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TAXATION LAWS AMENDMENT ACT (NO. 5) 2003 NO. 142, 2003 - SCHEDULE 6

- Reducing tax on excessive ETPs Part 1—Main amendments

Income Tax Rates Act 1986

1 Subsection 3(1)

Insert:

"ETP" has the meaning given by subsection 27A(1) of the Assessment Act.

2 Subsection 3(1)

Insert:

post-June 83 component of an ETP has the meaning given by section 27AA of the Assessment Act.

3 Subsection 3(1)

Insert:

retained amount of the post-June 83 component of an ETP has the meaning given by section 27AC of the Assessment Act.

4 Subsection 3(1)

Insert:

"taxed element" of the retained amount of the post-June 83 component of an ETP has the meaning given by section 27AC of the Assessment Act.

5 Paragraph 1(a) of Part I of Schedule 7

Repeal the paragraph, substitute:

(a) 38% for the amount (if any) of the EC part of the taxable income that does not exceed the difference between:
(i) the amount that would have been the taxed element of the retained amount of the post-June 83 component of the ETP if the amount of the excessive component of the ETP had been nil; and
(ii) the taxed element of the retained amount of the post-June 83 component of the ETP;
worked out disregarding section 27AAA of the Assessment Act;
(aa) 47% for the remainder (if any) of the EC part of the taxable income;

6 Paragraph 1(a) of Part II of Schedule 7

Repeal the paragraph, substitute:

(a) 38% for the amount (if any) of the EC part of the taxable income that does not exceed the difference between:
(i) the amount that would have been the taxed element of the retained amount of the post-June 83 component of the ETP if the amount of the excessive component of the ETP had been nil; and
(ii) the taxed element of the retained amount of the post-June 83 component of the ETP;
worked out disregarding section 27AAA of the Assessment Act;
(aa) 47% for the remainder (if any) of the EC part of the taxable income;

7 Paragraph 1(a) of Part I of Schedule 9

Repeal the paragraph, substitute:

(a) 38% for the amount (if any) of the EC part of the taxable income that does not exceed the difference between:
(i) the amount that would have been the taxed element of the retained amount of the post-June 83 component of the ETP if the amount of the excessive component of the ETP had been nil; and
(ii) the taxed element of the retained amount of the post-June 83 component of the ETP;
worked out disregarding section 27AAA of the Assessment Act;
(aa) 47% for the remainder (if any) of the EC part of the taxable income;

8 Paragraph 1(a) of Part II of Schedule 9

Repeal the paragraph, substitute:

(a) 38% for the amount (if any) of the EC part of the taxable income that does not exceed the difference between:
(i) the amount that would have been the taxed element of the retained amount of the post-June 83 component of the ETP if the amount of the excessive component of the ETP had been nil; and
(ii) the taxed element of the retained amount of the post-June 83 component of the ETP;
worked out disregarding section 27AAA of the Assessment Act;
(aa) 47% for the remainder (if any) of the EC part of the taxable income;

Superannuation Contributions Tax (Assessment and Collection) Act 1997

9 Paragraph 7A(3)(d)

After "year", insert ", worked out ignoring subsection 8(8) of this Act and subsection 9(9) of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 ".

10 Paragraph 7B(3)(e)

After "year", insert ", worked out ignoring subsection 8(8) of this Act and subsection 9(9) of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 ,".

11 At the end of section 8

Add:

Reduced surchargeable contributions

(8)
The amount of the surchargeable contributions of a member for a financial year is the amount worked out under subsection (2) or (3) (as appropriate), reduced by the amount worked out under subsection (9), if:

(a) an eligible termination payment is made to the member in the financial year from the superannuation fund, approved deposit fund or RSA; and
(b) the eligible termination payment has an excessive component.

(9)
The amount of the reduction is worked out as follows:

Amount of the reduction

Step 1. Work out the amount that would have been the taxed element of the retained amount of the post-June 83 component of the eligible termination payment if the amount of the excessive component of the eligible termination payment had been nil.
Step 2. Work out the taxed element of the retained amount of the post-June 83 component of the eligible termination payment.
Step 3. Subtract the result of step 2 from the result of step 1.
Step 4. Divide the result of step 3 by 0.85.
Step 5. Subtract the result of step 3 from the result of step 4.
Step 6. Add the result of step 5 to the excessive component of the eligible termination payment.
Step 7. Identify the amount of the surchargeable contributions (apart from subsection (8)) of the member reported for the financial year by the entity that paid the eligible termination payment.
Step 8. Identify the lesser of the results of steps 6 and 7 (or either result if they are the same).

12 Section 43

Insert:

excessive component of an eligible termination payment has the meaning given by subsection 27A(1) of the Income Tax Assessment Act.

13 Section 43

Insert:

post-June 83 component of an eligible termination payment has the meaning given by section 27AA of the Income Tax Assessment Act.

14 Section 43

Insert:

"retained amount" of the post-June 83 component of an eligible termination payment has the meaning given by section 27AC of the Income Tax Assessment Act .

15 Section 43

Insert:

"taxed element" of the retained amount of the post-June 83 component of an eligible termination payment has the meaning given by section 27AC of the Income Tax Assessment Act.

Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997

16 At the end of section 9

Add:

Reduced surchargeable contributions

(9)
The amount of the surchargeable contributions of a member for a financial year is the amount worked out under subsection (2) or (4) (as appropriate), reduced by the amount worked out under subsection (10), if:

(a) an eligible termination payment is made to the member in the financial year from the constitutionally protected superannuation fund; and
(b) the eligible termination payment has an excessive component.

(10)
The amount of the reduction is worked out as follows:

Amount of the reduction

Step 1. Work out the amount that would have been the taxed element of the retained amount of the post-June 83 component of the eligible termination payment if the amount of the excessive component of the eligible termination payment had been nil.
Step 2. Work out the taxed element of the retained amount of the post-June 83 component of the eligible termination payment.
Step 3. Subtract the result of step 2 from the result of step 1.
Step 4. Divide the result of step 3 by 0.85.
Step 5. Subtract the result of step 3 from the result of step 4.
Step 6. Add the result of step 5 to the excessive component of the eligible termination payment.
Step 7. Identify the amount of the surchargeable contributions (apart from subsection (9)) of the member reported for the financial year by the entity that paid the eligible termination payment.
Step 8. Identify the lesser of the results of steps 6 and 7 (or either result if they are the same).

17 Section 38

Insert:

excessive component of an eligible termination payment has the meaning given by subsection 27A(1) of the Income Tax Assessment Act.

18 Section 38

Insert:

post-June 83 component of an eligible termination payment has the meaning given by section 27AA of the Income Tax Assessment Act.

19 Section 38

Insert:

"retained amount" of the post-June 83 component of an eligible termination payment has the meaning given by section 27AC of the Income Tax Assessment Act .

20 Section 38

Insert:

"taxed element" of the retained amount of the post-June 83 component of an eligible termination payment has the meaning given by section 27AC of the Income Tax Assessment Act.

21 Application

The amendments made by this Part apply to eligible termination payments (as defined in section 27A of the Income Tax Assessment Act 1936 ) made on or after 1 July 2002.

Part 2—Technical correction

Income Tax Rates Act 1986

22 Subsection 3(1) (definition of EC part of the taxable
income )

After "27B(3)", insert "of the Assessment Act".

23 Application

The amendment made by this Part applies to assessments for the 1994-95 year of income and later years of income.


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