Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (No. 3) 1996 No. 78 of 1996 - SCHEDULE 1

Schedule 1-Amendment of the Income Tax Assessment Act 1936:
various measures
Part 1-Tax rebate for low income aged persons 1 Before section 160AAA Insert:
160AAAA Tax rebate for low income aged persons

(1) A taxpayer who is an individual (other than in the capacity as trustee) is
entitled to a rebate of tax in the taxpayer's assessment in respect of income
of a year of income of an amount (if any), ascertained in accordance with the
regulations, if the taxpayer satisfies the conditions in subsections (2) and
(3).

(2) The first condition is that, on at least one day during the year of
income, the taxpayer:

   (a)  has reached pension age, within the meaning of the Social  Security
        Act 1991 ; and

   (b)  has 10 years qualifying Australian residence or has a qualifying
        residence exemption for an age pension, within the meaning of the
        Social Security Act 1991; and

   (c)  is not in gaol.

(3) The second condition is that the taxpayer:

   (a)  has a taxable income for the year of income less than an amount
        ascertained in accordance with the regulations; and

   (b)  is not entitled to a rebate of tax for the year of income under
        section 160AAA.

(4) For the purposes of paragraph (3)(a), if the taxpayer is the spouse of
another person, the taxable income of the taxpayer is taken to be half of the
sum of:

   (a)  the taxable income of the taxpayer; and

   (b)  any share of the net income of a trust estate to which the spouse is
        presently entitled and that is assessed under section 98; and

   (c)  the actual taxable income of the spouse (reduced by any amount
        included in the spouse's assessable income under section 100).

(5) Regulations made for the purposes of this section may be expressed to
apply in relation to a year of income any part of which occurred before the
notification of the regulations. 160AAAB Tax rebate for low income aged
persons-trustees assessed under section 98

(1) A taxpayer who is a trustee who is liable to be assessed under section 98
in respect of a beneficiary's share of the net income of the trust estate is
entitled to a rebate of tax in the trustee's assessment in respect of income
of a year of income of an amount (if any), ascertained in accordance with the
regulations, if the conditions in subsections (2) and (3) are satisfied.

(2) The first condition is that, on at least one day during the year of
income, the beneficiary:

   (a)  has reached pension age, within the meaning of the Social  Security
        Act 1991 ; and

   (b)  has 10 years qualifying Australian residence or has a qualifying
        residence exemption for an age pension, within the meaning of the
        Social Security Act 1991; and

   (c)  is not in gaol.

(3) The second condition is that the beneficiary:

   (a)  has a taxable income for the year of income less than an amount
        ascertained in accordance with the regulations; and

   (b)  is not entitled to a rebate of tax for the year of income under
        section 160AAA.

(4) For the purposes of paragraph (3)(a), if the beneficiary is not the spouse
of another person, the taxable income of the beneficiary is taken to be the
beneficiary's share of the net income of the trust estate.

(5) For the purposes of paragraph (3)(a), if the beneficiary is the spouse of
another person, the taxable income of the beneficiary is taken to be half of
the sum of:

   (a)  the beneficiary's share of the net income of the trust estate; and

   (b)  any share of the net income of a trust estate to which the spouse is
        presently entitled and that is assessed under section 98; and

   (c)  the actual taxable income of the spouse (reduced by any amount
        included in the spouse's assessable income under section 100).

(6) Regulations made for the purposes of this section may be expressed to
apply in relation to a year of income any part of which occurred before the
notification of the regulations. 2 Subsection 221YAB(1) (definition of
qualifying rebates) After "159SZ", insert ", 160AAAA". 3 Paragraph
221YDA(1)(da) After "under section" (second occurring), insert "160AAAA,
160AAAB". 4 Subparagraph 221YDA(2)(a)(ii) After "under section" (second
occurring), insert "160AAAA, 160AAAB". 5 Application

(1) The amendments of the Income Tax Assessment Act 1936 made by items 1 and 2
of this Schedule apply to assessments for the 1996-97 year of income and for
all later years of income.

(2) The amendments of the Income Tax Assessment Act 1936 made by items 3 and 4
of this Schedule apply in respect of the 1996-97 year of income and for all
later years of income.
Part 2-Rebatable annuities 6 Subsection 27A(1) (paragraph (a) of the
definition of qualifying annuity) After "1987", insert ", wholly with
rolled-over amounts,". 7 Subsection 27A(1) (subparagraph (b)(i) of the
definition of qualifying annuity) After "1987", insert "wholly or partly with
rolled-over amounts". 8 Subsection 27A(1) (at the end of paragraph (c) of the
definition of qualifying annuity) Add "wholly or partly with rolled-over
amounts". 9 Application The amendments made by this Part apply to annuities
commuted, or that terminate, on or after 15 June 1996.
Part 3-Sale of mining rights 10 Paragraph 23(pa) After "mineral" (first
occurring), omit "being a person who is a bona fide prospector, that is to
say-", insert: where:

   (ia) those rights to mine were acquired by the person before 7.30 p.m., by
        legal time in the Australian Capital Territory, on 20 August 1996; and

   (ib) the income was derived prior to 20 August 2001 and is less than or
        equal to the market value of those rights at 7.30 p.m., by legal time
        in the Australian Capital Territory, on 20 August 1996; and

   (ic) the person, on or prior to 20 August 1996 and at the time the income
        was derived, was a bona fide prospector, that is to say-
Part 4-Equity investments in small-medium enterprises 11 After Division 11A of
Part III Insert:
Division 11B-Equity investments in small-medium enterprises 128TG Summary of
this Division

(1) The following is a summary of this Division.

