An Act to consolidate and amend the law relating to the imposition assessment and collection of a tax upon incomes
Part I—Preliminary
1 Short title
This Act may be cited as the Income Tax Assessment Act 1936.
6 Interpretation
(1AA) So far as a provision of the Income Tax Assessment Act 1936 gives an expression a particular meaning, the provision does not also have effect for the purposes of the Income Tax Assessment Act 1997 (the 1997 Act), or for the purposes of Schedule 1 to the Taxation Administration Act 1953, except as provided in the 1997 Act or in that Schedule.
(1) In this Act, unless the contrary intention appears:
100% subsidiary has the same meaning as in the Income Tax Assessment Act 1997.
adjusted fringe benefits total, of a taxpayer for a year of income, has the meaning given by clause 4 of Schedule 3 to the A New Tax System (Family Assistance) Act 1999.
adjusted taxable income for rebates means adjusted taxable income (within the meaning of the A New Tax System (Family Assistance) Act 1999, disregarding clauses 3 and 3A of Schedule 3 to that Act).
AFOF means an Australian venture capital fund of funds within the meaning of subsection 118‑410(3) of the Income Tax Assessment Act 1997.
agent: this Act applies to some entities (within the meaning of the Income Tax Assessment Act 1997) that are not agents in the same way as it applies to agents: see section 960‑105 of the Income Tax Assessment Act 1997.
allowable deduction has the same meaning as deduction has in the Income Tax Assessment Act 1997.
AMIT (short for attribution managed investment trust) has the same meaning as in the Income Tax Assessment Act 1997.
amount paid‑up on a share means the amount (if any), including any premium, paid on that share.
amount unpaid on a share means the amount (if any) unpaid on that share.
apportionable deductions has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
approved form has the meaning given by section 388‑50 in Schedule 1 to the Taxation Administration Act 1953.
approved stock exchange has the same meaning as in the Income Tax Assessment Act 1997.
assessable income has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
assessment means:
(a) the ascertainment:
(i) of the amount of taxable income (or that there is no taxable income); and
(ii) of the tax payable on that taxable income (or that no tax is payable); and
(iii) of the total of a taxpayer’s tax offset refunds for a year of income (or that the taxpayer can get no such refunds for the year of income); or
Note 1: A taxpayer does not have a taxable income if the taxpayer’s deductions equal or exceed the taxpayer’s assessable income: see subsection 4‑15(1) of the Income Tax Assessment Act 1997.
Note 2: A taxpayer may have no tax payable on an amount of taxable income if that income is below the tax‑free threshold or if the taxpayer’s tax offsets reduce the taxpayer’s basic income tax liability to nil.
(c) for a taxpayer that is the trustee of a unit trust that is a public trading trust (within the meaning of section 102R)—the ascertainment:
(i) of the net income of the trust (within the meaning of section 102M) (or that there is no net income); and
(ii) of the tax payable on that net income (or that no tax is payable); and
(iii) of the total of a taxpayer’s tax offset refunds for a year of income (or that the taxpayer can get no such refunds for the year of income); or
(d) for a taxpayer that is the trustee of a trust estate (other than a trustee to which paragraph (b) or (c) applies or the trustee of a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust)—the ascertainment:
(i) of so much of the net income of the trust estate as is net income in respect of which the trustee is liable to pay tax (or that there is no net income in respect of which the trustee is so liable); and
(ii) of the tax payable on that net income (or that no tax is payable); and
(iii) of the total of a taxpayer’s tax offset refunds for a year of income (or that the taxpayer can get no such refunds for the year of income); or
(e) the ascertainment of the amount of interest payable under section 102AAM (about distributions from non‑resident trust estates); or
(h) the ascertainment of the amount of income tax payable on the no‑TFN contributions income as defined by section 295‑610 of the Income Tax Assessment Act 1997 (or that no tax is payable); or
(j) the ascertainment of the amount payable (or that no amount is payable) under the following:
(i) subsection 276‑105(2) of the Income Tax Assessment Act 1997 (AMIT trustee taxed on amounts attributed to foreign resident members);
(ii) subsection 276‑340(2) of that Act (AMIT trustee taxed on trust component deficit of character relating to tax offset);
(iii) subsection 276‑405(2) of that Act (AMIT trustee taxed on shortfall in determined member components of character relating to assessable income);
(iv) subsection 276‑410(2) of that Act (AMIT trustee taxed on excess in determined member components of character relating to tax offset);
(v) subsection 276‑415(2) of that Act (AMIT trustee taxed on amounts of determined trust component that are not reflected in member components);
(vi) subsection 276‑420(2) of that Act (AMIT trustee taxed on amounts of under of character relating to assessable income not properly carried forward);
(vii) subsection 276‑425(2) of that Act (AMIT trustee taxed on amounts of over of character relating to tax offset not properly carried forward); or
(k) the ascertainment of the amount payable under subsection 177P(1) (diverted profits tax).
attribution managed investment trust: see AMIT.
Australia has the same meaning as in the Income Tax Assessment Act 1997.
Australian superannuation fund has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
bank or banker includes, but is not limited to, a body corporate that is an ADI (authorised deposit‑taking institution) for the purposes of the Banking Act 1959.
base interest rate has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
basic income tax liability has the meaning given by section 4‑10 of the Income Tax Assessment Act 1997.
business has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
capital gain has the same meaning as in the Income Tax Assessment Act 1997.
capital loss has the same meaning as in the Income Tax Assessment Act 1997.
capital proceeds has the same meaning as in the Income Tax Assessment Act 1997.
CGT asset has the same meaning as in the Income Tax Assessment Act 1997.
CGT event has the same meaning as in the Income Tax Assessment Act 1997.
Chief Executive Centrelink has the same meaning as in the Human Services (Centrelink) Act 1997.
child has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
Commissioner means the Commissioner of Taxation.
Commonwealth education or training payment has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
company has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
complying approved deposit fund has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
complying superannuation fund has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
consolidated group has the same meaning as in the Income Tax Assessment Act 1997.
constituent document, in relation to a company, means the memorandum and articles of association of the company, or any rules or other document constituting the company or governing its activities.
corporate limited partnership has the meaning given by section 94D.
corporate tax entity has the same meaning as in the Income Tax Assessment Act 1997.
corporate tax rate has the same meaning as in the Income Tax Assessment Act 1997.
cost base of a CGT asset has the same meaning as in the Income Tax Assessment Act 1997.
creditable acquisition has the meaning given by section 195‑1 of the GST Act.
debenture, in relation to a company, includes debenture stock, bonds, notes and any other securities of the company, whether constituting a charge on the assets of the company or not.
debt interest has the same meaning as in the Income Tax Assessment Act 1997.
deductible gift recipient has the meaning given by the Income Tax Assessment Act 1997.
demerged entity has the meaning given by section 125‑70 of the Income Tax Assessment Act 1997.
demerger has the meaning given by section 125‑70 of the Income Tax Assessment Act 1997.
demerger allocation means:
(a) the total market value of the allocation represented by the ownership interests issued by the demerged entity in itself under a demerger to the owners of ownership interests in the head entity of the demerger group; or
(b) the total market value of the allocation represented by the ownership interests disposed of by a member of a demerger group under a demerger to the owners of ownership interests in the head entity; or
(c) the total of both of those market values.
demerger dividend means that part of a demerger allocation that is assessable as a dividend under subsection 44(1) or that would be so assessable apart from subsections 44(3) and (4).
demerger group has the meaning given by section 125‑65 of the Income Tax Assessment Act 1997.
demerger subsidiary has the meaning given by section 125‑65 of the Income Tax Assessment Act 1997.
demerging entity has the meaning given by section 125‑70 of the Income Tax Assessment Act 1997.
depreciating asset has the same meaning as in the Income Tax Assessment Act 1997.
Deputy Commissioner means a Deputy Commissioner of Taxation.
distribution, when used in a franking context, has the same meaning as in the Income Tax Assessment Act 1997.
diverted profits tax has the meaning given by the Income Tax Assessment Act 1997.
dividend includes:
(a) any distribution made by a company to any of its shareholders, whether in money or other property; and
(b) any amount credited by a company to any of its shareholders as shareholders;
but does not include:
(d) moneys paid or credited by a company to a shareholder or any other property distributed by a company to shareholders (not being moneys or other property to which this paragraph, by reason of subsection (4), does not apply or moneys paid or credited, or property distributed for the redemption or cancellation of a redeemable preference share), where the amount of the moneys paid or credited, or the amount of the value of the property, is debited against an amount standing to the credit of the share capital account of the company; or
(e) moneys paid or credited, or property distributed, by a company for the redemption or cancellation of a redeemable preference share if:
(i) the company gives the holder of the share a notice when it redeems or cancels the share; and
(ii) the notice specifies the amount paid‑up on the share immediately before the cancellation or redemption; and
(iii) the amount is debited to the company’s share capital account;
except to the extent that the amount of those moneys or the value of that property, as the case may be, is greater than the amount specified in the notice as the amount paid‑up on the share; or
(f) a reversionary bonus on a life assurance policy.
Note: Subsection (4) sets out when paragraph (d) of this definition does not apply.
Division 230 financial arrangement has the same meaning as in the Income Tax Assessment Act 1997.
dual resident investment company has the meaning given by section 6F.
dwelling has the meaning given by the Income Tax Assessment Act 1997.
eligible taxable income has the meaning given by section 102AD.
Employment Secretary has the meaning given by the Income Tax Assessment Act 1997.
employment termination payment has the same meaning as in the Income Tax Assessment Act 1997.
equity holder has the same meaning as in the Income Tax Assessment Act 1997.
equity interest has the same meaning as in the Income Tax Assessment Act 1997.
ESVCLP means an early stage venture capital limited partnership within the meaning of subsection 118‑407(4) of the Income Tax Assessment Act 1997.
exempt entity has the same meaning as in the Income Tax Assessment Act 1997.
exempt income has the meaning given by section 6‑20 of the Income Tax Assessment Act 1997.
exploration credit has the same meaning as in the Income Tax Assessment Act 1997.
Families Secretary has the meaning given by the Income Tax Assessment Act 1997.
farm management deposit has the meaning given by the Income Tax Assessment Act 1997.
FMD provider has the meaning given by the Income Tax Assessment Act 1997.
foreign superannuation fund has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
foreign tax has the meaning given by section 6AB.
frankable distribution has the same meaning as in the Income Tax Assessment Act 1997.
franked part of a distribution has the same meaning as in the Income Tax Assessment Act 1997.
franking credit has the same meaning as in the Income Tax Assessment Act 1997.
franking debit has the same meaning as in the Income Tax Assessment Act 1997.
franking deficit tax has the same meaning as in the Income Tax Assessment Act 1997.
franking surplus has the same meaning as in the Income Tax Assessment Act 1997.
franks with an exempting credit has the same meaning as in the Income Tax Assessment Act 1997.
friendly society has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
friendly society dispensary has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
fringe benefit has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
full self‑assessment taxpayer, for a year of income (the current year), means any of the following:
(a) a company;
(c) the trustee of a trust that is a public trading trust in relation to the current year for the purposes of Division 6C of Part III;
(d) the trustee of a complying approved deposit fund or a non‑complying approved deposit fund in relation to the current year;
(e) the trustee of a complying superannuation fund or a non‑complying superannuation fund in relation to the current year;
(f) the trustee of a pooled superannuation trust in relation to the current year.
Note: A corporate limited partnership is taken to be a company under section 94J, so it will fall within paragraph (a) of this definition.
fund payment has the same meaning as in the Income Tax Assessment Act 1997.
general insurance company has the same meaning as in the Income Tax Assessment Act 1997.
general insurance policy has the same meaning as in the Income Tax Assessment Act 1997.
general interest charge means the charge worked out under Part IIA of the Taxation Administration Act 1953.
general partner has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
GST Act means the A New Tax System (Goods and Services Tax) Act 1999.
head company of a consolidated group or a MEC group has the same meaning as in the Income Tax Assessment Act 1997.
head entity of a demerger group has the meaning given by section 125‑65 of the Income Tax Assessment Act 1997.
Health Minister has the meaning given by the Income Tax Assessment Act 1997.
hold, in relation to an RSA, has the same meaning as in the Retirement Savings Accounts Act 1997.
holder, in relation to an RSA, has the same meaning as in the Retirement Savings Accounts Act 1997.
income from personal exertion or income derived from personal exertion means income consisting of earnings, salaries, wages, commissions, fees, bonuses, pensions, superannuation allowances, retiring allowances and retiring gratuities, allowances and gratuities received in the capacity of employee or in relation to any services rendered, the proceeds of any business carried on by the taxpayer either alone or as a partner with any other person, any amount received as a bounty or subsidy in carrying on a business, any amount that is included in the assessable income of the taxpayer by reason of section 393‑10 of the Income Tax Assessment Act 1997, the income from any property where that income forms part of the emoluments of any office or employment of profit held by the taxpayer, and any profit arising from the sale by the taxpayer of any property acquired by the taxpayer for the purpose of profit‑making by sale or from the carrying on or carrying out of any profit‑making undertaking or scheme, but does not include:
(a) interest, unless the taxpayer’s principal business consists of the lending of money, or unless the interest is received in respect of a debt due to the taxpayer for goods supplied or services rendered by the taxpayer in the course of the taxpayer’s business; or
(b) rents, dividends or non‑share dividends.
income from property or income derived from property means all income not being income from personal exertion.
income tax means income tax imposed as such by any Act, as assessed under this Act, but, except in section 260, does not include mining withholding tax or withholding tax.
Indigenous land has the same meaning as in the Income Tax Assessment Act 1997.
Indigenous person has the same meaning as in the Income Tax Assessment Act 1997.
industrial, commercial or scientific equipment means industrial, commercial or scientific equipment to the extent that an amount paid or credited as consideration for the use of the equipment, or for the right to use the equipment, is not rent from land (including rent from an interest in land or rent from fixtures on land).
insurance business has the same meaning as in the Insurance Act 1973.
insurance funds, in relation to a company, means all the Australian statutory funds of the company and all other funds maintained by the company in respect of the life assurance business of the company.
interest income, in relation to a taxpayer, means income consisting of interest, or a payment in the nature of interest, in respect of:
(a) money lent, advanced or deposited; or
(b) credit given; or
(c) any other form of debt or liability;
whether security is given or not, other than:
(d) an amount to the extent to which it is a return on an equity interest in a company; or
(e) interest derived by the taxpayer from a transaction directly related to the active conduct of a trade or business; or
(f) interest derived by the taxpayer from carrying on a banking business or any other business whose income is principally derived from the lending of money; or
(g) interest received by the taxpayer during a year of income from a foreign company, where:
(i) at any time during the year of income, the taxpayer had (or would have had, if the taxpayer were a company and a resident), a voting interest, within the meaning of section 334A, amounting to at least 10% of the voting power, within the meaning of that section, in that company; and
(ii) during the year of income or the preceding year of income, the company has not derived an amount of interest income exceeding 10% of the total profits derived by the company during the same year.
junior minerals exploration incentive tax offset means a tax offset under Subdivision 418‑B of the Income Tax Assessment Act 1997.
life assurance company has the meaning given to life insurance company by the Income Tax Assessment Act 1997.
life assurance policy has the meaning given to life insurance policy by the Income Tax Assessment Act 1997.
life assurance premium has the meaning given to life insurance premium by the Income Tax Assessment Act 1997.
limited partner has the same meaning as in the Income Tax Assessment Act 1997.
limited partnership has the same meaning as in the Income Tax Assessment Act 1997.
liquidator means the person who, whether or not appointed as liquidator, is the person required by law to carry out the winding‑up of a company.
loss carry back tax offset has the same meaning as in the Income Tax Assessment Act 1997.
loss year has the same meaning as in the Income Tax Assessment Act 1997.
managed investment trust has the same meaning as in the Income Tax Assessment Act 1997.
MEC group has the same meaning as in the Income Tax Assessment Act 1997.
Medicare levy means Medicare levy imposed as such by any Act as assessed under this Act.
Medicare levy (fringe benefits) surcharge has the meaning given by the Income Tax Assessment Act 1997.
member of a consolidated group or MEC group has the same meaning as in the Income Tax Assessment Act 1997.
member of a family tax benefit (Part B) family without shared care: a taxpayer is a member of a family tax benefit (Part B) family without shared care if:
(a) the taxpayer, or the taxpayer’s spouse while being the taxpayer’s partner (within the meaning of the A New Tax System (Family Assistance) Act 1999), is eligible for family tax benefit at the Part B rate (within the meaning of that Act); and
(b) clause 31 of Schedule 1 to that Act does not apply in respect of the Part B rate.
minerals has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
mining withholding tax means income tax payable in accordance with section 128V.
mortgage includes any charge, lien or encumbrance to secure the repayment of money.
mutual life assurance company means a life assurance company the profits of which are divisible only among the policy holders.
natural resource has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
net capital gain has the same meaning as in the Income Tax Assessment Act 1997.
net capital loss has the same meaning as in the Income Tax Assessment Act 1997.
net GST has the meaning given by section 995‑1 of the Income Tax Assessment Act 1997.
net input tax credit has the meaning given by section 995‑1 of the Income Tax Assessment Act 1997.
non‑assessable non‑exempt income has the meaning given by the Income Tax Assessment Act 1997.
non‑complying approved deposit fund has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
non‑complying superannuation fund has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
non‑entity joint venture has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
non‑equity share has the same meaning as in the Income Tax Assessment Act 1997.
non‑resident means a person who is not a resident of Australia.
non‑share capital account has the same meaning as in the Income Tax Assessment Act 1997.
non‑share capital return has the same meaning as in the Income Tax Assessment Act 1997.
non‑share distribution has the same meaning as in the Income Tax Assessment Act 1997.
non‑share dividend has the same meaning as in the Income Tax Assessment Act 1997.
non‑share equity interest has the same meaning as in the Income Tax Assessment Act 1997.
once‑only deduction: a deduction in a year of income in respect of a percentage of expenditure is a once‑only deduction, in relation to the expenditure, if no deduction is allowable in respect of a percentage of the expenditure in any other year of income.
ordinary class has the same meaning as in the Income Tax Assessment Act 1997.
ordinary income has the same meaning as in the Income Tax Assessment Act 1997.
over‑franking tax has the same meaning as in the Income Tax Assessment Act 1997.
owner of a farm management deposit has the meaning given by the Income Tax Assessment Act 1997.
ownership interest has the meaning given by section 125‑60 of the Income Tax Assessment Act 1997.
paid in relation to dividends or non‑share dividends includes credited or distributed.
paid‑up share capital has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
parent has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
partnership has the same meaning as in the Income Tax Assessment Act 1997.
part of a distribution that is franked with an exempting credit has the same meaning as in the Income Tax Assessment Act 1997.
part of a distribution that is franked with a venture capital credit has the same meaning as in the Income Tax Assessment Act 1997.
passive commodity gain, in relation to a taxpayer, in relation to a year of income, means a gain realised by the taxpayer in a year of income from disposing of a forward contract or a futures contract, or a right or option in respect of a forward contract or a futures contract, in respect of any thing (a commodity):
(a) that is capable of delivery under an agreement for its delivery; and
(b) that is not an instrument creating or evidencing a chose in action;
unless the contract, right or option relates to the carrying on by the taxpayer of a business:
(c) of producing or processing the commodity; or
(d) that involves the use of the commodity as a raw material in a production process.
passive income, in relation to a taxpayer, in relation to a year of income means:
(a) dividends (within the meaning of this section) and non‑share dividends paid to the taxpayer in the year of income; or
(b) unit trust dividends (within the meaning of Division 6C) paid to the taxpayer in the year of income; or
(c) a distribution made to the taxpayer in the year of income that is taken to be a dividend because of section 47; or
(d) an amount that is taken to be a dividend paid to the taxpayer in the year of income because of section 47A or 108 or Division 7A of Part III; or
(e) interest income derived by the taxpayer in the year of income; or
(f) annuities derived by the taxpayer in the year of income; or
(g) income derived by the taxpayer by way of rent (within the meaning of Part X) in the year of income; or
(h) royalties derived by the taxpayer in the year of income; or
(i) an amount derived by the taxpayer in the year of income as consideration for the assignment, in whole or in part, of any copyright, patent, design, trade mark or other like property or right; or
(j) profits of a capital nature that accrued to the taxpayer in the year of income; or
(k) passive commodity gains that accrued to the taxpayer in the year of income; or
(l) an amount included in the assessable income of the taxpayer of the year of income under section 102AAZD, 456, 457 or 459A;
but does not include:
(m) an amount that arose from an asset necessarily held by the taxpayer in connection with an insurance business actively carried on by the taxpayer; or
(n) an amount included in the taxpayer’s assessable income under Division 83A of the Income Tax Assessment Act 1997 (about employee share schemes).
