2004-2005-2006-2007 The Parliament of the Commonwealth of Australia HOUSE OF REPRESENTATIVES Presented and read a first time Tax Laws Amendment (2007 Measures No. 4) Bill 2007 No. , 2007 (Treasury) A Bill for an Act to amend the law relating to taxation, and for related purposes [Page Break] 1 Short title ........................................................................................... 1 2 Commencement ................................................................................. 1 3 Schedule(s) ........................................................................................ 3 Schedule 1--New foreign income tax offset rules 4 Part 1--Main amendments 4 Income Tax Assessment Act 1997 4 Part 2--FIF income 16 Income Tax Assessment Act 1936 16 Income Tax Assessment Act 1997 19 Part 3--Transitional 20 Income Tax (Transitional Provisions) Act 1997 20 Part 4--Consequential and other amendments 37 A New Tax System (Goods and Services Tax) Act 1999 37 Bank Integration Act 1991 37 Fringe Benefits Tax Assessment Act 1986 37 Income Tax Assessment Act 1936 38 Income Tax Assessment Act 1997 54 Income Tax (Transitional Provisions) Act 1997 62 International Tax Agreements Act 1953 63 Taxation Administration Act 1953 64 Taxation (Interest on Overpayments and Early Payments) Act 1983 65 Part 5--Application 67 Part 6--Savings provisions 68 Part 7--Sunsetting 70 Income Tax (Transitional Provisions) Act 1997 70 Schedule 2--Exchange of membership interests in MDOs 71 Part 1--Amendments 71 Income Tax Assessment Act 1997 71 Part 2--Application of amendments 75 [Page Break] warrants 76 Superannuation Industry (Supervision) Act 1993 76 Schedule 4--Trustee beneficiary reporting rules 78 Part 1--Main amendments 78 Income Tax Assessment Act 1936 78 Part 2--Consequential amendments 90 Income Tax Assessment Act 1936 90 Taxation Administration Act 1953 90 Part 3--Repeal of Acts 91 A New Tax System (Ultimate Beneficiary Non-disclosure Tax) Act (No. 1) 1999 91 A New Tax System (Ultimate Beneficiary Non-disclosure Tax) Act (No. 2) 1999 91 Part 4--Application and transitional 92 Schedule 5--Superannuation amendments 93 Part 1--Main amendments 93 Income Tax Assessment Act 1997 93 Income Tax (Former Non-resident Superannuation Funds) Act 1994 96 Income Tax (Transitional Provisions) Act 1997 96 Retirement Savings Accounts Act 1997 98 Superannuation Industry (Supervision) Act 1993 98 Superannuation Legislation Amendment (Simplification) Act 2007 99 Taxation Administration Act 1953 99 Part 2--Technical corrections 101 Income Tax Assessment Act 1997 101 Taxation Administration Act 1953 102 Part 3--Application 103 Schedule 6--Specific listings of deductible gift recipients 104 Income Tax Assessment Act 1997 104 [Page Break] Part 1--Main amendments 105 A New Tax System (Australian Business Number) Act 1999 105 A New Tax System (Goods and Services Tax) Act 1999 105 Crimes (Taxation Offences) Act 1980 106 Fringe Benefits Tax Assessment Act 1986 106 Income Tax Assessment Act 1936 106 Income Tax Assessment Act 1997 107 Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 113 Income Tax Rates Act 1986 114 Income Tax (Transitional Provisions) Act 1997 116 Taxation Administration Act 1953 116 Taxation (Interest on Overpayments and Early Payments) Act 1983 117 Part 2--Penalty unit conversion 118 Schedule 8--Family trusts 121 Income Tax Assessment Act 1936 121 [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 (2007 6 Measures No. 4) Act 2007. 7 2 Commencement 8 (1) Each provision of this Act specified in column 1 of the table 9 commences, or is taken to have commenced, in accordance with 10 column 2 of the table. Any other statement in column 2 has effect 11 according to its terms. 12 [Page Break] Column 1 Column 2 Column 3 Provision(s) Commencement Date/Details 1. Sections 1 to 3 The day on which this Act receives the and anything in Royal Assent. this Act not elsewhere covered by this table 2. Schedule 1, The day on which this Act receives the Parts 1 to 6 Royal Assent. 3. Schedule 1, 30 June 2014. 30 June 2014 Part 7 4. Schedules 2 to The day on which this Act receives the 4 Royal Assent. 5. Schedule 5, The day on which this Act receives the Part 1 Royal Assent. 6. Schedule 5, Immediately after the commencement of 15 March 2007 Part 2 Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007. 7. Schedule 5, The day on which this Act receives the Part 3 Royal Assent. 8. Schedule 6 The day on which this Act receives the Royal Assent. 9. Schedule 7, The day on which this Act receives the item 1 Royal Assent. 10. Schedule 7, 1 July 2006. 1 July 2006 items 2 to 6 11. Schedule 7, The day on which this Act receives the items 7 to 104 Royal Assent. 12. Schedule 8 The day on which this Act receives the Royal Assent. 1 Note: This table relates only to the provisions of this Act as originally 2 passed by both Houses of the Parliament and assented to. It will not be 3 expanded to deal with provisions inserted in this Act after assent. 4 (2) Column 3 of the table contains additional information that is not 5 part of this Act. Information in this column may be added to or 6 edited in any published version of this Act. [Page Break] 2 Each Act that is specified in a Schedule to this Act is amended or 3 repealed as set out in the applicable items in the Schedule 4 concerned, and any other item in a Schedule to this Act has effect 5 according to its terms. [Page Break] 2 Schedule 1--New foreign income tax offset 3 rules 4 Part 1--Main amendments 5 Income Tax Assessment Act 1997 6 1 After Division 768 7 Insert: 8 Division 770--Foreign income tax offsets 9 Table of Subdivisions 10 Guide to Division 770 11 770-A Entitlement rules for foreign income tax offsets 12 770-B Amount of foreign income tax offset 13 770-C Rules about payment of foreign income tax 14 770-D Administration 15 Guide to Division 770 16 770-1 What this Division is about 17 You may get a non-refundable tax offset for foreign income tax 18 paid on your assessable income. 19 There is a limit on the amount of the tax offset. 20 A resident of a foreign country does not get the offset for some 21 foreign income taxes. 22 You may also get the offset for foreign income tax paid on some 23 amounts that are not taxed in Australia. [Page Break] 2 (1) The object of this Division is to relieve double taxation where: 3 (a) you have paid foreign income tax on amounts included in 4 your assessable income; and 5 (b) you would, apart from this Division, pay Australian income 6 tax on the same amounts. 7 (2) To achieve this object, this Division gives you a tax offset to 8 reduce or eliminate Australian income tax otherwise payable on 9 those amounts. 10 Subdivision 770-A--Entitlement rules for foreign income tax 11 offsets 12 Table of sections 13 Basic entitlement rule for foreign income tax offset 14 770-10 Entitlement to foreign income tax offset 15 770-15 Meaning of foreign income tax, credit absorption tax and unitary tax 16 Basic entitlement rule for foreign income tax offset 17 770-10 Entitlement to foreign income tax offset 18 (1) You are entitled to a *tax offset for an income year for *foreign 19 income tax. An amount of foreign income tax counts towards the 20 tax offset for the year if you paid it in respect of an amount that is 21 all or part of an amount included in your assessable income for the 22 year. 23 Note 1: The offset is for the income year in which your assessable income 24 included an amount in respect of which you paid foreign income tax-- 25 even if you paid the foreign income tax in another income year. 26 Note 2: If the foreign income tax has been paid on an amount that is part 27 non-assessable non-exempt income and part assessable income for 28 you for the income year, only a proportionate share of the foreign 29 income tax (the share that corresponds to the part that is assessable 30 income) will count towards the tax offset (excluding the operation of 31 subsection (2)). 32 Note 3: For offshore banking units, the amount of foreign income tax paid in 33 respect of offshore banking income is reduced: see subsection 34 121EG(3A) of the Income Tax Assessment Act 1936. [Page Break] 2 (2) An amount of *foreign income tax counts towards the *tax offset 3 for you for the year if you paid it in respect of an amount that is 4 your *non-assessable non-exempt income under either section 23AI 5 or 23AK of the Income Tax Assessment Act 1936 for the year. 6 Note 1: Sections 23AI and 23AK of the Income Tax Assessment Act 1936 7 provide that amounts paid out of income previously attributed from a 8 controlled foreign company or a foreign investment fund are 9 non-assessable non-exempt income. 10 Note 2: Foreign income taxes covered by this subsection are direct taxes (for 11 example, a withholding tax on a dividend payment) and not 12 underlying taxes, only some of which are covered by section 770-135. 13 Exception for certain residence-based foreign income taxes 14 (3) An amount of *foreign income tax you paid does not count towards 15 the *tax offset for the year if you paid it: 16 (a) to a foreign country because you are a resident of that 17 country for the purposes of a law relating to the foreign 18 income tax; and 19 (b) in respect of an amount derived from a source outside that 20 country. 