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A Bill for an Act to amend the law relating to taxation and foreign acquisitions and takeovers, and for related purposes.
Administered by: Treasury
For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.
Registered 08 Feb 2018
Introduced HR 08 Feb 2018
Table of contents.

2016‑2017‑2018

 

The Parliament of the

Commonwealth of Australia

 

HOUSE OF REPRESENTATIVES

 

 

 

 

Presented and read a first time

 

 

 

 

Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Bill 2018

 

No.      , 2018

 

(Treasury)

 

 

 

A Bill for an Act to amend the law relating to taxation and foreign acquisitions and takeovers, and for related purposes

  

  


Contents

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

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

3............ Schedules............................................................................................ 2

Schedule 1—Capital gains tax changes for foreign residents                     3

Part 1—Main residence exemption                                                                        3

Income Tax Assessment Act 1997                                                                              3

Income Tax (Transitional Provisions) Act 1997                                                    7

Part 2—Principal asset test                                                                                         9

Income Tax Assessment Act 1997                                                                              9

Schedule 2—Near‑new dwelling interests                                                             10

Part 1—Amendments                                                                                                  10

Foreign Acquisitions and Takeovers Act 1975                                                    10

Part 2—Application and transitional provisions                                            12

Schedule 3—Additional capital gains discount for affordable housing 13

Income Tax Assessment Act 1997                                                                            13

Taxation Administration Act 1953                                                                         17

 

 


A Bill for an Act to amend the law relating to taxation and foreign acquisitions and takeovers, and for related purposes

The Parliament of Australia enacts:

1  Short title

                   This Act is the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Act 2018.

2  Commencement

             (1)  Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

 

Commencement information

Column 1

Column 2

Column 3

Provisions

Commencement

Date/Details

1.  Sections 1 to 3 and anything in this Act not elsewhere covered by this table

The day this Act receives the Royal Assent.

 

2.  Schedule 1

The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent.

 

3.  Schedule 2

The day after this Act receives the Royal Assent.

 

4.  Schedule 3

The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent.

 

Note:          This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.

             (2)  Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

3  Schedules

                   Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1Capital gains tax changes for foreign residents

Part 1Main residence exemption

Income Tax Assessment Act 1997

1  Section 118‑100

After “this exemption”, insert “may not apply if you are a foreign resident, and”.

2  At the end of section 118‑105

Add:

Note:          The exemption is not available for the main residence of a foreign resident.

3  Paragraph 118‑110(2)(a)

Omit “I1, I2,”.

4  At the end of section 118‑110

Add:

             (3)  However, this section does not apply if, at the time the *CGT event happens, you are a foreign resident.

5  Subsection 118‑145(4) (example)

Omit “(again renting it out), at the end of which you sell the house.”, substitute “(again renting it out). You then move back into it for 3 years, after which you sell the house.”.

6  At the end of section 118‑155

Add:

             (5)  However, this section does not apply if, just before the individual’s death, the individual was a foreign resident.

7  Subsection 118‑170(4) (example)

Omit “You and your spouse own”, substitute “You and your spouse (who are Australian residents) own”.

8  Subsection 118‑178(2) (at the end of example 1)

Add “if, at the time the dwelling is sold, Susan is an Australian resident”.

9  Subsection 118‑178(2) (at the end of example 2)

Add “if, at the time the dwelling is sold, David is an Australian resident”.

10  Subsection 118‑185(2) (example)

Omit “You bought a house in July 1990 and moved in immediately. In July 1993, you moved out and began to rent it. You sold it in July 2000, making (apart from this Subdivision) a capital gain of $10,000.”, substitute “You bought a house in July 2020 and moved in immediately. In July 2023, you moved out and began to rent it. You sold it in July 2030, making (apart from this Subdivision) a capital gain of $10,000. At the time you sold the house, you were an Australian resident.”.

11  At the end of section 118‑185

Add:

             (3)  However, this section does not apply if, at the time the *CGT event happens, you are a foreign resident.

12  After paragraph 118‑195(1)(b)

Insert:

             ; and (c)  the deceased was an Australian resident just before the deceased’s death.

13  After subsection 118‑195(1)

Insert:

          (1A)  For the purposes of a provision of this Subdivision that applies the table in subsection (1):

                     (a)  disregard paragraphs (a) and (b) in column 3 of item 2 of the table if, just before the deceased’s death, the deceased was a foreign resident; and

                     (b)  disregard paragraph (c) in column 3 of item 2 of the table if, at the time the relevant *CGT event happened, the individual was a foreign resident.

Note:          The other provisions that apply the table include paragraph 118‑192(3)(b), subsection 118‑200(2), paragraph 118‑225(3)(c) and section 118‑260.