PDF (pooled development fund) means a company that is a PDF within the meaning of the Pooled Development Funds Act 1992, but does not include such a company in the capacity of a trustee.
PDF component, in relation to a company that becomes a PDF during the year of income and is still a PDF at the end of the year of income, means:
(a) in a case where the amount that, if:
(i) the period beginning at the start of the year of income and ending immediately before the company becomes a PDF were a year of income of the company; and
(ii) the period (the PDF notional year) beginning when the company becomes a PDF and ending at the end of the year of income were a year of income of the company; and
(iii) paragraph (c) of the definition of taxable income were omitted;
would be the company’s taxable income of the PDF notional year is $1 or more—that amount; or
(b) otherwise—a nil amount.
permanent establishment, in relation to a person (including the Commonwealth, a State or an authority of the Commonwealth or a State), means a place at or through which the person carries on any business and, without limiting the generality of the foregoing, includes:
(a) a place where the person is carrying on business through an agent;
(b) a place where the person has, is using or is installing substantial equipment or substantial machinery;
(c) a place where the person is engaged in a construction project; and
(d) where the person is engaged in selling goods manufactured, assembled, processed, packed or distributed by another person for, or at or to the order of, the first‑mentioned person and either of those persons participates in the management, control or capital of the other person or another person participates in the management, control or capital of both of those persons—the place where the goods are manufactured, assembled, processed, packed or distributed;
but does not include:
(e) a place where the person is engaged in business dealings through a bona fide commission agent or broker who, in relation to those dealings, acts in the ordinary course of his or her business as a commission agent or broker and does not receive remuneration otherwise than at a rate customary in relation to dealings of that kind, not being a place where the person otherwise carries on business;
(f) a place where the person is carrying on business through an agent:
(i) who does not have, or does not habitually exercise, a general authority to negotiate and conclude contracts on behalf of the person; or
(ii) whose authority extends to filling orders on behalf of the person from a stock of goods or merchandise situated in the country where the place is located, but who does not regularly exercise that authority;
not being a place where the person otherwise carries on business; or
(g) a place of business maintained by the person solely for the purpose of purchasing goods or merchandise.
Note: Subsection (6) treats a person as carrying on, at or through a permanent establishment that is a place described in paragraph (d) of this definition, the business of selling the goods manufactured, assembled, processed, packed or distributed by the other person as described in that paragraph.
person has the same meaning as in the Income Tax Assessment Act 1997.
pooled superannuation trust has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
post FIF abolition credit means a post FIF abolition credit arising under:
(a) subsection 23AK(6); and
(b) subsection 717‑220(2) of the Income Tax Assessment Act 1997; and
(c) subsection 717‑255(2) of that Act.
post FIF abolition debit means a post FIF abolition debit arising under:
(a) subsection 23AK(2); and
(b) subsection 23B(1); and
(c) subsection 717‑220(3) of the Income Tax Assessment Act 1997; and
(d) subsection 717‑255(3) of that Act.
post FIF abolition surplus has the meaning given by section 23AK.
prescribed dual resident means a company that satisfies either of the following conditions:
(a) the first condition is that:
(i) the company is a resident of Australia within the meaning of subsection 6(1); and
(ii) there is an agreement (within the meaning of the International Tax Agreements Act 1953) in force in respect of a foreign country; and
(iii) the agreement contains a provision that is expressed to apply where, apart from the provision, the company would, for the purposes of the agreement, be both a resident of Australia and a resident of the foreign country; and
(iv) that provision has the effect that the company is, for the purposes of the agreement, a resident solely of the foreign country;
(b) the alternative condition is that the company:
(i) is a resident of Australia within the meaning of subsection 6(1) for no other reason than that it carries on business in Australia and has its central management and control in Australia; and
(ii) it is also a resident of another country; and
(iii) its central management and control is in another country.
primary production business has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
principal beneficiary of a special disability trust has the same meaning as in the Income Tax Assessment Act 1997.
private company, in relation to a year of income, means a company that is a private company in relation to that year of income for the purposes of Division 7 of Part III.
proclaimed superannuation standards day means 1 July 1990.
provider, in relation to an RSA, has the same meaning as in the Retirement Savings Accounts Act 1997.
prudential standards has the same meaning as in the Income Tax Assessment Act 1997.
rebatable benefit has the meaning given by subsection 160AAA(1).
rebate income of an individual for a year of income is the sum of:
(a) the individual’s taxable income for the year of income, disregarding the individual’s assessable FHSS released amount (within the meaning of the Income Tax Assessment Act 1997) for the year of income; and
(b) the individual’s reportable superannuation contributions for the year of income; and
(c) the individual’s total net investment loss for the year of income; and
(d) the individual’s adjusted fringe benefits total for the year of income.
recognised large credit union has the meaning given by section 6H.
recognised medium credit union has the meaning given by section 6H.
recognised small credit union has the meaning given by section 6H.
reduced cost base of a CGT asset has the same meaning as in the Income Tax Assessment Act 1997.
relative has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
reportable superannuation contributions has the same meaning as in the Income Tax Assessment Act 1997.
resident or resident of Australia means:
(a) a person, other than a company, who resides in Australia and includes a person:
(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia;
(ii) who has actually been in Australia, continuously or intermittently, during more than one‑half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or
(iii) who is:
(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or
(B) an eligible employee for the purposes of the Superannuation Act 1976; or
(C) the spouse, or a child under 16, of a person covered by sub‑subparagraph (A) or (B); and
(b) a company which is incorporated in Australia, or which, not being incorporated in Australia, carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia.
resident trust for CGT purposes has the same meaning as in the Income Tax Assessment Act 1997.
return on a debt interest or equity interest has the same meaning as in the Income Tax Assessment Act 1997.
return of income means a return of income, or of profits or gains of a capital nature, or of both income and such profits or gains.
royalty or royalties includes any amount paid or credited, however described or computed, and whether the payment or credit is periodical or not, to the extent to which it is paid or credited, as the case may be, as consideration for:
(a) the use of, or the right to use, any copyright, patent, design or model, plan, secret formula or process, trade mark, or other like property or right;
(b) the use of, or the right to use, any industrial, commercial or scientific equipment;
(c) the supply of scientific, technical, industrial or commercial knowledge or information;
(d) the supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in paragraph (a), any such equipment as is mentioned in paragraph (b) or any such knowledge or information as is mentioned in paragraph (c);
(da) the reception of, or the right to receive, visual images or sounds, or both, transmitted to the public by:
(i) satellite; or
(ii) cable, optic fibre or similar technology;
(db) the use in connection with television broadcasting or radio broadcasting, or the right to use in connection with television broadcasting or radio broadcasting, visual images or sounds, or both, transmitted by:
(i) satellite; or
(ii) cable, optic fibre or similar technology;
(dc) the use of, or the right to use, some or all of the part of the spectrum (within the meaning of the Radiocommunications Act 1992) specified in a spectrum licence issued under that Act;
(e) the use of, or the right to use:
(i) motion picture films;
(ii) films or video tapes for use in connexion with television; or
(iii) tapes for use in connexion with radio broadcasting; or
(f) a total or partial forbearance in respect of:
(i) the use of, or the granting of the right to use, any such property or right as is mentioned in paragraph (a) or any such equipment as is mentioned in paragraph (b);
(ii) the supply of any such knowledge or information as is mentioned in paragraph (c) or of any such assistance as is mentioned in paragraph (d);
(iia) the reception of, or the granting of the right to receive, any such visual images or sounds as are mentioned in paragraph (da);
(iib) the use of, or the granting of the right to use, any such visual images or sounds as are mentioned in paragraph (db);
(iic) the use of, or the granting of the right to use, some or all of such part of the spectrum specified in a spectrum licence as is mentioned in paragraph (dc); or
(iii) the use of, or the granting of the right to use, any such property as is mentioned in paragraph (e).
RSA has the same meaning as in the Income Tax Assessment Act 1997.
Note: That Act defines RSA as having the meaning given by the Retirement Savings Accounts Act 1997.
RSA provider has the same meaning as in the Income Tax Assessment Act 1997.
Note: That Act defines RSA provider as having the same meaning as in the Retirement Savings Accounts Act 1997.
Second Commissioner means a Second Commissioner of Taxation.
share in a company has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
share capital account has the same meaning as in the Income Tax Assessment Act 1997.
shareholder includes member or stockholder.
shareholders’ funds has the same meaning as in the Life Insurance Act 1995.
shortfall interest charge means the charge worked out under Division 280 in Schedule 1 to the Taxation Administration Act 1953.
small business entity has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
social security law has the meaning given by the Social Security Act 1991.
special disability trust has the same meaning as in the Income Tax Assessment Act 1997.
spouse has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
statutory income has the meaning given by the Income Tax Assessment Act 1997.
Student Assistance Secretary has the meaning given by the Income Tax Assessment Act 1997.
subsidiary member of a consolidated group or a MEC group has the same meaning as in the Income Tax Assessment Act 1997.
superannuation benefits means individual personal benefits, pensions or retiring allowances.
superannuation fund means:
(a) a scheme for the payment of superannuation benefits upon retirement or death; or
(b) a superannuation fund within the definition of superannuation fund in section 10 of the Superannuation Industry (Supervision) Act 1993.
superannuation fund for foreign residents has the meaning given by subsection 995‑1(1) of the Income Tax Assessment Act 1997.
superannuation lump sum has the same meaning as in the Income Tax Assessment Act 1997.
tainted, in relation to a company’s share capital account, has the same meaning as in the Income Tax Assessment Act 1997.
tax means income tax imposed as such by any Act, as assessed under this Act, but does not include mining withholding tax or withholding tax.
taxable Australian property has the same meaning as in the Income Tax Assessment Act 1997.
taxable income has the same meaning as in the Income Tax Assessment Act 1997.
taxable supply has the meaning given by section 195‑1 of the GST Act.
tax cost is set has the same meaning as in the Income Tax Assessment Act 1997.
tax loss has the same meaning as in the Income Tax Assessment Act 1997.
tax offset refund has the meaning given by the Income Tax Assessment Act 1997.
taxpayer means a person deriving income or deriving profits or gains of a capital nature.
this Act includes:
(a) the Income Tax Assessment Act 1997; and
(b) Part IVC of the Taxation Administration Act 1953, so far as that Part relates to:
(i) this Act or the Income Tax Assessment Act 1997; or
(ii) Schedule 1 to the Taxation Administration Act 1953; and
(c) Schedule 1 to the Taxation Administration Act 1953.
Note: Subsection (1AA) of this section prevents definitions in the Income Tax Assessment Act 1936 from affecting the interpretation of the Income Tax Assessment Act 1997.
total net investment loss has the same meaning as in the Income Tax Assessment Act 1997.
trading stock has the meaning given by section 70‑10 of the Income Tax Assessment Act 1997.
Tribunal means the Administrative Appeals Tribunal.
trustee in addition to every person appointed or constituted trustee by act of parties, by order, or declaration of a court, or by operation of law, includes:
(a) an executor or administrator, guardian, committee, receiver, or liquidator; and
(b) every person having or taking upon himself the administration or control of income affected by any express or implied trust, or acting in any fiduciary capacity, or having the possession, control or management of the income of a person under any legal or other disability;
unfranked part of a distribution has the same meaning as in the Income Tax Assessment Act 1997.
VCLP means a venture capital limited partnership within the meaning of subsection 118‑405(2) of the Income Tax Assessment Act 1997.
VCMP means a venture capital management partnership.
venture capital deficit tax has the same meaning as in the Income Tax Assessment Act 1997.
venture capital management partnership has the meaning given by subsection 94D(3).
Veterans’ Affairs Secretary means the Secretary of the Department administered by the Minister administering the Veterans’ Entitlements Act 1986.
withholding tax has the same meaning as in the Income Tax Assessment Act 1997.
work and income support related withholding payments and benefits means:
(a) payments from which an amount:
(i) must be withheld under a provision of Subdivision 12‑B (other than section 12‑55), 12‑C or 12‑D or Division 13 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not withheld); or
(ii) would be required to be withheld under a provision mentioned in subparagraph (i) (other than section 12‑55) apart from subsection 12‑1(1A) in Schedule 1 to that Act; and
(b) amounts included in a person’s assessable income under section 86‑15 of the Income Tax Assessment Act 1997 in respect of which an amount must be paid under Division 13 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not paid); and
(c) non‑cash benefits in relation to which the provider of the benefit must pay an amount to the Commissioner under Division 14 in Schedule 1 to the Taxation Administration Act 1953 (even if the amount is not paid).
Note: The payments covered by paragraph (a) are: payments to employees and company directors, payments to office holders, return to work payments, payments under labour hire arrangements, payments of annuities, superannuation benefits, payments for termination of employment, payments for unused leave, benefit payments, compensation payments and payments specified by regulations.
year of income means an income year as defined in subsection 995‑1(1) of the Income Tax Assessment Act 1997.
year of tax means the financial year for which income tax is levied.
(1A) Unless the contrary intention appears, a reference in this Act to a failure to do an act or thing includes a reference to a refusal to do the act or thing.
(2AA) A reference in this Act to an accounting period adopted in lieu of a year of income includes a reference to an accounting period:
(a) that commences or ends under section 18A; and
(b) that would, but for that section, form part of an accounting period so adopted.
(2AB) The Commissioner may, by legislative instrument, make a determination modifying the operation of one or more provisions of this Act in relation to limited partnerships whose accounting periods commence or end under section 18A of the Income Tax Assessment Act 1936.
(2AC) A determination can only be made under subsection (2AB) in order to take account of the fact that such accounting periods are of less than 12 months’ duration.
(3) The express references in this Act to companies do not imply that references to persons do not include references to companies.
(4) Paragraph (d) of the definition of dividend in subsection (1) does not apply if, under an arrangement:
(a) a person pays or credits any money or gives property to the company and the company credits its share capital account with the amount of the money or the value of the property; and
(b) the company pays or credits any money, or distributes property to another person, and debits its share capital account with the amount of the money or the value of the property so paid, credited or distributed.
(6) Where a place is, by virtue of paragraph (d) of the definition of permanent establishment in subsection (1), a permanent establishment of a person, the person shall, for the purposes of this Act, be deemed to be carrying on at or through that permanent establishment the business of selling the goods manufactured, assembled, processed, packed or distributed by the other person at the place that is that permanent establishment.
6AB Foreign income and foreign tax
(1) A reference in this Act to foreign income is a reference to income (including superannuation lump sums and employment termination payments) derived from sources in a foreign country or foreign countries, and includes a reference to an amount included in assessable income under section 102AAZD, 456, 457 or 459A of this Act, or section 305‑70 of the Income Tax Assessment Act 1997.
(1C) A reference in this Act to foreign income includes a reference to an amount included in assessable income under:
(a) Division 301 of the Income Tax Assessment Act 1997 in its application under section 301‑5 of the Income Tax (Transitional Provisions) Act 1997; or
(b) Division 302 of the Income Tax Assessment Act 1997 in its application under section 302‑5 of the Income Tax (Transitional Provisions) Act 1997.
(2) A reference in this Act to foreign tax is a reference to tax imposed by a law of a foreign country, being:
(a) tax upon income; or
(b) tax upon profits or gains, whether of an income or capital nature; or
(c) any other tax, being a tax that is subject to an agreement having the force of law under the International Tax Agreements Act 1953;
but does not include a unitary tax or a credit absorption tax.
(5B) This section applies to a non‑share dividend in the same way as it applies to a dividend.
(6) In this section:
credit absorption tax means a tax imposed by a law of a foreign country to the extent that the tax would not have been payable if the taxpayer concerned or another taxpayer had not been entitled to an offset in respect of the tax under Division 770 of the Income Tax Assessment Act 1997.
law, in relation to a foreign country, means a law of that country, or of any part of, or place in, that country.
unitary tax means tax imposed by a law of a foreign country, being a law which, for the purposes of taxing income, profits or gains of a company derived from sources within that country, takes into account, or is entitled to take into account, income, losses, outgoings or assets of the company (or of a company that for the purposes of that law is treated as being associated with the company) derived, incurred or situated outside that country, but does not include tax imposed by that law if that law only takes those matters into account:
(a) if such an associated company is a resident for the purposes of that law; or
(b) for the purposes of granting any form of relief in relation to tax imposed on dividends received by one company from another company.
6B Income beneficially derived
(1) For the purposes of this Act, an amount of income derived by a person, not being a dividend paid by a company to the person as a shareholder in the company, shall be deemed to be attributable to a dividend:
(a) if the person derived the amount of income by reason of being the beneficial owner of the share in respect of which the dividend was paid; or
(b) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to the dividend or to an amount that is deemed, by any application or successive applications of this subsection, to be an amount of income attributable to the dividend.
(1A) For the purposes of this Act, an amount of income derived by a person, being income other than passive income, is to be taken to be income attributable to passive income:
(a) if the person derived the amount of income by reason of being beneficially entitled to an amount representing passive income; or
(b) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to passive income or to an amount that is taken, by any application or successive applications of this subsection, to be an amount of income attributable to passive income.
(2) For the purposes of this Act, an amount of income derived by a person, being income other than interest income, shall be deemed to be income attributable to interest income:
(a) if the person derived the amount of income by reason of being beneficially entitled to an amount representing interest income; or
(b) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to interest income or to an amount that is deemed, by any application or successive applications of this subsection, to be an amount of income attributable to interest income.
(2A) For the purposes of this Act, an amount of income derived by a person shall be deemed to be income derived from a particular source:
(a) except where paragraph (b) applies:
(i) if the person derived the amount of income by reason of being beneficially entitled to an amount that is derived from that source; or
(ii) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to income derived from that source or to an amount that is deemed, by any other application or applications of this subsection, to be an amount that is income derived from that source; or
(b) if the income so derived is, by virtue of subsection (1), (1A) or (2), attributable to a dividend, passive income or interest income derived from that source.
(3) Where a beneficiary in a trust estate is presently entitled to income of the trust estate, that income shall, for the purposes of this section, be deemed to be an amount of income derived by the person.
(4) This section:
(a) applies to a non‑share equity interest in the same way as it applies to a share; and
(b) applies to an equity holder in the same way as it applies to a shareholder; and
(c) applies to a non‑share dividend in the same way as it applies to a dividend.
6BA Taxation treatment of certain shares
(1) This section applies if a shareholder holds shares in a company (the original shares) and the company issues other shares (the bonus shares) in respect of the original shares.
(2) If the bonus shares are a dividend, or taken to be a dividend (including as a result of section 45C), the consideration for the acquisition of the shares for the purposes of this Act is so much of the dividend as is:
(a) included in the taxpayer’s assessable income; and
(b) is not rebatable under section 46A.
