1 2004-2005-2006 2 3 The Parliament of the 4 Commonwealth of Australia 5 6 HOUSE OF REPRESENTATIVES 7 8 9 10 11 Presented and read a first time 12 13 14 15 16 17 18 19 20 21 Tax Laws Amendment (2006 Measures 22 No. 1) Bill 2006 23 24 No. , 2006 25 26 (Treasury) 27 28 29 30 A Bill for an Act to amend the law relating to 31 taxation, and for related purposes 32 33 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 1 [Page Break] 2 1 Short title ...........................................................................................3 3 2 Commencement.................................................................................3 4 3 Schedule(s) ........................................................................................3 5 Schedule 1--Foreign source income exemptions for temporary 6 residents 5 7 Part 1--Main amendments 5 8 Income Tax Assessment Act 1997 5 9 Part 2--Other amendments 21 10 Fringe Benefits Tax Assessment Act 1986 21 11 Income Tax Assessment Act 1936 21 12 Income Tax Assessment Act 1997 23 13 Schedule 2--Business related costs 28 14 Part 1--Capital allowances amendments 28 15 Income Tax Assessment Act 1997 28 16 Part 2--CGT amendments 37 17 Income Tax Assessment Act 1997 37 18 Income Tax (Transitional Provisions) Act 1997 41 19 Part 3--Application 42 20 Schedule 3--Promotion and implementation of schemes 43 21 Part 1--Main amendments 43 22 Taxation Administration Act 1953 43 23 Part 2--Consequential amendments 54 24 Income Tax Assessment Act 1997 54 25 Taxation Administration Act 1953 54 26 Part 3--Application 56 27 Schedule 4--Vouchers 57 28 A New Tax System (Goods and Services Tax) Act 1999 57 29 2 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] 2 taxation, and for related purposes 3 The Parliament of Australia enacts: 4 1 Short title 5 This Act may be cited as the Tax Laws Amendment (2006 6 Measures No. 1) Act 2006. 7 2 Commencement 8 This Act commences on the day on which it receives the Royal 9 Assent. 10 3 Schedule(s) 11 Each Act that is specified in a Schedule to this Act is amended or 12 repealed as set out in the applicable items in the Schedule Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 3 [Page Break] 2 according to its terms. 4 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 2 Schedule 1--Foreign source income 3 exemptions for temporary residents 4 Part 1--Main amendments 5 Income Tax Assessment Act 1997 6 1 At the end of Division 768 7 Add: 8 Subdivision 768-R--Temporary residents 9 Guide to Subdivision 768-R 10 768-900 What this Subdivision is about 11 This Subdivision modifies the general tax rules for people in 12 Australia who are temporary residents, whether Australian 13 residents or foreign residents. 14 Generally foreign income derived by temporary residents is 15 non-assessable non-exempt income and capital gains and losses 16 they make are also disregarded for CGT purposes. There are some 17 exceptions for employment-related income and capital gains on 18 shares and rights acquired under employee share schemes. 19 Temporary residents are also partly relieved of record-keeping 20 obligations in relation to the controlled foreign company and 21 foreign investment fund rules. 22 Interest paid by temporary residents is not subject to withholding 23 tax and may be non-assessable non-exempt income for a foreign 24 resident. 25 Table of sections 26 Operative provisions 27 768-905 Objects Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 5 [Page Break] Part 1 Main amendments 1 768-910 Income derived by temporary resident 2 768-915 Certain capital gains and capital losses of temporary resident to be 3 disregarded 4 768-920 Capital gains and losses on employee shares and rights where taxation of 5 discount not deferred 6 768-925 Notional gain or loss 7 768-930 Adjustment to notional gain or loss 8 768-935 Adjustment for share or right acquired under employee share scheme 9 768-940 Adjustment for derived share 10 768-945 Amending assessment to take account of effect on capital gain or loss of 11 recalculating discount 12 768-950 Individual becoming an Australian resident 13 768-955 Temporary resident who ceases to be temporary resident but remains an 14 Australian resident 15 768-960 Temporary resident not attributable taxpayer for purposes of controlled 16 foreign companies rules 17 768-965 Exemption of temporary resident from taxation in respect of foreign 18 investment fund income 19 768-970 Modification of rules for accruals system of taxation of certain non-resident 20 trust estates 21 768-975 Calculation of beneficiary's share of net income of non-resident trust estate 22 768-980 Interest paid by temporary resident 23 Operative provisions 24 768-905 Objects 25 The objects of this Subdivision are to: 26 (a) provide *temporary residents with tax relief on most foreign 27 source income and capital gains; and 28 (b) relieve the burdens associated with complying with certain 29 record-keeping obligations and interest withholding tax 30 obligations. 31 768-910 Income derived by temporary resident 32 (1) The following are *non-assessable non-exempt income: 33 (a) the *ordinary income you *derive directly or indirectly from a 34 source other than an *Australian source if you are a 35 *temporary resident when you derive it; 36 (b) your *statutory income (other than a *net capital gain) from a 37 source other than an Australian source if you are a temporary 38 resident when you derive it. 6 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 This subsection has effect subject to subsections (3) and (5). 2 Note: A capital gain or loss you make may be disregarded under 3 section 768-915. 4 (2) For the purposes of paragraph (1)(b): 5 (a) if you have statutory income because a particular 6 circumstance occurs, you derive the statutory income at the 7 time when the circumstance occurs; and 8 (b) if you have statutory income because a number of 9 circumstances occur, you derive the statutory income at the 10 time when the last of those circumstances occurs. 11 Exception to subsection (1) 12 (3) However, the following are not *non-assessable non-exempt 13 income under subsection (1): 14 (a) the *ordinary income you *derive directly or indirectly from a 15 source other than an *Australian source to the extent that it is 16 remuneration, for employment undertaken, or services 17 provided, while you are a *temporary resident; 18 (b) your *statutory income (other than a *net capital gain) from a 19 source other than an Australian source to the extent that it 20 relates to employment undertaken, or services provided, 21 while you are a temporary resident; 22 (c) an amount included in your assessable income under 23 Division 86; 24 (d) an amount that, but for subsection (1), would be included in 25 your assessable income under Division 13A of Part III of the 26 Income Tax Assessment Act 1936. 27 Note: This subsection only makes an amount not non-assessable non-exempt 28 income under subsection (1). It does not prevent that amount from 29 being non-assessable non-exempt income under some other provision 30 of this Act or the Income Tax Assessment Act 1936. 31 Section 26AAC employee share schemes 32 (4) This subsection applies if: 33 (a) an amount would otherwise be included in your assessable 34 income under section 26AAC of the Income Tax Assessment 35 Act 1936 (about shares and rights acquired by employees); 36 and Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 7 [Page Break] Part 1 Main amendments 1 (b) the applicable time mentioned in subsection 26AAC(15) of 2 that Act for the relevant *share occurs while you are a 3 *temporary resident. 4 (5) If subsection (4) applies, the amount is *non-assessable 5 non-exempt income to the extent to which you acquired the 6 relevant *share under a scheme for the acquisition of shares by 7 employees in respect of, or for or in relation (directly or indirectly) 8 to: 9 (a) any employment you undertook outside Australia; or 10 (b) any services you provided outside Australia; 11 prior to becoming a *temporary resident. 12 (6) Subsection (5) does not limit paragraph (1)(b). 13 768-915 Certain capital gains and capital losses of temporary 14 resident to be disregarded 15 A *capital gain or *capital loss you make from a *CGT event is 16 disregarded if: 17 (a) you are a *temporary resident when, or immediately before, 18 the CGT event happens; and 19 (b) you would not make a capital gain or loss from the CGT 20 event if you were a foreign resident when, or immediately 21 before, the CGT event happens. 22 Note: Division 136 deals with capital gains and capital losses by foreign 23 residents. 24 768-920 Capital gains and losses on employee shares and rights 25 where taxation of discount not deferred 26 When this section applies 27 (1) This section applies to a *share or right if: 28 (a) you *acquire the share or right under an *employee share 29 scheme; and 30 (b) you engage in employment, or render services, that affect the 31 holding or acquisition of the shares or rights while you are a 32 *temporary resident; and 33 (c) the share or right does not have the *necessary connection 34 with Australia; and 8 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 (d) either: 2 (i) the share or right is not a *qualifying share or 3 *qualifying right; or 4 (ii) the share or right is a qualifying share or qualifying 5 right and you have made an election under section 139E 6 of the Income Tax Assessment Act 1936 covering the 7 share or right; and 8 (e) a *CGT event happens in relation to the share or right; and 9 (f) if the CGT event is CGT event I1--you are not a temporary 10 resident immediately before the event happens; and 11 (g) you would make a *capital gain or *capital loss from the CGT 12 event, and the capital gain or capital loss would not be 13 disregarded, if you were an Australian resident (but not a 14 temporary resident) when the CGT event happens; and 15 (h) this section has not previously applied to you in relation to a 16 CGT event in relation to the share or right. 17 Note: Paragraph (a)--section 139DQ of the Income Tax Assessment Act 18 1936 applies for the purposes of this Subdivision to treat a matching 19 share or right issued as part of a 100% takeover or restructure as a 20 continuation of the share or right it matches. 21 (2) This section also applies to a *share (the derived share) if: 22 (a) you *acquire a right (the original right) under an *employee 23 share scheme; and 24 (b) you engage in employment, or render services, that affect the 25 holding or acquisition of the original right, or the derived 26 share, while you are a *temporary resident; and 27 (c) you acquire the derived share by exercising the original right; 28 and 29 (d) the derived share does not have the *necessary connection 30 with Australia; and 31 (e) either: 32 (i) the original right is not a *qualifying right; or 33 (ii) the original right is a qualifying right and you have 34 made an election under section 139E of the Income Tax 35 Assessment Act 1936 covering the original right; and 36 (f) a *CGT event happens in relation to the derived share; and 37 (g) if the CGT event is CGT event I1--you are not a temporary 38 resident immediately before the event happens; and Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 9 [Page Break] Part 1 Main amendments 1 (h) you would make a *capital gain or *capital loss from the CGT 2 event, and the capital gain or capital loss would not be 3 disregarded, if you were an Australian resident (but not a 4 temporary resident) when the CGT event happens; and 5 (i) this section has not previously applied to you in relation to 6 the original right or the derived share. 