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Income Tax (Transitional Provisions) Act 1997

Authoritative Version
  • - C2019C00137
  • In force - Superseded Version
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Act No. 40 of 1997 as amended, taking into account amendments up to Treasury Laws Amendment (2018 Measures No. 5) Act 2019
An Act setting out application and transitional provisions for the Income Tax Assessment Act 1997
Administered by: Treasury
Registered 11 Apr 2019
Start Date 01 Apr 2019
End Date 30 Jun 2019

Commonwealth Coat of Arms of Australia

Income Tax (Transitional Provisions) Act 1997

No. 40, 1997

Compilation No. 85

Compilation date:                              1 April 2019

Includes amendments up to:            Act No. 15, 2019

Registered:                                         11 April 2019

 

About this compilation

This compilation

This is a compilation of the Income Tax (Transitional Provisions) Act 1997 that shows the text of the law as amended and in force on 1 April 2019 (the compilation date).

The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law.

Application, saving and transitional provisions for provisions and amendments

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Editorial changes

For more information about any editorial changes made in this compilation, see the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law.

Self‑repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

  

  

  


Contents

Chapter 1—Introduction and core provisions                                1

Part 1‑1—Preliminary                                                                                                         1

Division 1—Preliminary                                                                                              1

1‑1......................... Short title............................................................................ 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                                                                                                3

Division 4—How to work out the income tax payable on your taxable income               3

4‑1......................... Application of the Income Tax Assessment Act 1997......... 3

4‑11....................... Temporary budget repair levy............................................. 3

Division 5—How to work out when to pay your income tax                  6

Subdivision 5‑A—How to work out when to pay your income tax                 6

5‑5......................... Application of Division 5 of the Income Tax Assessment Act 1997         6

5‑7......................... References in tax sharing agreements to former section 204 6

5‑10....................... General interest charge liabilities under former subsection 204(3)           7

5‑15....................... Application of section 5‑15 of the Income Tax Assessment Act 1997      7

Division 6—Assessable income and exempt income                                     8

6‑2......................... Effect of this Division......................................................... 8

6‑3......................... Assessable income for income years before 1997‑98......... 8

6‑20....................... Exempt income for income years before 1997‑98............... 8

Division 8—Deductions                                                                                                9

8‑2......................... Effect of this Division......................................................... 9

8‑3......................... Deductions for income years before 1997‑98..................... 9

8‑10....................... No double deductions for income year before 1997‑98 and income year after 1996‑97          9

Chapter 2—Liability rules of general application                    10

Part 2‑1—Assessable income                                                                                         10

Division 15—Some items of assessable income                                             10

15‑1....................... General application provision........................................... 10

15‑10..................... Application of section 15‑10 of the Income Tax Assessment Act 1997 to bounties and subsidies           11

15‑15..................... Application of section 15‑15 of the Income Tax Assessment Act 1997 to profit‑making undertaking or plan.......................................................................................... 11

15‑20..................... Application of section 15‑20 of the Income Tax Assessment Act 1997 to royalties  11

15‑30..................... Application of section 15‑30 of the Income Tax Assessment Act 1997 to insurance or indemnity payments.......................................................................................... 11

15‑35..................... Application of section 15‑35 of the Income Tax Assessment Act 1997 to interest on overpayments and early payments of tax................................................................. 12

Division 20—Items included to reverse the effect of past deductions 13

Subdivision 20‑A—Insurance, indemnity or recoupment for deductible expenses        13

20‑1....................... Application of Subdivision 20‑A of the Income Tax Assessment Act 1997             13

Subdivision 20‑B—Disposal of a car for which lease payments have been deducted   13

20‑100................... Application of Subdivision 20‑B of the Income Tax Assessment Act 1997             14

20‑105................... The cost of a car acquired in the 1996‑97 income year or an earlier income year     14

20‑110................... The termination value of a car disposed of in the 1996‑97 income year or an earlier income year           14

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...................................................... 15

Part 2‑5—Rules about deductibility of particular kinds of amounts   17

Division 25—Some amounts you can deduct                                                  17

25‑1....................... Application of Division 25 of the Income Tax Assessment Act 1997       17

25‑40..................... Application of section 25‑40 of the Income Tax Assessment Act 1997    17

25‑45..................... Application of section 25‑45 of the Income Tax Assessment Act 1997    17

25‑50..................... Application of section 25‑90 of the Income Tax Assessment Act 1997    18

25‑65..................... Local government election expenses................................. 18

Division 26—Some amounts you cannot deduct, or cannot deduct in full            19

26‑1....................... Application of Division 26 of the Income Tax Assessment Act 1997       19

26‑30..................... Application of section 26‑30 of the Income Tax Assessment Act 1997    19

Division 30—Gifts or contributions                                                                    20

30‑1....................... Application of Division 30 of the Income Tax Assessment Act 1997       20

30‑5....................... Keeping in force old declarations and instruments............ 20

30‑25..................... Keeping in force the old gifts registers.............................. 21

30‑102................... Fund, authorities and institutions taken to be endorsed..... 22

Division 32—Entertainment expenses                                                               24

32‑1....................... Application of Division 32 of the Income Tax Assessment Act 1997       24

Division 34—Non‑compulsory uniforms                                                          25

34‑1....................... Application of Division 34 of the Income Tax Assessment Act 1997       25

34‑5....................... Things done under former section 51AL of the Income Tax Assessment Act 1936 25

Division 35—Deferral of losses from non‑commercial business activities           27

35‑10..................... Deductions for certain new business investment.............. 27

35‑20..................... Application of Commissioner’s decisions........................ 27

Division 36—Tax losses of earlier income years                                         28

36‑100................... Tax losses for the 1997‑98 and later income years........... 28

36‑105................... Tax losses for 1989‑90 to 1996‑97 income years............. 28

36‑110................... Tax losses for 1957‑58 to 1988‑89 income years............. 28

Part 2‑10—Capital allowances: rules about deductibility of capital expenditure               30

Division 40—Capital allowances                                                                          30

Subdivision 40‑B—Core provisions                                                                    30

40‑10..................... Plant.................................................................................. 31

40‑12..................... Plant acquired after 30 June 2001..................................... 33

40‑13..................... Accelerated depreciation for split or merged plant............ 33

40‑15..................... Recalculating effective life................................................ 34

40‑20..................... IRUs................................................................................. 34

40‑25..................... Software........................................................................... 35

40‑30..................... Spectrum licences............................................................. 35

40‑33..................... Datacasting transmitter licences........................................ 36

40‑35..................... Mining unrecouped expenditure....................................... 36

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

40‑38..................... Mining cash bidding payments......................................... 42

40‑40..................... Transport expenditure....................................................... 44

40‑43..................... Post‑30 June 2001 transport expenditure.......................... 46

40‑44..................... No additional decline in certain cases................................ 48

40‑45..................... Intellectual property.......................................................... 49

40‑47..................... IRUs................................................................................. 49

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

40‑55..................... Environmental impact assessment..................................... 50

40‑60..................... Pooling under Subdivision 42‑L of the former Act.......... 51

40‑65..................... Substituted accounting periods......................................... 52

40‑67..................... Methods for working out decline in value........................ 56

40‑70..................... References to amounts deducted and reductions in deductions                56

40‑72..................... New diminishing value method not to apply in some cases 57

40‑75..................... Mining expenditure incurred after 1 July 2001 on an asset 58

40‑77..................... Mining, quarrying or prospecting rights or information held before 1 July 2001    59

40‑80..................... Other expenditure incurred after 1 July 2001 on a depreciating asset       63

40‑100................... Commissioner’s determination of effective life................. 63

40‑105................... Calculations of effective life.............................................. 63

Subdivision 40‑C—Cost                                                                                          64

40‑230................... Car limit............................................................................ 64

Subdivision 40‑D—Balancing adjustments                                                        64

40‑285................... Balancing adjustments...................................................... 65

40‑287................... Disposal of pre‑1 July 2001 mining depreciating asset to associate         67

40‑288................... Disposal of pre‑1 July 2001 mining non‑depreciating asset to associate  68

40‑289................... Surrendered firearms........................................................ 68

40‑290................... Reduction of deductions under former Act etc.................. 69

