Part III—Liability to taxation
Division 3—Deductions
79A Rebates for residents of isolated areas
(1) For the purpose of granting to residents of the prescribed area an income tax concession in recognition of the disadvantages to which they are subject because of the uncongenial climatic conditions, isolation and high cost of living in Zone A and, to a lesser extent, in Zone B, in comparison with parts of Australia not included in the prescribed area, a taxpayer (not being a company or a taxpayer in the capacity of a trustee) who is a resident of the prescribed area in the year of income is entitled, in the taxpayer’s assessment in respect of income of that year of income, to a rebate of tax ascertained in accordance with this section.
(2) Subject to subsections (2A) and 79B(4), the rebate allowable under this section in the assessment of a taxpayer in respect of income of the year of income is:
(a) if the taxpayer is a resident of the special area in Zone A, or of the special area in Zone B, in the year of income—an amount equal to the sum of:
(i) $1,173; and
(ii) an amount equal to 50% of the relevant rebate amount in relation to the taxpayer in relation to the year of income; or
(b) if the taxpayer is a resident of Zone A (but not of the special area in Zone A or of the special area in Zone B) in the year of income—an amount equal to the sum of:
(i) $338; and
(ii) an amount equal to 50% of the relevant rebate amount in relation to the taxpayer in relation to the year of income; or
(c) if the taxpayer is a resident of Zone B (but not of Zone A or of the special area in Zone B) in the year of income—an amount equal to the sum of:
(i) $57; and
(ii) an amount equal to 20% of the relevant rebate amount in relation to the taxpayer in relation to the year of income; or
(f) in any other case—such amount as, in the opinion of the Commissioner, is reasonable in the circumstances, being an amount not greater than the amount of the rebate to which the taxpayer would have been entitled under this section if paragraph (a) had applied to the taxpayer in respect of the year of income and not less than the amount of rebate to which the taxpayer would have been so entitled if paragraph (c) had so applied to the taxpayer.
(2A) The amount of any rebate that would, but for this subsection, be allowable to a taxpayer under this section in the taxpayer’s assessment in respect of income of a year of income shall be reduced by the amount of any prescribed allowance paid to the taxpayer in respect of the year of income.
(3) Any alteration of the boundaries of any area referred to in Schedule 2 made (otherwise than by an amendment of this Act) after the commencement of this section shall not affect the operation of this section.
(3A) This section has effect subject to section 23AB.
(3B) For the purposes of this section, a taxpayer is a resident of a particular area, being the prescribed area, Zone A, Zone B, the special area in Zone A or the special area in Zone B (in this subsection referred to as the relevant area) in a year of income if:
(a) the taxpayer had his or her usual place of residence in the relevant area in the year of income for a period of more than one‑half of the year of income; or
(c) the taxpayer died during the year of income and at the date of his or her death had his or her usual place of residence in the relevant area; or
(d) the following conditions are satisfied:
(i) the taxpayer had his or her usual place of residence in the relevant area in the year of income for a period of not more than one‑half of the year of income;
(ii) the taxpayer had his or her usual place of residence in the relevant area in the next preceding year of income for a period of not more than one‑half of the next preceding year of income;
(iii) for the purposes of this section, the taxpayer was not a resident of the relevant area in the next preceding year of income;
(iv) the sum of:
(A) the number of days in the period mentioned in subparagraph (i); and
(B) the number of days in the period mentioned in subparagraph (ii), other than days included in a period to which subsection 23AB(8) or 79B(3) applied in relation to the taxpayer in relation to the next preceding year of income;
exceeds 182; or
(e) the following conditions are satisfied:
(i) the taxpayer had his or her usual place of residence in the relevant area in the year of income for a period of not more than one‑half of the year of income, being a period that included the first day of the year of income;
(ii) the taxpayer had his or her usual place of residence in the relevant area, in a relevant preceding year of income, for a period of not more than one‑half of that relevant preceding year of income;
(iii) for the purposes of this section, the taxpayer was not a resident of the relevant area in that relevant preceding year of income;
(iv) the sum of:
(A) the number of days in the period mentioned in subparagraph (i); and
(B) the number of days in the period mentioned in subparagraph (ii), other than days included in a period to which subsection 23AB(8) or 79B(3) applied in relation to the taxpayer in relation to that relevant preceding year of income;
exceeds 182;
(v) the taxpayer had his or her usual place of residence in the relevant area continuously from the commencement of the period mentioned in subparagraph (ii) until the end of the period mentioned in subparagraph (i).
(3C) In subsection (3B), a reference to a taxpayer having his or her usual place of residence in a particular area in a year of income for a period of more than, or not more than, one‑half of the year of income is a reference to the taxpayer:
(a) having his or her usual place of residence in that area in the year of income for one period of more than, or not more than, as the case may be, one‑half of the year of income; or
(b) having his or her usual place of residence in that area in the year of income for 2 or more periods the aggregate of the lengths of which is more than, or not more than, as the case may be, one‑half of the year of income.
(3D) For the purposes of this section:
(a) the special area within Zone A or Zone B is constituted by:
(i) the points in that Zone that were not, as at 1 November 1981, situated at a distance of 250 kilometres or less by the shortest practicable surface route, from the centre point of the nearest urban centre (whether or not within that Zone) with a census population of not less than 2,500; and
(ii) the points in that Zone that were within the special area in that Zone for the purposes of this section as in force immediately before the commencement of the Income Tax Assessment Amendment Act (No. 4) 1984; and
(b) the distance, by the shortest practicable surface route, between a point in Zone A or Zone B and the centre point of an urban centre is:
(i) where there is only one location within that urban centre from which distances between the urban centre and other places are usually measured—the distance, by the shortest practicable surface route, between that point in Zone A or Zone B and that location; and
(ii) where there are 2 or more locations within that urban centre from which distances between parts of the urban centre and other places are usually measured—the distance, by the shortest practicable surface route, between that point in Zone A or Zone B and the one of those locations that is in the principal one of those parts.
(3E) For the purposes of this section other than this subsection, the Commissioner may, if he or she considers it appropriate having regard to all the circumstances, treat a point in Zone A or Zone B that is not in the special area in that Zone but is adjacent to or in close proximity to the special area in that Zone as being a point in the special area in that Zone.
(3F) For the purposes of this section, the census population of Nhulunbuy is taken to be less than 2,500.
(4) In this section:
census population, in relation to an urban centre, means the population of that urban centre specified in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1981, being the results published by the Australian Bureau of Statistics in the documents entitled “Persons and Dwellings in Local Government Areas and Urban Centres”.
prescribed allowance means so much of a payment under the Social Security Act 1991 or the Veterans’ Entitlements Act 1986 as was included in the payment by way of remote area allowance.
relevant preceding year of income, in relation to a year of income, means any of the next 4 preceding years of income other than the immediately preceding year of income.
relevant rebate amount, in relation to a taxpayer in relation to a year of income, means the sum of the following rebates (if any):
(a) any tax offset to which the taxpayer is entitled under Subdivision 61‑A of the Income Tax Assessment Act 1997;
(b) any notional tax offset to which the taxpayer is entitled under Subdivision 961‑A of the Income Tax Assessment Act 1997;
(c) any notional tax offset to which the taxpayer is entitled under Subdivision 961‑B of the Income Tax Assessment Act 1997.
surface route means a route other than an air route.
the prescribed area means the area comprised in Zone A and Zone B.
urban centre means an area that is described as an urban centre or bounded locality in the results of the Census of Population and Housing taken by the Australian Statistician on 30 June 1981, being the results published by the Australian Bureau of Statistics in the documents entitled “Persons and Dwellings in Local Government Areas and Urban Centres”.
Zone A means the area described in Part I of Schedule 2.
Zone B means the area described in Part II of Schedule 2.
79B Rebates for members of Defence Force serving overseas
(1) Subject to this section, a taxpayer who, during the year of income, serves as a member of the Defence Force at an overseas locality is entitled, in his or her assessment in respect of income of the year of income, to a rebate of tax ascertained in accordance with this section.
(1A) A taxpayer is not entitled to a rebate under this section in relation to service:
(a) as or under an attaché at an Australian Embassy or Legation in an overseas locality at a time as at which that locality was, or is deemed to have been, a specified locality for the purposes of this subsection; or
(b) with the South‑East Asia Treaty Organization Military Planning Office.
(1B) Where the Chief of the Defence Force or a person authorized by the Chief of the Defence Force to give certificates under this subsection certifies, and the Minister is satisfied, that any service of a taxpayer in any locality was or will be performed in circumstances similar to those in which any service referred to in subsection (1A) is performed, the taxpayer is not entitled to a rebate under this section in relation to that service.
(2) Subject to the succeeding provisions of this section, the rebate allowable under this section in the assessment of a taxpayer in respect of income of the year of income is:
(a) where the total period of service of the taxpayer at overseas localities during the year of income is more than one‑half of the year of income, or where the taxpayer dies at an overseas locality during the year of income—an amount equal to the sum of:
(i) $338; and
(ii) an amount equal to 50% of the concessional rebate amount; or
(b) in any other case—such amount as, in the opinion of the Commissioner, is reasonable in the circumstances, being an amount not greater than the amount of the rebate to which the taxpayer would have been entitled under this section if paragraph (a) had applied to him or her in respect of the year of income.
(3) For the purposes of subsection (2), the total periods of service of the taxpayer in any year of income at overseas localities shall be deemed to include any period of service of the taxpayer as a member of the Defence Force in that year of income in the prescribed area.
(3A) For the purposes of subsection (2), the total periods of service of the taxpayer in any year of income at overseas localities shall be deemed not to include any period of service of the taxpayer in respect of which an exemption from income tax applies under section 23AD or 23AG.
(4) The aggregate of the rebates allowable under this section and section 23AB or under this section and section 79A in the assessment of a taxpayer in respect of income of a year of income shall not exceed an amount equal to the sum of:
(a) $338; and
(b) an amount equal to 50% of the concessional rebate amount.
(4A) Where:
(a) but for subsection (4) and this subsection, a rebate would be allowable under this section and a rebate would be allowable under section 79A in the assessment of a taxpayer in respect of income of a year of income; and
(b) the rebate allowable under section 79A exceeds an amount equal to the sum of:
(i) $338; and
(ii) an amount equal to 50% of the concessional rebate amount;
the taxpayer is not entitled to a rebate under this section in that assessment and subsection (4) does not apply in relation to that assessment.
(5) For the purposes of this section the Minister may, by writing signed by the Minister and deposited with the Commissioner, declare that a locality outside Australia specified in the declaration shall:
(a) by reason of the uncongenial nature of service in that locality and the isolation of the locality, be, or be deemed to have been, as from a date, or during a period, (whether before or after the date of the declaration) specified in the declaration, a locality in relation to which this section applies; or
(b) as from a date (whether before or after the date of the declaration) specified in the declaration, cease, or be deemed to have ceased, to be such a locality;
and this section shall apply, or be deemed to have applied, and shall cease to apply, or be deemed to have ceased to apply, in relation to any such locality accordingly.
(5A) The Minister may, by writing signed by the Minister and deposited with the Commissioner, declare that an overseas locality specified in the declaration shall become, or be deemed to have become, on a specified date, or shall cease, or be deemed to have ceased, on a specified date, to be, a specified locality for the purposes of subsection (1A).
(5B) Nothing in section 170 prevents the amendment of an assessment at any time for the purpose of allowing a rebate to which the taxpayer has become entitled under this section after the making of the assessment.
(6) For the purpose of this section:
concessional rebate amount, in relation to a taxpayer in relation to a year of income, means the sum of the following rebates (if any):
(a) any tax offset to which the taxpayer is entitled under Subdivision 61‑A of the Income Tax Assessment Act 1997;
(b) any notional tax offset to which the taxpayer is entitled under Subdivision 961‑A of the Income Tax Assessment Act 1997;
(c) any notional tax offset to which the taxpayer is entitled under Subdivision 961‑B of the Income Tax Assessment Act 1997.
locality means an area of land or waters or an area of land and waters.
overseas locality means, in relation to service during any period or death at any time, a locality in relation to which, during that period or at that time, this section applies or is deemed to have applied; and
the prescribed area has the same meaning as that expression has in section 79A.
82 Double deductions
Where the profit arising from the sale of any property is included in the assessable income of any person, or where the loss arising from the sale is an allowable deduction, and any expenditure incurred by the person in connexion with that property has been allowed or is allowable as a deduction under this Act, that expenditure shall not be deducted in ascertaining the amount of the profit or loss.
82A Deductions for expenses of self‑education
(1) Where a deduction is, or but for this section would be, allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of a year of income in respect of expenses of self‑education, the deduction, or the aggregate of the deductions, so allowable to the taxpayer in respect of those expenses shall not be greater than the amount by which the net amount of expenses of self‑education exceeds $250.
(2) In this section:
educational assistance means amounts (other than amounts in the nature of an allowance for maintenance or accommodation) payable under a scheme for the provision by the Commonwealth of assistance for secondary education, technical or tertiary education or post‑graduate study.
expenses of self‑education means expenses necessarily incurred by the taxpayer for or in connection with a prescribed course of education but does not include:
(ba) a student contribution amount within the meaning of the Higher Education Support Act 2003 paid to a higher education provider (within the meaning of that Act); or
(bb) a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth under Chapter 4 of that Act; or
(bba) a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth under Part 3A of the VET Student Loans Act 2016; or
(bc) a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth under Chapter 2AA of the Social Security Act 1991 or under Part 2 of the Student Assistance Act 1973; or
(bd) a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth under the Trade Support Loans Act 2014; or
(be) a payment made in respect of, or in respect of the reduction or discharge of, any liability to overseas debtors repayment levy under the Student Loans (Overseas Debtors Repayment Levy) Act 2015; or
(c) a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth or to a participating corporation under Chapter 2B of the Social Security Act 1991 or Part 4A of the Student Assistance Act 1973.
net amount of expenses of self‑education means the amount ascertained by subtracting from the total amount of expenses of self‑education incurred by the taxpayer in the year of income the sum of:
(a) any payment or payments of educational assistance that were capable of being claimed in the year of income by the taxpayer or by another person in respect of the taxpayer other than:
(i) a payment the amount of which has been, or will be, included in the assessable income of the taxpayer of any year of income; or
(ii) a payment that was capable of being claimed in a preceding year of income; and
(b) any payment or payments (other than a payment the amount of which has been, or will be, included in the assessable income of the taxpayer of any year of income) received by the taxpayer, or that the taxpayer was entitled to receive, in the year of income, from the taxpayer’s employer, or from any other person, in respect of:
(i) expenses of self‑education that were incurred by the taxpayer during the year of income; or
(ii) expenses of self‑education in respect of which a deduction has been allowed, or is allowable, or in respect of which a rebate of tax has been allowed, or is allowable, in an assessment in respect of income derived by the taxpayer in a preceding year of income.
prescribed course of education means a course of education provided by a school, college, university or other place of education, and undertaken by the taxpayer for the purpose of gaining qualifications for use in the carrying on of a profession, business or trade or in the course of any employment.
Subdivision D—Losses and outgoings incurred under certain tax avoidance schemes
82KH Interpretation
(1) In this Subdivision, unless the contrary intention appears:
additional benefit, in relation to an amount of eligible relevant expenditure, means the additional benefit, or the aggregate of the additional benefits, as the case may be, referred to in paragraph (1F)(b) in relation to that eligible relevant expenditure.
agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.
associate, in relation to a taxpayer, means:
(a) in the case of a taxpayer who is a natural person, other than a taxpayer in the capacity of a trustee:
(i) a relative of the taxpayer;
(ii) a partner of the taxpayer;
(iii) if a person who is an associate of the taxpayer by virtue of subparagraph (ii) is a natural person—the spouse or a child of that person;
(iv) a trustee of a trust estate where the taxpayer or another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts; or
(v) a company where:
(A) the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the taxpayer, of another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph, of a company that is an associate of the taxpayer by virtue of another application of this subparagraph or of any 2 or more such persons; or
(B) the taxpayer is, the persons who are associates of the taxpayer by virtue of sub‑subparagraph (A) and the preceding subparagraphs of this paragraph are, or the taxpayer and the persons who are associates of the taxpayer by virtue of that sub‑subparagraph and those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company;
(b) in the case of a taxpayer being a company, other than a taxpayer in the capacity of a trustee:
(i) a partner of the taxpayer;
(ii) if a person who is an associate of the taxpayer by virtue of subparagraph (i) is a natural person—the spouse or a child of that person;
(iii) a trustee of a trust estate where the taxpayer or another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts;
(iv) another person where:
(A) the taxpayer company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person, or of that person and another person or other persons, whether those directions, instructions or wishes are communicated directly to the taxpayer company or its directors, or through any interposed companies, partnerships or trusts; or
(B) that person is, or that person and the persons who, if that person were the taxpayer, would be associates of that person by virtue of paragraph (a), by virtue of sub‑subparagraph (A), by virtue of another subparagraph of this paragraph or by virtue of paragraph (c) are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the taxpayer company;
(v) another company where:
(A) the other company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the taxpayer company, of a person who is an associate of the taxpayer company by virtue of another subparagraph of this paragraph, of a company that is an associate of the taxpayer company by virtue of another application of this subparagraph or of any 2 or more such persons; or
(B) the taxpayer company is, the persons who are associates of the taxpayer company by virtue of sub‑subparagraph (A) and the other subparagraphs of this paragraph are, or the taxpayer company and the persons who are associates of the taxpayer company by virtue of that sub‑subparagraph and those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other company; or
(vi) any other person who, if a third person who is an associate of the taxpayer company by virtue of subparagraph (iv) were the taxpayer, would be an associate of that third person by virtue of paragraph (a), by virtue of another subparagraph of this paragraph or by virtue of paragraph (c);
(c) in the case of a taxpayer in the capacity of a trustee of a trust estate:
(i) any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust estate, either directly or through any interposed companies, partnerships or trusts;
(ii) where a person who is an associate of the taxpayer by virtue of subparagraph (i) is a natural person—any person who, if that natural person were the taxpayer, would be an associate of that natural person by virtue of paragraph (a) or this paragraph; or
(iii) where a person who is an associate of the taxpayer by virtue of subparagraph (i) or (ii) is a company—any person who, if that company were the taxpayer, would be an associate of that company by virtue of paragraph (b) or this paragraph; or
(d) in the case of a taxpayer being a partnership:
(i) a partner in the partnership;
(ii) where any partner in the partnership is a natural person—any person who, if that natural person were the taxpayer, would be an associate of that natural person by virtue of paragraph (a) or (c); or
(iii) where any partner in the partnership is a company—any person who, if the company were the taxpayer, would be an associate of the company by virtue of paragraph (b) or (c).