7 Note: Paragraph (a)--section 139DQ of the Income Tax Assessment Act 8 1936 applies for the purposes of this Subdivision to treat a matching 9 share or right issued as part of a 100% takeover or restructure as a 10 continuation of the share or right it matches. 11 (3) To avoid doubt, paragraph (1)(e) or (2)(f) applies: 12 (a) even if you are not a *temporary resident when the *CGT 13 event happens; and 14 (b) whether you are an Australian resident or a foreign resident 15 when the CGT event happens. 16 Capital gain or loss 17 (4) If you are a *temporary resident or a foreign resident when the 18 *CGT event happens, you make a *capital gain or *capital loss from 19 the CGT event. 20 Note: If you are an Australian resident (but not a temporary resident) when 21 the CGT event occurs, neither Division 136 nor section 768-915 22 prevents you having a capital gain or capital loss. 23 (5) Subsection (4) has effect despite Division 136 and section 768-915. 24 Amount of capital gain or capital loss for temporary residents and 25 foreign residents 26 (6) If you are a *temporary resident or a foreign resident when the 27 *CGT event happens, the amount of the *capital gain or *capital 28 loss is the amount of your adjusted notional gain or loss worked 29 out under subsection (9). 30 Amount of capital gain or capital loss for Australian residents 31 (7) If you are an Australian resident (but not a *temporary resident) 32 when the *CGT event happens, the amount of the *capital gain or 33 *capital loss is the sum of: 34 (a) the amount that would be the amount of your capital gain or 35 capital loss if this section did not apply to you; and 10 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 (b) the amount of your adjusted notional gain or loss worked out 2 under subsection (9). 3 Example: George, a New Zealander, is granted shares (with a total market value 4 at the time of $100,000) under an employee share scheme on 5 20 January 2006. He comes to Australia as a temporary resident on 6 1 January 2007 and completes the rest of the employment to which the 7 shares relate in Australia. George elects to have the discount assessed 8 in that income year. He then ceases to be a temporary resident but 9 remains an Australian resident on 8 May 2008. At that time the shares 10 have a market value of $80,000. George disposes of the shares on 11 30 June 2009 for $115, 000. George's capital gain for the purpose of 12 paragraph (a) would be $35,000. Assume that the amount of the loss 13 that accrued up to 8 May 2008 that is to be counted for the purpose of 14 paragraph (b) is $9,000. For the year ending 30 June 2009, George 15 would, as a result of subsection (7), make a capital gain of $26,000 16 (being $35,000 less $9,000). 17 (8) If subsection (7) applies to the *CGT event, subsections 136-40(3) 18 and 768-955(3) do not apply for the purposes of applying 19 Division 115 in relation to the CGT event. 20 Adjusted notional gain or loss 21 (9) To work out your adjusted notional gain or loss: 22 (a) work out your notional gain or loss using section 768-925; 23 and 24 (b) adjust your notional gain or loss using sections 768-930, 25 768-935 and 768-940. 26 768-925 Notional gain or loss 27 (1) Your notional gain or loss is the *capital gain or *capital loss you 28 would have had in relation to the *CGT event if, for the whole of 29 the period set by subsections (2) and (3), you: 30 (a) had been an Australian resident; and 31 (b) had not been a *temporary resident. 32 (2) The period starts: 33 (a) in the case of section 768-920 applying to the *share or right 34 in relation to which the *CGT event happens because of 35 subsection 768-920(1): 36 (i) if the share or right was acquired from an *employee 37 share trust--when you first acquired a beneficial 38 interest in the share or right; or Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 11 [Page Break] Part 1 Main amendments 1 (ii) if subparagraph (i) does not apply--when you *acquired 2 that share or right; and 3 (b) in the case of section 768-920 applying to the *share in 4 relation to which the *CGT event happens because of 5 subsection 768-920(2): 6 (i) if the share was acquired from an *employee share 7 trust--when you first acquired a beneficial interest in 8 the original right; or 9 (ii) if subparagraph (i) does not apply--when you *acquired 10 the original right. 11 (3) The period ends when the *CGT event happens. 12 (4) If you are an Australian resident (but not a *temporary resident) 13 when the *CGT event happens, your notional gain or loss is 14 reduced by the amount of the *capital gain or *capital loss that you 15 would have made in relation to the *CGT event if section 768-920 16 did not apply to you. 17 768-930 Adjustment to notional gain or loss 18 (1) If section 768-920 applies to the *share or right in relation to which 19 the *CGT event happens because of subsection 768-920(1), adjust 20 your notional gain or loss by: 21 (a) firstly, applying the factor worked out under subsection 22 768-935(1), (2) or (3) to the amount of your notional gain or 23 loss; and 24 (b) secondly, applying the factor worked out under subsection 25 768-935(4) to the amount worked out under paragraph (a). 26 (2) If section 768-920 applies to the *share in relation to which the 27 *CGT event happens because of subsection 768-920(2), adjust your 28 notional gain or loss by: 29 (a) firstly, applying the factor worked out under subsection 30 768-940(1), (2) or (3) to the amount of your notional gain or 31 loss; and 32 (b) secondly, applying the factor worked out under subsection 33 768-940(4) to the amount worked out under paragraph (a). 12 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 768-935 Adjustment for share or right acquired under employee 2 share scheme 3 (1) If: 4 (a) the *CGT event happens on or after the *cessation time for 5 the share or right; and 6 (b) when, or immediately before, the CGT event happens you are 7 either: 8 (i) a foreign resident; or 9 (ii) an Australian resident who is a temporary resident; 10 the factor to be applied for the purposes of paragraph 11 768-930(1)(a) is: Days before cessation time 12 Days before CGT event 13 where: 14 days before cessation time is the number of days in the period that: 15 (a) starts on the day on which you *acquired the *share or right 16 or, if you acquired the share or right from an *employee share 17 trust, on the day on which you first acquired a beneficial 18 interest in the share or right; and 19 (b) ends on the *cessation time for the share or right. 20 days before CGT event is the number of days in the period that: 21 (a) starts on the day on which you *acquired the *share or right 22 or, if you acquired the share or right from an *employee share 23 trust, on the day on which you first acquired a beneficial 24 interest in the share or right; and 25 (b) ends on the day on which the *CGT event happens. 26 (2) If: 27 (a) the *CGT event happens on or after the *cessation time for 28 the share or right; and 29 (b) when, or immediately before, the CGT event happens you are 30 an Australian resident (but not a *temporary resident); 31 the factor to be applied for the purposes of paragraph 32 768-930(1)(a) is: Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 13 [Page Break] Part 1 Main amendments Days before cessation time 1 Days before ceasing to be a temporary resident 2 where: 3 days before cessation time is the number of days in the period that: 4 (a) starts on the day on which you *acquired the *share or right 5 or, if you acquired the share or right from an *employee share 6 trust, on the day on which you first acquired a beneficial 7 interest in the share or right; and 8 (b) ends on the *cessation time for the share or right. 9 days before ceasing to be a temporary resident is the number of 10 days in the period that: 11 (a) starts on the day on which you *acquired the *share or right 12 or, if you acquired the share or right from an *employee share 13 trust, on the day on which you first acquired a beneficial 14 interest in the share or right; and 15 (b) ends on the day on which you cease to be a *temporary 16 resident. 17 (3) The factor to be applied for the purposes of paragraph 18 768-930(1)(a) is 1 if: 19 (a) the CGT event happens before the *cessation time for the 20 *share or right; or 21 (b) you became an Australian resident who was not a *temporary 22 resident before the cessation time for the share or right. 23 (4) The factor to be applied for the purposes of paragraph 24 768-930(1)(b) is: Assessable part of discount 25 Discount 26 where: 27 assessable part of discount is the amount of the discount that: 28 (a) was included in your assessable income under Division 13A 29 of Part III of the Income Tax Assessment Act 1936 in relation 30 to the *share or right; or 14 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 (b) would have been included in your assessable income under 2 that Division in relation to the share or right if subsection 3 139BA(2) of that Act were disregarded. 4 discount is the amount of the discount. 5 768-940 Adjustment for derived share 6 (1) If: 7 (a) the *CGT event happens on or after the *cessation time for 8 the original right; and 9 (b) when, or immediately before, the CGT event happens you are 10 either: 11 (i) a foreign resident; or 12 (ii) an Australian resident who is a *temporary resident; 13 the factor to be applied for the purposes of paragraph 14 768-930(2)(a) is: Days before cessation time 15 Days before CGT event 16 where: 17 days before cessation time is the number of days in the period that: 18 (a) starts on the day on which you *acquired the original right or, 19 if you acquired the *share from an *employee share trust, on 20 the day on which you first acquired a beneficial interest in 21 the original right; and 22 (b) ends on the *cessation time for the original right. 23 days before CGT event is the number of days in the period that: 24 (a) starts on the day on which you *acquired the original right or, 25 if you acquired the *share from an *employee share trust, on 26 the day on which you first acquired a beneficial interest in 27 the original right; and 28 (b) ends on the day on which the *CGT event happens. 29 (2) If: 30 (a) the *CGT event happens on or after the *cessation time for 31 the original right; and 32 (b) when, or immediately before, the CGT event happens you are 33 an Australian resident (but not a *temporary resident); Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 15 [Page Break] Part 1 Main amendments 1 the factor to be applied for the purposes of paragraph 2 768-930(2)(a) is: Days before cessation time 3 Days before ceasing to be a temporary resident 4 where: 5 days before cessation time is the number of days in the period that: 6 (a) starts on the day on which you *acquired the original right or, 7 if you acquired the *share from an *employee share trust, on 8 the day on which you first acquired a beneficial interest in 9 the original right; and 10 (b) ends on the *cessation time for the original right. 