40‑292................... Balancing adjustment—assets used for both general tax purposes and R&D activities            69

40‑293................... Balancing adjustment—partnership assets used for both general tax purposes and R&D activities         72

40‑295................... Later year relief................................................................. 74

40‑340................... Roll‑overs......................................................................... 75

40‑345................... Balancing adjustments for depreciating assets that retain CGT indexation               79

40‑365................... Involuntary disposals........................................................ 81

Subdivision 40‑E—Low‑value and software development pools                 81

40‑420................... Low‑value pools under Division 42 continue................... 81

40‑430................... Allocating assets to low‑value pools................................. 82

40‑450................... Software development pools............................................. 82

Subdivision 40‑F—Primary production depreciating assets                        82

40‑515................... Water facilities, grapevines and horticultural plants.......... 82

40‑520................... Special rule for water facilities you no longer hold........... 83

40‑525................... Amounts deducted for water facilities............................... 83

Subdivision 40‑G—Capital expenditure of primary producers and other landholders               84

40‑645................... Electricity supply and telephone lines............................... 84

40‑650................... Special rule for land that you no longer hold.................... 84

40‑670................... Farm consultants............................................................... 85

Subdivision 40‑I—Capital expenditure that is deductible over time           85

40‑825................... Genuine prospectors......................................................... 85

40‑832................... New method not to apply in some cases........................... 85

Subdivision 40‑J—Ships depreciated under section 57AM of the Income Tax Assessment Act 1936       86

40‑830................... Ships depreciated under section 57AM of the Income Tax Assessment Act 1936    86

Division 43—Deductions for capital works                                                    88

43‑100................... Application of Division 43 to quasi‑ownership rights over land              88

43‑105................... Application of subsections 43‑50(1) and (2) to hotel buildings and apartment buildings         88

43‑110................... Application of subsection 43‑75(3).................................. 88

Division 45—Disposal of leases and leased plant                                         89

45‑1....................... Application of Division 45 of the Income Tax Assessment Act 1997       89

45‑3....................... Application of Division 45 to disposals between February 1999 and September 1999           89

45‑40..................... Application of Division to plant formerly owned by exempt entities       90

Part 2‑15—Non‑assessable income                                                                            93

Division 50—Exempt entities                                                                                  93

50‑1....................... Application of Division 50 of the Income Tax Assessment Act 1997       93

50‑50..................... Charities established prior to 1 July 1997......................... 93

Division 51—Exempt amounts                                                                               94

51‑1....................... Application of Division 51 of the Income Tax Assessment Act 1997       94

Division 52—Certain pensions, benefits and allowances are exempt from income tax 95

52‑1....................... Application of Division 52 of the Income Tax Assessment Act 1997       95

Division 53—Various exempt payments                                                           96

53‑1....................... Application of Division 53 of the Income Tax Assessment Act 1997       96

Division 54—Exemption for certain payments made under structured settlements and structured orders                                                                                                                      97

54‑1....................... Application of Division 54 of the Income Tax Assessment Act 1997       97

Division 55—Payments that are not exempt from income tax             98

55‑1....................... Application of Division 55 of the Income Tax Assessment Act 1997       98

Division 59—Particular amounts of non‑assessable non‑exempt income             99

Subdivision 59‑N—Native title benefits                                                              99

59‑50..................... Indigenous holding entities............................................... 99

Part 2‑20—Tax offsets                                                                                                    100

Division 61—Generally applicable tax offsets                                            100

Subdivision 61‑L—Tax offset for Medicare levy surcharge (lump sum payments in arrears) 100

61‑575................... Application of Subdivision 61‑L of the Income Tax Assessment Act 1997              100

Part 2‑25—Trading stock                                                                                              101

Division 70—Trading stock                                                                                   101

70‑1....................... Application of Division 70 of the Income Tax Assessment Act 1997       101

70‑10..................... Accounting for your disposal of items that stop being trading stock because of the change of definition........................................................................................ 102

70‑20..................... Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997..................................................................... 104

70‑55..................... Cost of live stock acquired by natural increase............... 104

70‑70..................... Valuing interests in FIFs on hand at the start of 1991‑92 105

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.......................... 105

70‑100................... Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business............................................ 106

70‑105................... Application of section 70‑105 of the Income Tax Assessment Act 1997 to deaths on or after 1 July 1997........................................................................................ 106

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.................................. 107

Part 2‑40—Rules affecting employees and other taxpayers receiving PAYG withholding payments   108

Division 82Pre‑10 May 2006 entitlements to life benefit termination payments          108

Subdivision 82‑AApplication of Division                                                     108

82‑10..................... Pre‑10 May 2006 entitlements—transitional termination payments        108

Subdivision 82‑BTransitional termination payments: general              110

82‑10A.................. Recipient has reached preservation age........................... 110

82‑10B.................. Lower cap amount.......................................................... 111

82‑10C.................. Recipient under preservation age.................................... 113

82‑10D.................. Upper cap amount........................................................... 114

Subdivision 82‑CPre‑payment statements                                                   115

82‑10E................... Transitional termination payments—pre‑payment statements.. 115

Subdivision 82‑DDirected termination payments made to superannuation and other entities               115

82‑10F................... Directed termination payments....................................... 115

82‑10G.................. Directed termination payments not assessable income and not exempt income        116

Subdivision 82‑EPre‑10 May 2006 entitlements and employment termination payments made after 1 July 2012                                                                                                       117

82‑10H.................. Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012................................................................................ 117

Division 83A—Employee share schemes                                                        118

Subdivision 83A‑A—Application of Division 83A of the Income Tax Assessment Act 1997      118

83A‑5.................... Application of Division 83A of the Income Tax Assessment Act 1997    118

Subdivision 83A‑B—Application of former provisions of the Income Tax Assessment Act 1936            121

83A‑10.................. Savings—continued operation of former provisions...... 121

83A‑15.................. Indeterminate rights........................................................ 122

Chapter 3—Specialist liability rules                                                       123

Part 3‑1—Capital gains and losses: general topics                                         123

Division 102—Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997         123

102‑1..................... Application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997              123

102‑5..................... Working out capital gains and capital losses................... 123

102‑15................... Applying net capital losses............................................. 124

102‑20................... Net capital gains, capital gains and capital losses for income years before 1998‑99 125

102‑25................... Transitional capital gains tax provisions for certain Cocos (Keeling) Islands and Norfolk Island assets 125

Division 104—CGT events                                                                                    128

Subdivision 104‑C—End of a CGT asset                                                          128

104‑25................... Cancellation, surrender and similar endings.................... 128

Subdivision 104‑D—Bringing into existence a CGT asset                           128

104‑40................... Granting an option.......................................................... 128

Subdivision 104‑E—Trusts                                                                                  129

104‑70................... Capital payment before 18 December 1986 for trust interest 129

Subdivision 104‑G—Shares                                                                                 130

104‑135................. Capital payment for shares.............................................. 130

Subdivision 104‑I—Australian residency ends                                               130

104‑165................. Choices made under subsection 104‑165(2) of the Income Tax Assessment Act 1997            130

104‑166................. Subsection 104‑165(1) still applies if you continue to be a short term Australian resident      131

Subdivision 104‑J—CGT events relating to roll‑overs                                131

104‑175................. Company ceasing to be member of wholly‑owned group after roll‑over 131

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..................................... 132

Subdivision 104‑K—Other CGT events                                                            132

104‑205................. Partial realisation of intellectual property........................ 132

104‑235................. CGT event K7: asset used for old law R&D activities.... 133

Division 108—CGT assets                                                                                     135

Subdivision 108‑A—What a CGT asset is                                                        135

108‑5..................... CGT assets..................................................................... 135

Subdivision 108‑B—Collectables                                                                       135

108‑15................... Sets of collectables.......................................................... 135

Subdivision 108‑D—Separate CGT assets                                                       136

108‑75................... Capital improvements to CGT assets for which a roll‑over may be available           136

108‑85................... Improvement threshold................................................... 137

Division 109—Acquisition of CGT assets                                                      138

Subdivision 109‑A—Operative rules                                                                 138

109‑5..................... General acquisition rules................................................. 138