21 Exception for previously complying funds and previously foreign 22 funds 23 (4) An amount of *foreign income tax paid by a *superannuation 24 provider in relation to a *superannuation fund does not count 25 towards the *tax offset for the year if: 26 (a) the tax was paid in respect of an amount included in the 27 fund's assessable income under table item 2 or 3 in 28 section 295-320; and 29 (b) the provider paid the tax before the start of the income year. 30 Note: Table items 2 and 3 in section 295-320 include additional amounts in 31 the assessable income of superannuation funds that change their status 32 from complying to non-complying or from foreign to Australian. 33 Exception for credit absorption tax and unitary tax 34 (5) An amount of *credit absorption tax or *unitary tax you paid does 35 not count towards the *tax offset for the year. [Page Break] 2 unitary tax 3 (1) Foreign income tax means tax that: 4 (a) is imposed by a law other than an *Australian law; and 5 (b) is: 6 (i) tax on income; or 7 (ii) tax on profits or gains, whether of an income or capital 8 nature; or 9 (iii) any other tax, being a tax that is subject to an agreement 10 having the force of law under the International Tax 11 Agreements Act 1953. 12 (2) Credit absorption tax means a tax imposed by a law of a foreign 13 country, or of any part of, or place in, a foreign country to the 14 extent that the tax would not have been payable if the entity 15 concerned or another entity had not been entitled to an offset in 16 respect of the tax under this Division. 17 (3) Unitary tax means a tax imposed by a law of a foreign country, or 18 of any part of, or place in, a foreign country, being a law which, for 19 the purposes of taxing income, profits or gains of a company 20 derived from sources within that country, takes into account, or is 21 entitled to take into account, income, losses, outgoings or assets of 22 the company (or of a company that for the purposes of that law is 23 treated as being associated with the company) derived, incurred or 24 situated outside that country, but does not include tax imposed by 25 that law if that law only takes those matters into account: 26 (a) if such an associated company is a resident of the foreign 27 country for the purposes of the law of the foreign country; or 28 (b) for the purposes of granting any form of relief in relation to 29 tax imposed on dividends received by one company from 30 another company. [Page Break] 2 Guide to Subdivision 770-B 3 770-65 What this Subdivision is about 4 The amount of your tax offset is based on the amount of foreign 5 income tax you have paid. 6 However, there is a limit on the maximum amount of your offset. 7 The limit is the greater of $1,000 and an amount worked out under 8 this Subdivision. This amount is based on a comparison between 9 your tax liability and the tax liability you would have if certain 10 foreign-taxed and foreign-sourced income and related deductions 11 were disregarded. 12 You may choose to use the limit of $1,000 and not work out this 13 amount. 14 There is an increase in the limit to ensure foreign income tax paid 15 on some amounts that are not taxed always forms part of the offset. 16 Table of sections 17 Operative provisions 18 770-70 Amount of foreign income tax offset 19 770-75 Foreign income tax offset limit 20 770-80 Increase in offset limit for tax paid on amounts to which section 23AI or 21 23AK of the Income Tax Assessment Act 1936 apply 22 Operative provisions 23 770-70 Amount of foreign income tax offset 24 The amount of your *tax offset for the year is the sum of the 25 *foreign income tax you paid that counts towards the offset for the 26 year. 27 Note 1: The amount of foreign income tax you paid may be affected by 28 Subdivision 770-C. [Page Break] 2 the Income Tax (Transitional Provisions) Act 1997, if you have 3 pre-commencement excess foreign income tax. 4 770-75 Foreign income tax offset limit 5 (1) There is a limit (the offset limit) on the amount of your *tax offset 6 for a year. If your tax offset exceeds the offset limit, reduce the 7 offset by the amount of the excess. 8 (2) Your offset limit is the greater of: 9 (a) $1,000; and 10 (b) this amount: 11 (i) the amount of income tax payable by you for the income 12 year; less 13 (ii) the amount of income tax that would be payable by you 14 for the income year if the assumptions in subsection (4) 15 were made. 16 Note 1: If you do not intend to claim a foreign income tax offset of more than 17 $1,000 for the year, you do not need to work out the amount under 18 paragraph (b). 19 Note 2: The amount of the offset limit might be increased under 20 section 770-80. 21 (3) For the purposes of paragraph (2)(b), work out the amount of 22 income tax payable by you, or that would be payable by you, 23 disregarding any *tax offsets. 24 (4) Assume that: 25 (a) your assessable income did not include: 26 (i) so much of any amount included in your assessable 27 income as represents an amount in respect of which you 28 paid *foreign income tax that counts towards the *tax 29 offset for the year; and 30 (ii) any other amounts of *ordinary income or *statutory 31 income from a source other than an *Australian source; 32 and 33 (b) you were not entitled to any deductions that: 34 (i) are *debt deductions that are attributable to an *overseas 35 permanent establishment of yours; or 36 (ii) are other deductions that are reasonably related to 37 income covered by paragraph (a) for that year. [Page Break] 2 certain converted foreign losses: see section 770-35 of the Income Tax 3 (Transitional Provisions) Act 1997. 4 Example: If an entity has paid foreign income tax on a capital gain that 5 comprises part of its net capital gain, only that capital gain on which 6 foreign income tax has been paid is disregarded. 7 770-80 Increase in offset limit for tax paid on amounts to which 8 section 23AI or 23AK of the Income Tax Assessment Act 9 1936 apply 10 Your offset limit under subsection 770-75(2) is increased by any 11 amounts of *foreign income tax that count towards the *tax offset 12 for you for the year because of subsection 770-10(2). 13 Subdivision 770-C--Rules about payment of foreign income tax 14 Table of sections 15 Rules about when foreign tax is paid 16 770-130 When foreign income tax is considered paid--taxes paid by someone else 17 770-135 Foreign income tax paid by CFCs and FIFs on attributed amounts 18 Rules about when foreign tax is considered not paid 19 770-140 When foreign income tax is considered not paid--anti-avoidance rule 20 Rules about when foreign tax is paid 21 770-130 When foreign income tax is considered paid--taxes paid by 22 someone else 23 (1) This Act applies to you as if you had paid an amount of *foreign 24 income tax in respect of an amount (a taxed amount) that is all or 25 part of an amount included in your *ordinary income or *statutory 26 income if you are covered by subsection (2) or (3) for an amount of 27 foreign income tax paid in respect of the taxed amount. 28 (2) You are covered by this subsection for an amount of *foreign 29 income tax paid in respect of a taxed amount if that foreign income 30 tax has been paid in respect of the taxed amount by another entity 31 under an *arrangement with you or under the law relating to the 32 foreign income tax. [Page Break] 2 income tax on the partnership income. 3 (3) You are covered by this subsection for an amount of *foreign 4 income tax paid in respect of the taxed amount to the extent that: 5 (a) the taxed amount is taken, because of section 6B of the 6 Income Tax Assessment Act 1936 (the 1936 Act), to be 7 attributable to another amount of income of a particular kind 8 or source; and 9 (b) foreign income tax has been paid in respect of the other 10 amount of income; and 11 (c) the taxed amount is less than it would have been if that tax 12 had not been paid. 13 Example: Aust Co (an Australian resident) is the sole beneficiary of an 14 Australian resident trust H and is presently entitled to all the income 15 of trust H. Trust H owns shares in For Co (a foreign company). For 16 Co pays a dividend to trust H and the dividend is subject to 17 withholding tax in For Co's country of residence. 18 Trust H allocates to Aust Co, the dividend, as well as other Australian 19 source income trust H earned in the year (none of which was subject 20 to foreign income tax). Aust Co is treated as having paid the foreign 21 income tax paid by For Co under subsection 770-130(3). The foreign 22 income tax is treated as paid in respect of the amount included in Aust 23 Co's assessable income that is attributable to the dividend. 24 770-135 Foreign income tax paid by CFCs and FIFs on attributed 25 amounts 26 (1) This Division applies to an entity as if it had paid an amount of 27 *foreign income tax worked out under subsection (7) in respect of 28 an amount included in its assessable income if: 29 (a) the amount is included in its assessable income as described 30 in subsection (2); and 31 (b) the conditions in subsections (3), (5) and (6) are satisfied. 32 (2) An amount is included in an entity's assessable income as 33 described in this subsection if: 34 (a) the entity is a company and the amount is included under: 35 (i) section 456 (a section 456 case) of the 1936 Act in 36 relation to a *CFC and a statutory accounting period; or 37 (ii) section 457 (a section 457 case) of that Act in relation 38 to a CFC; or [Page Break] 2 (within the meaning of Part XI of that Act) (a foreign 3 company case) in respect of a notional accounting 4 period (within the meaning of that Part) (a notional 5 accounting period); or 6 (b) the amount is included under section 529 of that Act in 7 relation to a foreign trust (within the meaning of Part XI of 8 that Act) (a foreign trust case) in respect of a notional 9 accounting period. 