(3) If the bonus shares are issued for no consideration and are not a dividend or taken to be a dividend, then for the purposes of this Act, in determining:
(a) the value of such of the original shares and bonus shares as the taxpayer elects under section 70‑45 of the Income Tax Assessment Act 1997 to value at cost; and
(b) where any of the original shares or any of the bonus shares are not articles of trading stock of the taxpayer:
(i) the amount or value of the consideration paid in respect of the acquisition of any of those shares for the purposes of Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997; or
(ii) the amount of any profit or loss arising on the sale or disposal of any of those shares;
any amounts paid or payable by the taxpayer in respect of the original shares (whether on purchase of the shares, on application for or allotment of the shares, to meet calls or otherwise) shall be deemed to have been paid or to be payable by the taxpayer in respect of the original shares and the bonus shares in such proportions as the Commissioner considers appropriate in the circumstances.
(4) A company issues shares for no consideration if:
(a) it credits its capital account with profits in connection with the issue of the shares; or
(b) it credits its capital account with the amount of any dividend to a shareholder and the shareholder does not have a choice whether to be paid the dividend or to be issued with the shares.
This subsection does not limit the generality of subsection (3).
Note: A company that makes a credit covered by paragraph (a) or (b) will have a tainted share capital account.
(5) Subject to subsection (6), if a shareholder has a choice whether to be paid a dividend or to be issued shares and the shareholder chooses to be issued with shares:
(a) the dividend is taken to be credited to the shareholder; and
(b) the dividend is taken to have been paid out of profits; and
(c) subsections (2) and (3) apply in working out the consideration for the acquisition of the shares for the purposes of this Act.
However, the share capital account of the company does not become a tainted share capital account as a result of the crediting of the dividend to the share capital account.
(6) Subsection (5) does not apply if:
(a) a shareholder in a listed public company (within the meaning of the Income Tax Assessment Act 1997) has a choice whether to be paid a dividend (other than a minimally franked dividend within the meaning of subsection 45(3)) or to be issued shares and the shareholder chooses to be issued with shares; and
(b) the company does not credit the share capital account in connection with the issue of those shares.
Note: If subsection (5) does not apply because of this subsection, subsection (3) will apply.
(7) This section (other than subsection (6)):
(a) applies to a non‑share equity interest in the same way as it applies to a share; and
(b) applies to an equity holder in the same way as it applies to a shareholder; and
(c) applies to a non‑share dividend in the same way as it applies to a dividend.
6C Source of royalty income derived by a non‑resident
(1) This section applies to income that is derived on or after 1 July 1968 by a non‑resident and consists of royalty that:
(a) is paid or credited to the non‑resident by the Commonwealth, by a State, by an authority of the Commonwealth or of a State or by a person who is, or by persons at least one of whom is, a resident and is not an outgoing wholly incurred by the Commonwealth, the State, the authority or that person or those persons in carrying on business in a country outside Australia at or through a permanent establishment of the Commonwealth, the State, the authority or that person or those persons in that country; or
(b) is paid or credited to the non‑resident by a person who is, or by persons each of whom is, a non‑resident and is, or is in part, an outgoing incurred by that person or those persons in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia.
(1A) For the purposes of Division 5 and Division 6 of Part III, but subject to subsections (3) and (4), income to which this section applies shall be deemed to be attributable to sources in Australia.
(2) For the purposes of sections 6‑5 and 6‑10 of the Income Tax Assessment Act 1997, but subject to subsections (3) and (4), income to which this section applies shall be deemed to have been derived from a source in Australia.
(3) Where:
(a) income to which this section applies is paid or credited to the non‑resident by whom it is derived by the Commonwealth, by a State, by an authority of the Commonwealth or of a State or by a person who is, or by persons at least one of whom is, a resident; and
(b) the royalty of which the income consists is, in part, an outgoing incurred by the Commonwealth, the State, the authority or that person or those persons in carrying on business in a country outside Australia at or through a permanent establishment of the Commonwealth, the State, the authority or that person or those persons in that country;
subsection (2) has effect in relation to so much only of the income as is attributable to so much of the royalty as is not an outgoing so incurred.
(4) Where:
(a) income to which this section applies is paid or credited to the non‑resident by whom it is derived by a person who, or by persons each of whom, is a non‑resident; and
(b) the royalty of which the income consists is, in part only, an outgoing incurred by the person or persons by whom it is paid or credited in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia;
subsection (2) has effect in relation to so much only of the income as is attributable to so much of the royalty as is an outgoing so incurred.
(5) In subsection (6), a reference to a relevant person is a reference to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person who is, or persons at least 1 of whom is, a resident.
(6) For the purposes of paragraphs (1)(a) and (3)(b), where:
(a) royalty is paid or credited, after the commencement of this subsection, to a non‑resident by a relevant person carrying on business in a country outside Australia; and
(b) the royalty or a part of the royalty:
(i) is incurred by the relevant person in gaining or producing income that is derived by the relevant person otherwise than in carrying on business in a country outside Australia at or through a permanent establishment of the relevant person in that country or is incurred by the relevant person for the purpose of gaining or producing income to be so derived; or
(ii) is incurred by the relevant person in carrying on business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the relevant person otherwise than in so carrying on business at or through a permanent establishment of the relevant person in a country outside Australia;
the royalty or the part of the royalty, as the case may be, is not an outgoing incurred by the relevant person in carrying on business in a country outside Australia at or through a permanent establishment of the relevant person in that country.
(7) For the purposes of paragraphs (1)(b) and (4)(b), where:
(a) royalty is paid or credited, after the commencement of this subsection, to a non‑resident by another person or other persons (in this subsection referred to as the payer), being:
(i) another person who is carrying on business in Australia and is a non‑resident; or
(ii) other persons who are carrying on business in Australia and each of whom is a non‑resident; and
(b) the royalty or a part of the royalty:
(i) is incurred by the payer in gaining or producing income that is derived by the payer in carrying on business in Australia at or through a permanent establishment of the payer in Australia or is incurred by the payer for the purpose of gaining or producing income to be so derived; or
(ii) is incurred by the payer in carrying on a business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the payer in so carrying on business at or through a permanent establishment of the payer in Australia;
the royalty or the part of the royalty, as the case may be, is an outgoing incurred by the payer in carrying on business in Australia at or through a permanent establishment of the payer in Australia.
6CA Source of natural resource income derived by a non‑resident
(1) In this section:
double tax agreement means an agreement within the meaning of the International Tax Agreements Act 1953.
natural resource income means income that:
(a) is derived by a non‑resident; and
(b) is calculated, in whole or in part, by reference to the value or quantity of natural resources produced, recovered or produced and recovered, in Australia after 7 April 1986;
but does not include:
(c) income that consists of royalty; or
(d) income where:
(i) on 7 April 1986, the non‑resident had a continuing entitlement to receive the income;
(ii) the income was derived by the non‑resident pursuant to that continuing entitlement;
(iii) the non‑resident was, at 5 o’clock in the afternoon, by standard time in the Australian Capital Territory on 7 April 1986, a resident, within the meaning of a double tax agreement, of a foreign country in respect of which the double tax agreement was in force;
(iv) before 8 April 1986, the Commissioner had given a statement in writing to the effect that income tax would be levied on 50% of income included in a specified class of income; and
(v) the income is included in that class of income.
(2) For the purposes of Divisions 5 and 6 of Part III, natural resource income shall be deemed to be attributable to sources in Australia.
(3) For the purposes of section 255 of this Act and sections 6‑5 and 6‑10 of the Income Tax Assessment Act 1997, natural resource income shall be deemed to have been derived from a source in Australia.
6D Some tax offsets under the 1997 Assessment Act are treated as credits
A tax offset under a provision of the Income Tax Assessment Act 1997 that corresponds to a provision of this Act that provides for a credit is taken to be a credit for the purposes of this Act.
Note: All other tax offsets under the Income Tax Assessment Act 1997 are treated as rebates: see section 160ADA.
6F Dual resident investment company
(1) For the purposes of this Act, a company (other than a company in the capacity of trustee) is a dual resident investment company in relation to a year of income if:
(a) at any time during the year of income the company is a resident of Australia; and
(b) the company is liable to tax in a foreign country in respect of some or all of the income or profits of the company of the year of income (or would be so liable if the company derived income or profits) because:
(i) the company is treated as a resident of that country for the purposes of the relevant law of that country; or
(ii) the company is treated as domiciled in that country for the purposes of the relevant law of that country; or
(iii) the company’s management and control is treated as being located in that country for the purposes of the relevant law of that country; and
(c) at any time during the year of income when the company was in existence:
(i) the company was not carrying on business with a reasonable view to profit; or
(ii) a substantial purpose of the company (whether or not stated in its constituent document) was to acquire or hold shares, securities or other investments in related companies (whether directly or indirectly through one or more companies, partnerships or trusts).
(2) For the purposes of this section, companies are related to each other if they are controlled (as defined by subsection (3)) by the same person, either alone or together with associates (whether or not the same associates are involved in relation to each company).
(3) For the purposes of this section, a person, either alone or together with associates, controls a company if:
(a) the person, either alone or together with associates:
(i) controls or is capable of controlling, either directly or through one or more interposed companies, partnerships or trusts, at least 50% of the maximum number of votes that might be cast at a general meeting of the company; or
(ii) is beneficially entitled to receive, directly or indirectly, at least 50% of any dividends that are or might be paid, or of any distribution of capital that is or may be made, by the company; or
(iii) is capable, under a scheme, of gaining such control or such an entitlement; or
(b) the company or its directors are accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the person, either alone or together with associates.
(4) Section 159GZH applies for the purposes of this section in determining the beneficial entitlement of a person to receive indirectly the whole or a particular fraction of a dividend that is, or might be, paid by a company or of a distribution of capital of a company.
(5) In this section:
associate has the same meaning as in section 318.
scheme means:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved.
6H Recognised small credit unions, recognised medium credit unions and recognised large credit unions
Recognised small credit union in relation to a year of income
(1) For the purposes of this Act, a credit union is a recognised small credit union in relation to a year of income if:
(a) both:
(i) the year of income is the 1994‑95 year of income; and
(ii) either:
(A) the credit union is not a designated credit union; or
(B) the credit union’s notional taxable income of the year of income is less than $50,000; or
(b) both:
(i) the year of income is the 1995‑96 year of income or a later year of income; and
(ii) the credit union’s notional taxable income of the year of income is less than $50,000.
Recognised medium credit union in relation to a year of income
(2) For the purposes of this Act, a credit union is a recognised medium credit union in relation to a year of income if:
(a) the year of income is the 1994‑95 year of income or a later year of income; and
(b) the credit union is not a recognised small credit union in relation to the year of income; and
(c) the credit union’s notional taxable income of the year of income is less than $150,000.
Recognised large credit union in relation to a year of income
(3) For the purposes of this Act, a credit union is a recognised large credit union in relation to a year of income if:
(a) the year of income is the 1994‑95 year of income or a later year of income; and
(b) the credit union is neither:
(i) a recognised small credit union in relation to the year of income; nor
(ii) a recognised medium credit union in relation to the year of income.
Designated credit union
(4) For the purposes of this section, a credit union is a designated credit union if:
(a) it was in existence on 1 July 1993; and
(b) assuming that its accounts for the last accounting period that ended before 1 July 1993 had been prepared in accordance with generally accepted accounting principles—the amount that would have been shown in those accounts as the gross value of its assets as at the end of that accounting period is more than $30 million.
Notional taxable income
(5) For the purposes of this section, the notional taxable income of a credit union of a year of income is the amount that would be its taxable income of the year of income if:
(a) section 23G did not apply to income derived by it in the 1994‑95 year of income or any later year of income; and
(b) Division 9 of Part III had not been enacted.
Definitions
(6) In this section:
accounting period, in relation to a credit union, means a period at the end of which the balance of its accounts is struck.
accounts, in relation to a credit union, means accounts prepared for the purposes of reporting annually to the shareholders in the credit union.
credit union means a credit union as defined in section 23G, except a life assurance company.
7B Application of the Criminal Code
Chapter 2 of the Criminal Code applies to all offences against this Act.
Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.
Part II—Administration
8 Commissioner
The Commissioner shall have the general administration of this Act.
Note: An effect of this provision is that people who acquire information under this Act are subject to the confidentiality obligations and exceptions in Division 355 in Schedule 1 to the Taxation Administration Act 1953.
14 Annual report
(1) The Commissioner shall, as soon as practicable after 30 June in each year, prepare and furnish to the Minister a report on the working of this Act, including any breaches or evasions of this Act of which the Commissioner has notice.
(2) The Minister shall cause a copy of a report furnished to him or her under subsection (1) to be laid before each House of the Parliament within 15 sitting days of that House after the day on which he or she receives the report.
(3) For the purposes of section 34C of the Acts Interpretation Act 1901, a report that is required by subsection (1) to be furnished as soon as practicable after 30 June in a year shall be taken to be a periodic report relating to the working of this Act during the year ending on that 30 June.
Part III—Liability to taxation
Division 1—General
18 Accounting period
Any person may, with the leave of the Commissioner, adopt an accounting period being the 12 months ending on some date other than 30 June. For the purposes of this Act, the person’s accounting period in each succeeding year shall end on the corresponding date of that year, unless:
(a) with the leave of the Commissioner some other date is adopted; or
(b) the accounting period ends earlier under section 18A.
18A Accounting periods for VCLPs, ESVCLPs, AFOFs and VCMPs
(1) If a partnership becomes, or ceases to be, a VCLP, an ESVCLP, an AFOF or a VCMP on a particular day:
(a) the accounting period during which that day occurs (the first accounting period) is taken to have ended immediately before that day; and
(b) another accounting period is taken to have commenced at the beginning of that day.
The other accounting period ends on the day on which the first accounting period would have ended if this section did not apply.
Example: A partnership whose accounting periods ended on 30 June becomes a VCLP, an ESVCLP on 1 October 2002, and ceases to be a VCLP, an ESVCLP on 1 April 2003.
The effect of becoming a VCLP, an ESVCLP: the accounting period that commenced on 1 July 2002 is taken under this section to end on 30 September 2002, and a second accounting period commences on 1 October 2002. The second accounting period is scheduled to end on 30 June 2003.
The effect of ceasing to be a VCLP, an ESVCLP: the second accounting period is now taken under this section to end on 31 March 2003, and a third accounting period commences on 1 April 2003. The third accounting period is to end on 30 June 2003.
(2) This section does not apply in relation to a partnership becoming, or ceasing to be, a VCLP, an ESVCLP, an AFOF or a VCMP on the day on which an accounting period commences.
21 Where consideration not in cash
(1) Where, upon any transaction, any consideration is paid or given otherwise than in cash, the money value of that consideration shall, for the purposes of this Act, be deemed to have been paid or given.
(2) This section has effect subject to section 21A.
21A Non‑cash business benefits
(1) For the purposes of this Act, in determining the income derived by a taxpayer, a non‑cash business benefit that is not convertible to cash shall be treated as if it were convertible to cash.
(2) For the purposes of this Act, if a non‑cash business benefit (whether or not convertible to cash) is income derived by a taxpayer:
(a) the benefit shall be brought into account at its arm’s length value reduced by the recipient’s contribution (if any); and
(b) if the benefit is not convertible to cash—in determining the arm’s length value of the benefit, any conditions that would prevent or restrict the conversion of the benefit to cash shall be disregarded.
(3) Where:
(a) a non‑cash business benefit is income derived by a taxpayer in a year of income; and
(b) if the taxpayer had, at the time the benefit was provided, incurred and paid unreimbursed expenditure in respect of the provision of the benefit equal to the amount of the arm’s length value of the benefit—a once‑only deduction would, or would but for section 82A, and Subdivisions F, GA and G of Division 3 of this Part, of this Act, and Divisions 28 and 900 of the Income Tax Assessment Act 1997, have been allowable to the taxpayer in respect of a percentage (in this subsection called the deductible percentage) of the expenditure;
the amount that, apart from this subsection, would be applicable under subsection (2) of this section in respect of the benefit shall be reduced by the deductible percentage.
(4) Where:
(a) a non‑cash business benefit is income derived by a taxpayer in a year of income; and
(b) a percentage (in this subsection called the non‑deductible entertainment percentage) of any expenditure incurred by the provider in respect of the provision of the benefit is non‑deductible entertainment expenditure;
the amount that, apart from this subsection, would be applicable under subsection (2) in respect of the benefit shall be reduced by the non‑deductible entertainment percentage.
(5) In this section:
arm’s length value, in relation to a non‑cash business benefit, means:
(a) the amount that the recipient could reasonably be expected to have been required to pay to obtain the benefit from the provider under a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction; or
(b) if such an amount cannot be practically determined—such amount as the Commissioner considers reasonable.
income derived by a taxpayer means income derived by a taxpayer in carrying on a business for the purpose of gaining or producing assessable income.
non‑cash business benefit means property or services provided after 31 August 1988:
(a) wholly or partly in respect of a business relationship; or
(b) wholly or partly for or in relation directly or indirectly to a business relationship.
non‑deductible entertainment expenditure means expenditure to the extent to which:
(a) section 32‑5 of the Income Tax Assessment Act 1997 applies to the expenditure; and
(b) but for that section, the expenditure would be deductible under section 8‑1 of the Income Tax Assessment Act 1997.
provide:
(a) in relation to property—includes dispose of (whether by assignment, declaration of trust or otherwise); and
(b) in relation to services—includes allow, confer, give, grant or perform.
recipient’s contribution, in relation to a non‑cash business benefit, means the amount of any consideration paid to the provider by the recipient in respect of the provision of the benefit, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration.
services includes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:
(a) an arrangement for or in relation to:
(i) the performance of work (including work of a professional nature), whether with or without the provision of property;
(ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or
(iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;
(b) a contract of insurance; or
(c) an arrangement for or in relation to the lending of money.
(6) Notwithstanding section 21, the consideration referred to in the definition of recipient’s contribution in subsection (5) of this section is consideration in money.
(7) This section does not apply to an ESS interest (within the meaning of the Income Tax Assessment Act 1997) to which Subdivision 83A‑B or 83A‑C of that Act (about employee share schemes) applies.
23AA Income of persons connected with certain projects of United States Government
(1) In this section, unless the contrary intention appears:
approved project means the establishment, maintenance or operation of the North West Cape naval communication station, of the Joint Defence Space Research Facility, of the Sparta project, of the Joint Defence Space Communications Station or of a Force Posture Initiative.
civilian accompanying the United States Forces means a person (not being a member of the United States Forces, an Australian citizen or a person ordinarily resident in Australia) who:
(a) is an employee:
(i) of the United States Forces; or
(ii) of, or of a body conducting, a club or other facility established for the benefit or welfare of members of the United States Forces or of persons accompanying those Forces and which is recognized by the Government of the United States of America as a non‑appropriated fund activity; or
(b) is serving with an organization that, with the approval of the Government of the Commonwealth, accompanies the United States Forces in Australia.
dependant, in relation to a person, means:
(a) the spouse of that person; or
(b) a relative, other than the spouse, of that person who is wholly or mainly dependent for support on that person;
but, in the case of a person who, immediately before becoming such a spouse or relative, was ordinarily resident in Australia, does not include that person so long as that person continues to be ordinarily resident in Australia.
Force Posture Agreement means the Force Posture Agreement between the Government of Australia and the Government of the United States of America done at Sydney on 12 August 2014, as amended and in force for Australia from time to time.
Note: The Treaty could in 2014 be viewed in the Australian Treaties Library on the AustLII website (http://www.austlii.edu.au).
Force Posture Initiative has the same meaning as in the Force Posture Agreement.