Division 110—Cost base and reduced cost base                                        139

Subdivision 110‑A—Cost base                                                                            139

110‑25................... Cost base of CGT asset of life insurance company or registered organisation         139

110‑35................... Incidental costs............................................................... 139

Division 112—Modifications to cost base and reduced cost base     140

Subdivision 112‑A—General rules                                                                    140

112‑20................... Market value substitution rule......................................... 140

Subdivision 112‑B—Special rules                                                                      140

112‑100................. Effect of terminated gold mining exemptions.................. 140

Division 114—Indexation of cost base                                                            142

114‑5..................... When indexation relevant................................................ 142

Division 118—Exemptions                                                                                     143

Subdivision 118‑A—General exemptions                                                        143

118‑10................... Interests in collectables................................................... 143

118‑24A................ Pilot plant........................................................................ 143

Subdivision 118‑B—Main residence                                                                 144

118‑195................. Exemption—dwelling acquired from deceased estate..... 144

Subdivision 118‑C—Goodwill                                                                             144

118‑260................. Business exemption threshold........................................ 145

Division 121—Record keeping                                                                            146

121‑15................... Retaining records under Division 121............................ 146

121‑25................... Records for mergers between qualifying superannuation funds               146

Part 3‑3—Capital gains and losses: special topics                                          147

Division 124—Replacement‑asset roll‑overs                                               147

Subdivision 124‑C—Statutory licences                                                             147

124‑140................. New statutory licence—ASGE licence etc...................... 147

124‑141................. ASGE licence etc.—cost base of ineligible part.............. 148

124‑142................. ASGE licence etc.—cost base of aquifer access licence etc. 149

Subdivision 124‑I—Change of incorporation                                                 150

124‑510................. Application of Subdivision 124‑I of the Income Tax Assessment Act 1997             150

Division 125—Demerger relief                                                                            151

Subdivision 125‑B—Consequences for owners of interests                         151

125‑75................... Employee share schemes................................................ 151

Division 126—Roll‑overs                                                                                        152

Subdivision 126‑A—Merger of qualifying superannuation funds            152

126‑100................. Merger of qualifying superannuation funds.................... 152

Subdivision 126‑B—Transfer of life insurance business                             153

126‑150................. Roll‑over on transfer of life insurance business.............. 153

126‑160................. Effects of roll‑over.......................................................... 154

126‑165................. References to Subdivision 126‑B of the Income Tax Assessment Act 1997             155

Division 128—Effect of death                                                                              156

128‑15................... Effect on the legal personal representative or beneficiary 156

Division 130—Investments                                                                                    157

Subdivision 130‑A—Bonus shares and units                                                   157

130‑20................... Issue of bonus shares or units........................................ 157

Subdivision 130‑B—Rights                                                                                  158

130‑40................... Exercise of rights............................................................ 158

Subdivision 130‑C—Convertible notes                                                             158

130‑60................... Shares or units acquired by converting a convertible note 159

Division 134—Options                                                                                             160

134‑1..................... Exercise of options......................................................... 160

Division 136—Foreign residents                                                                         161

Subdivision 136‑A—Making a capital gain or loss                                       161

136‑25................... When an asset is taxable Australian property.................. 161

Division 140—Share value shifting                                                                   162

Subdivision 140‑A—When is there share value shifting?                            162

140‑7..................... Pre‑1994 share value shifts irrelevant............................. 162

140‑15................... Off‑market buy backs..................................................... 162

Division 149—When an asset stops being a pre‑CGT asset                163

149‑5..................... Assets that stopped being pre‑CGT assets under old law 163

Division 152—Small business relief                                                                   164

152‑5..................... Small business roll‑over chosen but no capital gain returned 164

152‑10................... Small business roll‑over not chosen and time remains to acquire a replacement asset              165

152‑15................... Amendment of assessments............................................ 165

Part 3‑5—Corporate taxpayers and corporate distributions                  167

Division 165—Income tax consequences of changing ownership or control of a company        167

Subdivision 165‑CA—Applying net capital losses of earlier income years 167

165‑95................... Application of Subdivision 165‑CA of the Income Tax Assessment Act 1997        167

Subdivision 165‑CB—Working out the net capital gain and the net capital loss for the income year of the change                                                                                                       168

165‑105................. Application of Subdivision 165‑CB of the Income Tax Assessment Act 1997         168

Subdivision 165‑CC—Change of ownership or control of company that has an unrealised net loss        168

165‑115E............... Choice to use global method to work out unrealised net loss 168

Subdivision 165‑CD—Reductions after alterations in ownership or control of loss company   169

165‑115U.............. Choice to use global method to work out adjusted unrealised loss           169

165‑115ZC............ When certain notices to be given..................................... 169

165‑115ZD............ Adjustment (or further adjustment) for interest realised at a loss after global method has been used       171

Subdivision 165‑C—Deducting bad debts                                                        173

165‑135................. Application of Subdivision 165‑C of the Income Tax Assessment Act 1997           173

Division 166—Income tax consequences of changing ownership or control of a listed public company                                                                                                                    174

Subdivision 166‑C—Deducting bad debts                                                        174

166‑40................... Application of Subdivision 166‑C of the Income Tax Assessment Act 1997           174

Division 167—Companies whose shares carry unequal rights to dividends, capital distributions or voting power                                                                                                      175

167‑1..................... Application of provisions............................................... 175

Division 170—Treatment of company groups for income tax purposes               177

Subdivision 170‑A—Transfer of tax losses within certain wholly‑owned groups of companies                177

170‑45................... Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred....................................................................... 177

170‑55................... Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997................................................................................ 178

Subdivision 170‑B—Transfer of net capital losses within certain wholly‑owned groups of companies  178

170‑101................. Application of Subdivision 170‑B of the Income Tax Assessment Act 1997           178

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....................................................................... 178

170‑155................. Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997................................................................................ 179

Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies                                     179

170‑220................. Direct and indirect interests in the loss company............ 179

170‑225................. Direct and indirect interests in the gain company............ 179

Subdivision 170‑D—Transfer of life insurance business                             180

170‑300................. Transfer of life insurance business................................. 180

Division 175—Use of a company’s losses, deductions or bad debts to avoid income tax             181

Subdivision 175‑CA—Tax benefits from unused net capital losses of earlier income years      181

175‑40................... Application of Subdivision 175‑CA of the Income Tax Assessment Act 1997        181

Subdivision 175‑CB—Tax benefits from unused capital losses of the current year     181

175‑55................... Application of Subdivision 175‑CB of the Income Tax Assessment Act 1997         181

Subdivision 175‑C—Tax benefits from unused bad debt deductions        182

175‑78................... Application of Subdivision 175‑C of the Income Tax Assessment Act 1997           182

Division 197—Tainted share capital accounts                                            183

Subdivision 197‑A—Definitions                                                                         183

197‑1..................... Definitions...................................................................... 183

Subdivision 197‑B—General application provision                                     183

197‑5..................... Application of new Division 197.................................... 184

Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off                                                      184

197‑10................... Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off................................................................................... 184

197‑15................... Account taken to have ceased to be tainted when old Division 7B was closed off   184

197‑20................... After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting............................................................................ 185

197‑25................... Special provisions if company chooses to untaint after introduction day 185

Part 3‑6—The imputation system                                                                             189

Division 201—Object and application of Part 3‑6                                    189

201‑1..................... Estimated debits.............................................................. 189

Division 203—Benchmark rule                                                                           190

203‑1..................... Franking periods straddling 1 July 2002........................ 190

Division 205—Franking accounts                                                                      191

205‑1..................... Order of events provision............................................... 191

205‑5..................... Washing estimated debits out of the franking account before conversion                192

205‑10................... Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002............................................................. 192

205‑15................... Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002....................................................... 193

205‑20................... A late balancing company may elect to have its FDT liability determined on 30 June              195

205‑25................... Franking deficit tax......................................................... 196

205‑30................... Deferring franking deficit............................................... 196

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............................................................................... 197

205‑70................... Tax offset arising from franking deficit tax liabilities...... 198

205‑71................... Modification of franking deficit tax offset rules.............. 202

205‑75................... Working out the tax offset for the first income year........ 203

205‑80................... Application of Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936........................................................................................ 204