consumable supplies means property other than:
(a) trading stock; or
(b) choses in action.
expected tax saving, in relation to an amount of eligible relevant expenditure incurred by a taxpayer, means:
(a) where only one amount is, under subsection (1B), a tax saving amount for the purposes of the application of this definition in relation to the eligible relevant expenditure—that tax saving amount; and
(b) where 2 or more amounts are, under subsection (1B), tax saving amounts for the purposes of the application of this definition in relation to the eligible relevant expenditure—the sum of those tax saving amounts.
film means an aggregate of images, or of images and sounds, embodied in any material.
market research means:
(a) the undertaking of research to ascertain the location, extent, value or other characteristics of the market, or the potential market, for goods or services; and
(b) the provision of information, advice or assistance in connection with the marketing of particular goods or services or of goods or services generally.
property includes a chose in action and also includes any estate, interest, right or power, whether at law or in equity, in or over property.
relevant expenditure, in relation to a taxpayer, means:
(a) expenditure in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 25‑25 (Borrowing expenses) of the Income Tax Assessment Act 1997;
(b) expenditure in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 25‑30 (Expenses of discharging a mortgage) of the Income Tax Assessment Act 1997;
(c) a loss or outgoing incurred by the taxpayer in the purchase by the taxpayer of property (not being a chose in action) that, for the purposes of the application of this Act in relation to the taxpayer, is trading stock, to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(d) a loss or outgoing incurred by the taxpayer in respect of interest to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(e) a loss or outgoing incurred by the taxpayer in respect of rent to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(f) a bad debt incurred by the taxpayer in respect of money lent by the taxpayer in the course of carrying on a business to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 or section 25‑35 of the Income Tax Assessment Act 1997 in respect of the bad debt;
(g) a loss or outgoing incurred by the taxpayer in respect of:
(i) the production, marketing or distribution of a film; or
(ii) the acquisition of a copyright subsisting in a film;
to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(h) expenditure incurred by the taxpayer in respect of a unit of industrial property, being a unit of industrial property that relates to copyright subsisting in a film, to the extent to which the amount of that expenditure is taken into account, or would, apart from former subsections 124R(2) and (3), be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under former section 124M or 124N in respect of the residual value of the unit of industrial property;
(ka) expenditure incurred by the taxpayer in respect of an item of intellectual property (as defined in of the Income Tax Assessment Act 1997) that relates to copyright subsisting in a film, but only to the extent described at the end of this definition;
(k) a loss or outgoing incurred by the taxpayer in the purchase of consumable supplies to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(m) a loss or outgoing incurred by the taxpayer in respect of market research to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(n) expenditure incurred by the taxpayer in respect of the acquisition of a unit of industrial property, being a licence under a copyright subsisting in computer software, to the extent to which the amount of that expenditure is taken into account, or would, apart from former subsection 124R(3) be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under former section 124M or 124N in respect of the residual value of the unit of industrial property;
(oa) expenditure incurred by the taxpayer in respect of acquiring an item of intellectual property (as defined in of the Income Tax Assessment Act 1997) that is a licence under a copyright subsisting in computer software, but only to the extent described at the end of this definition;
(o) a loss or outgoing or expenditure incurred by the taxpayer by way of commission for collecting assessable income of the taxpayer to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing or the expenditure;
(p) a loss or outgoing incurred by the taxpayer in respect of the growing, care or supervision of trees on behalf of the taxpayer to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(pa) a loss or outgoing incurred by the taxpayer in respect of the establishment and tending of trees for felling on behalf of the taxpayer to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 394‑10 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(q) a loss or outgoing incurred by the taxpayer for the purpose of increasing the value of shares in a company, being shares held or beneficially owned by the taxpayer as trading stock, to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(r) a loss or outgoing incurred by the taxpayer in respect of:
(i) the production by another person of a master sound recording; or
(ii) the procuration of the production by another person of a master sound recording;
to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing;
(s) calls paid by the taxpayer on shares owned by the taxpayer in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under Division 30 (which is about gifts) of the Income Tax Assessment Act 1997;
(v) expenditure (other than expenditure to which a preceding paragraph of this definition applies) incurred by the taxpayer in respect of a unit of industrial property to the extent to which the amount of that expenditure is taken into account, or would, apart from former subsections 124R(2) and (3), be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under former section 124M or 124N in respect of the residual value of the unit of industrial property; or
(wa) expenditure (unless covered by an earlier paragraph of this definition) incurred by the taxpayer in respect of an item of intellectual property (as defined in of the Income Tax Assessment Act 1997), but only to the extent described at the end of this definition;
(w) a loss or outgoing (other than a loss or outgoing referred to in subsection 52A(1) or to which a preceding paragraph of this definition applies) incurred by the taxpayer to the extent to which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the loss or outgoing.
However, paragraph (ka), (oa) or (wa) only covers expenditure to the extent that:
(x) it is taken into account in working out under Division 40 of the Income Tax Assessment Act 1997 the adjustable value of the item to the taxpayer in determining whether, apart from section 82KL of this Act, the taxpayer could deduct an amount under that Division for the item for a year of income; or
(y) it would be so taken into account apart from item 8 in the table in subsection 40‑180(2), or item 1 in the table in subsection 40‑190(3) (both about non‑arm’s length transactions).
rent means rent in respect of land or premises.
tax avoidance agreement means an agreement that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that a person who, if the agreement had not been entered into or carried out, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than that person would have been liable to pay if the agreement had not been entered into or carried out.
unit of industrial property has the same meaning as in former Division 10B.
(1A) In determining for the purposes of this Subdivision whether an agreement is a tax avoidance agreement, no regard shall be had to a purpose that is a merely incidental purpose.
(1AA) A reference in this Subdivision to the incurring by a taxpayer of a bad debt shall be read as a reference to a debt, or a part of a debt, owed to the taxpayer becoming a bad debt.
(1AB) A reference in:
(a) subsection 82KL(2); or
(b) former section 80 in relation to this Subdivision;
to the incurring by a taxpayer of a loss or outgoing shall be read as including a reference to the incurring by a taxpayer of a bad debt.
(1ABA) This section has the same effect in relation to an allowable deduction under section 63E in respect of the extinguishing of the whole or part of a debt as it has in respect of an allowable deduction under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 in respect of the writing off of the whole or part of a debt as bad.
(1AC) In this Subdivision:
(a) a reference to a copyright subsisting in a film shall be read as including a reference to:
(i) a licence under a copyright subsisting in a film; and
(ii) an interest, whether at law or in equity, in respect of a copyright, or in respect of a licence under a copyright, subsisting in a film; and
(b) a reference to a licence under a copyright subsisting in computer software shall be read as including a reference to an interest, whether at law or in equity, in a licence under a copyright subsisting in computer software.
(1AD) A reference in this Subdivision to a tax benefit being allowed or allowable or not being allowed or allowable in respect of relevant expenditure incurred by a taxpayer shall be read as a reference to:
(a) in a case where the relevant expenditure is relevant expenditure to which paragraph (h), (n) or (v) of the definition of relevant expenditure in subsection (1) applies—a deduction being allowed or allowable or not being allowed or allowable, as the case may be, to the taxpayer under former section 124M or 124N in respect of the residual value of a unit of industrial property where that residual value would be calculated by reference to the relevant expenditure; and
(b) if paragraph (ka), (oa) or (wa) of the definition of relevant expenditure in subsection (1) covers the expenditure—the taxpayer deducting or being able to deduct, or not deducting or not being able to deduct, as appropriate, an amount under Division 40 of the Income Tax Assessment Act 1997 for an item of intellectual property for a year of income because the taxpayer’s adjustable value of the item would be calculated under that Division by reference to the relevant expenditure; and
(d) in any other case—a deduction being allowed or allowable or not being allowed or allowable, as the case may be, to the taxpayer in respect of the relevant expenditure.
(1B) For the purposes of the application of the definition of expected tax saving in subsection (1) in relation to an amount of eligible relevant expenditure incurred by a taxpayer:
(a) where:
(i) if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would be liable to pay income tax in respect of a year of income; and
(ii) if a tax benefit or tax benefits were allowable under this Act in respect of that eligible relevant expenditure, that person would be liable to pay a lesser amount of income tax in respect of that year of income;
the amount by which the amount of the tax referred to in subparagraph (i) exceeds the amount of the tax referred to in subparagraph (ii) is a tax saving amount; and
(b) where:
(i) if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would be liable to pay income tax in respect of a year of income; and
(ii) if a tax benefit or tax benefits were allowable under this Act in respect of that eligible relevant expenditure, that person would not be liable to pay income tax in respect of that year of income;
the amount of the tax referred to in subparagraph (i) is a tax saving amount.
(1BA) In the application of subsection (1B) in determining whether there is a tax saving amount in relation to an amount of eligible relevant expenditure incurred by a taxpayer in a case where, if a tax benefit or tax benefits were allowable in respect of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would:
(a) have a tax loss for a year of income that the person would not have; or
(b) have a greater tax loss for a year of income than the person would have;
if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, apply Division 36 and former Subdivision 375‑G of the Income Tax Assessment Act 1997 as if the amount were relevant expenditure but not eligible relevant expenditure.
(1D) Subject to subsection (1E), where, in respect of any 2 or more amounts of eligible relevant expenditure (whether incurred by one taxpayer or by 2 or more taxpayers and whether incurred in one year of income or in 2 or more years of income), the following conditions are satisfied, namely:
(a) if subsection (1B) were applied in relation to one of those amounts of eligible relevant expenditure in relation to a person (whether or not that person is the person or one of the persons who incurred the eligible relevant expenditure) in relation to a year of income on the assumption that no tax benefit is or was allowable in respect of any part of the other amount of eligible relevant expenditure, or in respect of any part of any of the other amounts of eligible relevant expenditure, as the case may be, the tax saving amount determined in accordance with that subsection would be greater than the tax saving amount that would be determined in accordance with that subsection in relation to that amount of eligible relevant expenditure in relation to that person in relation to that year of income if that subsection were applied on the assumption that a tax benefit or tax benefits were allowable under this Act in respect of the other amount of eligible relevant expenditure, or in respect of each of the other amounts of eligible relevant expenditure, as the case may be; and
(b) if paragraph (a) of this subsection were applied in relation to that person in relation to that year of income in relation to the other amount of eligible relevant expenditure, or in relation to each of the other amounts of eligible relevant expenditure, as the case may be, the condition specified in that paragraph would be satisfied in relation to that other amount or in relation to each of those other amounts, as the case may be;
then, in the application of subsection (1B) in calculating the tax saving amount in relation to that person in relation to the year of income in relation to any one of the amounts of eligible relevant expenditure first referred to in this subsection, it shall be assumed that no tax benefit is or was allowable in respect of any part of the other of those amounts or in respect of any part of any of the other of those amounts, as the case may be.
(1E) Where:
(a) but for this subsection, subsection (1D) would apply to require it to be assumed, for the purposes of the application of subsection (1B) in relation to an amount of eligible relevant expenditure, that no tax benefit is or was allowable in respect of any part of another amount of eligible relevant expenditure (in this subsection referred to as the allowable relevant expenditure); and
(b) section 82KL does not and will not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of the allowable relevant expenditure;
subsection (1D) shall not apply and shall be taken never to have applied so as to require it to be assumed, in the application of subsection (1B) in relation to an amount of eligible relevant expenditure other than the allowable relevant expenditure, that no tax benefit is or was allowable in respect of any part of the allowable relevant expenditure.
(1F) For the purposes of this Subdivision, an amount of relevant expenditure incurred by a taxpayer shall be taken to be an amount of eligible relevant expenditure if:
(a) that amount of relevant expenditure was incurred after 24 September 1978 by reason of, as a result of or as part of a tax avoidance agreement entered into after that date;
(b) by reason of, as a result of or as part of the tax avoidance agreement the taxpayer has obtained, in relation to that relevant expenditure being incurred, a benefit or benefits in addition to:
(i) in a case to which subparagraph (ii) does not apply:
(A) the benefit in respect of which the relevant expenditure was incurred; and
(B) any benefit that resulted directly or indirectly from the benefit in respect of which the relevant expenditure was incurred and is a benefit that, in the opinion of the Commissioner, might reasonably be expected to have resulted if the benefit in respect of which the relevant expenditure was incurred had been obtained otherwise than by reason of, as a result of or as part of a tax avoidance agreement; or
(ii) in a case where the relevant expenditure is relevant expenditure to which paragraph (w) of the definition of relevant expenditure in subsection (1) applies—any benefit that resulted directly or indirectly from the incurring of the relevant expenditure and is a benefit that, in the opinion of the Commissioner, might reasonably be expected to have resulted if the relevant expenditure had been incurred otherwise than by reason of, as a result of or as part of a tax avoidance agreement; and
(c) in a case where the relevant expenditure is relevant expenditure to which paragraph (s), (v) or (w) of the definition of relevant expenditure in subsection (1) applies—that amount of relevant expenditure was incurred by reason of, as a result of or as part of a tax avoidance agreement entered into before 28 May 1981.
(1FA) For the purposes of the application of subsection (1F) in relation to an amount of relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, any benefit obtained by the taxpayer in relation to the making of the loan in respect of which the bad debt is incurred shall be taken to be a benefit obtained by the taxpayer in relation to that relevant expenditure being incurred.
(1G) The reference in subsection (1F) to the benefit in respect of which relevant expenditure was incurred by a taxpayer shall be read as a reference to:
(a) in a case where the relevant expenditure is expenditure incurred by the taxpayer in borrowing money, being expenditure in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 25‑25 (Borrowing expenses) of the Income Tax Assessment Act 1997—the making available to the taxpayer of the money borrowed by the taxpayer;
(b) in a case where the relevant expenditure is expenditure incurred by the taxpayer in connection with the discharge of a mortgage, being expenditure in respect of which a deduction would, apart from section 82KL, be allowable to the taxpayer under section 25‑30 (Expenses of discharging a mortgage) of the Income Tax Assessment Act 1997—the discharge of the mortgage;
(c) in a case where the relevant expenditure was incurred by the taxpayer in the purchase of property that, for the purposes of the application of this Act in relation to the taxpayer, is or was trading stock—the acquisition of that property by the taxpayer;
(d) in a case where the relevant expenditure was incurred by the taxpayer in respect of interest—the availability to the taxpayer of the money borrowed by the taxpayer;
(e) in a case where the relevant expenditure was incurred by the taxpayer in respect of rent—the use of the property in respect of which the rent was paid;
(f) in a case where the relevant expenditure incurred by the taxpayer was in respect of a bad debt—any interest received or receivable by the taxpayer in respect of the loan in respect of which the bad debt was incurred;
(g) in a case where the relevant expenditure was incurred by the taxpayer in respect of the production, marketing or distribution of a film or the acquisition of a copyright subsisting in a film and is relevant expenditure to which paragraph (g) of the definition of relevant expenditure in subsection (1) applies—the production, marketing or distribution of the film, or the acquisition of the copyright by the taxpayer, as the case may be;
(h) in a case where the relevant expenditure was incurred by the taxpayer in respect of a unit of industrial property, being a unit of industrial property that relates to copyright subsisting in a film, and is relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies—the ownership by the taxpayer of the unit of industrial property;
(k) in a case where the relevant expenditure was incurred by the taxpayer in the purchase of consumable supplies—the acquisition of those consumable supplies by the taxpayer;
(m) in a case where the relevant expenditure was incurred by the taxpayer in respect of market research—the undertaking of the research, or the provision of the information, advice or assistance, in respect of which the relevant expenditure was incurred;
(n) in a case where the relevant expenditure was incurred by the taxpayer in respect of the acquisition of a unit of industrial property, being a licence under a copyright subsisting in computer software—the acquisition by the taxpayer of the unit of industrial property;
(o) in a case where the relevant expenditure was incurred by the taxpayer by way of commission for collecting assessable income of the taxpayer—the collection on behalf of the taxpayer of assessable income of the taxpayer;
(p) in a case where the relevant expenditure was incurred by the taxpayer in respect of the growing, care or supervision of trees on behalf of the taxpayer—the growing, care or supervision of the trees on behalf of the taxpayer;
(pa) in a case where the relevant expenditure was incurred by the taxpayer in respect of the establishment and tending of trees for felling on behalf of the taxpayer—the establishment and tending of trees for felling on behalf of the taxpayer;
(q) in a case where the relevant expenditure was incurred by the taxpayer for the purpose of increasing the value of shares in a company, being shares held or beneficially owned by the taxpayer as trading stock—the increase in the value of those shares;
(r) in a case where the relevant expenditure was incurred by the taxpayer in respect of the production of, or the procuration of the production of, a master sound recording—any amount payable to the taxpayer in respect of the master sound recording, being an amount that, in the opinion of the Commissioner, would be payable to the taxpayer as a result of the incurring by the taxpayer of the relevant expenditure if that expenditure had been incurred by reason of, as a result of or as part of an agreement other than a tax avoidance agreement;
(s) in a case where the relevant expenditure consists of calls paid by the taxpayer on shares owned by the taxpayer and is relevant expenditure to which paragraph (s) of the definition of relevant expenditure in subsection (1) applies—the satisfaction of any liability of the taxpayer to pay the calls and the taxpayer’s continuing ownership of the shares; and
(u) in a case where the relevant expenditure was incurred by the taxpayer in respect of a unit of industrial property and is relevant expenditure to which paragraph (v) of the definition of relevant expenditure in subsection (1) applies—the ownership by the taxpayer of the unit of industrial property.