Note: As well as some announced initiatives, this includes future initiatives that Australia and the United States mutually decide to be Force Posture Initiatives for the purposes of that Agreement.
foreign contractor means a person who is a party to a prescribed contract and is not:
(a) a company incorporated in Australia;
(b) an Australian citizen; or
(c) a person, other than a company, who is ordinarily resident in Australia.
foreign employee means a person who:
(a) is an employee of a foreign contractor; or
(b) is a director of a company that is a foreign contractor;
and is not an Australian citizen or ordinarily resident in Australia.
prescribed contract means:
(a) a contract to which the Government of the United States of America is a party in connexion with an approved project; or
(b) a contract made for purposes connected with the performance of a contract referred to in paragraph (a).
prescribed purposes means:
(a) in relation to a foreign contractor or foreign employee—purposes relating to the performance of a prescribed contract;
(aa) in relation to a United States employee—purposes relating to an approved project; and
(b) in relation to a member of the United States Forces or a civilian accompanying the United States Forces—purposes relating to the carrying on of activities agreed upon between the Government of the Commonwealth and the Government of the United States of America.
the Joint Defence Space Communications Station means the undertaking the establishment of which is provided for by an agreement dated 10 November 1969 between the Government of the Commonwealth and the Government of the United States of America.
the Joint Defence Space Research Facility means the undertaking the establishment of which is provided for by an agreement dated 9 December 1966 between the Government of the Commonwealth and the Government of the United States of America.
the North West Cape naval communication station means the naval communication station the establishment of which is provided for by the agreement approved by the United States Naval Communication Station Agreement Act 1963.
the Sparta project means the undertaking the establishment of which is provided for by a memorandum of arrangement dated 30 March 1966 between the Government of the Commonwealth, the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the United States of America.
the United States Forces means the armed forces of the Government of the United States of America.
United States employee means a person who is employed by the Government of the United States of America and is not:
(a) a member of the United States Forces;
(b) a civilian accompanying the United States Forces;
(c) an Australian citizen; or
(d) a person ordinarily resident in Australia.
(2) For the purposes of this section, a foreign contractor, foreign employee or United States employee who is in Australia, or is carrying on business in Australia, solely for prescribed purposes does not cease to be in Australia solely for those purposes, or to be carrying on business in Australia solely for those purposes, by reason of anything undertaken or done by him or her in connexion with an undertaking in Australia of the Government of the United States of America, other than an approved project, agreed upon between the Government of the Commonwealth and the Government of the United States of America.
(3) Where a person:
(a) has been in Australia, or has carried on business in Australia, solely for prescribed purposes during a period when the person was a foreign contractor or foreign employee;
(b) has been in Australia solely for prescribed purposes during a period when the person was a member of the United States Forces, a civilian accompanying the United States Forces or a United States employee; or
(c) has been in Australia during a period when the person was a dependant of such a contractor, employee, member or civilian who was in Australia solely for prescribed purposes;
that person shall, for the purposes of the provisions of this Act other than Subdivision A of Division 17, be deemed not to have been a resident of Australia during that period, and the presence of that person in Australia during that period shall be disregarded in determining, for the purposes of those provisions, whether the person was a resident of Australia at any other time.
(4) Subsection (3) does not apply in respect of, or of a part of, a period when a person was, or was a dependant of, a foreign contractor, a foreign employee, a civilian accompanying the United States Forces or a United States employee if the person:
(a) being a company—was not a domestic corporation for the purposes of the law of the United States of America relating to income tax; or
(b) not being a company—was not a resident of the United States of America for the purposes of that law or a citizen of the United States of America;
during that period or that part of that period, as the case may be.
(5) Where:
(a) a foreign contractor or a foreign employee has derived income wholly and exclusively from, or from employment in connexion with, the performance in Australia of a prescribed contract;
(b) the income is not exempt from income tax imposed by Chapter One of Subtitle A of the Internal Revenue Code of 1986 of the United States of America; and
(c) the foreign contractor or foreign employee was, at the time the income was derived, in Australia, or carrying on business in Australia, solely for prescribed purposes;
the income shall, for the purposes of this Act, be deemed to have been derived from sources out of Australia.
(6) Where:
(a) a person has derived income in respect of service as a civilian accompanying the United States Forces or as a United States employee during a period when the person was in Australia solely for prescribed purposes; and
(b) the income is not exempt from income tax imposed by Chapter One of Subtitle A of the Internal Revenue Code of 1986 of the United States of America;
the income shall, for the purposes of this Act, be deemed to have been derived from sources out of Australia.
23AB Income of certain persons serving with an armed force under the control of the United Nations
(1) In this section:
prescribed taxpayer means a taxpayer who, being a resident of Australia, is, or is included in a class of persons that is, prescribed by the regulations for the purposes of this section.
tax deductions unapplied, in relation to a deceased person, means any amounts withheld under Part 2‑5 in Schedule 1 to the Taxation Administration Act 1953 from work and income support related withholding payments and benefits derived by the deceased person in respect of United Nations service:
(a) that have not been credited in payment of income tax; and
(b) in respect of which a payment has not been made by the Commissioner.
the prescribed area has the same meaning as in section 79A.
United Nations service means service, other than service as a member of the Defence Force, performed, at the direction or with the approval of the Commonwealth, outside Australia with an armed force under the control of the United Nations, at a time when the person performing the service was a prescribed taxpayer.
(2) The regulations may prescribe a person or a class of persons for the purposes of this section but shall not so prescribe a person or class of persons unless the salary, wages and allowances received by the person or by all the persons in that class, as the case may be, in respect of his, her or their United Nations service are paid, given or granted by the Commonwealth or by the United Nations for and on behalf of the Commonwealth.
(3) A succeeding provision of this section does not apply in relation to a person if the regulations provide that that provision does not apply in relation to that person or in relation to a class of persons in which that person is included.
(4) Subsection 12(2) (retrospective commencement of legislative instruments) of the Legislation Act 2003 does not apply to regulations made for the purposes of subsection (2) or (3) of this section.
(5) Where:
(a) a payment of compensation under the Safety, Rehabilitation and Compensation Act 1988 is made in respect of the incapacity, impairment or death of a taxpayer; and
(b) the incapacity, impairment or death of the taxpayer resulted from an occurrence that happened during the performance by the taxpayer of United Nations service; and
(c) if the taxpayer had, at the time of the happening of the occurrence, been a member of the Defence Force rendering continuous full‑time service outside Australia while the taxpayer was allotted for duty in an operational area described in item 4, 5, 6, 7 8, 9, 10, 11, 12, 13 or 14 of Column 1 of Schedule 2 to the Veterans’ Entitlements Act 1986, the Commonwealth would be liable to pay a pension under that Act in respect of the incapacity, impairment or death of the taxpayer;
the payment of compensation is exempt from income tax.
(6) For the purposes of section 15‑2 of the Income Tax Assessment Act 1997, the total value of all allowances, gratuities, compensations, benefits, bonuses and premiums (in this subsection referred to as living allowances) allowed, given or granted in meals, sustenance or the use of premises or quarters (including payment in lieu of one or more of those living allowances) to a taxpayer in respect of, or for or in relation directly or indirectly to, United Nations service shall be deemed to be an amount calculated at the rate of $2 for each week of that service in which any of those living allowances were so allowed, given or granted, or in which payment in lieu of any of those living allowances was made, to the taxpayer.
(7) Subject to subsections (8), (8A) and (9A) and subsection 79B(4), a taxpayer is entitled to a rebate of tax in his or her assessment in respect of income of a year of income in which he or she has performed United Nations service and derived income by way of salary, wages or other allowances in respect of that service. The amount of the rebate is:
(a) where the total period of that service performed by the taxpayer during the year of income is more than one‑half of the year of income or where the taxpayer dies while performing that service during the year of income—an amount equal to the sum of:
(i) $338; and
(ii) the amount worked out using subsection (7A); 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 subsection if paragraph (a) had applied to him or her in respect of the year of income.
(7A) For the purposes of subparagraph (7)(a)(ii), the amount is equal to 50% of the sum of the following rebates (if any) in respect of the year of income:
(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.
(8) For the purposes of subsection (7), but subject to subsection (8A), the total period of United Nations service of a taxpayer in any year of income shall be deemed to include any period in that year of income during which the taxpayer has resided, or has actually been, in the prescribed area.
(8A) For the purposes of subsection (7), United Nations service does not include any period of service of the taxpayer in respect of which an exemption from income tax applies under section 23AG.
(9) Where a rebate is allowable under subsection (7) in the assessment of a taxpayer in respect of income of a year of income and, but for this subsection, a rebate of a lesser amount would be allowable in that assessment under section 79A, a rebate under section 79A is not allowable in that assessment.
(9A) Where a rebate is allowable under section 79A in the assessment of a taxpayer in respect of income of a year of income and, but for this subsection, a rebate of the same or a lesser amount would be allowable in that assessment under subsection (7), a rebate under subsection (7) is not allowable in that assessment.
(9B) Subsection 79B(4) shall be disregarded in determining for the purposes of subsections (9) and (9A) of this section the amount of a rebate allowable to a taxpayer under subsection (7) of this section or under section 79A.
(10) Where:
(a) the trustee of the estate of a deceased person who has performed United Nations service is liable to pay income tax, in respect of a year of income, upon income that consists of or includes salary, wages or allowances derived by the deceased person in respect of that service; or
(b) the death of the person resulted from an occurrence that happened during that service; and
(c) if the person had, at the time of the happening of the occurrence, been a member of the Defence Force rendering continuous full‑time service outside Australia while the taxpayer was allotted for duty in an operational area described in item 4, 5, 6, 7 or 8 of Column 1 of Schedule 2 to the Veterans’ Entitlements Act 1986, the Commonwealth would be liable to pay a pension under that Act in respect of the death of the person;
the trustee is, by force of this subsection, released from the payment of so much of that tax as remains after deducting any tax deductions unapplied:
(d) if the assessable income of the deceased person of the year of income consists solely of the salary, wages or allowances derived in respect of that service—from the amount of income tax so payable by the trustee; or
(e) if the assessable income of the deceased person of the year of income includes income other than the salary, wages or allowances derived in respect of that service:
(i) from the amount of income tax so payable by the trustee; or
(ii) from the amount by which the income tax payable in respect of the income of the year of income has been increased by the inclusion of the salary, wages or allowances so derived in the assessable income of the deceased person of the year of income;
whichever is the less.
(11) Nothing in subsection (10) shall be construed as authorizing or requiring the Commissioner to refund any amount paid as or for income tax by or on behalf of the deceased person or the trustee of his or her estate.
23AD Exemption of pay and allowances of Defence Force members performing certain overseas duty
Requirements for exemption
(1) The pay and allowances earned by a person serving as a member of the Defence Force are exempt from tax if:
(a) they are earned while there is in force a certificate in writing issued by the Chief of the Defence Force to the effect that the person is on eligible duty with a specified organisation in a specified area outside Australia; and
(b) the eligible duty is not as, or under, an attaché at an Australian embassy or legation.
Eligible duty
(2) The regulations may declare that duty with a specified organisation, in a specified area outside Australia and after a specified day, is eligible duty for the purposes of this section.
Where paragraph (1)(a) certificate in force
(3) A certificate under paragraph (1)(a):
(a) comes into force at the later of:
(i) the time specified in the certificate (which may be before the time when it is issued, but not before the end of the specified day under the regulations); and
(ii) the time when the person arrives for duty in the specified area concerned; and
(b) subject to paragraph (c), continues in force until the earliest of:
(i) the time of the person’s departure from the specified area; and
(ii) the time when, in accordance with a certificate of revocation signed by the Chief of the Defence Force, it ceases to be in force; and
(iii) any time prescribed by the regulations in relation to the eligible duty for the purposes of this subparagraph; and
(c) is in force during any period of hospital treatment resulting from an illness contracted, or injuries sustained, during the person’s eligible duty.
Review of paragraph (1)(a) certificate
(4) An application may be made to the Tribunal for review of a decision of the Chief of the Defence Force under paragraph (1)(a).
Delegation of paragraph (1)(a) power
(5) The Chief of the Defence Force may, by signed instrument, delegate to an officer of the Defence Force the power conferred by paragraph (1)(a).
Revocation certificate is legislative instrument
(6) A certificate of revocation referred to in subparagraph (3)(b)(ii) is a legislative instrument.
23AF Exemption of certain income derived in respect of approved overseas projects
(1) Where a taxpayer, being a natural person, has been engaged on qualifying service on a particular approved project for a continuous period of not less than 91 days, any eligible foreign remuneration derived by the person that is attributable to that qualifying service is exempt from tax.
(3) Subject to subsections (4) and (5), a person shall be taken for the purposes of this section to be engaged on qualifying service on an approved project during any period during which:
(a) the person is outside Australia and is engaged in the performance of personal services in connection with the approved project;
(b) the person is travelling between Australia and the site of the approved project;
(c) by reason of an incapacity for work due to accident or illness occurring while the person was, by virtue of paragraph (a) or (b), to be taken to be engaged on qualifying service on the approved project, the person is absent from work; or
(d) the person is on eligible leave, being leave that accrued in respect of a period during which the person was, by virtue of any of the preceding paragraphs, to be taken to be engaged on qualifying service on the approved project.
(4) A person shall not be taken to have been engaged on qualifying service on a particular approved project while the person was travelling between Australia and the site of the approved project unless the Commissioner is satisfied that the time taken for the journey is reasonable.
(5) A person shall not be taken to have been engaged on qualifying service on a particular approved project by virtue of paragraph (3)(c) during a period of incapacity for work unless the person is taken to have been engaged on qualifying service on that approved project by virtue of paragraph (3)(a), (b) or (d) during a period that commenced immediately after the incapacity ceased.
(6) Where:
(a) a person was engaged on qualifying service on a particular approved project; and
(b) due to unforeseen circumstances, the person ceased to be engaged on qualifying service on that approved project;
the period during which the person is to be taken to have been engaged on qualifying service on that approved project shall, except for the purpose of determining whether income derived by the person is eligible foreign remuneration, be taken to include the additional period after the person ceased to be engaged on qualifying service on that approved project during which the person would, in the opinion of the Commissioner, have continued to be engaged on qualifying service on that approved project but for those unforeseen circumstances.
(7) Where:
(a) a person (in this subsection referred to as the original person) was engaged on qualifying service on a particular approved project;
(b) due to unforeseen circumstances, the original person ceased to be engaged on qualifying service on that approved project; and
(c) as soon as practicable after the time when the original person ceased to be engaged on qualifying service on that approved project, another person (in this subsection referred to as the substituted person) commenced to be engaged on qualifying service on that approved project in lieu of the original person;
the period during which the substituted person is to be taken to have been engaged on qualifying service on that approved project shall, except for the purpose of determining whether income derived by the substituted person is eligible foreign remuneration, be taken to include a period that ended immediately before the substituted person commenced to be engaged on qualifying service on that approved project in lieu of the original person and was of the same duration as the continuous period during which the original person was, immediately before the original person ceased to be engaged on qualifying service on that approved project, taken to have been engaged on qualifying service on that approved project.
(8) Where:
(a) during the period (in this subsection referred to as the total project period) commencing at the time when a person was first engaged on qualifying service on an approved project and ending at the time when the person was last engaged on qualifying service on that approved project, the person was in Australia during a period or periods (in this subsection referred to as the intervening period or intervening periods) during which the person was not engaged on qualifying service on that approved project;
(b) the total number of days in the intervening period or intervening periods does not exceed one‑sixth of the total number of days during the total project period during which the person was engaged on qualifying service on the approved project; and
(c) at all times during the total project period, the person was engaged on qualifying service on the approved project or was in Australia;
the periods during the total project period during which the person was engaged on qualifying service on the approved project shall together be taken to constitute a continuous period during which the person was engaged on qualifying service on the approved project.
(9) Where, immediately before a person commences to take eligible leave, leave of the same kind as the eligible leave has accrued in relation to the person but has not been used and that unused leave consists of:
(a) leave that accrued in respect of a period or periods when the person was engaged on qualifying service on an approved project and leave that accrued in respect of a period or periods when the person was not engaged on qualifying service on an approved project;
(b) leave that accrued in respect of 2 or more periods when the person was engaged on qualifying service on 2 or more different approved projects; or
(c) leave that accrued in respect of 2 or more periods when the person was engaged on qualifying service on 2 or more different approved projects and leave that accrued in respect of a period or periods when the person was not engaged on qualifying service on an approved project;
the following provisions apply for the purposes of determining the extent to which the eligible leave taken by the person was eligible leave that accrued in respect of a period when the person was engaged on qualifying service on a particular approved project:
(d) in a case to which paragraph (a) applies—the person shall be deemed first to have taken leave that accrued in respect of the period when the person was engaged on qualifying service on the approved project referred to in that paragraph;
(e) in a case to which paragraph (b) applies—the leave shall be deemed to have been taken in the order that is reverse to the order in which it accrued;
(f) in a case to which paragraph (c) applies:
(i) the person shall be deemed not to have taken any of the leave that accrued in respect of a period or periods when the person was not engaged on qualifying service on an approved project until the person had taken leave for a number of days equal to the number of days of leave referred to in that paragraph that had accrued in respect of periods when the person was engaged on qualifying service on approved projects; and
(ii) the leave that had accrued in respect of periods when the person was engaged in qualifying service on approved projects shall be deemed to have been taken by the person in the order that is reverse to the order in which that leave accrued.
(10) Where the amount of income derived by a person that:
(a) is attributable to qualifying service on an approved project; and
(b) would, apart from this subsection, be eligible foreign remuneration;
exceeds the amount of income that the Commissioner considers would be reasonable remuneration in respect of that qualifying service, the amount of the excess is not eligible foreign remuneration for the purposes of this section.
(11) Where the Trade Minister is satisfied that the undertaking of an eligible project that was commenced, or is proposed to be commenced, after 19 August 1980 is, or will be, in the national interest, that Minister may, by writing signed by that Minister, approve that eligible project for the purposes of this section.
(12) The Trade Minister may, either generally or as otherwise provided by the instrument of delegation, by writing signed by that Minister, delegate to a person that Minister’s power under subsection (11).
(13) The power so delegated, when exercised by the delegate shall, for the purposes of this section, be deemed to have been exercised by the Trade Minister.
(14) A delegation under subsection (12) does not prevent the exercise of a power by the Trade Minister.
(15) Where:
(a) a person has derived eligible foreign remuneration during a year of income; and
(b) at the time of making an assessment in respect of income of the person of the year of income, the Commissioner is of the opinion that, at a later time, circumstances will exist by reason of which that eligible foreign remuneration will be exempt from tax by virtue of this section;
the Commissioner may apply the provisions of this section as if those circumstances existed at the time of making the assessment.
(16) Where, in the making of an assessment, this section has been applied on the basis that a circumstance that did not exist at the time of making the assessment would exist at a later time and the Commissioner, after making the assessment, 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 section shall be taken always to have applied on the basis that that circumstance did not exist.
(17) For the purposes of this section, income is excluded income if:
(a) the income is income to which section 23AG applies; or
(aa) the income is a payment, consideration or amount that:
(i) is included in assessable income under Division 82, section 83‑295 or Division 301, 302, 304 or 305 of the Income Tax Assessment Act 1997; or
(ii) is included in assessable income under Division 82 of the Income Tax (Transitional Provisions) Act 1997; or
(iii) is mentioned in paragraph 82‑135(e), (f), (g), (i) or (j) of the Income Tax Assessment Act 1997; or
(iv) is an amount transferred to a fund, if the amount is included in the assessable income of the fund under section 295‑200 of the Income Tax Assessment Act 1997; or
(b) the income is derived from sources in a country other than Australia and:
(i) is exempt from income tax in that country; and
(ii) would not be exempt from income tax in that country apart from the operation of an agreement applying to Australia and that other country relating to the avoidance of double taxation or of a law of that other country giving effect to such an agreement; or
(c) the income consists of:
(i) payments in lieu of long service leave; or
(ii) payments by way of superannuation or pension.
