9)  Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component.

           (10)  For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula:

where:

class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component.

class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component.


 

Part 3‑6The imputation system

Division 201Object and application of Part 3‑6

Table of sections

201‑1        Estimated debits

201‑1  Estimated debits

                   Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002:

                     (a)  lodging an application with the Commissioner for a determination of an estimated debit;

                     (b)  lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination;

                     (c)  a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination);

                     (d)  the service of notice of any such determination on a company;

                     (e)  the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination);

                      (f)  the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination).


 

Division 203Benchmark rule

  

Table of sections

203‑1        Franking periods straddling 1 July 2002

203‑1  Franking periods straddling 1 July 2002

                   Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period:

                     (a)  is taken to begin at the start of 1 July 2002; and

                     (b)  is taken to end when it would otherwise have ended.


 

Division 205Franking accounts

Table of sections

205‑1        Order of events provision

205‑5        Washing estimated debits out of the franking account before conversion

205‑10      Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002

205‑15      Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002

205‑20      A late balancing company may elect to have its FDT liability determined on 30 June

205‑25      Franking deficit tax

205‑30      Deferring franking deficit

205‑35      No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity

205‑70      Tax offset arising from franking deficit tax liabilities

205‑71      Modification of franking deficit tax offset rules

205‑75      Working out the tax offset for the first income year

205‑80      Application of Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936

205‑1  Order of events provision

                   If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows:

                     (a)  any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and

                     (b)  then:

                              (i)  in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and

                             (ii)  in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis.

205‑5  Washing estimated debits out of the franking account before conversion

                   If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002.

Note:          A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002.

205‑10  Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002

             (1)  This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act).

             (2)  If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002:

                     (a)  no franking credit arises under former section 160APL of that Act because of the surplus; and

                     (b)  a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company.

The amount of the franking credit is worked out under subsection (3).

             (3)  The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class.

 

Conversion of 1936 Act franking surplus into 1997 Act franking credit

Item

Franking surplus

Franking credit generated under paragraph (2)(b)

1

class A franking surplus

2

class B franking surplus

3

class C franking surplus

205‑15  Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002

             (1)  This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act).

             (2)  If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus):

                     (a)  a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and

                     (b)  a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company.

The amount of the franking credit is worked out under subsection (3).

             (3)  The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class.

 

Conversion of 1936 Act franking surplus into 1997 Act franking credit

Item

Original surplus

Franking credit generated under paragraph (2)(b)

1

class A

2

class B

3

class C

             (4)  If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit):

                     (a)  a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and

                     (b)  a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company.

The amount of the franking debit is worked out under subsection (5).

             (5)  The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class.

 

Conversion of 1936 Act franking deficit into 1997 Act franking debit

Item

Original deficit

Franking debit generated under paragraph (4)(b)

1

class A

2

class B

3

class C

205‑20  A late balancing company may elect to have its FDT liability determined on 30 June

             (1)  This section applies after 30 June 2002.

             (2)  A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if:

                     (a)  the entity was in existence at the end of 30 June 2002; and

                     (b)  the entity’s 2001‑02 income year ends after 30 June 2002; and

                     (c)  the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions.

             (3)  The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if:

                     (a)  the election is in writing; and

                     (b)  the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and

                     (c)  the entity’s liability to pay franking deficit tax has not previously been determined under the ongoing provisions.

205‑25  Franking deficit tax

Object

             (1)  While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit.

Franking deficit at end of 30 June

             (2)  An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year.

Corporate tax entity ceases to be a franking entity

             (3)  An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if:

                     (a)  it ceases to be a franking entity after 30 June 2002; and

                     (b)  immediately before it ceases to be a franking entity, its franking account is in deficit.

Note:          The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act.

205‑30  Deferring franking deficit

Object

             (1)  The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account.

End of year deficit deferred

             (2)  If:

                     (a)  a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and

                     (b)  the refund is attributable to a period of 12 months ending at the end of 30 June in that year; and

                     (c)  the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time;

the refund is taken to have been paid to the entity immediately before that time.

Deficit on ceasing to be a franking entity deferred

             (3)  If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if:

                     (a)  the refund is attributable to a period within that 12 months during which the entity was a franking entity; and

                     (b)  the refund is paid within 3 months after the entity ceases to be a franking entity; and

                     (c)  the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity.

205‑35  No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity

                   If:

                     (a)  an entity’s 2001‑02 income year ends after 30 June 2002; and

                     (b)  its franking account is in deficit at the end of that income year;

the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time.

205‑70  Tax offset arising from franking deficit tax liabilities

General application rule

             (1)  Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections.

Late balancing entities—2001‑2002 income year

             (2)  If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section.

Method statement

Step 1.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(a).

Step 2.   Add to the step 1 result the excess that is covered by paragraph (1)(c).

              The result is the tax offset to which the entity is entitled under this section for the relevant year.

Late balancing entities—2002‑2003 income year

             (3)  If:

                     (a)  a corporate tax entity’s 2002‑2003 income year ends after 30 June 2003; and

                     (b)  the entity makes a valid election under section 205‑20 in that income year;

section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section.

Method statement

Step 1.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003.

Step 2.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003.

              Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date.

Step 3.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003.

              Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year.

Step 4.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year.

Step 5.   Work out the excess that is covered by paragraph (1)(c).

Step 6.   Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year.

Late balancing entities—later income years

             (4)  If:

                     (a)  an income year of a corporate tax entity ends after 30 June 2004; and

                     (b)  the entity makes a valid election under section 205‑20 in that income year;

section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section.

Method statement

Step 1.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year.

              Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June.

Step 2.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year.

              Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year.

Step 3.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year.

              Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June.

Step 4.   Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year.

              Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year.

Step 5.   Add up the results of steps 3 and 4 for all the previous income years covered by paragraph (1)(b).

Step 6.   Work out the excess that is covered by paragraph (1)(c).

Step 7.   Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year.

Application of the 30% reduction rule

             (5)  If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in:

                     (a)  subsection (3) or (4); or

                     (b)  section 205‑70 of the Income Tax Assessment Act 1997;

that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement.

             (6)  The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity:

                     (a)  that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and

                     (b)  if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year.

             (7)  The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity.

             (8)  A determination under subsection (7) is not a legislative instrument.

205‑71  Modification of franking deficit tax offset rules

             (1)  This section applies to events that occur on or after 1 July 2002 and before the start of the 2004‑05 income year.

             (2)  The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity:

                     (a)  that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and

                     (b)  if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year.

             (3)  The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity.

             (4)  A determination under subsection (3) is not a legislative instrument.

205‑75  Working out the tax offset for the first income year

First income year and relevant liabilities

             (1)  This section applies to a corporate tax entity in relation to:

                     (a)  this income year of the entity (the first income year):

                              (i)  the 2001‑2002 income year if subsection 205‑70(2) applies to the entity; or

                             (ii)  the 2002‑2003 income year if subsection 205‑70(2) does not apply to the entity; and

                     (b)  amounts of liabilities incurred by the entity (the relevant liabilities) that:

                              (i)  are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and

                             (ii)  have not been applied under that Act to reduce the entity’s income tax liabilities for an earlier income year.

Relevant liabilities carried forward to the first income year

             (2)  Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity as if:

                     (a)  so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and

                     (b)  so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section.

             (3)  Subsection (2) has effect only for the purposes of working out:

                     (a)  whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and

                     (b)  the amount of that tax offset.

205‑80  Application of Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936

             (1)  This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002.

             (2)  Former section 160AOAA of that Act does not prevent:

                     (a)  the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and

                     (b)  the operation of any provision in that Subdivision in relation to that determination.

             (3)  However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded.


 

Division 208Exempting entities and former exempting entities

  

Table of sections

208‑111    Converting former exempting company’s exempting account balance on 30 June 2002

208‑111  Converting former exempting company’s exempting account balance on 30 June 2002

             (1)  This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002:

                     (a)  whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002;

                     (b)  the company’s class A exempting account balance (as defined in that Part) at a time after 30 June 2002;

                     (c)  the company’s class C exempting account balance (as defined in that Part) at a time after 30 June 2002.

Class A exempting surplus at the end of 30 June 2002

             (2)  If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002:

                     (a)  a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and

                     (b)  an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997:

Note:          Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then).

Class C exempting surplus at the end of 30 June 2002

             (3)  If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002:

                     (a)  a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and

                     (b)  an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997:

Note:          Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then).

Class A exempting deficit at end of 30 June 2002

             (4)  If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier:

                     (a)  a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and

                     (b)  an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997:

Note:          If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either:

(a)           increased the company’s liability for franking deficit tax; or

(b)           reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997.

Class C exempting deficit at end of 30 June 2002

             (5)  If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier:

                     (a)  a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and

                     (b)  an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997:

Note:          If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either:

(a)           increased the company’s liability for franking deficit tax; or

(b)           reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997.


 

Division 210Venture capital franking

Table of sections

210‑1        Order of events provision

210‑5        Washing estimated venture capital debits out of the old sub‑account before conversion

210‑10      Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002

210‑15      Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002

210‑1  Order of events provision

                   The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows:

                     (a)  any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and

                     (b)  then:

                              (i)  in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and

                             (ii)  in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis.

210‑5  Washing estimated venture capital debits out of the old sub‑account before conversion

                   If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002.

210‑10  Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002

             (1)  This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act).

             (2)  If the PDF has a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002:

                     (a)  no venture capital credit arose under former section 160ASEE of that Act because of the surplus; and

                     (b)  a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF.

