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This is a Bill, not an Act. For current law, see the Acts databases.
1996-97
The Parliament of
the
Commonwealth of
Australia
HOUSE OF
REPRESENTATIVES
(As read a third
time)
Taxation Laws
Amendment Bill (No. 1) 1997
No. ,
1997
A Bill for an Act to amend
the law relating to
taxation
9620940—1,256/6.3.1997—(209/96)
Cat. No. 96 7314 8 ISBN 0644 499338
Contents
Part 1—Special depreciation on trading
ships 7tla10h3.html
Part 2—Commonwealth education or training
payments 7tla10h3.html
Part 3—Controlled foreign companies and foreign investment
funds 7tla10h3.html
Part 1—Insertion of Division 17A in Part
IIIA 7tla10h3.html
Part 2—Consequential
amendments 7tla10h3.html
Part 3—Application 7tla10h3.html
This
Bill originated in the House of Representatives; and, having this day passed, is
now ready for presentation to the Senate for its concurrence.
L.M. BARLIN
Clerk of the House
of Representatives
House of Representatives
5 March
1997
A Bill for an Act to amend the law relating to
taxation
The Parliament of Australia
enacts:
This Act may be cited as the Taxation Laws Amendment Act (No. 1)
1997.
(1) Subject to this section, this Act commences on the day on which it
receives the Royal Assent.
(2) Items 17, 18 and 19 of Schedule 1 are taken to have commenced on 3
June 1990.
(3) Item 24 of Schedule 1 is taken to have commenced on 1 January
1993.
(4) Items 22 and 23 of Schedule 1 are taken to have commenced on
1 September 1994.
(5) Schedule 2 is taken to have commenced immediately after the
commencement of item 159 of Schedule 2 to the Taxation Laws Amendment Act
(No. 4) 1995.
(6) Items 3 and 4 of Schedule 3 are taken to have commenced immediately
after the commencement of the Income Tax Assessment Amendment (Capital Gains)
Act 1986.
(7) Item 5 of Schedule 3 is taken to have commenced immediately after the
commencement of the Taxation Laws Amendment (Self Assessment) Act
1992.
(8) Schedule 4 is taken to have commenced on 20 January 1997.
(9) Schedule 6 is taken to have commenced immediately after the
commencement of Schedule 2C to the Income Tax Assessment Act
1936.
(10) Schedule
7 is taken to have commenced immediately after the commencement of section 299G
of the Superannuation Industry (Supervision) Act 1993.
(11) Schedule 8 is
taken to have commenced immediately after the commencement of Part 5 of Schedule
1 to the Taxation Laws Amendment Act (No. 3) 1996.
Subject to section 2, 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.
Part
1—Special depreciation on trading ships
1 Paragraph 57AM(4)(ba)
Omit “2002”, substitute “1997”.
Part
2—Commonwealth education or training payments
2 Subsection 6(1)
Insert:
Commonwealth education or training payment means a payment by
the Commonwealth of an allowance or reimbursement to or on behalf of:
(a) a participant in a Commonwealth labour market program; or
(b) a student under a scheme of assistance to students administered by the
Commonwealth, where the payment is in respect of a period starting at or after
the time when the student turned 16.
3 Subsection 6(1)
Insert:
Commonwealth labour market program means a program
administered by the Commonwealth under which:
(a) unemployed persons are given training in skills to improve their
employment prospects; or
(b) unemployed persons are assisted in obtaining employment or to become
self-employed; or
(c) employed persons are given training in skills and other assistance to
aid them in continuing to be employed by their current employer or in obtaining
other employment.
4 At the end of subparagraph
23(z)(i)
Add “or”.
5 Subparagraphs 23(z)(ii) to
(x)
Repeal the subparagraphs, substitute:
(ii) a Commonwealth education or training payment (see subsection 6(1));
or
Note: Although the payment is not exempt from income tax
under this paragraph, the whole or part of the payment may be exempt under
section 24ABZF.
(iii) an education entry payment received under Part 2.13A of the
Social Security Act 1991;
6 Subparagraphs 23(zaa)(i) to
(vii)
Repeal the subparagraphs, substitute:
(i) a Commonwealth education or training payment (see subsection 6(1));
or
Note: Although the payment is not exempt from income tax
under this paragraph, the whole or part of the payment may be exempt under
section 24ABZF.
(ii) an education entry payment received under Part 2.13A of the Social
Security Act 1991;
7 Division 1AA of Part III
(heading)
Repeal the heading, substitute:
8 Section 24AAA (table)
Omit “Payments under Part 8 of the Student and Youth Assistance
Act 1973”, substitute “Commonwealth education or training
payments”.
9 Subdivision BA of Division 1AA of Part
III
Repeal the Subdivision, substitute:
(1) For the purpose of applying this Subdivision to a Commonwealth
education or training payment (see subsection 6(1)) derived by a taxpayer, there
are 2 kinds of supplementary amount.
(2) One kind of supplementary amount is so much of the payment as was
included in the payment to assist with, or to reimburse, the costs of any one or
more of the following:
(a) rent;
(b) living in a remote area;
(c) commencing employment;
(d) travel to, or participation in, courses, interviews, education or
training;
(e) a child or children wholly or substantially dependent on the
taxpayer;
(f) telephone bills;
(g) living away from the taxpayer’s usual residence;
(h) maintaining the taxpayer’s usual residence while living away
from that residence;
(i) accommodation, books or equipment;
(j) discharging a HEC assessment debt (within the meaning of
Chapter 4 of the Higher Education Funding Act 1988);
(k) transport in travelling to undertake education or training, or to
visit the taxpayer’s usual residence when undertaking education or
training away from that residence;
(l) if the taxpayer is disabled—acquiring any special equipment,
services or transport as a result of the disability;
(m) anything that would otherwise prevent the taxpayer from beginning,
continuing or completing any education or training.
(3) The other kind of supplementary amount is so much of the payment as
was included in the payment by way of pharmaceutical allowance.
(1) Subject to subsection (2), the treatment of a Commonwealth education
or training payment is as follows:
(a) the supplementary amounts are exempt;
(b) the balance is not exempt.
(2) No part of a Commonwealth education or training payment is exempt if
the payment is by way of a scholarship, bursary or other educational assistance
and is made on condition that the recipient, or the individual on whose behalf
the recipient receives the payment, will (or will if required) render, or
continue to render, services to the payer.
10 Subsection 159ZR(1) (paragraph (d) of the
definition of eligible income)
Repeal the paragraph, substitute:
(d) a Commonwealth education or training payment (see subsection
6(1));
11 Subsection 160AAA(1) (paragraphs (b) to (d)
of the definition of rebatable benefit)
Repeal the paragraphs, substitute:
(b) consisting of a Commonwealth education or training payment (see
subsection 6(1)), except where:
(i) the recipient, or the individual on whose behalf the recipient
receives the payment, is an employee of any person who is entitled to a
Commonwealth subsidy in respect of the employment; or
(ii) the payment is by way of a scholarship, bursary or other educational
assistance and is made on condition that the recipient, or the individual on
whose behalf the recipient receives the payment, will (or will if required)
render, or continue to render, services to the payer; or
12 Subsection 160AAA(1) (paragraph (da) of the
definition of rebatable benefit)
Omit “or”.
13 Subsection 160AAA(1) (paragraph (e) of the
definition of rebatable benefit)
Repeal the paragraph.
14 Subsection 221A(1) (at the end of paragraphs
(a) to (f) of the definition of salary or wages)
Add “or”.
15 Subsection 221A(1) (paragraphs (g) to (nb) of
the definition of salary or wages)
Repeal the paragraphs, substitute:
(g) by way of Commonwealth education or training payment (see subsection
6(1));
16 Application
(1) The amendments made by this Part, other than items 14 and 15, apply to
amounts received on or after 1 July 1996.
(2) The amendments made by items 14 and 15 apply to payments made after the
28th day after the day on which this Part commences.
Part
3—Controlled foreign companies and foreign investment
funds
17 Subsection 47A(9)
After “there is no entity”, insert “(other than the
provider referred to in that subsection)”.
18 Subsection 47A(12)
After “there is no entity”, insert “(other than the
provider referred to in that subsection)”.
19 Paragraph 47A(13)(b)
After “there is an entity”, insert “(other than the
provider referred to in subsection (8) or (11), as the case may
be)”.
20 At the end of section
385
Add:
(5) In determining for the purposes of paragraph (4)(b) the gross turnover
of the eligible CFC for the eligible period, section 434 has effect as
if:
(a) subparagraph 434(1)(a)(i) were omitted; and
(b) the words “, but not including amounts that are shown in those
recognised accounts as amounts covered by section 436” were omitted
from paragraphs 434(1)(b), (c) and (d); and
(c) the words “(other than an exclusion of amounts shown in those
recognised accounts as amounts covered by section 436)” were omitted
from subsection 434(2).
21 Application
Item 20 applies in respect of statutory accounting periods of a controlled
foreign company that began or begin on or after 1 July 1990.
22 Paragraphs 517(2)(a) and
(b)
Repeal the paragraphs, substitute:
(a) the person was lawfully in Australia because the person was the holder
of a temporary visa (the current visa) granted under the
Migration Act 1958; and
(b) the period from the time when:
(i) the current visa; or
(ii) if the current visa was granted by way of an extension of a previous
temporary visa or of extensions of previous temporary entry visas—the
earlier or earliest previous temporary visa;
was granted until the current visa is due to expire does not exceed 4
years; and
23 At the end of section
517
Add:
(3) A reference in subsection (2) to a temporary visa includes a reference
to a temporary entry permit granted before 1 September 1994.
(4) For the purposes of this section, a person who is a citizen of New
Zealand is an exempt visitor to Australia in relation to a year of income
if:
(a) at the end of that year of income:
(i) the person had not been a resident of Australia for a continuous
period exceeding 4 years; and
(ii) had the person not been a citizen of New Zealand, he or she would
have been required to be the holder of a temporary visa; and
(b) the person has not come to live in Australia permanently.
24 After section 567
Insert:
(1) Any net capital losses incurred by the FIF during the relevant period
(other than losses taken into account under section 567) are notional deductions
from the notional income of the FIF of that period.
(2) For the purposes of the application of this Subdivision to the
taxpayer in relation to a FIF, an amount (the excluded amount) is
not taken into account in determining whether an amount is a notional deduction
from the notional income of the FIF of the relevant period, or in calculating
the amount of such a deduction, to the extent (if any) to which the excluded
amount:
(a) has been, or is to be, allowed as a notional deduction, or taken into
account in the calculation of a notional deduction, from the notional income of
the FIF in respect of the relevant period or a previous notional accounting
period; or
(b) would have been, or would be, allowed as a notional deduction, or
taken into account in the calculation of a notional deduction, from the notional
income of the FIF in respect of a previous notional accounting period if the
taxpayer had been required for the purposes of this Part to work out the
notional deductions from that notional income.