(17A) If the income of a taxpayer of a year of income consists of an amount that is exempt from tax under this section (in this section called the exempt amount) and other income, the amount of tax (if any) payable in respect of the other income is calculated using the formula:
where:
Notional gross tax means the number of whole dollars in the amount of income tax that would be assessed under this Act in respect of the taxpayer’s taxable income of the year of income if:
(a) the exempt amount were not exempt income; and
(aa) if the exempt amount is a payment covered by section 83‑240 or 305‑65 of the Income Tax Assessment Act 1997—the exempt amount (excluding any part of that amount that represented contributions made by the taxpayer) were assessable income of the taxpayer; and
(b) the taxpayer were not entitled to any rebate of tax.
Notional gross taxable income means the number of whole dollars in the amount that would have been the taxpayer’s taxable income of the year of income if the exempt amount were not exempt income.
Other taxable income means the amount (if any) remaining after deducting from so much of the other income as is assessable income:
(d) any deductions allowable to the taxpayer in relation to the year of income that relate exclusively to that assessable income; and
(e) so much of any other deductions (other than apportionable deductions) allowable to the taxpayer in relation to the year of income as, in the opinion of the Commissioner, may appropriately be related to that assessable income; and
(f) the amount calculated using the formula in subsection (17B).
(17B) The formula referred to in paragraph (17A)(f) is:
where:
Apportionable deductions means the number of whole dollars in the apportionable deductions allowable to the taxpayer in relation to the year of income.
Other taxable income means the amount that, apart from paragraph (17A)(f), would be represented by the component Other taxable income in subsection (17A).
Notional gross taxable income means the number of whole dollars in the amount that would have been the taxpayer’s taxable income of the year of income if the exempt amount were not exempt income.
(17C) Subsection (17A) applies to a taxpayer in respect of income of a year of income as if any payment covered by section 83‑240 or 305‑65 of the Income Tax Assessment Act 1997 in relation to qualifying service that was made in respect of the taxpayer during that year of income were income of the taxpayer of that year of income that is exempt from tax under this section.
(18) In this section, unless the contrary intention appears:
approved project means a project in respect of which there is in force an approval granted under subsection (11).
eligible contractor means:
(a) a resident of Australia;
(b) the Commonwealth, a State, a Territory, the government of a country other than Australia or an authority of the Commonwealth, of a State, of a Territory or of the government of a country other than Australia;
(c) an organization:
(i) of which Australia and a country or countries other than Australia are members; or
(ii) that is constituted by a person or persons representing Australia and a person or persons representing a country or countries other than Australia; or
(d) an agency of an organization to which paragraph (c) applies.
eligible foreign remuneration, in relation to a person, means income (not being excluded income) that is derived by the person at a time when the person is a resident, being:
(a) income consisting of salary, wages, commission, bonuses or allowances, or of amounts included in a person’s assessable income under Division 83A of the Income Tax Assessment Act 1997 (about employee share schemes), derived by the person in his or her capacity as an employee of an eligible contractor; or
(b) income, or amounts included in a person’s assessable income under that Division, derived by the person under a contract with an eligible contractor, being a contract that is wholly or substantially for the personal services of the person;
that is directly attributable to qualifying service by the person on an approved project and includes any payments received in lieu of eligible leave that accrued in respect of a period during which the person was a resident and was engaged on qualifying service on an approved project.
eligible leave means leave other than long service leave.
eligible project means:
(a) a project for the design, supply or installation of any equipment or facilities; or
(b) a project for the construction of works; or
(c) a project for the development of an urban area or a regional area; or
(d) a project for the development of agriculture; or
(e) a project consisting of giving advice or assistance relating to the management or administration of a government department or of a public utility; or
(f) a project included in a class of projects approved in writing for the purposes of this section by the Trade Minister.
employee includes:
(a) a person employed by the Commonwealth, by a State, by a Territory, by the government of a country other than Australia or by an authority of the Commonwealth, of a State, of a Territory or of the government of a country other than Australia; and
(b) a member of the Defence Force.
long service leave means long leave, furlough, extended leave or leave of a similar kind (however described).
23AG Exemption of income earned in overseas employment
(1) Where a resident, being a natural person, has been engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived by the person from that foreign service are exempt from tax.
(1AA) However, those foreign earnings are not exempt from tax under this section unless the continuous period of foreign service is directly attributable to any of the following:
(a) the delivery of Australian official development assistance by the person’s employer (except if that employer is an Australian government agency (within the meaning of the Income Tax Assessment Act 1997));
(b) the activities of the person’s employer in operating a public fund that:
(i) is covered by item 9.1.1 or 9.1.2 of the table in subsection 30‑80(1) of the Income Tax Assessment Act 1997 (international affairs deductible gift recipients); and
(ii) meets the special conditions mentioned in that item;
(c) the activities of the person’s employer, if the employer is exempt from income tax because of paragraph 50‑50(1)(c) or (d) of the Income Tax Assessment Act 1997 (prescribed institutions located or pursuing objectives outside Australia);
(d) the person’s deployment outside Australia as a member of a disciplined force by:
(i) the Commonwealth, a State or a Territory; or
(ii) an authority of the Commonwealth, a State or a Territory;
(e) an activity of a kind specified in the regulations.
(1A) A person is taken, for the purposes of subsection (1), to have been engaged in foreign service for a continuous period of 91 days if:
(a) the person died at a time when he or she was engaged in foreign service for a continuous period of less than 91 days; and
(b) he or she would have otherwise continued to be engaged in the foreign service; and
(c) his or her continuous period of engagement in the foreign service would have otherwise been a period of at least 91 days.
(2) An amount of foreign earnings derived in a foreign country is not exempt from tax under this section if the amount is exempt from income tax in the foreign country only because of any of the following:
(a) a law of the foreign country giving effect to a double tax agreement within the meaning of Part X;
(b) a double tax agreement within the meaning of Part X;
(c) provisions of a law of the foreign country under which income covered by any of the following categories is generally exempt from income tax:
(i) income derived in the capacity of an employee;
(ii) income from personal services;
(iii) similar income;
(d) the law of the foreign country does not provide for the imposition of income tax on one or more of the categories of income mentioned in paragraph (c);
(e) a law of the foreign country corresponding to the International Organisations (Privileges and Immunities) Act 1963 or to the regulations under that Act;
(f) an international agreement to which Australia is a party and that deals with:
(i) diplomatic or consular privileges and immunities; or
(ii) privileges and immunities in relation to persons connected with international organisations;
(g) a law of the foreign country giving effect to an agreement covered by paragraph (f).
(2A) Subsection (2) does not apply in relation to foreign earnings to the extent that the person derived them from foreign service in Iraq after 31 December 2002 but before 1 May 2004.
(3) If the income of a taxpayer of a year of income consists of an amount that is exempt from tax under this section (in this section called the exempt amount) and other income, the amount of tax (if any) payable in respect of the other income is calculated using the formula:
where:
Notional gross tax means the number of whole dollars in the amount of income tax that would be assessed under this Act in respect of the taxpayer’s taxable income of the year of income if:
(a) the exempt amount were not exempt income; and
(aa) if the exempt amount is a payment covered by section 83‑240 or 305‑65 of the Income Tax Assessment Act 1997—the exempt amount (excluding any part of that amount that represented contributions made by the taxpayer) were assessable income of the taxpayer; and
(b) the taxpayer were not entitled to any rebate of tax.
Notional gross taxable income means the number of whole dollars in the amount that would have been the taxpayer’s taxable income of the year of income if the exempt amount were not exempt income.
Other taxable income means the amount (if any) remaining after deducting from so much of the other income as is assessable income:
(d) any deductions allowable to the taxpayer in relation to the year of income that relate exclusively to that assessable income; and
(e) so much of any other deductions (other than apportionable deductions) allowable to the taxpayer in relation to the year of income as, in the opinion of the Commissioner, may appropriately be related to that assessable income; and
(f) the amount calculated using the formula in subsection (4).
(4) The formula referred to in paragraph (3)(f) is:
where:
Apportionable deductions means the number of whole dollars in the apportionable deductions allowable to the taxpayer in relation to the year of income.
Other taxable income means the amount that, apart from paragraph (3)(f), would be represented by the component Other taxable income in subsection (3).
Notional gross taxable income means the number of whole dollars in the amount that would have been the taxpayer’s taxable income of the year of income if the exempt amount were not exempt income.
(5) Subsection (3) applies to a taxpayer in respect of income of a year of income as if any payment covered by section 83‑240 or 305‑65 of the Income Tax Assessment Act 1997 that related to the termination of employment that was made in respect of the taxpayer during that year of income were income of the taxpayer of that year of income that is exempt from tax under this section.
(6) For the purposes of this section, a period during which a person is engaged in foreign service includes any period during which the person is, in accordance with the terms and conditions of that service:
(a) absent on recreation leave, other than:
(i) leave wholly or partly attributable to a period of service or employment other than that foreign service;
(ii) long service leave, furlough, extended leave or leave of a similar kind (however described); or
(iii) leave without pay or on reduced pay; or
(b) absent from work because of accident or illness.
(6A) 2 or more periods in which a person has been engaged in foreign service are together taken to constitute a continuous period of foreign service until:
(a) the end of the last of the 2 or more periods; or
(b) a time (if any), since the start of the first of the 2 or more periods, when the person’s total period of absence exceeds 1/6 of the person’s total period of foreign service;
whichever happens sooner.
Example: Kate is engaged in foreign service for 20 days, is absent for 2 days and is then engaged in foreign service for 10 days. These 2 periods of foreign service constitute a continuous period of foreign service, because the total period of absence is never more than 1/10 of the total period of foreign service.
Kate is then absent for 5 days before commencing a further period of foreign service. No matter how long the further period lasts, it can never constitute a continuous period of foreign service with the first 2 periods of foreign service, because on the fourth day of the second absence the total period of absence is 1/5 of the total period of foreign service.
(6B) In subsection (6A):
total period of absence, in relation to a particular time, means the number of days, in the period starting at the start of the first of the 2 or more periods and ending at that time, for which the person was not engaged in foreign service.
total period of foreign service, in relation to a particular time, means the number of days, in the period starting at the start of the first of the 2 or more periods and ending at that time, for which the person was engaged in foreign service.
(6F) Where:
(a) a person has derived foreign earnings during a year of income; and
(b) at the time of making an assessment in respect of income of the person of the year of income, the Commissioner is of the opinion that, at a later time, circumstances will exist because of which those foreign earnings will be exempted from tax by this section;
the Commissioner may apply the provisions of this section as if those circumstances existed at the time of making the assessment.
(7) In this section:
employee includes:
(a) a person employed by a government or an authority of a government or by an international organisation; or
(b) a member of a disciplined force.
foreign earnings means income consisting of earnings, salary, wages, commission, bonuses or allowances, or of amounts included in a person’s assessable income under Division 83A of the Income Tax Assessment Act 1997 (about employee share schemes), but does not include any payment, consideration or amount that:
(a) is included in assessable income under Division 82 or Subdivision 83‑295 or Division 301, 302, 304 or 305 of the Income Tax Assessment Act 1997; or
(b) is included in assessable income under Division 82 of the Income Tax (Transitional Provisions) Act 1997; or
(c) is mentioned in paragraph 82‑135(e), (f), (g), (i) or (j) of the Income Tax Assessment Act 1997; or
(d) is an amount transferred to a fund, if the amount is included in the assessable income of the fund under section 295‑200 of the Income Tax Assessment Act 1997.
foreign service means service in a foreign country as the holder of an office or in the capacity of an employee.
income tax, in relation to a foreign country:
(a) in all cases—does not include a municipal income tax; and
(b) in the case of a federal foreign country—does not include a State income tax.
23AH Foreign branch income of Australian companies not assessable
Objects
(1) The objects of this section are:
(a) to ensure that active foreign branch income derived by a resident company, and capital gains made by a resident company in disposing of non‑tainted assets used in deriving foreign branch income, (except income and capital gains from the operation of ships or aircraft in international traffic) are not assessable income or exempt income of the company; and
(b) to include in the assessable income of a resident company that part of its income and capital gains derived through a branch in a foreign country that is comparable to the amounts that would be included in an attributable taxpayer’s assessable income for income and capital gains derived by a CFC resident in the same foreign country; and
(c) to get the same outcomes where one or more partnerships or trusts are interposed between a resident company and a foreign branch; and
(d) to limit the effect mentioned in paragraph (a) where there is a branch hybrid mismatch for the purposes of Division 832 of the Income Tax Assessment Act 1997.
Foreign branch income not assessable
(2) Subject to this section, foreign income derived by a company, at a time when the company is a resident, in carrying on a business at or through a PE of the company in a listed country or unlisted country is not assessable income, and is not exempt income, of the company.
Foreign capital gains and losses disregarded
(3) Subject to this section, a capital gain from a CGT event happening to a CGT asset is disregarded for the purposes of Part 3‑1 of the Income Tax Assessment Act 1997 if:
(a) the gain is made by a company that is a resident; and
(b) the company used the asset wholly or mainly for the purpose of producing foreign income in carrying on a business at or through a PE of the company in a listed country or unlisted country; and
(c) the asset is not taxable Australian property.
(4) Subject to this section, a capital loss from a CGT event happening to a CGT asset is disregarded for the purposes of Part 3‑1 of the Income Tax Assessment Act 1997 if:
(a) the loss is made by a company that is a resident; and
(b) the company used the asset wholly or mainly for the purpose of producing foreign income in carrying on a business at or through a PE of the company in a listed country or unlisted country; and
(c) had the loss been a gain, it would be disregarded under subsection (3).
Exception relating to hybrid mismatch rules
(4A) Subsection (2) does not apply to foreign income derived by the company if the foreign income is branch hybrid mismatch income (see subsection (14C)).
Exceptions: listed country PE
(5) Subsection (2) does not apply to foreign income derived by the company if:
(a) the PE is in a listed country; and
(b) the PE does not pass the active income test (see subsection (12)); and
(c) the foreign income is both:
(i) adjusted tainted income (see subsection (13)); and
(ii) eligible designated concession income in relation to a listed country.
(6) Subsection (3) or (4) does not apply to a capital gain or capital loss if:
(a) the PE is in a listed country; and
(b) for a capital gain—the gain is from a tainted asset and is eligible designated concession income in relation to a listed country; and
(c) for a capital loss—the loss is from a tainted asset and would be eligible designated concession income in relation to a listed country if it were a capital gain.
Exceptions: unlisted country PE
(7) Subsection (2) does not apply to foreign income derived by the company if:
(a) the PE is in an unlisted country; and
(b) the PE does not pass the active income test (see subsection (12)); and
(c) the foreign income is adjusted tainted income (see subsection (13)).
(8) Subsection (3) or (4) does not apply to a capital gain or capital loss if:
(a) the PE is in an unlisted country; and
(b) the gain or loss is from a tainted asset.
Income derived in disposing of a business
(9) This section applies to foreign income derived by an entity in the course of disposing, in whole or in part, of a business carried on in a listed country or unlisted country at or through a PE of the entity in the listed country or unlisted country as if the foreign income had been derived in carrying on that business.
Interposed partnerships or trusts
(10) This section applies to any indirect interest (through one or more partnerships or trust estates) of a company in foreign income derived by a partnership or trustee through a PE of the partnership or trustee in a listed country or unlisted country as if that indirect interest were foreign income derived by the company through a PE of the company in that country.
(11) This section applies to any indirect interest (through one or more partnerships or trust estates) of a company in a capital gain or capital loss made in relation to an asset of a partnership, or made by a trustee, in carrying on a business at or through a PE of the partnership or trustee in a listed country or unlisted country as if that indirect interest were a capital gain or capital loss made by the company through a PE of the company in that country.
Active income test
(12) A PE of an entity passes the active income test for a year of income if the entity would have passed the active income test in section 432 if:
(a) the assumptions in subsection (14) were made; and
(b) subsection 432(3) and 446(2) and paragraphs 432(1)(b) and (e) and 447(1)(b), (d) and (f) had not been enacted.
Adjusted tainted income
(13) For the purposes of this section, the adjusted tainted income of a PE of an entity is income or other amounts that would be adjusted tainted income of the entity for the purposes of Part X if:
(a) the assumptions in subsection (14) were made; and
(b) subsection 446(2) and paragraphs 447(1)(b), (d) and (f) had not been enacted.
Assumptions for subsections (12) and (13)
(14) The assumptions referred to in paragraphs (12)(a) and (13)(a) are:
(a) except in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b), the only income or other amounts derived by the entity were the income derived in carrying on business at or through the PE; and
(b) the entity’s statutory accounting periods were the same as the entity’s years of income; and
(c) in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b):
(i) the part of the entity’s operations that consists of the business carried on at or through the PE were a company (the PE company); and
(ii) the remaining part of the entity’s operations were a separate company (the HQ company); and
(iii) the PE company and the HQ company had carried out the transactions that they would have carried out if the PE company were engaged in the same or similar activities as the PE under the same or similar conditions as the PE and were dealing wholly independently with the HQ company; and
(iv) any income derived by the HQ company were disregarded; and
(d) if the entity is an AFI entity (within the meaning of subsection 326(2))—the entity were an AFI subsidiary; and
(e) in applying paragraphs 447(1)(a), (c) and (e), the HQ company were an associate of the PE company.
(14A) This section does not apply to foreign income, or to a capital gain or capital loss, of a company to the extent that the income, gain or loss is from:
(a) the operation of ships or aircraft in international traffic at or through a PE of the company in a listed country or unlisted country; or
(b) things that are ancillary to that operation.
(14B) A company operates a ship or aircraft in international traffic if the company operates it for transporting passengers or goods between a place in one country and a place in another country.
Branch hybrid mismatch income
(14C) For the purposes of this section, if foreign income derived by the company is an amount that, for the purposes of Division 832 of the Income Tax Assessment Act 1997, is a payment:
(a) received by the company; and
(b) that, apart from subsection (4A) of this section, would give rise to a branch hybrid mismatch;
then so much of the foreign income as does not exceed the amount of the branch hybrid mismatch is branch hybrid mismatch income.
(14D) For the purposes of this section, PE, when it is used in Division 832 of the Income Tax Assessment Act 1997, does not have the meaning it has in that Act but instead has the same meaning as in this section.
Definitions
(15) In this section:
company does not include a company in the capacity of a trustee.
double tax agreement has the same meaning as in Part X.
eligible designated concession income has the same meaning as in Part X.
foreign income includes an amount that:
(a) apart from this section, would be included in assessable income under a provision of this Act other than Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997 (CGT); and
(b) is derived from sources in a listed country or unlisted country.
listed country has the same meaning as in Part X.
permanent establishment, or PE, in relation to a listed country or unlisted country:
(a) if there is a double tax agreement in relation to that country—has the same meaning as in the double tax agreement; or
(b) in any other case—has the meaning given by subsection 6(1).
statutory accounting period has the same meaning as in Part X.
tainted asset has the same meaning as in Part X.
unlisted country has the same meaning as in Part X.
