Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (NO. 3) 1999 NO. 11, 1999 - SCHEDULE 2--Measures

Income Tax Assessment Act 1936

1 Subsection 177A(1)

Insert:

foreign tax credit means a credit within the meaning of Division 19 of Part III.

2 At the end of paragraph 177C(1)(ba)

Add "or".

3 After paragraph 177C(1)(ba)

Insert:

(bb) a foreign tax credit being allowable to the taxpayer where the whole or a part of that foreign tax credit would not have been allowable, or might reasonably be expected not to have been allowable, to the taxpayer if the scheme had not been entered into or carried out;

Add:

; and (f) in a case where paragraph (bb) applies--the amount of the whole of the foreign tax credit or of the part of the foreign tax credit, as the case may be, referred to in that paragraph.

Add:

; or (d) a foreign tax credit being allowable to the taxpayer the whole or a part of which would not have been, or might reasonably be expected not to have been, allowable to the taxpayer if the scheme had not been entered into or carried out, where:

(i) the allowance of the foreign tax credit to the taxpayer is attributable to the making of a declaration, agreement, election, selection or choice, the giving of a notice or the exercise of an option by any person, being a declaration, agreement, election, selection, choice, notice or option expressly provided for by this Act; and

(ii) the scheme was not entered into or carried out by any person for the purpose of creating any circumstance or state of affairs the existence of which is necessary to enable the declaration, agreement, election, selection, choice, notice or option to be made, given or exercised, as the case may be.

Omit "or (c)(i)", substitute ", (c)(i) or (d)(i)".

7 At the end of paragraph 177C(3)(c)

Add "or".

8 After paragraph 177C(3)(c)

Insert:

(ca) the allowance of a foreign tax credit to a taxpayer;

Add:

; or (g) the foreign tax credit would not have been allowable.

Add "or".

11 After paragraph 177F(1)(c)

Insert:

(d) in the case of a tax benefit that is referable to a foreign tax credit, or a part of a foreign tax credit, being allowable to the taxpayer--determine that the whole or a part of the foreign tax credit, or the part of the foreign tax credit, as the case may be, is not to be allowable to the taxpayer;

Add "or".

13 After paragraph 177F(3)(c)

Insert:

(d) if, in the opinion of the Commissioner:

(i) an amount would have been allowed, or would be allowable, to the relevant taxpayer as a foreign tax credit if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, apart from this subsection, be allowable, as the case may be, as a foreign tax credit to the relevant taxpayer; and

(ii) it is fair and reasonable that the amount, or a part of the amount, should be allowable as a foreign tax credit to the relevant taxpayer;

determine that that amount or that part, as the case may be, should have been allowed or is allowable, as the case may be, as a foreign tax credit to the relevant taxpayer;

Insert:

177H Amendment of foreign tax credit determinations (1) Section 160AK does not prevent the amendment of a foreign tax credit determination at any time before the end of 6 years after the original determination date if the amendment is for the purposes of giving effect to subsection 177F(1).

(2) Section 160AK does not prevent the amendment of a foreign tax credit determination at any time if the amendment is for the purpose of giving effect to subsection 177F(3).

(3) For the purposes of this section, a foreign tax credit determination is a determination under Division 19 of Part III.

(4) For the purposes of this section, the original determination date for a foreign tax credit determination has the same meaning as in section 160AK.

15 Subsection 222A(1) (definition of scheme section )

Omit "or 226", substitute ", 226 or 226AA".

16 Subsection 222A(1) (at the end of the definition of wrongful behaviour provision )

Add:

; or (d) in relation to section 226AA, paragraph 226AA(1)(c) or (2)(c).

Insert:

226AA Penalty tax where Part IVA applies--foreign tax credits (1) If:

(a) for the purpose of making a foreign tax credit determination, the Commissioner has calculated the amount of a foreign tax credit that is allowable to a taxpayer; and

(b) in calculating the amount of the foreign tax credit allowable to the taxpayer, one or more determinations made by the Commissioner under subsection 177F(1) were taken into account; and

(c) the amount of the foreign tax credit that would have been allowable if those subsection 177F(1) determinations had not been made exceeds the amount of the foreign tax credit referred to in paragraph (a);

(2) If:

(a) the Commissioner makes a foreign tax credit determination to the effect that a foreign tax credit is not allowable to a taxpayer; and

(b) in determining that the foreign tax credit is not allowable to the taxpayer, one or more determinations made by the Commissioner under subsection 177F(1) were taken into account; and

(c) a foreign tax credit would have been allowable to the taxpayer if those subsection 177F(1) determinations had not been made;

(3) For the purposes of this Part, additional tax payable by a taxpayer under subsection (1) or (2) is in respect of a year of income if:

(a) the additional tax is payable by the taxpayer in relation to an amount of a foreign tax credit that would have been allowable to the taxpayer if the subsection 177F(1) determinations referred to in paragraph (1)(c) or (2)(c) had not been made; and

(b) the foreign tax credit relates to assessable income, or another amount, derived by the taxpayer during the year of income.

foreign tax credit means a credit within the meaning of Division 19 of Part III.

foreign tax credit determination means a determination under Division 19 of Part III.

penalty percentage means:

(a) subject to paragraph (b)--50%; or

(b) if it is reasonably arguable that Part IVA does not apply--25%.

Note: The heading to section 226 is altered by adding at the end " --general ".

After "scheme section", insert "(other than section 226AA)".

19 Application

The amendments made by this Schedule apply in relation to schemes that were entered into after 4 pm, by legal time in the Australian Capital Territory, on 13 August 1998.