Division 208—Exempting entities and former exempting entities    205

208‑111................. Converting former exempting company’s exempting account balance on 30 June 2002          205

Division 210—Venture capital franking                                                         209

210‑1..................... Order of events provision............................................... 209

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

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

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............................................... 211

Division 214—Administering the imputation system                               212

214‑1..................... Application..................................................................... 212

214‑5..................... Entity must give a franking return................................... 213

214‑10................... Notice to a specific corporate tax entity........................... 213

214‑15................... Effect of a refund on franking returns............................. 213

214‑20................... Franking returns for the income year.............................. 215

214‑25................... Commissioner may make a franking assessment............ 215

214‑30................... Commissioner taken to have made a franking assessment on first return 215

214‑35................... Amendments within 3 years of the original assessment.. 216

214‑40................... Amended assessments are treated as franking assessments 216

214‑45................... Further return as a result of a refund affecting a franking deficit tax liability           217

214‑50................... Later amendments—on request....................................... 217

214‑55................... Later amendments—failure to make proper disclosure... 217

214‑60................... Later amendments—fraud or evasion............................. 218

214‑65................... Further amendment of an amended particular................. 218

214‑70................... Other later amendments.................................................. 219

214‑75................... Amendment on review etc.............................................. 219

214‑80................... Notice of amendments.................................................... 219

214‑85................... Validity of assessment.................................................... 219

214‑90................... Objections....................................................................... 219

214‑100................. Due date for payment of franking tax............................. 220

214‑105................. General interest charge.................................................... 221

214‑110................. Refunds of amounts overpaid......................................... 221

214‑120................. Record keeping............................................................... 221

214‑125................. Power of Commissioner to obtain information............... 222

214‑135................. Interpretation................................................................... 222

Division 219—Imputation for life insurance companies                        223

219‑40................... Reversing and replacing (on tax paid basis) certain franking credits that arose before 1 July 2002         223

219‑45................... Reversing (on tax paid basis) certain franking debits that arose before 1 July 2002                224

Division 220—Imputation for NZ resident companies and related companies  226

220‑1..................... Application to things happening on or after 1 April 2003 226

220‑5..................... Residency requirement for income year including 1 April 2003              226

220‑10................... NZ franking company cannot frank before 1 October 2003 226

220‑35................... Extended time to make NZ franking choice.................... 227

220‑501................. Franking and exempting accounts of new former exempting entities       227

Part 3‑10—Financial transactions                                                                            231

Division 235—Particular financial transactions                                        231

Subdivision 235‑I—Instalment trusts                                                                231

235‑810................. Application of Subdivision 235‑I of the Income Tax Assessment Act 1997             231

Division 242—Leases of luxury cars                                                                232

242‑10................... Application..................................................................... 232

242‑20................... Balancing adjustments.................................................... 232

Division 245—Forgiveness of commercial debts                                       233

Subdivision 245‑A—Application of Division 245 of the Income Tax Assessment Act 1997        233

245‑5..................... Application and saving................................................... 233

245‑10................... Pre‑28 June 1996 arrangements etc................................ 233

Division 247—Capital protected borrowings                                              235

Subdivision 247‑A—Interim apportionment methodology                         235

247‑5..................... Interim apportionment methodology............................... 235

247‑10................... Products listed on the Australian Stock Exchange that have explicit put options     235

247‑15................... Other capital protected products...................................... 237

247‑20................... The indicator method...................................................... 237

247‑25................... The percentage method................................................... 238

Subdivision 247‑B—Other transitional provisions                                       238

247‑75................... Post‑July 2007 capital protected borrowings.................. 239

247‑80................... Capital protected borrowings in existence on 1 July 2013 240

247‑85................... Extensions and other changes......................................... 241

Division 253—Financial claims scheme for account‑holders with insolvent ADIs           243

Subdivision 253‑A—Tax treatment of entitlements under financial claims scheme     243

253‑5..................... Application of section 253‑5 of the Income Tax Assessment Act 1997    243

253‑10................... Application of sections 253‑10 and 253‑15 of the Income Tax Assessment Act 1997             243

Part 3‑25—Particular kinds of trusts                                                                     244

Division 275—Australian managed investment trusts                            244

Subdivision 275‑A—Choice for capital treatment of MIT gains and losses 244

275‑10................... Consequences of making choice—Commissioner cannot make certain amendments to previous assessments........................................................................................ 244

Subdivision 275‑L—Modification for non‑arm’s length income               246

275‑605................. Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year              246

Division 276—Attribution managed investment trusts                           248

Subdivision 276‑A—Application                                                                        248

276‑5..................... Application of Division 276........................................... 248

Subdivision 276‑B—Starting income year                                                      248

276‑25................... Starting income year....................................................... 248

Subdivision 276‑T—Becoming an AMIT: unders and overs                      249

276‑700................. Application of Subdivision to MIT that becomes AMIT 249

276‑705................. Accounting for unders and overs for base years before becoming an AMIT           249

Subdivision 276‑U—Becoming an AMIT: CGT treatment of payment by trustee of AMIT       250

276‑750................. Payment by trustee on or after 1 July 2011—certain CGT provisions etc. apply for the purposes of working out non‑assessable part for first income year of AMIT.. 250

276‑755................. Payment by trustee before 1 July 2011—limit on amendment of assessment          251

Part 3‑30—Superannuation                                                                                         253

Division 290Contributions                                                                                253

290‑10................... Directed termination payments not deductible etc........... 253

290‑15................... Early balancers—deduction limits from end of 2006‑2007 income year to 1 July 2007          253

Division 291—Excess concessional contributions                                     255

Subdivision 291‑A—Application of Division 291 of the Income Tax Assessment Act 1997        255

291‑10................... Application of Division 291 of the Income Tax Assessment Act 1997     255

Subdivision 291‑C—Modifications for defined benefit interests               255

291‑170................. Transitional rules for notional taxed contributions.......... 255

Division 292Excess non‑concessional contributions tax                   259

292‑80................... Application of excess non‑concessional contributions tax from 10 May 2006 to 1 July 2007 259

292‑80A................ Transitional release authority.......................................... 262

292‑80B................ Giving a transitional release authority to a superannuation provider        263

292‑80C................ Superannuation provider given transitional release authority must pay amount       263

292‑85................... Non‑concessional contributions cap for a financial year. 264

292‑90................... Non‑concessional contributions for a financial year....... 265

Division 293—Sustaining the superannuation contribution concession 266

Subdivision 293‑A—Application of Division 293 tax rules                         266

293‑10................... Application of Division 293 of the Income Tax Assessment Act 1997     266

Division 294—Transfer balance cap                                                                267

Subdivision 294‑A—Application of Division 294 of the Income Tax Assessment Act 1997        267

294‑10................... Application of Division 294 of the Income Tax Assessment Act 1997     267

294‑30................... Minor excess transfer balances disregarded if remedied in first 6 months               267

294‑55................... Repayment of limited recourse borrowing arrangements 268

294‑80................... Structured settlement contributions made before 1 July 2017—debit increased to match credits             269

Subdivision 294‑B—CGT relief                                                                         269

294‑100................. Object............................................................................. 269

294‑105................. Interpretation................................................................... 270

294‑110................. Segregated current pension assets................................... 270

294‑115................. Superannuation funds using the proportionate method—deemed sale and purchase of CGT asset          271

294‑120................. Superannuation funds using the proportionate method—disregard initial capital gain but recognise deferred notional gain................................................................... 272

294‑125................. Pooled superannuation trust using proportionate or alternative exemption method—deemed sale and purchase of CGT asset................................................................... 274

294‑130................. Pooled superannuation trusts using proportionate or alternative exemption method—disregard initial capital gain but recognise deferred notional gain........................ 275

Division 295—Taxation of superannuation entities                                 277

Subdivision 295‑B—Modifications of the Income Tax Assessment Act 1997 for 30 June 1988 assets    277

295‑75................... Application of Subdivision............................................. 277

295‑80................... Meaning of 30 June 1988 asset...................................... 277

295‑85................... Cost base of 30 June 1988 asset..................................... 278

295‑90................... Market value of stock exchange listed assets.................. 278

