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This is a Bill, not an Act. For current law, see the Acts databases.
2002-2003-2004
The Parliament
of the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
Presented and read a first
time
Tax
Laws Amendment (2004 Measures No. 3) Bill
2004
No. ,
2004
(Treasury)
A Bill
for an Act to amend the law relating to taxation, and for related
purposes
Contents
Part 1—Tax
amendments 3
Income Tax Assessment Act
1936 3
Income Tax Assessment Act
1997 3
Part 2—Venture Capital Act
amendments 10
Venture Capital Act
2002 10
Part 3—Application 13
Fringe Benefits Tax Assessment Act
1986 14
Income Tax Assessment Act
1936 15
A Bill for an Act to amend the law relating to taxation,
and for related purposes
The Parliament of Australia enacts:
This Act may be cited as the Tax Laws Amendment (2004 Measures
No. 3) Act 2004.
(1) Each provision of this Act specified in column 1 of the table
commences, or is taken to have commenced, in accordance with column 2 of the
table. Any other statement in column 2 has effect according to its
terms.
|
Commencement information |
||
|---|---|---|
|
Column 1 |
Column 2 |
Column 3 |
|
Provision(s) |
Commencement |
Date/Details |
|
1. Sections 1 to 4 and anything in this Act not elsewhere covered by
this table |
The day on which this Act receives the Royal Assent. |
|
|
2. Schedule 1 |
The day on which this Act receives the Royal Assent. |
|
|
3. Schedule 2 |
1 April 2004. |
1 April 2004 |
|
4. Schedule 3 |
The day on which this Act receives the Royal Assent. |
|
Note: This table relates only to the provisions of this Act
as originally passed by the Parliament and assented to. It will not be expanded
to deal with provisions inserted in this Act after assent.
(2) Column 3 of the table contains additional information that is not part
of this Act. Information in this column may be added to or edited in any
published version of this Act.
Each Act that is specified in a Schedule to this Act is amended or
repealed as set out in the applicable items in the Schedule concerned, and any
other item in a Schedule to this Act has effect according to its
terms.
Section 170 of the Income Tax Assessment Act 1936 does not
prevent the amendment of an assessment made before the commencement of this
section for the purposes of giving effect to this Act.
Income Tax Assessment Act
1936
1 At the end of subsection
16(4)
Add:
; or (m) the PDF Registration Board established under section 5 of
the Pooled Development Funds Act 1992 for the purpose of the
administration of a law of the Commonwealth relating to venture
capital.
2 At the end of
section 94D
Add:
(4) The place of residence of a VCMP is the place at which the partnership
has its central management and control.
3 At the end of subparagraph
128B(3)(h)(ii)
Add “(except interest derived by a limited partner in a VCLP or AFOF
as such a partner)”.
Income Tax Assessment Act
1997
4 Subsection 118-410(3)
Before “under Part 2”, insert “of
funds”.
5 At the end of
section 118-420
Add:
(8) For the purposes of this section, the place of residence of a
*general partner of a
*limited partnership:
(a) that is a company or a limited partnership; and
(b) that is a foreign resident;
is the place in which the general partner has its central management and
control.
(9) For the purposes of this section, the place of residence of an entity
referred to in paragraph (5)(a) is the place in which the entity has its
central management and control.
6 After subsection 118-425(1)
Insert:
Certain entities not treated as connected entities
(1A) In applying subparagraph (1)(d)(ii), ignore an entity that is a
*connected entity of the company only because
it is an *associate of the company because of
an investment made in the entity by the partnership.
7 Subsection 118-425(3)
Repeal the subsection, substitute:
Predominant activity
(3) The company must satisfy at least 2 of these requirements:
(a) more than 75% of the company’s assets (determined by value) must
be used primarily in activities that are not ineligible activities mentioned in
subsection (13);
(b) more than 75% of the company’s employees must be engaged
primarily in activities that are not ineligible activities mentioned in
subsection (13);
(c) more than 75% of the company’s total assessable income,
*exempt income and
*non-assessable non-exempt income must come
from activities that are not ineligible activities mentioned in
subsection (13).
Note 1: This requirement is ongoing. It is not limited to
the circumstances at the time the investment was made.
Note 2: See subsection (10) for the value of
assets.
Note 3: A company that fails to meet at least 2 of the
requirements can still be eligible if the PDF Board determines that the
company’s primary activity is not ineligible and the failure is temporary:
see subsection (14).
8 Subparagraph 118-425(4)(a)(i)
After “company”, insert “(except another entity that is
an *associate of the company because of an
investment made in the entity by the partnership)”.
9 Subsection 118-425(5)
Repeal the subsection, substitute:
Registered auditor
(5) The company must have as its auditor:
(a) a person registered as a company auditor under a law in force in a
State or a Territory; or
(b) if the company is no longer an Australian resident—a person
registered as a company auditor under a law in force in the country of which the
company is a resident.
Note: This requirement is ongoing. It is not limited to the
circumstances at the time the investment was made.