14  Paragraph 118‑195(2)(a)

Omit “I1, I2,”.

15  Subsection 118‑200(2) (after paragraph (a) of the definition of non‑main residence days)

Insert:

                    (aa)  if the deceased acquired the ownership interest on or after 20 September 1985 and, just before the deceased’s death, the deceased was a foreign resident—the number of remaining days in the deceased’s ownership period; and

16  After paragraph 118‑200(3)(c)

Insert:

            ; and (d)  just before the deceased’s death, the deceased was an Australian resident.

17  At the end of subsection 118‑200(4)

Add:

             ; and (c)  just before the deceased’s death, the deceased was an Australian resident.

18  At the end of section 118‑205

Add:

             (4)  Add to the component non‑main residence days in the formula the number of days in the period applicable under subsection (2) that the *dwelling was the main residence of an individual who:

                     (a)  owned the dwelling; and

                     (b)  was a foreign resident;

just before the individual’s death.

19  Paragraph 118‑210(5)(a)

Omit “I1, I2,”.

20  At the end of section 118‑210

Add:

             (6)  However, this section does not apply if, just before the deceased’s death, the deceased was a foreign resident.

21  Section 118‑215 (note)

Omit “Note”, substitute “Note 1”.

22  At the end of section 118‑215

Add:

Note 2:       The exemptions may not apply if the principal beneficiary of the trust is a foreign resident.

23  At the end of subsection 118‑218(1)

Add:

            ; and (d)  the *principal beneficiary of the trust is an Australian resident at the time the CGT event happens.

24  At the end of section 118‑225

Add:

             (5)  However, subsection (2) does not apply if, just before the deceased’s death, the deceased was a foreign resident.

25  After paragraph 118‑227(1)(c)

Insert:

           ; and (ca)  just before the deceased’s death, the deceased was an Australian resident;

26  Section 118‑240 (note)

Omit “Note”, substitute “Note 1”.

27  At the end of section 118‑240

Add:

Note 2:       The exemption does not apply at all if you are a foreign resident.

28  At the end of section 118‑245

Add:

No exemption if you are a foreign resident

             (3)  However, this section does not apply if, at the time the *CGT event happens, you are a foreign resident.

29  Subsection 128‑15(4) (cell at table item 3, column headed “For this kind of CGT asset:”)

Repeal the cell, substitute:

A *dwelling that was your main residence just before you died if:

(a) the dwelling was not then being used for the *purpose of producing assessable income; and

(b) you were then an Australian resident

Income Tax (Transitional Provisions) Act 1997

30  Before section 118‑195

Insert:

118‑110  Foreign residents

             (1)  None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No. 2) Act 2018 apply in relation to a capital gain or capital loss you make from a CGT event if:

                     (a)  the CGT event happens on or before 30 June 2019; and

                     (b)  you held an ownership interest in the dwelling to which the CGT event relates throughout the period:

                              (i)  starting just before 7.30 pm (by legal time in the Australian Capital Territory) on 9 May 2017; and

                             (ii)  ending just before the CGT event happens.

             (2)  For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by:

                     (a)  in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or

                     (b)  in relation to sections 118‑215 to 118‑230 of that Act—the trustee of the special disability trust.

31  Application of amendments

The amendments made by this Part apply in relation to CGT events happening at or after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 2017.

Part 2Principal asset test

Income Tax Assessment Act 1997

32  Subsection 855‑30(4) (table item 1)

Repeal the item, substitute:

1

the sum of the *total participation interests held by the holding entity and its *associates in the other entity is less than 10%

zero

 

the *market value of the *membership interest mentioned in subsection (3)

33  After subsection 855‑30(4)

Insert:

          (4A)  For the purposes of working out the *total participation interests held by the holding entity and its *associates under item 1 of the table in subsection (4), take into account:

                     (a)  a particular *direct participation interest; or

                     (b)  a particular *indirect participation interest;

held in the other entity only once if it would otherwise be counted more than once because the entity holding it is an associate of the holding entity.

34  Application of amendments

The amendments made by this Part apply in relation to CGT events happening at or after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 2017.

Schedule 2Near‑new dwelling interests

Part 1Amendments

Foreign Acquisitions and Takeovers Act 1975

1  Section 4

Insert:

near‑new dwelling acquisition has the meaning given by subsection 113(4A).

residential land (near‑new dwelling interests) certificate has the same meaning as in the Foreign Acquisitions and Takeovers Regulation 2015.