10 Note: Section 456 of the 1936 Act includes, in the assessable income of 11 certain Australian shareholders, amounts that are attributable to the 12 profits of an Australian-controlled foreign company. 13 Section 457 does likewise when a controlled foreign company 14 changes residence from an unlisted to a listed country or to Australia. 15 Section 529 includes, in the assessable income of resident taxpayers, 16 amounts that are attributable to FIF interests held in foreign 17 companies and in foreign trusts. 18 Tax paid condition 19 (3) An amount of *foreign income tax, income tax or *withholding tax 20 (the tax amount) must have been paid: 21 (a) for a section 456 case--by the *CFC in respect of an amount 22 included in the notional assessable income of the CFC for the 23 statutory accounting period; or 24 (b) for a section 457 case--by the CFC; or 25 (c) for a foreign company case or a foreign trust case--by the 26 foreign company or foreign trust in respect of an amount 27 included in its notional income (within the meaning of 28 Part XI of the 1936 Act) of the notional accounting period. 29 Note: Section 770-130 deems foreign income tax to have been paid in 30 certain circumstances. 31 (4) For the purposes of paragraphs (3)(a) and (b), the tax amount 32 includes an amount that is taken to have been paid by the *CFC 33 under subsection 393(4) of the 1936 Act (about tax paid on 34 reinsurance premiums). 35 Association condition 36 (5) If the entity is a company, it must have an *attribution percentage 37 of 10% or more: [Page Break] 2 the statutory accounting period; or 3 (b) for a section 457 case--in relation to the CFC at the 4 residence-change time (within the meaning of section 457 of 5 the 1936 Act); or 6 (c) for a foreign company case--at the end of the notional 7 accounting period. 8 Note: There is no association condition for a foreign trust case. 9 Calculation method condition for FIFs 10 (6) For a foreign company case and a foreign trust case, the amount 11 included under section 529 of the 1936 Act must have been 12 determined by the application of the calculation method set out in 13 Subdivision D of Division 18 of Part XI of that Act (the 14 calculation method). 15 Amount of foreign income tax 16 (7) The amount worked out under this subsection is: 17 (a) for a section 456 case--the sum of all the tax amounts for the 18 statutory accounting period multiplied by the company's 19 *attribution percentage in relation to the *CFC at the time 20 mentioned in paragraph (5)(a); or 21 (b) for a section 457 case--the sum of all the tax amounts to the 22 extent they are attributable to the amount included in the 23 company's assessable income under section 457 of the 1936 24 Act; or 25 (c) for a foreign company case or a foreign trust case--an 26 amount worked out using the following formula: Sum of all of the tax Entity's share of calculated profit 27 amounts for the notional × accounting period FIF's calculated profit 28 where: 29 entity's share of calculated profit means the share of the 30 calculated profit of the foreign company or foreign trust in respect 31 of the notional accounting period to which the entity is entitled as 32 determined under the calculation method. [Page Break] 2 company or foreign trust in respect of the notional accounting 3 period as determined under the calculation method. 4 Grossing-up of attributed amount 5 (8) For the purposes of this Act except this section and: 6 (a) section 371 of the 1936 Act (for a section 456 case or a 7 section 457 case); or 8 (b) section 605 of that Act (for a foreign company case or a 9 foreign trust case); 10 the amount included in the entity's assessable income as described 11 in subsection (2) is taken to be increased by the amount of tax 12 worked out under subsection (7). 13 Note: Section 371 of the 1936 Act records an amount in an attribution 14 account when the amount is included in the assessable income of an 15 attributable taxpayer in relation to a CFC. Section 605 does the same 16 thing for taxpayers with interests in FIFs. 17 Rules about when foreign tax is considered not paid 18 770-140 When foreign income tax is considered not paid-- 19 anti-avoidance rule 20 Despite anything else in this Division, this Act applies to you as if 21 you had not paid an amount of *foreign income tax to the extent 22 that you or any other entity become entitled to: 23 (a) a refund of the foreign income tax; or 24 (b) any other benefit worked out by reference to the amount of 25 the foreign income tax (other than a reduction in the amount 26 of the foreign income tax). 27 Subdivision 770-D--Administration 28 Table of sections 29 770-190 Amendment of assessments [Page Break] 2 (1) Section 170 of the Income Tax Assessment Act 1936 does not 3 prevent the amendment of an assessment for the purpose of giving 4 effect to this Division for an income year if: 5 (a) an event described in subsection (2) (an amendment event) 6 happens after the time you lodged your *income tax return for 7 that year; and 8 (b) the amendment is made at any time during the period of 4 9 years starting immediately after the amendment event. 10 Note: Section 170 of that Act specifies the periods within which assessments 11 may be amended. 12 (2) The following are amendment events: 13 (a) you pay an amount of *foreign income tax that counts 14 towards your *tax offset for the year; 15 (b) there is an increase in an amount of foreign income tax you 16 paid that counts towards your offset for the year; 17 (c) there is a reduction in an amount of foreign income tax you 18 paid that counts towards your offset for the year. [Page Break] 2 Part 2--FIF income 3 Income Tax Assessment Act 1936 4 2 After subsection 535(4) 5 Insert: 6 (4A) Subsection (4) does not prevent the taxpayer from making an 7 election under subsection (3) in relation to a FIF in relation to a 8 notional accounting period if the taxpayer also makes a choice 9 under subsection 559A(1) in relation to the FIF in relation to the 10 notional accounting period. 11 3 After section 559 12 Insert: 13 559A Choice to work out notional income and notional deductions 14 under Part X 15 (1) The taxpayer may choose to work out the notional income and 16 notional deductions of the FIF in accordance with subsection (3) if: 17 (a) the FIF is a foreign company; and 18 (b) the taxpayer's attribution percentage in relation to the FIF is 19 10% or more at the end of the relevant period; and 20 (c) if the taxpayer has previously made a choice under this 21 subsection in relation to the FIF in relation to a notional 22 accounting period of the FIF--the taxpayer has made such a 23 choice in relation to the FIF in relation to every notional 24 accounting period of the FIF (if any) occurring between: 25 (i) the end of the notional accounting period of the FIF for 26 which the taxpayer first made such a choice in relation 27 to the FIF; and 28 (ii) the start of the relevant period. 29 (2) For the purposes of this section: 30 (a) treat the FIF as a FIF that is a CFC; and 31 (b) treat the taxpayer as an attributable taxpayer in relation to the 32 FIF throughout the relevant period; and [Page Break] 2 the FIF. 3 Main rule--work out notional income and notional deductions 4 under Part X, etc. 5 (3) For the purposes of working out the notional income and notional 6 deductions of the FIF of the relevant period: 7 (a) treat that notional income as the FIF's notional assessable 8 income worked out under Part X for the relevant period; and 9 (b) treat those notional deductions as the FIF's notional 10 allowable deductions worked out under Part X for the 11 relevant period; and 12 (c) if the taxpayer is an AFI entity at a particular time in the 13 relevant period--treat the FIF as an AFI subsidiary at that 14 time. 15 (4) In working out the FIF's notional allowable deductions for the 16 purposes of paragraph (3)(b): 17 (a) disregard sections 429 and 431 (which deal with losses); and 18 (b) instead, include notional deductions (if any) from the 19 notional income of the FIF of the relevant period worked out 20 under section 572 (which deals with notional deductions for 21 calculated losses for prior periods). 22 (5) For the purposes of subsection (3), treat the FIF's commencing day 23 mentioned in Subdivision C of Division 7 of Part X as the first day 24 of the period over which, apart from this section, the profits or 25 gains of a capital nature derived by the FIF during the relevant 26 period would be determined. 27 Application of sections 575 to 579 28 (6) For the purposes of subsection (3), apply sections 575 to 579 in 29 relation to a taxpayer (the actual taxpayer), subject to the rules in 30 subsections (7) and (8). 31 (7) If the actual taxpayer has made a choice under subsection (1) in 32 relation to a FIF (the first-tier FIF), in working out the first-tier 33 FIF's notional assessable income for the purposes of 34 paragraph (3)(a): [Page Break] 2 with amounts included in notional assessable income under 3 Part XI); and 4 (b) instead, include in that notional assessable income the 5 first-tier FIF's notional income worked out under 6 section 576. 