23AI Amounts paid out of attributed income not assessable
(1) Where:
(a) either:
(i) an attribution account payment of a kind referred to in paragraph 365(1)(a), (b), (c) or (e) is made to a taxpayer (other than a partnership or taxpayer in the capacity of trustee of a trust); or
(ii) an attribution account payment of a kind referred to in paragraph 365(1)(d) is made to a taxpayer; and
(b) on the making of the payment, an attribution debit arises, for the entity making the payment, in relation to the taxpayer;
the following provisions have effect:
(c) if the payment is of a kind referred to in paragraph 365(1)(a)—the payment is not assessable income, and is not exempt income, to the extent of the debit;
(d) if the payment is of a kind referred to in paragraph 365(1)(b) and, apart from this section, an amount would be included in the taxpayer’s assessable income under section 92 in respect of an individual interest in the net income of the partnership of the year of income referred to in that paragraph—that amount is not assessable income, and is not exempt income, to the extent of the debit;
(e) if the payment is of a kind referred to in paragraph 365(1)(c) and, apart from this section, an amount would be included in the taxpayer’s assessable income under section 97, 98A or 100 in respect of a share of the net income of the trust of the year of income referred to in that paragraph—that amount is not assessable income and is not exempt income, to the extent of the debit;
(ea) if the payment is of a kind referred to in paragraph 365(1)(c) and, apart from this section, an amount would be assessable to the trustee of the trust referred to in that paragraph under section 98 in respect of a share of the net income of the trust of the year of income referred to in that paragraph—that amount is not so assessable to the extent of the debit;
(f) if the payment is of a kind referred to in paragraph 365(1)(d)—the payment is not, to the extent of the debit, assessable to the taxpayer as mentioned in that paragraph;
(g) if the payment is of a kind referred to in paragraph 365(1)(e) and, apart from this section, an amount would be included in the taxpayer’s assessable income, of the year of income referred to in that paragraph, under section 99B in respect of the trust property referred to in that paragraph—that amount is not assessable income, and is not exempt income, to the extent of the debit.
(2) This section is to be disregarded for the purposes of applying any other provision of this Act to determine allowable deductions.
(3) In this section:
attribution account payment has the same meaning as in Part X.
attribution debit has the same meaning as in Part X.
company has the same meaning as in Part X.
trust has the same meaning as in Part X, but does not include a trust covered by subsection 371(7).
23AK Amounts paid out of attributed foreign investment fund income not assessable
When this section applies
(1) This section applies if:
(a) either:
(i) a FIF attribution account payment of a kind referred to in former paragraph 603(1)(a), (b), (c), (d), (f), (g) or (h) is made to a taxpayer (other than a partnership or taxpayer in the capacity of trustee of a trust); or
(ii) a FIF attribution account payment of a kind referred to in former paragraph 603(1)(e) is made to a taxpayer; and
(b) on the making of the payment, a post FIF abolition debit arises, for the FIF attribution account entity making the payment, in relation to the taxpayer.
Post FIF abolition debit arises
(2) A post FIF abolition debit arises for a FIF attribution account entity (the eligible entity) in relation to a taxpayer if:
(a) the eligible entity makes a FIF attribution account payment to the taxpayer or to a FIF attribution account entity; and
(b) immediately before the eligible entity makes the FIF attribution account payment, there is a post FIF abolition surplus for the eligible entity in relation to the taxpayer.
Amount of post FIF abolition debit
(3) The amount of the post FIF abolition debit is the lesser of:
(a) the post FIF abolition surplus; and
(b) whichever of the following is applicable:
(i) if the attribution account payment is made to the taxpayer—the FIF attribution account payment;
(ii) in any other case—the taxpayer’s FIF attribution account percentage (for the FIF attribution account entity to which the payment is made) of the FIF attribution account payment;
reduced by any attribution debit that arises under section 372 for the entity in relation to the taxpayer as a result of the making of the payment.
When the post FIF abolition debit arises
(4) The post FIF abolition debit arises when the FIF attribution account payment is made.
When a post FIF abolition surplus exists
(5) A post FIF abolition surplus for a FIF attribution account entity in relation to a taxpayer exists at a particular time (the relevant time) if the sum of:
(a) the entity’s total FIF attribution credits (within the meaning of former section 605) that arose before the commencement of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010; and
(b) the entity’s total post FIF abolition credits arising before the relevant time in relation to the taxpayer;
exceeds the sum of:
(c) the entity’s total FIF attribution debits (within the meaning of former section 606) that arose before that commencement in relation to the taxpayer; and
(d) the entity’s total post FIF abolition debits arising before the relevant time in relation to the taxpayer.
Post FIF abolition credit arises
(6) A post FIF abolition credit arises for a FIF attribution account entity (the eligible entity) in relation to a taxpayer if a FIF attribution account payment that requires a post FIF abolition debit for another entity in relation to the taxpayer is made to the eligible entity.
Amount of post FIF abolition credit
(7) The amount of the post FIF abolition credit is equal to the amount of the post FIF abolition debit for the other entity.
When the post FIF abolition credit arises
(8) The post FIF abolition credit arises when the FIF attribution account payment referred to in subsection (6) is made.
Effect of this section applying
(9) If this section applies, the following provisions have effect:
(a) if the payment is of a kind referred to in former paragraph 603(1)(a) or (b)—the payment is not assessable income, and is not exempt income, to the extent of the debit;
(b) if the payment is of a kind referred to in former paragraph 603(1)(c) and, apart from this section, an amount would be included in the taxpayer’s assessable income under section 92 in respect of an individual interest in the net income of the partnership of the year of income referred to in that paragraph—that amount is not assessable income, and is not exempt income, to the extent of the debit;
(c) if the payment is of a kind referred to in former paragraph 603(1)(d) and, apart from this section, an amount would be included in the taxpayer’s assessable income under section 97, 98A or 100 in respect of a share of the net income of the trust of the year of income referred to in that paragraph—that amount is not assessable income, and is not exempt income, to the extent of the debit;
(d) if the payment is of a kind referred to in former paragraph 603(1)(d) and, apart from this section, an amount would be assessable to the trustee of the trust referred to in that paragraph under section 98 in respect of a share of the net income of the trust of the year of income referred to in that paragraph—that amount is not so assessable to the extent of the debit;
(e) if the payment is of a kind referred to in former paragraph 603(1)(e)—the payment is not, to the extent of the debit, assessable to the taxpayer as mentioned in that paragraph;
(f) if the payment is of a kind referred to in former paragraph 603(1)(f) and, apart from this section, an amount would be included in the taxpayer’s assessable income, of the year of income referred to in that paragraph, under section 99B in respect of the trust property referred to in that paragraph—that amount is not assessable income, and is not exempt income, to the extent of the debit;
(g) if the payment is of a kind referred to in former paragraph 603(1)(g)—the payment is not assessable income, and is not exempt income, to the extent of the debit;
(h) if the payment is of a kind referred to in former paragraph 603(1)(h)—the payment is not assessable income, and is not exempt income, to the extent of the debit.
(10) This section is to be disregarded for the purposes of applying any other provision of this Act to determine allowable deductions.
(11) In this section:
FIF attribution account entity has the same meaning as in former Part XI.
FIF attribution account payment has the same meaning as in former Part XI.
FIF attribution account percentage has the same meaning as in former Part XI.
trust has the same meaning as in former Part XI, but does not include a trust covered by former subsection 605(11).
23B Reduction of disposal consideration if FIF attributed income not distributed
(1) If:
(a) it is necessary, for the purposes of applying a provision of this Act in the assessment of a taxpayer for a year of income, to take into account:
(i) the amount of consideration received, entitled to be received or taken to have been received, by the taxpayer in respect of the disposal of an asset; or
(ii) the capital proceeds from a CGT event happening in relation to a CGT asset;
being an asset that is an interest in a FIF attribution account entity; and
(b) immediately before the disposal or CGT event takes place there is a post FIF abolition surplus for the FIF attribution account entity in relation to the taxpayer;
then, for the purposes of this Act:
(c) the consideration or capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the disposal or CGT event is taken to be reduced by so much of the amount of the post FIF abolition surplus as does not exceed the consideration or capital proceeds; and
(d) a post FIF abolition debit arises at the time of the disposal or the CGT event under this paragraph, in relation to the taxpayer, for the FIF attribution account entity; and
(e) the amount of the post FIF abolition debit is equal to so much of the surplus as is taken into account under paragraph (c).
(2) For the purposes of paragraph (1)(c), if the disposal of the asset or the CGT event causes the taxpayer’s FIF attribution account percentage for the FIF attribution account entity to be reduced by a proportion, then only that proportion of the post FIF abolition surplus for the entity is to be taken into account under that paragraph.
(3) In this section:
FIF attribution account entity has the same meaning as in former Part XI.
FIF attribution account percentage has the same meaning as in former Part XI.
23G Exemption of interest received by credit unions
(1) In this section:
credit union means a company in relation to which the following conditions are satisfied:
(a) the company is an ADI (authorised deposit‑taking institution) for the purposes of the Banking Act 1959;
(b) the company has a consent under section 66 of that Act that allows it to assume or use the expression “credit union” or “credit society”, or another expression (whether or not in English) that is of like import to either of those expressions.
(2) Income derived during a year of income by a credit union that is an approved credit union in relation to that year of income, being interest paid to the credit union by members of the credit union not being companies in respect of loans made to those members, is exempt from income tax.
(2A) Subsection (2) does not apply to a credit union in relation to a year of income if:
(a) the credit union is a recognised medium credit union in relation to the year of income; or
(b) the credit union is a recognised large credit union in relation to the year of income.
(3) For the purposes of this section, a credit union is an approved credit union in relation to a year of income if, and only if, the Commissioner is satisfied that:
(a) during that year of income the credit union did not enter into any transactions of a kind not ordinarily entered into by a company of a kind referred to in paragraph (a) of the definition of credit union in subsection (1); and
(b) by comparison with the profits of other credit unions for that year of income and the amounts transferred by those credit unions out of those profits to reserves, and after making due allowance for differences in the numbers of transactions entered into by other credit unions and the first‑mentioned credit union and the amounts to which the respective transactions related, the profit of the first‑mentioned credit union for that year of income was not excessive and the first‑mentioned credit union did not transfer an unreasonable part of that profit to a reserve.
(4) In determining for the purposes of paragraph (3)(a) whether any transactions entered into by a credit union during a year of income were transactions of a kind referred to in that paragraph, the Commissioner may have regard to:
(a) the circumstances in which, and the terms and conditions upon which, during that year of income:
(i) moneys were lent to, invested with, or otherwise obtained by, the credit union;
(ii) moneys were lent or otherwise made available by the credit union to its members or to other persons; and
(iii) moneys were invested by the credit union;
(b) the nature of the connexion (if any) between:
(i) the credit union or any of its members and any of the persons by whom moneys were lent to, invested with, or otherwise made available to, the credit union during that year of income;
(ii) the credit union or any of its members and any of the persons who owed moneys to the credit union at any time during that year of income; or
(iii) any of the persons by whom moneys were lent to, invested with, or otherwise made available to, the credit union during that year of income and any of the persons who owed moneys to the credit union at any time during that year of income; and
(c) any other relevant matters.
23K Substitution of certain securities
(1) In this section:
central borrowing authority means:
(a) the New South Wales Treasury Corporation;
(b) the Victorian Public Authorities Finance Agency;
(c) the Victoria Transport Borrowing Agency;
(d) the Queensland Government Development Authority;
(e) the Treasurer of the State of Western Australia;
(f) the South Australian Government Financing Authority;
(g) the Local Government Finance Authority of South Australia;
(h) any other public authority of a State, being a public authority that is empowered to issue securities in the manner referred to in paragraph (2)(a).
public authority includes a Minister of the Crown in right of a State, a municipal corporation and any other local government body.
security means stock, a bond or debenture, or any other document evidencing the indebtedness of a person, whether or not the debt is secured.
(2) For the purposes of this section, a person shall be taken to have issued a security (in this subsection referred to as the substituted security) to a taxpayer in substitution for another security (in this subsection referred to as the original security) held by the taxpayer if and only if:
(a) the substituted security was issued by the person to the taxpayer in exchange for the surrender or transfer of, or otherwise in replacement or substitution for, the original security; and
(b) the terms and conditions provided for by the substituted security were identical in all material respects to those provided for by the original security.
(3) Where:
(a) but for this subsection, a person would be taken to have issued a security (in this subsection referred to as the substituted security) to a taxpayer in substitution for another security (in this subsection referred to as the original security) held by the taxpayer; and
(b) either or both of the following conditions is or are satisfied:
(i) an amount was payable by the taxpayer by way of consideration for the issue of the substituted security; or
(ii) an amount was payable to the taxpayer by way of consideration for the surrender, transfer, replacement or substitution of the original security;
the person shall not be taken for the purposes of this section to have issued the substituted security in substitution for the original security.
(4) Where:
(a) under terms and conditions provided for by a security, the day on which interest is payable in respect of a period is different from that on which interest is payable in respect of the same period under another security; and
(b) the terms and conditions provided for by the securities are otherwise identical in all material respects;
the following provisions have effect:
(c) if the days on which the interest is payable are separated by an interval not exceeding 31 days—the terms and conditions provided for by the 2 securities shall, for the purposes of paragraph (2)(b), be taken to be identical in all material respects; and
(d) in any other case—the terms and conditions provided for by the 2 securities shall, for the purposes of paragraph (2)(b), be taken not to be identical in all material respects.
(5) Where, on or after 8 August 1984, a central borrowing authority issued or issues a security (in this subsection referred to as the substituted security) to a taxpayer in substitution for another security (in this subsection referred to as the original security) held by the taxpayer that was issued by a public authority other than the central borrowing authority:
(a) the substituted security shall, for the purposes of this Act, be deemed to be a continuation of the original security on the terms and conditions provided for by the substituted security; and
(b) no amount shall, in respect of the issue of the substituted security or the surrender, transfer, replacement or substitution of the original security, be included in, allowable as a deduction from or taken into account in ascertaining any amount included in or allowable as a deduction from, the assessable income of any taxpayer in respect of any year of income.
23L Certain benefits in the nature of income not assessable
(1) Income derived by a taxpayer by way of the provision of a fringe benefit is not assessable income and is not exempt income of the taxpayer.
(1A) Income derived by a taxpayer by way of the provision of a benefit (other than a benefit to which section 15‑70 of the Income Tax Assessment Act 1997 applies) that, but for paragraph (g) of the definition of fringe benefit in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986, would be a fringe benefit is exempt income of the taxpayer.
(2) Where:
(a) in a year of income, a taxpayer derives income consisting of one or more non‑cash business benefits (within the meaning of section 21A); and
(b) the total amount that is applicable under section 21A in respect of those benefits does not exceed $300;
the income is exempt income.
Division 1AB—Certain State/Territory bodies exempt from income tax
Subdivision A—Exemption for certain State/Territory bodies
24AK Key principle
A body that is a State/Territory body (an STB) is exempt from income tax under this Division unless it is an excluded STB. There are 5 different ways in which a body can be an STB.
24AL Diagram—guide to work out if body is exempt under this Division
The following diagram is a guide to help work out whether a body is exempt from income tax under this Division:
24AM Certain STBs exempt from tax
The income of a State/Territory body (an STB) is exempt from income tax unless section 24AN applies to the STB.
24AN Certain STBs not exempt from tax under this Division
Income derived by an STB is not exempt from income tax under this Division if, at the time that it is derived, the STB is an excluded STB.
Notes: 1. For the definition of excluded STB see section 24AT.
2. Even though an excluded STB is not exempt from income tax under this Division, it may still be exempt under another provision of this Act.
24AO First way in which a body can be an STB
A body is an STB if:
(a) it is a company limited solely by shares; and
(b) all the shares in it are beneficially owned by one or more government entities.
Note: For the definition of government entity see section 24AT. Note that an excluded STB is not a government entity.
24AP Second way in which a body can be an STB
A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation provides that it must distribute all of its profits (if any) only to one or more government entities; and
(d) if the legislation makes provision as to the way its net assets may be distributed if it is dissolved or wound up—the provision is that, if it is dissolved, all of its net assets (if any) must be distributed only to one or more government entities.
24AQ Third way in which a body can be an STB
A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation gives the power to appoint or dismiss its governing person or body only to one or more government entities.
24AR Fourth way in which a body can be an STB
A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation gives the power to direct its governing person or body as to the conduct of its affairs only to one or more government entities.
24AS Fifth way in which a body can be an STB
A body is an STB if:
(a) it is not a company limited solely by shares; and
(b) it is not established by State or Territory legislation; and
(c) all the legal and beneficial interests (including, but not limited to, interests as to income, profits, dividends, capital and distributions of capital) in it are held only by one or more government entities; and
(d) all the rights or powers (if any) to vote, appoint or dismiss its governing person or body and direct its governing person or body as to the conduct of its affairs are held only by one or more government entities.
24AT What do excluded STB, government entity and Territory mean?
In this Division:
excluded STB means an STB that:
(a) at a particular time, is prescribed as an excluded STB in relation to that time; or
(b) is a municipal corporation or other local governing body (within the meaning of section 50‑25 of the Income Tax Assessment Act 1997); or
(c) is a public educational institution to which any of paragraphs 50‑55(1)(a) to (c) of the Income Tax Assessment Act 1997 applies; or
(d) is a public hospital to which any of paragraphs 50‑55(1)(a) to (c) of the Income Tax Assessment Act 1997 applies; or
(e) is a superannuation fund.
government entity means:
(a) a State; or
(b) a Territory; or
(ba) a municipal corporation or other local governing body (within the meaning of section 50‑25 of the Income Tax Assessment Act 1997); or
Note: The effect of this paragraph is that some bodies owned or controlled by a municipal corporation or other local governing body may be an STB even though the municipal corporation or other local governing body is an excluded STB.
(c) another STB that is not an excluded STB.
Territory means the Northern Territory or the Australian Capital Territory.
24AU Governor, Minister and Department Head taken to be a government entity
For the purposes of sections 24AQ, 24AR and 24AS, if the power to appoint, dismiss or direct the governing body is given to, or is held by:
(a) a Governor of a State; or
(b) a Minister of the Crown of a State; or
(c) a Minister of a Territory; or
(d) the head of a Department of a State or a Territory; or
(e) any combination of paragraphs (a) to (d);
the power is taken to be given to, or held by, a government entity.
24AV Regulations prescribing excluded STBs
States and Territories to consent to STBs being excluded STBs
(1) The regulations may prescribe that an STB is an excluded STB only if all States and Territories consent to the STB being so prescribed.
Retrospective application of regulations prescribing excluded STBs
(2) Subsection 12(2) (retrospective application of legislative instruments) of the Legislation Act 2003 does not apply to a regulation prescribing an STB as an excluded STB.
Subdivision B—Body ceasing to be an STB
24AW Body ceasing to be an STB
If a body ceases to be an STB in a year of income (the cessation year), this Act applies to the body as if:
(a) the cessation were a change which requires a company to calculate its taxable income and tax loss under Subdivision 165‑B of the Income Tax Assessment Act 1997; and
(b) the references in that Subdivision to “company” were references to “body”; and
(c) if the body is not a company—there were no further requirement for the body to calculate its taxable income for the year of income under that Subdivision; and
(d) the amount of any notional loss of the body calculated under section 165‑50 of that Act for the period before the cessation were nil; and
(e) the body’s deductions for tax losses were attributed under section 165‑55 of that Act to the period before the cessation and not to any other period; and
(f) those deductions were taken not to be full year deductions under section 165‑55 of that Act; and
(g) the application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 were modified, for the purposes of that Subdivision, in accordance with section 24AX of this Act.
24AX Special provisions relating to capital gains and losses
Period after cessation date—prior net capital losses to be disregarded
(1) In determining if an amount is to be included in the assessable income of the body under Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 for a period that occurred after the cessation, any net capital losses incurred before the cessation are to be disregarded.
Special cases where net capital gain before cessation and net capital loss after cessation
(2) Subsections (3) and (4) apply if:
(a) a net capital gain accrued in the period before the cessation; and
(b) if the period from the cessation until the end of the year of income were treated as a year of income—a net capital loss would have accrued in that period.
Special case 1—gain exceeds loss
(3) If this subsection applies and the net capital gain exceeds the net capital loss:
(a) the amount that is to be included in the assessable income of the body for the period that occurred before the cessation as a result of the net capital gain accruing to the body is taken to be the amount by which the net capital gain exceeds the net capital loss; and
(b) no net capital gain is taken to have accrued, and no net capital loss is taken to have been incurred, in any period in the cessation year after the cessation; and
(c) in determining if a net capital gain accrued to, or a net capital loss was incurred by, the body for the year following the cessation year, no net capital loss is taken to have been incurred by the body in the cessation year.