             (3)  The amount of the venture capital credit is worked out using the following formula:

210‑15  Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002

             (1)  This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act).

             (2)  If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus):

                     (a)  a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and

                     (b)  a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF.

             (3)  The amount of the venture capital credit is worked out using the formula:

             (4)  If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit):

                     (a)  a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and

                     (b)  a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF.

             (5)  The amount of the venture capital debit is worked out using the formula:


 

Division 214Administering the imputation system

Table of sections

214‑1        Application

214‑5        Entity must give a franking return

214‑10      Notice to a specific corporate tax entity

214‑15      Effect of a refund on franking returns

214‑20      Franking returns for the income year

214‑25      Commissioner may make a franking assessment

214‑30      Commissioner taken to have made a franking assessment on first return

214‑35      Amendments within 3 years of the original assessment

214‑40      Amended assessments are treated as franking assessments

214‑45      Further return as a result of a refund affecting a franking deficit tax liability

214‑50      Later amendments—on request

214‑55      Later amendments—failure to make proper disclosure

214‑60      Later amendments—fraud or evasion

214‑65      Further amendment of an amended particular

214‑70      Other later amendments

214‑75      Amendment on review etc.

214‑80      Notice of amendments

214‑85      Validity of assessment

214‑90      Objections

214‑95      Evidence

214‑100    Due date for payment of franking tax

214‑105    General interest charge

214‑110    Refunds of amounts overpaid

214‑120    Record keeping

214‑125    Power of Commissioner to obtain information

214‑135    Interpretation

214‑1  Application

                   This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period).

214‑5  Entity must give a franking return

             (1)  The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period:

                     (a)  if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and

                     (b)  if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and

                     (c)  the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period.

             (2)  The return must be in writing in the approved form.

214‑10  Notice to a specific corporate tax entity

             (1)  The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period.

             (2)  The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner.

             (3)  The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5.

214‑15  Effect of a refund on franking returns

If no franking return is outstanding

             (1)  If:

                     (a)  the entity receives a refund of income tax; and

                     (b)  the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and

                     (c)  when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose;

the entity must give the Commissioner a franking return for the period within 14 days after the refund is received.

Refund received within 14 days before an outstanding franking return is due

             (2)  If:

                     (a)  the entity receives a refund of income tax; and

                     (b)  the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and

                     (c)  when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and

                     (d)  the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner;

the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received.

Meaning of outstanding

             (3)  A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time:

                     (a)  the entity has been required to give a franking return for the period;

                     (b)  the time within which the franking return must be given has not yet passed;

                     (c)  the franking return has not yet been given.

214‑20  Franking returns for the income year

             (1)  A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends.

             (2)  However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period.

214‑25  Commissioner may make a franking assessment

             (1)  The Commissioner may make an assessment of:

                     (a)  if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and

                     (b)  if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and

                     (c)  the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period.

This is a franking assessment for the entity for the balancing period.

             (2)  The Commissioner must give the entity notice of the assessment as soon as practicable after making the assessment.

             (3)  The notice may be included in a notice of any other assessment under this Act.

214‑30  Commissioner taken to have made a franking assessment on first return

             (1)  If:

                     (a)  the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and

                     (b)  the return is the first franking return given to the Commissioner by the entity for the balancing period; and

                     (c)  the Commissioner has not already made a franking assessment for the entity for that period;

the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed:

                     (d)  the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and

                     (e)  the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return.

             (2)  The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day.

214‑35  Amendments within 3 years of the original assessment

             (1)  The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period.

             (2)  The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made.

214‑40  Amended assessments are treated as franking assessments

                   Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period.

214‑45  Further return as a result of a refund affecting a franking deficit tax liability

             (1)  If:

                     (a)  a franking assessment for the entity for the balancing period has been made; and

                     (b)  on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax);

the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed:

                     (c)  the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and

                     (d)  the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return.

             (2)  The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day.

214‑50  Later amendments—on request

                   The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period:

                     (a)  the entity applies for the amendment; and

                     (b)  the entity gives the Commissioner all the information necessary for making the amendment.

214‑55  Later amendments—failure to make proper disclosure

                   If:

                     (a)  the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and

                     (b)  in making the assessment, the Commissioner makes an under‑assessment; and

                     (c)  the Commissioner is not of the opinion that the under‑assessment is due to fraud or evasion;

the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day.

214‑60  Later amendments—fraud or evasion

                   If:

                     (a)  the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and

                     (b)  in making the assessment, the Commissioner makes an under‑assessment; and

                     (c)  the Commissioner is of the opinion that the under‑assessment is due to fraud or evasion;

the Commissioner may amend the assessment at any time.

214‑65  Further amendment of an amended particular

                   If:

                     (a)  a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and

                     (b)  the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment;

the Commissioner may do so within a period of 3 years after the first amendment.

214‑70  Other later amendments

                   In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment.

214‑75  Amendment on review etc.

                   Nothing in this Division prevents the amendment of a franking assessment for the entity for the balancing period:

                     (a)  to give effect to a decision on a review or appeal; or

                     (b)  to reduce the assessment as a result of an objection made under this Act or pending an appeal or review.

214‑80  Notice of amendments

             (1)  If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment.

             (2)  The notice may be included in a notice of any other assessment under this Act.

214‑85  Validity of assessment

                   The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with.

214‑90  Objections

                   If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953.

214‑95  Evidence

                   Section 177 of the Income Tax Assessment Act 1936 applies as if:

                     (a)  a reference in that section to a return included a reference to a franking return under this Division; and

                     (b)  a reference in that section to an assessment or a notice of assessment included a reference to a franking assessment or a notice of a franking assessment (as required) under this Division.

214‑100  Due date for payment of franking tax

General rule

             (1)  Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period.

Amended assessments—other than because of deficit deferral

             (2)  If:

                     (a)  the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and

                     (b)  the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment;

the excess amount is due and payable one month after the day on which the assessment was amended.

Tax payable because of deficit deferral

             (3)  If:

                     (a)  the entity receives a refund of income tax; and

                     (b)  the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3);

the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on:

                     (c)  if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or

                     (d)  in any other case—14 days after the day on which the refund was received.

214‑105  General interest charge

                   If:

                     (a)  franking deficit tax that is payable by the entity remains unpaid after the time by which it is due and payable; and

                     (b)  the Commissioner has not allocated the unpaid amount to an RBA;

the entity is liable to pay the general interest charge on the unpaid amount for each day in the period that:

                     (c)  starts at the beginning of the day on which the franking deficit tax was due to be paid; and

                     (d)  ends at the end of the last day on which, at the end of the day, any of the following remains unpaid:

                              (i)  the franking deficit tax;

                             (ii)  general interest charge on any of the franking deficit tax.

Note:          The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953.

214‑110  Refunds of amounts overpaid

                   Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax.

214‑120  Record keeping

                   Section 262A of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if:

                     (a)  the reference in that section to a person carrying on a business were a reference to a corporate tax entity; and

                     (b)  the reference in paragraph (2)(a) of that section to the person’s income and expenditure were a reference to:

                              (i)  the entity’s franking account balance; and

                             (ii)  the entity’s liability to pay franking tax; and

                     (c)  paragraph (5)(a) of that section were omitted.

214‑125  Power of Commissioner to obtain information

                   Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division.

214‑135  Interpretation

                   If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997.


 

Division 219Imputation for life insurance companies

  

Table of sections

219‑40      Reversing and replacing (on tax paid basis) certain franking credits that arose before 1 July 2002

219‑45      Reversing (on tax paid basis) certain franking debits that arose before 1 July 2002

219‑40  Reversing and replacing (on tax paid basis) certain franking credits that arose before 1 July 2002

             (1)  This section applies if:

                     (a)  a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and

                     (b)  the company’s assessment day (the assessment day) for that income year occurs on or after 1 July 2002; and

                     (c)  the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997.

             (2)  A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day:

where:

amount of the 1936 Act credit means the amount of the franking credit mentioned in paragraph (1)(a).

             (3)  On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002.

Note:          On the assessment day, the franking credit mentioned in paragraph (1)(a) is therefore:

·      reversed by the franking debit arising under subsection (2); and

·      replaced with a franking credit arising under subsection (3).

219‑45  Reversing (on tax paid basis) certain franking debits that arose before 1 July 2002

             (1)  This section applies if:

                     (a)  a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and

                     (b)  the company’s assessment day (the assessment day) for that income year occurs on or after 1 July 2002; and

                     (c)  the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997.

             (2)  A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002:

where:

amount of the 1936 Act debit means the amount of the franking debit mentioned in paragraph (1)(a).

Note:          As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date.


 

Division 220Imputation for NZ resident companies and related companies

Table of sections

220‑1        Application to things happening on or after 1 April 2003

220‑5        Residency requirement for income year including 1 April 2003

220‑10      NZ franking company cannot frank before 1 October 2003

220‑35      Extended time to make NZ franking choice

220‑501    Franking and exempting accounts of new former exempting entities

220‑1  Application to things happening on or after 1 April 2003

                   The following apply in relation to things happening on or after 1 April 2003, subject to this Division:

                     (a)  Division 220 of the Income Tax Assessment Act 1997;

                     (b)  the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997.

220‑5  Residency requirement for income year including 1 April 2003

                   In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003.

220‑10  NZ franking company cannot frank before 1 October 2003

                   An NZ franking company cannot:

                     (a)  frank a distribution made before 1 October 2003; or

                     (b)  frank with an exempting credit a distribution made before 1 October 2003.