1 Paragraph 159(1)(c) of Schedule
2
Repeal the paragraph, substitute:
(c) the company would have been liable to pay tax under subsection
160AQJ(1) of the Income Tax Assessment Act 1936 for its 1995-96 franking
year on the following assumptions:
(i) the amendments made by this Schedule did not apply in respect of the
company for its 1995-96 franking year; and
(ii) no class A franking debit of the company arose under subsection
160AQB(1) of the Income Tax Assessment Act 1936 after the class C
conversion time of the company.
2 Paragraph 159(3)(c) of Schedule
2
Repeal the paragraph, substitute:
(c) the company would have been liable to pay tax under subsection
160ARX(1) of the Income Tax Assessment Act 1936 for its 1995-96 franking
year on the following assumptions:
(i) the amendments made by this Schedule did not apply in respect of the
company for its 1995-96 franking year; and
(ii) no class A franking debit of the company arose under subsection
160AQB(1) of the Income Tax Assessment Act 1936 after the class C
conversion time of the company.
3 After item 159 of Schedule
2
Insert:
159A Transitional—companies may defer or
decline certain franking credits
(1) This item applies if, apart from this item, a class C franking credit
of a company would arise on a particular day in the 1995-96 franking year of the
company because:
(a) a class C franked dividend is paid to the company on that day;
or
(b) there is a class C flow-on franking amount in relation to a trust
amount or partnership amount that is included in, or a partnership amount that
is allowed as a deduction from, the assessable income of the company.
(2) The company may elect that:
(a) the class C franking credit does not arise; or
(b) the class C franking credit does not arise on that day but arises on a
later day nominated by the company.
(3) If the company nominates a later day:
(a) the later day must be within 14 days (or within such longer period as
the Commissioner allows) of the day on which the class C franking credit would
have arisen; and
(b) the later day must be before the end of the 1995-96 franking year of
the company.
(4) Any election or nomination under subitem (2):
(a) must be in writing; and
(b) is irrevocable.
(5) This item does not apply where a class C franking credit arises on a
particular day as the result of a previous operation of this item.
1 Paragraph 26AAC(4AA)(a)
Omit “the taxpayer”, substitute “a
taxpayer”.
2 After paragraph
26AAC(4AA)(a)
Insert:
(aa) the consideration for the acquisition is equal to, or more than, the
market value of the share or right (within the meaning of Subdivision F of
Division 13A) at the time of the acquisition; or
3 Subsection 26AAC(15A)
Omit “issued to”, substitute “acquired
by”.
4 Paragraph 26AAC(15B)(b)
Omit “issued”, substitute “acquired by the
taxpayer”.
5 Subsection 26AAC(15B)
Omit “issued”, substitute “acquired by the
taxpayer”.
6 Subsection 139BA(2)
Omit “$500”, substitute “$1,000”.
7 Subsection 139C(5)
After “the taxpayer is”, insert “the trustee
of”.
8 Subsection 139CD(5)
Omit “75%”, substitute
“2/3”.
9 Subsection 139CD(5)
Omit “the employees”, substitute “the permanent
employees”.
10 Subsection 139CD(8)
Omit “or right”.
11 Subsection 139CE(4)
Omit “139GE”, substitute “139GF”.
12 Paragraph 139DC(2)(a)
Omit “$500”, substitute “$1,000”.
13 Paragraph 139FA(a)
Omit “before”, substitute “up to and
including”.
14 Paragraph 139FA(b)
Repeal the paragraph, substitute:
(b) if there were no transactions on that stock market in that one week
period in such shares and rights:
(i) the last price at which an offer was made on that stock market in that
period to buy such a share or right; or
(ii) if, in the case of a share, no such offer has been made—the
value of the share that would have been determined under section 139FB if that
section applied to the share; or
(iii) if, in the case of a right, no such offer has been made—the
value of the right that would have been determined under section 139FC if that
section applied to the right.
15 At the end of section
139FA
Add:
(2) If a share or right is quoted on 2 or more approved stock markets on
that day, the market value is the value determined under subsection (1) in
respect of whichever of those the taxpayer chooses.
16 Section 139FH
Repeal the section.
17 Section 139FI
Omit “30”, substitute “60”.
18 Subsection 139FN(2)
After “exercised”, insert “(the exercise
period)”.
19 Subsection 139FN(3)
Omit “(the exercise period)”.
20 Subsection 139GF(2)
Omit “75%” (wherever occurring), substitute
“2/3”.
21 Paragraph 139GF(4)(b)
Omit “75%”, substitute
“2/3”.
22 Section 139GH (table item relating to
Published price)
Repeal the item.
23 After subsection
160ZZC(9)
Insert:
(9A) For the purposes of subsections (8) and (9), despite paragraph
160M(5)(a), an issue of shares in a company is taken to constitute a disposal of
shares by the company.
24 Subsection 160ZZC(10)
Omit “or (8)”, substitute “, (8) or (9)”.
25 Application
(1) Part 4 of Schedule 2 to the Taxation Laws Amendment Act (No. 2)
1995 applies in the same way to the amendments made by items 1, 7, 9, 10,
11, 13, 14, 15, 16, 18, 19 and 22 of this Schedule as it applied to the
amendments made by Schedule 2 to that Act.
(2) The amendments made by items 2 and 17 apply to shares acquired on or
after the day that this Act receives the Royal Assent.
(3) The amendments made by items 3, 4 and 5 apply in relation to shares
acquired on or after 20 September 1985.
(4) The amendments made by items 6, 8, 12, 20 and 21 apply to shares or
rights acquired on or after 1 July 1996.
(5) The amendments made by items 23 and 24 apply in relation to options
exercised on or after 20 September 1985.
1 Division 20 of Part IIIA
(heading)
Repeal the heading, substitute:
2 Before section 160ZZS
Insert:
(1) In this Division:
abnormal trading has the meaning given by Subdivision
D.
approved stock exchange has the same meaning as in section
470.
base time, in relation to a public entity, means:
(a) the last moment of a day within the period beginning on 1 July 1985
and ending on 30 June 1986 that is chosen by the entity and is a day the choice
of which will result in a determination that gives a reasonable approximation of
the natural persons who held underlying interests in the assets of the entity at
the last moment of 19 September 1985; or
(b) if no day within that period is so chosen—the last moment of 19
September 1985.
business day, in relation to the application of paragraph (b)
of the definition of test time to a public entity, means a day
other than:
(a) a Saturday; or
(b) a Sunday; or
(c) a day that is a public holiday or a bank holiday in the place where
the records of ownership of shares or other interests in the entity are
kept.
capital shareholding of less than 1% has the meaning given by
subsection 160ZZSN(1).
capital unitholding of less than 1% has the meaning given by
subsection 160ZZSO(1).
complying approved deposit fund means a complying approved
deposit fund within the meaning of section 47 of the Superannuation Industry
(Supervision) Act 1993.
complying superannuation fund means a complying
superannuation fund within the meaning of section 45 of the Superannuation
Industry (Supervision) Act 1993.
dividend shareholding of less than 1% has the meaning given
by subsection 160ZZSN(2).
first test time means the last moment of 20 January
1997.
government body means:
(a) the Commonwealth, a State or a Territory; or
(b) a municipal corporation or other local government body; or
(c) a foreign state.
head company has the meaning given by section
160ZZSK.
head trust has the meaning given by section
160ZZSK.
hold includes have.
in a position to affect rights has the meaning given by
section 160ZZRRB.
income unitholding of less than 1% has the meaning given by
subsection 160ZZSO(2).
indirect beneficial interest:
(a) in relation to an asset, has the meaning given by
section 160ZZRS; and
(b) in relation to income derived from an asset, has the meaning given by
section 160ZZRT.
interposed entity has the meaning given by section
160ZZSL.
last moment, in relation to a day, has the meaning given by
subsection (3).
listed public company means a company in which any of the
shares (except shares that carry the right to a fixed rate of dividend) are
listed for quotation in the official list of an approved stock
exchange.
majority underlying interests, in relation to an asset, means
more than one-half of:
(a) the beneficial interests that natural persons hold (whether directly
or indirectly) in the asset; and
(b) the beneficial interests that natural persons hold (whether directly
or indirectly) in any income that may be derived from the asset.
mutual insurance organisation means:
(a) a mutual insurance company within the meaning of section 121AB;
or
(b) a mutual affiliate company within the meaning of
section 121AC.
part of a substantial shareholding has the meaning given by
section 160ZZSP.
prescribed period, in relation to a test time,
means:
(a) the period of 6 months beginning on the day after the day on which
that time occurs; or
(b) the period of 3 months beginning on the day after the day on which the
Taxation Laws Amendment Act (No. 1) 1997 received the Royal
Assent;
whichever period ends last.
public company means:
(a) a listed public company; or
(b) a company (other than a listed public company) all the shares in which
are beneficially owned by any one or more of the following:
(i) listed public companies;
(ii) mutual insurance organisations;
(iii) publicly traded unit trusts; or
(c) a 100% subsidiary of a company to which paragraph (b)
applies.
public entity means:
(a) a public company; or
(b) a mutual insurance organisation; or
(c) a publicly traded unit trust.
publicly traded unit trust means a unit trust the units in
which:
(a) are listed for quotation in the official list of an approved stock
exchange; or
(b) are ordinarily available for subscription or purchase by the
public.
relevant interest has the meaning given by Division 5 of Part
1.2 of the Corporations Law.
special company means:
(a) a mutual insurance organisation; or
(b) a company whose constituent document prevents it from making any
distribution, whether in money, property or otherwise, to its members;
or
(c) a company that is prescribed by the regulations.
subsidiary: the expression 100% subsidiary has
the meaning given by section 160ZZRRA.
test time, in relation to a public entity, means:
(a) the last moment of 20 January 1997; or
(b) the last moment of a day that is 5 years (or a multiple of 5 years)
after the day referred to in paragraph (a) or, if a day worked out under
this paragraph is not a business day, the last moment of the next day that is a
business day; or
(c) if the public entity is a public company or a publicly traded unit
trust—the last moment of any day after 20 January 1997 on which:
(i) there is abnormal trading in shares in the company or in units in the
trust; or
(ii) in respect of a public entity that is, or is a 100% subsidiary of, a
public company all the shares in which are beneficially owned by a listed public
company or are beneficially owned by a publicly traded unit trust—there is
abnormal trading in shares in the listed public company or in the publicly
traded unit trust.
trading, in relation to shares in a public company or units
in a publicly traded unit trust, has the meaning given by
subsections 160ZZSE(2) and (3).
underlying interest, in relation to an asset, means a
beneficial interest that a natural person holds (whether directly or indirectly)
in the asset or in any income that may be derived from the asset.