11 days before ceasing to be a temporary resident is the number of 12 days in the period that: 13 (a) starts on the day on which you *acquired the original right or, 14 if you acquired the *share from an *employee share trust, on 15 the day on which you first acquired a beneficial interest in 16 the original right; and 17 (b) ends on the day on which you cease to be a *temporary 18 resident. 19 (3) The factor to be applied for the purposes of paragraph 20 768-930(2)(a) is 1 if: 21 (a) the *CGT event happens before the *cessation time for the 22 original right; or 23 (b) you became an Australian resident who was not a *temporary 24 resident before the cessation time for the original right. 25 (4) The factor to be applied for the purposes of paragraph 26 768-930(2)(b) is: Assessable part of discount 27 Discount 28 where: 29 assessable part of discount is the amount of the discount that: 30 (a) was included in your assessable income under Division 13A 31 of Part III of the Income Tax Assessment Act 1936 in relation 32 to the original right; or 16 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 (b) would have been included in your assessable income under 2 that Division in relation to the original right if subsection 3 139BA(2) of that Act were disregarded. 4 discount is the amount of the discount. 5 768-945 Amending assessment to take account of effect on capital 6 gain or loss of recalculating discount 7 (1) This section applies if: 8 (a) an amount is included in your assessable income, or you have 9 a net capital loss, for a particular income year; and 10 (b) that amount is reduced, or increased, because of a change in 11 the extent (if any) to which any of the following provisions 12 of the Income Tax Assessment Act 1936 apply in relation to 13 the amount during a subsequent income year: 14 (i) section 23AF; 15 (ii) section 23AG; 16 (iii) subsection 139B(1A). 17 (2) In paragraph (1)(b): 18 (a) the reference to an amount being reduced includes a 19 reference to the amount being reduced to a nil amount; and 20 (b) the reference to an amount being increased includes a 21 reference to the amount being increased from a nil amount. 22 (3) Section 170 of the Income Tax Assessment Act 1936 does not 23 prevent the amendment of an assessment to take account of the 24 effect that the reduction or increase has on the determination of the 25 amount of a *capital gain or *capital loss under subsection 26 768-920(6) or (7). 27 (4) If section 768-920 applies to the *share or right in relation to which 28 the *CGT event occurs because of subsection 768-920(1), the 29 amendment must be made before the end of the period of 4 years 30 starting immediately after the income year during which the period 31 of employment or service relating to the *acquisition of the share or 32 right ends. 33 (5) If section 768-920 applies to the *share or right in relation to which 34 the *CGT event occurs because of subsection 768-920(2), the 35 amendment must be made before the end of the period of 4 years Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 17 [Page Break] Part 1 Main amendments 1 starting immediately after the income year during which the period 2 of employment or service relating to the *acquisition of the original 3 right ends. 4 768-950 Individual becoming an Australian resident 5 Section 136-40 does not apply to your becoming an Australian 6 resident if you are a *temporary resident immediately after you 7 become an Australian resident. 8 768-955 Temporary resident who ceases to be temporary resident 9 but remains an Australian resident 10 (1) If you are a *temporary resident and you then cease to be a 11 temporary resident (but remain, at that time, an Australian 12 resident), there are rules relevant to each *CGT asset that: 13 (a) you owned just before you ceased to be a temporary resident; 14 and 15 (b) does not have the *necessary connection with Australia; and 16 (c) you *acquired on or after 20 September 1985. 17 (2) The first element of the *cost base and *reduced cost base of the 18 asset (at the time you cease to be a *temporary resident) is its 19 *market value at that time. This subsection has effect despite 20 Subdivision 130-D. 21 (3) Also, Parts 3-1 and 3-3 apply to the asset as if you had *acquired it 22 at the time you ceased to be a *temporary resident. 23 (4) This section does not apply to a *share or right if: 24 (a) it is a *qualifying share or a *qualifying right; and 25 (b) you have not made an election under section 139E of the 26 Income Tax Assessment Act 1936 covering the share or right; 27 and 28 (c) the *cessation time for the share or right has not occurred. 29 768-960 Temporary resident not attributable taxpayer for purposes 30 of controlled foreign companies rules 31 For the purposes of Part X of the Income Tax Assessment Act 1936 32 (which deals with the attribution of income in respect of controlled 33 foreign companies), you are taken not to be an *attributable 18 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 taxpayer in relation to a *CFC or *CFT at any time you are a 2 *temporary resident. 3 768-965 Exemption of temporary resident from taxation in respect 4 of foreign investment fund income 5 If you are a *temporary resident at the end of an income year, 6 section 529 and Division 22 of Part XI of the Income Tax 7 Assessment Act 1936 do not apply to you in relation to a *FIF or 8 *FLP in respect of the notional accounting period of the FIF or FLP 9 that ends in that income year. 10 768-970 Modification of rules for accruals system of taxation of 11 certain non-resident trust estates 12 At any time when you are a *temporary resident, you are taken not 13 to be a resident for the purposes of section 102AAZD of the 14 Income Tax Assessment Act 1936. 15 768-975 Calculation of beneficiary's share of net income of 16 non-resident trust estate 17 At any time when you are a *temporary resident, you are taken not 18 to be a resident for the purposes of subsection 96C(6) of the 19 Income Tax Assessment Act 1936. 20 768-980 Interest paid by temporary resident 21 Interest that is paid by a *temporary resident: 22 (a) is an amount to which section 128B (liability to withholding 23 tax) of the Income Tax Assessment Act 1936 does not apply; 24 and 25 (b) is *non-assessable non-exempt income if the interest is: 26 (i) *derived by a foreign resident; and 27 (ii) is not derived from carrying on *business in Australia at 28 or through a *permanent establishment in Australia. 29 2 Subsection 995-1(1) 30 Insert: 31 temporary resident: you are a temporary resident if: Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 19 [Page Break] Part 1 Main amendments 1 (a) you hold a temporary visa granted under the Migration Act 2 1958; and 3 (b) you are not an Australian resident within the meaning of the 4 Social Security Act 1991; and 5 (c) your *spouse is not an Australian resident within the meaning 6 of the Social Security Act 1991. 7 However, you are not a temporary resident if you have been an 8 Australian resident (within the meaning of this Act), and any of 9 paragraphs (a), (b) and (c) are not satisfied, at any time after the 10 commencement of this definition. 11 Note: The tests in paragraphs (b) and (c) are applied to ensure that holders of 12 temporary visas who nonetheless have a significant connection with 13 Australia are not treated as temporary residents for the purposes of 14 this Act. 20 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Other amendments Part 2 1 2 Part 2--Other amendments 3 Fringe Benefits Tax Assessment Act 1986 4 3 Subsection 136(1) (sub-subparagraph (j)(ii)(B) of the 5 definition of fringe benefit) 6 Omit "an exempt visitor to Australia for the purposes of section 517 of 7 that Act in relation to the year of income in which", substitute "a 8 temporary resident (within the meaning of the Income Tax Assessment 9 Act 1997) when". 10 Income Tax Assessment Act 1936 11 4 At the end of subsection 96C(6) 12 Add: 13 Note: A temporary resident is taken not to be a resident for the purposes of 14 this subsection: see section 768-975 of the Income Tax Assessment Act 15 1997. 16 5 At the end of subsection 128B(2) 17 Add: 18 Note: An amount of interest paid to a person by a temporary resident is an 19 amount to which this section does not apply: see section 768-980 of 20 the Income Tax Assessment Act 1997. 21 6 At the end of subsection 128B(2A) 22 Add: 23 Note: An amount of interest paid to a person by a temporary resident is an 24 amount to which this section does not apply: see section 768-980 of 25 the Income Tax Assessment Act 1997. 26 7 At the end of section 128D 27 Add: 28 Note: An amount of interest paid to a person by a temporary resident is 29 non-assessable non-exempt income: see section 768-980 of the 30 Income Tax Assessment Act 1997. 31 8 Subsection 139DQ(1) Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 21 [Page Break] Part 2 Other amendments 1 After "this Division", insert "and Subdivision 768-R of the Income Tax 2 Assessment Act 1997". 3 9 Subsection 139DQ(2) 4 After "this Division", insert "and Subdivision 768-R of the Income Tax 5 Assessment Act 1997". 6 10 Subsection 139DQ(3) 7 After "this Division", insert "and Subdivision 768-R of the Income Tax 8 Assessment Act 1997". 9 11 Paragraphs 139GB(3)(a) and (b) 10 Repeal the paragraphs, substitute: 11 (a) is a temporary resident within the meaning of the Income Tax 12 Assessment Act 1997; or 13 (b) is not a resident; or 14 12 Paragraph 274(1)(aa) 15 Omit "an exempt visitor to Australia for the purposes of section 517 in 16 relation to", substitute "a temporary resident within the meaning of the 17 Income Tax Assessment Act 1997 at the end of". 18 13 At the end of section 361 19 Add: 20 (3) Subsections (1) and (2) have effect subject to section 768-960 of 21 the Income Tax Assessment Act 1997. 22 14 Subsection 469(5) 23 Repeal the subsection, substitute: 24 (5) The operative provision does not apply, or its application is 25 affected, in certain circumstances which are set out in: 26 (a) Divisions 2 to 15 of this Part; and 27 (b) section 768-965 of the Income Tax Assessment Act 1997. 28 15 Division 10 of Part XI 29 Repeal the Division. 22 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Other amendments Part 2 1 Income Tax Assessment Act 1997 2 16 Section 11-55 (table item headed "foreign aspects of 3 income taxation") 4 Before: withholding tax, dividend royalty or interest subject to............. 128D 5 insert: income derived by temporary residents...................................... 768-910 interest paid by temporary residents........................................... 768-980 6 17 Section 11-55 (after table item headed "tax loss transfers") 7 Insert: temporary residents see foreign aspects of income taxation 8 18 Subsection 104-160(6) (note 1) 9 Omit "section 104-165", substitute "section 104-166". 10 19 Subsection 104-160(6) (after note 1) 11 Insert: 12 Note 1A: An individual may disregard the gain or loss if he or she was a 13 temporary resident immediately before he or she stopped being an 14 Australian resident: see section 768-915. 15 20 Subsection 104-165(1) 16 Repeal the subsection. 