220‑35  Extended time to make NZ franking choice

             (1)  A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year.

             (2)  Subsection (1) has effect despite paragraph 220‑40(1)(a) of the Income Tax Assessment Act 1997.

220‑501  Franking and exempting accounts of new former exempting entities

             (1)  This section has effect if:

                     (a)  a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of:

                              (i)  an NZ franking choice by a company (the NZ company); and

                             (ii)  Division 220 of the Income Tax Assessment Act 1997; and

                     (b)  the NZ franking choice comes into force at the start of the NZ company’s income year including 1 April 2003; and

                     (c)  at the switch time there is a franking surplus in the Australian company’s franking account; and

                     (d)  at the switch time the Australian company is a 100% subsidiary of a company (the NZ parent company) that:

                              (i)  is not a 100% subsidiary of another company that is a member of the same wholly‑owned group; and

                             (ii)  is a post‑choice NZ franking company; and

                     (e)  there is a period for which all these requirements are met:

                              (i)  the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time;

                             (ii)  the Australian company must have been a 100% subsidiary of the NZ parent company for the whole of the period;

                            (iii)  the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period;

                            (iv)  the NZ parent company must meet the condition in subsection (4) for the whole of the period.

Conditions relating to the Australian company

             (2)  One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if:

                     (a)  those sections and sections 220‑505 and 220‑510 of that Act had applied throughout the period; and

                     (b)  an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time:

                              (i)  the interest was held by, or indirectly for the benefit of, a company (the interest holder); and

                             (ii)  the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period.

             (3)  The other condition relating to the Australian company is that the company was a 100% subsidiary of a company that:

                     (a)  was a listed public company; and

                     (b)  was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period.

Condition relating to the NZ parent company

             (4)  The condition relating to the NZ parent company is that it:

                     (a)  was not a 100% subsidiary of another company that was a member of the same wholly‑owned group; and

                     (b)  was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period.

Franking credits for the period remain franking credits

             (5)  A franking credit arises in the Australian company’s franking account immediately after the switch time.

Note:          This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time.

Franking credits for the period do not become exempting credits

             (6)  An exempting debit arises in the Australian company’s exempting account immediately after the switch time.

Note:          This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time.

Amount of franking credit and exempting debit

             (7)  Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table:

 

Amount of the franking credit and the exempting debit

Item

If:

The amount of the credit and debit is:

1

The period starts immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997

The franking surplus in the Australian company’s franking account at the switch time

2

Both these conditions are met:

(a) item 1 does not apply;

(b) the Australian company’s franking account was not in surplus at the start of the period

The franking surplus in the Australian company’s franking account at the switch time

3

All these conditions are met:

(a) item 1 does not apply;

(b) the Australian company’s franking account was in surplus at the start of the period;

(c) the surplus in the account at the switch time is greater than the surplus at the start of the period

The difference between:

(a) the franking surplus in the Australian company’s franking account at the switch time; and

(b) the franking surplus in the Australian company’s franking account at the start of the period

No franking credit or exempting debit in some cases

             (8)  Subsections (5) and (6) do not have effect if:

                     (a)  the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and

                     (b)  the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period.


 

Part 3‑10Financial transactions

Division 242Leases of luxury cars

Table of sections

242‑10      Application

242‑20      Balancing adjustments

242‑10  Application

             (1)  Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years.

             (2)  However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time).

             (3)  The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997.

242‑20  Balancing adjustments

Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997.


 

Division 245Forgiveness of commercial debts

Table of Subdivisions

245‑A   Application of Division 245 of the Income Tax Assessment Act 1997

Subdivision 245‑AApplication of Division 245 of the Income Tax Assessment Act 1997

Table of sections

245‑5        Application and saving

245‑10      Pre‑28 June 1996 arrangements etc.

245‑5  Application and saving

             (1)  Division 245 of the Income Tax Assessment Act 1997 applies to debts forgiven in:

                     (a)  the 2010‑11 income year; and

                     (b)  later income years.

             (2)  Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in:

                     (a)  the 2009‑10 income year; and

                     (b)  earlier income years.

             (3)  Subsection (2) does not limit the effect of section 8 of the Acts Interpretation Act 1901 in relation to the repeal.

245‑10  Pre‑28 June 1996 arrangements etc.

             (1)  Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that:

                     (a)  was entered into on or before 27 June 1996; and

                     (b)  is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose.

             (2)  Those Subdivisions also do not apply to reduce your expenditure:

                     (a)  if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or

(b)  to the extent (if any) to which the expenditure was recouped by you on or before 27 June 1996.


 

Division 247Capital protected borrowings

Table of Subdivisions

247‑A   Interim apportionment methodology

247‑B    Other transitional provisions

Subdivision 247‑AInterim apportionment methodology

Table of sections

247‑5        Interim apportionment methodology

247‑10      Products listed on the Australian Stock Exchange that have explicit put options

247‑15      Other capital protected products

247‑20      The indicator method

247‑25      The percentage method

247‑5  Interim apportionment methodology

                   The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007.

Note:          To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997.

247‑10  Products listed on the Australian Stock Exchange that have explicit put options

             (1)  For a capital protected borrowing that:

                     (a)  is an instalment warrant listed on the Australian Stock Exchange; and

                     (b)  contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option;

subsection (2) applies.

             (2)  If an amount is incurred:

                     (a)  to acquire the capital protected borrowing in the primary market; or

                     (b)  at a reset date of the borrowing under the capital protected borrowing;

the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option.

             (3)  For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5).

             (4)  If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is:

                     (a)  the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less

                     (b)  the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest.

             (5)  If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is:

                     (a)  the market value of the instalment warrant; less

                     (b)  any pre‑paid interest.

             (6)  If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil.

247‑15  Other capital protected products

             (1)  If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one.

             (2)  If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred.

247‑20  The indicator method

             (1)  Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest.

Example:    Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax.

             (2)  Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year.

             (3)  If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year.

             (4)  The relevant indicator rate is:

                     (a)  for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and

                     (b)  for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into.

247‑25  The percentage method

             (1)  Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest.

Example:    Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax.

             (2)  The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year:

                     (a)  40% if the term is 1 year or shorter; or

                     (b)  27.5% if the term is longer than 1 year but not longer than 2 years; or

                     (c)  20% if the term is longer than 2 years but not longer than 3 years; or

                     (d)  17.5% if the term is longer than 3 years but not longer than 4 years; or

                     (e)  15% if the term is longer than 4 years.

Subdivision 247‑BOther transitional provisions

Table of sections

247‑75      Post‑July 2007 capital protected borrowings

247‑80      Capital protected borrowings in existence on 1 July 2013

247‑85      Extensions and other changes

247‑75  Post‑July 2007 capital protected borrowings

             (1)  For a capital protected borrowing entered into or extended:

                     (a)  on or after 1 July 2007; but

                     (b)  at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 2008 (the 2008 Budget time);

work out the amount that is reasonably attributable to the capital protection using the following method statement.

Method statement

Step 1.   Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest.

Step 2.   Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3).

Step 3.   If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year.

Example:    Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax.

             (2)  If:

                     (a)  the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and

                     (b)  that fixed rate is applicable to the capital protected borrowing for all or part of the income year;

use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term.

             (3)  If:

                     (a)  the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and

                     (b)  a variable rate is applicable to the capital protected borrowing for all or part of the income year;

use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate.

247‑80  Capital protected borrowings in existence on 1 July 2013

             (1)  This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75):

                     (a)  entered into at or before the 2008 Budget time; and

                     (b)  in existence on 1 July 2013; and

                     (c)  to which section 247‑85 does not apply.

             (2)  Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013.

             (3)  If:

                     (a)  the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and

                     (b)  that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013;

use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate.

             (4)  The rate (the adjusted loan rate), at a particular time, is the sum of:

                     (a)  the Reserve Bank of Australia’s Indicator Lending Rate for Standard Variable Housing Loans at that time; and

                     (b)  100 basis points.

             (5)  If:

                     (a)  the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and

                     (b)  a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013;

use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate.

247‑85  Extensions and other changes

             (1)  This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred:

                     (a)  the term of the capital protected borrowing is extended;

                     (b)  some other change is made to the terms and conditions of the capital protected borrowing.

             (2)  Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times:

                     (a)  the time the extension or change took effect;

                     (b)  the start of 1 July 2013;

(the switch‑over time).

             (3)  If:

                     (a)  the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and

                     (b)  that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time;

use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate.

             (4)  If:

                     (a)  the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and

                     (b)  a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time;

use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate.


 

Division 253Financial claims scheme for account‑holders with insolvent ADIs

Table of Subdivisions

253‑A   Tax treatment of entitlements under financial claims scheme

Subdivision 253‑ATax treatment of entitlements under financial claims scheme

Table of sections

253‑5        Application of section 253‑5 of the Income Tax Assessment Act 1997

253‑10      Application of sections 253‑10 and 253‑15 of the Income Tax Assessment Act 1997

253‑5  Application of section 253‑5 of the Income Tax Assessment Act 1997

                   Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008.

Note:          Division 2AA of Part II of the Banking Act 1959 commenced on 18 October 2008.

253‑10  Application of sections 253‑10 and 253‑15 of the Income Tax Assessment Act 1997

                   Sections 253‑10 and 253‑15 of the Income Tax Assessment Act 1997 apply to CGT events happening after 17 October 2008.