(1H) For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:
(a) an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;
(b) in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, the taxpayer or an associate of the taxpayer acquires from another person the right to recover the amount of a debt that was owed to that other person; and
(c) by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, no consideration was paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of that right or the amount or value of the consideration paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of that right was less than the amount of the debt;
the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit having a value equal to:
(d) in a case where no consideration was paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of the right to recover the amount of the debt—the amount of the debt; and
(e) in any other case—the amount by which the amount of the debt exceeds the amount or value of the consideration paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of the right to recover the amount of the debt.
(1J) For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:
(a) an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;
(b) in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement:
(i) a debt becomes owing by the taxpayer or an associate of the taxpayer; or
(ii) a debt became owing, before or at the time of the incurring of the relevant expenditure, by the taxpayer or an associate of the taxpayer; and
(c) it may reasonably be expected that, by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, the person to whom the debt is owed will release, abandon or fail to demand repayment of the debt or of a part of the debt;
the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit of an amount equal to the amount of the debt or that part of the debt, as the case may be.
(1JA) For the purposes of the application of subsection (1H) in relation to an amount of relevant expenditure incurred by a taxpayer, being relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, a reference in paragraph (1H)(b) to the acquisition by the taxpayer or an associate of the taxpayer, in relation to that relevant expenditure being incurred, of the right to recover a debt shall be read as including a reference to the acquisition by the taxpayer or an associate of the taxpayer, in relation to the making by the taxpayer of the loan in respect of which the relevant expenditure was incurred, of such a right.
(1JB) For the purposes of the application of subsection (1J) in relation to an amount of relevant expenditure incurred by a taxpayer, being relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, a reference in paragraph (1J)(b) to a debt becoming owing, or having become owing, by the taxpayer or an associate of the taxpayer in relation to that relevant expenditure being incurred, shall be read as including a reference to a debt becoming owing, or having become owing, by the taxpayer or an associate of the taxpayer, in relation to the making by the taxpayer of the loan in respect of which the relevant expenditure was incurred.
(1JE) For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:
(a) an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;
(b) that relevant expenditure consists of calls paid by the taxpayer on shares owned by the taxpayer and is relevant expenditure to which paragraph (s) of the definition of relevant expenditure in subsection (1) applies; and
(c) in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, consideration (in this subsection referred to as the relevant consideration) is paid or given to the taxpayer or an associate of the taxpayer in respect of the acquisition by any person from the taxpayer of:
(i) all or any of those shares;
(ii) the right to purchase all or any of those shares; or
(iii) the right to require a person to vote, in a meeting of shareholders of the company, in favour of a resolution to vary the rights attached to all or any of those shares;
the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit in addition to the benefits referred to in subparagraphs (1F)(b)(i) and (ii) having a value equal to the amount or value of the relevant consideration reduced by the amount or value of the part (if any) of that relevant consideration that, in the opinion of the Commissioner, is attributable to expenditure (other than the relevant expenditure) incurred by the taxpayer in respect of the shares.
(1K) Where:
(a) 2 or more amounts of relevant expenditure are incurred by a taxpayer (whether in the same year of income or in different years of income) by reason of, as a result of or as part of the same tax avoidance agreement;
(b) the same paragraph of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts; and
(c) those amounts were incurred in respect of the same benefit;
those amounts shall, for the purposes of this Subdivision, be treated as together constituting one amount of relevant expenditure.
(1L) For the purposes of subsection (1K), 2 or more amounts of relevant expenditure shall be taken to have been incurred in respect of the same benefit if:
(a) in a case where paragraph (a) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;
(b) in a case where paragraph (b) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the discharge of the same mortgage;
(c) in a case where paragraph (c) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in the purchase of the same property;
(d) in a case where paragraph (d) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;
(e) in a case where paragraph (e) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same property;
(f) in a case where paragraph (f) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;
(g) in a case where paragraph (g) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same film;
(h) in a case where paragraph (h) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same film;
(k) in a case where paragraph (k) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in the purchase of the same property;
(m) in a case where paragraph (m) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same market research;
(n) in a case where paragraph (n) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same unit of industrial property;
(o) in a case where paragraph (o) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same source of assessable income;
(p) in a case where paragraph (p) or paragraph (pa) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of trees on the same parcel of land;
(q) in a case where paragraph (q) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same shares;
(r) in a case where paragraph (r) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were payable to the same person;
(s) in a case where paragraph (s) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were calls paid on shares in the same company;
(v) in a case where paragraph (v) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same unit of industrial property; and
(w) in a case where paragraph (w) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same source of assessable income or in carrying on the same business.
(1M) For the purposes of this Subdivision, a person who obtains a benefit by reason of an act, transaction or circumstance that occurs as part of, in connection with or as a result of a tax avoidance agreement shall be deemed to have obtained that benefit by reason of the tax avoidance agreement.
(1N) Where, for the purposes of the application of any provision of this Subdivision, it is required to be assumed that a tax benefit is not or was not allowable in respect of any part of an amount of eligible relevant expenditure and that expenditure is expenditure that was incurred in the acquisition of property that, for the purposes of the application of this Act in relation to the person who incurred the expenditure, is or was trading stock, it shall also be assumed, for the purposes of the application of that provision, that, for the purposes of the application of Division 70 (Trading stock) or 385 (Primary production) of the Income Tax Assessment Act 1997 in relation to that property in relation to the person who incurred the expenditure, that the cost of that property is, and at all times was, nil.
(1P) For the purposes of this Subdivision, any benefit that has been obtained by an associate of a taxpayer by reason of, as a result of or as part of a tax avoidance agreement, being a benefit that was obtained in relation to the incurring by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of relevant expenditure, not being relevant expenditure to which subsection (1Q) applies, shall be taken to be a benefit that was obtained by the taxpayer by reason of that tax avoidance agreement and in relation to that relevant expenditure being incurred by the taxpayer.
(1Q) For the purposes of this Subdivision, any benefit that has been obtained by an associate of a taxpayer by reason of, as a result of or as part of a tax avoidance agreement, being a benefit that was obtained in relation to:
(a) the incurring by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies; or
(b) the making by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of the loan in respect of which relevant expenditure to which that paragraph applies was incurred;
shall be taken to be a benefit that was obtained by the taxpayer by reason of that tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer or that loan being made by the taxpayer, as the case may be.
(1S) For the purposes of the application of this section in determining the amount of any additional benefit obtained by a taxpayer in relation to an amount of relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies being incurred, being expenditure that, by virtue of the expenditure of moneys (in this subsection referred to as the partnership moneys) by a partnership, is deemed by former section 124KA to have been incurred by the taxpayer:
(a) the partnership shall be taken to be an associate of the taxpayer;
(b) a reference to the relevant expenditure being incurred by the taxpayer shall be read as including a reference to the partnership moneys being expended by the partnership; and
(c) any benefit obtained by the partnership in relation to the partnership moneys being expended by the partnership shall be taken to have been obtained by the taxpayer in relation to the relevant expenditure being incurred by the taxpayer to such extent only as the Commissioner considers fair and reasonable.
(1T) Where:
(a) a taxpayer expends moneys (in this subsection referred to as the film moneys) in producing, or by way of contribution to the cost of producing, a film; and
(b) by virtue of the operation of former subsection 124K(2), a part only of the film moneys is taken to be an amount of relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies;
for the purposes of the application of this section in determining the amount of any additional benefit obtained by the taxpayer in relation to the relevant expenditure being incurred:
(c) a reference to the relevant expenditure being incurred by the taxpayer shall read as including a reference to the film moneys being expended by the taxpayer; and
(d) any benefit obtained by the taxpayer in relation to the film moneys being expended by the taxpayer shall be taken to have been obtained by the taxpayer in relation to the relevant expenditure being incurred by the taxpayer to such extent only as the Commissioner considers fair and reasonable.
(2) A reference in this Subdivision to the supply of goods or the provision of services shall be read as not including a reference to the making available of money by way of loan.
(3) For the purposes of this Subdivision, an agreement shall be taken to have been entered into or carried out for a particular purpose, or for purposes that included a particular purpose, if any of the parties to the agreement entered into or carried out the agreement for that purpose, or for the purposes that included that purpose, as the case may be.
(4) A reference in this Subdivision to a person shall be read as including a reference to a person in the capacity of a trustee.
(5) A reference in this Subdivision to a provision of the Income Tax Assessment Act 1997 includes a reference to the corresponding provision of the Income Tax Assessment Act 1936.
82KJ Deduction not allowable in respect of certain pre‑paid outgoings
Where:
(a) a loss or outgoing in respect of which a deduction would, but for this Subdivision, be allowable, was incurred by a taxpayer after 19 April 1978 by reason of, as a result of or as part of a tax avoidance agreement;
(b) having regard to the benefit in respect of which the loss or outgoing was incurred (but without regard to any benefit relating to the acquisition or possible acquisition of the property referred to in paragraph (c)), the amount of the loss or outgoing was greater than the amount (if any) that might reasonably be expected to have been incurred, at the time when the loss or outgoing was incurred, in respect of that benefit if the loss or outgoing had not been incurred by reason of, as a result of or as part of a tax avoidance agreement;
(c) property has been, will be, or may reasonably be expected to be, acquired by the taxpayer or by an associate of the taxpayer as a result of, by reason of, or as part of the tax avoidance agreement; and
(d) the consideration (if any) that was payable in respect of the acquisition of that property was less, or the consideration that may reasonably be expected to be payable in respect of the acquisition of that property is less, than the consideration that might reasonably be expected to have been payable, or to be payable, as the case may be, in respect of the acquisition of that property if the loss or outgoing had not been incurred;
notwithstanding any other provision of this Act, a deduction is not allowable to the taxpayer in respect of the loss or outgoing.
82KK Schemes designed to postpone tax liability
(1) This section applies to a loss or outgoing incurred by a taxpayer if:
(a) the loss or outgoing was incurred after 19 April 1978 and was incurred to an associate of the taxpayer;
(b) a deduction is allowable to the taxpayer in respect of that loss or outgoing; and
(c) the deduction allowable in respect of that loss or outgoing would, but for this section, be allowable to the taxpayer in the year of income in which the loss or outgoing was incurred and:
(i) in a case where the loss or outgoing is in respect of interest that, if it had actually been paid, would be subject to withholding tax under Division 11A—the withholding tax payable in respect of the whole or a part of the interest is not payable until a time occurring in a subsequent year of income; and
(ii) in any other case—the whole or a part of the amount incurred to the associate will not be included in the assessable income of the associate until a subsequent year of income.
(2) Notwithstanding any other provision of this Act, where:
(a) a taxpayer incurs in a year of income (in this subsection referred to as the relevant year of income) a loss or outgoing (not being a loss or outgoing in respect of the supply of goods or the provision of services at a time that occurs after, or during a period that occurs after or extends beyond, the end of the relevant year of income) and the loss or outgoing is a loss or outgoing to which this section applies; and
(b) the loss or outgoing was incurred by reason of, as a result of, as part of or in connection with an agreement, course of conduct or course of business that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that:
(i) in a case where the loss or outgoing is in respect of interest that, if it had actually been paid, would be subject to withholding tax under Division 11A—the withholding tax payable in respect of the whole or a part of the interest will not be payable until a time occurring in a subsequent year of income; and
(ii) in any other case—the whole or a part of the amount incurred to the associate would not be included in the assessable income of the associate until a subsequent year of income;
the loss or outgoing shall, for the purposes of this Act, be deemed to have been incurred by the taxpayer in the relevant year of income and in any subsequent year of income only to the extent to which the loss or outgoing represents an amount actually paid during the relevant year of income or that subsequent year of income by the taxpayer to the person to whom the loss or outgoing is incurred.
(3) Notwithstanding any other provision of this Act but subject to subsection (4), where:
(a) a taxpayer incurs in a year of income a loss or outgoing in respect of the supply of goods or the provision of services at a time that occurs after, or during a period that occurs after or extends beyond, the end of the year of income and the loss or outgoing is a loss or outgoing to which this section applies; and
(b) the loss or outgoing was incurred by reason of, as a result of or as part of an agreement that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that:
(i) a deduction would be allowable to the taxpayer in a year of income in respect of the loss or outgoing; and
(ii) the whole or a part of the amount of the loss or outgoing would not be included in the assessable income of the person to whom the loss or outgoing was incurred until a subsequent year of income;
that loss or outgoing shall, for the purposes of this Act, be deemed to have been incurred by the taxpayer in the year of income in which, or in the years of income in which, goods to which the loss or outgoing relates are supplied or services to which the loss or outgoing relates are provided.
(4) Where, by virtue of subsection (3), a loss or outgoing incurred by a taxpayer in respect of the supply of goods or the provision of services is deemed to have been incurred by the taxpayer in each of 2 or more years of income, there shall be allowable as a deduction to the taxpayer in each such year of income so much only of the amount that, apart from this section, would be allowable as a deduction in respect of the loss or outgoing as the Commissioner considers reasonable having regard to the extent to which the goods in respect of which the loss or outgoing was incurred were supplied or the services in respect of which the loss or outgoing was incurred were provided, in each of those years of income.
(5) In determining whether paragraph (2)(b) or (3)(b) applies in relation to a loss or outgoing, no regard shall be had to a purpose that is a merely incidental purpose.
82KL Tax benefit not allowable in respect of certain recouped expenditure
(1) Where the sum of the amount or value of the additional benefit in relation to an amount of eligible relevant expenditure incurred by a taxpayer and the expected tax saving in relation to that amount of eligible relevant expenditure is equal to or greater than the amount of the eligible relevant expenditure, notwithstanding any other provision of this Act but subject to this section, a tax benefit is not and shall be deemed never to have been, allowable in respect of any part of that amount of eligible relevant expenditure.
(2) Where, at any time, the Commissioner is of the opinion that, apart from this subsection, subsection (1) might reasonably be expected, at a later time, to operate to deem a tax benefit not to be allowable and never to have been allowable in respect of expenditure or a loss or outgoing incurred by a taxpayer then, notwithstanding any other provision of this Act but subject to this section, a tax benefit is not allowable and shall be deemed never to have been allowable in respect of that expenditure or that loss or outgoing, as the case may be.
(3) Where, in the making of an assessment, subsection (2) has been applied by reason that the Commissioner was of the opinion that a particular circumstance would exist and the Commissioner later becomes satisfied that that circumstance will not exist, then, notwithstanding anything contained in section 170, the Commissioner may amend the assessment at any time for the purposes of ensuring that this Subdivision shall be taken always to have applied on the basis that that circumstance did not, and would not, exist.
(4) Where:
(a) an amount of eligible relevant expenditure is incurred by a partnership;
(b) apart from this subsection, this section would not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of that amount of eligible relevant expenditure; and
(c) the Commissioner is satisfied that any partner in the partnership became a partner in the partnership by reason of or as a result of an agreement (whether or not that agreement was the agreement by virtue of which the partner became a partner in the partnership) that was entered into by any of the parties to the agreement for the purpose, or primarily for the purpose, of ensuring that this section would not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of the amount of the eligible relevant expenditure;
then, notwithstanding any other provision of this Act, a tax benefit is not allowable and shall be deemed never to have been allowable in respect of any part of that amount of eligible relevant expenditure.
(5) Where:
(a) in the making of an assessment, this section has been applied on the basis that a taxpayer was to be taken to have obtained a benefit by reason that it was reasonable to expect that a person to whom a debt was owed by the taxpayer or an associate of the taxpayer would release, abandon or fail to demand repayment of the debt or of a part of the debt; and
(b) the whole or a part of that debt or of that part of the debt is repaid;
then, notwithstanding anything contained in section 170, the Commissioner may amend the assessment at any time for the purposes of ensuring that this Subdivision shall be taken never to have applied on the basis that it was reasonable to expect that the person to whom the debt was owed would release, abandon or fail to demand repayment of the amount that was repaid.
(6) Where subsection (1), (2) or (4) deems a tax benefit not to be and never to have been allowable in respect of a loss or outgoing incurred by a taxpayer in the purchase of property that, for the purposes of the application of this Act and the Income Tax Assessment Act 1997 in relation to the taxpayer is or was trading stock, then, notwithstanding any other provision of this Act or that Act, the cost or cost price of that property, for the purposes of the application of (Primary production) of the Income Tax Assessment Act 1997 Subdivision B of Division 2 of Part III of this Act or Division 70 (Trading stock) or 385 in relation to that property in relation to the taxpayer, shall be taken to be, and at all times to have been, nil.
(7) Where, at any time after the making of an assessment in relation to a taxpayer, the taxpayer considers that the Commissioner ought to amend the assessment in accordance with subsection (3) or (5), the taxpayer may post to or lodge with the Commissioner a request in writing for an amendment of the assessment in accordance with subsection (3) or (5) or in accordance with subsections (3) and (5).
(8) The Commissioner shall consider the request and shall serve on the taxpayer, by post or otherwise, a written notice of the Commissioner’s decision on the request.
(9) If the taxpayer is dissatisfied with the Commissioner’s decision on the request, the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.