(2) If, in connection with a money-lending business, a taxpayer is issued
shares in a small-medium enterprise, any profit or loss the taxpayer makes
when it disposes of certain shares that would be dealt with under section 25
or 51 is, to the extent that it relates to the period after the issue, instead
dealt with under Part IIIA (Capital gains and capital losses).

(3) For this to apply, the taxpayer must, after the issue, hold shares
representing at least 10% of the paid up capital of the small- medium
enterprise. 128TH When Division applies
This Division applies if:

   (a)  a taxpayer acquires a threshold interest in an SME (see section
        128TJ); and

   (b)  afterwards, in the course of carrying on a business of lending money,
        or otherwise in connection with such a business, the taxpayer disposes
        of ordinary shares, or an interest in ordinary shares, in the SME that
        were issued to the taxpayer (whether before, at the time of, or after
        acquiring the threshold interest); and

   (c)  the shares are not trading stock of the taxpayer; and

   (d)  apart from this section:

        (i)    any profit on the disposal would be included in the taxpayer's
               assessable income of a year of income under section 25; and

        (ii)   any loss on the disposal would be allowable as a deduction from
               the taxpayer's assessable income of a year of income under
               section 51. 128TI Consequences of Division applying
If this Division applies:

   (a)  no profit on the disposal is included in the taxpayer's assessable
        income of any year of income under section 25; and

   (b)  no loss on the disposal is allowable as a deduction from the
        taxpayer's assessable income of any year of income under section 51;
        and

   (c)  the taxpayer is taken:

        (i)    to have disposed of the shares, at the time of acquiring the
               threshold interest in the SME, for a consideration equal to
               their market value at the time; and

        (ii)   to have re-acquired the shares immediately afterwards (for the
               purposes of this section, as if they had been issued to the
               taxpayer) for an amount equal to that consideration; and

   (d)  any profit or loss on the disposal that is taken to have happened by
        subparagraph (c)(i) is included in the taxpayer's assessable income
        under section 25, or is an allowable deduction under section 51, in
        the year of income in which the shares are actually (disregarding that
        subparagraph) disposed of, and not in any other year of income. Note:
        As a result of this section, the tax consequences of the actual
        disposal will be dealt with under section 25 or 51 in respect of any
        period of holding before the acquisition of the threshold interest and
        under Part IIIA in respect of any period after the acquisition of that
        interest. 128TJ Acquiring a threshold interest in an SME
A taxpayer acquires a threshold interest in an SME if:

   (a)  in the course of carrying on a business of lending money, or otherwise
        in connection with such a business, ordinary shares in a company are
        issued to the taxpayer; and

   (b)  the company is an SME (see section 128TK) when the shares are issued;
        and

   (c)  immediately after the shares, and any other ordinary shares forming
        part of the same issue, are issued to the taxpayer and any other
        persons, the percentage of the total paid-up capital of the company
        (assuming all amounts payable for the issue had been paid) represented
        by ordinary shares issued to the taxpayer (whether before or as part
        of the threshold share issue) is at least 10%; and

   (d)  no previous issue of shares to the taxpayer had resulted in the
        taxpayer acquiring a threshold interest in the SME. 128TK SME or
        small-medium enterprise

(1) An SME or small-medium enterprise is a company the total value of whose
assets, as determined under this section, is no more than $50 million.

(2) The total value of the company's assets is the total value of its assets
(both current and non-current) as shown in the last audited accounts prepared
in relation to the company for the purposes of Division 4 of Part 3.6 of the
Corporations Law of a State or internal Territory before the investment is
made.

(3) If:

   (a)  no such audited accounts have been prepared within the 12 months
        ending when the shares are issued; or

   (b)  the last such audited accounts prepared relate to a period that ended
        more than 18 months before the shares are issued; then the company is
        not an SME unless:

   (c)  before the shares are issued, the taxpayer gets an audited statement
        (see subsection (4)) showing the total value of the company's assets
        as at a time no more than 12 months before the shares are issued; and

   (d)  that value is no more than $50 million.

(4) In subsection (3), an audited statement is a statement audited by a person
or firm:

   (a)  who is appointed as the company's auditor in accordance with the
        Corporations Law of a State or internal Territory; or

   (b)  who is eligible to consent to being so appointed. 12 Application The
        amendment made by this Part applies where the taxpayer acquired the
        threshold interest in the SME on or after 1 July 1996. 13
        Transitional-pre-1 July 1996 shares For the purposes of Division 11B
        of the Income Tax Assessment Act 1936 as amended by this Part, any
        shares held by the taxpayer on or after 1 July 1996 that were issued
        to the taxpayer before 1 July 1996 are taken to be held instead by a
        person other than the taxpayer.
Part 5-Deductions allowable to co-operative companies 14 At the end of section
120 Add:

(3) It is hereby declared to be the intention of the Parliament that paragraph
(1)(c) applies to loans taken out for the purpose of acquiring assets from:

   (a)  government sources; or

   (b)  non-government sources.