Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (No. 2) 1991No. 100, 1991 - SECT 25

25. Section 26BC of the Principal Act is amended:
(a) by omitting "listed" from paragraph (a) of the definition of "eligible
security" in subsection (1) and substituting " public";

   (b)  by inserting in subsection (1) the following definitions:

" `distribution' includes:

   (a)  interest; or

   (b)  a dividend; or

   (c)  a share issued by a company to a shareholder in the company where the
        share is issued:

        (i)    as a bonus share; or

        (ii)   in the circumstances mentioned in subsection 6BA (1); or

   (d)  an amount credited by the trustee of a unit trust to a unit holder as
        a unit holder; or

   (e)  a unit issued by the trustee of a unit trust in the circumstances that
        would be covered by section 160ZYC if paragraph (d) of that section
        had not been enacted;
`public company' means:

   (a)  a listed company; or

   (b)  a mutual life assurance company (within the meaning of section 110);
        or

   (c)  a company in which a government or an authority of a government has a
        controlling interest; or

   (d)  a company that is a subsidiary of a company covered by paragraph (a),
        (b) or (c);
`subsidiary' has the same meaning as in section 160ZZO.";

   (c)  by omitting from subparagraph (3) (a) (ii) "not being later than 3
        months" and substituting "being less than 12 months";

   (d)  by omitting paragraph (3) (c) and substituting the following
        paragraph:
  "(c)   if any of the following events occurred during the period (in this
section called the `borrowing period') commencing at the original disposal
time and ending at the re-acquisition time:

        (i)    the making or payment of a distribution (whether in property or
               money) in respect of the borrowed security;

        (ii)   the issue, by the company, trustee, government or government
               authority concerned, of a right or option in respect of the
               borrowed security;

        (iii)  if the borrowed security is a right or option:

                (A)  the giving of a direction by the lender to the borrower
                     to exercise the right or option; or

                (B)  the giving of a direction by the lender to the borrower
                     to exercise an identical right or option; then (even if
                     the event occurred after the borrowed security was
                     disposed of by the borrower to a third party), the lender
                     receives from the borrower, under the agreement:

        (iv)   if subparagraph (i) applies:

                (A)  the distribution; or

                (B)  if the distribution is in property - identical property;
                     or

                (C)  a payment (in this section called the `compensatory
                     payment') equal to the value to the lender of the
                     distribution; or

        (v)    if subparagraph (ii) applies:

                (A)  the right or option; or

                (B)  an identical right or option; or

                (C)  a payment (in this section also called the `compensatory
                     payment') equal to the value to the lender of the right
                     or option; or

        (vi)   if subparagraph (iii) applies:

                (A)  the shares, units, bonds, debentures or financial
                     instruments that resulted from exercising the right or
                     option; or

                (B)  shares, units, bonds, debentures or financial instruments
                     that are identical to those that resulted from, or that
                     would have resulted from, exercising the right or option;
                     or

                (C)  a payment (in this section also called the `compensatory
                     payment') equal to the value to the lender of the shares,
                     units, bonds, debentures or financial instruments that
                     resulted from, or would have resulted from, exercising
                     the right or option; and";

   (e)  by inserting after subsection (3) the following subsection:

"(3A) For the purposes of paragraph (3) (c), if, apart from this subsection,
either of the following events occurred after the commencement of the
borrowing period:

   (a)  the making or payment of a distribution (whether in property or money)
        in respect of the borrowed security;

   (b)  the issue, by the company, trustee, government or government authority
        concerned, of a right or option in respect of the borrowed security;
        (even if the event occurred after the borrowed security was disposed
        of by the borrower to a third party), the event is taken to have
        occurred during the borrowing period if, and only if, (assuming that
        the borrower had held the borrowed security at all times during the
        borrowing period) the entitlement to the distribution or issue would
        have been attributable to the borrower's holding of the borrowed
        security at a particular time during the borrowing period.";

   (f)  by inserting after subsection (4) the following subsections:

"(4A) If the lender receives a compensatory payment covered by
sub-subparagraph (3) (c) (v) (C), then, in determining whether an amount is
included in the assessable income of the lender under a provision of this Act
other than Part IIIA, the lender is to be treated as if:

   (a)  the lender had held the borrowed security at all relevant times during
        the borrowing period; and

   (b)  the right or option had been issued directly to the lender in respect
        of the borrowed security; and

   (c)  the the lender had disposed of the right or option immediately after
        its issue for a consideration equal to the compensatory payment.

"(4B) If the lender receives a compensatory payment covered by
sub-subparagraph (3) (c) (vi) (C), then, in determining whether an amount is
included in the assessable income of the lender under a provision of this Act
other than Part IIIA, the lender is to be treated as if:

   (a)  the lender had held the right or option at all relevant times during
        the borrowing period; and

   (b)  the lender had exercised the right or option; and

   (c)  the lender had immediately disposed of the shares, units, bonds,
        debentures or financial instruments that resulted from exercising the
        right or option for a consideration equal to the compensatory
        payment.";
(g) by omitting from subparagraph (6) (b) (i) all the words after "of that
Part" and substituting the following word and sub-subparagraphs:

"if:

                (A)  the lender had disposed of the borrowed security
                     immediately before the acquisition of the replacement
                     security; and

                (B)  that Part had applied in respect of the disposal of the
                     borrowed security by the lender; or";

   (h)  by omitting subsection (7) and substituting the following subsection:

"(7) If, in the case of a borrowed security to which paragraph (6) (b)
applies, the replacement security was disposed of by the lender (otherwise
than under a transaction covered by subsection (3)):

   (a)  if the disposal of the replacement security occurred within 12 months
        after the earliest day on which a paired security in relation to the
        replacement security was acquired by the lender (otherwise than under
        a transaction covered by subsection (3)) - the reference in paragraph
        (6) (b) to the indexed cost base to the lender of the borrowed
        security is to be read as a reference to the cost base to the lender
        of the paired security; or

   (b)  if the disposal of the replacement security occurred not less than 12
        months after the earliest day on which a paired security in relation
        to the replacement security was acquired by the lender (otherwise than
        under a transaction covered by subsection (3)) - subsection 160Z (3)
        does not apply to the disposal of the replacement security.";

        (i)    by inserting after subsection (9) the following subsections:

"(9A) Subject to subsection 160zh (6), a reference in subsection 160ZH (1),
(2) or (3) to the incidental costs to the borrower of the acquisition of an
eligible security covered by sub-subparagraph (3) (a) (ii) (B) includes a
reference to a compensatory payment incurred by the borrower.