Subdivision H—Period of deductibility of certain advance expenditure
82KZL Interpretation
(1) In this Subdivision, unless the contrary intention appears:
agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.
associate has the meaning given by section 318.
eligible service period, in relation to an amount of expenditure incurred under an agreement, means the period from the beginning of:
(a) the day, or the first day, on which the thing to be done under the agreement in return for the amount of expenditure is required, or permitted, as the case may be, to commence being done; or
(b) if the expenditure is incurred on a later day—the day on which the expenditure is incurred;
until the end of:
(c) the day, or the last day, on which the thing to be done under the agreement in return for the amount of expenditure is required, or permitted, as the case may be, to cease being done; or
(d) if that day or last day ends more than 10 years after the beginning of the period—10 years after the beginning of the period.
excluded expenditure means an amount of expenditure:
(a) less than $1,000; or
(b) required to be incurred by a law, or by an order of a court, of the Commonwealth, a State or a Territory; or
(c) under a contract of service; or
(d) to the extent that it is of a capital nature and cannot be deducted under:
(i) section 355‑205 (R&D expenditure); or
(ii) section 355‑480 (earlier year associate R&D expenditure);
of the Income Tax Assessment Act 1997; or
(da) to the extent that it is of a private or domestic nature; or
(e) that has been or is incurred after 21 September 1999 by a general insurance company in connection with the issue of a general insurance policy and was related or relates to the gross premiums derived by the company in respect of the policy; or
(f) that has been or is incurred after 21 September 1999 by a general insurance company in payment of reinsurance premiums in respect of the reinsurance of risks covered by general insurance policies, other than reinsurance premiums that were or are paid in respect of a particular class of insurance business where, under the contract of reinsurance, the reinsurer agrees, in respect of a loss incurred by the company that is covered by the relevant policy, to pay only some or all of the excess over an agreed amount.
pre‑RBT obligation means a contractual obligation that:
(a) exists under an agreement at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999; and
(b) requires the payment of an amount for the doing of a thing under the agreement; and
(c) requires the payment to be made before the doing of the thing; and
(d) cannot be escaped by unilateral action by the party bound by the obligation to make the payment.
R&D activities has the same meaning as in the Income Tax Assessment Act 1997.
transfer includes assign.
(2) Without otherwise limiting the generality of references in this Subdivision to expenditure being incurred under an agreement in return for the doing of a thing under the agreement:
(a) where expenditure incurred under an agreement consists of a payment of loan interest or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the making available or continued making available, as the case requires, of the loan principal, or other amount of a similar kind, under the agreement during the period to which the payment relates; and
(b) where expenditure incurred under an agreement consists of a payment of rent, a lease payment or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the making available or continued making available, as the case requires, of the thing rented or leased, or other thing of a similar kind, under the agreement during the period to which the payment relates; and
(c) where expenditure incurred under an agreement consists of a payment of an insurance premium or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the provision or continued provision, as the case requires, of insurance against the risk concerned, or of a thing of a similar kind, under the agreement during the period to which the payment relates.
(3) This Subdivision has effect as if conducting R&D activities were carrying on a business.
82KZLA Subdivision does not apply to financial arrangements to which Subdivision 250‑E applies
To avoid doubt, this Subdivision does not apply to:
(a) a Division 230 financial arrangement (within the meaning of the Income Tax Assessment Act 1997); or
(b) a financial benefit (within the meaning of that Act) that is provided or received in relation to such an arrangement.
Note: See section 250‑210 of the Income Tax Assessment Act 1997.
82KZLB How this Subdivision applies to deductible R&D expenditure incurred to associates in earlier income years
In addition to its application apart from this section, this Subdivision applies to expenditure deductible under section 355‑480 of the Income Tax Assessment Act 1997 as if:
(a) references in this Subdivision to incurring the expenditure were references to paying the expenditure; and
(b) references in this Subdivision to the expenditure year were references to the payment year.
82KZM Expenditure by small and medium business entities and individuals incurring non‑business expenditure
(1) Where:
(a) a taxpayer incurs expenditure under an agreement entered into after 25 May 1988; and
(aa) at least one of the following applies:
(i) the taxpayer is a small business entity, or is covered by subsection (1A), for the year of income and has not chosen to apply section 82KZMD to the expenditure;
(ii) the taxpayer is an individual and the expenditure is not incurred in carrying on a business;
(iii) the expenditure meets a pre‑RBT obligation (see subsection 82KZL(1)); and
(b) the expenditure is not excluded expenditure; and
(ba) either:
(i) the eligible service period for the expenditure is longer than 12 months; or
(ii) the eligible service period for the expenditure is 12 months or shorter but ends after the last day of the year of income after the one in which the expenditure was incurred; and
(c) apart from this section, a deduction under:
(i) section 8‑1; or
(ii) section 355‑205 (R&D expenditure) or 355‑480 (earlier year associate R&D expenditure);
of the Income Tax Assessment Act 1997, in respect of the expenditure, would be allowable from the taxpayer’s assessable income for the year of income in which the expenditure is incurred;
then, for the purposes of this Act, instead of the deduction being allowable as mentioned in paragraph (c), a proportion of the deduction is allowable from the assessable income of the taxpayer of each year of income during which the whole or part of the eligible service period in relation to the expenditure occurs, being a proportion ascertained in accordance with the formula:
where:
Period in year is the number of days in the whole or the part of the eligible service period that occurs in the year of income.
Eligible service period is the number of days in the eligible service period.
(1A) A taxpayer is covered by this subsection for a year of income if:
(a) the taxpayer is not a small business entity for the year of income; and
(b) the taxpayer would be a small business entity for the year of income if:
(i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and
(ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to a taxpayer covered by this subsection.
(2) Subsection (1) has effect subject to Division 245 of the Income Tax Assessment Act 1997.
82KZMA Application of section 82KZMD
Overview
(1) Section 82KZMD sets the amount and timing of deductions for expenditure that a taxpayer incurs in a year of income (the expenditure year), if:
(a) apart from that section, the taxpayer could deduct the expenditure for the expenditure year under:
(i) section 8‑1; or
(ii) section 355‑205 (R&D expenditure) or 355‑480 (earlier year associate R&D expenditure);
of the Income Tax Assessment Act 1997; and
(b) the requirements in subsections (2), (3), (4) and (5) are met.
Requirements for taxpayer
(2) The taxpayer:
(a) must:
(i) carry on a business; or
(ii) be a taxpayer that is not an individual and that does not carry on a business; and
(b) if the taxpayer is a small business entity, or is covered by subsection (2A), for the expenditure year—must, before lodging its return of income for that year or within such further time as the Commissioner allows, choose to apply section 82KZMD to the expenditure.
(2A) A taxpayer is covered by this subsection for the expenditure year if:
(a) the taxpayer is not a small business entity for the expenditure year; and
(b) the taxpayer would be a small business entity for the expenditure year if:
(i) each reference in Subdivision 328‑C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and
(ii) the reference in paragraph 328‑110(5)(b) of that Act to a small business entity were instead a reference to a taxpayer covered by this subsection.
(3) The expenditure must be:
(a) either:
(i) incurred in carrying on a business; or
(ii) incurred otherwise than in carrying on a business by a taxpayer that is not an individual; and
(b) incurred under an agreement (see subsection 82KZL(1); and
(c) incurred in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.
Requirement for expenditure not to be excluded expenditure
(4) The expenditure must not be excluded expenditure (see subsection 82KZL(1)).
Requirement for expenditure not to meet pre‑RBT obligation
(5) The expenditure must not meet a pre‑RBT obligation (see subsection 82KZL(1)).
Relationship with other provisions
(6) Section 82KZMD has effect:
(a) despite section 8‑1 of the Income Tax Assessment Act 1997; and
(b) subject to Division 245 of that Act.
82KZMD Business expenditure and non‑business expenditure by non‑individual
(2) For each year of income containing all or part of the eligible service period for the expenditure, the taxpayer may deduct the amount worked out using the formula:
Note: This section does not apply to expenditure incurred by a small or medium business entity unless the entity chooses to apply this section to the expenditure: see paragraph 82KZMA(2)(b).
82KZME Expenditure under some agreements
(1) Section 82KZMF applies to set the amount and timing of deductions for expenditure that a taxpayer incurs in a year of income (the expenditure year) if:
(a) apart from that section, the taxpayer could deduct the expenditure for the expenditure year under:
(i) section 8‑1; or
(ii) section 355‑205 (R&D expenditure) or 355‑480 (earlier year associate R&D expenditure);
of the Income Tax Assessment Act 1997; and
(c) the requirements of subsections (2) and (3) are met.
Note: There are some exceptions: see subsections (5), (7), (8) and (9).
General requirements for expenditure
(2) The expenditure must be incurred:
(a) after 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999 under an agreement; and
(b) in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.
Requirements for agreement
(3) There are these requirements for the agreement:
(a) the taxpayer’s allowable deductions for the expenditure year that are attributable to the agreement must exceed the taxpayer’s assessable income (if any) for the expenditure year that is attributable to the agreement; and
(b) the taxpayer does not have day to day control over the operation of the agreement (whether or not the taxpayer has the right to be consulted or give directions); and
(c) at least one of these must be satisfied:
(i) there is more than one participant in the agreement in the same capacity as the taxpayer;
(ii) the person who manages, arranges or promotes the agreement, or an associate of that person, manages, arranges or promotes similar agreements for other taxpayers.
Activities that relate to the agreement
(4) Without affecting the operation of any other section in this Subdivision, an agreement referred to in this section includes all activities that relate to the agreement, including those that give rise to deductions or assessable income.
Exception 1: certain negatively geared investments
(5) The expenditure must not be:
(a) a premium for building insurance, contents insurance or rent protection insurance; or
(b) interest on money borrowed to acquire:
(i) real property or an interest in real property; or
(ii) shares that are listed for quotation in the official list of an approved stock exchange; or
(iii) units in a trust that has at least 300 beneficiaries and is a widely held unit trust as defined in section 272‑105 in Schedule 2F;
where:
(c) the taxpayer has obtained, or can reasonably be expected to obtain, rent, dividends or trust income from the agreement; and
(d) the taxpayer has not obtained and will not obtain any other kind of assessable income from the agreement (except a capital gain or an insurance receipt); and
(e) all aspects of the agreement have been conducted at arm’s length.
Exception 3: expenditure is excluded expenditure
(7) The expenditure must not be excluded expenditure (see subsection 82KZL(1)).
Exception 4: expenditure meets a pre‑existing obligation
(8) The expenditure by the taxpayer must not meet a contractual obligation that:
(a) exists under an agreement at or before 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999; and
(b) requires the payment of an amount for the doing of a thing under the agreement; and
(c) requires the payment to be made before the doing of the thing; and
(d) cannot be escaped by unilateral action by the taxpayer.
Exception 5: agreement to which a product ruling applies
(9) The expenditure must not be under an agreement to which a product ruling applies, describing expenditure under the agreement as being allowable as a deduction.
(10) The product ruling must be made:
(a) on or before 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999; or
(b) in response to an application for a product ruling where:
(i) the application was received by the Commissioner on or before the time specified in paragraph (a); and
(ii) the Commissioner acknowledged receiving the application.
(11) In this section:
product ruling means a public ruling made under Part IVAAA of the Taxation Administration Act 1953 about a particular investment product.
82KZMF Proportional deduction
(1) If this section applies to expenditure incurred by a taxpayer in a year of income:
(a) the taxpayer cannot deduct all of the expenditure for the expenditure year; and
(b) instead, the taxpayer can deduct, for each year of income during which part of the eligible service period for the expenditure occurs, an amount worked out using this formula:
(2) This section has effect:
(a) despite section 8‑1 of the Income Tax Assessment Act 1997; and
(b) subject to Division 245 of the Income Tax Assessment Act 1997.
Note: Deductions under section 355‑205 or 355‑480 of the Income Tax Assessment Act 1997 for R&D expenditure are subject to this section (see subsection 8‑5(2) and section 355‑105 of that Act).
82KZMG Deductions for certain forestry expenditure
(1) Sections 82KZMD and 82KZMF do not affect the timing of a deduction for expenditure incurred by a taxpayer in a year of income (the expenditure year) to the extent that the requirements of this section are met.
General requirements for expenditure
(2) There are these requirements for the expenditure:
(a) it must be incurred on or after 2 October 2001 and on or before 30 June 2008 under an agreement; and
(b) the eligible service period for the expenditure must be 12 months or shorter and must end on or before the last day of the year of income after the expenditure year; and
(c) it must be incurred in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.
Requirements for agreement
(3) There are these requirements for the agreement:
(a) the agreement must be for planting and tending trees for felling; and
(b) the taxpayer must not have day to day control over the operation of the agreement (whether or not the taxpayer has the right to be consulted or give directions); and
(c) at least one of these must be satisfied:
(i) there is more than one participant in the agreement in the same capacity as the taxpayer;
(ii) the person (the manager) who manages, arranges or promotes the agreement, or an associate of that person, manages, arranges or promotes similar agreements for other taxpayers.
Requirements for expenditure
(4) The expenditure incurred by the taxpayer must be paid for seasonally dependent agronomic activities undertaken by the manager during the establishment period for the relevant planting of trees for felling.
Example: Examples of seasonally dependent agronomic activities include:
· tending the seedlings prior to planting, and planting them;
· ripping and mounding the site where the planting is to occur;
· applying fertiliser, herbicide or pesticide in conjunction with the planting.
(5) The establishment period for a particular planting of trees starts on the day when the first seasonally dependent agronomic activity for that planting is done and ends on the later of:
(a) the day when the last seedling is planted as part of that planting, not including replacement of seedlings already planted; and
(b) the day when any fertiliser, herbicide or pesticide is applied to the seedlings in conjunction with that planting.
82KZMGA Deductions for certain forestry expenditure
(1) A taxpayer cannot deduct expenditure in relation to which the requirements in section 82KZMG (apart from paragraph 82KZMG(2)(a)) are met if:
(a) the taxpayer holds the taxpayer’s interest in the agreement mentioned in section 82KZMG as an initial participant in the agreement; and
(b) a CGT event happens in relation to that interest within 4 years after the end of the year of income in which the taxpayer first incurred expenditure under the agreement; and
(c) the expenditure is incurred on or before 30 June 2008.
(1A) Paragraph (1)(b) does not apply to a CGT event if:
(a) the CGT event happens because of circumstances outside the taxpayer’s control; and
Example: The interest is compulsorily acquired.
(b) when the taxpayer acquired the interest, the taxpayer could not reasonably have foreseen the CGT event happening.
(2) Despite section 170, the Commissioner may amend the taxpayer’s assessment at any time within 2 years after the end of the year of income in which the CGT event happens, for the purpose of giving effect to this section.
82KZMGB CGT event in relation to interest in 82KZMG agreement
(1) This section applies if:
(a) a taxpayer holds an interest in an agreement mentioned in section 82KZMG as an initial participant in the agreement; and
(b) at least one of these conditions is satisfied:
(i) the taxpayer can deduct or has deducted an amount for a year of income in relation to the interest;
(ii) the condition in subparagraph (i) would be satisfied if section 82KZMGA were disregarded; and
(c) subsection 82KZMG(1) applies to the timing of the deduction (or would apply if section 82KZMGA were disregarded); and
(d) a CGT event happens in relation to the interest, other than a CGT event that happens in respect of thinning.
(2) The taxpayer’s assessable income for the year of income in which the CGT event happens includes:
(a) if, as a result of the CGT event, the taxpayer no longer holds the interest—the market value of the interest (worked out as at the time of the event); or
(b) otherwise—the decrease (if any) in the market value of the interest as a result of the CGT event.
(3) Any amount that the taxpayer actually receives because of the CGT event is not included in the taxpayer’s assessable income (nor is it exempt income).
82KZN Transfer etc. of rights under agreement
Where:
(a) under an agreement entered into either before or after the commencement of this section, a taxpayer (in this section called the original taxpayer) incurs expenditure in return for the doing of a thing during a period after the incurring of the expenditure; and
(b) either:
(i) the original taxpayer transfers to another taxpayer (in this section called the recipient taxpayer) all of his or her rights under the agreement in relation to the doing of the thing during the remainder of the period; or
(ii) the agreement is discharged (whether by performance or otherwise) in so far as it relates to the doing of the thing during the remainder of the period;
the following provisions have effect for the purpose of this Subdivision:
(c) if the whole or part of a deduction under former section 51 of this Act or section 8‑1 of the Income Tax Assessment Act 1997 in respect of the expenditure is, because of this Subdivision, allowable from the assessable income of the original taxpayer of any year of income occurring after the year of income in which the transfer or discharge occurs—that deduction is instead allowable from the assessable income of the year of income in which the transfer, assignment or discharge occurs;
(d) if the recipient taxpayer incurs expenditure in return for the transfer—the recipient taxpayer shall be taken to have incurred, under an agreement entered into at the time of the transfer, so much of that expenditure as is not of a capital, private or domestic nature in return for the doing of the thing during the remainder of the period.