 

Part 3‑25Particular kinds of trusts

Division 275Australian managed investment trusts

Table of Subdivisions

275‑A   Choice for capital treatment of MIT gains and losses

Subdivision 275‑AChoice for capital treatment of MIT gains and losses

Table of sections

275‑10      Consequences of making choice—Commissioner cannot make certain amendments to previous assessments

275‑10  Consequences of making choice—Commissioner cannot make certain amendments to previous assessments

             (1)  This section applies if:

                     (a)  the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and

                     (b)  the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities:

                              (i)  the trustee of the managed investment trust;

                             (ii)  a beneficiary of the managed investment trust;

                            (iii)  an entity that holds interests in the managed investment trust indirectly, through a chain of trusts; and

                     (c)  the previous assessment was made on the basis that:

                              (i)  a CGT event happened at a time involving a CGT asset that was owned by the managed investment trust; and

                             (ii)  a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and

                     (d)  the previous assessment was also made on the basis that:

                              (i)  the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or

                             (ii)  the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and

                     (e)  the previous assessment was also made on one of these bases:

                              (i)  the CGT asset was a revenue asset;

                             (ii)  the CGT asset was not a revenue asset; and

                      (f)  none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made:

                              (i)  Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event;

                             (ii)  a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year.

             (2)  The Commissioner cannot amend the previous assessment on the basis that:

                     (a)  if subparagraph (1)(e)(i) applies—the CGT asset should not have been treated as a revenue asset; or

                     (b)  if subparagraph (1)(e)(ii) applies—the CGT asset should have been treated as a revenue asset.

             (3)  Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936.

             (4)  Subsection (2) does not apply in any of these cases:

                     (a)  if the entity for which the assessment was made gives the Commissioner a written consent to the amendment;

                     (b)  if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936;

                     (c)  if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph.


 

Part 3‑30Superannuation

Division 290Contributions

Table of sections

290‑10      Directed termination payments not deductible etc.

290‑15      Early balancers—deduction limits from end of 2006‑2007 income year to 1 July 2007

290‑10  Directed termination payments not deductible etc.

                   Division 290 of the Income Tax Assessment Act 1997 does not apply to a contribution that is a directed termination payment (within the meaning of section 82‑10F).

290‑15  Early balancers—deduction limits from end of 2006‑2007 income year to 1 July 2007

             (1)  This section applies if a person’s 2006‑2007 income year ends before the end of the 2006‑2007 financial year.

             (2)  The object of this section is to apply (with modifications) provisions limiting deductibility in respect of certain contributions made during the period that:

                     (a)  starts when the person’s 2006‑2007 income year ends; and

                     (b)  ends just before 1 July 2007.

             (3)  The provisions are as follows:

                     (a)  Subdivisions AA and AB of Division 3 of Part III of the Income Tax Assessment Act 1936, as in force just before they were repealed by the Superannuation Legislation Amendment (Simplification) Act 2007;

                     (b)  any other provision of the Income Tax Assessment Act 1936, or of any instrument made under that Act, to the extent that it relates to the operation of those Subdivisions;

                     (c)  any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of those Subdivisions.

             (4)  Those provisions apply in relation to the period mentioned in subsection (2), and do so as if:

                     (a)  that period were the 2007‑2008 income year; and

                     (b)  the deduction limit mentioned in section 82AAC for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and

                     (c)  the deduction limit mentioned in section 82AAT for the 2006‑2007 income year were the deduction limit for the income year mentioned in paragraph (a); and

                     (d)  Division 290 of the Income Tax Assessment Act 1997 did not apply to contributions made during the income year mentioned in paragraph (a).


 

Division 292Excess contributions tax

Table of sections

292‑20      Concessional contributions cap for a financial year

292‑25      Excess directed termination payments included in concessional contributions

292‑80      Application of excess non‑concessional contributions tax from 10 May 2006 to 1 July 2007

292‑80A   Transitional release authority

292‑80B    Giving a transitional release authority to a superannuation provider

292‑80C    Superannuation provider given transitional release authority must pay amount

292‑90      Non‑concessional contributions for a financial year

292‑20  Concessional contributions cap for a financial year

             (1)  This section applies if:

                     (a)  you have excess concessional contributions for a financial year that:

                              (i)  begins on or after 1 July 2007; and

                             (ii)  ends before 1 July 2012; and

                     (b)  you are 50 years or over on the last day of that financial year.

             (2)  Despite section 292‑20 of the Income Tax Assessment Act 1997, your concessional contributions cap for that financial year is:

                     (a)  if the year is the 2007‑2008 financial year—$100,000; or

                     (b)  if the year is the 2008‑2009 financial year—$100,000; or

                     (c)  if the year is the 2009‑2010 financial year—$50,000; or

                     (d)  if the year is the 2010‑2011 financial year—$50,000; or

                     (e)  if the year is the 2011‑2012 financial year—$50,000.

Note:          This amount is not indexed.

             (3)  Subsection (2) does not apply for the purposes of subsection 292‑85(2) of that Act.

292‑25  Excess directed termination payments included in concessional contributions

          (1A)  To avoid doubt, the tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your concessional contributions (see section 292‑25 of the Income Tax Assessment Act 1997) for the financial year.

             (1)  The taxable component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your concessional contributions (see section 292‑25 of the Income Tax Assessment Act 1997) for the financial year, to the extent that the component does not exceed the amount mentioned in subsection (2).

             (2)  The amount is $1,000,000, reduced by the taxable component of every transitional termination payment (within the meaning of section 82‑10) made to you during the period:

                     (a)  starting on 1 July 2007; and

                     (b)  ending just before the directed termination payment was made.

292‑80  Application of excess non‑concessional contributions tax from 10 May 2006 to 1 July 2007

             (1)  The object of this section is to apply (with modifications) provisions relating to excess non‑concessional contributions tax in respect of certain contributions made during the period that:

                     (a)  begins on 10 May 2006; and

                     (b)  ends just before 1 July 2007.

             (2)  The provisions are as follows:

                     (a)  Subdivision 292‑C of the Income Tax Assessment Act 1997 (excess non‑concessional contributions tax);

                     (b)  any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision;

                     (c)  any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision.

Example: Section 390‑65 in Schedule 1 to the Taxation Administration Act 1953.

             (3)  Those provisions apply in relation to that period, and do so as if:

                     (a)  that period were the 2006‑2007 financial year; and

                     (b)  the amount of a person’s non‑concessional contributions for that financial year:

                              (i)  did not include the amount of the person’s excess concessional contributions for that financial year; and

                             (ii)  if subsection (6) applies—included the amount mentioned in that subsection; and

                            (iii)  included each contribution covered under subsection (7) in respect of the person; and

                     (c)  the person’s non‑concessional contributions cap for that financial year were $1,000,000; and

                     (d)  subsections 292‑85(3) and (4) of the Income Tax Assessment Act 1997 were omitted; and

                     (e)  the person’s CGT cap amount at the start of that financial year were $1,000,000; and

                    (ea)  in a case where paragraph 292‑95(1)(b) of that Act would have allowed the contribution mentioned in that paragraph to be made at a time within that period—that paragraph allowed the contribution to be made on or before 30 June 2007; and

                      (f)  paragraph 292‑95(1)(d) of that Act allowed the notification mentioned in that paragraph to be made on or before 31 July 2007; and

                    (fa)  in a case where subsection 292‑100(2), (4), (7) or (8) of that Act would have allowed the contribution mentioned in that subsection to be made at a time within that period—that subsection allowed the contribution to be made on or before 30 June 2007; and

                     (g)  paragraph 292‑100(9)(b) of that Act allowed the choice mentioned in that paragraph to be given on or before 31 July 2007; and

                     (h)  contributions made during that period that are covered under section 292‑100 of that Act reduce the person’s CGT cap amount for the 2007‑2008 financial year in accordance with subsection 292‑105(2) of that Act (and despite subsection (1) of that section); and

                      (i)  if the conditions in subsection (4) are satisfied—the person’s excess non‑concessional contributions for that financial year were reduced by the amount paid as mentioned in paragraph (4)(d); and

                      (j)  the reference in subsection 307‑220(1) of that Act to 30 June 2007 were a reference to 9 May 2006.

             (4)  For the purposes of paragraph (3)(i), the conditions are:

                     (a)  the person gives the Commissioner an application under subsection 292‑80A(1) before 1 July 2007; and

                     (b)  the Commissioner gives the person a transitional release authority under subsection 292‑80A(2) in response to the application; and

                     (c)  the person gives the transitional release authority to a superannuation provider that holds a superannuation interest for the person (other than a defined benefit interest) in accordance with section 292‑80B within 21 days after the date of the release authority; and

                     (d)  the superannuation provider pays the person the amount required under section 292‑80C in relation to the transitional release authority.

             (5)  Subsection (6) applies if:

                     (a)  contributions are made in respect of a person (the first person) in either or both of the following periods:

                              (i)  10 May 2006 to 30 June 2006;

                             (ii)  1 July 2006 to 30 June 2007; and

                     (b)  those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act).

             (6)  The amount to be included in the first person’s amount of non‑concessional contributions under subparagraph (3)(b)(ii) is the sum of:

                     (a)  the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and

                     (b)  the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person’s deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made.

             (7)  A contribution is covered under this subsection if:

                     (a)  the contribution is made in respect of the person mentioned in subparagraph (3)(b)(iii) by another entity; and

                     (b)  the person is not an employee of the other entity; and

                     (c)  under Division 295 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)), the contribution is included in the assessable income of the superannuation provider in relation to the superannuation plan to which the contribution is made; and

                     (d)  the contribution is made after 6 December 2006.