7 (8) If the taxpayer mentioned in paragraphs (1)(b) and (3)(c) is the 8 first-tier FIF mentioned in section 576 (because of the effect of 9 section 576 on this section): 10 (a) treat the references in those paragraphs to the taxpayer as 11 references to the actual taxpayer (and not to the first-tier 12 FIF); and 13 (b) if, as a result of paragraph (a), the actual taxpayer has made a 14 choice under subsection (1) in relation to a FIF (the 15 second-tier FIF)--in working out the second-tier FIF's 16 notional assessable income for the purposes of 17 paragraph (3)(a): 18 (i) disregard paragraphs 384(2)(ca) and 385(2)(ca) (which 19 deal with amounts included in notional assessable 20 income under Part XI); and 21 (ii) instead, include in that notional assessable income the 22 second-tier FIF's notional income worked out under 23 section 579. 24 Note: The actual taxpayer cannot make a choice under subsection (1) in 25 relation to a third-tier FIF, because the calculation method is not 26 available in respect of a third-tier FIF (see subparagraph 579(b)(ii)). 27 Definitions 28 (9) In this section: 29 AFI entity has the same meaning as in section 326. 30 AFI subsidiary has the same meaning as in Part X (see 31 section 326). 32 attributable taxpayer has the same meaning as in Part X (see 33 section 361). 34 attribution percentage has the same meaning as in Part X (see 35 section 362). [Page Break] 2 (see section 382). 3 notional assessable income has the same meaning as in Part X (see 4 section 382). 5 Income Tax Assessment Act 1997 6 4 After section 768-530 7 Insert: 8 768-533 Foreign company that is a FIF using CFC calculation 9 method--treatment as AFI subsidiary under this 10 Subdivision 11 (1) This section applies if: 12 (a) the foreign company is a *FIF; and 13 (b) the holding company has made a choice under subsection 14 559A(1) of the Income Tax Assessment Act 1936 in relation 15 to the foreign company in respect of a *notional accounting 16 period of the foreign company; and 17 (c) because of the choice, the foreign company is treated under 18 paragraph 559A(3)(c) of that Act as an AFI subsidiary 19 (within the meaning of that Act) in relation to that holding 20 company at a particular time. 21 Note: If the holding company makes a choice under subsection 559A(1) of 22 the Income Tax Assessment Act 1936, the notional income and 23 notional deductions of the foreign company (in its capacity as a FIF) 24 is worked out under the FIF calculation method by reference to its 25 notional assessable income and notional allowable deductions under 26 Part X of that Act. 27 (2) For the purposes of this Subdivision, treat the foreign company as 28 an AFI subsidiary in relation to that holding company at that time. [Page Break] 2 Part 3--Transitional 3 Income Tax (Transitional Provisions) Act 1997 4 5 Before Division 820 5 Insert: 6 Division 770--Foreign income tax offsets and foreign losses 7 Table of Subdivisions 8 770-A Transitional foreign losses (common rules) 9 770-B Transitional foreign losses (special rules for consolidated 10 groups) 11 770-C Transitional foreign losses (special rules for CFCs) 12 770-D Transitional foreign income tax offsets (common rules) 13 770-E Transitional foreign income tax offsets (special rules for 14 consolidated groups) 15 Subdivision 770-A--Transitional foreign losses (common rules) 16 Table of sections 17 Converting an overall foreign loss into a type of tax loss 18 770-1 Converting a past foreign loss into a tax loss 19 770-5 Convertible foreign loss 20 770-10 Reducing the amount of an overall foreign loss of a class of assessable 21 foreign income 22 Utilising transitional foreign losses 23 770-15 No special rules if convertible foreign losses total less than or equal to 24 $10,000 or choice made 25 770-20 Starting total for loss parcel 26 770-25 Tax loss has foreign loss component 27 770-30 Deduction limit for foreign loss component 28 770-35 Offset limit to take account of deducted foreign loss component [Page Break] 2 770-1 Converting a past foreign loss into a tax loss 3 (1) The Income Tax Assessment Act 1936 (the 1936 Act), the Income 4 Tax Assessment Act 1997 (the 1997 Act) and this Act operate for 5 the purposes of the income years mentioned in subsection (3) as if 6 an entity that has a convertible foreign loss for an earlier income 7 year under section 770-5 had a tax loss for the earlier year equal to: 8 (a) the amount (if any) that would have been the entity's tax loss 9 for the earlier year under section 36-10, 165-70, 175-35 or 10 701-30 of the 1997 Act (about deducting past tax losses); 11 plus 12 (b) the amount of the entity's convertible foreign loss for the 13 earlier year. 14 Note 1: This is instead of an amount of tax loss worked out under 15 section 36-10, 165-70, 175-35 or 701-30 of the 1997 Act. 16 Note 2: This section does not affect the amount (if any) of an entity's taxable 17 income for the year. An entity may be taken to have a tax loss for a 18 year under this section, but also have a taxable income for the year. 19 Note 3: This section has an expanded operation for consolidated groups: see 20 section 770-90. 21 (2) The earlier year is taken for those purposes to be a loss year for the 22 entity if the entity would not otherwise have a tax loss for that year. 23 (3) The income years are: 24 (a) the first income year starting on or after the first 1 July that 25 occurs after the day on which the Tax Laws Amendment 26 (2007 Measures No. 4) Act 2007 receives the Royal Assent 27 (the commencement year); and 28 (b) later income years. 29 770-5 Convertible foreign loss 30 (1) An entity has a loss to which this section applies (a convertible 31 foreign loss) for an earlier income year covered by subsection (2) 32 if: 33 (a) the entity has incurred an overall foreign loss in respect of a 34 class of assessable foreign income (within the meaning of 35 former section 160AFD of the 1936 Act) for the earlier year, 36 reduced to the extent that it has been taken into account under [Page Break] 2 income of the relevant class for an income year before the 3 commencement year; and 4 (b) a positive amount remains after reducing the overall foreign 5 loss under section 770-10. 6 Note 1: For the classes of income, see former subsection 160AFD(8) of the 7 1936 Act. 8 Note 2: There is a modification to this rule for losses transferred to a head 9 company of a consolidated group: see subsection 770-80(2). 10 Note 3: Former section 160AFD of the 1936 Act allowed a past foreign loss to 11 reduce assessable foreign income of the same class. 12 (2) The income year must be one of the most recent 10 income years 13 ending before the commencement year. 14 (3) The amount of the convertible foreign loss for the earlier year is 15 the sum of the positive amounts remaining after each overall 16 foreign loss in respect of a class of assessable foreign income for 17 the earlier year is reduced under section 770-10. 18 770-10 Reducing the amount of an overall foreign loss of a class of 19 assessable foreign income 20 Apply the following method statement to each overall foreign loss 21 in relation to a class of assessable foreign income of an earlier 22 income year. 23 Method statement 24 Step 1. If the entity is a company and the relevant class of 25 assessable foreign income is the "all other assessable 26 income" class--reduce the amount applicable under 27 paragraph 770-5(1)(a) to the extent (if any) that the loss 28 is attributable to losses or outgoings incurred in gaining 29 or producing income of a kind that would be the 30 company's non-assessable non-exempt income if it were 31 gained or produced in the commencement year. 32 Note: For other entities, there is no reduction under step 1. 33 Step 2. For income years other than the most recent 7 income 34 years ending before the commencement year--reduce the 35 result of step 1 by half. [Page Break] 2 company of a consolidated group: see subsection 3 770-80(3). 4 Utilising transitional foreign losses 5 770-15 No special rules if convertible foreign losses total less than or 6 equal to $10,000 or choice made 7 Section 770-30 does not apply in relation to a tax loss an entity is 8 taken by section 770-1 to have if: 9 (a) the amount worked out under section 770-20 (the starting 10 total) is less than or equal to $10,000; or 11 (b) the entity chooses to reduce one or more tax losses the entity 12 is taken by section 770-1 to have had so that the starting total 13 equals $10,000. 14 770-20 Starting total for loss parcel 15 The sum of the convertible foreign losses for each earlier year for 16 which an entity is taken by section 770-1 to have a tax loss is the 17 starting total for all of those tax losses taken together (the loss 18 parcel). 19 Example: On 1 July 2008, Loss Co determines that it has incurred the following 20 overall foreign losses: 21 · Year ended 30 June 2002: $5,000 (with no amount of 22 convertible foreign loss due to the operation of 770-10); 23 · Year ended 30 June 2004: $4,000 (with an amount of $2,000 24 being a convertible foreign loss); 25 · Year ended 30 June 2005: $7,000 (with an amount of $3,000 26 being a convertible foreign loss); 27 · Year ended 30 June 2007: $8,000 (with the entire amount 28 being a convertible foreign loss). 