2  Subsection 113(1) (cell at table item 1, column 2)

Repeal the cell, substitute:

(a) when the application is made; and

(b) for a person who is given an exemption certificate under section 57 or a residential land (near‑new dwelling interests) certificate—at the end of each 6 month period covered by subsection (2) or (2A).

3  Subsection 113(2) (heading)

Repeal the heading, substitute:

6 monthly fees for developers

4  Subsection 113(2)

After “section 57”, insert “(the section 57 certificate)”.

5  After subsection 113(2)

Insert:

          (2A)  A person (the developer) who is given a residential land (near‑new dwelling interests) certificate must pay a fee for a 6 month period if there were one or more near‑new dwelling acquisitions covered by the certificate during the period.

6  Paragraph 113(3)(a)

Omit “certificate”, substitute “section 57 certificate or the residential land (near‑new dwelling interests) certificate (whichever is applicable)”.

7  Paragraph 113(3)(b)

Omit “each”, substitute “any”.

8  Subsection 113(4)

Omit “the exemption certificate”, substitute “the section 57 certificate”.

9  After subsection 113(4)

Insert:

          (4A)  A near‑new dwelling acquisition is an acquisition by a foreign person of a near‑new dwelling interest that is covered by the residential land (near‑new dwelling interests) certificate given to the developer.

Part 2Application and transitional provisions

10  Application of amendments—general

            Subject to item 11 of this Schedule, the amendments of the Foreign Acquisitions and Takeovers Act 1975 made by Part 1 of this Schedule apply in relation to a near‑new dwelling acquisition occurring on or after 1 July 2017.

Note:       For the meaning of near‑new dwelling acquisition, see subsection 113(4A) of the Foreign Acquisitions and Takeovers Act 1975, as amended by Part 1 of this Schedule.

11  Transitional—certificate given before commencement

(1)       This item applies in relation to a near‑new dwelling acquisition if the acquisition:

                     (a)  occurred on or after 1 July 2017; and

                     (b)  is covered by a residential land (near‑new dwelling interests) certificate that was given to a person (the developer) 6 months or more before the day this item commenced.

(2)       The transitional fee period is the period of 12 months beginning immediately after the developer was given the certificate.

(3)       Paragraph (b) of item 1 of the table in subsection 113(1) of the Foreign Acquisitions and Takeovers Act 1975, as amended by Part 1 of this Schedule, has effect as if the paragraph required the developer to pay a fee in relation to the certificate at the end of the transitional fee period.

(4)       Subsection 113(2A) of the Foreign Acquisitions and Takeovers Act 1975, as inserted by Part 1 of this Schedule, has effect as if the reference in that subsection to a 6 month period were a reference to the transitional fee period or any subsequent 6 month period (disregarding the definition of 6 month period in subsection 113(3) of that Act).

Schedule 3Additional capital gains discount for affordable housing

  

Income Tax Assessment Act 1997

1  At the end of section 115‑100

Add:

               ; or (e)  the percentage resulting from section 115‑125 if that section applies to the gain.

2  At the end of Subdivision 115‑B

Add:

115‑125  Investors disposing of property used for affordable housing

Object

             (1)  The object of this section is to increase the discount percentage to the extent that the *discount capital gain relates to a *dwelling used to *provide affordable housing.

When this section applies

             (2)  This section applies to a *discount capital gain if:

                     (a)  you are an individual; and

                     (b)  either:

                              (i)  you make the discount capital gain from a *CGT event happening in relation to a *CGT asset that is your *ownership interest in a *dwelling; or

                             (ii)  because of section 115‑215, Division 102 applies to you as if you had made the discount capital gain for a *capital gain of a trust covered by subsection (3); and

                     (c)  where subparagraph (b)(ii) applies—the trust’s capital gain was made directly, or indirectly through one or more entities that are all covered by subsection (3), from a CGT event happening in relation to a CGT asset that is an ownership interest in a dwelling; and

                     (d)  the dwelling was used to *provide affordable housing on at least 1095 days:

                              (i)  before the CGT event; and

                             (ii)  during your, or the relevant trustee’s or partner’s, *ownership period of that dwelling; and

                            (iii)  on or after 1 January 2018.

The days mentioned in paragraph (d) need not be consecutive.

Note:          1095 days is the same as 3 years.

             (3)  This subsection covers the following:

                     (a)  a trust, other than a *superannuation fund or a public unit trust (within the meaning of section 102P of the Income Tax Assessment Act 1936);

                     (b)  a *managed investment trust;

                     (c)  a partnership.

Discount percentage

             (4)  The percentage resulting from this section is the sum of:

                     (a)  the *discount percentage that would apply to the *discount capital gain apart from this section; and

                     (b)  the result (expressed as a percentage) of subsection (5).