Special case 2—loss equal to or exceeds gain
(4) If this subsection applies and the net capital gain does not exceed the net capital loss:
(a) no amount is to be included in the assessable income of the body for any period in the cessation year as a result of a net capital gain accruing to the body; and
(b) in determining if a net capital gain accrued to, or a net capital loss was incurred by, the body for the year following the cessation year, the net capital loss that the body incurred in the cessation year is taken to be the amount (if any) by which the net capital loss exceeds the net capital gain.
24AY Losses from STB years not carried forward
(1) If a body is an STB on the last day of a year of income in which it incurs a tax loss, the tax loss is not allowable as a deduction from the body’s assessable income of a later year of income unless the body is an STB on the first day of that later year of income.
Note: This section prevents losses from years prior to the cessation year from being carried forward to years after the cessation year.
(2) This section only applies to a tax loss incurred in the 1995‑96 year of income or a later year of income.
24AYA Effect of unfunded superannuation liabilities
(1) This section applies to a deduction under section 290‑60 of the Income Tax Assessment Act 1997 in respect of a contribution made in relation to a person who was an employee of a prescribed excluded STB when it ceased to be an STB.
(2) A deduction to which this section applies is not allowable to the body for any year of income unless the requirements of subsections (3) and (4) are complied with.
(3) For the deduction to be allowable, the body must obtain a certificate by an authorised actuary stating the actuarial value, as at the time the body ceases to be an STB, of liabilities of the STB to provide superannuation benefits for, or for SIS dependants of, employees of the body, where the liabilities:
(a) accrued after 30 June 1995 and before the time when the body ceased to be an STB; and
(b) were, according to actuarial principles, unfunded at that time.
(4) The certificate must be in a form approved in writing by the Commissioner. The body must obtain the certificate:
(a) before the date of lodgment of its return of income of the year of income in which the body ceased to be an STB; or
(b) within such further time as the Commissioner allows.
(5) If the body obtains the certificate, a deduction to which this section applies is nevertheless not allowable for a year of income if the sum of all deductions to which this section applies for the year of income is less than or equal to the unfunded liability limit (see subsection (6)) for the year of income.
(6) If the sum is greater than that limit, so much of the deduction as is worked out using the following formula is not allowable:
where:
Unfunded liability limit for a year of income is:
(a) if the year of income is the one in which the body ceases to be an STB—the actuarial value of the liabilities set out in the actuary’s certificate; or
(b) in any other case—that actuarial value as reduced by the total amount of deductions to which this section applies that, because of subsection (5), have not been allowable to the body for all previous years of income.
(7) Expressions used in this section that are also used in section 290‑60 of the Income Tax Assessment Act 1997 have the same respective meanings as in that section.
24AZ Meaning of period and prescribed excluded STB
In this Subdivision:
period means any of the periods into which the cessation year is divided under section 165‑45 of the Income Tax Assessment Act 1997.
prescribed excluded STB means an STB that is an excluded STB as a result of regulations made for the purposes of paragraph (a) of the definition of excluded STB in section 24AT.
Division 2—Income
Subdivision A—Assessable income generally
25A Assessable income to include certain profits
(1A) This section does not apply in respect of the sale of property acquired on or after 20 September 1985.
(1B) This section does not apply to a profit arising in the 1997‑98 year of income or a later year of income from the carrying on or carrying out of a profit‑making undertaking or scheme, even if the undertaking or scheme was entered into, or began to be carried on or carried out, before the 1997‑98 year of income.
Note: Section 15‑15 (Profit‑making undertaking or plan) of the Income Tax Assessment Act 1997 deals with such a profit.
(1) The assessable income of a taxpayer shall include profit arising from the sale by the taxpayer of any property acquired by the taxpayer for the purpose of profit‑making by sale, or from the carrying on or carrying out of any profit‑making undertaking or scheme.
(2) Subject to subsection (3), where:
(a) after 23 August 1983, a taxpayer sold or sells property (in this subsection referred to as the relevant property) being:
(i) shares in a private company;
(ii) an interest in a partnership; or
(iii) an interest in a private trust estate; and
(b) at the time of sale of the relevant property:
(i) the company, partnership or trustee of the trust estate, as the case may be, held property that:
(A) was acquired for the purpose of profit‑making by sale by the company, partnership or trustee, as the case may be; and
(B) was not excepted property of the company, partnership or trust estate, as the case may be; or
(ii) the company, partnership or trustee of the trust estate, as the case may be, held an interest, through one or more interposed companies, partnerships or trusts, in property that:
(A) was acquired for the purpose of profit‑making by sale by another private company, partnership or trustee of a private trust estate; and
(B) was not excepted property of that other company, partnership or trust estate, as the case may be;
the taxpayer shall, for the purposes of the application of this Act (including any application of any other provision of this section), be deemed to have acquired the relevant property for the purpose of profit‑making by sale.
(3) Subsection (2) does not apply in relation to the sale by a taxpayer of property where the Commissioner, having regard to:
(a) the extent to which the assets of the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a), immediately before the time of sale, consisted of the property referred to in subparagraph (2)(b)(i) or the interest referred to in subparagraph (2)(b)(ii), as the case may be;
(b) the nature and extent, immediately before the time of sale, of the taxpayer’s control of the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a) including, in the case of a company, the nature and extent of the taxpayer’s shareholding in the company;
(c) the circumstances surrounding any other sale, whether or not by the taxpayer, of shares in the company, or an interest in the partnership or trust estate, as the case may be, referred to in paragraph (2)(a), being a sale at a time when the property of that company, partnership or trust estate included the property referred to in subparagraph (2)(b)(i) or the interest referred to in subparagraph (2)(b)(ii), as the case may be; and
(d) such other matters as the Commissioner considers relevant;
considers that it is not appropriate that that subsection should apply in relation to the sale of the property by the taxpayer.
(4) Where:
(a) a taxpayer acquired or acquires property, being shares in a company, for the purpose of profit‑making by sale; and
(b) after 23 August 1983:
(i) the company issued or issues other shares (in this subsection referred to as the bonus shares) to the taxpayer in satisfaction of a dividend (including an amount debited against an amount standing to the credit of a share premium account) payable to the taxpayer in respect of the shares referred to in paragraph (a); or
(ii) by reason that the taxpayer was the owner of the shares referred to in paragraph (a), the company issued or issues to the taxpayer rights to acquire other shares in the company;
the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the bonus shares or the rights, as the case may be, for the purpose of profit‑making by sale.
(5) Where, after 23 August 1983, property was or is acquired by a taxpayer as a result of a transfer in the prescribed manner by a person who acquired the property for the purpose of profit‑making by sale, the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the property for the purpose of profit‑making by sale.
(6) Where:
(a) after 23 August 1983, a taxpayer sold or sells property; and
(b) the property sold was:
(i) an interest in property, being property acquired by the taxpayer for the purpose of profit‑making by sale; or
(ii) property, or an interest in property, in which was merged an interest in property, being an interest acquired by the taxpayer for the purpose of profit‑making by sale;
the taxpayer shall, for the purposes of the application of this Act (including any application of any other provision of this section), be deemed to have acquired the property sold for the purpose of profit‑making by sale.
(7) For the purposes of subsection (2), where a company, partnership or trustee of a trust estate holds or held property (in this subsection referred to as the underlying property) consisting of:
(a) an interest in property, being property acquired by the company, partnership or trustee for the purpose of profit‑making by sale; or
(b) property, or an interest in property, in which was merged an interest in property, being an interest acquired by the company, partnership or trustee for the purpose of profit‑making by sale;
the company, partnership or trustee, as the case may be, shall be deemed to have acquired the underlying property for the purpose of profit‑making by sale.
(8) Where:
(a) property (in this subsection referred to as the acquired property) was or is acquired for the purpose of profit‑making by sale; and
(b) after 23 August 1983, property (in this subsection referred to as the transferred property) being:
(i) an interest in the acquired property; or
(ii) property, or an interest in property, in which was merged an interest in the acquired property;
was or is transferred to a taxpayer in the prescribed manner;
the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the transferred property for the purpose of profit‑making by sale.
(9) Where a taxpayer sold or sells property that, by virtue of any of the preceding provisions of this section, is deemed to have been acquired by the taxpayer for the purpose of profit‑making by sale, so much (if any) of the proceeds of sale as, in the opinion of the Commissioner, is appropriate shall, for the purposes of this Act, be deemed to be profit arising from the sale by the taxpayer of the property.
(10) For the purposes of the application of subsection (9) in relation to the sale of property (in this subsection referred to as the relevant property) by a taxpayer:
(a) if:
(i) the relevant property is deemed by subsection (2) to have been acquired by the taxpayer for the purpose of profit‑making by sale;
(ii) the property (in this paragraph referred to as the underlying property) to which sub‑subparagraph (2)(b)(i)(A) or (2)(b)(ii)(A), as the case may be, applies was actually acquired for the purpose of profit‑making by sale by the company, partnership or trustee referred to in that sub‑subparagraph (which company, partnership or trustee is in this paragraph referred to as the underlying owner); and
(iii) the relevant property was not transferred to the taxpayer in the prescribed manner;
the Commissioner shall have regard to the extent to which, in the Commissioner’s opinion, the proceeds of sale of the relevant property are attributable to the amount of any increase in the value of the underlying property during the period (in this paragraph referred to as the relevant period) when the underlying property was held by the underlying owner and the relevant property was held by the taxpayer reduced by the amount of any capital expenditure incurred by the underlying owner in respect of the underlying property during the relevant period (not including expenditure in respect of which a deduction has been allowed, or is allowable, to the underlying owner);
(b) if the relevant property is deemed by subsection (5) to have been acquired by the taxpayer for the purpose of profit‑making by sale and the relevant property was actually acquired for the purpose of profit‑making by sale by the person (in this paragraph referred to as the transferor) who transferred the relevant property to the taxpayer in the prescribed manner—the Commissioner shall have regard to the extent to which the amount (if any) that would have been included in the assessable income of the transferor if the transferor had sold the relevant property at the time when it was sold by the taxpayer for an amount of consideration equal to the amount of the consideration received or receivable by the taxpayer in respect of the sale of the relevant property by the taxpayer exceeds the sum of:
(i) any expenditure incurred by the taxpayer in respect of the relevant property, not including:
(A) any consideration given by the taxpayer in respect of the transfer of the relevant property to the taxpayer; or
(B) expenditure to which subparagraph (ii) applies;
(ii) where the taxpayer incurred expenditure of a capital nature in respect of the relevant property otherwise than:
(A) in acquiring property for the purpose of profit‑making by sale; or
(B) as part of a profit‑making undertaking or scheme;
an amount equal to so much of the consideration received or receivable by the taxpayer in respect of the sale of the relevant property by the taxpayer as exceeds the amount that, in the opinion of the Commissioner, would have been the consideration received or receivable by the taxpayer if the taxpayer had not incurred that capital expenditure; and
(iii) the amount of any profit included in the assessable income of the transferor in respect of the transfer of the relevant property to the taxpayer;
(c) if the relevant property is deemed to have been acquired by the taxpayer by virtue of the application of this section (either directly or indirectly) in relation to property (in this paragraph referred to as the related property) that was actually acquired by the taxpayer or by another person or other persons for the purpose of profit‑making by sale—the Commissioner shall have regard to the extent to which the relevant property consists of, or is attributable to, the related property;
(d) if the relevant property consists of rights to acquire shares in a company, being rights that the taxpayer is deemed by subsection (4) to have acquired for the purpose of profit‑making by sale—the relevant property shall be deemed to have been acquired by the taxpayer at no cost; and
(e) if the relevant property consists of bonus shares that the taxpayer is deemed by subsection (4) to have acquired for the purpose of profit‑making by sale—the cost to the taxpayer of the relevant property shall be ascertained in accordance with section 6BA.
(11) For the purposes of this section, property shall be taken to have been transferred to a person (in this subsection referred to as the transferee) in the prescribed manner if:
(a) the following conditions are satisfied:
(i) the property is transferred by way of gift or for consideration the amount or value of which is less than the amount that, in the opinion of the Commissioner, is the value of the property immediately before the time of transfer;
(ii) the property is transferred otherwise than as a result of:
(A) a will, a codicil or an order of a court that varied or modified the provisions of a will or a codicil; or
(B) 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; and
(iii) the Commissioner is satisfied that the transferee and the person who transferred the property were not dealing with each other at arm’s length in relation to the transfer of the property; or
(b) the property:
(i) is transferred by way of a distribution of property of a private company or private trust estate made (whether in the course of the winding up of the company or trust estate or otherwise) to the transferee in the transferee’s capacity as a shareholder in the company or a beneficiary of the trust estate, as the case may be; and
(ii) is not excepted property of the company or trust estate, as the case may be.
(12) In this section:
(a) a reference to excepted property of a company, partnership or trust estate is a reference to:
(i) trading stock of the company, partnership or trustee; or
(ii) property being plant within the meaning of section 45‑40 of the Income Tax Assessment Act 1997 purchased for use by the company, partnership or trustee of the trust estate for the purpose of producing assessable income;
(b) a reference to a private company is a reference to a company other than a company the shares in which are listed for quotation in the official list of a stock exchange in Australia or elsewhere;
(c) a reference to a private trust estate is a reference to a trust estate other than a unit trust the units in which are listed for quotation in the official list of a stock exchange in Australia or elsewhere or are ordinarily available for subscription or purchase by the public; and
(d) a reference to property generally or to a particular kind of property includes a reference to an estate or interest in property or in that kind of property, as the case may be.
26AB Assessable income—premium for lease
(1A) For the purposes of assessments for the 1997‑98 year of income and later years of income, this section applies only in relation to assignments of leases granted before 20 September 1985.
Note: The Income Tax Assessment Act 1997 does not contain a rewritten version of this section.
For the 1998‑99 year of income and later years of income, Parts 3‑1 and 3‑3 (about CGT) deal with the income tax treatment of premiums for:
· granting leases; and
· assigning leases granted on or after 20 September 1985.
For the 1997‑98 year of income, former Part IIIA of this Act (about CGT) dealt with the income tax treatment of such premiums.
(1) In this section, premium means a consideration payable in one amount, or each amount of a consideration payable in more than one amount, where the consideration is:
(a) in the nature of a premium, fine or foregift payable for or in connexion with the grant or assignment of a lease; or
(b) for or in connexion with an assent to the grant or assignment of a lease;
but does not include an amount in respect of goodwill or a licence.
(2) Where, in the year of income, a taxpayer receives a premium that relates to the grant or assignment of a lease of property that was not, at the date on which the agreement to grant or assign the lease was made, or the assent to the grant or assignment of the lease was given, as the case may be, intended by the grantee or assignee to be used by the grantee or the assignee or some other person wholly or partly for the purpose of gaining or producing assessable income, the assessable income of the taxpayer shall include the premium.
(3) Where, in the year of income, a taxpayer receives a premium that relates to the grant or assignment of a lease of property that was, at the date on which the agreement to grant or assign the lease was made, or the assent to the grant or assignment of the lease was given, as the case may be, intended by the grantee or assignee to be used by the grantee or assignee or some other person partly for the purpose of gaining or producing assessable income and partly for other purposes, the assessable income of the taxpayer shall include such part of the premium as the Commissioner considers may reasonably be attributed to the intended use of the property for purposes other than gaining or producing assessable income.
(4) Where, in a case referred to in subsection (2) or (3), the taxpayer satisfies the Commissioner that, at the date on which the agreement to grant or assign the lease was made, or the assent to the grant or assignment of the lease was given, as the case may be, the taxpayer believed on reasonable grounds that the grantee or assignee intended a particular use of the property by the grantee or assignee or some other person for the purpose of gaining or producing assessable income, the Commissioner may apply this section on the basis that that intention existed.
(5) This section does not apply in relation to:
(b) a premium received in connexion with the assignment of a lease of land granted under a law of a State or Territory relating to mining;
(c) a premium received in connexion with the grant or assignment of a lease that was, for the purposes of former section 88B, a grant or assignment for mining purposes; or
(d) a premium received in connexion with the assignment from the Commonwealth or a State of a lease:
(i) granted in perpetuity or for a term not less than 99 years; or
(ii) with a right of purchase; or
(iii) effecting improvements to be used for residential purposes only.
26AF Assessable income to include value of benefits received from or in connection with former paragraph 23(ja) funds or former section 23FB funds
(1) Where:
(a) in a year of income and after 19 August 1980, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, a paragraph 23(ja) fund or a section 23FB fund;
(aa) if the fund is an exempt fund within the meaning of section 26AFB (as in force just before the commencement of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007)—the benefit was received or obtained by the taxpayer before the proclaimed superannuation standards day;
(b) the benefit is received or obtained otherwise than in accordance with approved terms and conditions applicable to the fund at the time when the benefit is received or obtained; and
(c) the Commissioner is satisfied that the taxpayer received or obtained the benefit:
(i) by reason that the taxpayer was, or had been, a member of the fund;
(ii) by reason that the taxpayer was, or had been, a dependant of a person who was, or had been, a member of the fund; or
(iii) by reason that the taxpayer was, or had been, associated with a person who was, or had been, a member of the fund;
the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.
(2) Where, in a year of income and after 19 August 1980, a taxpayer receives valuable consideration in respect of the transfer by the taxpayer to another person (whether by assignment, by declaration of trust or by any other means) of a right (whether vested or contingent) to receive a benefit from a fund, being a paragraph 23(ja) fund or a section 23FB fund and not being an exempt fund within the meaning of section 26AFB (as in force just before the commencement of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007), the assessable income of the taxpayer of the year of income shall include the amount or value of that consideration.
(3) In this section:
approved terms and conditions, in relation to a fund, means:
(a) in the case of a paragraph 23(ja) fund—terms and conditions approved by the Commissioner under subparagraph 23(ja)(ii) as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987; or
(b) in the case of a section 23FB fund—terms and conditions approved by the Commissioner under subsection 23FB(2) as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987.
paragraph 23(ja) fund means a fund the income of which of any year of income is or has been exempt from tax by virtue of paragraph 23(ja) as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987 or would, but for the provisions of section 121C as in force at any time before the commencement of section 21 of the Taxation Laws Amendment Act 1985 and Division 9C, be, or have been, exempt from tax by virtue of that paragraph;
section 23FB fund means:
(a) a fund the income of which of any year of income is or has been exempt from tax by virtue of section 23FB as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987 or would, but for the provisions of Division 9C, be, or have been, exempt from tax by virtue of that section; and
(b) a fund that was a section 79 fund for the purposes of this section as in force at any time before the commencement of the Income Tax Assessment Amendment Act (No. 3) 1984.
(4) For the purposes of this section, where either of the following paragraphs applies in relation to an exempt fund within the meaning of section 26AFB of this Act (as in force just before the commencement of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007) in relation to the year of income of the fund commencing on 1 July 1986 or a subsequent year of income:
(a) the year of income ended before the proclaimed superannuation standards day and the income of the fund of the year of income would, but for the amendments made by the Taxation Laws Amendment Act (No. 4) 1987, have been exempt from tax under paragraph 23(ja) or section 23FB of this Act, as in force at any time before the commencement of section 1 of that Act;
(b) the proclaimed superannuation standards day occurred during the year of income and, if the year of income had ended on the proclaimed superannuation standards day, the income of the fund of the year of income would have been exempt from tax under paragraph 23(ja) or section 23FB of this Act, as in force at any time before the commencement of section 1 of that Act;
paragraph 23(ja) or section 23FB of this Act, as in force immediately before the commencement of section 1 of that Act, shall be taken to have continued to apply in relation to the fund in relation to the year of income of the fund.