29 Loss Co does not have any other domestic tax losses for those income 30 years (that is, the 2002, 2004, 2005 and 2007 income years are not 31 loss years). 32 Initially, Loss Co's starting total for the loss parcel is $13,000, which 33 consists of the tax losses incurred in the year ended 30 June 2004, the 34 year ended 30 June 2005 and the year ended 30 June 2007 (there is no 35 convertible foreign loss incurred in the year ended 30 June 2002 36 because of section 770-1 and therefore there is no tax loss included in 37 the loss parcel for that year). The 2004, 2005 and 2007 income years 38 will then be a new loss year for Loss Co (under subsection 770-1(2)), 39 because Loss Co did not otherwise incur a tax loss in those years. [Page Break] 2 Loss Co chooses under paragraph 770-15(b) to reduce the starting 3 total for the loss parcel to $10,000 by not converting $3,000 of its 4 convertible foreign losses (which consists of $2,000 of the 2004 tax 5 loss and $1,000 of the 2005 tax loss). Consequently, only the 2005 6 and 2007 income years are the new loss years for Loss Co. 7 770-25 Tax loss has foreign loss component 8 A tax loss an entity is taken to have under section 770-1 has a 9 separate component (the foreign loss component). The amount of 10 the component is the amount of the convertible foreign loss. 11 770-30 Deduction limit for foreign loss component 12 (1) The amount of the foreign loss component of one or more tax 13 losses in a loss parcel that any entity can deduct in an income year 14 cannot exceed the amount worked out for the year using the table. 15 Limit on deducting foreign loss component of a tax loss Item For this income year: The amount of the component that you can deduct cannot exceed: 1 The commencement 1/5 of the starting total for the loss parcel year 2 The first income year The difference between: ending after the (a) 2/5 of the starting total for the loss parcel; and commencement year (b) the amount of the foreign loss component of one or more tax losses in the loss parcel deducted for the income year mentioned in item 1 3 The second income The difference between: year ending after the (a) 3/5 of the starting total for the loss parcel; and commencement year (b) the amount of the foreign loss component of one or more tax losses in the loss parcel deducted for the income years mentioned in items 1 and 2 4 The third income year The difference between: ending after the (a) 4/5 of the starting total for the loss parcel; and commencement year (b) the amount of the foreign loss component of one or more tax losses in the loss parcel deducted for the income years mentioned in [Page Break] Item For this income year: The amount of the component that you can deduct cannot exceed: items 1, 2 and 3 1 Note: There may be a reduction of the limit for the head company of a 2 consolidated group under section 770-100. 3 (2) This section does not limit the amount of the foreign loss 4 component of a tax loss that an entity can deduct in a year later 5 than the third income year ending after the commencement year. 6 Note: For later years, any remaining undeducted tax loss may be deducted to 7 the extent permitted by the general rules for tax losses. 8 770-35 Offset limit to take account of deducted foreign loss 9 component 10 (1) This section affects the calculation of your offset limit for an 11 income year under section 770-75 of the 1997 Act. 12 (2) This section applies for an income year if you have deducted an 13 amount of the foreign loss component of one or more tax losses 14 (see section 770-25) in the income year. 15 (3) In working out the amount referred to in subparagraph 16 770-75(2)(b)(ii) of the 1997 Act for the year, you must assume (in 17 addition to the assumptions set out in subsection 770-75(4) of that 18 Act), that you were not entitled to any deductions covered by 19 subsection (2). 20 Subdivision 770-B--Transitional foreign losses (special rules 21 for consolidated groups) 22 Table of sections 23 770-80 Transferred losses taken not to be refreshed for purposes of converting 24 overall foreign loss 25 770-85 Deduction limit not to restrict transfer of losses 26 770-90 Transfer of losses not restricted where part of trial year occurs before 27 commencement year 28 770-95 Foreign loss component and starting total retained after transfer to head 29 company 30 770-100 Limit where foreign loss component utilised by joining entity [Page Break] 2 component 3 770-110 Application of Subdivision to MEC groups 4 770-80 Transferred losses taken not to be refreshed for purposes of 5 converting overall foreign loss 6 (1) This section applies if: 7 (a) a loss is transferred under section 707-120 of the Income Tax 8 Assessment Act 1997 (the 1997 Act) from a joining entity to a 9 head company; and 10 (b) the loss is an overall foreign loss in respect of a class of 11 assessable foreign income (within the meaning of former 12 section 160AFD of the Income Tax Assessment Act 1936 (the 13 1936 Act)). 14 Note: Former section 160AFD of the 1936 Act allowed a past foreign loss to 15 reduce assessable foreign income of the same class. 16 (2) In applying section 770-5, only have regard to the overall foreign 17 loss if the income year in which it was actually incurred 18 (disregarding subsection 707-140(1) of the 1997 Act) was one of 19 the most recent 10 income years ending before the commencement 20 year. 21 Note: Section 770-5 is about the amount of an entity's convertible foreign 22 losses. Section 707-140 deems the head company of a group to have 23 made a transferred loss in the year in which it is transferred. 24 (3) A reduction must be made under step 2 of the method statement in 25 section 770-10 if the overall foreign loss was actually incurred 26 (disregarding subsection 707-140(1) of that Act) in an income year 27 other than the most recent 7 income years ending before the 28 commencement year. 29 Note: Section 770-10 is about reducing an entity's past foreign losses to 30 arrive at the entity's convertible foreign loss for past years. 31 770-85 Deduction limit not to restrict transfer of losses 32 Section 770-30 (deduction limit for foreign loss component) does 33 not limit the transfer, under Subdivision 707-A of the 1997 Act, of 34 a tax loss that has a foreign loss component. [Page Break] 2 occurs before commencement year 3 Section 770-1 operates in relation to a trial year in the same way it 4 operates in relation to the income years mentioned in subsection 5 770-1(3) if: 6 (a) a tax loss has a foreign loss component; and 7 (b) it is necessary to determine whether an entity could utilise the 8 tax loss for an income year consisting of the trial year; and 9 (c) part of the trial year occurs before the start of the 10 commencement year mentioned in subsection 770-1(3). 11 770-95 Foreign loss component and starting total retained after 12 transfer to head company 13 Where a tax loss having a foreign loss component is transferred 14 under Subdivision 707-A of the 1997 Act to a head company: 15 (a) the tax loss has the same amount of foreign loss component 16 after the transfer as it had immediately before the transfer; 17 and 18 (b) the starting total for the loss parcel to which the tax loss 19 belongs (see section 770-20) is the same after the transfer as 20 it was immediately before the transfer; and 21 (c) for the purposes of section 770-30, the amount of the foreign 22 loss component of one or more of the tax losses in the parcel 23 that any entity has deducted for an income year is the same 24 after the transfer as immediately before the transfer. 25 Note 1: This section ensures a tax loss retains its foreign loss component, 26 starting total and deduction history even though the head company is 27 taken after the transfer to have made the loss for the income year in 28 which the transfer occurs. 29 Note 2: Section 770-30 sets a limit on how much of an entity's past foreign 30 losses may be deducted in each of the first 4 years after the 31 commencement of this section. 32 770-100 Limit where foreign loss component utilised by joining 33 entity 34 (1) This section applies where one or more tax losses having a foreign 35 loss component are transferred under Subdivision 707-A of the 36 1997 Act to the head company of a consolidated group. [Page Break] 2 loss component of the tax losses that the transferee can deduct for 3 an income year (the deduction year) mentioned in an item in the 4 table in that subsection is reduced by the amount (if any) worked 5 out under subsection (3). 6 (3) The amount of the reduction is the sum of each amount of the 7 foreign loss component that has been deducted by other entities in 8 respect of a non-membership period mentioned in section 701-30 9 of the 1997 Act, or income year, ending before the end of the 10 deduction year. 11 Note: Section 701-30 of the 1997 Act sets out how an entity that is not a 12 subsidiary member of a consolidated group for all of an income year 13 calculates its tax liability or tax loss for the periods (called 14 non-membership periods) when it is not a member of a group. 