17 Note: The heading to section 104-165 is replaced by the heading "Exception for 18 individuals". 19 21 After section104-165 20 Insert: 21 104-166 Subsection 104-165(1) still applies if you continue to be a 22 short term Australian resident 23 Subsection 104-165(1) continues to apply, despite its repeal by 24 item 20 of Schedule 1 to the Tax Laws Amendment (2006 25 Measures No. 1) Act 2006, to an individual: Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 23 [Page Break] Part 2 Other amendments 1 (a) who is in Australia on the day on which that item receives the 2 Royal Assent; and 3 (b) who remains an Australian resident from that day until the 4 time subsection 104-165(1) is applied in respect of him or 5 her. 6 22 Section 109-55 (table item 15) 7 After "become an Australian resident", insert "(but not a temporary 8 resident)". 9 23 Section 109-55 (after table item 15) 10 Insert: 15A You are a temporary resident, when you cease to be section 768-955 you then cease to be a a temporary resident temporary resident (but remain, at that time, an Australian resident) and you owned a CGT asset that you acquired on or after 20 September 1985 and that did not have the necessary connection with Australia 11 24 Section 112-87 (table item 1) 12 After "becomes an Australian resident", insert "(but not a temporary 13 resident)". 14 25 Section 112-87 (after table item 1) 15 Insert: 1A A temporary resident ceases First element of cost 768-955 to be a temporary resident base and reduced cost (but remains, at that time, an base Australian resident) 16 26 After paragraph 130-80(4)(a) 17 Insert: 18 (aa) you are not a *temporary resident immediately after you 19 become an Australian resident; and 20 27 Subsection 130-80(4) (note) 24 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Other amendments Part 2 1 Omit "Note", substitute "Note 1". 2 28 Subsection 130-80(4) (note) 3 Omit "Section 136-40 deals", substitute "Sections 136-40 and 768-955 4 deal". 5 29 At the end of subsection 130-80(4) 6 Add: 7 Note 2: Paragraph (aa)--see also section 768-920. 8 30 After paragraph 130-83(4)(a) 9 Insert: 10 (aa) you are not a *temporary resident immediately after you 11 become an Australian resident; and 12 31 Subsection 130-83(4) (note) 13 Omit "Note", substitute "Note 1". 14 32 Subsection 130-83(4) (note) 15 Omit "Section 136-40 deals", substitute "Sections 136-40 and 768-955 16 deal". 17 33 After paragraph 130-85(4)(a) 18 Insert: 19 (aa) you are not a *temporary resident immediately after you 20 become an Australian resident; and 21 34 Subsection 130-85(4) (note) 22 Omit "Note", substitute "Note 1". 23 35 Subsection 130-85(4) (note) 24 Omit "Section 136-40 deals", substitute "Sections 136-40 and 768-955 25 deal". 26 36 At the end of subsection 130-85(4) 27 Add: 28 Note 2: Paragraph (aa)--see also section 768-920. 29 37 At the end of subsection 136-40(1) Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 25 [Page Break] Part 2 Other amendments 1 Add: 2 Note: This section has effect subject to section 768-950 (individuals who 3 become Australian residents and are temporary residents immediately 4 after they become Australian residents). 5 38 Subsection 995-1(1) 6 Insert: 7 FLP has the same meaning as in Part XI of the Income Tax 8 Assessment Act 1936. 9 39 Subsection 995-1(1) (definition of notional accounting 10 period) 11 Omit "section 486", substitute "section 470". 12 40 Application 13 (1) Sections 768-910, 768-945, 768-960, 768-965, 768-970 and 768-975 of 14 the Income Tax Assessment Act 1997 apply for an income year that 15 begins on or after the start-up day. 16 (2) Sections 768-915, 768-920, 768-925, 768-930, 768-935 and 768-940 of 17 the Income Tax Assessment Act 1997 and items 20 and 21 of this 18 Schedule apply if the relevant CGT event happens on or after the 19 start-up day. 20 (3) For the purposes of sections 768-920, 768-925, 768-930, 768-935, 21 768-940 and 768-945 of the Income Tax Assessment Act 1997, items 8, 22 9 and 10 of this Schedule apply if: 23 (a) the relevant CGT event happens on or after the start-up day; 24 and 25 (b) the relevant matching shares or rights were acquired on or 26 after 1 July 2004. 27 (4) Section 768-950 of the Income Tax Assessment Act 1997 and items 26, 28 30 and 33 of this Schedule apply to an individual becoming an 29 Australian resident on or after the start-up day. 30 (5) Section 768-955 of the Income Tax Assessment Act 1997 applies to an 31 individual ceasing to be a temporary resident (but remaining an 32 Australian resident) on or after the start-up day. 26 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Other amendments Part 2 1 (6) For the purposes of section 768-955 of the Income Tax Assessment Act 2 1997, items 8, 9 and 10 of this Schedule apply if: 3 (a) the individual ceases to be a temporary resident (but remains 4 an Australian resident) on or after the start-up day; and 5 (b) the relevant CGT asset is a matching share or right that was 6 acquired on or after 1 July 2004. 7 (7) Section 768-980 of the Income Tax Assessment Act 1997 applies to a 8 payment of interest made on or after the day on which this Act receives 9 the Royal Assent. 10 (8) The amendments made by items 13, 14 and 15 of this Schedule apply 11 for an income year that begins on or after the start-up day. 12 (9) In this item: 13 start-up day means the 1 July next following the day on which this Act 14 receives the Royal Assent. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 27 [Page Break] Part 1 Capital allowances amendments 1 2 Schedule 2--Business related costs 3 Part 1--Capital allowances amendments 4 Income Tax Assessment Act 1997 5 1 Subsection 12-5(2) (before table item headed "leases") 6 Insert: lease, authority, licence, permit or quota expenditure to terminate...................................................... 25-110 7 2 At the end of Division 25 8 Add: 9 25-110 Capital expenditure to terminate lease etc. 10 (1) You can deduct an amount for capital expenditure you incur to 11 terminate a lease or licence (including an authority, permit or 12 quota) that results in the termination of the lease or licence if the 13 expenditure is incurred: 14 (a) in the course of *carrying on a *business; or 15 (b) in connection with ceasing to carry on a business. 16 (2) The amount you can deduct is 20% of the expenditure: 17 (a) for the income year in which the lease or licence is 18 terminated; and 19 (b) for each of the next 4 income years. 20 Exceptions 21 (3) You cannot deduct any amount for expenditure you incur to 22 terminate a lease that, in accordance with *accounting standards, or 23 statements of accounting concepts made by the Australian 24 Accounting Standards Board, is classified as a finance lease. 25 (4) If you incurred the expenditure under an *arrangement and: 26 (a) there is at least one other party to the arrangement with 27 whom you did not deal at *arm's length; and 28 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Capital allowances amendments Part 1 1 (b) apart from this subsection, the amount of the expenditure 2 would be more than the *market value of what it was for 3 (assuming the termination did not occur and was never 4 proposed to occur); 5 the amount of expenditure you take into account is that market 6 value. 7 (5) You cannot deduct any amount for expenditure you incur to 8 terminate a lease or licence if: 9 (a) after the termination, you or an *associate of yours enters into 10 another lease or licence with the same party or an associate of 11 that party; and 12 (b) the other lease or licence is of the same kind as the original 13 one. 14 (6) You cannot deduct any amount for expenditure you incur to 15 terminate a lease or licence to the extent that the expenditure is for 16 the granting or receipt of another lease or licence in relation to the 17 asset that was the subject of the original lease or licence. 18 3 Section 35-5 19 Repeal the section, substitute: 20 35-5 Object 21 (1) The object of this Division is to improve the integrity of the 22 taxation system by: 23 (a) preventing losses from non-commercial activities that are 24 *carried on as *businesses by individuals (alone or in 25 partnership) being offset against other assessable income; 26 and 27 (b) preventing pre-business capital expenditure and 28 post-business capital expenditure by individuals (alone or in 29 partnership) in relation to non-commercial activities being 30 deductible under section 40-880 (business related costs); 31 unless certain exceptions apply. 32 (2) This Division is not intended to apply to activities that do not 33 constitute *carrying on a *business (for example, the receipt of 34 income from passive investments). 35 4 Subsection 35-10(2) (heading) Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 29 [Page Break] Part 1 Capital allowances amendments 1 Repeal the heading, substitute: 2 Rules 3 5 After subsection 35-10(2) 4 Insert: 5 (2A) You cannot deduct an amount under section 40-880 (business 6 related costs) for expenditure in relation to a *business activity you 7 used to *carry on if you are an individual, either alone or in 8 partnership (whether or not some other entity is a member of the 9 partnership) unless: 10 (a) one of the tests set out in section 35-30 (assessable income 11 test), 35-35 (profits test), 35-40 (real property test) or 35-45 12 (other assets test) was satisfied for the business activity; or 13 (b) the Commissioner has exercised the discretion set out in 14 section 35-55 for the business activity; or 15 (c) the exception in subsection (4) applied; 16 for the income year in which the business activity ceased to be 17 carried on or an earlier income year. 18 (2B) If you are an individual, either alone or in partnership (whether or 19 not some other entity is a member of the partnership), you cannot 20 deduct an amount under section 40-880 (business related costs) for 21 expenditure in relation to a *business activity: 22 (a) you propose to *carry on; or 23 (b) another entity proposes to carry on if the other entity is not an 24 individual, either alone or in partnership; 25 for an income year before the one in which the business activity 26 starts to be carried on. 27 (2C) This section applies to an amount that you could have deducted, 28 apart from paragraph (2B)(a), as if it were an amount attributable 29 to the *business activity that you can deduct from assessable 30 income from the activity for the income year in which the business 31 activity starts to be *carried on. 32 (2D) You can deduct expenditure covered by paragraph (2B)(b) for the 33 income year in which the *business activity starts to be *carried on. 34 6 Subsection 35-10(4) 30 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Capital allowances amendments Part 1 1 After "subsection (2)", insert ", (2A) or (2B)". 2 7 Subsection 35-15(1) 3 Omit "section 35-10", substitute "subsection 35-10(2)". 4 8 Subsection 35-20(1) 5 Omit "section 35-10", substitute "subsection 35-10(2) or (2A)". 6 9 Section 35-30 7 Omit "rule in section 35-10 does not apply", substitute "rules in 8 section 35-10 do not apply". 9 10 Subsection 35-35(1) 10 Omit "rule in section 35-10 does not apply", substitute "rules in 11 section 35-10 do not apply". 