             (8)  For the purposes of paragraph (7)(b), treat the person as an employee of the other entity if the person would be treated as an employee of the other entity under Division 290 of the Income Tax Assessment Act 1997 (as that Division applies for the purposes of subsection (3)).

292‑80A  Transitional release authority

             (1)  A person may apply to the Commissioner in the approved form for a transitional release authority under subsection (2). The application can only be made before 1 July 2007.

             (2)  The Commissioner must give the person a transitional release authority if the Commissioner considers that, apart from subparagraph 292‑80(3)(b)(i), the person would have excess non‑concessional contributions for the financial year mentioned in paragraph 292‑80(3)(a).

             (3)  The transitional release authority must:

                     (a)  state the amount of excess non‑concessional contributions mentioned in subsection (2); and

                     (b)  be dated; and

                     (c)  contain any other information that the Commissioner considers relevant.

             (4)  For the purposes of this section, disregard contributions made in respect of the person after 6 December 2006 in working out:

                     (a)  whether the person has excess non‑concessional contributions as mentioned in subsection (2); and

                     (b)  the amount of those excess non‑concessional contributions.

292‑80B  Giving a transitional release authority to a superannuation provider

                   The person may give the transitional release authority to a superannuation provider that holds a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 21 days after the date of the release authority.

292‑80C  Superannuation provider given transitional release authority must pay amount

             (1)  A superannuation provider that has been given a transitional release authority in accordance with section 292‑80B must pay to the person within 30 days after receiving the release authority the least of the following amounts:

                     (a)  if the person requests the provider in writing to pay a specified amount in relation to the release authority—that amount;

                     (b)  the amount of excess non‑concessional contributions stated in the release authority;

                     (c)  the sum of the values of every superannuation interest (other than a defined benefit interest) held by the superannuation provider for the person in complying superannuation plans.

Note 1:       Section 288‑95 in Schedule 1 to the Taxation Administration Act 1953 provides for an administrative penalty for failing to comply with this subsection.

Note 2:       Section 288‑100 in Schedule 1 to the Taxation Administration Act 1953 provides that the person giving the release authority to the superannuation provider can be liable to an administrative penalty if excess amounts are paid in relation to the release authority.

Note 3:       For reporting obligations on the superannuation provider in these circumstances, see section 390‑65 in Schedule 1 to the Taxation Administration Act 1953.

Note 4:       For the taxation treatment of the payment, see section 304‑15 of the Income Tax Assessment Act 1997.

             (2)  The payment must be made out of one or more superannuation interests (other than a defined benefits interest) held by the superannuation provider for the person in complying superannuation plans.

             (3)  Section 307‑125 of the Income Tax Assessment Act 1997 (the proportioning rule) does not apply to a payment made as required under this section.

292‑90  Non‑concessional contributions for a financial year

                   The tax free component of a directed termination payment (within the meaning of section 82‑10F) made in a financial year on behalf of you is not included in your non‑concessional contributions (see section 292‑90 of the Income Tax Assessment Act 1997) for the financial year.


 

Division 295Taxation of superannuation entities

Table of Subdivisions

295‑B    Modifications of the Income Tax Assessment Act 1997 for 30 June 1988 assets

295‑C    Notices relating to contributions

295‑F    Exempt income

295‑G   Deductions

295‑I     No‑TFN contributions income

Subdivision 295‑BModifications of the Income Tax Assessment Act 1997 for 30 June 1988 assets

Table of sections

295‑75      Application of Subdivision

295‑80      Meaning of 30 June 1988 asset

295‑85      Cost base of 30 June 1988 asset

295‑90      Market value of stock exchange listed assets

295‑95      Adjustment of cost base as at 30 June 1988—return of capital

295‑100    Exercise of rights

295‑75  Application of Subdivision

                   This Subdivision applies to an entity that is the trustee of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust.

295‑80  Meaning of 30 June 1988 asset

                   For the purposes of this Subdivision, an asset is a 30 June 1988 asset of a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust if the entity owned it at the end of 30 June 1988.

Note:          Section 295‑90 of the Income Tax Assessment Act 1997 treats these assets as having been acquired on 30 June 1988.

295‑85  Cost base of 30 June 1988 asset

             (1)  The first element of the cost base of each 30 June 1988 asset of the entity’s is the greater of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day).

             (2)  The first element of the reduced cost base of each 30 June 1988 asset of the entity’s is the lesser of the asset’s market value (at the end of 30 June 1988) and its cost base (on that day).

295‑90  Market value of stock exchange listed assets

             (1)  If:

                     (a)  a 30 June 1988 asset of the entity’s was listed on an Australian stock exchange on 30 June 1988; and

                     (b)  on that day, identical assets were:

                              (i)  computer traded on a national market; or

                             (ii)  traded on a State capital city market;

the market value of the asset as at the end of 30 June 1988 is the average of the highest and lowest trade prices for identical assets recorded on 30 June 1988 in whichever of the following markets is applicable:

                     (c)  if, on that date, identical assets were computer traded on a national market—that national market;

                     (d)  if, on that date, there was a State capital city market (other than the Sydney market) that recorded a higher volume of trading than the Sydney market in identical assets—that State capital city market;

                     (e)  in any other case—the Sydney market.

             (2)  For the purposes of this section, an asset is taken to have been listed on an Australian stock exchange on 30 June 1988 if, and only if, on that day the asset had the status of having been granted official quotation by a securities exchange within the meaning of the former Securities Industry Act 1980 or the law of a State or Territory corresponding to that former Act.

295‑95  Adjustment of cost base as at 30 June 1988—return of capital

             (1)  If:

                     (a)  30 June 1988 assets of the entity’s consist of shares in a company; and

                     (b)  at any time during the period commencing at the time when the shares were acquired and ending at the end of 30 June 1988, the company paid an amount that was not a dividend to the entity in respect of the shares;

the cost base to the entity of the shares as at 30 June 1988 is reduced by that amount.

             (2)  If:

                     (a)  a 30 June 1988 asset of the entity’s consists of an interest or unit in a trust; and

                     (b)  at any time during the period commencing at the time when the interest or unit was acquired and ending at the end of 30 June 1988, the trustee of the trust paid an amount to the entity in respect of the interest or unit, being:

                              (i)  in a case where the entity was exempt from tax for the year of income in which the payment was made—an amount that, if the entity had not been exempt from tax, would not have been the entity’s assessable income; or

                             (ii)  in any other case—an amount that would not have been the entity’s assessable income;

the cost base to the entity of the interest or unit as at 30 June 1988 is reduced by so much of the amount as is not attributable to a deduction allowed under former Division 10C or 10D of the Income Tax Assessment Act 1936.

295‑100  Exercise of rights

             (1)  Despite section 130‑40 of the Income Tax Assessment Act 1997, the modifications in subsections (2) and (3) of this section apply if an entity exercises rights or options as mentioned in that section to acquire:

                     (a)  shares in a company, or options to acquire shares in a company; or

                     (b)  units in a unit trust, or options to acquire units in a unit trust;

and those rights or options are 30 June 1988 assets of the entity.

             (2)  The first element of the cost base of the shares, units or options is the sum of:

                     (a)  the amount paid to exercise the rights or options; and

                     (b)  the greater of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day).

             (3)  The first element of the reduced cost base of the shares, units or options is the sum of:

                     (a)  the amount paid to exercise the rights or options; and

                     (b)  the lesser of the market value of the rights or options (at the end of 30 June 1988) and the cost base of the rights or options (on that day).

             (4)  The payment referred to in subsection (2) or (3) can include giving property. To the extent that the payment does, use the market value of the property in working out the amount of the payment.

             (5)  For indexation purposes, the amount referred to in paragraph (2)(b) is taken to have been incurred on 30 June 1988.

Subdivision 295‑CNotices relating to contributions

Table of sections

295‑190    Deductions for personal contributions

295‑190  Deductions for personal contributions

             (1)  A notice given under subsection 82AAT(1A) or (1CB) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑170 of the Income Tax Assessment Act 1997.

             (2)  A notice given under subsection 82AAT(1C) or (1CD) of the Income Tax Assessment Act 1936 in relation to the 2006‑07 income year or an earlier year has effect, after 1 July 2007, as if it were a notice under section 290‑180 of the Income Tax Assessment Act 1997.

Subdivision 295‑FExempt income

Table of sections

295‑390    Fixed interest complying ADFs—exemption of income attributable to certain 25 May 1988 deposits

295‑390  Fixed interest complying ADFs—exemption of income attributable to certain 25 May 1988 deposits

             (1)  A proportion of the ordinary income and statutory income of a continuously complying fixed interest ADF of an income year that would otherwise be assessable income is exempt from income tax under this section. The proportion is worked out under subsection (3).

             (2)  Subsection (1) does not apply to:

                     (a)  non‑arm’s length income; or

                     (b)  amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997.

             (3)  The proportion is:

where:

Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the income year.

Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the income year.

             (4)  A choice for the purposes of the definition of reckoning time in subsection (5) must be made on or before the date of lodgment of the income tax return of the ADF for the income year to which the choice relates, or before a later day allowed by the Commissioner.