15 770-105 Modified operation of Subdivision 707-C of the 1997 Act for 16 foreign loss component 17 (1) This section affects the way in which one or more tax losses in a 18 bundle of losses transferred under Subdivision 707-A of the 1997 19 Act can be utilised by the transferee in an income year if: 20 (a) one or more of the tax losses has a foreign loss component 21 (regardless whether at the time of transfer the bundle 22 included a tax loss having a foreign loss component or an 23 overall foreign loss in respect of a class of income (within the 24 meaning of former section 160AFD of the 1936 Act)); and 25 (b) section 770-30 limits the amount of the foreign loss 26 component that the transferee can deduct in the income year. 27 (2) Subdivision 707-C of the 1997 Act does not limit the utilisation of 28 the foreign loss component for the income year. 29 Note: This means that the available fraction does not apply to the foreign 30 loss component of a tax loss in the first 4 years after commencement. 31 Instead, the deduction limit in section 770-30 applies. 32 (3) For the purposes of working out under Subdivision 707-C of the 33 1997 Act how much of the tax losses in the bundle the transferee 34 can utilise in the income year, section 707-310 of the 1997 Act has 35 effect as if the first reference in paragraph (3)(b) of that section to 36 the transferee's losses included a reference to the sum of the 37 amounts of the foreign loss components for all loss parcels in the 38 income year. [Page Break] 2 utilising other tax losses in the bundle (because that limit depends on 3 the transferee's income and gains remaining after utilisation of losses 4 that have not been transferred under Subdivision 707-A of that Act): 5 see subsection 707-310(3) of that Act. 6 770-110 Application of Subdivision to MEC groups 7 This Subdivision has effect in relation to a MEC group in the same 8 way in which it has effect in relation to a consolidated group. 9 Subdivision 770-C--Transitional foreign losses (special rules 10 for CFCs) 11 Table of sections 12 770-160 Converting a past CFC loss 13 770-165 Convertible CFC loss 14 770-170 Reducing the amount of a CFC loss of a class of notional assessable income 15 770-160 Converting a past CFC loss 16 (1) The Income Tax Assessment Act 1936 (the 1936 Act) operates for 17 the purposes of the statutory accounting periods mentioned in 18 subsection (2) as if an eligible CFC (within the meaning of 19 Division 7 of Part X of that Act) (an eligible CFC) that has a 20 convertible CFC loss for an earlier statutory accounting period 21 under section 770-165 has a loss for the earlier period equal to the 22 amount of the convertible CFC loss. 23 Note: Part X of the 1936 Act deals with the attribution of the income of a 24 CFC to attributable taxpayers. 25 (2) The statutory accounting periods are: 26 (a) the first statutory accounting period starting on or after the 27 first 1 July that occurs after the day on which the Tax Laws 28 Amendment (2007 Measures No. 4) Act 2007 receives the 29 Royal Assent (the commencement period); and 30 (b) later statutory accounting periods. [Page Break] 2 (1) An eligible CFC has a loss to which this section applies (a 3 convertible CFC loss) for an earlier statutory accounting period 4 covered by subsection (2) if: 5 (a) the eligible CFC has a loss under section 426 of the 1936 Act 6 for the earlier period in relation to notional assessable income 7 of a class, reduced to the extent that it has been previously 8 taken into account under section 431 of the 1936 Act in 9 respect of a statutory accounting period before the 10 commencement period; and 11 (b) a positive amount remains after reducing the loss under 12 section 770-170. 13 Note: For the classes of notional assessable income, see former subsection 14 424(1) of the 1936 Act. 15 (2) The statutory accounting period must be one of the most recent 10 16 statutory accounting periods ending before the commencement 17 period. 18 (3) The amount of the convertible CFC loss for the earlier period is the 19 sum of the positive amounts remaining after each loss in relation to 20 notional assessable income of a class for the earlier period is 21 reduced under section 770-170. 22 770-170 Reducing the amount of a CFC loss of a class of notional 23 assessable income 24 Apply the following method statement to each loss in relation to 25 notional assessable income of a class for the earlier statutory 26 accounting period. 27 Method statement 28 Step 1. Reduce the amount applicable under paragraph 29 770-165(1)(a) to the extent (if any) that the loss relates to 30 the "all other amounts" class of notional assessable 31 income, except to the extent (if any) that the loss is 32 attributable to losses or outgoings incurred in gaining or 33 producing income of a kind that would be the company's 34 notional assessable income or sometimes-exempt income. [Page Break] 2 recent 7 statutory accounting periods ending before the 3 commencement period--reduce the result of step 1 by 4 half. 5 Subdivision 770-D--Transitional foreign income tax offsets 6 (common rules) 7 Table of sections 8 770-220 Converting excess foreign tax credits into pre-commencement excess 9 foreign income tax 10 770-225 Pre-commencement excess foreign income tax generated for a company by 11 excess foreign tax credits relating to other income 12 770-230 Increase in the foreign income tax offset 13 770-220 Converting excess foreign tax credits into 14 pre-commencement excess foreign income tax 15 (1) You have pre-commencement excess foreign income tax from an 16 income year if: 17 (a) you have excess foreign tax credits in relation to a class of 18 foreign income from an earlier income year under former 19 section 160AFE of the Income Tax Assessment Act 1936 (the 20 1936 Act); and 21 (b) the earlier income year is one of the most recent 5 income 22 years ending before the first income year starting on or after 23 the first 1 July that occurs after the day on which the Tax 24 Laws Amendment (2007 Measures No. 4) Act 2007 receives 25 the Royal Assent; and 26 (c) the credits have not already been applied under former 27 section 160AFE of the 1936 Act. 28 Note: For the classes of income, see former subsections 160AF(7) and 29 160AFE(5) of the 1936 Act. 30 Former section 160AFE of the 1936 Act determined whether an entity 31 had excess foreign tax credits for an income year and whether it could 32 use them to increase the foreign tax credit amount in a later income 33 year. Under the former foreign tax credit system, the excess credits 34 were worked out and, where applicable, applied to increase the 35 foreign tax credit amount in relation to each of the classes of income 36 listed in former subsection 160AF(7). [Page Break] 2 from an income year is the sum of the amounts set out in the table 3 in subsection (3) for that year. 4 (3) Column 2 of the following table specifies the class of income to 5 which the excess foreign tax credits covered by subsection (1) 6 relate. Column 3 sets the amount of pre-commencement excess 7 foreign income tax from that income year generated by those 8 excess foreign tax credits. 9 Conversion of excess foreign tax credits into pre-commencement excess foreign income tax for an income year Item Excess foreign tax credits Pre-commencement excess foreign covered by subsection (1) income tax generated relating to this class of income referred to in former subsection 160AF(7) of the 1936 Act 1 Passive income The amount of those excess foreign tax credits 2 Offshore banking income The amount of those excess foreign tax credits multiplied by the eligible fraction (within the meaning of section 121EG of the 1936 Act) 3 An amount included in assessable The amount of those excess foreign income under section 305-70 of the tax credits 1997 Act (which is about the assessability of lump sums received from foreign superannuation funds) 4 Other income (a) For a company--the amount of those excess foreign tax credits, as reduced under section 770-225; or (b) For an entity other than a company--the amount of those excess foreign tax credits 10 Note: Section 121EG of the 1936 Act applies the eligible fraction to 11 assessable OB income, allowable OB deductions and foreign income 12 tax paid on assessable OB income. [Page Break] 2 a company by excess foreign tax credits relating to other 3 income 4 Reduce the amount of the excess foreign tax credits to the extent (if 5 any) that they are attributable to foreign tax paid in respect of 6 amounts that would be your non-assessable non-exempt income if 7 they were derived in the commencement year. 8 770-230 Increase in the foreign income tax offset 9 (1) This section affects the amount of your tax offset under 10 section 770-70 of the Income Tax Assessment Act 1997 (the 1997 11 Act). 12 Note: That section determines how much tax offset you can claim for 13 foreign income tax you have paid. 14 (2) Your tax offset for an income year (the current year) is increased 15 in accordance with this section if: 16 (a) the amount of your tax offset worked out under 17 section 770-70 of the 1997 Act falls short of your offset limit 18 under section 770-75 of that Act; and 19 (b) you have pre-commencement excess foreign income tax (see 20 section 770-220) from an earlier year of income that is one of 21 the most recent 5 income years ending before the current 22 year. 23 (3) Increase your tax offset for the current year by adding your 24 pre-commencement excess foreign income tax covered by 25 paragraph (2)(b) to the amount of your tax offset worked out under 26 section 770-70 of the 1997 Act. 27 (4) Only increase the offset to the extent of the shortfall worked out 28 under paragraph (2)(a). 