10 Subsection 118-425(10)
Omit “paragraph (2)(b)”, substitute “this
section”.
11 At the end of
section 118-425
Add:
Investment in holding companies
(11) A company is taken to meet the requirements of subsections (3)
and (4) if:
(a) a *VCLP, an
*AFOF or an
*eligible venture capital investor acquires
*shares or options in the company;
and
(b) the company was formed solely for the purpose of investing in another
company; and
(c) within 6 months after the investment referred to in paragraph (a)
was made, the company uses the money from that investment:
(i) in acquiring shares or options in the other company (including
incidental costs); or
(ii) on administrative expenses associated with the investment;
or
(iii) making loans to the other company; and
(d) the other company meets the requirements of subsections (2) to
(7) within that period of 6 months and after the end of that period.
Note: The requirement in paragraph (11)(d) is ongoing
(unless the company becomes the head company of a consolidated group or
consolidatable group: see subsection (16)).
Application to consolidated or consolidatable groups
(12) This section applies to a
*consolidated group or
*consolidatable group as if:
(a) the *head company of the group
carried on all of the activities that are carried on by
*subsidiary members of the group; and
(b) the assets, employees and income of the subsidiary members of the
group were assets, employees and income of the head company; and
(c) each subsidiary member of the group were parts of the head company
rather than separate entities.
Ineligible activities
(13) These activities are ineligible activities:
(a) property development or land ownership;
(b) finance, to the extent that it is any of the following:
(i) banking;
(ii) providing capital to others;
(iii) leasing;
(iv) factoring;
(v) securitisation;
(c) insurance;
(d) construction (including extension, improvement or up-grading) or
acquisition of infrastructure facilities (within the meaning of section 93L
of the Development Allowance Authority Act 1992) or related facilities
(within the meaning of section 93M of that Act), or both;
(e) making investments, whether made directly or indirectly, that are
directed to deriving income in the nature of interest, rents, dividends,
royalties or lease payments.
For the purposes of this subsection, activities that are ancillary or
incidental to a particular activity are taken to form part of that
activity.
PDF Board discretion
(14) A company is taken to meet the requirements of subsection (3)
even if it fails to satisfy at least 2 of the requirements in that subsection if
the *PDF Board determines under
section 25-15 of the Venture Capital Act 2002 that:
(a) the company’s primary activity is not an ineligible activity
mentioned in subsection (13); and
(b) the failure is temporary and did not exist at the time the investment
referred to in subsection (1) was made and, if it has been disposed of,
when it was disposed of.
Convertible notes and convertible preference shares
(15) To the extent that an investment by an entity consists of the
acquisition of a *share in a company by
converting a *convertible note, or a
convertible preference share, issued by the company, the investment is, for the
purpose of determining whether the company meets the requirements of
subsections (2) to (7), taken to have been made at the time when the entity
last acquired the convertible note or convertible preference share.
Subsection (11) stops applying
(16) Subsection (11) stops applying to the company first referred to
in that subsection if the company becomes the
*head company of a
*consolidated group or
*consolidatable group.
12 At the end of subsection
118-440(1)
Add:
Note: The time the entity makes the investment is, for a
share acquired by converting a convertible note or a convertible preference
share, the time when the entity last acquired the convertible note or
convertible preference share: see subsection 118-425(15).
13 At the end of
section 118-440
Add:
(3) In applying paragraphs (1)(b), (5)(b) and (7)(c), ignore the
total value of the assets of an entity that is
*connected with the entity first-mentioned in
subsection (1) (the target entity) either immediately before
or immediately after the investment referred to in that subsection if it is so
connected only because of *eligible venture
capital investments made in both of those entities by the same
*VCLP, *AFOF
or *eligible venture capital
investor.
(4) In applying paragraphs (1)(b), (5)(b) and (7)(c), ignore the
total value of the assets of an entity that, immediately after the investment is
made, is not *connected with the target
entity.
(5) Despite the previous provisions of this section, the target entity
exceeds the permitted entity value immediately before the time
(the investment time) when the
*VCLP, *AFOF
or *eligible venture capital investor made the
investment in the target entity if:
(a) the target entity was *connected with
an entity (the linked entity) in which the VCLP, AFOF or eligible
venture capital investor had made an *eligible
venture capital investment at some time in the period of 12 months before the
investment time; and
(b) the sum of the total value of the assets of the target entity and of
any entity *connected with the target entity
(at the investment time) and the linked entity and of any entity connected with
the linked entity (at the time that the entity making the investment made its
investment in the linked entity) exceeds $250 million.
(6) The Commissioner may determine that subsection (5) does not apply
if the Commissioner is satisfied that:
(a) the activities of the target entity are not the same as, not an
integral part of and not a necessary support for the activities of the linked
entity; and
(b) the making of the investment in the target entity is not part of a
*scheme to acquire interests in all or a
substantial part of a group of companies that are
*connected with each other.