295‑95................... Adjustment of cost base as at 30 June 1988—return of capital                279

295‑100................. Exercise of rights............................................................ 279

Subdivision 295‑C—Notices relating to contributions                                  280

295‑190................. Deductions for personal contributions............................ 280

Subdivision 295‑F—Exempt income                                                                 281

295‑390................. Fixed interest complying ADFs—exemption of income attributable to certain 25 May 1988 deposits    281

Subdivision 295‑G—Deductions                                                                         284

295‑465................. Complying funds—deductions for insurance premiums. 284

Subdivision 295‑I—No‑TFN contributions income                                       284

295‑610................. No‑TFN contributions income........................................ 284

Division 301—Superannuation member benefits paid from complying plans etc.           286

301‑5..................... Extended application to certain foreign superannuation funds  286

301‑85................... Extended meaning of disability superannuation benefit for superannuation income stream     286

Division 302—Superannuation death benefits paid from complying plans etc. 287

302‑5..................... Extended application to certain foreign superannuation funds  287

302‑195................. Extended meaning of death benefits dependant for superannuation income stream 287

302‑195A.............. Meaning of death benefits dependant for 2008‑2009 income year           288

Division 303—Superannuation benefits paid in special circumstances  289

303‑10................... Superannuation lump sum member benefit paid to member having a terminal medical condition            289

Division 304—Superannuation benefits in breach of legislative requirements etc.         290

304‑15................... Excess payments from release authorities....................... 290

Division 305—Superannuation benefits paid from non‑complying superannuation plans           291

Subdivision 305‑B—Superannuation benefits from foreign superannuation funds     291

305‑80................... Lump sums paid into complying superannuation plans post‑FIF abolition              291

Division 306—Roll‑overs etc.                                                                               293

306‑10................... Roll‑over superannuation benefit—directed termination payment            293

Division 307—Key concepts relating to superannuation benefits    294

307‑125................. Treatment of tax free component of existing pension payments etc.         294

307‑127................. Extension—income stream replacing an earlier one because of an involuntary roll‑over         297

307‑230................. Total superannuation balance—modification for transfer balance just before 1 July 2017       298

307‑290................. Taxed and untaxed elements of death benefit superannuation lump sums                299

307‑345................. Low rate component—Effect of rebate under the Income Tax Assessment Act 1936               299

Part 3‑32—Co‑operatives and mutual entities                                                  300

Division 316—Demutualisation of friendly society health or life insurers           300

Subdivision 316‑A—Application                                                                        300

316‑1..................... Application of Division 316 of the Income Tax Assessment Act 1997     300

Part 3‑35—Insurance business                                                                                   301

Division 320—Life insurance companies                                                       301

Operative provisions                                                                                             301

Subdivision 320‑A—Preliminary                                                                       301

320‑5..................... Life insurance companies that are friendly societies........ 301

Subdivision 320‑C—Deductions and capital losses                                        302

320‑85................... Deduction for increase in value of liabilities under risk components of life insurance policies                302

Subdivision 320‑D—Taxable income and tax loss of life insurance companies            302

320‑100................. Savings—tax losses of previous income years............... 303

Subdivision 320‑F—Virtual PST                                                                        303

320‑170................. Transfer of part of an asset to a virtual PST.................... 303

320‑175................. Transfers of assets to virtual PST................................... 304

320‑180................. Deferred annuities purchased before 1 July 2007........... 305

Subdivision 320‑H—Segregation of assets for the purpose of discharging exempt life insurance policies            305

320‑225................. Transfer of part of an asset to segregated exempt assets. 305

320‑230................. Transfers of assets to segregated exempt assets.............. 306

Division 322—Assistance for policyholders with insolvent general insurers      308

Subdivision 322‑B—Tax treatment of entitlements under financial claims scheme     308

322‑25................... Application of section 322‑25 of the Income Tax Assessment Act 1997  308

322‑30................... Application of section 322‑30 of the Income Tax Assessment Act 1997  308

Part 3‑45—Rules for particular industries and occupations                   309

Division 328—Small business entities                                                               309

328‑1..................... Definitions...................................................................... 309

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........................................................ 310

328‑111................. Access to certain small business concessions for former STS taxpayers that are winding up a business........................................................................................ 310

328‑112................. Working out whether you are a small business entity for certain small business concessions—entities connected with you......................................................... 311

328‑115................. When you stop using the STS accounting method.......... 312

328‑120................. Continuing to use the STS accounting method............... 313

328‑125................. Meaning of STS accounting method............................... 314

328‑175................. Choices made in relation to depreciating assets used in primary production business              314

328‑180................. Increased access to accelerated depreciation from 12 May 2015 to 30 June 2019    314

328‑185................. Depreciating assets allocated to STS pools..................... 316

328‑195................. Opening pool balances for 2007‑08 income year............ 316

328‑200................. General small business pool for the 2012‑13 income year 317

328‑440................. Taxpayers who left the STS on or after 1 July 2005....... 318

Division 355—Research and Development                                                   319

Subdivision 355‑D—Registration for activities before 2011‑12 income year                319

355‑200................. Registration for activities before 2011‑12 income year... 319

Subdivision 355‑E—Balancing adjustments for decline in value deductions for assets used in R&D activities    319

355‑320................. Balancing adjustment—assets only used for R&D activities 320

355‑325................. Balancing adjustment—R&D partnership assets only used for R&D activities       323

355‑340................. Balancing adjustment—tax exempt entities that become taxable               327

Subdivision 355‑F—Integrity rules                                                                   327

355‑415................. Expenditure reduced to reflect group mark‑ups.............. 327

Subdivision 355‑K—Modified application of the old R&D law                 328

355‑550................. Prepayments of R&D expenditure extending into the 2011‑12 income year            328

Subdivision 355‑M—Undeducted core technology expenditure                 329

355‑600................. Scope.............................................................................. 329

355‑605................. Core technology that is a depreciating asset.................... 330

355‑610................. Core technology that is not a depreciating asset.............. 330

Subdivision 355‑W—Other matters                                                                  330

355‑720................. Certain related amounts may be reduced if notional deductions exceeded $100 million           331

Division 375—Australian films                                                                            332

Subdivision 375‑G—Film losses                                                                         332

375‑100................. Film component of tax loss for 1997‑98 or later income year  332

375‑105................. Film component of tax loss for 1989‑90 to 1996‑97 income years          332

375‑110................. Film loss for 1989‑90 or later income year..................... 332

Division 392—Long‑term averaging of primary producers’ tax liability            333

392‑1..................... Application of Division 392 of the Income Tax Assessment Act 1997     333

392‑25................... Transitional provision—election under section 158A of the Income Tax Assessment Act 1936              333

Division 393—Farm management deposits                                                   335

Subdivision 393‑A—Tax consequences of farm management deposits   335

393‑1..................... Application of Division 393 of the Income Tax Assessment Act 1997     335

393‑5..................... Unrecouped FMD deduction.......................................... 335

393‑10................... Unrecouped FMD deduction for deposits made as a result of section 25B of the Loan (Income Equalization Deposits) Act 1976......................................................... 336

393‑27................... Trustee may choose that a beneficiary is a chosen beneficiary of the trust               336

393‑30................... Unclaimed moneys......................................................... 337

Subdivision 393‑B—Meaning of farm management deposit and owner 337

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......................................................... 337

Division 410—Copyright collecting societies                                               339

410‑1..................... Application of section 51‑43 of the Income Tax Assessment Act 1997    339

Division 415—Designated infrastructure projects                                   340

Subdivision 415‑B—Application of Subdivision 415‑B of the Income Tax Assessment Act 1997             340

415‑10................... Application of Subdivision 415‑B of the Income Tax Assessment Act 1997           340

Part 3‑50—Climate change                                                                                          341

Division 420—Registered emissions units                                                      341

Subdivision 420‑A—General application provision                                     341

420‑1..................... Application of Division 420 of the Income Tax Assessment Act 1997     341

Part 3‑80—Roll‑overs applying to assets generally                                        342

Division 615—Roll‑overs for business restructures                                 342

Subdivision 615‑A—Modifications for roll‑overs between the 2011 and 2012 Budget times     342