82KZO Partnership changes where entire interest in agreement rights is not transferred
Where:
(a) under an agreement entered into after 25 May 1988, a person (in this section called the original person), or the partners in a partnership (in this section called the original partnership), incurs or incur expenditure in return for the doing of a thing during a period after the incurring of the expenditure;
(b) either of the following (in this section called a partnership change) happens:
(i) a partnership is formed or the original partnership is dissolved, or both; or
(ii) the constitution of the original partnership, or the interests of the partners in the original partnership, is or are varied;
with the result that, after the partnership change:
(iii) a person (in this section called the later person), or the partners in a partnership (in this section called the later partnership), holds or hold all of any rights under the agreement to have the thing done during the period after the partnership change; and
(iv) the original person, or one or more of the partners in the original partnership, has an interest in the rights after the partnership change; and
(c) the whole or part of a deduction under former section 51 of this Act or section 8‑1 of the Income Tax Assessment Act 1997 in respect of the expenditure (which whole or part is in this section called a spread deduction) is, because of the application of this Subdivision, allowable from the assessable income of the original person or the original partnership of the year of income in which the partnership change happens or a subsequent year of income;
the following provisions have effect:
(d) if a spread deduction is allowable in relation to the year of income in which the partnership change occurs—the entitlement to the deduction shall, for the purposes of this Act but subject to any later application of this section, be apportioned between the original person or original partnership and the later person or later partnership according to the portions of the eligible service period in the year of income (or, if the case requires, of so much of the period as occurs after a partnership change resulting from a previous application of this section) that occur before and after the partnership change;
(e) if a spread deduction relates to a subsequent year of income—the later person or later partnership, instead of the original person or original partnership, shall, for the purposes of this Act but subject to any later application of this section, be entitled to the deduction;
(f) for the purposes of any later application of this section or section 82KZN, the later person or later partnership, instead of the original person or original partnership, shall be taken to have incurred the expenditure under the agreement.
Division 3A—Convertible notes
82LA Application of Division
(1) This Division applies only for the purposes of:
(a) calculating an eligible CFC’s attributable income for the purposes of Part X; and
(b) defining convertible note.
(2) A term used in paragraph (1)(a) has the same meaning as it has when used in Part X.
82L Interpretation
(1) In this Division, unless the contrary intention appears:
attributable income has the meaning given by Division 7 of Part X.
CFC or controlled foreign company has the meaning given by section 340.
convertible note includes a note issued by a company that provides, whether in pursuance of or by virtue of a trust deed or otherwise:
(a) that the amount of the loan to the company that is evidenced, acknowledged or created by the note or to which the note relates:
(i) whether with or without interest;
(iii) whether at the option of the holder or owner of the note or of some other person or not;
(iv) whether in whole or in part; or
(v) whether exclusively or otherwise;
is to be or may be converted into shares in the capital of the company or of another company or is to be or may be redeemed, repaid or satisfied by:
(vi) the allotment or transfer of shares in the capital of the company or of some other company, whether to the holder or owner of the note or to some other person;
(vii) the acquisition of such shares, whether by the holder or owner or by some other person, otherwise than as mentioned in subparagraph (vi); or
(viii) application in or towards paying‑up, in whole or in part, the balance unpaid on shares issued or to be issued by the company or by some other company, whether to the holder or owner or to some other person; or
(b) that the holder or owner of the note is to have, or may have, any right or option to have allotted or transferred to him or her or to some other person, or for him or her or some other person otherwise to acquire, shares in the capital of the company or of some other company.
foreign loan means a loan to a company raised outside Australia in a currency other than the currency of Australia.
instrument includes debenture, bond, certificate, receipt or any other document or writing.
issued includes given and executed, and issue has a corresponding meaning.
loan, in relation to a company, means:
(a) a loan, advance or deposit of money to or with the company;
(b) money subscribed to the company; or
(c) any other form of debt or liability of the company;
whether secured or unsecured and whenever redeemable, repayable or to be satisfied.
note means a note or other instrument issued by a company that evidences, acknowledges, creates or relates to a loan to the company.
prescribed stock exchange means an approved stock exchange (within the meaning of the Income Tax Assessment Act 1997) operating in Australia.
qualified person, in relation to the valuing of a share in the capital of a company, means a person registered as a company auditor under a law in force in a State or a Territory, but does not include:
(a) a director, secretary or employee of the company;
(b) a partner, employer or employee of a person referred to in paragraph (a); or
(c) a partner or employee of an employee of a person so referred to.
the date of offer, in relation to a loan to a company means the earliest date on which, by any relevant prospectus, notice, circular, advertisement or other written invitation, any person was or persons were invited to subscribe to the loan:
(a) in the case of a new loan—by the payment of money to the company; or
(b) in the case of an approved replacement loan—by converting, in whole or in part, an earlier loan, or by converting, in whole or in part, an earlier loan and the payment of money to the company.
the maturity date, in relation to a loan to which a convertible note applies, means the date by which the whole of the loan is, under the terms applicable to the note, to be repaid, redeemed or satisfied.
the relevant valuation period, in relation to a share, means:
(a) where neither paragraph (b) nor (c) applies in relation to the share—the period of one month ending on the date that is the valuation date in relation to the share;
(b) where:
(i) the share is included in a class of shares that, during the whole of the period of 2 months ending on the valuation date, was listed for quotation in the official list of a stock exchange that was a prescribed stock exchange during the whole of that period of 2 months, or in the official lists of 2 or more stock exchanges each of which was a prescribed stock exchange during the whole of that period of 2 months; and
(ii) fully paid shares included in that class of shares were not recorded by that stock exchange or by any of those stock exchanges, as the case may be, as having been sold during the period of one month specified in paragraph (a) but were recorded by that stock exchange or by one or more of those stock exchanges, as the case may be, as having been sold during the period of one month immediately preceding the commencement of the period of one month so specified;
that preceding period of one month; or
(c) where:
(i) the share is included in a class of shares that, during the whole of the period of 3 months ending on the valuation date, was listed for quotation in the official list of a stock exchange that was a prescribed stock exchange during the whole of that period of 3 months, or in the official lists of 2 or more stock exchanges each of which was a prescribed stock exchange during the whole of that period of 3 months; and
(ii) fully paid shares included in that class of shares were not recorded by that stock exchange or by any of those stock exchanges, as the case may be, as having been sold during the period of 2 months ending on the valuation date but were recorded by that stock exchange or by one or more of those stock exchanges, as the case may be, as having been sold during the period of one month immediately preceding the commencement of that period of 2 months;
that preceding period of one month.
the valuation date, in relation to a share, means the date that is earlier by 6 weeks than the date that is the date of offer in relation to the loan in respect of which the value of the share is to be ascertained.
(2) Where the combined effect or operation of 2 or more related instruments, whether issued at the same time or not, would have the effect or operation of a convertible note, those instruments shall, for the purposes of this Division, be deemed to be together a convertible note.
(3) Where:
(a) a company issues a note that provides that the amount of the loan to the company that is evidenced, acknowledged or created by the note or to which the note relates:
(i) whether with or without interest;
(iii) whether at the option of the holder or owner of the note or of some other person or not;
(iv) whether in whole or in part; or
(v) whether exclusively or otherwise;
is to be or may be redeemed, repaid or satisfied by the issue, whether by the same company or by another company, of an instrument or a series of instruments; and
(b) that instrument, or any instrument in that series of instruments, is to provide, whether in pursuance of or by virtue of a trust deed or otherwise, as mentioned in paragraph (a) or (b) of the definition of convertible note in subsection (1);
that note and the instrument, or that note and each of the instruments in the series of instruments, shall, for the purposes of this Division, be deemed to be a convertible note.
(4) For the purposes of this Division, a convertible note issued by a company applies to a loan to a company if it evidences, acknowledges or creates the loan.
(5) A reference in this Division to the terms, or a term, applicable to a convertible note shall be read as including a reference to terms, or a term, that so apply or applies in pursuance of or by virtue of a trust deed or otherwise.
82M New loans and replacement loans
(1) Where:
(a) a loan to a company is made, and is wholly made, by money being paid to the company at the time when the loan is made; and
(b) the loan is not part of or related to a transaction, or is not one of a series of related transactions, under which the person making the loan is to receive or has received, for the purpose of enabling him or her to make, or of assisting him or her in making, the loan, any money or other property from the company, or from another company or person as a result of arrangements made with that other company or person by the first‑mentioned company;
the loan shall, for the purposes of this Division, be treated as a new loan.
(2) Where:
(a) a loan to a company is, under subsection (1), to be treated as a new loan for the purposes of this Division;
(b) the loan is not evidenced, acknowledged or created by a convertible note or is not a loan to which a convertible note otherwise applies;
(c) the loan is for a fixed period;
(d) the rate of interest payable in respect of the loan is the same in respect of all periods occurring before the date by which the whole of the loan is to be repaid, redeemed or satisfied; and
(e) the loan is, in whole or in part, converted into another loan to the company or to another company, or the loan is, in whole or in part, converted into a part of another loan to the company or to another company and the remainder of the other loan:
(i) is made by money being paid to the company or other company at the time when the loan is made; and
(ii) would, if it were a separate loan, be a loan that, under subsection (1), is to be treated as a new loan for the purposes of this Division;
that other loan shall, for the purposes of this Division, be treated as an approved replacement loan.
82P Bonus share allotments
(1) For the purposes of this section, the making of a bonus share allotment by a company is the allotment by the company of shares (in this section referred to as bonus shares) in the capital of the company (being shares all of which are of the same class as each other) to persons who are the holders of other shares (in this section referred to as qualifying shares) in the capital of the company or in the capital of another company (being shares all of which are of the same class as each other but which are not necessarily of the same class as the bonus shares), being an allotment made to the holders of all shares of the same class as the qualifying shares or an allotment made in pursuance of applications for the allotment of the bonus shares by the holders of the qualifying shares in accordance with an invitation to apply for the allotment of shares given to the holders of the qualifying shares and the holders of all other shares of the same class as the qualifying shares.
(2) Where:
(a) the option to convert that exists under a convertible note is an option to have shares allotted to the holder or owner of the note; and
(b) the terms applicable to the note are such that, if a bonus share allotment is made by the company that issued the note or by another company in respect of qualifying shares that are of the same class as the shares that are to be allotted to the holder or owner of the note upon the exercise of the option to convert, the holder or owner of the note is to have the right to have allotted to him or her shares in the capital of the company or of that other company, as the case may be, of the same class as the bonus shares on terms and conditions that are the same as or correspond with, or are no more favourable to him or her than, the terms and conditions on which bonus shares are allotted to any holder of qualifying shares;
that right shall, for the purposes of subparagraph 82SA(1)(d)(ii), be deemed to be an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the convertible note.
(3) Where:
(a) the option to convert that exists under a convertible note is an option to have shares transferred to the holder or owner of the note; and
(b) the terms applicable to the note are such that, if a bonus share allotment is made by the company that issued the note or by another company, being an allotment the qualifying shares relating to which include the shares that are to be transferred to the holder or owner of the note upon the exercise of the option to convert, and bonus shares allotted in respect of the qualifying shares to be so transferred are allotted to the holder of those shares on terms and conditions that are the same as or correspond with, or are no more favourable to him or her than, the terms and conditions on which bonus shares are allotted to any other holder of qualifying shares, the holder or owner of the note is to have the right to have the bonus shares allotted to that person transferred to him or her upon the payment by him or her, where a consideration was paid or is payable in respect of the allotment of the bonus shares to the other person, of a consideration not less than that consideration;
that right shall, for the purposes of subparagraphs 82S(1)(d)(ii) and 82SA(1)(d)(ii), be deemed to be an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the convertible note.
82Q Classes of shares
(1) Shares in the capital of a company to which there are attached the same rights, including the following rights:
(a) rights in respect of voting;
(b) rights in respect of dividends;
(c) rights in respect of distribution of share capital in consequence of a reduction of share capital;
(d) rights in respect of distribution of the property of the company in the event of the winding up of the company;
constitute a class of shares for the purposes of this Division, and no other shares in the capital of the company constitute a class of shares for such purposes.
(2) Notwithstanding anything contained in subsection (1), a share in the capital of a company to be allotted upon the exercise of the option to convert given under the terms applicable to a convertible note shall not, for the purposes of this Division, be deemed to be a share of a different class from a share in the capital of the company already allotted by reason only that during the period of one year after the allotment of the first‑mentioned share, any dividend payable in respect of the share will or may be less than any dividend payable in respect of the second‑mentioned share.
82R Interest on certain convertible notes not to be an allowable deduction
(1) Subject to section 82SA, this section applies to a convertible note issued by a company, not being:
(a) a convertible note issued on or before 15 November 1960; or
(b) a convertible note:
(i) the terms of the issue of which were announced by the company on or before that date; or
(ii) that the company was, in pursuance of an agreement made on or before that date, bound to issue.
(2) Where, in pursuance of the terms upon which any convertible notes were issued by a company, a person was entitled to have a convertible note issued to him or her by that company, the company shall, for the purposes of subsection (1), be deemed to have issued the convertible note to that person at the time when the person first became entitled to have the convertible note issued to him or her.
(3) An outgoing consisting of interest, or a payment in the nature of interest, under a convertible note to which this section applies shall be deemed not to be an allowable deduction from the assessable income of the company.
(4) Where a payment has been made by a person (whether under a guarantee or otherwise) that represents, in effect, a payment of interest under a convertible note to which this section applies and the company has incurred an outgoing by way of making good the first‑mentioned payment to that person, whether by way of indemnification or otherwise, the amount of that outgoing shall, for the purposes of this section, be deemed to be an outgoing consisting of interest under the convertible note.
(5) Section 25‑25 (Borrowing expenses) of the Income Tax Assessment Act 1997 does not apply to the expenditure incurred by the company in borrowing money by means of convertible notes to which this section applies.
82SA Interest on certain convertible notes to be an allowable deduction—where loan made on or after 1 January 1976
(1) Subject to the succeeding provisions of this section, section 82R does not apply in relation to a convertible note issued by a company where:
(a) the loan to the company to which the note applies is, under section 82M, to be treated as a new loan or an approved replacement loan for the purposes of this Division;
(b) the loan was made on or after 1 January 1976;
(c) the convertible note was issued before the expiration of 2 months after the loan was made; and
(d) the terms applicable to the convertible note are, at the time the note was issued and at all subsequent times, such that:
(i) an option is given to the holder or owner of the convertible note (in this Division referred to as the option to convert) to have allotted or transferred to him or her shares in the capital of the company or of another company;
(ii) no provision is made for the allotting or transferring of shares in the capital of the company or of another company to the holder or owner of the convertible note except in pursuance of the exercise of the option to convert or except in pursuance of a right that, under section 82P, is an approved right relating to the allotting or transfer of bonus shares to the holder or owner of the note;
(iii) the convertible note would not, but for the option to convert and any right of the kind referred to in subparagraph (ii), be a convertible note;
(iv) the earliest date on which the option to convert may be exercised is a date not later than 2 years after the date of offer;
(v) the latest date on which the option to convert may be exercised is a date not later than the maturity date of the loan or, if the date of offer is more than 10 years earlier than the maturity date, a date not later than 10 years after the date of offer;
(vi) the rate of interest payable in respect of the loan is, subject to subsection (5), the same in respect of all periods occurring before the maturity date of the loan;
(vii) subject to subsection (6), the obligations and rights of the holder or owner of the convertible note (including, but without limiting the generality of the foregoing, obligations and rights with respect to the amount payable on repayment, redemption or satisfaction of the loan and the terms on which shares are to be allotted or transferred in pursuance of the exercise of the option to convert) do not vary in his or her favour by reason that he or she exercises the option, or he, she or the company exercises any other right in relation to the note, at a later rather than at an earlier time after the issue of the note;
(viii) the rights of the holder or owner of the convertible note with respect to the amount payable on repayment, redemption or satisfaction of the loan do not vary according to whether or not he or she exercises the option to convert;
(ix) the shares to be allotted or transferred upon the exercise of the option to convert:
(A) are to be allotted or transferred within 2 months after the exercise of the option;
(B) in the case of shares to be allotted, are, upon payment of the amount payable in respect of the allotment, to be fully paid shares or, in the case of shares to be transferred, are, at the time of transfer, to be fully paid shares; and
(C) are to be shares of the same class as shares in the capital of the company that, not later than 6 weeks before the date that is the date of offer in relation to the loan, had been allotted and were fully paid;
(x) the shares to be allotted or transferred upon the exercise of the option to convert are to be shares with respect to which no provision is made (whether by the memorandum, or memorandum and articles, of the company, or other instrument constituting or defining the constitution of the company, or otherwise) for changing or converting them into shares of another class, except for the purpose of enabling, in accordance with any law relating to companies, the consolidation and division of all or any of the share capital of the company or of another company or the sub‑division of all or any of the shares in the capital of the company or of another company; and
(xi) the amount payable in respect of the allotment or transfer of a share in pursuance of the exercise of the option to convert is to be paid not later than 1 month after the allotment or transfer, and is to be not less than 90% of the amount that, in accordance with section 82T, is the value as at the valuation date of a fully paid share included in the class of shares in which the share to be allotted or transferred will be, or is, included.
(2) Where subsection (1) ceases to have effect in relation to a convertible note by reason of a change in the terms applicable to the note (not being a change resulting from a compromise or arrangement approved by a court), subsection (1) shall be deemed never to have had effect in relation to the note.
(3) Where a note is a convertible note in relation to which subsection (1) has effect and the right to exercise the option to convert relating to the note becomes exercisable by a person other than the holder or owner of the note by reason of an assignment of that right, the assignment shall, for the purposes of this section, be disregarded.
(4) Where, in relation to a convertible note issued by a company, the company or a director of the company does any act or thing for the purpose of, or purposes that include the purpose of, and having the effect of, causing the amount that, for the purposes of subsection (1), is the minimum amount applicable to a share to be allotted or transferred in pursuance of the exercise of the option to convert relating to the note, to be less than it would otherwise have been, subsection (1) does not have effect in relation to the note.
(5) Where, under the terms applicable to a convertible note, the rate of interest payable in respect of the loan to which the note applies is to be varied from time to time (otherwise than with retrospective effect) in accordance with changes, or changes exceeding a specified percentage, in the rate of interest prevailing from time to time:
(a) where the loan is a foreign loan, at a specified place outside Australia in respect of a specified class of transactions; or
(b) where the loan is not a foreign loan, in respect of a specified class of securities issued under an Act;
the term shall, for the purposes of subparagraph (1)(d)(vi), be deemed not to be a term providing for a variation in the rate of interest payable in respect of the loan.