29 (5) You no longer have the pre-commencement excess foreign income 30 tax to the extent that it has been used to increase your offset limit. 31 Subdivision 770-E--Transitional foreign income tax offsets 32 (special rules for consolidated groups) 33 Table of sections [Page Break] 2 770-290 Transferring subsidiary member's pre-commencement excess foreign 3 income tax to head company 4 770-295 Where entity not subsidiary member for whole of income year 5 770-300 Pre-commencement excess foreign income tax lost on joining consolidated 6 group 7 770-305 Exit history rule does not treat leaving entity as having pre-commencement 8 excess foreign income tax 9 770-310 Application of Subdivision to MEC groups 10 770-285 Objects of this Subdivision 11 The main objects of this Subdivision are: 12 (a) to allow the head company of a consolidated group to apply, 13 in relation to an income year, pre-commencement excess 14 foreign income tax of an entity (the joining entity) that 15 becomes a subsidiary member of the group at a time (the 16 joining time) if: 17 (i) the income year starts at or after the joining time; and 18 (ii) that pre-commencement excess foreign income tax is 19 from an income year ending before the joining time; and 20 (b) to prevent the joining entity from applying 21 pre-commencement excess foreign income tax mentioned in 22 subparagraph (a)(ii) to increase its own tax offset under 23 Division 770 of the Income Tax Assessment Act 1997 (the 24 1997 Act). 25 770-290 Transferring subsidiary member's pre-commencement 26 excess foreign income tax to head company 27 (1) This section operates for the purposes of section 770-220 in 28 relation to an income year if: 29 (a) an entity (the joining entity) becomes a subsidiary member of 30 a consolidated group at a time (the joining time); and 31 (b) the joining time is before or at the start of that income year; 32 and 33 (c) the joining entity has pre-commencement excess foreign 34 income tax (the transferred foreign income tax) from an 35 earlier income year. 36 (2) For those purposes: [Page Break] 2 transferred foreign income tax; and 3 (b) if, apart from paragraph (a), the head company has 4 pre-commencement excess foreign income tax from the 5 earlier year--the transferred foreign income tax is taken to be 6 included in that pre-commencement excess foreign income 7 tax. 8 (3) Subsection (2) also has effect for the purposes of a subsequent 9 operation of this section. 10 770-295 Where entity not subsidiary member for whole of income 11 year 12 (1) This section operates if: 13 (a) an entity (the joining entity) is a subsidiary member of a 14 consolidated group for some but not all of an income year 15 (the joining year); and 16 (b) there are one or more periods in the joining year (each of 17 which is a non-membership period) during which the entity 18 is not a subsidiary member of any consolidated group. 19 Note: Section 701-30 of the 1997 Act treats each non-membership period as 20 a separate income year for some purposes. 21 (2) Subsection (3) has effect for the purposes of section 701-30 of the 22 1997 Act in relation to the joining entity. 23 (3) In working out amounts for the joining entity under subsection 24 701-30(3) of the 1997 Act in relation to each non-membership 25 period, assume that, if the joining year starts at the same time as 26 the earliest of those non-membership periods, section 770-230 27 operates in relation to the joining entity for that non-membership 28 period. 29 770-300 Pre-commencement excess foreign income tax lost on 30 joining consolidated group 31 (1) For the purposes of section 770-220 in relation to an income year 32 ending after the time an entity becomes a subsidiary member of a 33 consolidated group, the entity is taken not to have any 34 pre-commencement excess foreign income tax from an income [Page Break] 2 1997 Act, that ended before or at that time. 3 (2) Subsection (1) does not affect the operation of section 770-220 in 4 accordance with section 770-290. 5 770-305 Exit history rule does not treat leaving entity as having 6 pre-commencement excess foreign income tax 7 (1) This section operates in relation to an income year if: 8 (a) an entity (the leaving entity) ceases to be a subsidiary 9 member of a consolidated group before the end of that 10 income year; and 11 (b) the head company of the group has pre-commencement 12 excess foreign income tax from an earlier income year. 13 (2) To avoid doubt, the leaving entity is not taken because of 14 section 701-40 of the 1997 Act (the exit history rule) to have that 15 pre-commencement excess foreign income tax. 16 (3) It does not matter whether the head company has that 17 pre-commencement excess foreign income tax because of 18 section 717-10 of the 1997 Act or 770-290 (whether in relation to 19 the leaving entity or another entity) or because of another 20 provision. 21 770-310 Application of Subdivision to MEC groups 22 This Subdivision has effect in relation to a MEC group in the same 23 way in which it has effect in relation to a consolidated group. [Page Break] 2 Part 4--Consequential and other amendments 3 A New Tax System (Goods and Services Tax) Act 1999 4 6 Section 110-10 5 Repeal the section. 6 7 Section 195-1 (note at the end of the definition of taxable 7 supply) 8 Omit "110-10,". 9 Bank Integration Act 1991 10 8 Paragraph 22(4)(c) 11 Omit "and foreign tax credits". 12 Fringe Benefits Tax Assessment Act 1986 13 9 Paragraph 19(1)(b) 14 Omit ", other than a foreign income deduction,". 15 10 Subparagraph 19(1)(ba)(ii) 16 Omit "other than a foreign income deduction". 17 11 Paragraph 24(1)(b) 18 Omit ", other than a foreign income deduction,". 19 12 Subparagraph 24(1)(ba)(ii) 20 Omit "other than a foreign income deduction". 21 13 Paragraph 44(1)(b) 22 Omit ", other than a foreign income deduction,". 23 14 Subparagraph 44(1)(ba)(ii) 24 Omit "other than a foreign income deduction". [Page Break] 2 Omit ", other than a foreign income deduction,". 3 16 Subparagraph 52(1)(ba)(ii) 4 Omit "other than a foreign income deduction". 5 17 Subsection 136(1) (definition of foreign income deduction) 6 Repeal the definition. 7 Income Tax Assessment Act 1936 8 18 Subsection 6(1) 9 Insert: 10 interest income, in relation to a taxpayer, means income consisting 11 of interest, or a payment in the nature of interest, in respect of: 12 (a) money lent, advanced or deposited; or 13 (b) credit given; or 14 (c) any other form of debt or liability; 15 whether security is given or not, other than: 16 (d) an amount to the extent to which it is a return on an equity 17 interest in a company; or 18 (e) interest derived by the taxpayer from a transaction directly 19 related to the active conduct of a trade or business; or 20 (f) interest derived by the taxpayer from carrying on a banking 21 business or any other business whose income is principally 22 derived from the lending of money; or 23 (g) interest received by the taxpayer during a year of income 24 from a foreign company, where: 25 (i) at any time during the year of income, the taxpayer had 26 (or would have had, if the taxpayer were a company and 27 a resident), a voting interest, within the meaning of 28 section 334A, amounting to at least 10% of the voting 29 power, within the meaning of that section, in that 30 company; and 31 (ii) during the year of income or the preceding year of 32 income, the company has not derived an amount of 33 interest income exceeding 10% of the total profits 34 derived by the company during the same year. [Page Break] 2 Insert: 3 passive commodity gain, in relation to a taxpayer, in relation to a 4 year of income, means a gain realised by the taxpayer in a year of 5 income from disposing of a forward contract or a futures contract, 6 or a right or option in respect of a forward contract or a futures 7 contract, in respect of any thing (a commodity): 8 (a) that is capable of delivery under an agreement for its 9 delivery; and 10 (b) that is not an instrument creating or evidencing a chose in 11 action; 12 unless the contract, right or option relates to the carrying on by the 13 taxpayer of a business: 14 (c) of producing or processing the commodity; or 15 (d) that involves the use of the commodity as a raw material in a 16 production process. 17 20 Subsection 6(1) 18 Insert: 19 passive income, in relation to a taxpayer, in relation to a year of 20 income means: 21 (a) dividends (within the meaning of this section) and non-share 22 dividends paid to the taxpayer in the year of income; or 23 (b) unit trust dividends (within the meaning of Division 6B or 24 6C) paid to the taxpayer in the year of income; or 25 (c) a distribution made to the taxpayer in the year of income that 26 is taken to be a dividend because of section 47; or 27 (d) an amount that is taken to be a dividend paid to the taxpayer 28 in the year of income because of section 47A or 108 or 29 Division 7A of Part III; or 30 (e) interest income derived by the taxpayer in the year of 31 income; or 32 (f) annuities derived by the taxpayer in the year of income; or 33 (g) income derived by the taxpayer by way of rent (within the 34 meaning of Part X) in the year of income; or 35 (h) royalties derived by the taxpayer in the year of income; or 36 (i) an amount derived by the taxpayer in the year of income as 37 consideration for the assignment, in whole or in part, of any [Page Break] 2 right; or 3 (j) profits of a capital nature that accrued to the taxpayer in the 4 year of income; or 5 (k) passive commodity gains that accrued to the taxpayer in the 6 year of income; or 7 (l) an amount included in the assessable income of the taxpayer 8 of the year of income under section 102AAZD, 456, 457, 9 459A or 529; 10 but does not include: 11 (m) an amount that arose from an asset necessarily held by the 12 taxpayer in connection with an insurance business actively 13 carried on by the taxpayer; or 14 (n) an amount included in the taxpayer's assessable income 15 under Division 13A. 16 21 Subsection 6AB(1) 17 Omit "26D,". 