615‑5..................... Roll‑overs between the 2011 and 2012 Budget times..... 342

615‑10................... Modifications—when additional consequences can apply 342

615‑15................... Modifications—trading stock......................................... 343

615‑20................... Modifications—revenue assets....................................... 343

Division 620—Assets of wound‑up corporation passing to corporation with not significantly different ownership                                                                                              344

Subdivision 620‑A—Corporations covered by Subdivision 124‑I             344

620‑10................... Application of Subdivision 620‑A of the Income Tax Assessment Act 1997           344

Part 3‑90—Consolidated groups                                                                               345

Division 700—Application of Part 3‑90 of Income Tax Assessment Act 1997  345

700‑1..................... Application of Part 3‑90 of Income Tax Assessment Act 1997                345

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               346

Subdivision 701‑A—Preliminary                                                                       346

701‑1..................... Transitional group and transitional entity........................ 346

701‑5..................... Chosen transitional entity................................................ 347

701‑7..................... Working out the cost base or reduced cost base of a pre‑CGT asset after certain roll‑overs    348

701‑10................... Interpretation................................................................... 349

Subdivision 701‑B—Modified application of provisions                             349

701‑15................... Tax cost and trading stock value not set for assets of chosen transitional entities    349

701‑20................... Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities........................................................................................ 350

701‑25................... No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities............................................................................. 353

701‑32................... No adjustment of amount of liabilities required in working out allocable cost amount             353

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.............. 354

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     355

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.............................................................................. 356

701‑50................... Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity............................................................. 357

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     361

701A‑1.................. Continuing majority‑owned entity, designated group etc. 361

701A‑5.................. Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity..................................................... 362

701A‑7.................. Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity................................... 363

701A‑10................ Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity................................... 364

Division 701B—Modified application of provisions of Income Tax Assessment Act 1997 relating to CGT event L1                                                                                                 370

701B‑1.................. Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1.......................................................................... 370

Division 701CModified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures                                       372

Subdivision 701C‑AOverview                                                                         372

701C‑1.................. Overview........................................................................ 372

Subdivision 701C‑BMembership rules allowing foreign holding         373

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........................................................................................ 373

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...................................................................... 375

701C‑20................ Transitional foreign‑held subsidiaries and transitional foreign‑held indirect subsidiaries         376

Subdivision 701C‑C—Modifications of tax cost setting rules                     377

Application and object                                                                                          378

701C‑25................ Application and object of this Subdivision..................... 378

Basic modification                                                                                                 378

701C‑30................ Transitional foreign‑held subsidiary to be treated as part of head company             378

Other modifications                                                                                               379

701C‑35................ Trading stock value not set for assets of transitional foreign‑held subsidiaries        379

701C‑40................ Cost setting rules for exit cases—modification of core rules 379

701C‑50................ Cost setting rules for exit cases—reference to modification of core rule  380

Division 701DTransitional foreign loss makers                                    381

Subdivision 701D‑AObject of this Division                                                 381

701D‑1.................. Object of this Division.................................................... 381

Subdivision 701D‑BRules allowing transitional foreign loss makers to remain outside consolidated group    381

701D‑10................ Transitional foreign loss maker not member of group if certain conditions satisfied                382

701D‑15................ Choice to apply transitional rules to entity...................... 384

Division 702—Modified application of this Act to assets that an entity brings into a consolidated group                                                                                                                    385

702‑1..................... Modified application of section 40‑77 of this Act to assets that an entity brings into a consolidated group........................................................................................ 385

702‑4..................... Extended operation of subsection 40‑285(3).................. 386

702‑5..................... Modified application of subsection 40‑285(6) of this Act after entity brings assets into consolidated group........................................................................................ 387

Division 703—Consolidated groups and their members                        389

703‑30................... Debt interests that are not membership interests............. 389

703‑35................... Employee share schemes................................................ 389

Division 705—Tax cost setting amount for assets where entities become members of consolidated groups                                                                                                                    390

Subdivision 705‑E—Expenditure relating to exploration, mining or quarrying          390

705‑300................. Application and object of this Subdivision..................... 390

705‑305................. Rules affecting depreciating assets.................................. 391

705‑310................. Adjustable value of head company’s notional assets...... 393

Division 707—Losses for head companies when entities become members etc.                395

Subdivision 707‑A—Transfer of losses to head company                           395

707‑145................. Certain choices to cancel the transfer of a loss may be revoked               395

Subdivision 707‑C—Amount of transferred losses that can be utilised    396

707‑325................. Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value............................................................................... 396

707‑326................. Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value.................................................................... 400

707‑327................. Choosing available fraction to apply to value donor’s loss 401

707‑328................. Income year and conditions for possible transfer under Division 170 of the Income Tax Assessment Act 1997........................................................................................ 403

707‑328A.............. Some events involving only group members not covered by rule against inflation of modified market value........................................................................................ 405

707‑329................. Modified market value at a time before 8 December 2004 407

707‑350................. Alternative loss utilisation regime to Subdivision 707‑C of the Income Tax Assessment Act 1997         408

707‑355................. Ignore certain losses in working out when a choice can be made under this Subdivision        410

Subdivision 707‑D—Special rules about losses                                               411

707‑405................. Special rules about losses referable to part of income year 411

Division 709—Other rules applying when entities become subsidiary members etc.     412

Subdivision 709‑D—Deducting bad debts                                                        412

709‑200................. Application of Subdivision 709‑D of the Income Tax Assessment Act 1997           412

Division 712—Certain rules for where entities cease to be subsidiary members of consolidated groups                                                                                                                    413

Subdivision 712‑E—Expenditure relating to exploration, mining or quarrying          413

712‑305................. Reducing adjustable value of head company’s notional asset.. 413

Division 713—Rules for particular kinds of entities                                414

Subdivision 713‑L—Transitional relief for certain transactions relating to life insurance companies  414

713‑500................. Object of Subdivision..................................................... 414

713‑505................. When this Subdivision applies (first case)...................... 414

713‑510................. When this Subdivision applies (second case)................. 415

713‑515................. Entities must choose the relief......................................... 416

713‑520................. Conditions...................................................................... 416

713‑525................. Time of transfer.............................................................. 417

713‑530................. What the relief is............................................................. 418

713‑535................. Subsequent consequences............................................... 418

713‑540................. Requirement to notify happening of new event............... 420

713‑545................. Discount capital gain in certain cases.............................. 420

Subdivision 713‑M—General insurance companies                                     421

713‑700................. Application..................................................................... 421

Division 715—Interactions between the consolidation rules and other areas of the income tax law    422

Subdivision 715‑F—Interactions with Division 230 (financial arrangements)              422

715‑380................. Exit history rule not to affect certain matters related to Division 230 financial arrangements   422

Subdivision 715‑J—Entry history rule and choices                                      423

715‑658................. Application..................................................................... 423

715‑659................. Extension of time for making choice if joining time was before commencement     423

Subdivision 715‑K—Exit history rule and choices                                        423

715‑698................. Application..................................................................... 424

715‑699................. Extension of time for making choice if leaving time was before commencement     424

Division 716—Miscellaneous special rules                                                    425

Subdivision 716‑G—Software development pools                                         425

716‑340................. Expenditure incurred before 1 July 2001 and allocated to a software pool               425

Division 719—MEC rules                                                                                       426

Subdivision 719‑A—Modified application of Part 3‑90 to MEC groups 426

719‑2..................... Modified application of Part 3‑90 to MEC groups......... 426

Subdivision 719‑B—MEC groups and their members                                  427

719‑5..................... Debt interests that are not membership interests............. 427

719‑10................... Effect of Division 701C.................................................. 427

719‑15................... Modified effect of subsection 701D‑10(2)..................... 427

719‑30................... Employee share schemes................................................ 428

Subdivision 719‑C—Cost setting                                                                        428

719‑160................. Transitional cost setting rules on joining have effect with modifications  428

719‑161................. Modified effect of section 701‑1..................................... 429

719‑163................. Modified effect of section 701‑35................................... 430

719‑165................. Modified effect of paragraph 701‑45(1)(b)..................... 430

Subdivision 719‑F—Losses                                                                                  431

719‑305................. Available fraction for bundle of losses not affected by concessional rules               431