12 11 Subsection 35-35(1) 13 Omit "subsection 35-10(2)", substitute "subsections 35-10(2) and 14 (2C)". 15 12 Subsection 35-35(2) 16 Omit "rule in section 35-10 does not apply", substitute "rules in 17 section 35-10 do not apply". 18 13 Subsection 35-35(2) 19 Omit "subsection 35-10(2)", substitute "subsections 35-10(2) and 20 (2C)". 21 14 Subsection 35-40(1) 22 Omit "rule in section 35-10 does not apply", substitute "rules in 23 section 35-10 do not apply". 24 15 Subsection 35-45(1) 25 Omit "rule in section 35-10 does not apply", substitute "rules in 26 section 35-10 do not apply". 27 16 Subsection 35-55(1) 28 Omit "section 35-10", substitute "subsection 35-10(2)". Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 31 [Page Break] Part 1 Capital allowances amendments 1 17 Subparagraph 35-55(1)(b)(ii) 2 Omit "subsection 35-10(2)", substitute "subsections 35-10(2) and 3 (2C)". 4 18 At the end of section 35-55 (after the note) 5 Add: 6 (2) The Commissioner may decide that the rule in subsection 7 35-10(2B) does not apply to a *business activity for an income year 8 if the Commissioner is satisfied that it would be unreasonable to 9 apply that rule because special circumstances of the kind referred 10 to in paragraph (1)(a) of this section prevented the activity from 11 starting. 12 Note: This subsection is intended to provide for a case where a business 13 activity would have begun to be carried on and satisfied one of the 14 tests if it were not for the special circumstances. 15 19 Section 40-10 (table item 2.3) 16 After "5 years", insert "where the amounts are not otherwise taken into 17 account and are not denied a deduction". 18 20 At the end of section 40-180 19 Add: 20 (3) The first element of *cost includes an amount you paid or are taken 21 to have paid in relation to starting to *hold the *depreciating asset if 22 that amount is directly connected with holding the asset. 23 (4) The first element of *cost of a *depreciating asset does not include 24 an amount that forms part of the second element of cost of another 25 depreciating asset. 26 21 Paragraph 40-185(1)(b) 27 Omit "for holding the asset or receiving the benefit", substitute "in 28 relation to holding the asset or receiving the benefit". 29 22 Subsection 40-185(1) (example) 30 Omit "Example", substitute "Example 1". 31 23 Subsection 40-185(1) (after example 1) 32 Insert: 32 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Capital allowances amendments Part 1 1 Example 2: Laura travels overseas to purchase a purpose-built vehicle for use in 2 her trade. The purchase of the vehicle is the sole reason for the trip. 3 Laura incurs expenses for airfares and accommodation. These 4 expenses are included in the cost of the vehicle because they are "in 5 relation to starting to hold" the vehicle. 6 24 Subsection 40-190(2) 7 Repeal the subsection (not including the example or the note), 8 substitute: 9 (2) The second element is: 10 (a) the amount you are taken to have paid under section 40-185 11 for each economic benefit that has contributed to bringing the 12 asset to its present condition and location from time to time 13 since you started to *hold the asset; and 14 (b) expenditure you incur that is reasonably attributable to a 15 *balancing adjustment event occurring for the asset. 16 25 Subsection 40-190(2) (example) 17 Omit "Example", substitute "Example 1". 18 26 Subsection 40-190(2) (before the note) 19 Insert: 20 Example 2: Leonie needed to replace one of her old depreciating assets that was 21 fixed to her land with a new, more efficient one. Leonie paid a 22 contractor a fee to demolish and remove the old asset. This resulted in 23 a balancing adjustment event occurring for the old asset, and the fee 24 forms part of the second element of the cost of the old asset that was 25 demolished. 26 27 Before subsection 40-190(3) 27 Insert: 28 (2A) Paragraph (2)(b) does not apply to a *balancing adjustment event 29 referred to in item 6 or 11 of the table in subsection 40-300(2). 30 28 Section 40-315 31 Repeal the section. 32 29 Section 40-825 33 After "5 years", insert "if the amounts are not otherwise taken into 34 account and are not denied a deduction". Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 33 [Page Break] Part 1 Capital allowances amendments 1 30 Section 40-880 2 Repeal the section, substitute: 3 40-880 Business related costs 4 Object 5 (1) The object of this section is to make certain *business capital 6 expenditure deductible over 5 years if: 7 (a) the expenditure is not otherwise taken into account; and 8 (b) a deduction is not denied by some other provision; and 9 (c) the business is, was or is proposed to be *carried on for a 10 *taxable purpose. 11 Deduction 12 (2) You can deduct, in equal proportions over a period of 5 income 13 years starting in the year in which you incur it, capital expenditure 14 you incur: 15 (a) in relation to your *business; or 16 (b) in relation to a business that used to be *carried on; or 17 (c) in relation to a business proposed to be carried on; or 18 (d) to liquidate or deregister a company of which you were a 19 *member, to wind up a partnership of which you were a 20 partner or to wind up a trust of which you were a beneficiary, 21 that carried on a business. 22 Limitations and exceptions 23 (3) You can only deduct the expenditure, for a *business that you 24 *carry on, used to carry on or propose to carry on, to the extent that 25 the business is carried on, was carried on or is proposed to be 26 carried on for a *taxable purpose. 27 (4) You can only deduct the expenditure, for a *business that another 28 entity used to *carry on or proposes to carry on, to the extent that: 29 (a) the business was carried on or is proposed to be carried on 30 for a *taxable purpose; and 31 (b) the expenditure is in connection with: 32 (i) your deriving assessable income from the business; and 34 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Capital allowances amendments Part 1 1 (ii) the business that was carried on or is proposed to be 2 carried on. 3 (5) You cannot deduct anything under this section for an amount of 4 expenditure you incur to the extent that: 5 (a) it forms part of the *cost of a *depreciating asset that you 6 *hold, used to hold or will hold; or 7 (b) you can deduct an amount for it under a provision of this Act 8 other than this section; or 9 (c) it forms part of the cost of land; or 10 (d) it is in relation to a lease or other legal or equitable right; or 11 (e) it would, apart from this section, be taken into account in 12 working out: 13 (i) a profit that is included in your assessable income (for 14 example, under section 6-5 or 15-15); or 15 (ii) a loss that you can deduct (for example, under 16 section 8-1 or 25-40); or 17 (f) it could, apart from this section, be taken into account in 18 working out the amount of a *capital gain or *capital loss 19 from a *CGT event; or 20 (g) a provision of this Act other than this section would 21 expressly make the expenditure non-deductible if it were not 22 of a capital nature; or 23 (h) a provision of this Act other than this section expressly 24 prevents the expenditure being taken into account as 25 described in paragraphs (a) to (f) for a reason other than the 26 expenditure being of a capital nature; or 27 (i) it is expenditure of a private or domestic nature; or 28 (j) it is incurred in relation to gaining or producing *exempt 29 income or *non-assessable non-exempt income. 30 (6) The exceptions in paragraphs (5)(d) and (f) do not apply to 31 expenditure you incur to preserve (but not enhance) the value of 32 goodwill if the expenditure you incur is in relation to a legal or 33 equitable right and the value to you of the right is solely 34 attributable to the effect that the right has on goodwill. 35 (7) You cannot deduct an amount under paragraph (2)(c) in relation to 36 a *business proposed to be *carried on unless, having regard to any 37 relevant circumstances, it is reasonable to conclude that the 38 business is proposed to be carried on within a reasonable time. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 35 [Page Break] Part 1 Capital allowances amendments 1 (8) You cannot deduct anything under this section for an amount of 2 expenditure that, because of a market value substitution rule, was 3 excluded from the *cost of a *depreciating asset or the *cost base or 4 *reduced cost base of a *CGT asset. 5 Note: Some examples of market value substitution rules are subsection 6 40-180(2) (table item 8), subsection 40-190(3) (table item 1) and 7 sections 40-765 and 112-20. 8 (9) You cannot deduct anything under this section for an amount of 9 expenditure you incur: 10 (a) by way of returning an amount you have received (except to 11 the extent that the amount was included in your assessable 12 income or taken into account in working out an amount so 13 included); or 14 (b) to the extent that, for another entity, the amount is a *return 15 on or of: 16 (i) an *equity interest; or 17 (ii) a *debt interest that is an obligation of yours. 36 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] CGT amendments Part 2 1 2 Part 2--CGT amendments 3 Income Tax Assessment Act 1997 4 31 Section 108-17 5 Omit "non-capital costs of ownership", substitute "costs of ownership". 6 32 Section 108-30 7 Omit "non-capital costs of ownership", substitute "costs of ownership". 8 33 Subsection 110-25(1) 9 Omit ", subject to subsections (7), (8) and (9)". 10 34 Subsection 110-25(3) 11 Repeal the subsection (not including the note), substitute: 12 (3) The second element is the *incidental costs you incurred. These 13 costs can include giving property: see section 103-5. 14 35 Subsection 110-25(4) 15 Omit "non-capital costs of ownership of", substitute "costs of owning". 16 36 Subsection 110-25(5) 17 Repeal the subsection (including the note), substitute: 18 (5) The fourth element is capital expenditure you incurred: 19 (a) the purpose or the expected effect of which is to increase or 20 preserve the asset's value; or 21 (b) that relates to installing or moving the asset. 22 The expenditure can include giving property: see section 103-5. 23 Note: There are 3 situations involving leases in which this element is 24 modified: see section 112-80. 25 (5A) Subsection (5) does not apply to capital expenditure incurred in 26 relation to goodwill. 27 37 Subsections 110-25(7), (8), (9), (10) and (11) 28 Repeal the subsections. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 37 [Page Break] Part 2 CGT amendments 1 38 Subsection 110-25(12) (note 1) 2 Omit "subsection (5) of this section or". 3 39 Subsection 110-35(1) 4 Repeal the subsection, substitute: 5 (1) There are a number of incidental costs you may have incurred. 6 Except for the ninth, they are costs you may have incurred: 7 (a) to *acquire a *CGT asset; or 8 (b) that relate to a *CGT event. 9 40 Paragraphs 110-35(5)(a) and (b) 10 After "advertising", insert "or marketing". 11 41 At the end of section 110-35 12 Add: 13 (7) The sixth is search fees relating to a *CGT asset. 14 (8) The seventh is the cost of a conveyancing kit (or a similar cost). 15 (9) The eighth is borrowing expenses (such as loan application fees 16 and mortgage discharge fees). 