(2) A reference in this Division to a requirement having, or not having,
been made of a public entity, or to a public entity having done or failed to do
any thing, is, if the entity is a publicly traded unit trust, taken to be a
reference to the requirement having, or not having, been made of the trustee of
the trust or to the trustee of the trust having done or failed to do that thing,
as the case may be.
(3) A reference in the definition of base time or test
time, for the purposes of the application of that definition to a public
entity, to the last moment of a day is a reference to the last
moment of that day by legal time in the place where the records of
ownership of shares or other interests in the entity are kept.
(4) For the purposes of this Division, the following are taken to be
natural persons:
(a) a government body;
(b) a company whose constituent document prevents it from making any
distribution, whether in money, property or otherwise, to its members.
(1) A company (the subsidiary company) is a 100%
subsidiary of another company (the holding company) if all
the shares in the subsidiary company are beneficially owned by:
(a) the holding company; or
(b) one or more 100% subsidiaries of the holding company; or
(c) the holding company and one or more 100% subsidiaries of the holding
company.
(2) However, the subsidiary company is not a 100%
subsidiary of the holding company if a person is in a position to affect
rights, in relation to the subsidiary company, of:
(a) the holding company; or
(b) a 100% subsidiary of the holding company.
(3) The subsidiary company is also not a 100%
subsidiary of the holding company if at some future time a person will
be in a position to affect rights as described in subsection (2).
(4) A company (other than the subsidiary company) is a 100%
subsidiary of the holding company if, and only if:
(a) it is a 100% subsidiary of the holding company; or
(b) it is a 100% subsidiary of a 100% subsidiary of the holding
company;
because of any other application or applications of this section.
(1) A person is in a position to affect rights of a company
in relation to another company if the person has the right, power or
option:
(a) to acquire those rights from one or other of those companies;
or
(b) to do something that would prevent one or other of those companies
from exercising its rights for its own benefit, or from receiving any benefit
arising from having those rights.
(2) It does not matter whether the person has the right, power or option
because of the constituent document of one or other of those companies, any
agreement or otherwise.
A natural person is taken to hold an indirect beneficial interest in an
asset of an entity (other than another natural person) for the purposes of this
Division where:
(a) if the entity were to distribute any of its capital; and
(b) in the case where another entity or other entities are interposed
between the first-mentioned entity and the person—if the capital were then
distributed by the other entity or successively distributed by each of the other
entities;
the person would have the right to receive any of the capital for the
person’s own benefit.
A natural person is taken to hold an indirect beneficial interest in
income that may be derived from an asset of an entity (other than another
natural person) for the purposes of this Division where:
(a) if the entity were to pay a dividend or otherwise distribute any of
its income; and
(b) in the case where another entity or other entities are interposed
between the first-mentioned entity and the person—if the dividend or
income were then paid or distributed by the other entity or successively paid or
distributed by each of the other entities;
the person would have the right to receive any of the dividend or income
for the person’s own benefit.
For the purposes of this Division, if, because of a person’s death,
a natural person acquires a percentage (the acquired percentage)
of the underlying interests in an asset, the natural person is taken to have
held (in addition to any other part of the total underlying interests that the
person held or is taken to have held), at any time when the dead person held a
percentage (the dead person’s percentage) of the total
underlying interests in the asset, a percentage of the total underlying
interests in the asset equal to the acquired percentage, or the dead
person’s percentage at that time, whichever is the less.
3 Before subsection
160ZZS(1)
Insert:
(1AA) This section does not apply to a taxpayer that is a public entity in
respect of an asset to which Subdivision C applies.
Note: The heading to section 160ZZS is replaced by the
heading “Changes in majority underlying interests in assets of
taxpayers other than public entities”.
4 Subsection 160ZZS(2)
Repeal the subsection.
5 Subsection 160ZZS(2A)
Repeal the subsection.
6 Subsection 160ZZS(3)
Repeal the subsection.
7 After section 160ZZS
Insert:
Determination to be made by entity that has not previously found a lack
of continuity of holding of majority underlying interests
(1) This section applies to a public entity in relation to a test time in
respect of an asset acquired on or before 19 September 1985 if, and only
if:
(a) the entity was the owner of the asset at the test time; and
(b) the asset was not, immediately before 20 January 1997, taken, under
subsection 160ZZS(1), to have been acquired by the entity after 19
September 1985; and
(c) if the test time was a time referred to in paragraph (b) or (c) of the
definition of test time in subsection 160ZZRR(1)—the asset
was not, immediately before the day on which the test time occurred, taken,
under section 160ZZS or under a previous application of this Subdivision, to
have been acquired by the entity after 19 September 1985.
Entity to examine its records to determine whether continuity
exists
(2) The entity must, within the prescribed period after the test time or
within such further period (if any) as the Commissioner approves, make a
determination, by an examination of its records, showing whether majority
underlying interests in the asset at the test time were held by natural persons
who held majority underlying interests in the asset at the base time.
Interests whose holders cannot be identified
(3) If there were, at the base time, underlying interests in the asset the
holders of which cannot be identified by the entity from an examination of its
records, those interests are taken, for the purposes of the determination, to
have been held at the base time by natural persons who did not hold underlying
interests in the asset at the test time.
Section applies if determination not made in respect of test
time
(1) This section applies if a public entity that is required under
subsection 160ZZSA(2) to make a determination in respect of an asset in
respect of a test time fails duly to make the determination within the period
applying under that subsection.
Failure to determine in respect of first test time
(2) If the test time is the first test time, the asset is taken for the
purposes of this Part to have been acquired by the entity on
20 September 1985.
Failure of public entity to determine in respect of first test time
after it becomes a public entity
(3) If:
(a) a public entity becomes a public entity after
20 January 1997; and
(b) the test time is the first time it is required to make a determination
under subsection 160ZZSA(2) after it became a public entity;
the asset is taken for the purposes of this Part to have been acquired by
the entity at the time when it became a public entity.
Failure to determine in respect of later test time
(4) If the test time is later than the test time applicable under
subsection (2) or (3), as the case may be, the asset is taken for the purposes
of this Part to have been acquired by the entity on the most recent day in
respect of which both the following conditions were satisfied:
(a) the day must have been a day on which a test time occurred;
(b) at the test time that occurred on the day, majority underlying
interests in the asset must have been held by natural persons who held majority
underlying interests in the asset at the base time.
Consideration for acquisition of asset
(5) If an asset is taken by subsection (2), (3) or (4) to have been
acquired by a public entity on a particular day, the entity is taken to have
acquired the asset for a consideration equal to the market value of the asset on
that day.
Time of, and consideration for, acquisition of asset
(1) If a determination by a public entity under subsection 160ZZSA(2) in
relation to the first test time shows that majority underlying interests in an
asset of the entity at that test time were not held by natural persons who held
majority underlying interests in the asset at the base time, the asset is taken
for the purposes of this Part:
(a) to have been acquired by the entity at the time applicable under this
section; and
(b) to have been so acquired for a consideration equal to the market value
of the asset at that time.
Commissioner may accept that the same natural persons held majority
underlying interests in an asset at the base time and the first test
time
(2) A determination referred to in subsection (1) is taken not to show
that majority underlying interests in an asset of a public entity at the first
test time were not held by natural persons who held majority underlying
interests in the asset at the base time if the Commissioner is satisfied, or
considers it reasonable to assume, that majority underlying interests in the
asset at that test time were held by natural persons who held majority
underlying interests in the asset at the base time.
If no requirement to test before 20 January 1997
(3) If the entity was not required before 20 January 1997, under
a ruling given by the Commissioner that was made available to the public, to
determine whether, at a time after the base time and before the first test time,
majority underlying interests in the asset were held by natural persons who held
majority underlying interests in the asset at the base time, the asset is taken
to have been acquired by the entity on 20 January 1997.
If requirement to test before 20 January 1997
(4) If the entity was required before 20 January 1997, under a ruling
given by the Commissioner that was made available to the public, to determine
whether, at a time (the previous determination time) after the
base time and before the first test time, majority underlying interests in the
asset were held by natural persons who held majority underlying interests in the
asset at the base time, the asset is taken to have been acquired by the entity
on:
(a) the earliest day in respect of which:
(i) the entity was required under the ruling to determine whether majority
underlying interests in the asset were held by natural persons who held majority
underlying interests in the asset at the base time; and
(ii) the entity is unable to show that majority underlying interests were
so held; and
(b) if there is no day applicable under paragraph
(a)—20 January 1997.
Time of, and consideration for, acquisition of asset
(1) If a determination by a public entity under subsection 160ZZSA(2)
in relation to a later test time shows that majority underlying interests in an
asset of the entity at that test time were not held by natural persons who held
majority underlying interests in the asset at the base time, the asset is taken
for the purposes of this Part:
(a) to have been acquired by the entity at the later test time;
and
(b) to have been so acquired for a consideration equal to the market value
of the asset at that time.
Commissioner may accept that the same natural persons held majority
underlying interests in an asset at the base time and the later test
time
(2) A determination referred to in subsection (1) is taken not to show
that majority underlying interests in an asset of a public entity at a later
test time were not held by natural persons who held majority underlying
interests in the asset at the base time if the Commissioner is satisfied, or
considers it reasonable to assume, that majority underlying interests in the
asset at that test time were held by natural persons who held majority
underlying interests in the asset at the base time.
(1) This Subdivision applies for the purpose of determining whether there
has been abnormal trading in shares in a public company or in
units in a publicly traded unit trust for the purposes of this
Division.
(2) There is taken for the purposes of this Division to have been a
trading in shares in the company, or in units in the trust, if
there was an issue, redemption or transfer of, or any other dealing in, those
shares or units.
(3) However, an issue, redemption or transfer of, or another dealing in,
shares in the company or units in the trust is not a trading in the shares or
units to which this Division applies if the issue, redemption, transfer or other
dealing does not change the proportions in which natural persons hold underlying
interests in assets of the company or trust.
(1) There is taken to have been an abnormal trading in
shares in the company, or in units in the trust, if a trading in the shares or
units was abnormal having regard to all relevant factors, including
these:
(a) the timing of the trading, when compared with the normal timing for
trading in the company’s shares or in the trust’s units;
(b) the number of shares or units traded, when compared with the normal
number of the company’s shares, or the trust’s units,
traded;
(c) any connection between the trading and any other trading in the
company’s shares or in the trust’s units.
(2) There may also be an abnormal trading under section
160ZZSG, 160ZZSH or 160ZZSI.
There is taken to have been an abnormal trading in shares
in the company, or in units in the trust, if 5% or more of the shares or units
were traded in one transaction.
There is taken to have been an abnormal trading in shares
in the company, or in units in the trust, if there was a trading in those shares
or units that the company or trustee knows or reasonably suspects was part of an
acquisition or merger of the company with another company or of the trust with
another trust.
(1) There is taken to have been an abnormal trading in
shares in the company, or in units in the trust, if more than 20% of the shares
or units were traded during a 60 day period.
(2) The abnormal trading is taken to have happened at the end of the 60
day period concerned.
This Subdivision has rules that make it easier for a public company or the
trustee of a publicly traded unit trust to determine, as at a test time or the
base time, the holders of majority underlying interests in its assets.
All holdings of shares or units of less than 1% in the company or trust are
treated as if they were held by a single notional natural person. This means
that the company or trustee does not have to trace through to the actual natural
persons who beneficially hold underlying interests in the assets of the company
or trust.
A similar rule applies if another public company or publicly traded unit
trust is interposed between the company or trust and those persons. All holdings
of less than 1% in the interposed company or interposed trust are
treated as if they were held by a different single notional natural person. This
means that the company or trustee does not have to trace through the interposed
company or interposed trust to the actual natural persons who beneficially hold
underlying interests in the assets of the head company or the head
trust.
Note: The rules in this Subdivision may not apply if they
would hide a change in the holding of majority underlying interests in the
company or trust: see section 160ZZSQ.
This Subdivision modifies the way in which a public company (the
head company) or a publicly traded unit trust (the head
trust) may determine under subsection 160ZZSA(2) the natural persons
who, at a test time or the base time, held underlying interests in:
(a) an asset of the head company if there were at that time:
(i) capital shareholdings of less than 1%; or
(ii) dividend shareholdings of less than 1%;
in the head company; or
(b) an asset of the head trust if there were at that time:
(i) capital unit holdings of less than 1%; or
(ii) income unit holdings of less than 1%;
in the head trust.
(1) This Subdivision also modifies the way in which the head company or
the head trust may determine under subsection 160ZZSA(2) the natural persons
who, at a test time or the base time, held underlying interests in an asset of
the head company or of the head trust if at that time another entity (the
interposed entity) that is a public company or a publicly traded
unit trust met the conditions in subsections (2) and (3).
(2) The interposed entity must have been interposed between the head
company or head trust and natural persons who held indirectly beneficial
interests in the asset or in any income that may be derived from the
asset.
(3) There must have been:
(a) if the interposed entity was a public company:
(i) capital shareholdings of less than 1%; or
(ii) dividend shareholdings of less than 1%;
in the interposed public company; or
(b) if the interposed entity was a publicly traded unit trust:
(i) capital unitholdings of less than 1%; or
(ii) income unitholdings of less than 1%;
in the interposed publicly traded unit trust.
Application
(1) The head company or the head trust may apply the provisions of this
section in determining the natural persons who held underlying interests in an
asset of the head company or of the head trust at the base time and at a test
time.
Notional shareholder or unitholder of head company or head
trust
(2) Subject to subsection (6), the natural persons who held underlying
interests in the asset at the respective times may be determined as if a single
notional natural person (the notional holder) had the right to
receive, for the person’s own benefit and directly:
(a) in respect of a determination in relation to an asset of the head
company:
(i) any distributions of capital of the head company in respect of each
capital shareholding of less than 1% in the company at each such time;
and
(ii) any dividends the head company may pay in respect of each dividend
shareholding of less than 1% in the company at each such time; and
(b) in respect of a determination in relation to an asset of the head
trust:
(i) any distributions of capital of the head trust in respect of each
capital unitholding of less than 1% in the trust at each such time;
and
(ii) any income that may be distributed by the head trust in respect of
each income unitholding of less than 1% in the trust at each such
time.
Notional shareholder or unitholder of the interposed
entity
(3) Subject to subsection (6), the natural persons who held underlying
interests in the asset at the respective times may also be determined as if, for
each interposed entity, a different single notional natural person (the
notional holder) had the right to receive, for the person’s
own benefit and directly:
(a) if the interposed entity is a public company:
(i) any distributions of capital of the interposed entity in respect of
each capital shareholding of less than 1% in the interposed entity at each such
time; and
(ii) any dividends the interposed entity may pay in respect of each
dividend shareholding of less than 1% in the interposed entity at each such
time; or
(b) if the interposed entity is a publicly traded unit trust:
(i) any distributions of capital of the interposed entity in respect of
each capital unitholding of less than 1% in the interposed entity at each such
time; or
(ii) any income that may be distributed by the interposed entity in
respect of each income unitholding of less than 1% in the interposed entity at
each such time.
People who actually had rights in respect of head company or head trust
are taken not to have had the rights
(4) If subsection (2) is applied in determining the natural persons who
held underlying interests in the asset at a particular time, the determination
is to be made as if the natural persons who at that time had the right to
receive for their own benefit (whether directly or indirectly):
(a) any distributions of capital of the head company or head trust in
respect of each capital shareholding of less than 1% or each capital unitholding
of less than 1% in the company or trust; and
(b) any dividends that may be paid by the head company, or any income that
may be distributed by the head trust, in respect of each dividend shareholding
of less than 1% in the company or each income unitholding of less than 1% in the
trust;
did not have that right.
People who actually had rights in respect of interposed entity are taken
not to have had the rights
(5) If subsection (3) is applied in determining the natural persons who
held underlying interests in the asset at a particular time, the determination
is also to be made as if the natural persons who at that time had the right to
receive for their own benefit (whether directly or indirectly):
(a) any distributions of capital of the interposed entity in respect of
each capital shareholding of less than 1% or each capital unitholding of less
than 1% in the entity; and
(b) any dividends that may be paid by, or any income that may be
distributed by, the interposed entity in respect of each dividend shareholding
of less than 1% or each income unitholding of less than 1% in the
entity;
did not have that right.
Reduction of percentage of notional holder’s rights to
distributions
(6) If:
(a) the percentage of the distributions of capital, dividends or income of
the head company or head trust, or of the interposed entity, that the notional
holder had the right to receive at a test time;
is greater than:
(b) the percentage (the lower percentage) of the
distributions of capital, dividends or other income of the head company or head
trust, or of the interposed entity, that the notional holder had the right to
receive at the base time;
the notional holder is taken to have the right to receive the lower
percentage of the distributions of capital, dividends or other income at the
test time.
Meaning of capital shareholding of less than 1%
(1) If all the shares in the head company, or in an interposed entity that
is a public company, of which an entity is the registered holder at a test time
or the base time carry (between them) the right to receive less than 1% of any
distribution of capital of the company, those shares (except shares that are
part of a substantial shareholding) constitute a capital shareholding of
less than 1% in the company at that time.
Meaning of dividend shareholding of less than 1%
(2) If all the shares in the head company, or in an interposed entity that
is a public company, of which an entity is the registered holder at a test time
or the base time carry (between them) the right to receive less than 1% of any
dividends that the company may pay, those shares (except shares that are part of
a substantial shareholding) constitute a dividend shareholding of less
than 1% in the company at that time.
Meaning of capital unitholding of less than 1%
(1) If all the units in the head trust, or in an interposed entity that is
a publicly traded unit trust, of which an entity is the registered holder at a
test time or the base time carry (between them) the rights to receive less than
1% of any distribution of capital of the trust, those units constitute a
capital unitholding of less than 1% in the trust at that
time.
Meaning of income unitholding of less than 1%
(2) If all the units in the head trust, or in an interposed entity that is
a publicly traded unit trust, of which an entity is the registered holder at a
test time or the base time carry (between them) the rights to receive less than
1% of any distribution of income of the trust, those units constitute an
income unitholding of less than 1% in the trust at that
time.
When shares begin to be part of substantial shareholding
(1) Shares in a company begin to be part of a substantial
shareholding of a person when the person gives the company:
(a) a notice under section 709 of the Corporations Law from which it
appears that the person or an associate (within the meaning of that section) had
a relevant interest in the shares as at the day when the person became a
substantial shareholder in the company; or
(b) a notice under section 710 of the Corporations Law from which it
appears that the person or an associate (within the meaning of that section) had
a relevant interest in the shares after the change in relevant interests because
of which the notice had to be given;
whichever happens first.
When shares stop being part of substantial shareholding
(2) The shares stop being part of the substantial shareholding when
the person gives the company:
(a) a notice under section 710 of the Corporations Law from which it
appears that neither the person nor an associate (within the meaning of that
section) had a relevant interest in the shares after the change in relevant
interests because of which the notice had to be given; or
(b) a notice under section 711 of the Corporations Law from which it
appears that the person had stopped being a substantial shareholder in the
company;
whichever happens first.
This Subdivision does not apply for the purposes of a determination under
subsection 160ZZSA(2) in respect of an asset of the head company or of the head
trust in relation to a test time if the Commissioner considers it reasonable to
assume that at that time a majority of underlying interests in the asset would
not have been held by natural persons who held majority underlying interests in
the asset at the base time if it were not for the rules in this
Subdivision.
This Subdivision has rules that make it easier for a public company or the
trustee of a publicly traded unit trust to determine, as at a test time or the
base time, the holders of underlying interests in its assets.
The company or trustee does not have to trace through any complying
superannuation funds, complying approved deposit funds, special companies or
government bodies that are interposed between the company or trust and the
natural persons who beneficially hold underlying interests in the assets of the
company or trust.
(1) A public company or a publicly traded unit trust may apply the
provisions of this section in determining the natural persons who held
underlying interests in an asset of the company or in an asset of the trust, as
the case may be, at a test time or the base time if:
(a) a superannuation fund, approved deposit fund, special company or
government body was interposed, at that time, between natural persons and the
company or trust; and
(b) at that time, those persons had the right to receive for their own
benefit, and indirectly through the fund, special company or government body (or
through entities including it), a percentage (the relevant
percentage) of:
(i) any distributions of capital of the public company or publicly traded
unit trust; or
(ii) any dividends that the public company may pay or any income that the
publicly traded unit trust may distribute; and
(c) where a superannuation fund was interposed as mentioned in
paragraph (a)—at the test time the fund was a complying
superannuation fund or was a foreign superannuation fund; and
(d) where an approved deposit fund was interposed as mentioned in
paragraph (a)—at the test time the fund was a complying approved
deposit fund.
If fund, special company or government body has more than 50
members
(2) If, at the test time or the base time, the fund, special company or
government body had more than 50 members, the public company or the publicly
traded unit trust may determine the natural persons who held underlying
interests in the asset of the company or trust at that time as if the fund,
special company or government body were a natural person who had the right to
receive, for the person’s own benefit, the relevant percentage of those
distributions of capital, those dividends or that income of the public company
or publicly traded unit trust.
If fund or special company has not more than 50 members
(3) If, at the test time or the base time, the fund or special company did
not have more than 50 members, the public company or the publicly traded unit
trust may determine the natural persons who held underlying interests in the
asset of the company or trust at that time as if each member were a natural
person who had a right to receive, for the person’s own benefit, an equal
proportion of those distributions of capital, those dividends or that
income.
Persons who actually had the right are taken not to have had the
right
(4) If the public company or the publicly traded unit trust applies
subsection (2) or (3) in determining the natural persons who held underlying
interests in an asset of the company or trust at a test time or the base time,
those interests are to be determined as if, at that time, the natural persons
who had the right to receive that percentage of those distributions of capital,
those dividends or that income did not have that right (except as provided by
subsection (3)).
Notional membership of government body
(5) For the purposes of this section, a government body is taken to have
more than 50 members.
(1) A public entity may apply the provisions of this section in
determining the natural persons who held underlying interests in an asset of the
entity at a test time or the base time if:
(a) the entity was a mutual insurance organisation at the base time;
and
(b) the entity has, whether before or after the commencement of this
section, ceased to be such an organisation but has continued in existence as a
public company or a publicly traded unit trust; and
(c) at the time of the cessation (the cessation time) the
entity had more than 50 members.
(2) A natural person who:
(a) immediately before the cessation time was a member of the entity;
and
(b) immediately after the cessation time held:
(i) an underlying interest in an asset of the entity; or
(ii) an underlying interest, through the entity, in an asset of another
entity that was a public entity;
is taken, for the purposes of the application of this Division in
determining, after the cessation time, the natural persons who held underlying
interests in assets of the entity or the other entity at a test time or the base
time, to have held the interest at all times from and including the base time
until immediately after the cessation time.
8 Before section 160ZZT
Insert:
Part
1—Insertion of Division 17A in Part IIIA
1 After Division 17 of Part
IIIA
Insert:
(1) In this Division, unless the contrary intention appears:
active asset has the meaning given by subsections 160ZZPL(3),
(4), (5) and (6).
asset has the meaning given by subsections 160ZZPL(1) and
(2).
associate has the meaning given by section 160ZZPM.
Australian Statistician means the Australian Statistician
referred to in subsection 5(2) of the Australian Bureau of Statistics Act
1975.
connected has the meaning given by section 160ZZPN.
depreciable asset means an asset the cost of which is
allowable as a deduction under this Act over a period of time.
disposal test time, in relation to the disposal of an asset,
means the time immediately before the disposal.
disposal year of income, in relation to a taxpayer in
relation to a roll-over asset, means the year of income in which the roll-over
asset was disposed of by the taxpayer.
entity means any of the following:
(a) an individual;
(b) a partnership;
(c) a company;
(d) a trust.
gross goodwill roll-over amount has the meaning given by
subsection 160ZZPQ(4).
gross non-goodwill roll-over amount has the meaning given by
subsection 160ZZPQ(3).
gross roll-over amount means a gross goodwill roll-over
amount or a gross non-goodwill roll-over amount.
listed public company means a company in which any of the
shares (except shares that carry the right to a fixed rate of dividend) are
listed for quotation in the official list of an approved stock
exchange.
mutual insurance organisation means:
(a) a mutual insurance company within the meaning of section 121AB;
or
(b) a mutual affiliate company within the meaning of
section 121AC.
net goodwill roll-over amount has the meaning given by
subsection 160ZZPS(5).
net non-goodwill roll-over amount has the meaning given by
subsection 160ZZPR(5).
net roll-over amount means a net goodwill roll-over amount or
a net non-goodwill roll-over amount.
notional capital gain has the meaning given by paragraph
160ZZPQ(1)(b).
public company means:
(a) a listed public company; or
(b) a company (other than a listed public company) all the shares in which
are beneficially owned by any one or more of the following:
(i) listed public companies;
(ii) mutual insurance organisations;
(iii) publicly traded unit trusts.
public entity means:
(a) a public company; or
(b) a mutual insurance organisation; or
(c) a publicly traded unit trust.
publicly traded unit trust means a unit trust the units in
which:
(a) are listed for quotation in the official list of an approved stock
exchange; or
(b) are ordinarily available for subscription or purchase by the
public.
replacement asset has the meaning given by subsection
160ZZPT(1) but does not include an asset in respect of whose disposal:
(a) this Part would not apply because of a provision of section 160L;
or
(b) a capital gain would not be taken to have accrued because of
subsection 160Z(6).
replacement goodwill asset means a replacement asset that is
goodwill.
replacement non-goodwill asset means a replacement asset that
is not goodwill.
roll-over asset has the meaning given by
subsection 160ZZPL(7).
roll-over goodwill asset means a roll-over asset that is
goodwill.
roll-over non-goodwill asset means a roll-over asset that is
not goodwill.
total goodwill cost base, in relation to a taxpayer in
relation to a disposal year of income, means the amount that, apart from this
Division, would be the cost base of a replacement goodwill asset, or the sum of
the amounts that, apart from this Division, would be the cost bases of
replacement goodwill assets, nominated by the taxpayer in respect of a net
goodwill roll-over amount that applies to the taxpayer in respect of that year
of income.
total net roll-over amount, in relation to a taxpayer in
relation to a disposal year of income, means the net roll-over amount, or the
sum of the net roll-over amounts, applying to the taxpayer in respect of that
year of income.
total non-goodwill cost base, in relation to a taxpayer in
relation to a disposal year of income, means the amount that, apart from this
Division, would be the cost base of a replacement non-goodwill asset, or the sum
of the amounts that, apart from this Division, would be the cost bases of
replacement non-goodwill assets, nominated by the taxpayer in respect of a net
roll-over amount or net roll-over amounts that apply to the taxpayer in respect
of that year of income.
Application of Division to trusts
(2) This Division applies to a trust as if the trust were a taxpayer.
However, a trust is not a legal person and any thing to be done by the trust has
to be done by the trustee of the trust. Accordingly, any provision of this
Division that refers to a taxpayer or entity having been, or not having been,
required to do any thing or having done, or not having done, any thing is taken,
if the taxpayer or entity is a trust, to refer to the trustee of the trust
having been, or not having been, required to do that thing or having done, or
not having done, that thing, as the case may be.
Meaning of asset
(1) In this Division:
asset has the meaning given by section 160A except that it
includes any motor vehicle, and includes a part of an asset, but, where the
expression is used in relation to an individual who is not acting as a trustee,
it does not include:
(a) an asset that is being used solely for the personal use and enjoyment
of the individual or an associate of the individual; or
(b) a right to, or to any part of, any allowance, annuity or capital
amount payable out of a superannuation fund or an approved deposit fund, as
referred to in paragraph 160ZZJ(1)(a); or
(c) a right to, or to any part of, an asset of a superannuation fund or of
an approved deposit fund, as referred to in paragraph 160ZZJ(1)(b);
or
(d) a policy of life assurance as defined by
subsection 160ZZI(1).
Assets in connected entity excluded
(2) The assets of an entity for the purposes of this Division do not
include shares, units or other interests (excluding an interest that is a
security as defined by subsection 159GP(1)) in another entity that
is connected with the first-mentioned entity.
Meaning of active asset
(3) Subject to subsections (4), (5) and (6), an asset owned by a taxpayer
is an active asset at a particular time if at that time:
(a) it is used, or held ready for use, by the taxpayer in the course of
carrying on a business; or
(b) it is an intangible asset that is inherently connected with a business
carried on by a taxpayer (for example, goodwill or the benefit of a restrictive
covenant).
Certain assets not to be regarded as active assets
(4) The following assets are not active assets:
(a) shares in companies;
(b) interests in trusts;
(c) subject to subsections (5) and (5A), an asset whose predominant use is
to derive interest, an annuity, rent, royalties or foreign exchange gains;
(d) financial instruments (such as loans, debentures, bonds, promissory
notes, futures contracts, forward contracts, currency swap contracts and a right
or option in respect of a share, security, loan or contract).
Exception for roll-over assets whose value has been enhanced by
taxpayer
(5) A roll-over asset whose predominant use is a use mentioned in
paragraph (4)(c) is not precluded by that paragraph from being an active asset
if it has been substantially developed, altered or improved by the taxpayer to
such an extent that its market value has been substantially enhanced.
Exception for replacement asset temporarily used to derive
rent
(5A) A replacement asset is not precluded by paragraph (4)(c) from
being an active asset merely because its predominant use is to derive rent if
its use for that purpose is only temporary.
Asset deemed to be active asset for 2 years in certain
circumstances
(6) If:
(a) a taxpayer acquires an asset in a year of income for the purpose of
having the asset as an active asset; and
(b) the taxpayer wishes to nominate the asset as a replacement asset for
the purposes of the application of this Division in respect of a net roll-over
amount; and
(c) a gross roll-over amount that applies to the taxpayer in respect of
the year of income in which a roll-over asset was disposed of is taken into
account in calculating the net roll-over amount; and
(d) the first-mentioned asset is an active asset at the end of 2 years
after the last occasion in the year of income referred to in paragraph (c) on
which the taxpayer disposed of any roll-over asset;
the first-mentioned asset is taken to have been an active asset at all
times during that period of 2 years.
Meaning of roll-over asset
(7) An asset of a business carried on by a taxpayer is a roll-over asset
in respect of the taxpayer in respect of a year of income if:
(a) the asset is disposed of by the taxpayer in the year of income;
and
(b) the threshold criteria set out in section 160ZZPP are complied
with at the disposal test time.
(1) A person is an associate of a taxpayer for the purposes of this
Division if the person is:
(a) if the taxpayer is an individual who is not acting as a
trustee:
(i) the spouse of the taxpayer; or
(ii) a child under 18 years of age of the taxpayer; or
(b) an entity that acts, or could reasonably be expected to act, in
accordance with the directions or wishes of the taxpayer; or
(c) an entity that acts, or could reasonably be expected to act, in
concert with the taxpayer.
(2) If a taxpayer is a partner in a partnership, no other partner in the
partnership is taken to be an associate of the taxpayer merely because of
paragraph (1)(c).
Connection to be based on control
(1) Subject to this section, an entity is connected with a taxpayer for
the purposes of this Division if:
(a) the taxpayer controls the entity; or
(b) the taxpayer is controlled by the entity; or
(c) the taxpayer and the entity are each controlled by the same
entity.
Control of entity: 50% or more of rights
(2) Subject to subsection (3), an entity (the first entity)
is taken for the purposes of subsection (1) to control another entity if the
first entity, or an associate or associates of the first entity, or the first
entity and an associate or associates of the first entity:
(a) own beneficially, or have the right to acquire the beneficial
ownership of, interests in the other entity that carry between them the right to
receive at least 50% of any distribution of income or capital that the other
entity may make; or
(b) if the other entity is a company—own beneficially, or have the
right to acquire beneficial ownership of, shares in the company that carry
between them the right to exercise, or control the exercise of, at least 50% of
the voting power in the company; or
(c) if the other entity is a discretionary trust:
(i) are the trustee or trustees of the trust; or
(ii) have the power to determine the manner in which the trustee or
trustees of the trust exercise the power to make any payment of income or
capital to or for the benefit of beneficiaries of the trust.
Exception
(3) Paragraph (2)(c) does not apply if:
(a) the trust referred to in that paragraph is the taxpayer referred to in
subsection (1); and
(b) a beneficiary of that trust is taken to control the trust because of
the operation of a provision of this section; and
(c) that beneficiary is an associate of that trust or of any person who
has the power of determination referred to in
subparagraph (2)(c)(ii).
Control of entity: at least 40% but less than 50% of
rights
(4) An entity (the first entity) is also taken for the
purposes of subsection (1) to control another entity if the first entity, or an
associate or associates of the first entity, or the first entity and an
associate or associates of the first entity:
(a) own beneficially, or have the right to acquire the beneficial
ownership of, interests in the other entity that carry between them the right to
receive at least 40%, but less than 50%, of any distribution of income or
capital that the other entity may make; or
(b) if the other entity is a company—own beneficially, or have the
right to acquire beneficial ownership of, shares in the company that carry
between them the right to exercise, or control the exercise of, at least 40%,
but less than 50%, of the voting power in the company;
unless the first entity satisfies the Commissioner that the other entity is
controlled by a person other than, or by persons that do not include, the first
entity or an associate of the first entity.
Control of discretionary trust
(5) If the trustee or trustees of a discretionary trust have the power to
pay to, or apply for the benefit of, an entity any income or capital of the
trust, the entity is taken for the purposes of this section to own beneficially
interests in any distribution of any income or capital, as the case may be, of
the trust that is equal to the maximum percentage of the income or capital that
the trustee is empowered to pay to, or apply for the benefit of, the
entity.
Indirect control of entity
(6) Subject to subsection (7), an entity that directly controls a second
entity is taken for the purposes of this section also to control any other
entity that is directly, or indirectly by any other application or applications
of this section, controlled by the second entity.
No tracing through public entity
(7) If an entity (the first entity) controls a public
entity, the first entity is not taken merely because of the operation of
subsection (6) to control any other entity that is controlled by the public
entity.
This Subdivision sets out the way in which roll-over relief is given to a
taxpayer in respect of a year of income in which assets of a business (the
relevant assets) are disposed of by the taxpayer.
• The threshold criteria must
be satisfied at the time immediately before the disposal of the relevant assets
(paragraph 160ZZPL(7)(b)).
• Certain conditions must be satisfied in
respect of the relevant assets, and any gross non-goodwill roll-over
amounts and gross goodwill roll-over amounts in respect of
those assets must be worked out: these are equivalent to the amounts of the
capital gains that would have accrued if there had been no roll-over relief
(sections 160ZZPQ and 160ZZR).
• The net non-goodwill roll-over
amount in respect of the year of income is to be worked out by applying
all the gross non-goodwill roll-over amounts in reduction of capital losses
(section 160ZZPR).
• The net goodwill roll-over
amount in respect of the year of income is to be worked out by applying
all the gross goodwill roll-over amounts in reduction of capital losses to the
extent that those losses have not been reduced by gross non-goodwill roll-over
amounts (section 160ZZPS).
• The taxpayer may then nominate certain
replacement assets in respect of the net roll-over amounts. If the taxpayer does
not do so, a capital gain equal to the net roll-over amount concerned accrues
during the year of income in which the relevant assets were disposed of (section
160ZZPT).
• The taxpayer is to apportion net roll-over
amounts to replacement assets.
• If the only replacement assets are goodwill,
the net goodwill roll-over amount is to be apportioned to the maximum extent
among those assets.
The amount apportioned to an asset is applied to reduce the cost base of
the asset.
Any part of the net goodwill roll-over amount that cannot be
apportioned to replacement goodwill assets is taken to be a capital gain
accruing during the year of income in which the relevant assets were disposed of
(section 160ZZPU).
• If the only replacement assets are not
goodwill, both the net non-goodwill roll-over amount and the net goodwill
roll-over amount are to be apportioned to the maximum extent among those
assets.
The amount apportioned to a non-depreciable asset is applied to reduce the
cost base of the asset.
The amount that is apportioned to a depreciable asset is taken (unless a
change in the status of the asset has previously occurred as mentioned in
section 160ZZPX) to be a capital gain that accrues when the asset is disposed
of.
Any part of the roll-over amounts that cannot be apportioned to
replacement assets is taken to be a capital gain accruing during the year of
income in which the relevant assets were disposed of (section
160ZZPV).
• If the replacement assets include both
goodwill and assets other than goodwill, the net goodwill roll-over amount is
apportioned among the replacement assets that are goodwill.
The amount apportioned to particular goodwill is applied to reduce the
cost base of the goodwill.
Any part of the net goodwill roll-over amount that is not applied in this
way, and any net non-goodwill roll-over amount, are to be apportioned among
replacement assets that are not goodwill.
Any amount apportioned to a non-depreciable asset is applied to reduce the
cost base of the asset.
Any amount that is apportioned to a depreciable asset is taken (unless a
change in the status of the asset has previously occurred as mentioned in
section 160ZZPX) to be a capital gain that accrues when the asset is disposed
of.
Any amount remaining is taken to be a capital gain accruing during the
year of income in which the relevant assets were disposed of (section
160ZZPW).
• If a change in the status of a replacement
asset occurs as mentioned in section 160ZZPX, any amount apportioned to the
asset is taken to be a capital gain and, if it is a non-depreciable asset, the
reduction in its cost base is cancelled.
(1) This section sets out the threshold criteria all of which must be
satisfied before this Division applies in relation to the disposal by a taxpayer
of an asset.
Note: The criteria must be satisfied at the disposal test
time (see paragraph 160ZZPL(7)(b)).
(2) The net value of the taxpayer’s assets must not exceed
$5,000,000.
(3) If the taxpayer or an associate of the taxpayer is a partner in a
partnership and the asset disposed of is an asset of the partnership, the net
value of the partnership’s assets must not exceed $5,000,000.
(4) The sum of:
(a) the total of the net values of the assets of the taxpayer;
and
(b) the net values of the assets of any entities that are connected with
the taxpayer; and
(c) if the taxpayer is a partner in a partnership (other than a
partnership that is connected with the taxpayer)—the share of the taxpayer
in the net value of the assets of the partnership; and
(d) if an associate of the taxpayer is a partner in a partnership (other
than a partnership that is connected with the taxpayer)—the share of the
associate in the net value of the assets of the partnership;
must not exceed $5,000,000.
(5) The net value of the assets of an entity at a particular time for the
purposes of this Subdivision is the amount (if any) by which at that time the
sum of the market values of the assets of the entity exceeded the sum of the
liabilities of the entity that related to those assets (other than a liability
that related to an asset that is not an asset for the purposes of this Part
because of paragraph (a), (b), (c) or (d) of the definition of
asset in subsection 160ZZPL(1)).
Assets in respect of which roll-over relief may apply
(1) If:
(a) there is a roll-over asset in respect of a taxpayer in respect of a
year of income; and
(b) apart from this Division, a capital gain (the notional capital
gain) would be taken to have accrued to the taxpayer as a result of the
disposal of the roll-over asset; and
(c) either:
(i) the roll-over asset was an active asset at the disposal test time;
or
(ii) if the roll-over asset was not an active asset at the disposal test
time and the relevant business had ceased to be carried on not earlier than 12
months before the disposal test time—the roll-over asset was an active
asset immediately before the cessation occurred; and
(d) the roll-over asset was an active asset during more than one-half of
the period in which it was owned by the taxpayer; and
(e) where the cost base of the roll-over asset was reduced under a
previous application of this Division—the roll-over asset was acquired by
the taxpayer more than 5 years before the disposal test time; and
(f) the taxpayer elects in writing, on or before the date of lodgment of
the taxpayer’s return of income for the disposal year of income, that this
Division is to apply to the taxpayer in respect of the disposal of the roll-over
asset;
the following provisions of this section have effect.
Exclusion of Part in respect of disposal of roll-over
asset
(2) This Part (other than this Division) does not apply in respect of the
disposal of the roll-over asset.
Calculation of gross non-goodwill roll-over amount
(3) If the roll-over asset is not goodwill, an amount (the gross
non-goodwill roll-over amount) equal to the notional capital gain is
taken for the purposes of this Division to apply to the taxpayer in respect of
the year of income in which the disposal occurred.
Calculation of gross goodwill roll-over amount
(4) If the roll-over asset is goodwill, an amount (the gross
goodwill roll-over amount) equal to the notional capital gain is taken
for the purposes of this Division to apply to the taxpayer in respect of the
year of income in which the disposal occurred.
Application of section
(1) This section applies to a taxpayer in respect of a disposal year of
income if:
(a) there is a roll-over asset, or there are roll-over assets, in respect
of the taxpayer in respect of that year of income; and
(b) there is a gross non-goodwill roll-over amount, or there are gross
non-goodwill roll-over amounts, that apply to the taxpayer in respect of the
disposal year of income.
Gross non-goodwill amount to reduce capital losses
(2) The gross non-goodwill roll-over amount, or the sum of the gross
non-goodwill roll-over amounts, is to be applied, to the maximum extent
possible:
(a) first, in reduction of any capital losses that the taxpayer is taken
to have incurred in the disposal year of income; and
(b) then, in reduction of any net capital losses that the taxpayer is
taken to have incurred in respect of years of income (applicable years of
income) earlier than the disposal year of income but not earlier than
the 1995-96 year of income.
Order in which net capital losses to be reduced
(3) In making reductions under paragraph (2)(b) of net capital losses
incurred in respect of 2 or more applicable years of income, reductions are not
to be made in respect of net capital losses incurred in respect of a particular
applicable year of income until reductions are made, to the maximum extent
possible, of net capital losses incurred in respect of any earlier applicable
year of income or earlier applicable years of income.
If capital losses wholly absorb gross non-goodwill roll-over
amount
(4) If no part of the gross non-goodwill roll-over amount, or of the sum
of the gross non-goodwill roll-over amounts, remains after the application of
that amount or sum under subsection (2), there is no net non-goodwill roll-over
amount applying to the taxpayer in respect of the disposal year of
income.
Net non-goodwill roll-over amount
(5) If any part of the gross non-goodwill roll-over amount, or of the sum
of the gross non-goodwill roll-over amounts, remains after the application of
that amount or sum under subsection (2), the amount remaining is taken to be the
net non-goodwill roll-over amount applying to the taxpayer in
respect of the disposal year of income.
Application of section
(1) This section applies to a taxpayer in respect of a disposal year of
income if:
(a) there is a roll-over asset, or there are roll-over assets, in respect
of the taxpayer in respect of that year of income; and
(b) there is a gross goodwill roll-over amount, or there are gross
goodwill roll-over amounts, that apply to the taxpayer in respect of the
disposal year of income.
Gross goodwill roll-over amounts to reduce capital losses
(2) The gross goodwill roll-over amount, or the sum of the gross goodwill
roll-over amounts, is to be applied, to the maximum extent possible:
(a) first, in reduction of any capital losses that:
(i) the taxpayer is taken to have incurred in respect of the disposal year
of income; and
(ii) remain after the application (if any) of section 160ZZPR;
and
(b) then, in reduction of any net capital losses that:
(i) the taxpayer is taken to have incurred in respect of years of income
(applicable years of income) earlier than the disposal year of
income but not earlier than the 1995-96 year of income; and
(ii) remain after the application (if any) of
section 160ZZPR.
Order in which net capital losses to be reduced
(3) In making reductions under paragraph (2)(b) of net capital losses
incurred in respect of 2 or more applicable years of income, reductions are not
to be made in respect of net capital losses incurred in respect of a particular
applicable year of income until reductions are made, to the maximum extent
possible, of net capital losses incurred in respect of any earlier applicable
year of income or earlier applicable years of income.
If capital losses wholly absorb gross goodwill roll-over
amount
(4) If no part of the gross goodwill roll-over amount, or of the sum of
the gross goodwill roll-over amounts, remains after the application of that
amount or sum under subsection (2), there is no net goodwill roll-over amount
applying to the taxpayer in respect of the disposal year of income.
Net goodwill roll-over amount
(5) If any part of the gross goodwill roll-over amount, or of the sum of
the gross goodwill roll-over amounts, remains after the application of that
amount or sum under subsection (2), the amount remaining is taken to be the
net goodwill roll-over amount applying to the taxpayer in respect
of the disposal year of income.
Taxpayer may nominate replacement assets
(1) Subject to subsections (2) and (3), if:
(a) there is a roll-over asset or there are roll-over assets in respect of
a taxpayer in respect of a year of income; and
(b) there is a net roll-over amount that applies to the taxpayer in
respect of the year of income;
the taxpayer may nominate, for the purposes of the application of this
Division in respect of the net roll-over amount, one or more assets (a
replacement asset or replacement assets):
(c) that are active assets; and
(d) that were acquired by the taxpayer within the period beginning 1 year
before, and ending 2 years after, the last disposal by the taxpayer of any
roll-over asset in that year of income.
Replacement goodwill asset cannot be nominated in respect of net
non-goodwill roll-over amount
(2) If the taxpayer disposes of, and immediately re-acquires, a roll-over
asset, the taxpayer cannot nominate that asset as a replacement asset.
(3) A taxpayer cannot nominate a replacement goodwill asset for the
purposes of the application of this Division in respect of a net non-goodwill
roll-over amount.
Consequences of nomination of replacement assets
(4) If the taxpayer duly nominates a replacement asset or replacement
assets for the purposes of the application of this Division in respect of a net
roll-over amount, whichever of sections 160ZZPU, 160ZZPV and 160ZZPW is relevant
applies to the taxpayer in respect of the disposal year of income.
Capital gain to accrue if no nomination of replacement
assets
(5) If the taxpayer does not duly nominate a replacement asset or
replacement assets for the purposes of the application of this Division in
respect of a net roll-over amount, a capital gain equal to the net roll-over
amount is taken to have accrued to the taxpayer in the disposal year of
income.
Application of section
(1) This section applies to a taxpayer in relation to a disposal year of
income if the taxpayer nominates only a replacement goodwill asset or
replacement goodwill assets for the purposes of the application of this Division
in respect of the net roll-over amount or the net roll-over amounts applying to
the taxpayer in respect of that year of income.
Note: Replacement goodwill assets can only be nominated in
respect of a net goodwill roll-over amount (see subsection
160ZZPT(3)).
If total goodwill cost base is not less than net goodwill roll-over
amount
(2) If the total goodwill cost base in relation to the taxpayer in respect
of the disposal year of income is equal to or greater than the net goodwill
roll-over amount applying to the taxpayer in respect of that year of
income:
(a) the taxpayer must apportion the whole of the net goodwill roll-over
amount among the nominated replacement assets in such manner as the taxpayer
determines but so that the amount apportioned to a particular asset does not
exceed the cost base of the asset; and
(b) if an amount is apportioned to an asset—the cost base of the
asset is taken, from the time of its acquisition by the taxpayer, to have been
reduced by that amount.
If total goodwill cost base is less than net goodwill roll-over
amount
(3) If the total goodwill cost base in relation to the taxpayer in respect
of the disposal year of income is less than the net goodwill roll-over amount
applying to the taxpayer in respect of that year of income, the following
provisions have effect:
(a) the taxpayer must apportion so much of the net goodwill roll-over
amount as is equal to the total goodwill cost base among the nominated
replacement assets but so that the amount apportioned to a particular asset does
not exceed the cost base of the asset;
(b) if an amount is apportioned to an asset—the cost base of the
asset is taken, from the time of its acquisition by the taxpayer, to have been
nil;
(c) an amount equal to the difference between the total goodwill cost base
and the net goodwill roll-over amount is taken to be a capital gain that accrued
to the taxpayer during the disposal year of income.
Application of section
(1) This section applies to a taxpayer in relation to a disposal year of
income if the taxpayer nominates only a replacement non-goodwill asset or
replacement non-goodwill assets for the purposes of the application of this
Division in respect of the net roll-over amount or net roll-over amounts
applying to the taxpayer in respect of that year of income.
If total non-goodwill cost base is not less than total net roll-over
amount
(2) If the total non-goodwill cost base in relation to the taxpayer in
respect of the disposal year of income is equal to or greater than the total net
roll-over amount applying to the taxpayer in respect of that year of income, the
following provisions have effect:
(a) the taxpayer must apportion the whole of the total net roll-over
amount among the nominated replacement assets in such manner as the taxpayer
determines but so that the amount apportioned to a particular asset does not
exceed the cost base of the asset;
(b) if an amount is apportioned to an asset that is not a depreciable
asset—the cost base of the asset is taken, from the time of its
acquisition by the taxpayer, to have been reduced by the amount;
(c) if an amount is apportioned to an asset that is a depreciable asset
and section 160ZZPX does not apply in relation to the asset before it is
disposed of—the amount is taken to be a capital gain that accrues to the
taxpayer during the year of income in which the asset is disposed of.
If total non-goodwill cost base is less than the total net roll-over
amount
(3) If the total non-goodwill cost base in relation to the taxpayer in
respect of the disposal year of income is less than the total net roll-over
amount applying to the taxpayer in respect of that year of income, the following
provisions have effect:
(a) the taxpayer must apportion so much of the total net roll-over amount
as is equal to the total non-goodwill cost base among the nominated replacement
assets but so that the amount apportioned to a particular asset does not exceed
the cost base of the asset;
(b) if an amount is apportioned to an asset that is not a depreciable
asset—the cost base of the asset is taken, from the time of its
acquisition by the taxpayer, to have been nil;
(c) if an amount is apportioned to an asset that is a depreciable asset
and section 160ZZPX does not apply in relation to the asset before it is
disposed of—the amount is taken to be a capital gain that accrues to the
taxpayer during the year of income in which the asset is disposed of;
(d) an amount equal to the difference between the total non-goodwill cost
base and the total net roll-over amount is taken to be a capital gain that
accrued to the taxpayer during the disposal year of income.
Definition
(1) In this section:
residual net roll-over amount, in relation to a taxpayer in
relation to a disposal year of income, means the sum of:
(a) the net goodwill roll-over amount applying to the taxpayer in respect
of that year of income as reduced under paragraph (4)(c); and
(b) the net non-goodwill roll-over amount applying to the taxpayer in
respect of that year of income.
Application of section
(2) This section applies to a taxpayer in relation to a disposal year of
income if the taxpayer nominates both one or more replacement goodwill assets
and one or more replacement non-goodwill assets for the purposes of the
application of this Division in respect of a net roll-over amount or net
roll-over amounts applying to the taxpayer in respect of that year of
income.
Note: Replacement goodwill assets can only be nominated in
respect of a net goodwill roll-over amount (see subsection
160ZZPT(3)).
If total goodwill cost base is not less than net goodwill roll-over
amount
(3) If the total goodwill cost base in relation to the taxpayer in respect
of the disposal year of income is equal to or greater than the net goodwill
roll-over amount applying to the taxpayer in respect of that year of
income:
(a) the taxpayer must apportion the whole of the net goodwill roll-over
amount among the replacement assets that are nominated in respect of the net
goodwill roll-over amount in such manner as the taxpayer determines but so that
the amount apportioned to a particular asset does not exceed the cost base of
the asset; and
(b) if an amount is apportioned to an asset—the cost base of the
asset is taken, from the time of its acquisition by the taxpayer, to have been
reduced by the amount.
If total goodwill cost base is less than net goodwill roll-over
amount
(4) If the total goodwill cost base in relation to the taxpayer in respect
of the disposal year of income is less than the net goodwill roll-over amount
applying to the taxpayer in respect of that year of income:
(a) the taxpayer must apportion so much of the net goodwill roll-over
amount as is equal to the total goodwill cost base among the replacement assets
that are nominated in respect of the net goodwill roll-over amount but so that
the amount apportioned to a particular asset does not exceed the cost base of
the asset; and
(b) if an amount is apportioned to an asset—the cost base of the
asset is taken, from the time of its acquisition by the taxpayer, to have been
nil; and
(c) the net goodwill roll-over amount is taken to be reduced by an amount
equal to the total goodwill cost base.
If total non-goodwill cost base is not less than residual net roll-over
amount
(5) If the total non-goodwill cost base in relation to the taxpayer in
respect of the disposal year of income is equal to or greater than the residual
net roll-over amount applying to the taxpayer in respect of that year of income,
the following provisions have effect:
(a) the taxpayer must apportion the residual net roll-over amount among
the non-goodwill replacement assets that are nominated in respect of a net
roll-over amount in such manner as the taxpayer determines but so that the
amount apportioned to a particular asset does not exceed the cost base of the
asset;
(b) if an amount is apportioned to an asset that is not a depreciable
asset—the cost base of the asset is taken, from the time of its
acquisition by the taxpayer, to have been reduced by the amount;
(c) if an amount is apportioned to an asset that is a depreciable asset
and section 160ZZPX does not apply in relation to the asset before it is
disposed of—the amount is taken to be a capital gain that accrues to the
taxpayer during the year of income in which the asset is disposed of.
If total non-goodwill cost base is less than residual net roll-over
amount
(6) If the total non-goodwill cost base in relation to the taxpayer in
respect of the disposal year of income is less than the residual net roll-over
amount applying to the taxpayer in respect of that year of income, the following
provisions have effect:
(a) the taxpayer must apportion the residual net roll-over amount among
the non-goodwill replacement assets that are nominated in respect of a net
roll-over amount but so that the amount apportioned to a particular asset does
not exceed the cost base of the asset;
(b) if an amount is apportioned to an asset that is not a depreciable
asset—the cost base of the asset is taken, from the time of its
acquisition by the taxpayer, to have been nil;
(c) if an amount is apportioned to an asset that is a depreciable asset
and section 160ZZPX does not apply in relation to the asset before it is
disposed of—the amount is taken to be a capital gain that accrues to the
taxpayer during the year of income in which the asset is disposed of;
(d) an amount equal to the difference between the total non-goodwill cost
base and the residual net roll-over amount is taken to be a capital gain that
accrued to the taxpayer during the disposal year of income.
Change of status to which section applies
(1) This section applies if:
(a) there is a roll-over asset in respect of a taxpayer in respect of a
year of income; and
(b) there is a net roll-over amount that applies to the taxpayer in
respect of the year of income; and
(c) a replacement asset is nominated by the taxpayer under section 160ZZPT
in respect of the net roll-over amount; and
(d) at a time (the change time) after the taxpayer nominated
the replacement asset, the asset:
(i) ceases to be an active asset; or
(ii) becomes an asset in respect of whose disposal this Part would not
apply because of a provision of section 160L; or
(iii) becomes an asset in respect of whose disposal a capital gain would
not be taken to have been incurred because of subsection 160Z(6).
Capital gain accrues when change of status occurs
(2) An amount (the adjustment amount) equal to the amount
that was apportioned to the asset by the taxpayer under section 160ZZPU, 160ZZPV
or 160ZZPW, as the case may be, is taken to be a capital gain that accrued to
the taxpayer in the year of income in which the relevant change time
occurred.
Cost base of non-depreciable asset is increased
(3) If the replacement asset is not a depreciable asset, the cost base of
the asset is taken, from the change time, to be increased by the adjustment
amount.
Application of section
(1) This section applies if:
(a) a replacement asset is disposed of; and
(b) this Part does not apply to the disposal because of a provision of
this Part (other than this Division and section 160X).
Capital gain accrues when asset disposed of
(2) An amount (the adjustment amount) equal to the amount
that was apportioned to the asset by the taxpayer under section 160ZZPU, 160ZZPV
or 160ZZPW, as the case may be, is taken to be a capital gain that accrued to
the taxpayer in the year of income in which the disposal of the replacement
asset occurs.
Cost base of non-depreciable asset is increased
(3) If the replacement asset is not a depreciable asset, the cost base of
the asset is taken, for the purposes of the application of this Part in relation
to the person who acquired the asset, to be increased, from the time of the
acquisition, by the adjustment amount.
(1) If:
(a) a replacement asset that formed part of the estate of a dead person
has passed to the dead person’s legal personal representative;
and
(b) section 160ZZPX had never applied to the dead person in relation to
that asset;
anything done or omitted to be done by the dead person in relation to the
asset is taken for the purposes of this Division to have been done or omitted to
be done by the legal personal representative.
(2) If:
(a) a replacement asset that formed part of the estate of a dead person
has passed to a beneficiary in that estate; and
(b) section 160ZZPX had never applied to the dead person, or to the
dead person’s legal personal representative, in relation to that
asset;
anything done or omitted to be done by the dead person or the dead
person’s legal personal representative in relation to the asset is taken
for the purposes of this Division to have been done or omitted to be done by the
beneficiary.
2 At the end of section
160ZZR
Add:
(3) If a taxpayer makes an election under paragraph 160ZZPQ(1)(f) in
relation to the disposal of an interest in goodwill, this section does not
apply, and is taken never to have applied, in respect of the
disposal.
Part
2—Consequential amendments
3 At the end of subsection
160Z(1)
Add:
Note: The amount of a capital loss referred to in paragraph
(1)(b) may be reduced under subsection 160ZZPR(2) or
160ZZPS(2).
4 At the end of subsection
160ZC(4)
Add:
Note: The amount of a net capital loss referred to in
subsection (4) may be reduced under subsection 160ZZPR(2) or
160ZZPS(2).
5 Application
The Division inserted in the Income Tax Assessment Act 1936 by item
1 applies to disposals of assets on or after 1 July 1997.
1 Subsection 245-25(1)
Omit “it falls within any of the following provisions of this
section”, substitute “subsection (2), (3) or (4) provides that the
debt is a commercial debt”.
2 Subsection 245-25(2)
Omit “A debt”, substitute “Subject to subsection (4A), a
debt”.
3 After subsection
245-25(4)
Insert:
Debt to Commonwealth not a commercial debt
(4A) A debt owed to the Commonwealth that arose under a law relating to
taxation is not a commercial debt.
4 Subsection 245-55(4)
Repeal the subsection, substitute:
(4) Paragraph (2)(a) and subparagraph (3)(a)(i) do not apply in relation
to a debt if:
(a) either:
(i) at the time when the debt was forgiven the creditor was a resident;
or
(ii) the forgiveness of the debt was the disposal of a taxable Australian
asset for the purposes of Part IIIA; and
(b) the debtor and the creditor were not dealing with each other at
arm’s length in respect of the incurring of the debt; and
(c) the debt was not a moneylending debt.
5 Subsection 245-65(2)
Omit “If”, substitute “Subject to subsection (2A),
if”.
6 After subsection
245-65(2)
Insert:
(2A) Subsection (2) does not apply in relation to a debt unless:
(a) at the time when the debt was forgiven the creditor was a resident;
or
(b) the forgiveness of the debt was the disposal of a taxable Australian
asset for the purposes of Part IIIA.
7 Subsection 245-75(1)
Omit “If”, substitute “Subject to subsection (3),
if”.
8 Subsection 245-75(2)
Omit “If”, substitute “Subject to subsection (3),
if”.
9 At the end of section
245-75
Add:
(3) If 2 or more persons were liable (otherwise than as partners in a
partnership) to pay a debt, whether their liability was joint or several, or
joint and several, the gross forgiven amount of the debt in
relation to the person, or each of the persons, in respect of whom the debt was
a commercial debt is the amount worked out using the formula:
where:
overall gross forgiven amount means the amount that would be
the gross forgiven amount of the debt if all the persons liable to pay the debt
were treated as a single person and the debt was a commercial debt in respect of
that person.
number of commercial debtors means the number of persons
liable to pay the debt in respect of whom the debt was a commercial
debt.
10 Subsection 245-140(1) (table of deductible
expenditure)
After:
|
Expenditure on scientific research |
Subsection 73A(2) |
insert:
|
Expenditure on research and development activities |
Section 73B |
11 Subsection 245-140(1) (at the end of the
table of deductible expenditure)
Add:
|
Expenditure incurred in establishing horticultural plants |
Sections 124ZZF and 124ZZG and subsection 124ZZM(2) |
12 Subsection 245-190(3)
Repeal the subsection, substitute:
(3) The maximum amount by which each of the relevant cost bases of an
asset may be reduced is the amount that, apart from sections 245-175 to
245-185, would be the reduced cost base of the asset calculated as if the asset
had been disposed of:
(a) subject to paragraph (b), on the first day of the forgiveness year of
income; or
(b) if, after the beginning of that year of income, an event occurred that
would cause the reduced cost base of the asset to be reduced—on the day on
which the event occurred;
and to have been so disposed of at its market value on the day
concerned.
13 Subsection 245-225(3)
Omit all the words after paragraph (b), substitute:
the other company is taken to be included in the group of related companies
referred to in subsection (2) in respect of the relevant debt if:
(c) a taxpayer who was a controller of the other company immediately
before, and immediately after, the 2 companies ceased to be under common
ownership was also:
(i) a controller of the other company at the time when the relevant debt
was forgiven; and
(ii) a controller of the debtor company at that time; or
(d) immediately before, and immediately after, the 2 companies ceased to
be under common ownership and at the time when the relevant debt was
forgiven:
(i) the debtor company was a controller of the other company; or
(ii) the other company was a controller of the debtor company.
14 At the end of section
245-230
Add:
(4) In this section:
deductible revenue losses, in relation to a company, does not
include a loss that is taken by paragraph 80G(6)(f), to be incurred by the
company in the year of income immediately preceding the loss year referred to in
that paragraph.
1 Subsection 299G(2)
Omit “7th”, substitute “30th”.
1 Paragraph 128TH(b)
Omit “in the course of carrying on a business of lending money, or
otherwise in connection with such a business,”.
2 After paragraph 128TH(b)
Insert:
(ba) the disposal takes place:
(i) in any case—in the course of the taxpayer carrying on a business
of lending money or otherwise in connection with such a business of the
taxpayer; or
(ii) if the taxpayer is a company that is a subsidiary of another
company—while the one or more members of the direct ownership group of the
taxpayer (see subsection 128TL(3)) are each carrying on a business of lending
money; and
3 Paragraphs 128TJ(a) and
(b)
Repeal the paragraphs, substitute:
(a) ordinary shares in an SME (see section 128TK) are issued to the
taxpayer; and
(b) the shares are issued:
(i) in any case—in the course of the taxpayer carrying on a business
of lending money or otherwise in connection with such a business of the
taxpayer; or
(ii) if the taxpayer is a company that is a subsidiary of another
company—while the one or more members of the direct ownership group of the
taxpayer (see subsection 128TL(3)) are each carrying on a business of lending
money; and
4 Paragraph 128TJ(c)
Omit “company”, substitute “SME”.
5 At the end of Division 11B of Part
III
Add:
(1) A company (the first company) is a
subsidiary of another company (the second company)
if all the shares in the first company are beneficially owned by:
(a) the second company; or
(b) a company that is, or 2 or more companies each of which is, a
subsidiary of the second company; or
(c) the second company and a company that is, or 2 or more companies each
of which is, a subsidiary of the second company.
(2) For the purposes of subsection (1), if a company is a subsidiary of
another company (including a company that is such a subsidiary because of a
previous application or applications of this subsection), every company that is
a subsidiary of the first-mentioned company is taken to be a subsidiary of that
other company.
(3) The one or more companies in whichever of paragraph (1)(a), (b) or (c)
applies are the direct ownership group of the first
company.
6 Application
The amendments made by this Part apply where the taxpayer acquired a
threshold interest in an SME on or after 1 July
1996.
(209/96)