             (5)  In this section:

continuously complying fixed interest ADF, in relation to an income year (the current year), means a fund that is a fixed interest complying ADF in relation to each of the following years:

                     (a)  the current year;

                     (b)  the income year in which 1 July 1988 occurred;

                     (c)  each income year later than the year mentioned in paragraph (b) and earlier than the current year.

current 25 May balance, in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time:

                     (a)  the balance from time to time is not to exceed the original 25 May balance and is not to be less than nil;

                     (b)  subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 September 1989 is to be added to the balance;

                     (c)  subject to paragraph (a), an amount repaid to the depositor from the ADF is to be deducted from the balance.

eligible depositor, in relation to an ADF, means:

                     (a)  a depositor whose 55th birthday occurred on or before 25 May 1988; or

                     (b)  a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that day, made a deposit with the ADF that consisted wholly or partly of the roll‑over (as defined in Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 as in force on that day) of an eligible termination payment as so defined, being an eligible termination payment that included a concessional component (as so defined).

fixed interest complying ADF, in relation to a year of income, means a complying ADF where both of the following conditions are satisfied:

                     (a)  not less than 90% of the amount that, apart from this section, would be the assessable income of the ADF of the income year (other than non‑arm’s length income or amounts included in assessable income under Subdivision 295‑C of the Income Tax Assessment Act 1997) consists of any one or more of the following:

                              (i)  interest or a payment in the nature of interest;

                             (ii)  any profit arising on the disposal, redemption, cancellation or maturity of a CGT asset referred to in paragraph 295‑85(3)(b) of the Income Tax Assessment Act 1997;

                            (iii)  an amount included in assessable income under Division 16E of Part III of the Income Tax Assessment Act 1936 (or would be so included if Division 230 of the Income Tax Assessment Act 1997 did not apply);

                     (b)  at no time during the year of income did the assets of the fund consist of or include any of the following:

                              (i)  units in a PST;

                             (ii)  virtual PST life insurance policies (as defined in the Income Tax Assessment Act 1997) issued by a life insurance company.

original 25 May balance, in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988.

reckoning time, in relation to an ADF in relation to an income year, means the beginning of the income year, or such other time during the income year as the ADF chooses in accordance with subsection (4).

             (6)  This section does not apply to an ADF in relation to an income year unless the whole of the benefit that would accrue to the ADF from the application of this section in relation to the income year has been, or can reasonably expected to be, passed on to eligible depositors.

Subdivision 295‑GDeductions

Table of sections

295‑465    Complying funds—deductions for insurance premiums

295‑466    Complying funds—deductions for insurance premiums for disability superannuation benefits

295‑467    Complying funds—deductions for self‑insurance for disability superannuation benefits

295‑485A Meaning of spouse and child for 2008‑2009 income year

295‑485    Deductions for increased amount of superannuation lump sum death benefit

295‑465  Complying funds—deductions for insurance premiums

                   An election made by the trustee of a complying superannuation fund under subsection 279(4) of the Income Tax Assessment Act 1936 that had effect for the income year of the fund in which 30 June 2007 occurs continues to have effect as if it had been made under section 295‑465 of the Income Tax Assessment Act 1997.

295‑466  Complying funds—deductions for insurance premiums for disability superannuation benefits

Scope

             (1)  This section applies if:

                     (a)  a complying superannuation fund pays a premium for an insurance policy during:

                              (i)  the 2007‑08 income year; or

                             (ii)  the 2008‑09 income year; or

                            (iii)  the 2009‑10 income year; or

                            (iv)  the 2010‑11 income year; and

                     (b)  the policy is (wholly or partly) for current or contingent liabilities of the fund to provide superannuation benefits for members of the fund (whether the policy covers the whole or parts of the liabilities).

Note:          For premiums paid during the 2004‑05 to 2006‑07 income years, see Part 1 of Schedule 2 to the Superannuation Legislation Amendment Act 2010.

Entitlement to deduction

             (2)  Treat the superannuation benefits mentioned in paragraph (1)(b) as being disability superannuation benefits, to the extent that:

                     (a)  the superannuation benefits are conditional on the disability of the members mentioned in that paragraph; and

                     (b)  the disability is described as a permanent disability in regulations made for the purposes of this section.

Note:          Other events might have to occur after the event of the disability of the members before the fund pays the benefits to the members. For example, the members might have to satisfy a condition of release of benefits specified in a standard made under paragraph 31(2)(h) of the Superannuation Industry (Supervision) Act 1993, such as by reaching a certain age.

             (3)  Subsection (2) applies:

                     (a)  for the purposes of applying:

                              (i)  subsection 295‑465(1) of the Income Tax Assessment Act 1997; and

                             (ii)  paragraph 295‑460(b) of that Act, to the extent that it relates to subsection 295‑465(1) of that Act;

                            to the payment mentioned in paragraph (1)(a) of this section; and

                     (b)  without limiting subsection 295‑465(1) and paragraph 295‑460(b) of that Act.

Amendment of assessments

             (4)  Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment if:

                     (a)  the assessment was made before the commencement of this section; and

                     (b)  the amendment is made within 2 years after that commencement; and

                     (c)  the amendment is made for the purpose of giving effect to this section.

Note:          This section will be repealed on 1 January 2017: see Division 2 of Part 2 of Schedule 2 to the Superannuation Legislation Amendment Act 2010.

295‑467  Complying funds—deductions for self‑insurance for disability superannuation benefits

Scope

             (1)  This section applies if:

                     (a)  during an income year, a complying superannuation fund is subject to current or contingent liabilities to provide superannuation benefits for members of the fund; and

                     (b)  the income year is:

                              (i)  the 2007‑08 income year; or

                             (ii)  the 2008‑09 income year; or

                            (iii)  the 2009‑10 income year; or

                            (iv)  the 2010‑11 income year.

Note:          For liabilities during the 2004‑05 to 2006‑07 income years, see item 8 of Schedule 3 to the Tax Laws Amendment (2011 Measures No. 4) Act 2011.

Entitlement to deduction

             (2)  Treat the superannuation benefits mentioned in paragraph (1)(a) as being disability superannuation benefits, to the extent that:

                     (a)  the superannuation benefits are conditional on the disability of the members mentioned in that paragraph; and

                     (b)  the disability is described as a permanent disability in regulations made for the purposes of section 295‑466.

Note:          Other events might have to occur after the event of the disability of the members before the fund pays the benefits to the members. For example, the members might have to satisfy a condition of release of benefits specified in a standard made under paragraph 31(2)(h) of the Superannuation Industry (Supervision) Act 1993, such as by reaching a certain age.

             (3)  Subsection (2) applies:

                     (a)  for the purposes of applying:

                              (i)  subsection 295‑465(2) of the Income Tax Assessment Act 1997; and

                             (ii)  paragraph 295‑460(b) of that Act, to the extent that it relates to subsection 295‑465(2) of that Act;

                            to the liabilities mentioned in paragraph (1)(a) of this section; and

                     (b)  without limiting subsection 295‑465(2) and paragraph 295‑460(b) of that Act.

Amendment of assessments

             (4)  Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment if:

                     (a)  the assessment was made before the commencement of this section; and

                     (b)  the amendment is made within 2 years after that commencement; and

                     (c)  the amendment is made for the purpose of giving effect to this section.

Note:          This section will be repealed on 1 January 2017: see Division 2 of Part 2 of Schedule 3 to the Tax Laws Amendment (2011 Measures No. 4) Act 2011.

295‑485A  Meaning of spouse and child for 2008‑2009 income year

             (1)  This section applies only for the 2008‑2009 income year.

             (2)  For the purposes of section 295‑485 of the Income Tax Assessment Act 1997, paragraph 295‑485(1)(a) of that Act applies as if:

                     (a)  the reference to a spouse or former spouse of the deceased were a reference to:

                              (i)  a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008; or

                             (ii)  an individual who was formerly such a spouse; and

                     (b)  the reference to a child of the deceased were a reference to a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008.

295‑485  Deductions for increased amount of superannuation lump sum death benefit

                   Paragraph 295‑485(1)(b) of the Income Tax Assessment Act 1997 has effect as if the reference in that paragraph to amounts included in assessable income under Subdivision 295‑C of that Act included a reference to amounts included in assessable income under former section 274 (taxable contributions) of the Income Tax Assessment Act 1936.

Subdivision 295‑INo‑TFN contributions income

Table of sections

295‑610    No‑TFN contributions income

295‑610  No‑TFN contributions income

                   Subdivisions 295‑I (no‑TFN contributions) and 295‑J (Tax offset for no‑TFN contributions income (TFN quoted within 4 years)) of the Income Tax Assessment Act 1997 apply to an entity whose 2006‑2007 income year ends on a day (the end day) after 1 July 2007 as if:

                     (a)  the period starting on 1 July 2007 and ending on the end day were part of the entity’s 2007‑2008 income year; and

                     (b)  the entity’s no‑TFN contributions income for the entity’s 2007‑2008 income year included contributions made during that period that would have been income of that kind for the entity’s 2007‑2008 income year if the contributions concerned had been made in the entity’s 2007‑2008 income year.

Division 301Superannuation member benefits paid from complying plans etc.

Table of sections

301‑5        Extended application to certain foreign superannuation funds

301‑85      Extended meaning of disability superannuation benefit for superannuation income stream

301‑5  Extended application to certain foreign superannuation funds

             (1)  A foreign superannuation fund is covered by this section if:

                     (a)  the fund has been a complying superannuation fund; and

                     (b)  the fund last stopped being a complying superannuation fund after 1 July 1988 and before 1 July 1995.

             (2)  Division 301 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section because you are a member of the fund in the same way as it would apply if the payments were superannuation member benefits paid to you from a complying superannuation fund.

301‑85  Extended meaning of disability superannuation benefit for superannuation income stream

                   For the purposes of the Income Tax Assessment Act 1997, a superannuation income stream benefit is taken to be a disability superannuation benefit if, just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (b) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936.