17 (10) The ninth is expenditure that: 18 (a) is incurred by the *head company of a *consolidated group to 19 an entity that is not a *member of the group; and 20 (b) reasonably relates to a *CGT asset *held by the head 21 company; and 22 (c) is incurred because of a transaction that is between members 23 of the group. 24 Example: Land is transferred by one company to another company. The 25 companies are members of a consolidated group. Stamp duty is 26 payable as a result of the transaction. 27 The transaction has no taxation consequences because of its 28 intra-group nature. 29 The stamp duty is included in the cost base and reduced cost base of 30 the land. 31 Note: Intra-group assets are not held by the head company because of the 32 operation of subsection 701-1(1) (the single entity rule). An example 33 of an intra-group asset is a debt owed by a member of the consolidated 34 group to another member of the group. 38 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] CGT amendments Part 2 1 42 After section 110-35 2 Insert: 3 110-36 Indexation 4 (1) The cost base of a *CGT asset *acquired at or before 11.45 am (by 5 legal time in the Australian Capital Territory) on 21 September 6 1999 also includes indexation of the elements of the cost base 7 (except the third element) if the requirements of Division 114 are 8 met. 9 (2) However, for the purposes of working out the *capital gain of an 10 entity mentioned in an item of the table from a *CGT event 11 happening after 11.45 am (by legal time in the Australian Capital 12 Territory) on 21 September 1999, the cost base includes indexation 13 only if the entity mentioned in the item chooses that the cost base 14 includes indexation. 15 Choice of indexation Item For the purposes of working out The cost base includes indexation the capital gain of this entity: only if this entity chooses so: 1 An individual The individual 2 A *complying superannuation entity The trustee of the complying superannuation entity 3 A trust The trustee of the trust 4 A listed investment company The company 16 Note 1: Section 103-25 specifies when you must make the choice and provides 17 that the way you prepare your income tax return is evidence of your 18 choice. 19 Note 2: For each CGT asset whose cost base you need to work out, you may 20 either choose to index the expenditure included in the asset's cost base 21 or not make that choice. If you do not choose to index the expenditure, 22 your net capital gain includes only part of your capital gain on the 23 CGT asset as worked out on the basis of the cost base not including 24 indexation and reduced by your capital losses. 25 (3) Also, for the purpose of working out the *capital gain of a *life 26 insurance company from a *CGT event happening after 30 June 27 2000 in respect of a *CGT asset that is a *virtual PST asset, the cost 28 base includes indexation only if the life insurance company 29 chooses that the cost base includes indexation. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 39 [Page Break] Part 2 CGT amendments 1 Note: Section 110-25 of the Income Tax (Transitional Provisions) Act 1997 2 provides that, in working out the capital gain from a CGT event after 3 11.45 am on 21 September 1999 and before 1 July 2000 in respect of 4 an asset of a life insurance company or registered organisation, the 5 cost base includes indexation only if the company or organisation 6 chooses it. 7 43 Section 110-38 8 Before "Expenditure", insert "(1)". 9 44 At the end of section 110-38 10 Add: 11 (2) Expenditure does not form part of any element of the cost base to 12 the extent that it is a *bribe to a foreign public official or a *bribe to 13 a public official. 14 (3) Expenditure does not form part of any element of the cost base to 15 the extent that it is in respect of providing *entertainment. 16 (4) Expenditure does not form part of any element of the cost base to 17 the extent that section 26-5 prevents it being deducted (even if 18 some other provision also prevents it being deducted). 19 Note: Section 26-5 denies deductions for penalties. 20 45 After subsection 110-55(9A) 21 Insert: 22 (9B) Expenditure does not form part of the reduced cost base to the 23 extent that it is a *bribe to a foreign public official or a *bribe to a 24 public official. 25 (9C) Expenditure does not form part of the reduced cost base to the 26 extent that it is in respect of providing *entertainment. 27 (9D) Expenditure does not form part of the reduced cost base to the 28 extent that section 26-5 prevents it being deducted (even if some 29 other provision also prevents it being deducted). 30 Note: Section 26-5 denies deductions for penalties. 31 46 Section 114-1 (note 3) 32 Omit "non-capital costs of ownership", substitute "costs of ownership". 40 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] CGT amendments Part 2 1 47 Subsections 114-5(2) and (3) 2 Omit "for the purposes of section 110-25". 3 48 Subsection 960-275(4) 4 Omit "non-capital costs of ownership", substitute "costs of ownership". 5 49 Subsection 995-1(1) (definition of incidental costs) 6 Repeal the definition, substitute: 7 incidental costs has the meaning given by section 110-35. 8 Income Tax (Transitional Provisions) Act 1997 9 50 Section 114-5 10 Omit "section 110-25 of". Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 41 [Page Break] Part 3 Application 1 2 Part 3--Application 3 51 Application 4 (1) The amendments made by Part 1 of this Schedule apply to expenditure 5 incurred on or after 1 July 2005. 6 (2) The amendments made by Part 2 of this Schedule apply to CGT events 7 happening on or after 1 July 2005. 42 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 2 Schedule 3--Promotion and implementation 3 of schemes 4 Part 1--Main amendments 5 Taxation Administration Act 1953 6 1 After Division 288 in Schedule 1 7 Insert: 8 Division 290--Promotion and implementation of schemes 9 Table of Subdivisions 10 290-A Objects of this Division 11 290-B Civil penalties 12 290-C Injunctions 13 290-D Voluntary undertakings 14 Subdivision 290-A--Objects of this Division 15 Table of sections 16 290-5 Objects of this Division 17 290-5 Objects of this Division 18 The objects of this Division are: 19 (a) to deter the promotion of tax avoidance *schemes and tax 20 evasion schemes; and 21 (b) to deter the implementation of schemes that have been 22 promoted on the basis of conformity with a *product ruling in 23 a way that is materially different from that described in the 24 product ruling. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 43 [Page Break] Part 1 Main amendments 1 Subdivision 290-B--Civil penalties 2 Table of sections 3 290-50 Civil penalties 4 290-55 Exceptions 5 290-60 Meaning of promoter 6 290-65 Meaning of tax exploitation scheme 7 290-50 Civil penalties 8 Promoter of tax exploitation scheme 9 (1) An entity must not engage in conduct that results in that or another 10 entity being a *promoter of a *tax exploitation scheme. 11 Implementing scheme otherwise than in accordance with ruling 12 (2) An entity must not engage in conduct that results in a *scheme that 13 has been promoted on the basis of conformity with a *product 14 ruling being implemented in a way that is materially different from 15 that described in the product ruling. 16 Note: A scheme will not have been implemented in a way that is materially 17 different from that described in a product ruling if the tax outcome for 18 participants in the scheme is the same as that described in the ruling. 19 Civil penalty 20 (3) If the Federal Court of Australia is satisfied, on application by the 21 Commissioner, that an entity has contravened subsection (1) or (2), 22 the Court may order the entity to pay a civil penalty to the 23 Commonwealth. 24 Amount of penalty 25 (4) The maximum amount of the penalty is the greater of: 26 (a) 5,000 penalty units (for an individual) or 25,000 penalty units 27 (for a body corporate); and 28 (b) twice the consideration received or receivable (directly or 29 indirectly) by the entity and *associates of the entity in 30 respect of the *scheme. 31 Note: See section 4AA of the Crimes Act 1914 for the current value of a 32 penalty unit. 44 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 Principles relating to penalties 2 (5) In deciding what penalty is appropriate for a contravention of 3 subsection (1) or (2) by an entity, the Federal Court of Australia 4 may have regard to all matters it considers relevant, including: 5 (a) the amount of the consideration received or receivable 6 (directly or indirectly) by the entity and *associates of the 7 entity in respect of the *scheme; and 8 (b) the deterrent effect that any penalty may have; and 9 (c) the amount of loss or damage incurred by scheme 10 participants; and 11 (d) the nature and extent of the contravention; and 12 (e) the circumstances in which the contravention took place, 13 including the deliberateness of the entity's conduct and 14 whether there was an honest and reasonable mistake of law; 15 and 16 (f) the period over which the conduct extended; and 17 (g) whether the entity took any steps to avoid the contravention; 18 and 19 (h) whether the entity has previously been found by the Court to 20 have engaged in the same or similar conduct; and 21 (i) the degree of the entity's cooperation with the 22 Commissioner. 23 Recovery of penalty 24 (6) The penalty is a civil debt payable to the Commonwealth, and the 25 Commissioner may, on behalf of the Commonwealth, enforce an 26 order for an entity to pay the penalty as if it were an order made in 27 civil proceedings against the entity to recover a debt due by the 28 entity. The debt arising from the order is taken to be a judgment 29 debt. 30 290-55 Exceptions 31 Reasonable mistake or reasonable precautions 32 (1) The Federal Court of Australia must not order the entity to pay a 33 civil penalty if the entity satisfies the Court: 34 (a) that the conduct in respect of which the proceedings were 35 instituted was due to a reasonable mistake of fact; or Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 45 [Page Break] Part 1 Main amendments 1 (b) that: 2 (i) the conduct in respect of which the proceedings were 3 instituted was due to the act or default of another entity, 4 to an accident or to some other cause beyond the 5 entity's control; and 6 (ii) the entity took reasonable precautions and exercised due 7 diligence to avoid the conduct. 8 (2) The other entity referred to in paragraph (1)(b) does not include 9 someone who was an employee or agent of the entity when the 10 alleged conduct occurred. 11 Reliance on advice from the Commissioner 12 (3) The Commissioner must not make an application under 13 section 290-50 for conduct referred to in subsection 290-50(1) in 14 relation to an entity's involvement in a *scheme if: 15 (a) the scheme is based on treating a *taxation law as applying in 16 a particular way; and 17 (b) that way agrees with: 18 (i) advice given to the entity or the entity's agent by or on 19 behalf of the Commissioner; or 20 (ii) a statement in a publication approved in writing by the 21 Commissioner. 22 Time limitation 23 (4) The Commissioner must not make an application under 24 section 290-50 in relation to an entity's involvement in a *tax 25 exploitation scheme more than 4 years after the entity last engaged 26 in conduct that resulted in the entity or another entity being a 27 *promoter of the tax exploitation scheme. 