719‑310................. Certain choices may be revoked...................................... 431

Subdivision 719‑I—Bad debts                                                                             431

719‑450................. Application of Subdivision 719‑I of the Income Tax Assessment Act 1997             431

Division 721—Liability for payment of tax where head company fails to pay on time                432

Subdivision 721‑A—Application of Division                                                  432

721‑25................... References in tax sharing agreements to former table item 25  432

Part 3‑95—Value shifting                                                                                              433

Division 723—Direct value shifting by creating right over non‑depreciating asset       433

723‑1..................... Application of Division 723........................................... 433

Division 725—Direct value shifting affecting interests in companies and trusts              434

725‑1..................... Application of Division 725........................................... 434

Division 727—Indirect value shifting affecting interests in companies and trusts, and arising from non‑arm’s length dealings                                                            435

727‑1..................... Application of Division 727........................................... 435

727‑230................. Transitional exclusion for certain indirect value shifts relating mainly to services    436

727‑470................. Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer........................................................................................ 437

Chapter 4—International aspects of income tax                      438

Part 4‑5—General                                                                                                              438

Division 815—Cross‑border transfer pricing                                             438

Subdivision 815‑A—Cross‑border transfer pricing                                      438

815‑1..................... Application of Subdivision 815‑A of the Income Tax Assessment Act 1997           438

815‑5..................... Cross‑border transfer pricing guidance........................... 438

815‑10................... Scheme penalty applies in pre‑commencement period as if only the old law applied               439

815‑15................... Application of Subdivisions 815‑B, 815‑C and 815‑D of the Income Tax Assessment Act 1997            439

Division 820—Application of the thin capitalisation rules                    441

820‑10................... Application of Division 820 of the Income Tax Assessment Act 1997     441

820‑12................... Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act.................................................................................. 441

820‑45................... Transitional provision—accounting standards and prudential standards  442

Division 830—Application of the foreign hybrid rules                           444

830‑1..................... Standard application........................................................ 444

830‑15................... Modified version of income tax law to apply for certain past income years             445

830‑20................... Modifications of income tax law..................................... 447

Division 832—Hybrid mismatch rules                                                             449

Subdivision 832‑A—Application of Division 832 of the Income Tax Assessment Act 1997        449

832‑10................... Application of Division 832 of the Income Tax Assessment Act 1997 (other than imported hybrid mismatch rule)................................................................................ 449

832‑15................... Application of imported hybrid mismatch rule................ 449

Division 840—Withholding taxes                                                                       451

Subdivision 840‑M—Managed investment trust amounts                           451

840‑805................. Managed investment trust amounts................................. 451

840‑810................. Payment of tax under section 840‑805............................ 452

Subdivision 840‑S—Seasonal Labour Mobility Program withholding tax 452

840‑905................. Application of Subdivision 840‑S of the Income Tax Assessment Act 1997            453

Division 842—Exempt Australian source income and gains of foreign residents            454

Subdivision 842‑I—Investment manager regime                                          454

842‑207................. Application of replacement version of Subdivision 842‑I 454

842‑208................. Modified meaning of IMR foreign fund for the purposes of earlier income years   455

842‑209................. Residence of corporate limited partnerships.................... 455

842‑210................. Treatment of IMR foreign fund that is a corporate tax entity 456

842‑215................. Treatment of foreign resident beneficiary that is not a trust or partnership               457

842‑220................. Treatment of foreign resident partner that is not a trust or partnership     461

842‑225................. Treatment of trustee of an IMR foreign fund.................. 463

842‑230................. Pre‑2012 IMR deduction................................................ 466

842‑235................. Pre‑2012 IMR capital loss.............................................. 466

842‑240................. Pre‑2012 non‑IMR net income, pre‑2012 non‑IMR Division 6E net income and pre‑2012 non‑IMR net capital gain................................................................................. 466

842‑245................. Pre‑2012 non‑IMR partnership net income and pre‑2012 non‑IMR partnership loss            468

Chapter 5—Administration                                                                            470

Part 5‑35—Miscellaneous                                                                                              470

Division 909—Regulations                                                                                     470

909‑1..................... Regulations..................................................................... 470

Chapter 6—The Dictionary                                                                            471

Part 6‑1—Concepts and topics                                                                                   471

Division 960—General                                                                                             471

Subdivision 960‑B—Utilisation of tax attributes                                           471

960‑20................... Utilisation—corporate loss carry back............................ 471

Subdivision 960‑E—Entities                                                                                471

960‑100................. Effect of this Subdivision............................................... 472

960‑105................. Entities, and members of entities, benefiting from the application of this Subdivision             472

960‑110................. No taxation consequences to result from changes to managed investment scheme  473

960‑115................. Certain entities treated as agents...................................... 474

Subdivision 960‑M—Indexation                                                                         474

960‑262................. Application of Subdivision 960‑M of the Income Tax Assessment Act 1997          474

960‑275................. Indexation factor............................................................. 474

Endnotes                                                                                                                                  476

Endnote 1—About the endnotes                                                                          476

Endnote 2—Abbreviation key                                                                              478

Endnote 3—Legislation history                                                                           479

Endnote 4—Amendment history                                                                         498


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

                   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

4‑11          Temporary budget repair 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.

4‑11  Temporary budget repair levy

Temporary budget repair levy

             (1)  You must pay extra income tax (temporary budget repair levy) for a financial year if:

                     (a)  you are an individual; and

                     (b)  your taxable income for the corresponding income year exceeds $180,000; and

                     (c)  the financial year is a temporary budget repair levy year.

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.

Amount of temporary budget repair levy

             (2)  Your temporary budget repair levy is worked out by reference to your taxable income for the corresponding income year using the rate or rates that apply to you.

Interaction with other provisions

             (3)  For the purpose of working out your income tax for the financial year:

                     (a)  section 4‑10 of the Income Tax Assessment Act 1997 has effect as if it made you liable to pay the extra tax mentioned in subsection (1) of this section; and

                     (b)  subsection 4‑10(3) of that Act has effect as if step 4 of the method statement in that subsection were omitted and the following were substituted:

Step 3A. Subtract your tax offsets from your basic income tax liability.

For the list of tax offsets, see section 13‑1.

Step 3B. Add the extra income tax you must pay as mentioned in subsection 4‑11(1) of the Income Tax (Transitional Provisions) Act 1997.

Step 4.   If an amount of your tax offset for foreign income tax under Division 770 remains after applying section 63‑10, subtract the remaining amount from the result of step 3B. The result is how much income tax you owe for the financial year.

             (4)  To avoid doubt, temporary budget repair levy is not included in your basic income tax liability.

Note:          As a result, you cannot apply any tax offsets against temporary budget repair levy under Part 2‑20 of the Income Tax Assessment Act 1997 (apart from the foreign income tax offset applied under step 4 of the method statement in subsection (3)).

Meaning of temporary budget repair levy year

             (5)  Each of the following is a temporary budget repair levy year:

                     (a)  the 2014‑15 financial year;

                     (b)  the 2015‑16 financial year;

                     (c)  the 2016‑17 financial year.

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

30‑25        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

30‑25  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

40‑67        Methods for working out decline in value

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

40‑105      Calculations 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.

40‑67  Methods for working out decline in value

             (1)  Subsections 40‑65(6) and (7) of the Income Tax Assessment Act 1997 apply with the changes set out in this section if either or both of the following events have happened:

                     (a)  you have deducted one or more amounts under former section 73BA of the Income Tax Assessment Act 1936 for an asset;

                     (b)  you could have deducted one or more amounts under that former section for the asset if you had not chosen tax offsets under former section 73I of that Act.

             (2)  Assume:

                     (a)  paragraph 40‑65(6)(a) of the Income Tax Assessment Act 1997 included both events set out in subsection (1) of this section; and

                     (b)  subsections 40‑65(6) and (7) of that Act deal with all 4 kinds of events in a corresponding way to the way that they deal with 2 kinds of events.

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.

          (1D)  Division 40 of the new Act does not apply to an interest in a mining, quarrying or prospecting right that you started to hold on or after 1 July 2001 if:

                     (a)  you acquired the interest under an interest realignment arrangement; and

                     (b)  the interest was acquired in exchange for one or more other interests in other mining, quarrying or prospecting rights all of which you had started to hold before 1 July 2001.