(7) Despite the previous provisions of this section, the target entity
exceeds the permitted entity value immediately before the
investment time if:
(a) the target entity was *connected with
an entity (also the linked entity) in which the
*VCLP, *AFOF
or *eligible venture capital investor had made
an *eligible venture capital investment more
than 12 months before the investment time; and
(b) the activities of the target entity are the same as, are an integral
part of or are a necessary support for the activities of the linked entity;
and
(c) the sum of the total value of the assets of the target entity and of
any entity *connected with the target entity
(at the investment time) and the linked entity and of any entity connected with
the linked entity (at the time that the entity making the investment made its
investment in the linked entity) exceeds $250 million.
(8) In applying paragraphs (5)(b) and (7)(c), ignore the total value
of the assets of an entity that is *connected
with the linked entity either immediately before or immediately after the
investment in the linked entity if it is so connected only because of
*eligible venture capital investments made in
both of those entities by the same *VCLP,
*AFOF or
*eligible venture capital
investor.
Part 2—Venture
Capital Act amendments
14 After paragraph 15-1(g)
Insert:
(ga) for an investment in a company that the partnership held throughout
the financial year—a statement from a general partner as to whether the
company met the requirements of subsections 118-425(3), (4) and (5), and
paragraph 118-425(11)(d), of the Income Tax Assessment Act 1997 at all
times during that year;
15 At the end of
section 15-10
Add:
; and (c) for each investment in a company made during the quarter—a
statement from a general partner as to whether the company met the requirements
of subsections 118-425(3), (4) and (5), and paragraph 118-425(11)(d), of the
Income Tax Assessment Act 1997 at all times during the quarter after the
investment was made; and
(d) for each disposal of an investment in a company during the
quarter—a statement from a general partner as to whether the company met
those requirements at all times during the quarter up to the day of
disposal.
16 At the end of subsection
21-20(1)
Add:
; (g) for each investment in a company that the entity held throughout
that year—a statement as to whether the company met the requirements of
subsections 118-425(3), (4) and (5), and paragraph 118-425(11)(d), of the
Income Tax Assessment Act 1997 at all times during that year;
(h) for each investment in a company that the entity made during that
year—a statement as to whether the company met those requirements at all
times during that year after the investment was made;
(i) for each investment in a company that the entity disposed of during
that year—a statement as to whether the company met those requirements at
all times during that year up to the day of disposal.
17 At the end of
Division 25
Add:
(1) The *PDF Board may, on the
application of a *general partner of a
partnership registered as a *VCLP or an
*AFOF, determine that:
(a) a company’s primary activity is not an ineligible activity
mentioned in subsection 118-425(13) of the Income Tax Assessment Act
1997; and
(b) the company’s failure to satisfy at least 2 of the requirements
in subsection 118-425(3) of that Act is temporary and did not exist at the time
the relevant investment in the company was made and, if it has been disposed of,
when it was disposed of.
(2) The application must be in the *form
approved by the PDF Board.
(3) In considering whether to make a determination, the
*PDF Board must apply the principles specified
under subsection (4).
(4) The *PDF Board may make principles
about making determinations under this section.
(5) If the *PDF Board makes a
determination under subsection (1), the PDF Board must notify the
*general partner as soon as practicable after
the determination is made.
(6) If the *PDF Board refuses to make a
determination, the PDF Board must:
(a) notify the *general partner as soon
as practicable after the refusal; and
(b) provide reasons for the refusal.
(7) Principles made under subsection (4) are disallowable instruments
for the purposes of section 46A of the Acts Interpretation Act
1901.
18 Paragraph 29-1(i)
After “section 25-10”, insert “or
25-15”.
19 Application
The amendments made by this Schedule apply, and are taken to have applied,
to CGT events relating to investments made on or after 1 July
2002.
Fringe Benefits Tax
Assessment Act 1986
1 Paragraph 58PC(1)(a)
After “existing worker entitlement fund”, insert “or an
approved worker entitlement fund”.
2 Paragraph 58PC(1)(d)
After “1 April 2003”, insert “or 1 April
2004”.
3 Subsection 58PC(3)
Repeal the subsection, substitute:
(3) A contribution is made in accordance with existing industrial
practice if the taxpayer or another person in the taxpayer’s
industry:
(a) made payments in the FBT year beginning on 1 April 2002 to an
existing worker entitlement fund; or
(b) made payments in the FBT year beginning on 1 April 2003 to an
approved worker entitlement fund;
for the purposes of ensuring that an obligation to make leave payments
(including payments in lieu of leave) or payments when an employee ceases
employment is met.
4 Application
The amendments made by this Schedule apply in respect of the FBT year
beginning on 1 April 2004 and in respect of all later FBT
years.
Income Tax Assessment Act
1936
1 Paragraph 160AFCD(1)(a)
Omit “but not (d)”, substitute “but not paragraph
160AF(1)(e)”.
2 Subsection 160AFCJ(2)
Omit “but not (d)”, substitute “but not paragraph
160AF(1)(e)”.