28 (5) The Commissioner must not make an application under 29 section 290-50 in relation to an entity's involvement in a *scheme 30 that has been promoted on the basis of conformity with a *product 31 ruling more than 4 years after the entity last engaged in conduct in 32 relation to implementation of the scheme. 33 (6) However, the limitation in subsection (4) or (5) does not apply to a 34 *scheme involving tax evasion. 46 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 Exception where entity does not know result of conduct 2 (7) The Federal Court of Australia must not order an entity to pay a 3 civil penalty in relation to the entity's engaging in conduct: 4 (a) that results in another entity being a *promoter of a *tax 5 exploitation scheme; or 6 (b) that results in a *scheme that has been promoted on the basis 7 of conformity with a *product ruling being implemented in a 8 way that is materially different from that described in the 9 product ruling; 10 if the entity satisfies the Court that the entity did not know, and 11 could not reasonably be expected to have known, that the entity's 12 conduct would produce that result. 13 Employees 14 (8) The Commissioner must not make an application under 15 section 290-50 in relation to an individual's involvement in a 16 *scheme as an employee if the Federal Court of Australia has 17 ordered the individual's employer to pay a civil penalty under this 18 Division in relation to the same scheme. 19 290-60 Meaning of promoter 20 (1) An entity is a promoter of a *tax exploitation scheme if: 21 (a) the entity markets the scheme or otherwise encourages the 22 growth of the scheme or interest in it; and 23 (b) the entity or an *associate of the entity receives (directly or 24 indirectly) consideration in respect of that marketing or 25 encouragement; and 26 (c) having regard to all relevant matters, it is reasonable to 27 conclude that the entity has had a substantial role in respect 28 of that marketing or encouragement. 29 (2) However, an entity is not a promoter of a *tax exploitation scheme 30 merely because the entity provides advice about the *scheme. 31 (3) An employee is not to be taken to have had a substantial role in 32 respect of that marketing or encouragement merely because the 33 employee distributes information or material prepared by another 34 entity. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 47 [Page Break] Part 1 Main amendments 1 290-65 Meaning of tax exploitation scheme 2 (1) A *scheme is a tax exploitation scheme if, at the time of the 3 conduct mentioned in subsection 290-50(1): 4 (a) one of these conditions is satisfied: 5 (i) if the scheme has been implemented--it is reasonable to 6 conclude that an entity that (alone or with others) 7 entered into or carried out the scheme did so with the 8 sole or dominant purpose of that entity or another entity 9 getting a *scheme benefit from the scheme; 10 (ii) if the scheme has not been implemented--it is 11 reasonable to conclude that, if an entity (alone or with 12 others) had entered into or carried out the scheme, it 13 would have done so with the sole or dominant purpose 14 of that entity or another entity getting a scheme benefit 15 from the scheme; and 16 (b) one of these conditions is satisfied: 17 (i) if the scheme has been implemented--it is not 18 *reasonably arguable that the scheme benefit is available 19 at law; 20 (ii) if the scheme has not been implemented--it is not 21 reasonably arguable that the scheme benefit would be 22 available at law if the scheme were implemented. 23 Note: The condition in paragraph (b) would not be satisfied if the 24 implementation of the scheme for all participants were in accordance 25 with binding advice given by or on behalf of the Commissioner of 26 Taxation (for example, if that implementation were in accordance with 27 a public ruling under this Act, or all participants had private rulings 28 under this Act and that implementation were in accordance with those 29 rulings). 30 (2) In deciding whether it is *reasonably arguable that a *scheme 31 benefit would be available at law, take into account any thing that 32 the Commissioner can do under a *taxation law. 33 Example: The Commissioner may cancel a tax benefit obtained by a taxpayer in 34 connection with a scheme under section 177F of the Income Tax 35 Assessment Act 1936. 48 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 Subdivision 290-C--Injunctions 2 Table of sections 3 290-120 Conduct to which this Subdivision applies 4 290-125 Injunctions 5 290-130 Interim injunctions 6 290-135 Delay in making ruling 7 290-140 Discharge etc. of injunctions 8 290-145 Certain limits on granting injunctions not to apply 9 290-150 Other powers of the Federal Court unaffected 10 290-120 Conduct to which this Subdivision applies 11 This Subdivision applies to conduct of the kind referred to in 12 subsection 290-50(1) or (2). 13 290-125 Injunctions 14 If an entity has engaged, is engaging or is proposing to engage in 15 conduct to which this Subdivision applies or would apply, the 16 Federal Court of Australia may, on the application of the 17 Commissioner, grant an injunction: 18 (a) restraining the entity from engaging in the conduct; and 19 (b) if, in the Court's opinion, it is desirable to do so--requiring 20 the entity to do something. 21 290-130 Interim injunctions 22 The Federal Court of Australia may, before considering an 23 application for an injunction under section 290-125, grant an 24 interim injunction restraining an entity from engaging in conduct to 25 which this Subdivision applies. 26 290-135 Delay in making ruling 27 If: 28 (a) an entity applied in writing to the Commissioner for a 29 *product ruling in relation to a *scheme; and 30 (b) the Commissioner has neither made the ruling nor told the 31 entity in writing that the Commissioner has declined to make 32 the ruling; Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 49 [Page Break] Part 1 Main amendments 1 the Commissioner must not make an application under 2 section 290-125 in relation to conduct or proposed conduct by an 3 entity in relation to the scheme until the Commissioner makes the 4 ruling or tells the entity in writing that the Commissioner has 5 declined to make the ruling. 6 290-140 Discharge etc. of injunctions 7 The Federal Court of Australia may discharge or vary an injunction 8 granted under this Subdivision. 9 290-145 Certain limits on granting injunctions not to apply 10 Restraining injunctions 11 (1) The power of the Federal Court of Australia under this Subdivision 12 to grant an injunction restraining an entity from engaging in 13 conduct of a particular kind may be exercised: 14 (a) if the Court is satisfied that the entity has engaged in conduct 15 of that kind--whether or not it appears to the Court that the 16 entity intends to engage again, or to continue to engage, in 17 conduct of that kind; or 18 (b) if it appears to the Court that, if an injunction is not granted, 19 it is likely that the entity will engage in conduct of that 20 kind--whether or not the entity has previously engaged in 21 conduct of that kind and whether or not there is an imminent 22 danger of substantial damage to anyone if the entity engages 23 in conduct of that kind. 24 Performance injunctions 25 (2) The power of the Federal Court of Australia under this Subdivision 26 to grant an injunction requiring an entity to do something may be 27 exercised: 28 (a) if the Court is satisfied that the entity has refused or failed to 29 do that thing--whether or not it appears to the Court that the 30 entity intends to refuse or fail again, or to continue to refuse 31 or fail, to do that thing; or 32 (b) if it appears to the Court that, if an injunction is not granted, 33 it is likely that the entity will refuse or fail to do that thing-- 34 whether or not the entity has previously refused or failed to 35 do that act or thing and whether or not there is an imminent 50 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 danger of substantial damage to anyone if the entity refuses 2 or fails to do that act or thing. 3 290-150 Other powers of the Federal Court unaffected 4 The powers conferred on the Federal Court of Australia under this 5 Subdivision are in addition to, and not instead of, any other powers 6 of the Court, however conferred. 7 Subdivision 290-D--Voluntary undertakings 8 Table of sections 9 290-200 Voluntary undertakings 10 290-200 Voluntary undertakings 11 (1) The Commissioner may accept a written undertaking given by an 12 entity for the purposes of this section in connection with furthering 13 the objects of this Division. 14 (2) The entity may withdraw or vary the undertaking at any time, but 15 only with the consent of the Commissioner. 16 (3) If the Commissioner considers that the entity that gave the 17 undertaking has breached any of its terms, the Commissioner may 18 apply to the Federal Court of Australia for an order under 19 subsection (4). 20 (4) If the Court is satisfied that the entity has breached a term of the 21 undertaking, the Court may make one or both of the following 22 orders: 23 (a) an order directing the entity to comply with that term of the 24 undertaking; 25 (b) any other order that the Court considers appropriate. 26 2 At the end of Division 298 in Schedule 1 27 Add: Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 51 [Page Break] Part 1 Main amendments 1 Subdivision 298-B--Civil penalties 2 Table of sections 3 298-80 Application of Subdivision 4 298-85 Civil evidence and procedure rules for civil penalty orders 5 298-90 Civil proceedings after criminal proceedings 6 298-95 Criminal proceedings during civil proceedings 7 298-100 Criminal proceedings after civil proceedings 8 298-105 Evidence given in proceedings for penalty not admissible in criminal 9 proceedings 10 298-110 Civil double jeopardy 11 298-80 Application of Subdivision 12 This Subdivision applies for the purposes of the provisions (the 13 civil penalty provisions) set out in this table. 14 Application of Subdivision Item Provision Brief description 1 Division 290 Civil penalties for the promotion and implementation of schemes 15 298-85 Civil evidence and procedure rules for civil penalty orders 16 The Federal Court of Australia must apply the rules of evidence 17 and procedure for civil matters when hearing proceedings for a 18 civil penalty order under the civil penalty provisions. 19 298-90 Civil proceedings after criminal proceedings 20 The Court must not make a civil penalty order under the civil 21 penalty provisions against an entity if the entity has been convicted 22 of an offence constituted by conduct that is substantially the same 23 as the conduct in relation to which the civil penalty order would be 24 made. 25 298-95 Criminal proceedings during civil proceedings 26 (1) Proceedings for a civil penalty order under the civil penalty 27 provisions against an entity are stayed if: 52 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Main amendments Part 1 1 (a) criminal proceedings are started or have already been started 2 against the entity for an offence; and 3 (b) the offence is constituted by conduct that is substantially the 4 same as the conduct in relation to which the civil penalty 5 order would be made. 6 (2) The proceedings for the order may be resumed if the entity is not 7 convicted of the offence. Otherwise, the proceedings for the order 8 are dismissed. 