26AFA Assessable income to include value of certain benefits received from or in connection with former section 23F funds
(1) Where:
(a) in a year of income and on or after 7 December 1983, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, a section 23F fund;
(aa) if the fund is an exempt fund within the meaning of section 26AFB (as in force just before the commencement of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007)—the benefit was received or obtained by the taxpayer before the proclaimed superannuation standards day;
(b) the benefit:
(i) is not a benefit that the taxpayer has a right to receive from the fund; or
(ii) is an excessive benefit; and
(c) the Commissioner is satisfied that the taxpayer received or obtained the benefit:
(i) by reason that the taxpayer was, or had been, a member of the fund;
(ii) by reason that the taxpayer was, or had been, a dependant of a person who was, or had been, a member of the fund;
(iii) by reason that the taxpayer was, or had been, associated with a person who was, or had been, a member of the fund; or
(iv) by reason that the taxpayer was, or had been, associated with a person who had made contributions to the fund, being contributions to which Subdivision AA of Division 3 applied;
the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.
(2) Where:
(a) subsection (1) would, but for this subsection, apply to the amount or value of an excessive benefit received or obtained by a taxpayer out of, or attributable to assets of, a section 23F fund; and
(b) the Commissioner, having regard to:
(i) the nature of the fund;
(ii) the circumstances by reason of which the benefit is an excessive benefit; and
(iii) such other matters relating to the receiving or obtaining of the benefit by the taxpayer as the Commissioner considers relevant;
is satisfied that it would be unreasonable for subsection (1) to apply to the whole or part of the benefit;
that subsection does not apply to the benefit, or to that part of the benefit, as the case may be.
(3) Where, in a year of income and on or after 7 December 1983, a taxpayer receives valuable consideration in respect of the transfer by the taxpayer to another person (whether by assignment, by declaration of trust or by any other means) of a right (whether vested or contingent) to receive a benefit from a fund, being a section 23F fund and not being an exempt fund within the meaning of section 26AFB (as in force just before the commencement of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007), the assessable income of the taxpayer of the year of income shall include the amount or value of that consideration.
(4) In this section:
dependant, in relation to a taxpayer, includes the spouse and any child of the taxpayer.
excessive benefit means a benefit of any kind that is excessive in amount or value having regard to the matters mentioned in subparagraphs 23F(2)(h)(i), (ii), (iii) and (iv) as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987.
section 23F fund means a fund to which section 23F (as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987) applies, or has applied, in relation to any year of income.
(5) For the purposes of this section, where either of the following paragraphs applies in relation to an exempt fund within the meaning of section 26AFB of this Act (as in force just before the commencement of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007) in relation to the year of income of the fund commencing on 1 July 1986 or a subsequent year of income:
(a) the year of income ended before the proclaimed superannuation standards day and section 23F of this Act, as in force immediately before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987, would, but for the amendments made by that Act, have applied in relation to the fund in relation to the year of income;
(b) the proclaimed superannuation standards day occurred during the year of income and, if the year of income had ended on the proclaimed superannuation standards day, section 23F of this Act, as in force immediately before the commencement of section 1 of that Act, would, but for the amendments made by that Act, have applied in relation to the fund in relation to the year of income;
section 23F of this Act, as in force immediately before the commencement of section 1 of that Act, shall be taken to have continued to apply in relation to the fund in relation to the year of income of the fund.
26AG Certain film proceeds included in assessable income
(1) Where:
(a) under a contract entered into on or after 1 October 1980, a taxpayer has expended, or is deemed by former section 124ZAP to have expended, capital moneys in producing, or by way of contribution to the cost of producing, a film;
(b) by reason of the moneys having been expended, the taxpayer became the owner of an interest in the copyright in the film; and
(c) a deduction has been allowed, or is allowable, to the taxpayer under former section 124ZAF or 124ZAFA in respect of some or all of those moneys;
this section applies, and shall be deemed always to have applied, in relation to the taxpayer in relation to a year of income (whether commencing before or after the commencement of this section), to:
(d) any amount derived by the taxpayer in the year of income from sources in or out of Australia as consideration for the use of, or the right to use, the copyright or the film, to the extent to which the amount derived is attributable to the interest referred to in paragraph (b); and
(e) any amount (other than an amount to which paragraph (d) applies) receivable by the taxpayer from sources in or out of Australia as consideration in respect of the disposal, in the year of income, of the whole or a part of the interest referred to in paragraph (b).
(2) The assessable income of a taxpayer of a year of income shall include amounts to which this section applies in relation to the taxpayer in relation to the year of income.
(3) Where:
(a) for any reason, including:
(i) the formation or dissolution of a partnership; or
(ii) a variation in the constitution of a partnership or in the interests of the partners;
a change has occurred in the ownership of, or in the interests of persons in, a copyright in a film;
(b) the person, or one or more of the persons, who owned the copyright before the change has or have an interest in the copyright after the change; and
(c) any person (in this subsection referred to as the relevant person) who had an interest in the copyright before the change:
(i) did not have an interest in the copyright after the change; or
(ii) had a lesser interest in the copyright after the change;
the following provisions have effect:
(d) if the relevant person did not have an interest in the copyright after the change, the relevant person shall be deemed, for the purposes of subsection (1), to have disposed of the whole of his or her interest in the copyright at the time when the change occurred for an amount of consideration equal to:
(i) if the change occurred in pursuance of an agreement and the agreement specified, as the value of the copyright for the purposes of the agreement, an amount greater than the value of the copyright at the time when the change occurred—so much of the amount specified in the agreement as bears to that amount the same proportion as the value, at the time when the change occurred, of the interest deemed to have been disposed of bears to the value of the copyright at the time when the change occurred; and
(ii) in any other case—the value, at the time when the change occurred, of the interest disposed of;
(e) if the relevant person had a lesser interest in the copyright after the change, the relevant person shall be deemed, for the purposes of subsection (1), to have disposed of a part of his or her interest in the copyright at the time when the change occurred for an amount of consideration equal to:
(i) if the change occurred in pursuance of an agreement and the agreement specified, as the value of the copyright for the purposes of the agreement, an amount greater than the value of the copyright at the time when the change occurred—so much of the amount specified in the agreement as bears to that amount the same proportion as the value, at the time when the change occurred, of the part of the interest deemed to have been disposed of bears to the value of the copyright at the time when the change occurred; and
(ii) in any other case—the value, at the time when the change occurred, of the part of the interest disposed of.
(4) For the purposes of this section, where, in pursuance of a judgment of a court or otherwise, an amount is paid to a taxpayer in respect of an infringement, or an alleged infringement, of a copyright in a film, the taxpayer shall be deemed to have disposed of a part of his or her interest in the copyright, at the time of payment, in consideration of the payment of that amount.
(5) Subject to subsections (3) and (6), a reference in this section to the consideration receivable by a taxpayer in respect of the disposal of the whole or a part of the taxpayer’s interest in a copyright (which whole or part is in this subsection referred to as the unit) is a reference to:
(a) where the unit is disposed of for a specified price—that price less:
(i) the expenses of the disposal; and
(ii) if the disposal is a taxable supply—an amount equal to the GST payable on the supply; or
(b) where the unit is disposed of together with other property and no separate price is allocated to the unit—such amount as the Commissioner determines.
(6) Where:
(a) a taxpayer disposes of the whole or a part of the taxpayer’s interest in a copyright (which whole or part is in this subsection referred to as the unit) to another person;
(b) the Commissioner is satisfied, having regard to any connection between the taxpayer and that other person or to any other relevant circumstances, that the taxpayer and that other person were not dealing with each other at arm’s length in relation to the disposal; and
(c) there was no amount receivable by the taxpayer in respect of the disposal or the amount receivable by the taxpayer in respect of the disposal was less than the value of the unit at the time of the disposal;
the amount of the consideration receivable by the taxpayer in respect of the disposal shall be taken, for the purposes of this section, to be the amount that was the value of the unit at the time of the disposal.
(8) If:
(a) a non‑resident taxpayer derives, from sources outside Australia, income in respect of a film; and
(b) but for this subsection, subsection (2) would include the amount in the taxpayer’s assessable income of a year of income;
that subsection does not include in the taxpayer’s assessable income so much of the amount as:
(c) is attributable to the exhibition of the film in the country from sources in which the income was derived; and
(d) is not exempt from income tax in the country from sources in which the income was derived.
(9) Where:
(a) an amount (in this subsection referred to as the relevant amount) is derived by a partnership in a year of income; and
(b) if the relevant amount were derived by a partner in the partnership, the relevant amount, or a part of the relevant amount, would, by virtue of paragraph (1)(d), be an amount to which this section applies in relation to that partner in relation to the year of income;
the following provisions have effect:
(c) the relevant amount shall not be taken into account, for the purposes of any provision of this Act, in calculating the net income of the partnership, or the partnership loss, of any year of income in accordance with section 90; and
(d) for the purposes of the application of this Act in relation to a taxpayer being a partner in the partnership, an amount equal to:
(i) so much of the relevant amount as the partners have agreed is derived for the benefit of the taxpayer; or
(ii) if the partners have not agreed as mentioned in subparagraph (i)—so much of the relevant amount as bears to the relevant amount the same proportion as the individual interest of the taxpayer in the net income of the partnership of the year of income in which the relevant amount was derived by the partnership bears to that net income or, as the case requires, the individual interest of the taxpayer in the partnership loss for that year of income bears to that partnership loss;
shall be taken to have been derived by the taxpayer.
(10) Where:
(a) a partnership has disposed of the whole or a part of the copyright or of an interest in the copyright in a film;
(b) an amount (in this subsection referred to as the relevant amount) is receivable by the partnership as consideration in respect of that disposal; and
(c) if the relevant amount were receivable by a partner in the partnership, the relevant amount or a part of the relevant amount would, by virtue of paragraph (1)(e), be an amount to which this section applies in relation to that partner in relation to the year of income;
the following provisions have effect:
(d) the relevant amount shall not be taken into account, for the purposes of any provision of this Act, in calculating the net income of the partnership, or the partnership loss, of any year of income in accordance with section 90;
(e) for the purposes of the application of this Act in relation to a taxpayer being a partner in the partnership, an amount equal to:
(i) so much of the relevant amount as the partners have agreed is receivable for the benefit of the taxpayer; or
(ii) if the partners have not agreed as mentioned in subparagraph (i)—so much of the relevant amount as bears to the relevant amount the same proportion as the individual interest of the taxpayer in the net income of the partnership of the year of income in which the disposal mentioned in paragraph (a) occurred bears to that net income, or, as the case requires, the individual interest of the taxpayer in the partnership loss for that year of income bears to that partnership loss;
shall be taken to be receivable by the taxpayer;
(f) where the taxpayer had an interest in the copyright before the disposal and did not have an interest in the copyright after the disposal or had a lesser interest in the copyright after the disposal, the amount deemed to be receivable by the taxpayer shall be deemed to be receivable in respect of the disposal by the taxpayer of his or her interest in the copyright or of a part of his or her interest in the copyright, as the case may be;
(g) where the disposal is deemed to have occurred by virtue of subsection (4) or is a disposal to which paragraph (13)(a) applies, the amount deemed to be receivable by the taxpayer shall be deemed to be receivable, in respect of the disposal by the taxpayer of a part of his or her interest in the copyright.
(11) In determining for the purposes of subsection (10) whether a partnership has disposed of the whole or part of a copyright or of an interest in a copyright and in determining the amount of consideration receivable by the partnership in respect of the disposal, subsections (4), (5), (6) and (13) apply as if the partnership were a taxpayer.
(12) Where:
(a) a taxpayer has disposed of the whole or a part of the taxpayer’s interest in a copyright;
(b) by reason of that disposal, an amount would, but for former subsection 124T(3), be included in the assessable income of the taxpayer of a year of income under former section 124P or would be applied, under former section 124N or 124S, in reducing the residual value, for the purposes of former Division 10B, of a unit of industrial property owned by the taxpayer; and
(c) but for this subsection, this section would apply, in relation to a year of income, to the amount of the consideration receivable by the taxpayer in respect of the disposal;
the amount to which this section applies by virtue of the disposal is the amount of the consideration referred to in paragraph (c) reduced by the amount that would be included in the assessable income of the taxpayer, or would be applied under former section 124N or 124S, as mentioned in paragraph (b).
(13) In this section:
(a) a reference to a disposal by a taxpayer of the whole or a part of the taxpayer’s interest in a copyright in a film includes a reference to the assignment by the taxpayer of a right to receive amounts as consideration for the use of, or the right to use, the copyright or the film;
(b) a reference to an amount derived by a taxpayer as consideration for the use of, or the right to use, a copyright in a film includes a reference to an amount derived as consideration for the granting of a licence in respect of copyright in the film that is to come into existence at a future time or upon the happening of a future event;
(c) a reference to the value of property at a particular time shall, if there is insufficient evidence of the value of the property at that time, be read as a reference to such amount as, in the opinion of the Commissioner, is fair and reasonable;
(d) a reference to the expenditure of capital moneys is a reference to the expenditure of moneys that is expenditure of a capital nature;
(e) a reference to a taxpayer becoming the owner of an interest in copyright includes a reference to the taxpayer becoming the owner of the copyright; and
(f) a reference to copyright, in relation to a film, is a reference to the copyright subsisting in the film by virtue of Part IV of the Copyright Act 1968 and includes a reference to copyright subsisting in, or in relation to, the film or in any work comprised in the film, under the law of a country other than Australia.
26AH Bonuses and other amounts received in respect of certain short‑term life assurance policies
(1) In this section, unless the contrary intention appears:
agreement means any agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.
assurance year, in relation to an eligible policy, means the period of 12 months commencing on, or on any anniversary of, the date of commencement of risk of the policy.
date of commencement of risk, in relation to an eligible policy, means the date of commencement of the period in respect of which the first or only premium paid under the policy was paid or, if the first or only premium was not paid in respect of a period, the date on which that premium was paid.
eligible period, in relation to an eligible policy, means the period of 10 years commencing on the date of commencement of risk of the policy.
eligible policy means a life assurance policy in relation to which the date of commencement of risk is after 27 August 1982, other than a funeral policy (as defined in the Income Tax Assessment Act 1997) issued on or after 1 January 2003.
eligible reckoning date, in relation to an eligible policy, means the date of commencement of an assurance year that, for the purposes of an application of subsection (13), is the premium increase year referred to in that subsection.
(2) Where a paid‑up life assurance policy is issued to a taxpayer in lieu of an eligible policy:
(a) the paid‑up policy shall, for the purposes of this section, be deemed to be a continuation of the eligible policy; and
(b) no amount shall be taken for the purposes of subsection (4) to have been re‑invested or otherwise dealt with on behalf of the taxpayer or as he or she directs in connection with the issue of the paid‑up policy to the taxpayer in lieu of the eligible policy.
(3) This section applies to any amount received after 27 August 1982 under an eligible policy.
(4) For the purposes of this section, but subject to subsection (5), a taxpayer shall be taken to have received an amount under or in relation to an eligible policy although the amount is not actually paid to the taxpayer but is re‑invested or otherwise dealt with on his or her behalf or as he or she directs.
(5) Subsection (4) does not apply in relation to an amount in relation to an eligible policy if the amount is re‑invested or otherwise dealt with on behalf of the taxpayer or as the taxpayer directs so as to increase the amount that might reasonably be expected to be received under the eligible policy on a surrender or maturity of the eligible policy.
(6) Where, during the eligible period in relation to an eligible policy, a taxpayer receives an amount (in this subsection referred to as the relevant amount) under the policy as or by way of a bonus, being an amount that, but for this section, would not be included in the assessable income of the taxpayer of any year of income, the assessable income of the taxpayer of the year of income in which the relevant amount is received shall include:
(a) if the relevant amount is received during the first 8 years of the eligible period—an amount equal to the relevant amount;
(b) if the relevant amount is received during the ninth year of the eligible period—an amount equal to two‑thirds of the relevant amount; or
(c) if the relevant amount is received during the tenth year of the eligible period—an amount equal to one‑third of the relevant amount.
(6A) If, during the year of income, an amount referred to in subsection (6) is received during the eligible period in relation to an eligible policy held by the trustee of a non‑complying superannuation fund:
(a) subsection (6) does not apply to the amount; and
(b) the amount is included in the assessable income of the fund of the year of income.
(7) Subsection (6) does not apply to any amount received by a taxpayer in a year of income under an eligible policy where:
(a) the amount is received in consequence of:
(i) the death of the person on whose life the policy was effected; or
(ii) an accident, illness or other disability suffered by the person on whose life the policy was effected; or
(aa) the eligible policy is an RSA; or
(b) the eligible policy is held by the trustee of:
(i) a complying superannuation fund; or
(ii) a complying approved deposit fund; or
(iii) a pooled superannuation trust; or
(ba) the eligible policy is issued by a life assurance company and the company’s liabilities under the policy are to be discharged out of:
(i) complying superannuation assets within the meaning of the Income Tax Assessment Act 1997; or
(ii) segregated exempt assets within the meaning of that Act; or
(c) except where the policy was effected, purchased or taken on assignment with a view to it being forfeited, surrendered or otherwise terminated, or to it maturing, within 10 years—the amount was received by the taxpayer by reason of the forfeiture, surrender or other termination of the whole or a part of the policy in circumstances arising out of serious financial difficulties of the taxpayer.
(8) Where:
(a) subsection (6) would, but for this subsection, apply to an amount (in this subsection referred to as the relevant amount) received by a taxpayer by reason of the forfeiture, surrender or other termination of the whole or a part of an eligible policy; and
(b) the Commissioner, having regard to:
(i) the total amount of premiums paid under the eligible policy;
(ii) the total amounts received by the taxpayer or by any other person under the eligible policy and the total amounts of bonuses included in the amounts so received;
(iii) the amount of the surrender value of the eligible policy at the time when the forfeiture, surrender or other termination occurred; and
(iv) such other matters as the Commissioner considers relevant, is of the opinion that it would be unreasonable for subsection (6) to apply to the relevant amount or to a part of the relevant amount;
subsection (6) does not apply to the relevant amount, or to that part of the relevant amount, as the case may be.
(9) Where:
(a) otherwise than as or by way of a bonus, a taxpayer receives an amount (in this subsection referred to as the relevant amount) under an eligible policy; and
(b) the Commissioner is of the opinion that the relevant amount or a part of the relevant amount represents the whole or part of:
(i) a bonus that has accrued or has been declared in respect of the policy; or
(ii) a bonus that can reasonably be expected to accrue in respect of the policy;
the relevant amount or the part of the relevant amount, as the case may be, shall, for the purposes of subsection (6), be deemed to have been received by the taxpayer under the policy as or by way of a bonus.
(10) Where:
(a) subsection (9) applies by reason that the Commissioner has formed an opinion under paragraph (9)(b) that the whole or a part of an amount received by a taxpayer represents the whole or a part of a bonus; and
(b) the taxpayer subsequently receives an amount (in this subsection referred to as the actual bonus), being the whole or a part of the bonus, or of the part of the bonus, as the case may be, referred to in paragraph (a) of this subsection;
the following provisions have effect:
(c) the operation of subsection (9) is not affected by the receipt of the actual bonus; and
(d) no part of the actual bonus shall be included in the assessable income of the taxpayer.
(11) Where, in relation to an eligible policy, a taxpayer receives an amount from the assurer, or from another person at the request of, or under an agreement with, the assurer, by way of an advance or loan in respect of which interest is not payable or in respect of which interest is payable at a rate less than the rate of interest that could reasonably be expected to be payable in respect of a loan of the same amount made on similar terms and conditions by the assurer or the other person, as the case may be, to a person with whom the assurer or that other person was dealing at arm’s length, the amount shall, for the purposes of subsection (9), be deemed to be an amount to which paragraph (9)(a) applies.
(12) Where an eligible policy, or any right to receive any benefits that have accrued, or will or may reasonably be expected to accrue, under an eligible policy, is sold or assigned in whole or in part by a taxpayer during the eligible period in relation to the policy: