1996

The Parliament of the Commonwealth of Australia

HOUSE OF REPRESENTATIVES

Taxation Laws amendment bill (No. 3) 1996

SUPPLEMENTARY Explanatory Memorandum

Amendments to be moved on behalf of the Government

(Circulated by authority of the
Treasurer, the Hon Peter Costello, MP)

79473  Cat. No. 96 5436 4  ISBN 0644 481439

Co-operative companies
Amends the Bill to modify the conditions contained in subparagraph 18(2)(c)(i).  The subparagraph will now provide that the transitional arrangements can apply where the directors of a co-operative have approved a business plan which includes the acquisition of the asset. 
Date of effect: 7.30pm Eastern Standard Time on 20 August 1996.
Amendment announced: Not previously announced.
Financial impact: The nature of the amendment is such that a reliable estimate cannot be made. However, the revenue impact is expected to be insignificant.
Compliance cost impact: None.

Purpose of the amendment
1.	To modify the conditions contained in subparagraph 18(2)(c)(i) of the Bill.
Background to the legislation
2.	Part 6 of Schedule 1 of the Bill amends the Income Tax Assessment Act 1936 to ensure that co-operative companies will no longer receive a deduction under paragraph 120(1)(c) for the repayment of new government loans.

3.	Subitem 18(2) provides a transitional arrangement for certain co-operative companies which enter into loan contracts by 31 December 1996. One of the conditions for this transitional arrangement is that, before the Budget, the directors of the company had, under a business plan approved by the directors, authorised the entry into a contract by the company to acquire the asset and had recorded that authorisation in the company's minutes.
Explanation
4.	The amendment provides a new condition for determining whether the transitional provision contained in subitem 18(2) can apply to a co-operative. This new condition is implemented by replacing the current subparagraph 18(2)(c)(i) with a new subparagraph. [Amendment 1 - substitutes subparagraph (c)(i) of subitem 18(2)]

5.	To satisfy this condition the asset for whose acquisition the loan was entered into must be identified in the co-operative's business plan as an asset which the co-operative plans to acquire. The business plan may identify several such assets and the transitional provision can apply to each one.

6.	Also, the directors must approve the business plan and that approval must be recorded in the co-operative's minutes before 7.30pm on 20 August 1996.