(6) For the purposes of subparagraph (1)(d)(vii), the obligations and rights of the holder or owner of a convertible note shall not be deemed to vary in a manner referred to in that subparagraph by reason only that any dividend payable in respect of a share in the capital of a company to be allotted upon the exercise of the option to convert relating to the note, being a dividend payable during the period of 1 year after the allotment of the share, will or may vary according to the time when, in relation to the period to which the dividend relates, the option to convert is exercised.
82T Value of shares
(1) For the purposes of section 82SA, the value of a fully paid share as at the valuation date is:
(a) where:
(i) the share is included in a class of shares that, during the whole of the relevant valuation period, was listed for quotation in the official list of a stock exchange that was a prescribed stock exchange during the whole of that period, or in the official lists of 2 or more stock exchanges each of which was a prescribed stock exchange during the whole of that period; and
(ii) fully paid shares included in that class of shares were recorded by that stock exchange, or by one or more of those stock exchanges, as the case may be, as having been sold during that period;
an amount ascertained by dividing the total consideration paid or payable in respect of those sales by the total number of shares so recorded as having been sold; and
(b) in any other case—the amount that a person who is a qualified person in relation to the valuing of the share certifies that, on a true and fair view of the state of the company’s affairs, would, in respect of a sale at the end of the relevant valuation period between a willing but not anxious seller and a willing but not anxious buyer, be expected to be the consideration paid for the share, on the assumption, in a case where the class of shares in which that share is included was not, at the end of the relevant valuation period, listed for quotation in the official list of a stock exchange that, at that time, was a prescribed stock exchange, that the memorandum, or memorandum and articles, of the company, or other instrument constituting or defining the constitution of the company, satisfied, at that time, such of the requirements of a stock exchange that, at that time, was a prescribed stock exchange as it would have been necessary to satisfy to enable that class of shares to be listed for quotation in the official list of that stock exchange.
Division 5—Partnerships
90 Interpretation
In this Division:
exempt income, in relation to a partnership, means the exempt income of the partnership calculated as if the partnership were a taxpayer who was a resident.
net income, in relation to a partnership, means the assessable income of the partnership, calculated as if the partnership were a taxpayer who was a resident, less all allowable deductions except deductions allowable under section 290‑150 or Division 36 of the Income Tax Assessment Act 1997.
non‑assessable non‑exempt income, in relation to a partnership, means the non‑assessable non‑exempt income of the partnership calculated as if the partnership were a taxpayer who was a resident.
partnership loss, in relation to a partnership, means the excess (if any) of the allowable deductions, other than deductions allowable under section 290‑150 or Division 36 of the Income Tax Assessment Act 1997, over the assessable income of the partnership calculated as if the partnership were a taxpayer who was a resident.
91 Liability of partnerships
A partnership shall furnish a return of the income of the partnership, but shall not be liable to pay tax thereon.
92 Income and deductions of partner
(1) The assessable income of a partner in a partnership shall include:
(a) so much of the individual interest of the partner in the net income of the partnership of the year of income as is attributable to a period when the partner was a resident; and
(b) so much of the individual interest of the partner in the net income of the partnership of the year of income as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.
(2) Subject to section 830‑45 of the Income Tax Assessment Act 1997, if a partnership loss is incurred by a partnership in a year of income, there shall be allowable as a deduction to a partner in the partnership:
(a) so much of the individual interest of the partner in the partnership loss as is attributable to a period when the partner was a resident; and
(b) so much of the individual interest of the partner in the partnership loss as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.
(2AA) However, if:
(a) the partner is a limited partner in a partnership; and
(b) the partnership is a VCLP, an ESVCLP, an AFOF or a VCMP during the year of income;
the amount allowable under subsection (2), in respect of the year of income, as a deduction must not exceed the amount worked out as follows:
Method statement
Step 1. Work out the sum of the amounts that the partner has contributed (the partner’s contribution) to the partnership.
Step 2. Subtract the sum of all the amounts (if any) of the partner’s contribution that are repaid to the partner.
Step 3. Subtract the sum of all deductions allowed to the partner for losses of the partnership in previous years of income.
Step 4. Subtract the sum of the amounts of all the debt interests issued by the partner to the extent that they are secured by the partner’s interest in the partnership.
Example: A limited partner contributes $100,000 to a VCLP, having borrowed $80,000. Because the lender values the partner’s interest in the partnership at $70,000, the partner also provides, as additional security, other assets valued at $10,000.
If none of the partner’s contribution has been repaid and the partner has not been allowed deductions for partnership losses in previous years of income, the amount allowable to the partner for a partnership loss cannot exceed $30,000.
(2A) Subsection (2) does not apply to a partnership loss if the partner’s interest in the partnership at the end of the year of income is:
(a) a segregated exempt asset (as defined in the Income Tax Assessment Act 1997) of a life assurance company; or
(b) a segregated current pension asset (as defined in the Income Tax Assessment Act 1997) of a complying superannuation fund.
(3) The exempt income of a partner in a partnership shall include:
(a) so much of the individual interest of the partner in the exempt income of the partnership of the year of income as is attributable to a period when the partner was a resident; and
(b) so much of the individual interest of the partner in the exempt income of the partnership of the year of income as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.
(4) The non‑assessable non‑exempt income of a partner in a partnership shall include:
(a) so much of the individual interest of the partner in the non‑assessable non‑exempt income of the partnership of the year of income as is attributable to a period when the partner was a resident; and
(b) so much of the individual interest of the partner in the non‑assessable non‑exempt income of the partnership of the year of income as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.
92A Deductions in respect of outstanding subsection 92(2AA) amounts
(1) If:
(a) the partner is a limited partner in a partnership; and
(b) the partnership is a VCLP, an ESVCLP, an AFOF or a VCMP during the year of income; and
(c) the amount allowable under subsection 92(2) as a deduction to the partner for partnership losses incurred by the partnership in the year of income is not reduced because of subsection 92(2AA); and
(d) the partner has an outstanding subsection 92(2AA) amount for the year of income;
there is allowable as a deduction to the partnership an amount worked out as follows:
Method statement
Step 1. Subtract the amount allowable under subsection 92(2) as a deduction to the partner for partnership losses incurred by the partnership in the year of income from the amount worked out using the method statement in subsection 92(2AA).
Step 2. If the amount worked out under step 1 is greater than or equal to the outstanding subsection 92(2AA) amount for the year of income, the amount of the deduction allowable under this section is the outstanding subsection 92(2AA) amount.
Step 3. If the amount worked out under step 1 is less than the outstanding subsection 92(2AA) amount for the year of income, the amount of the deduction allowable under this section is the amount worked out under step 1.
(2) The partner has an outstanding subsection 92(2AA) amount for a year of income if:
(a) an amount allowable under subsection 92(2) as a deduction to the partner for partnership losses incurred by the partnership in a previous year of income was reduced because of subsection 92(2AA); and
(b) the difference between:
(i) the sum of all reductions made under subsection 92(2AA) to amounts allowable under subsection 92(2) as deductions to the partner for partnership losses incurred by the partnership in previous years of income; and
(ii) the sum of all amounts allowable under this section, in respect of previous years of income, as deductions to the partner in relation to those reductions;
is greater than zero.
The amount of that difference is the partner’s outstanding subsection 92(2AA) amount for the year of income.
(3) To avoid doubt, a partner’s outstanding subsection 92(2AA) amount for a year of income cannot form part of a tax loss for the purposes of Division 36 or 160 of the Income Tax Assessment Act 1997.
94 Partner not having control and disposal of share in partnership income
(1) Subject to this section, where:
(a) a share in the net income of a partnership of a year of income is included in the assessable income of a partner in the partnership, not being:
(i) a company;
(ii) a person in the capacity of a trustee; or
(iii) a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership; and
(b) the partnership is so constituted or controlled, or its operations are so conducted, that the partner has not the real and effective control and disposal of that share or of a part of that share;
this section applies to that share or that part of that share, as the case may be.
(2) Subject to the succeeding provisions of this section, where:
(a) a partnership is so constituted or controlled, or its operations are so conducted, that a partner in the partnership, being a trustee of a trust estate, has not the real and effective control and disposal of his or her share in the net income of the partnership of a year of income or of a part of that share (which share or part of a share, as the case may be, is in this subsection referred to as uncontrolled partnership income); and
(b) in calculating in accordance with section 95 the net income of that trust estate or of any other trust estate, there is included in the assessable income of the trust estate any uncontrolled partnership income;
then:
(c) if:
(i) a beneficiary, not being a company or a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership, is presently entitled to the whole of the income of the trust estate otherwise than in the capacity of a trustee; or
(ii) there is no part of the net income of the trust estate that is included in the assessable income of a beneficiary in pursuance of section 97 or in respect of which the trustee is assessed and liable to pay tax in pursuance of section 98;
this section applies to the portion of the net income of the trust estate that was derived from uncontrolled partnership income;
(d) if a beneficiary, not being a company or a person who was under the age of 18 years on the last day of the year of income of the person that corresponds with the year of income of the partnership, is presently entitled to a share of the income of the trust estate otherwise than in the capacity of a trustee, this section applies to so much of that share of the net income of the trust estate as bears to that share the same proportion as the portion of the net income of the trust estate that was derived from uncontrolled partnership income bears to the net income of the trust estate; and
(e) if there is a part of the net income of the trust estate that is not included in the assessable income of a beneficiary in pursuance of section 97 and in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section 98, this section applies to so much of that part of the net income of the trust estate as bears to that part the same proportion as the portion of the net income of the trust estate that was derived from uncontrolled partnership income bears to the net income of the trust estate.
(5) For the purposes of this section:
(a) where:
(i) the assessable income of a trust estate includes the net income or a share of the net income of another trust estate; and
(ii) the assessable income of the other trust estate by reference to which that net income is calculated included income of a particular class (including an amount that is to be deemed by an application or applications of this paragraph to be income of a particular class);
the assessable income of the first‑mentioned trust estate shall be deemed to include income of that class of an amount equal to so much of the net income or share of the net income of the other trust estate that is included in the assessable income of the first‑mentioned trust estate as bears to that net income or share of that net income the same proportion as the portion of the net income of the other trust estate that was derived from income of that class bears to the net income of the other trust estate; and
(b) the portion of the net income of a trust estate that is derived from income of a particular class that is included in the assessable income of the trust estate is the amount remaining after deducting from the income of that class that is included in the assessable income of the trust estate:
(i) any prescribed deductions that relate exclusively to that income of that class;
(ii) so much of any other prescribed deductions (other than apportionable deductions) as, in the opinion of the Commissioner, may appropriately be related to that income of that class; and
(iii) the amount that bears to the prescribed deductions (being apportionable deductions) the same proportion as the amount that, but for this subparagraph, would be the portion of the net income of the trust estate that is derived from that income of that class bears to the sum of the net income of the trust estate and those last‑mentioned prescribed deductions.
(6) Where the assessable income of a trust estate includes, or, by virtue of paragraph (5)(a), is to be deemed to include, income of a particular class but the Commissioner is of the opinion that it would be unreasonable to treat each part or share of the net income of the trust estate that is included in the assessable income of a beneficiary, or on or in respect of which the trustee is assessed and liable to pay tax, as including a proportionate part of the portion of the net income of the trust estate that is derived from income of that class, the amount:
(a) that is the amount of a part or share of the net income of the trust estate to which this section applies by virtue of paragraph (2)(d) or (e); or
(b) that is, by virtue of paragraph (5)(a), the amount of the income of that class that is to be deemed to be included in the assessable income of another trust estate;
is, in lieu of the amount that, but for this subsection, would be the amount of that part or share of that net income or the amount of that income of that class, as the case may be, such amount as the Commissioner considers reasonable in the circumstances.
(8) Where the Commissioner is of the opinion that, by reason of special circumstances, it would be unreasonable that this section should apply to any income, this section does not apply to that income.
(8A) In forming an opinion for the purposes of subsection (8) as to whether it is unreasonable that this section should apply in relation to any of the net income of a trust estate, the Commissioner shall take into consideration the extent (if any) to which that net income represents income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia.
(9) Where the assessable income of a taxpayer, other than a taxpayer in the capacity of a trustee, includes income to which this section applies, the taxpayer shall be assessed and is liable to pay further tax, in accordance with subsection (10A) or (10B), upon the portion (in this section referred to as the eligible portion) of his or her taxable income that is derived from income to which this section applies.
(10) For the purposes of subsection (9), the portion of the taxable income of a taxpayer that is derived from income to which this section applies is the amount remaining after deducting from the income to which this section applies that is included in his or her assessable income:
(a) any deductions allowed or allowable in his or her assessment that relate exclusively to the income to which this section applies that is included in his or her assessable income;
(b) so much of any other deductions allowed or allowable in his or her assessment (other than apportionable deductions) as, in the opinion of the Commissioner, may appropriately be related to the income to which this section applies that is included in his or her assessable income; and
(c) the amount that bears to the apportionable deductions allowed or allowable in his or her assessment the same proportion as the amount that, but for this paragraph, would be the portion of his or her taxable income that is derived from income to which this section applies bears to the sum of his or her taxable income and those apportionable deductions.
(10A) Where Division 392 (Long‑term averaging of primary producers’ tax liability) of the Income Tax Assessment Act 1997 does not apply in relation to the income of a taxpayer of the year of income, the taxpayer is liable to pay further tax upon the eligible portion of his or her taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (9) in respect of the relevant part of the taxable income.
(10B) Where Division 392 (Long‑term averaging of primary producers’ tax liability) of the Income Tax Assessment Act 1997 applies in relation to the income of a taxpayer of the year of income, the taxpayer is liable to pay further tax upon the relevant part of the eligible portion of his or her taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (9) in respect of the relevant part of the taxable income and is, in addition, liable to pay further tax upon the prescribed part of the eligible portion of his or her taxable income at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (9) in respect of the prescribed part of the taxable income.
(10C) For the purposes of subsections (10A) and (10B):
(a) the prescribed part of the eligible portion of the taxable income of a taxpayer of a year of income is:
(i) in a case to which subparagraph (ii) does not apply—the sum of:
(A) the amount ascertained by deducting from so much of the assessable primary production income of the taxpayer as is also income to which this section applies so much of the deductions allowable in his or her assessment as constitutes primary production deductions and is also deductible in accordance with subsection (10) from income to which this section applies; and
(B) the amount (if any) ascertained in accordance with the formula 
, where:
A is the amount shown in the following table:
| Value of A for formula |
|
Item
| Taxpayer’s taxable non‑primary production income |
Value of A
|
| 1 | Nil | Nil |
| 2 | Not more than $5,000 (but more than nil) | Difference between basic taxable income and taxable primary production income |
| 3 | Between $5,000 and $10,000 | $10,000 taxable non‑primary production income |
| 4 | At least $10,000 | Nil |
B is the number of whole dollars in the amount ascertained by deducting from the eligible portion the amount calculated in accordance with sub‑subparagraph (A); and
C is the number of whole dollars in the amount ascertained by deducting from the taxable income of the taxpayer of the year of income the taxable primary production income of the taxpayer of the year of income; and
(ii) in a case where the taxpayer’s primary production deductions for the year of income exceed the taxpayer’s assessable primary production income for that year—the amount ascertained in accordance with the formula 
, where:
A is the amount shown in the following table:
| Value of A for formula |
|
Item
| Taxpayer’s taxable non‑primary production income |
Value of A
|
| 1 | Nil | Nil |
| 2 | Not more than $5,000 (but more than nil) | Basic taxable income |
| 3 | Between $5,000 and $10,000 | Non‑primary production shade‑out amount worked out under subsection 392‑90(3) of the Income Tax Assessment Act 1997 |
| 4 | At least $10,000 | Nil |
B is the number of whole dollars in the eligible portion.
C is the number of whole dollars in the taxable income of the taxpayer of the year of income; and
D is the number of whole dollars in the difference between the taxpayer’s primary production deductions for the year of income and the taxpayer’s assessable primary production income for that year; and
(b) the relevant part of the eligible portion of the taxable income of the taxpayer is the amount ascertained by deducting from the amount of that eligible portion so much of that eligible portion as is the prescribed part of that eligible portion.
(11) Where:
(a) section 98 applies in relation to the net income of a trust estate or a share of that net income; and
(b) this section applies to a portion (in this subsection referred to as the relevant portion) of that net income or of that share of that net income, as the case may be;
the trustee of the trust estate shall be assessed and is liable to pay further tax, in accordance with subsection (12A) or (12B), upon the relevant portion of that net income or of that share of that net income, as the case may be.
(12) Where:
(a) section 99 applies in relation to the net income of a trust estate or a part of that net income; and
(b) this section applies to a portion (in this section referred to as the eligible trust portion) of that net income or of that part of that net income, as the case may be;
the trustee of the trust estate shall be assessed and is liable to pay further tax, in accordance with subsection (12A) or (12B), upon the eligible trust portion.
(12A) Where Division 16 does not apply in respect of the net income of a trust estate of which the eligible trust portion is a portion, the trustee is liable to pay further tax upon the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (11) or (12) in respect of the relevant part of the net income of a trust estate.
(12B) Where Division 16 applies in respect of the net income of a trust estate of which the eligible trust portion is a portion, the trustee is liable to pay further tax upon the relevant part of the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (11) or (12) in respect of the relevant part of the net income of a trust estate and is, in addition, liable to pay further tax upon the prescribed part of the eligible trust portion at the rate declared by the Parliament to be the rate of further tax payable in pursuance of subsection (11) or (12) in respect of the prescribed part of the net income of a trust estate.
(12C) For the purposes of subsections (12A) and (12B):
(a) the prescribed part of the eligible trust portion in relation to a trust estate in relation to a year of income is:
(i) in a case to which subparagraph (ii) does not apply—the sum of:
(A) the amount ascertained by deducting from so much of the assessable primary production income of the trust estate of the year of income as is also income that was taken into account in determining the amount of the eligible trust portion so much of the deductions allowable in the assessment of the trustee of the trust estate as constitutes relevant primary production deductions and was also deductible in accordance with subsection (5) in determining the amount of the eligible trust portion; and
(B) the amount (if any) ascertained in accordance with the formula , where:
A is the amount of the notional net income from primary production of the trust estate of the year of income.
B is the number of whole dollars in the amount ascertained by deducting from the eligible trust portion the amount calculated in accordance with sub‑subparagraph (A); and
C is the number of whole dollars in the amount ascertained by deducting from the net income of the trust estate of which the eligible trust portion is a portion the actual net income from primary production of the trust estate of the year of income; and
(ii) in a case where the aggregate of the relevant primary production deductions allowable in calculating the net income of the trust estate of the year of income exceeds the assessable primary production income of the trust estate of the year of income—the amount ascertained in accordance with the formula , where:
A is the amount of the notional net income from primary production of the trust estate of the year of income.
B is the number of whole dollars in the eligible trust portion.
C is the number of whole dollars in the net income of the trust estate of which the eligible trust portion is a portion; and
D is the number of whole dollars in the amount by which the net income of the trust estate of which the eligible trust portion is a portion would have been increased if the aggregate of the relevant primary production deductions allowable in calculating the net income of the trust estate of the year of income had been equal to the assessable primary production income of the trust estate of the year of income; and
(b) the relevant part of the eligible trust portion in relation to a trust estate is the amount ascertained by deducting from that eligible trust portion so much of that eligible trust portion as is the prescribed part of that eligible trust portion.
(13) In this section:
prescribed deductions, in relation to a trust estate, means the deductions that are allowable in calculating in accordance with section 95 the net income of the trust estate.
share in the net income of a partnership, in relation to a partner, means:
(a) so much of the individual interest of the partner in the net income of the partnership and of any income derived by the partner from the partnership otherwise than as a partner as is attributable to a period when the partner was a resident; and
(b) so much of the individual interest of the partner in the net income of the partnership and of any income derived by the partner from the partnership otherwise than as a partner as is attributable to a period when the partner was not a resident and is also attributable to sources in Australia.
(14) In this section, actual net income from primary production, assessable primary production income, notional net income from primary production and relevant primary production deductions have the same respective meanings as in section 156.
(15) In this section, the following terms have the same meanings that they have in Division 392 (Long‑term averaging of primary producers’ tax liability) of the Income Tax Assessment Act 1997:
(a) assessable primary production income;
(b) basic taxable income;
(c) non‑primary production shade‑out amount;
(d) primary production deductions;
(e) taxable non‑primary production income;
(f) taxable primary production income.
Division 5A—Income of certain limited partnerships
Subdivision A—Preliminary
94A Object
The object of this Division is to provide for certain limited partnerships to be treated as companies for tax purposes.
94B Interpretation
In this Division:
income tax law means:
(a) this Act (other than this Division and Division 830 of the Income Tax Assessment Act 1997); and
(b) an Act that imposes any tax payable under this Act; and
(c) the Income Tax Rates Act 1986; and
(d) the Taxation Administration Act 1953, so far as it relates to an Act covered by paragraph (a), (b) or (c); and
(e) any other Act, so far as it relates to an Act covered by paragraph (a), (b), (c) or (d); and
(f) regulations under an Act covered by any of the preceding paragraphs.
year of income means (except in paragraph 94L(b)) the year of income in which 19 August 1992 occurred or a later year of income.
94C Continuity of limited partnership not affected by changes in composition
For the purposes of this Division, a change in the composition of a limited partnership does not affect the continuity of the partnership.
Subdivision B—Corporate limited partnerships
94D Corporate limited partnerships
(1) For the purposes of this Division, a limited partnership is a corporate limited partnership in relation to a year of income of the partnership if:
(a) the year of income is the 1995‑96 year of income or a later year of income; or
(b) the partnership was formed on or after 19 August 1992; or
(c) both:
(i) the partnership was formed before 19 August 1992; and
(ii) the partnership does not pass the continuity of business test set out in section 94E; or
(d) all of the following apply:
(i) the partnership was formed before 19 August 1992;
(ii) a change in the composition of the partnership occurs during the period:
(A) beginning on 19 August 1992; and
(B) ending at the end of the year of income;
(iii) the partners do not elect, in accordance with section 94F, that the partnership is not to be treated as a corporate limited partnership in relation to the year of income.
(2) However, a partnership that is a VCLP, an ESVCLP, an AFOF or a venture capital management partnership cannot be a corporate limited partnership.
Note 1: This subsection can apply without the partnership meeting the applicable registration requirements under the Venture Capital Act 2002. It must be registered under that Act in order to be a VCLP, an ESVCLP or an AFOF, but it is possible for it to remain registered while the requirements are not met.
Note 2: VCLPs, ESVCLPs, AFOFs and VCMPs are taxed as ordinary partnerships under Division 5.
Note 3: If the partnership’s registration as a VCLP, ESVCLP or AFOF is unconditional, some partners’ share in capital gains and losses from CGT events relating to some investments may be disregarded: see Subdivision 118‑F of the Income Tax Assessment Act 1997.
(3) A venture capital management partnership is a limited partnership that:
(a) is a general partner of one or more of the following:
(i) one or more VCLPs;
(ia) one or more ESVCLPs;
(ii) one or more AFOFs; and
(b) only carries on activities that are related to being such a general partner.
A limited partnership ceases to be a venture capital management partnership if it ceases to meet the requirements of paragraphs (a) and (b).
Note: In this Act, the term “venture capital management partnership” is usually abbreviated to “VCMP”.
(4) The place of residence of a VCMP is the place at which the partnership has its central management and control.
(5) A limited partnership that is a foreign hybrid limited partnership in relation to a year of income because of subsection 830‑10(1) of the Income Tax Assessment Act 1997 is not a corporate limited partnership in relation to the year of income.
Note: As result, both the normal partnership provisions and special provisions relating to foreign hybrid limited partnerships will apply to the entity.
(6) If, for the purpose of applying this Act and the Income Tax Assessment Act 1997 in relation to a partner’s interest in a limited partnership, the partnership is a foreign hybrid limited partnership in relation to a year of income because of subsection 830‑10(2) of that Act, the partnership is not a corporate limited partnership in relation to the partner’s interest in relation to the year of income.
Note: As result, both the normal partnership provisions and special provisions relating to foreign hybrid limited partnerships will apply to the entity, but only in relation to the partner’s interest.
94E Continuity of business test
In determining whether a limited partnership is a corporate limited partnership in relation to a year of income, the partnership passes the continuity of business test if, and only if:
(a) at all times during the period:
(i) beginning on 19 August 1992; and
(ii) ending at the end of the year of income;
the partnership carried on the same business as it carried on immediately before the beginning of that period; and
(b) the partnership did not, at any time during that period, derive income from a business of a kind that it did not carry on, or from a transaction of a kind that it had not entered into in the course of its business operations, before that period.
94F Change in composition of limited partnership—election that partnership not be treated as an eligible limited partnership
An election referred to in paragraph 94D(1)(d) in relation to a limited partnership and in relation to a year of income has no effect unless:
(a) the partnership passes the continuity of ownership test set out in section 94G; and
(b) the election is made:
(i) within 6 months after the end of the later of the following years of income:
(A) the year of income to which the election relates;
(B) the year of income in which the Taxation Laws Amendment Act (No. 6) 1992 received the Royal Assent; or
(ii) within such further period as the Commissioner allows.
94G Continuity of ownership test
In determining whether a limited partnership is a corporate limited partnership in relation to a year of income, the partnership passes the continuity of ownership test if, and only if:
(a) at all times during the period:
(i) beginning on 19 August 1992; and
(ii) ending at the end of the year of income;
more than 50% of the interests in the partnership were held by persons who, immediately before that period, held more than 50% of the interests in the partnership; or
(b) the condition set out in paragraph (a) is not satisfied only because of the acquisition during so much of that period as occurred before 1 July 1993 of interests in the partnership, where the acquisitions are in response to, and in accordance with the terms of:
(i) a prospectus, offer or invitation issued before 19 August 1992; or
(ii) if that prospectus, offer or invitation was varied before 19 August 1992—that prospectus, offer or invitation as so varied.
Subdivision C—Corporate tax modifications applicable to corporate limited partnerships
94H Corporate tax modifications applicable to corporate limited partnerships
If a partnership is a corporate limited partnership in relation to a year of income, the income tax law has effect, in relation to the partnership and in relation to the year of income, subject to the changes set out in the following provisions of this Subdivision.
94J Company includes corporate limited partnership
A reference in the income tax law (other than the definitions of dividend, and resident or resident of Australia, in section 6 of this Act and other than Division 355 of the Income Tax Assessment Act 1997) to a company or to a body corporate includes a reference to the partnership.
94K Partnership does not include corporate limited partnership
A reference in the income tax law to a partnership does not include a reference to the partnership.
94L Dividend includes distribution of corporate limited partnership
A reference in the income tax law (other than subsection 44(1A) of this Act) to a dividend or to a dividend within the meaning of section 6:
(a) includes a reference to a distribution made by the partnership, whether in money or in other property, to a partner in the partnership; and
(b) does not include a reference to a distribution to the extent to which the distribution is attributable to profits or gains arising during a year of income in relation to which the partnership was not a corporate limited partnership.
94M Drawings etc. deemed to be dividends paid out of profits
(1) If the partnership pays or credits an amount to a partner in the partnership:
(a) against the profits or anticipated profits of the partnership; or
(b) otherwise in anticipation of the profits of the partnership;
(whether or not the amount of the profits or anticipated profits is ascertainable), the amount paid or credited is taken, for the purposes of the income tax law, to be a dividend paid by the partnership to the partner out of profits derived by the partnership.
(2) If the partnership makes a subsequent distribution, the Commissioner must take such steps (if any) as are necessary to ensure that the partner is not subject to double taxation.
94N Private company does not include corporate limited partnership
A reference in the income tax law to a private company in relation to the year of income does not include a reference to the partnership.
Note: Division 7A (Distributions to entities connected with a private company) applies to certain corporate limited partnerships in the same way as it applies to private companies: see section 109BB.
94P Share includes interest in corporate limited partnership
A reference in the income tax law to a share includes a reference to an interest in the partnership.
94Q Shareholder includes partner in corporate limited partnership
A reference in the income tax law to a shareholder includes a reference to a partner in the partnership.
94R Liquidator may include partner in corporate limited partnership
For the purposes of the income tax law:
(a) a reference to the liquidator of the partnership includes a reference to a partner in the partnership who carries out the winding‑up of the partnership; and
(b) a reference to distributions made by a liquidator in the course of winding up the partnership includes a reference to distributions made by such a partner to himself or herself in the course of winding‑up the partnership.
94S Continuity of corporate limited partnership not affected by changes in composition
For the purposes of the income tax law, a change in the composition of the partnership does not affect the continuity of the partnership.
94T Residence of corporate limited partnership
(1) For the purposes of the income tax law, the partnership is:
(a) a resident; and
(b) a resident within the meaning of section 6; and
(c) a resident of Australia; and
(d) a resident of Australia within the meaning of section 6;
if and only if:
(e) the partnership was formed in Australia; or
(f) either:
(i) the partnership carries on business in Australia; or
(ii) the partnership’s central management and control is in Australia.
(2) In determining whether the partnership carries on business in Australia for the purposes of subparagraph (1)(f)(i), if, for the year of income, the partnership is an IMR entity (within the meaning of the Income Tax Assessment Act 1997, but disregarding paragraph 842‑220(a) of that Act), disregard business that:
(a) is carried on by the partnership (either by itself directly or by another entity on its behalf); and
(b) solely relates to IMR financial arrangements (within the meaning of that Act).
94U Incorporation
For the purposes of the income tax law, the partnership is taken to have been incorporated:
(a) in the place where it was formed; and
(b) under a law in force in that place.
94V Obligations and offences
(1) The application of the income tax law to the partnership as if the partnership were a company is subject to the following changes:
(a) obligations that would be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners;
(b) the partners are jointly and severally liable to pay any amount that would be payable by the partnership;
(c) any offence against the income tax law that would otherwise be committed by the partnership is taken to have been committed by each of the partners.
(2) In a prosecution of a person for an offence that the person is taken to have committed because of paragraph (1)(c), it is a defence if the person proves that the person:
(a) did not aid, abet, counsel or procure the relevant act or omission; and
(b) was not in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the person).
94X Modification of loss provisions
Subdivisions 165‑A and 165‑B of the Income Tax Assessment Act 1997 apply in relation to the partnership as if the provisions relating to voting power had not been enacted.
Division 6—Trust income
95AAA Simplified outline of the relationship between this Division, Division 6E and Subdivisions 115‑C and 207‑B of the Income Tax Assessment Act 1997
The following is a simplified outline of the relationship between this Division, Division 6E and Subdivisions 115‑C and 207‑B of the Income Tax Assessment Act 1997.
This Division sets out the basic income tax treatment of the net income of the trust estate. Generally:
(a) it has the result of assessing beneficiaries on a share of the net income of the trust estate based on their present entitlement to a share of the income of the trust estate; and
(b) it has the result of assessing the trustee directly on any residual net income; and
(c) as a collection mechanism, it has the result of assessing the trustee in respect of some beneficiaries, such as non‑residents or those under a legal disability.
If the trust estate has capital gains, franked distributions or franking credits, this basic treatment is modified as described below.
Division 6E modifies the operation of this Division for the purpose of excluding amounts relevant to capital gains, franked distributions and franking credits from the calculations of assessable amounts under sections 97, 98, 99, 99A and 100.
Division 6E does not modify the operation of this Division (or any other provision of this Act) for any other purpose. For example:
(a) it does not modify the operation of this Division for the purposes of applying section 100A; and
(b) it does not modify amounts taxed in the hands of the trustee under Subdivisions 115‑C and 207‑B of the Income Tax Assessment Act 1997.
Subdivisions 115‑C and 207‑B of the Income Tax Assessment Act 1997 provide the corresponding taxation treatment for those capital gains, franked distributions and franking credits. Specifically:
(a) Subdivision 115‑C of that Act has the effect that an amount corresponding to each of those capital gains is taxed in the hands of the beneficiaries of the trust (as a capital gain) and, if necessary, assessed to the trustee.
(b) Subdivision 207‑B of that Act has the effect that an amount corresponding to each of those franked distributions is taxed in the hands of the beneficiaries of the trust and, if necessary, the trustee. It also has the effect that the entity in whose hands those distributions are taxed can take advantage of the relevant amount of related franking credits.
95AAB Adjustments under Subdivision 115‑C or 207‑B of the Income Tax Assessment Act 1997—references in this Act to assessable income under section 97, 98A or 100
(1) Subsection (2) applies if an amount is included in the assessable income of a beneficiary of a trust estate because of Subdivision 115‑C or 207‑B of the Income Tax Assessment Act 1997.
(2) For the purposes of a provision of this Act (other than a provision mentioned in subsection (3)), treat the amount as being included in the beneficiary’s assessable income in relation to the net income of the trust estate under section 97, 98A or 100 (as the case requires).
(3) The provisions are as follows:
(a) sections 97, 98A (other than subsection 98A(2)) and 100 (other than subsections 100(2) and (3));
(b) sections 98, 99 and 99A;
(c) Subdivisions 115‑C and 207‑B of the Income Tax Assessment Act 1997.
(4) To avoid doubt, subsection (2) applies despite subsection 6(1AA).
95AAC Adjustments under Subdivision 115‑C or 207‑B of the Income Tax Assessment Act 1997—references in this Act to liabilities under section 98, 99 or 99A
(1) Subsection (2) applies if an amount in respect of which a trustee of a trust estate is liable to be assessed (and pay tax) under section 98 in respect of the beneficiary is increased because of Subdivision 115‑C or 207‑B of the Income Tax Assessment Act 1997.
(2) For the purposes of a provision of this Act (other than a provision mentioned in subsection (5)), treat the amount of the increase as being an amount in respect of which the trustee is liable to be assessed (and pay tax) under section 98 in respect of the beneficiary’s interest in or share of the net income of the trust estate.
(3) Subsection (4) applies if an amount in respect of which a trustee of a trust estate is liable to be assessed (and pay tax) under section 99 or 99A is increased because of Subdivision 115‑C or 207‑B of the Income Tax Assessment Act 1997.
(4) For the purposes of a provision of this Act (other than a provision mentioned in subsection (5)), treat the amount of the increase as being an amount in respect of which the trustee is liable to be assessed (and pay tax) under section 99 or 99A in respect of the net income of the trust estate.
(5) The provisions are as follows:
(a) sections 97, 98A (other than subsection 98A(2)) and 100 (other than subsections 100(2) and (3));
(b) sections 98, 99 and 99A;
(c) Subdivisions 115‑C and 207‑B of the Income Tax Assessment Act 1997.
(6) To avoid doubt, subsections (2) and (4) apply despite subsection 6(1AA).
95AAD Division does not apply in relation to AMIT
This Division does not apply in relation to a trust estate that is an AMIT.
95 Interpretation
(1) In this Division:
adjusted Division 6 percentage, of an entity that is a beneficiary or trustee of a trust estate, means the entity’s Division 6 percentage of the income of the trust estate calculated on the assumption that the amount of a capital gain or franked distribution to which any beneficiary or the trustee of the trust estate is specifically entitled were disregarded in working out the income of the trust estate.
adjusted net income, in relation to a trust estate, has the meaning given by subsection 100AB(4).