 

Division 302Superannuation death benefits paid from complying plans etc.

Table of sections

302‑5        Extended application to certain foreign superannuation funds

302‑195    Extended meaning of death benefits dependant for superannuation income stream

302‑195A Meaning of death benefits dependant for 2008‑2009 income year

302‑5  Extended application to certain foreign superannuation funds

             (1)  A foreign superannuation fund is covered by this section if:

                     (a)  the fund has been a complying superannuation fund; and

                     (b)  the fund last stopped being a complying superannuation fund after 1 July 1988 and before 1 July 1995.

             (2)  Division 302 of the Income Tax Assessment Act 1997 applies to payments to you from a foreign superannuation fund covered by this section after another person’s death, because the other person was a member of that fund, in the same way as it would apply if the payments were superannuation death benefits paid to you from a complying superannuation fund.

302‑195  Extended meaning of death benefits dependant for superannuation income stream

                   For the purposes of Division 302 of the Income Tax Assessment Act 1997, treat a person who receives a superannuation income stream benefit as a death benefits dependant in relation to the benefit if:

                     (a)  the benefit is a superannuation death benefit; and

                     (b)  just before 1 July 2007, the superannuation income stream from which the benefit is paid was covered by paragraph (a) of the definition of death or disability annuity/pension in section 159SJ of the Income Tax Assessment Act 1936.

302‑195A  Meaning of death benefits dependant for 2008‑2009 income year

             (1)  This section applies only for the 2008‑2009 income year.

             (2)  For the purposes of Subdivision 82‑B of Division 82, Division 302 and section 303‑5 of the Income Tax Assessment Act 1997, the definition of death benefits dependant in section 302‑195 of that Act applies as if paragraphs (a) and (b) of the definition were replaced with the following paragraphs:

                     (a)  a spouse of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008 or a person who was formerly such a spouse; or

                     (b)  a child of the deceased within the meaning of the Superannuation Industry (Supervision) Act 1993 as in force immediately after the commencement of Schedule 4 to the Same‑Sex Relationships (Equal Treatment in Commonwealth Laws—Superannuation) Act 2008, who is aged less than 18.


 

Division 303Superannuation benefits paid in special circumstances

Table of sections

303‑10      Superannuation lump sum paid to member having a terminal medical condition

303‑10  Superannuation lump sum member benefit paid to member having a terminal medical condition

             (1)  This section applies to a superannuation member benefit that you receive during the 2007‑08 financial year and that:

                     (a)  is a superannuation lump sum; and

                     (b)  is:

                              (i)  paid from a complying superannuation plan; or

                             (ii)  a superannuation guarantee payment, a small superannuation account payment, an unclaimed money payment, a superannuation co‑contribution benefit payment or a superannuation annuity payment.

             (2)  The lump sum is not assessable income and is not exempt income if a terminal medical condition exists in relation to you at a time in the period:

                     (a)  starting when you receive the lump sum; and

                     (b)  ending at the later of:

                              (i)  90 days after you receive it; and

                             (ii)  30 June 2008.


 

Division 304Superannuation benefits in breach of legislative requirements etc.

Table of sections

304‑15      Excess payments from release authorities

304‑15  Excess payments from release authorities

             (1)  This section applies to a superannuation benefit that you receive, paid in relation to a release authority given in relation to you in accordance with section 292‑80B.

             (2)  The superannuation benefit is not assessable income and is not exempt income to the extent that it does not exceed the amount mentioned in subsection (3).

             (3)  The amount is the amount of excess non‑concessional contributions stated in the release authority in accordance with paragraph 292‑80A(3)(a), reduced (but not below zero) by the amount of any superannuation benefit that was not assessable income and not exempt income under a previous operation of subsection (2) in relation to the release authority.

             (4)  The superannuation benefit is assessable income to the extent (if any) that it exceeds the amount mentioned in subsection (3).

             (5)  This section applies despite Divisions 301, 302 and 303 of the Income Tax Assessment Act 1997.


 

Division 306Roll‑overs etc.

Table of sections

306‑10      Roll‑over superannuation benefit—directed termination payment

306‑10  Roll‑over superannuation benefit—directed termination payment

                   For the purposes of the definition of specified roll‑over amount in the Income Tax Assessment Act 1997, treat the taxable component of a directed termination payment (within the meaning of section 82‑10F) as the element untaxed in the fund of a superannuation benefit that is a roll‑over superannuation benefit.


 

Division 307Key concepts relating to superannuation benefits

Table of sections

307‑125    Treatment of tax free component of existing pension payments etc.

307‑290    Taxed and untaxed elements of death benefit superannuation lump sums

307‑345    Low rate component—Effect of rebate under the Income Tax Assessment Act 1936

307‑125  Treatment of tax free component of existing pension payments etc.

             (1)  This section applies to a superannuation income stream from which at least one superannuation income stream benefit has been paid before 1 July 2007.

             (2)  Despite subsection 307‑125(2) of the Income Tax Assessment Act 1997, work out the tax free component of superannuation income stream benefits paid from the superannuation income stream in an income year beginning on or after 1 July 2007 as follows:

                     (a)  first, work out the deductible amount in relation to the superannuation income stream for the income year including 30 June 2007 in accordance with section 27H of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007);

                     (b)  next, allocate the deductible amount worked out under paragraph (a) to each of those benefits in proportion to the amount of those benefits.

The amount allocated to a superannuation income stream benefit under paragraph (b) is the tax free component of the benefit. The taxable component of the benefit is the remainder of the benefit.

             (3)  Subsection (2) does not apply to the payment of a superannuation income stream benefit after at least one of the following events has happened:

                     (a)  the superannuation income stream has been wholly or partially commuted;

                     (b)  the holder of the superannuation interest has died, if:

                              (i)  none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or

                             (ii)  where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day;

                   (ba)  the holder of the superannuation interest is aged 60 or above on 1 July 2007, if none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund;

                     (c)  the holder of the superannuation interest turns 60, if:

                              (i)  none of the superannuation income stream benefits paid from the superannuation interest after 30 June 2007 consist of, or include, an element untaxed in the fund; or

                             (ii)  where no superannuation income stream benefits have been paid from the superannuation interest after 30 June 2007—all payments from the interest on or before that day would have satisfied the requirement in subparagraph (i) if they had been paid after that day.

Continuing payments of superannuation income stream after subsection (3) event

             (4)  If subsection (2) does not apply to the payment of a superannuation income stream benefit because of subsection (3):

                     (a)  treat the time mentioned in subsection (5) as the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to the benefit; and

                     (b)  work out the tax free component of the superannuation interest for the purposes of section 307‑125 of the Income Tax Assessment Act 1997 under subsections (6) and (6A).

             (5)  For the purposes of subsection (4), the time is:

                     (a)  the time just before the event mentioned in subsection (3) happens; or

                     (b)  if there are 2 or more such events—the time just before the earliest of those events happens.

             (6)  For the purposes of paragraph (4)(b), work out the tax free component of the superannuation interest as follows:

                     (a)  first, assume that:

                              (i)  an eligible termination payment had been made in respect of the holder of the interest just before the time mentioned in subsection (5); and

                             (ii)  the amount of the eligible termination payment had been equal to the value of the superannuation interest at that time;

                     (b)  next, work out the unused undeducted purchase price (within the meaning of paragraph (a) of the definition of that term in subsection 27A(1) of the Income Tax Assessment Act 1936 just before the commencement of this section, and disregarding paragraphs (b) and (c) of that definition) of the superannuation income stream, reduced by the tax free components (worked out under subsection (2)) of any benefits paid from the superannuation income stream after 30 June 2007;

                     (c)  next, work out the pre‑July 83 component (within the meaning of section 27A of the Income Tax Assessment Act 1936 just before the commencement of this section) of the eligible termination payment.

The tax free component is equal to the sum of the amounts worked out under paragraphs (b) and (c).

          (6A)  Despite subsection (6), if:

                     (a)  at least one superannuation income stream benefit was paid from the superannuation income stream before 1 July 1994; or

                     (b)  section 27AAAA of the Income Tax Assessment Act 1936 (as in force just before 1 July 2007) applied to the superannuation income stream just before 1 July 2007;

for the purposes of paragraph (4)(b), the tax free component is equal to the amount worked out under paragraph (6)(b).

             (7)  For the purposes of paragraph (6)(c), disregard the value of the interest to the extent that it would consist, apart from this subsection, of the element untaxed in the fund of the taxable component of a superannuation benefit constituted by the eligible termination payment.

Commutation of superannuation income stream

             (8)  If the superannuation income stream has been wholly or partially commuted as mentioned in paragraph (3)(a), treat the applicable time for the purposes of subsection 307‑125(3) of the Income Tax Assessment Act 1997 in relation to a superannuation benefit arising from the commutation as:

                     (a)  the time just before the commutation; or

                     (b)  if 1 or more other events mentioned in subsection (3) happened before the commutation—the time just before the earliest of those events happens.

307‑290  Taxed and untaxed elements of death benefit superannuation lump sums

                   For the purposes of section 307‑290 of the Income Tax Assessment Act 1997:

                     (a)  treat a deduction made under former section 279 of the Income Tax Assessment Act 1936 as having been made under section 295‑465 of the Income Tax Assessment Act 1997 instead; and

                     (b)  treat a deduction made under former section 279B of the Income Tax Assessment Act 1936 as having been made under section 295‑470 of the Income Tax Assessment Act 1997 instead.