             (5)  Work out the following:

where:

affordable housing days means the number of days during that *ownership period (see paragraph (2)(d)) of the *dwelling, and on or after 1 January 2018, on which:

                     (a)  the dwelling was used to *provide affordable housing; and

                     (b)  you were neither a foreign resident nor a *temporary resident.

total ownership days means the number of days during that *ownership period (see paragraph (2)(d)) of the *dwelling, less the number of days after 8 May 2012 during that ownership period that you were a foreign resident or a *temporary resident.

3  At the end of Part 6‑1

Add:

Division 980Affordable housing

Table of Subdivisions

             Guide to Division 980

980‑A   Providing affordable housing

Guide to Division 980

980‑1  What this Division is about

A dwelling is used to provide affordable housing if certain conditions are met, including that the dwelling is tenanted or available to be tenanted, and that tenancies of the dwelling are exclusively managed by a community housing provider.

Subdivision 980‑AProviding affordable housing

Table of sections

Operative provisions

980‑5        Providing affordable housing

980‑10      Eligible community housing providers

980‑15      Affordable housing certificates

Operative provisions

980‑5  Providing affordable housing

                   A *dwelling is used to provide affordable housing on a particular day (the test day) if:

                     (a)  on the test day, the dwelling is *taxable Australian real property and is *residential premises that:

                              (i)  are tenanted or available to be tenanted; and

                             (ii)  are not *commercial residential premises; and

                     (b)  on the test day, the tenancy or prospective tenancy of the dwelling is exclusively managed by an *eligible community housing provider; and

                     (c)  the eligible community housing provider has given each entity that holds an *ownership interest in the dwelling a certificate under section 980‑15 that covers the dwelling for the test day; and

                     (d)  no entity is entitled to receive an incentive, under the Scheme prescribed for the purposes of Part 2 of the National Rental Affordability Scheme Act 2008, for the dwelling for the NRAS year (within the meaning of that Scheme) that includes the test day; and

                     (e)  in the case of a *managed investment trust holding an *ownership interest in the dwelling on the test day—none of the tenants or occupants of the dwelling on that day holds an interest in the trust that passes the *non‑portfolio interest test at any time during that day.

980‑10  Eligible community housing providers

             (1)  An eligible community housing provider is:

                     (a)  an entity registered (however described) under an *Australian law as a provider of community housing services; or

                     (b)  an entity registered (however described) by an *Australian government agency as a provider of community housing services.

             (2)  However, an entity that ceases to be covered by subsection (1) continues to be an eligible community housing provider for the 90‑day period starting on the day of the cessation.

980‑15  Affordable housing certificates

                   For the purposes of paragraph 980‑5(c), a certificate must:

                     (a)  include a declaration that the *eligible community housing provider reasonably believes paragraphs 980‑5(a) and (b) to be satisfied for the *dwelling for the test day; and

                     (b)  be given in the *approved form on or before the 31st day after the end of the income year that contains the test day.

4  Subsection 995‑1(1)

Insert:

commercial residential premises has the same meaning as in the *GST Act.

eligible community housing provider has the meaning given by section 980‑10.

provide affordable housing has the meaning given by section 980‑5.

Taxation Administration Act 1953

5  Subsection 355‑65(8) in Schedule 1 (at the end of the table)

Add:

9

an *Australian government agency that administers an *Australian law referred to in paragraph 980‑10(1)(a) of the Income Tax Assessment Act 1997

is for the purpose of administering that *Australian law in relation to whether an entity should be, or should continue to be, covered by that Australian law in the way described in that paragraph.

10

an *Australian government agency that registers entities as described in paragraph 980‑10(1)(b) of the Income Tax Assessment Act 1997

is for the purpose of determining whether an entity should be, or should continue to be, registered as described in that paragraph.

6  Section 396‑55 in Schedule 1 (after table item 9)

Insert:

9A

an *eligible community housing provider

the issuing by the provider of a certificate under section 980‑15 of the Income Tax Assessment Act 1997

7  Application of amendments

(1)       Section 115‑125 of the Income Tax Assessment Act 1997 (as added by this Schedule) applies in relation to CGT events happening on or after 1 January 2018.

(2)       Division 980 of the Income Tax Assessment Act 1997 (as added by this Schedule) applies in relation to tenancies starting before, at or after 1 January 2018.

(3)       The amendment of subsection 355‑65(8) in Schedule 1 to the Taxation Administration Act 1953 made by this Schedule applies in relation to records and disclosures of information made at or after the commencement of this Schedule, whether the information was obtained before, at or after the commencement of this Schedule.