Division 6 percentage:
(a) a beneficiary of a trust estate has a Division 6 percentage of the income of the trust estate equal to the share (expressed as a percentage) of the income of the trust estate to which the beneficiary is presently entitled; and
(b) the trustee of a trust estate has a Division 6 percentage of the income of the trust estate equal to the share (expressed as a percentage) of the income of the trust estate to which no beneficiary is presently entitled.
However, if the income of a trust estate is nil:
(c) a beneficiary of a trust estate has a Division 6 percentage of the income of the trust estate of 0%; and
(d) the trustee of a trust estate has a Division 6 percentage of the income of the trust estate of 100%.
exempt income, in relation to a trust estate, means the exempt income of the trust estate calculated as if the trustee were a taxpayer who was a resident.
Note: See also Division 54 of the Income Tax Assessment Act 1997 (in particular, the provisions in section 54‑70 about trusts), which provides a tax exemption for certain payments under structured settlements and structured orders.
net income, in relation to a trust estate, means the total assessable income of the trust estate calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions, except deductions under Division 393 of the Income Tax Assessment Act 1997 (Farm management deposits) and except also, in respect of any beneficiary who has no beneficial interest in the corpus of the trust estate, or in respect of any life tenant, the deductions allowable under Division 36 of the Income Tax Assessment Act 1997 in respect of such of the tax losses of previous years as are required to be met out of corpus.
A trust may be required to work out its net income in a special way by Division 266 or 267 in Schedule 2F to this Act or Division 275 of the Income Tax Assessment Act 1997.
non‑assessable non‑exempt income, in relation to a trust estate, means the non‑assessable non‑exempt income of the trust estate calculated as if the trustee were a taxpayer who was a resident.
specifically entitled has the same meaning as in the Income Tax Assessment Act 1997.
(2) For the purposes of this Division, a trust estate shall be taken to be a resident trust estate in relation to a year of income if:
(a) a trustee of the trust estate was a resident at any time during the year of income; or
(b) the central management and control of the trust estate was in Australia at any time during the year of income.
(3) In this Division, a trust estate that is not a resident trust estate in relation to a year of income is referred to as a non‑resident trust estate in relation to that year of income.
95AB Modifications for special disability trusts
(1) This Division applies with the modifications set out in this section in relation to a year of income in relation to a trust estate that is a special disability trust at the end of the year of income.
(2) Treat the principal beneficiary of the trust estate as being presently entitled to all of the income of the trust estate of the year of income.
(3) If the principal beneficiary of the trust estate is a resident of Australia at the end of the year of income treat that person as being under a legal disability throughout the year of income.
(4) If there is no income of the trust estate assume that:
(a) there is income of the trust estate of the year of income; and
(b) the principal beneficiary of the trust estate is presently entitled to all of the income of the trust estate of the year of income.
(5) If the amount to be deducted under subsection 100(2) from the income tax assessed against the principal beneficiary is greater than the amount of the income tax assessed against the principal beneficiary, the Commissioner must pay to the principal beneficiary an amount equal to the difference between those 2 amounts.
Note: The tax offset is subject to the refundable tax offset rules: see section 67‑23 of the Income Tax Assessment Act 1997.
95A Special provisions relating to present entitlement
(1) For the purposes of this Act, where a beneficiary of a trust estate is presently entitled to any income of the trust estate, the beneficiary shall be taken to continue to be presently entitled to that income notwithstanding that the income is paid to, or applied for the benefit of, the beneficiary.
(2) For the purposes of this Act, where a beneficiary has a vested and indefeasible interest in any of the income of a trust estate but is not presently entitled to that income, the beneficiary shall be deemed to be presently entitled to that income of the trust estate.
95B Certain beneficiaries deemed not to be under legal disability
For the purposes of this Act, a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate in the capacity of a trustee of another trust estate shall, in respect of his or her present entitlement to that share, be deemed not to be under a legal disability.
96 Trustees
Except as provided in this Act, a trustee shall not be liable as trustee to pay income tax upon the income of the trust estate.
97 Beneficiary not under any legal disability
(1) Subject to Division 6D, where a beneficiary of a trust estate who is not under any legal disability is presently entitled to a share of the income of the trust estate:
(a) the assessable income of the beneficiary shall include:
(i) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(ii) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia; and
(b) the exempt income of the beneficiary shall include:
(i) so much of the individual interest of the beneficiary in the exempt income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(ii) so much of the individual interest of the beneficiary in the exempt income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;
except to the extent to which the exempt income to which that individual interest relates was taken into account in calculating the net income of the trust estate; and
(c) the non‑assessable non‑exempt income of the beneficiary shall include:
(i) so much of the individual interest of the beneficiary in the non‑assessable non‑exempt income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(ii) so much of the individual interest of the beneficiary in the non‑assessable non‑exempt income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia.
(2) A reference in this section to income of a trust estate to which a beneficiary is presently entitled shall be read as not including a reference to income of a trust estate:
(a) to which a beneficiary is deemed to be presently entitled by virtue of the operation of subsection 95A(2) where the beneficiary:
(i) is a natural person;
(ii) is a resident at the end of the year of income;
(iii) is not, in respect of that income, a beneficiary in the capacity of a trustee of another trust estate; and
(iv) is not a beneficiary to whom subsection 97A(1) or (1A) applies in relation to the year of income; or
(b) to which a beneficiary is presently entitled where the beneficiary:
(i) is a non‑resident at the end of the year of income;
(ii) is not a beneficiary to whom subsection (3) of this section or subsection 97A(1) or (1A) applies in relation to the year of income; and
(iii) is not, in respect of that income, a beneficiary in the capacity of a trustee of another trust estate.
(3) Where:
(a) a beneficiary of a trust estate is presently entitled to a share of the income of the trust estate;
(b) the beneficiary is a non‑resident at the end of the year of income; and
(c) the beneficiary is:
(i) a body, association, fund or organization the income of which is exempt from tax by virtue of the operation of Subdivision 50‑A or section 51‑5, 51‑10 or 51‑30 of the Income Tax Assessment Act 1997; or
(ii) an organization the income of which is exempt from tax by virtue of a regulation in force under the International Organisations (Privileges and Immunities) Act 1963;
that beneficiary is, for the purposes of the application of this Division in relation to that beneficiary in relation to that year of income, a beneficiary to whom this subsection applies.
97A Beneficiaries who are owners of farm management deposits
(1) Where a beneficiary who is under a legal disability:
(a) is presently entitled to a share of the income of a trust estate derived during a year of income of the beneficiary; and
(b) is the owner of a farm management deposit made during the year of income;
this Division applies in relation to the beneficiary in relation to the year of income as if the beneficiary were not under any legal disability.
(1A) Where a beneficiary who is deemed by subsection 95A(2) to be presently entitled to any income of a trust estate derived during a year of income of the beneficiary:
(a) is not under a legal disability; and
(b) is the owner of a farm management deposit made during the year of income;
the beneficiary is, for the purposes of the application of this Division in relation to that beneficiary in relation to that year of income, a beneficiary to whom this subsection applies.
Note: This section applies to certain beneficiaries as if they were individuals who are carrying on a primary production business: see subsections 393‑25(3), (4), (5) and (6) of the Income Tax Assessment Act 1997.
98 Liability of trustee
(1) Where a beneficiary of a trust estate who is under a legal disability is presently entitled to a share of the income of the trust estate, the trustee of the trust estate shall be assessed and liable to pay tax in respect of:
(a) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(b) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;
as if it were the income of an individual and were not subject to any deduction.
(2) Where a beneficiary of a trust estate:
(a) is deemed to be presently entitled to a share of the income of the trust estate of a year of income by virtue of the operation of subsection 95A(2);
(aa) is a natural person and is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate;
(b) is not a beneficiary to whom subsection 97A(1) or (1A) applies in relation to the year of income; and
(c) is not under a legal disability;
the trustee of the trust estate shall be assessed and liable to pay tax in respect of:
(d) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(e) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;
as if it were the income of an individual and were not subject to any deduction.
(2A) If:
(a) a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate:
(i) is a non‑resident at the end of the year of income; and
(ii) is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate; and
(iii) is not a beneficiary to whom section 97A applies in relation to the year of income; and
(iv) is not a beneficiary to whom subsection 97(3) applies; and
(b) the trustee of the trust estate is not assessed and is not liable to pay tax under subsection (1) or (2) in respect of any part of that share of the net income of the trust estate;
subsection (3) applies to the trustee in respect of:
(c) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(d) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia.
(3) A trustee to whom this subsection applies in respect of an amount of net income is to be assessed and is liable to pay tax:
(a) if the beneficiary is not a company—in respect of the amount of net income as if it were the income of an individual and were not subject to any deduction; or
(b) if the beneficiary is a company—in respect of the amount of net income at the rate declared by the Parliament for the purposes of this paragraph.
Note: If the trust estate’s net income includes a net capital gain, and the beneficiary is a company, Subdivision 115‑C of the Income Tax Assessment Act 1997 affects the assessment of the trustee.
(4) If:
(a) a beneficiary of a trust estate (the first trust estate) who is presently entitled to a share of the income of the first trust estate:
(i) is, in respect of that share of the income of the first trust estate, a beneficiary in the capacity of a trustee of another trust estate; and
(ii) is not a beneficiary to whom subsection 97(3) applies; and
(b) a trustee of the other trust estate is a non‑resident at the end of the year of income;
the trustee of the first trust estate is to be assessed and is liable to pay tax in respect of so much of that share of the net income of the first trust estate as is attributable to sources in Australia at the rate declared by the Parliament for the purposes of this subsection.
Note: If the trust estate’s net income includes a net capital gain, Subdivision 115‑C of the Income Tax Assessment Act 1997 affects the assessment of the trustee.
98A Non‑resident beneficiaries assessable in respect of certain income
(1) Where the trustee of a trust estate is assessed and is liable to pay tax in respect of the whole or a part of a share of the net income of a trust estate of a year of income in pursuance of subsection 98(3), the assessable income of the beneficiary who is presently entitled to that share of the income of the trust estate shall include:
(a) so much of the individual interest of the beneficiary in the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and
(b) so much of the individual interest of the beneficiary in the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia.
(2) Where the trustee of a trust estate is assessed and is liable to pay tax in respect of the whole or a part of a share of the net income of a trust estate of a year of income in pursuance of subsection 98(3):
(a) there shall be deducted from the income tax assessed against the beneficiary the amount (in this subsection referred to as the relevant amount) of the tax paid by the trustee in respect of the beneficiary’s interest in the net income of the trust estate; and
(b) if the relevant amount is greater than the amount of the income tax assessed against the beneficiary—the Commissioner shall pay to the beneficiary an amount equal to the difference between those 2 amounts.
Note: See Division 3A of Part IIB of the Taxation Administration Act 1953 for the rules about how the Commissioner must pay the entity. Division 3 of Part IIB allows the Commissioner to apply the amount owing as a credit against tax debts that the entity owes to the Commonwealth.
(3) If a beneficiary of a trust estate who is presently entitled to a share of the income of the trust estate:
(a) is not, in respect of that share of the income of the trust estate, a beneficiary in the capacity of a trustee of another trust estate; and
(b) is a non‑resident at the end of the year of income;
the assessable income of the beneficiary includes so much of the individual interest of the beneficiary in the net income of the trust estate as is reasonably attributable to a part of the net income of another trust estate in respect of which the trustee of the other trust estate is assessed and is liable to pay tax under subsection 98(4).
(4) To the extent that subsection (3) includes an amount in the assessable income of a beneficiary of a trust estate, the amount is not included by subsection (1) or section 100.
98B Deduction from beneficiary’s tax
(1) This section applies to a beneficiary of a trust estate for a year of income if the assessable income of the beneficiary of the year of income includes an amount covered by subsection (2).
(2) This subsection covers an amount (the assessable amount) if:
(a) the amount is included in the assessable income of the beneficiary under one of the following:
(i) section 97;
(ii) subsection 98A(3);
(iii) section 100; and
(b) the amount does not represent income of the trust estate to which the beneficiary is presently entitled in the capacity of a trustee of another trust estate; and
(c) the amount is reasonably attributable to:
(i) an amount (the taxed net income) in respect of which the trustee of another trust estate is assessed and liable to pay tax (the subsection 98(4) tax) under subsection 98(4); or
(ii) an amount (the taxed component) in respect of which the trustee of an AMIT is assessed and liable to pay tax (the paragraph 276‑105(2)(c) tax) because of paragraph 276‑105(2)(c) of the Income Tax Assessment Act 1997.
(3) A proportion of the subsection 98(4) tax or of the paragraph 276‑105(2)(c) tax (as applicable) is to be deducted from the income tax assessed against the beneficiary of the year of income. That proportion is the same as the proportion of the taxed net income or of the taxed component (as applicable) that gave rise to the assessable amount.
Note: To work out the proportion of the taxed net income that gives rise to assessable income for a beneficiary of another trust estate, you would have regard to the share of the income of each interposed trust estate to which a beneficiary (including a beneficiary in the capacity of a trustee) is presently entitled.
Example: The P Trust has two non‑resident trustee beneficiaries, the trustees of the S Trust and the H Trust. Each trustee is presently entitled to a 1/2 share of the income of the P Trust. The net income of the P Trust is $100,000. The trustee of the P Trust pays tax of $22,500 under subsection 98(4) in respect of the trustee of the S Trust’s interest and $22,500 under subsection 98(4) in respect of the trustee of the H Trust’s interest.
The S Trust has a non‑resident beneficiary, G, who is presently entitled to a 1/3 share of the income of the S Trust. The net income of the S Trust is $30,000. Subsection 98A(3) includes $10,000 in G’s assessable income.
The taxed net income of the P trust is $50,000. The proportion of that taxed net income that gave rise to the $10,000 being included in G’s assessable income is 1/3.This is because G had a 1/3 share of the income of the S Trust. $7,500 (1/3 x $22,500) is deducted from the income tax assessed against G.
If section 97, subsection 98A(3) or section 100 also includes amounts in the assessable income of any beneficiaries of the H Trust, each of those beneficiaries also works out the amount of the deduction against the income tax assessed against them in the same way.
(4) If the amount to be deducted under subsection (3) is greater than the amount of the income tax assessed against the beneficiary, the Commissioner must pay to the beneficiary an amount equal to the difference between those 2 amounts.
Note: See Division 3A of Part IIB of the Taxation Administration Act 1953 for the rules about how the Commissioner must pay the entity. Division 3A of Part IIB allows the Commissioner to apply the amount owing as a credit against tax debts that the entity owes to the Commonwealth.
99 Certain trust income to be taxed as income of an individual
(1) This section applies in relation to a trust estate in relation to a year of income only if section 99A does not apply in relation to that trust estate in relation to that year of income.
(2) Where there is no part of the net income of a resident trust estate:
(a) that is included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;
(b) in respect of which the trustee of the trust estate is assessed and liable to pay tax in pursuance of section 98; or
(c) that represents income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia;
the trustee shall be assessed and is liable to pay tax on the net income of the trust estate as if it were the income of an individual who was a resident and were not subject to any deduction.
(3) Where there is a part of the net income of a resident trust estate:
(a) that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;
(b) in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section 98; and
(c) that does not represent income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia;
the trustee shall be assessed and is liable to pay tax on that part of the net income of the trust estate as if it were the income of an individual who was a resident and were not subject to any deduction.
(4) Where there is no part of the net income of a trust estate that is not a resident trust estate:
(a) that is included in the assessable income of a beneficiary of the trust estate in pursuance of section 97;
(b) in respect of which the trustee of the trust estate is assessed and liable to pay tax in pursuance of section 98; or
(c) that is attributable to sources out of Australia;
the trustee shall be assessed and is liable to pay tax on the net income of the trust estate as if it were the income of an individual and were not subject to any deduction.
(5) Where there is a part of the net income of a trust estate that is not a resident trust estate:
(a) that is attributable to sources in Australia;
(b) that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97; and
(c) in respect of which the trustee of the trust estate is not assessed and is not liable to pay tax in pursuance of section 98;
the trustee shall be assessed and is liable to pay tax on that part of the net income of the trust estate as if it were the income of an individual and were not subject to any deduction.
99A Certain trust income to be taxed at special rate
(2) This section does not apply in relation to a trust estate in relation to a year of income, being a trust estate:
(a) that resulted from:
(i) a will, a codicil or an order of a court that varied or modified the provisions of a will or a codicil; or
(ii) an intestacy or an order of a court that varied or modified the application, in relation to the estate of a deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate;
(b) that consists of the property of a person who has become bankrupt, being property that has vested in The Official Receiver in Bankruptcy, or in a registered trustee, under the Bankruptcy Act 1966;
(c) that is administered under Part XI of the Bankruptcy Act 1966; or
(d) that consists of property of a kind referred to in paragraph 102AG(2)(c);
if the Commissioner is of the opinion that it would be unreasonable that this section should apply in relation to that trust estate in relation to that year of income.
(3) In forming an opinion for the purposes of subsection (2):
(a) the Commissioner shall have regard to the circumstances in which and the conditions, if any, upon which, at any time, property (including money) was acquired by or lent to the trust estate, income was derived by the trust estate, benefits were conferred on the trust estate or special rights or privileges were conferred on or attached to property of the trust estate, whether or not the rights or privileges have been exercised;
(b) if a person who has, at any time, directly or indirectly:
(i) transferred or lent any property (including money) to, or conferred any benefits on, the trust estate; or
(ii) conferred or attached any special right or privilege, or done any act or thing, either alone or together with another person or persons, that has resulted in the conferring or attaching of any special right or privilege, on or to property of the trust estate whether or not the right or privilege has been exercised;
has not, at any time, directly or indirectly:
(iii) transferred or lent any property (including money) to, or conferred any benefits on, anoth