307‑345  Low rate component—Effect of rebate under the Income Tax Assessment Act 1936

                   If you have become entitled to a rebate under section 159SA of the Income Tax Assessment Act 1936, your low rate cap amount for the 2007‑2008 income year is, despite subsection 307‑345(1), the total of:

                     (a)  your closing balance for the 2006‑2007 income year (worked out under subsection 159SF(2) of that Act); and

                     (b)  the amount by which $140,000 exceeds the upper limit for the 2006‑2007 income year (worked out under section 159SG of that Act).


 

Part 3‑32Co‑operatives and mutual entities

Division 316Demutualisation of friendly society health or life insurers

Table of Subdivisions

316‑A   Application

Subdivision 316‑AApplication

Table of sections

316‑1        Application of Division 316 of the Income Tax Assessment Act 1997

316‑1  Application of Division 316 of the Income Tax Assessment Act 1997

                   Division 316 of the Income Tax Assessment Act 1997 applies in relation to demutualisations occurring on or after 1 July 2008.


 

Part 3‑35Insurance business

Division 320Life insurance companies

Table of Subdivisions

320‑A   Preliminary

320‑C    Deductions and capital losses

320‑D   Taxable income and tax loss of life insurance companies

320‑F    Virtual PST

320‑H   Segregation of assets for the purpose of discharging exempt life insurance policies

Operative provisions

Subdivision 320‑APreliminary

Table of sections

320‑5        Life insurance companies that are friendly societies

320‑5  Life insurance companies that are friendly societies

                   If:

                     (a)  any assets held by the benefit funds of a life insurance company that is a friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a complying superannuation fund; and

                     (b)  the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer;

the transfer is disregarded for any purposes of the Income Tax Assessment Act 1997 or the Income Tax Assessment Act 1936.

Subdivision 320‑CDeductions and capital losses

Table of sections

320‑85      Deduction for increase in value of liabilities under risk components of life insurance policies

320‑85  Deduction for increase in value of liabilities under risk components of life insurance policies

             (1)  In working out the amount that a life insurance company can deduct, in respect of life insurance policies that are disability policies (other than continuous disability policies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income.

             (2)  In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection (1) applies) under subsection 320‑85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company’s liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company’s liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320‑85(4) of that Act.

Subdivision 320‑DTaxable income and tax loss of life insurance companies

Table of sections

320‑100    Savings—tax losses of previous income years

320‑100  Savings—tax losses of previous income years

                   If:

                     (a)  a life insurance company has a tax loss for an income year ending before 1 July 2000; and

                     (b)  all or a part of that tax loss is carried forward to the income year that includes that date;

so much of that tax loss as is so carried forward has effect as if it were a tax loss of the ordinary class.

Subdivision 320‑FVirtual PST

Table of sections

320‑170    Transfer of part of an asset to a virtual PST

320‑175    Transfers of assets to virtual PST

320‑170  Transfer of part of an asset to a virtual PST

             (1)  This section applies to an asset (an approved asset) of a life insurance company if:

                     (a)  the asset was acquired by the company before 1 July 2000; and

                     (b)  the asset is held in an Australian fund or an Australian/overseas fund of the company; and

                     (c)  the market value of the asset at that date exceeds whichever is the lesser of:

                              (i)  $50,000,000; or

                             (ii)  whichever is the greater of 2% of the value of that fund at that date or $5,000,000.

             (2)  If the life insurance company wishes to include a part of an approved asset in its virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST.

             (3)  If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company.

320‑175  Transfers of assets to virtual PST

             (1)  If:

                     (a)  a life insurance company had a liability before 1 July 2000 under a life insurance policy; and

                     (b)  the liability or a part of the liability is to be discharged out of the company’s virtual PST assets; and

                     (c)  there is a transfer of the company’s assets to the virtual PST to meet that liability or that part of the liability;

then, to the extent to which the assets are transferred to meet that liability or that part of the liability:

                     (d)  if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or

                     (e)  if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except:

                              (i)  section 320‑200 of that Act; and

                             (ii)  any other provisions that rely on the operation of that section (for example, paragraph 320‑15(1)(e) of that Act).

Note:          This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑87(2) of that Act.

          (1A)  If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability.

             (2)  If a life insurance company that is a friendly society establishes a virtual PST in the 2000‑01 income year, the calculation of the transfer values of the company’s virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year.

Subdivision 320‑HSegregation of assets for the purpose of discharging exempt life insurance policies

Table of sections

320‑225    Transfer of part of an asset to segregated exempt assets

320‑230    Transfers of assets to segregated exempt assets

320‑225  Transfer of part of an asset to segregated exempt assets

             (1)  This section applies to an asset (an approved asset) of a life insurance company if:

                     (a)  the asset was acquired by the company before 1 July 2000; and

                     (b)  the asset is held in an Australian fund or an Australian/overseas fund of the company; and

                     (c)  the market value of the asset at that date exceeds whichever is the lesser of:

                              (i)  $50,000,000; or

                             (ii)  whichever is the greater of 2% of the value of that fund at that date or $5,000,000.

             (2)  If the life insurance company wishes to include a part of an approved asset in its segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets.

             (3)  If the life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company.

320‑230  Transfers of assets to segregated exempt assets

             (1)  If:

                     (a)  a life insurance company had a liability before 1 July 2000 under a life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and

                     (b)  the liability or a part of the liability is to be discharged out of the company’s segregated exempt assets; and

                     (c)  there is a transfer of the company’s assets to the segregated exempt assets to meet that liability or that part of the liability;

then, to the extent to which the assets are transferred to meet that liability or that part of the liability:

                     (d)  if the transfer occurs before 1 October 2000—the transfer is to be disregarded for the purposes of the Income Tax Assessment Act 1997; or

                     (e)  if the transfer occurs on or after 1 October 2000—the transfer is to be disregarded for the purposes of that Act, except:

                              (i)  section 320‑255 of that Act; and

                             (ii)  any other provisions that rely on the operation of that section (for example, paragraph 320‑15(1)(g) of that Act).

Note:          This means, amongst other things, that a life insurance company to which this subsection applies will not be able to claim a deduction in respect of the transfer under subsection 320‑105(1) of that Act.

          (1A)  If subsection (1) has applied to a life insurance company in respect of a transfer of assets to meet a liability or a part of a liability, that subsection does not apply again in respect of another transfer of assets to meet that liability or that part of the liability.

             (2)  If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320‑225 of the Income Tax Assessment Act 1997 in the 2000‑01 income year, the calculation of the transfer values of the company’s segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year.


 

Division 322Assistance for policyholders with insolvent general insurers

Table of Subdivisions

322‑B    Tax treatment of entitlements under financial claims scheme

Subdivision 322‑BTax treatment of entitlements under financial claims scheme

Table of sections

322‑25      Application of section 322‑25 of the Income Tax Assessment Act 1997

322‑30      Application of section 322‑30 of the Income Tax Assessment Act 1997

322‑25  Application of section 322‑25 of the Income Tax Assessment Act 1997

                   Section 322‑25 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Part VC of the Insurance Act 1973 after 17 October 2008.

Note:          Part VC of the Insurance Act 1973 commenced on 18 October 2008.

322‑30  Application of section 322‑30 of the Income Tax Assessment Act 1997

                   Section 322‑30 of the Income Tax Assessment Act 1997 applies to CGT events happening after 17 October 2008.


 

Part 3‑45Rules for particular industries and occupations

Division 328Small business entities

Table of sections

328‑1        Definitions

328‑110    Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years

328‑111    Access to certain small business concessions for former STS taxpayers that are winding up a business

328‑112    Working out whether you are a small business entity for certain small business concessions—entities connected with you

328‑115    When you stop using the STS accounting method

328‑120    Continuing to use the STS accounting method

328‑125    Meaning of STS accounting method

328‑175    Choices made in relation to depreciating assets used in primary production business

328‑185    Depreciating assets allocated to STS pools

328‑195    Opening pool balances for 2007‑08 income year

328‑440    Taxpayers who left the STS on or after 1 July 2005

328‑1  Definitions

                   In this Division:

general STS pool means a general STS pool under old Subdivision 328‑D.

long life STS pool means a long life STS pool under old Subdivision 328‑D.

new Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force after the commencement of this section.

old Subdivision 328‑D means Subdivision 328‑D of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section.

STS taxpayer means an STS taxpayer within the meaning of Division 328 of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section.

328‑110  Working out whether you are a small business entity for the 2007‑08 or 2008‑09 income year—turnover for earlier income years

             (1)  This section applies for the purpose of working out whether you are a small business entity (other than because of subsection 328‑110(4) of the Income Tax Assessment Act 1997) for the 2007‑08 or 2008‑09 income year.

             (2)  You work out your aggregated turnover for the 2005‑06 or 2006‑07 income year as if the amendments made by Schedule 1 to the Tax Laws Amendment (Small Business) Act 2007 had been in force in relation to that year.

             (3)  However, your aggregated turnover for the 2005‑06 income year is taken to be less than $2 million if:

                     (a)  your aggregated turnover for the 2005‑06 income year (worked out in accordance with subsection (2)) is $2 million or more; but

                     (b)  your STS group turnover for that year (worked out under Subdivision 328‑F of the Income Tax Assessment Act 1997, as in force immediately before the commencement of this section) is less than $2 million.

328‑111  Access to certain small business concessions for former STS taxpayers that are winding up a business

             (1)  This section applies if:

                     (a)  in the 2007‑08 income year or a later income year you are winding up a business you previously carried on; and

                     (b)  you were an STS taxpayer for the income year in which you stopped carrying on that business.