          (1E)  If:

                     (a)  you acquired, under an interest realignment arrangement, an interest (a new interest) in a mining, quarrying or prospecting right; and

                     (b)  the interest was acquired in exchange for one or more other interests (old interests) in other mining, quarrying or prospecting rights; and

                     (c)  you started to hold some of the old interests before 1 July 2001;

Division 40 of the new Act applies to the new interest only to the extent that the new interest was acquired in exchange for the old interests that you started to hold on or after 1 July 2001.

             (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.

40‑105  Calculations of effective life

             (1)  This section applies to the following (the instrument):

                     (a)  a determination under section 40‑100 of the Income Tax Assessment Act 1997 of the effective life of an asset;

                     (b)  a calculation under section 40‑105 of that Act of the effective life of an asset;

if the instrument was in force immediately before the commencement of Schedule 1 to the Tax Laws Amendment (Research and Development) Act 2011.

             (2)  The instrument has effect, after that commencement, as if it had been made under that section as amended by the Tax Laws Amendment (Research and Development) Act 2011.

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.

40‑292      Balancing adjustment—assets used for both general tax purposes and R&D activities

40‑293      Balancing adjustment—partnership assets used for both general tax purposes and R&D activities

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.

40‑292  Balancing adjustment—assets used for both general tax purposes and R&D activities

R&D entity has old law R&D decline in value deductions

             (1)  This section applies to an R&D entity if:

                     (a)  a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D entity and:

                              (i)  the R&D entity can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or

                             (ii)  the R&D entity could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and

                     (b)  either or both of the following subparagraphs apply:

                              (i)  the R&D entity can deduct (the old law deductions) under former section 73BA or 73BH of the old Act an amount for one or more income years for the asset;

                             (ii)  the R&D entity chooses tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset.

Note:          This section applies even if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑305 of that Act for the asset.

Section 40‑290 to be applied as if use for carrying on R&D activities were use for a taxable purpose

             (2)  In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for:

                     (a)  the purpose of the carrying on, by or on behalf of the R&D entity, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or

                     (b)  if the R&D entity is entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑305 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate.

Increase in amounts deductible or assessable under section 40‑285

             (3)  Any amount (the section 40‑285 amount):

                     (a)  that the R&D entity can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or

                     (b)  that is included in the R&D entity’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;

is taken to be increased under section 40‑292 of the new Act by the following amount:

where:

adjusted section 40‑285 amount means:

                     (a)  if the section 40‑285 amount is a deduction—the amount of the deduction; or

                     (b)  if the section 40‑285 amount is an amount included in the R&D entity’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value.

old law 1.25 rate deductions means the sum of the R&D entity’s notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions.

total decline in value means the cost of the asset less its adjustable value.

Normal rules do not apply for the asset and the event

             (4)  Neither of the following sections:

                     (a)  section 40‑292 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011);

                     (b)  section 40‑292 of the new Act (as that section applies because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011);

to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event.

Note 1:       The section 40‑292 of the new Act mentioned in paragraph (a) would otherwise apply for the event in a case where the R&D entity had new law deductions.

Note 2:       The section 40‑292 of the new Act mentioned in paragraph (b) would otherwise apply for the event in respect of the old law deductions.

40‑293  Balancing adjustment—partnership assets used for both general tax purposes and R&D activities

Partners have old law R&D decline in value deductions

             (1)  This section applies to an R&D partnership if:

                     (a)  a balancing adjustment event happens in an income year (the event year) commencing on or after 1 July 2011 for an asset held by the R&D partnership and:

                              (i)  the R&D partnership can deduct, for an income year, an amount under section 40‑25 of the Income Tax Assessment Act 1997 (the new Act), as that section applies apart from Division 355 of that Act and former section 73BC of the Income Tax Assessment Act 1936 (the old Act); or

                             (ii)  the R&D partnership could have deducted, for an income year, an amount as described in subparagraph (i) if it had used the asset; and

                     (b)  either or both of the following subparagraphs apply:

                              (i)  one or more partners of the R&D partnership can deduct (the old law deductions) under former section 73BA or 73BH of the old Act amounts for one or more income years for the asset;

                             (ii)  one or more partners of the R&D partnership choose tax offsets under former section 73I of the old Act instead of deductions (also the old law deductions) under those former sections for one or more income years for the asset.

Note:          This section applies even if the partners are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions under section 355‑520 of that Act for the asset.

Section 40‑290 to be applied as if use for carrying on R&D activities were use for a taxable purpose

             (2)  In applying section 40‑290 of the new Act (including references in that section to the reduction of deductions under section 40‑25 of that Act) in relation to the asset, assume that using the asset for a taxable purpose includes using it for:

                     (a)  the purpose of the carrying on, by or on behalf of the R&D partnership, of the research and development activities (within the meaning of former section 73B of the old Act) to which the old law deductions relate; or

                     (b)  if one or more partners of the R&D partnership are entitled under section 355‑100 of the new Act to tax offsets for one or more income years for deductions (the new law deductions) under section 355‑520 of that Act for the asset—the purpose of conducting the R&D activities to which the new law deductions relate.

Increase in amounts deductible or assessable under section 40‑285

             (3)  Any amount (the section 40‑285 amount):

                     (a)  that the R&D partnership can deduct for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year; or

                     (b)  that is included in the R&D partnership’s assessable income for the asset under section 40‑285 of the new Act (after applying subsection (2) of this section) for the event year;

is taken to be increased under section 40‑293 of the new Act by the following amount:

where:

adjusted section 40‑285 amount means:

                     (a)  if the section 40‑285 amount is a deduction—the amount of the deduction; or

                     (b)  if the section 40‑285 amount is an amount included in the R&D partnership’s assessable income—so much of the section 40‑285 amount as does not exceed the total decline in value.

old law 1.25 rate deductions means the sum of the partners’ notional Division 40 deductions, and notional Division 42 deductions, (if any) for the asset that were multiplied by 1.25 in working out the old law deductions.

total decline in value means the cost of the asset less its adjustable value.

Normal rules do not apply for the asset and the event

             (4)  Section 40‑293 of the new Act, to the extent that it would otherwise apply apart from this section to the R&D partnership or its partners for the event, does not so apply to the R&D partnership and the partners for the event.

Note:          Section 40‑293 of the new Act would otherwise apply for the event in a case where the partners had new law deductions.

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

40‑430      Allocating assets to low‑value pools

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.

40‑430  Allocating assets to low‑value pools

                   For the purposes of Subdivision 40‑E of the Income Tax Assessment Act 1997, you cannot allocate a depreciating asset to a low‑value pool if:

                     (a)  you can deduct an amount for the asset under former section 73BA of the Income Tax Assessment Act 1936; or

                     (b)  you could so deduct an amount if you had not chosen a tax offset under former section 73I of that Act;

for a period before, or starting at the same time as, the allocation has effect.

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 2‑15Non‑assessable income

Division 50Exempt entities

Table of sections

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

50‑50        Charities established prior to 1 July 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.

50‑50  Charities established prior to 1 July 1997

                   Disregard the use of the following amounts in determining (for the purposes of Subdivision 50‑A of the Income Tax Assessment Act 1997 whether a fund established before 1 July 1997 operates and pursues its purposes in Australia:

                     (a)  an amount received by the entity before 1 July 1997;

                     (b)  an amount derived from an amount mentioned in paragraph (a) or this paragraph.

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.

Division 59Particular amounts of non‑assessable non‑exempt income

Table of Subdivisions

59‑N     Native title benefits

Subdivision 59‑NNative title benefits

Table of sections

59‑50        Indigenous holding entities

59‑50  Indigenous holding entities

                   Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if:

                     (a)  the time occurred:

                              (i)  during an income year starting on or after 1 July 2008; and

                             (ii)  before the commencement of Chapter 2 of the Australian Charities and Not‑for‑profits Commission Act 2012; and

                     (b)  at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time.

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(1)(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

102‑25      Transitional capital gains tax provisions for certain Cocos (Keeling) Islands and Norfolk Island assets

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