9 298-100 Criminal proceedings after civil proceedings 10 Criminal proceedings may be started against an entity for conduct 11 that is substantially the same as conduct in relation to which a civil 12 penalty order under the civil penalty provisions could be made 13 regardless of whether a civil penalty order has been made against 14 the entity. 15 298-105 Evidence given in proceedings for penalty not admissible in 16 criminal proceedings 17 Evidence of information given or evidence of production of 18 documents by an entity is not admissible in criminal proceedings 19 against the entity if: 20 (a) the entity previously gave the evidence or produced the 21 documents in proceedings for a civil penalty order under the 22 civil penalty provisions against the entity (whether or not the 23 order was made); and 24 (b) the conduct alleged to constitute the offence is substantially 25 the same as the conduct in relation to which the civil penalty 26 order was sought. 27 However, this does not apply to a criminal proceeding in respect of 28 the falsity of the evidence given by the entity in the proceedings for 29 the civil penalty order. 30 298-110 Civil double jeopardy 31 If an entity is ordered to pay a civil penalty under the civil penalty 32 provisions in respect of particular conduct, the entity is not liable to 33 a civil penalty under some other provision of a *Commonwealth 34 law in respect of that conduct. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 53 [Page Break] Part 2 Consequential amendments 1 2 Part 2--Consequential amendments 3 Income Tax Assessment Act 1997 4 3 Subsection 995-1(1) 5 Insert: 6 product ruling means a public ruling under the Taxation 7 Administration Act 1953 that states that it is a product ruling. 8 4 Subsection 995-1(1) 9 Insert: 10 promoter has the meaning given by section 290-60 in Schedule 1 11 to the Taxation Administration Act 1953. 12 5 Subsection 995-1(1) 13 Insert: 14 tax exploitation scheme has the meaning given by section 290-65 15 in Schedule 1 to the Taxation Administration Act 1953. 16 Taxation Administration Act 1953 17 6 Subsection 16-35(1) in Schedule 1 (note 2) 18 After "administrative", insert "and civil". 19 7 Subsection 16-43(2) in Schedule 1 (note) 20 After "administrative", insert "and civil". 21 8 Subsection 16-140(3) in Schedule 1 (note 2) 22 After "administrative", insert "and civil". 23 9 Section 255-1 in Schedule 1 24 Before "A tax-related liability", insert "(1)". 25 10 At the end of section 255-1 in Schedule 1 26 Add: 54 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] Consequential amendments Part 2 1 (2) A civil penalty under Division 290 is not a tax-related liability. 2 11 Part 4-25 in Schedule 1 (heading) 3 Repeal the heading, substitute: 4 Part 4-25--Charges and penalties 5 12 Section 288-10 in Schedule 1 (note 2) 6 After "administrative", insert "and civil". 7 13 Section 288-20 in Schedule 1 (note 2) 8 After "administrative", insert "and civil". 9 14 Division 298 in Schedule 1 (heading) 10 Repeal the heading, substitute: 11 Division 298--Machinery provisions for penalties 12 Subdivision 298-A--Administrative penalties 13 15 Section 298-5 in Schedule 1 14 Repeal the section, substitute: 15 298-5 Scope of Subdivision 16 This Subdivision applies if: 17 (a) an administrative penalty is imposed on an entity by another 18 Division in this Part; or 19 (b) a penalty is imposed on an entity by Subdivision 162-D of 20 the *GST Act. 21 16 Section 420-5 in Schedule 1 (note 2) 22 After "administrative", insert "and civil". Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 55 [Page Break] Part 3 Application 1 2 Part 3--Application 3 17 Application 4 The amendments made by this Schedule apply in relation to conduct 5 engaged in on or after the day on which this Act receives the Royal 6 Assent. 56 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] 1 2 Schedule 4--Vouchers 3 4 A New Tax System (Goods and Services Tax) Act 1999 5 1 At the end of subsection 29-25(2) 6 Add: 7 ; or (h) a supply or acquisition for which the GST treatment will be 8 unknown until a later supply is made. 9 2 Section 100-1 (note) 10 Omit "state a", substitute "have a stated". 11 3 Section 100-5 (heading) 12 Repeal the heading, substitute: 13 100-5 Supplies of vouchers with a stated monetary value 14 4 Paragraph 100-5(1)(a) 15 Omit "a monetary value stated on the voucher", substitute "the *stated 16 monetary value of the voucher". 17 5 Paragraph 100-5(1)(b) 18 Omit "that monetary value", substitute "the stated monetary value of the 19 voucher". 20 6 Subsection 100-5(2) 21 Omit "that monetary value", substitute "the *stated monetary value of 22 the voucher". 23 7 After subsection 100-5(2) 24 Insert: 25 (2A) The stated monetary value, in relation to a *voucher other than a 26 *prepaid phone card or facility, means the monetary value stated on 27 the voucher or in documents accompanying the voucher. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 57 [Page Break] 1 (2B) The stated monetary value, in relation to a *voucher that is a 2 *prepaid phone card or facility, means the sum of: 3 (a) in any case--the monetary value stated on the voucher or in 4 documents accompanying the voucher; and 5 (b) if the voucher is topped up after it is supplied--the monetary 6 value of the top-up stated on the voucher or in documents 7 accompanying the top-up. 8 However, disregard the monetary value stated on the voucher (or in 9 documents accompanying the voucher) or top-up (as the case 10 requires), of any bonus supplies covered by the voucher or top-up 11 (as the case requires). 12 8 Subsection 100-10(3) 13 Omit "a monetary value stated on the voucher", substitute "the *stated 14 monetary value of the voucher". 15 9 After section 100-10 16 Insert: 17 100-12 Consideration on redemption of vouchers 18 (1) To avoid doubt, the consideration for a *taxable supply of a thing 19 acquired by fully redeeming a *voucher is taken to be the sum of: 20 (a) the *stated monetary value of the voucher, reduced by any 21 amount of that value refunded to the holder of the voucher in 22 respect of the supply; and 23 (b) any additional consideration provided for the supply. 24 (2) To avoid doubt, the consideration for a *taxable supply of a thing 25 acquired by partly redeeming a *voucher is taken to be the sum of: 26 (a) the amount of the *stated monetary value of the voucher that 27 the redemption represents; and 28 (b) any additional consideration provided for the supply. 29 (3) Subsections (1) and (2) have effect despite section 9-15 (which is 30 about consideration). 31 10 Paragraph 100-15(1)(b) 32 Omit "a monetary value stated on the voucher", substitute "the *stated 33 monetary value of the voucher". 58 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] 1 11 Paragraph 100-15(1)(c) 2 Before "redeemed", insert "fully". 3 12 Subsection 100-15(2) 4 Repeal the subsection, substitute: 5 (2) The amount of the increasing adjustment is 1/11 of the *stated 6 monetary value of the voucher to the extent that it was not 7 redeemed. 8 13 After section 100-15 9 Insert: 10 100-18 Arrangement for supply of voucher 11 (1) An entity (the supplier) may, in writing, enter into an arrangement 12 with another entity under which the other entity supplies (whether 13 or not as an agent on the supplier's behalf) a *voucher to a third 14 party. 15 (2) If, under the arrangement, the supplier pays, or is liable to pay, an 16 amount, as a commission or similar payment, to the other entity for 17 the other entity's supply, the supply by the other entity to the 18 supplier, to which the supplier's payment or liability relates, is 19 treated as if it were not a *taxable supply. 20 (3) This section has effect despite section 9-5 (which is about what are 21 taxable supplies). 22 14 Section 100-25 23 Repeal the section, substitute: 24 100-25 Meaning of voucher etc. 25 (1) A voucher is any: 26 (a) voucher, token, stamp, coupon or similar article; or 27 (b) *prepaid phone card or facility; 28 the redemption of which in accordance with its terms entitles the 29 holder to receive supplies in accordance with its terms. However, a 30 postage stamp is not a voucher. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 59 [Page Break] 1 (2) A prepaid phone card or facility is any article or facility supplied 2 for the primary purpose of enabling the holder: 3 (a) to use, on a prepaid basis, telephone or like services supplied 4 by a supplier of *telecommunications supplies; or 5 (b) to make, on a prepaid basis, acquisitions that are facilitated 6 by using telephone or like services supplied by such a 7 supplier. 8 15 Section 195-1 (note to the definition of consideration) 9 After "100-5", insert ", 100-12". 10 16 Section 195-1 11 Insert: 12 prepaid phone card or facility has the meaning given by 13 subsection 100-25(2). 14 17 Section 195-1 15 Insert: 16 stated monetary value has the meanings given by subsections 17 100-5(2A) and (2B). 18 18 Section 195-1 (note to the definition of taxable supply) 19 Before "110-5", insert "100-18". 20 19 Section 195-1 (definition of voucher) 21 Omit "section 100-25", substitute "subsection 100-25(1)". 22 20 Application of amendments 23 (1) The amendments made by items 1, 13 and 18 apply in relation to 24 supplies made on or after the day on which this Act receives the Royal 25 Assent. 26 (2) The amendments made by items 2, 3, 4, 5, 6, 7, 8, 10, 14, 16, 17 and 19 27 apply, and are taken to have applied, in relation to supplies made on or 28 after 1 July 2000. 29 (3) The amendments made by items 9, 11, 12 and 15 apply in relation to 30 supplies made on or after 11 May 2005. 60 Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 [Page Break] 1 21 Transitional provision 2 (1) This item applies if: 3 (a) a supplier of telecommunications supplies entered into an 4 arrangement under section 153-50 of the A New Tax System 5 (Goods and Services Tax) Act 1999 before the day on which 6 this Act receives the Royal Assent; and 7 (b) the arrangement applies wholly or partly to prepaid phone 8 cards or facilities; and 9 (c) to the extent that the arrangement applies to those cards or 10 facilities, section 153-55 of that Act did not apply to the 11 supply of those cards or facilities merely because: 12 (i) the supply was not a taxable supply; or 13 (ii) the supply was not a taxable supply and another party to 14 the arrangement was not an agent of the supplier of 15 telecommunications supplies. 16 (2) To the extent that the arrangement applies to supplies of prepaid phone 17 cards or facilities made on or after the day on which this Act receives 18 the Royal Assent, the arrangement is taken to have effect under 19 Subdivision 153-B of the A New Tax System (Goods and Services Tax) 20 Act 1999 as if: 21 (a) those supplies were taxable supplies; and 22 (b) if subparagraph (1)(c)(ii) applies--that other party supplies 23 those cards or facilities as the agent of the supplier of 24 telecommunications supplies. Tax Laws Amendment (2006 Measures No. 1) Bill 2006 No. , 2006 61