"(9B) For the purposes of the application of Part IIIA to a right or option
received by the lender as mentioned in subparagraph (3) (c) (v), the borrower
and lender are to be treated as if the eligible security in respect of which
the right or option was issued had been held by the lender at the time of the
acquisition of the right or option.

"(9C) For the purposes of the application of Part IIIA to a share, unit, bond,
debenture or financial instrument received by the lender as mentioned in
subparagraph (3) (c) (vi), the borrower and the lender are to be treated as
if:

   (a)  the share, unit, bond, debenture or financial instrument had been
        received as the result of the exercise of the borrowed security; and

   (b)  the borrowed security had been held by the lender at the time of the
        exercise; and

   (c)  the lender had exercised the borrowed security; and

   (d)  the lender had exercised the borrowed security at the time the
        direction concerned was given; and

   (e)  the amount of the contribution (if any) made by the lender to the
        borrower in respect of the carrying out of the direction were an
        amount paid as consideration by the lender in respect of the exercise.

"(9D) If a distribution covered by subparagraph (3) (c) (i) consists of one or
more shares issued by a company to the borrower or to a third party in the
circumstances mentioned in subsection 6BA (1), then, for the purposes of the
applicaton of Part IIIA to a share (in this subsection called the `notional
bonus share') received by the lender in relation to the distribution in the
circumstances mentioned in sub-subparagraph (3) (c) (iv) (A) or (B), the
borrower and the lender are to be treated as if:

   (a)  the company had issued the notional bonus share to the lender instead
        of the borrower or the third party, as the case requires; and

   (b)  the notional bonus share had been issued in the circumstances
        mentioned in subsection 6BA (1); and

   (c)  the notional bonus share had been issued in respect of the borrowed
        security; and

   (d)  the lender had held the borrowed security at the time the notional
        bonus share was issued.

"(9E) If a distribution covered by subparagraph (3) (c) (i) consists of one or
more units issued by the trustee of a unit trust to the borrower or to a third
party in the circumstances covered by section 160ZYC, then, for the purposes
of the application of Part IIIA to a unit (in this subsection called the
`notional bonus unit') received by the lender in relation to the distribution
in the circumstances mentioned in sub-subparagraph (3) (c) (iv) (A) or (B),
the borrower and the lender are to be treated as if:

   (a)  the trustee had issued the notional bonus unit to the lender instead
        of the borrower or the third party, as the case requires; and

   (b)  the notional bonus unit had been issued in the circumstances covered
        by section 160ZYC; and

   (c)  the notional bonus unit had been issued in respect of the borrowed
        security; and

   (d)  the lender had held the borrowed security at the time the notional
        bonus unit was issued.

"(9F) If the lender receives a compensatory payment covered by
sub-subparagraph (3) (c) (v) (C), then, for the purposes of the application of
Part IIIA to the lender, the lender is to be treated as if:

   (a)  the lender had held the borrowed security at all relevant times during
        the borrowing period; and

   (b)  the right or option had been issued directly to the lender in respect
        of the borrowed security; and

   (c)  the lender had disposed of the right or option immediately after its
        issue for a consideration equal to the compensatory payment.

"(9G) If the lender receives a compensatory payment covered by
sub-subparagraph (3) (c) (vi) (C), then, for the purposes of the application
of Part IIIA to the lender, the lender is to be treated as if:

   (a)  the lender had held the right or option at all relevant times during
        the borrowing period; and

   (b)  the lender had exercised the right or option; and

   (c)  the lender had immediately disposed of the shares, units, bonds,
        debentures or financial instruments that resulted from exercising the
        right or option for a consideration equal to the compensatory
        payment.";

   (j)  by omitting from subsection (10) "or (9)" and substituting ",(9),
        (9A), (9B), (9C), (9D), (9E), (9F) or (9G)";

   (k)  by omitting from subsection (11) "and (9)" and substituting ",(9),
        (9A), (9B), (9C), (9D), (9E), (9F) and (9G)";

   (l)  by inserting after subsection (11) the following subsections:

"(11A) If:

   (a)  the lender receives from the borrower a distribution or identical
        property covered by subparagraph (3) (c) (iv); and

   (b)  assuming that the borrowed security had continued to be held by the
        lender, an amount (in this subsection called the `otherwise assessable
        amount') would have been included in the lender's assessable income of
        a year of income in respect of the distribution concerned; the
        lender's assessable income of the year of income includes an amount
        equal to the otherwise assessable amount.

"(11B) If:

   (a)  the lender receives from the borrower a compensatory payment covered
        by sub-subparagraph (3) (c) (iv) (C); and

   (b)  assuming that the borrowed security had continued to be held by the
        lender, an amount (in this subsection called the `otherwise assessable
        amount') would have been included in the lender's assessable income of
        a year of income in respect of the distribution concerned; the
        lender's assessable income of the year of income includes an amount
        equal to the otherwise assessable amount.".