18 22 Subsections 6AB(1A) and (1B) 19 Repeal the subsections. 20 23 Subsection 6AB(2) 21 Repeal the subsection, substitute: 22 (2) A reference in this Act to foreign tax is a reference to tax imposed 23 by a law of a foreign country, being: 24 (a) tax upon income; or 25 (b) tax upon profits or gains, whether of an income or capital 26 nature; or 27 (c) any other tax, being a tax that is subject to an agreement 28 having the force of law under the International Tax 29 Agreements Act 1953; 30 but does not include a unitary tax or a credit absorption tax. 31 24 Subsections 6AB(3), (3A), (4), (5) and (5A) 32 Repeal the subsections. 33 25 Subsection 6AB(6) (definition of credit absorption tax) [Page Break] 2 substitute "an offset in respect of the tax under Division 770 of the 3 Income Tax Assessment Act 1997". 4 26 Section 6AC 5 Repeal the section. 6 27 Subsections 6B(2AA) and (2B) 7 Repeal the subsections. 8 28 After section 6CA 9 Insert: 10 6D Some tax offsets under the 1997 Assessment Act are treated as 11 credits 12 A tax offset under a provision of the Income Tax Assessment Act 13 1997 that corresponds to a provision of this Act that provides for a 14 credit is taken to be a credit for the purposes of this Act. 15 Note: All other tax offsets under the Income Tax Assessment Act 1997 are 16 treated as rebates: see section 160ADA. 17 29 Subsection 23AI(2) 18 Repeal the subsection, substitute: 19 (2) This section is to be disregarded for the purposes of applying any 20 other provision of this Act to determine allowable deductions. 21 30 Subsection 23AK(2) 22 Repeal the subsection, substitute: 23 (2) This section is to be disregarded for the purposes of applying any 24 other provision of this Act to determine allowable deductions. 25 31 Section 26A 26 Repeal the section. 27 32 Section 26D 28 Repeal the section. 29 33 Subsection 46FA(11) (definition of group company) [Page Break] 2 34 Subsection 46FB(6) (definition of group company) 3 Before "section 160AFE", insert "former". 4 35 Subsection 47A(2) 5 Omit "Division 18 and section 365", substitute "section 365 of this Act 6 and Division 770 of the Income Tax Assessment Act 1997". 7 36 Section 79D 8 Repeal the section. 9 37 Section 79DA 10 Repeal the section. 11 38 Section 102AAB 12 Insert: 13 tax offset has the same meaning as in the Income Tax Assessment 14 Act 1997. 15 39 Subsection 102AAM(2) (formula) 16 Omit "FTC", substitute "FITO". 17 40 Subsection 102AAM(2) 18 Insert: 19 FITO (Foreign income tax offset) means so much of any tax offset 20 under Division 770 of the Income Tax Assessment Act 1997 to 21 which the taxpayer is entitled as is attributable to the distributed 22 amount of the non-resident trust's year of income. 23 41 Subsection 102AAM(2) (definition of FTC) 24 Repeal the definition. 25 42 Subsection 102AAM(3) (formula) 26 Omit "FTC", substitute "FITO". 27 43 Subsection 102AAM(3) 28 Insert: [Page Break] 2 under Division 770 of the Income Tax Assessment Act 1997 to 3 which the taxpayer is entitled as is attributable to the taxpayer's 4 portion of the distributed amount of the non-resident trust's year of 5 income. 6 44 Subsection 102AAM(3) (definition of FTC) 7 Repeal the definition. 8 45 Subsection 102AAM(4) (formula) 9 Omit "FTC", substitute "FITO". 10 46 Subsection 102AAM(4) 11 Insert: 12 FITO (Foreign income tax offset) means so much of any tax offset 13 under Division 770 of the Income Tax Assessment Act 1997 to 14 which the taxpayer is entitled as is attributable to the taxpayer's 15 portion of the distributed amount of the non-resident trust's year of 16 income. 17 47 Subsection 102AAM(4) (definition of FTC) 18 Repeal the definition. 19 48 Subsection 102AAM(4A) (formula) 20 Omit "FTC", substitute "FITO". 21 49 Subsection 102AAM(4A) 22 Insert: 23 FITO (Foreign income tax offset) means so much of any tax offset 24 under Division 770 of the Income Tax Assessment Act 1997 to 25 which the trustee of the first trust would be entitled, in respect of 26 the taxpayer's portion of the distributed amount of the non-resident 27 trust's year of income, if the taxpayer's portion of the distributed 28 amount of the non-resident trust's income were an amount in 29 respect of which the trustee were liable to be assessed and to pay 30 tax under section 99A. 31 50 Subsection 102AAM(4A) (definition of FTC) 32 Repeal the definition. [Page Break] 2 Omit "(1)". 3 52 Subsection 102AAZC(2) 4 Repeal the subsection. 5 53 Subsection 102L(6) 6 Omit "or in section 160AF". 7 54 Subsection 102T(7) 8 Omit "or in section 160AF". 9 55 Paragraph 121B(3)(c) 10 Repeal the paragraph. 11 56 Paragraph 121B(3)(d) 12 Omit "unless it is taken to have a foreign source because it has been 13 subject to foreign tax". 14 57 After subsection 121EG(3) 15 Insert: 16 Only eligible fraction of foreign income tax is taken to be paid 17 (3A) Subject to section 121EH, this Act applies to an OBU as if only the 18 eligible fraction of each amount of foreign income tax (within the 19 meaning of the Income Tax Assessment Act 1997) the OBU paid in 20 respect of an amount of assessable OB income had been paid in 21 respect of that income. 22 Note: The heading to section 121EG is replaced by the heading "Reduction of assessable OB 23 income, allowable OB deductions and foreign income tax paid". 24 58 At the end of section 121EH 25 Add: 26 ; and (e) subsection 121EG(3A) (which limits the OBU's foreign 27 income tax) does not apply to the OBU in relation to an 28 amount of foreign income tax (within the meaning of the 29 Income Tax Assessment Act 1997) the OBU paid in respect of 30 an amount of the OBU's assessable OB income of the year of 31 income. [Page Break] 2 Repeal the section. 3 60 Subsection 121EJ(1) 4 Omit "(1)". 5 61 Subsection 121EJ(2) 6 Repeal the subsection. 7 62 Section 121K 8 Omit "subsection 3(6) and". 9 63 Section 160ADA (note) 10 Omit "160AHA", substitute "6D". 11 64 Division 18 of Part III 12 Repeal the Division. 13 65 Division 18A of Part III 14 Repeal the Division. 15 Note: The heading to Division 18B of Part III is omitted. 16 66 Division 19 of Part III 17 Repeal the Division. 18 67 Section 160ZZY 19 Repeal the section. 20 68 After subsection 170(10A) 21 Insert: 22 (11) Nothing in this section prevents the amendment, at any time, of an 23 assessment to decrease the liability of a taxpayer for the purpose of 24 giving effect to section 24 of the International Tax Agreements Act 25 1953. 26 69 Subsection 177A(1) (definition of foreign tax credit) 27 Repeal the definition. [Page Break] 2 Insert: 3 foreign income tax offset means a tax offset allowed under 4 Division 770 of the Income Tax Assessment Act 1997. 5 71 Paragraphs 177C(1)(bb) and (f) 6 Omit "foreign tax credit" (wherever occurring), substitute "foreign 7 income tax offset". 8 72 Paragraph 177C(2)(d) 9 Omit "foreign tax credit" (wherever occurring), substitute "foreign 10 income tax offset". 11 73 Paragraphs 177C(3)(ca) and (g) 12 Omit "foreign tax credit", substitute "foreign income tax offset". 13 74 Paragraph 177F(1)(d) 14 Omit "foreign tax credit" (wherever occurring), substitute "foreign 15 income tax offset". 16 75 Paragraph 177F(3)(d) 17 Omit "foreign tax credit" (wherever occurring), substitute "foreign 18 income tax offset". 19 76 Section 177H 20 Repeal the section. 21 77 Paragraph 316(2)(e) 22 Repeal the paragraph. 23 78 Section 317 24 Before "In this Part", insert "(1)". 25 79 Section 317 (definition of attributed tax account credit) 26 Repeal the definition. 27 80 Section 317 (definition of attributed tax account debit) 28 Repeal the definition. [Page Break] 2 Repeal the definition. 3 82 Section 317 (definition of member of a non-portfolio 4 company group) 5 Repeal the definition. 6 83 Section 317 (definition of non-portfolio dividend) 7 Omit "section 160AFB", substitute "section 334A". 8 84 Section 317 (definition of tainted interest income) 9 Omit all the words after "factoring income;", substitute: 10 but does not include: 11 (d) income (being interest, fees, commission or other amounts) 12 derived by a person in respect of offshore banking transfers 13 of the person; or 14 (e) income consisting of dividends or non-share dividends paid 15 to a person by a company out of profits derived from the 16 making of offshore banking transfers. 17 85 At the end of section 317 18 Add: 19 (2) Where, if all offshore borrowings made by persons when they were 20 offshore banking units were taken to be tax exempt loan money of 21 the persons for the purposes of Division 11A of Part III, an 22 offshore loan, or other transfer, of an amount by a person would, 23 for the purposes of that Division, be an offshore loan, or other 24 transfer, of tax exempt loan money of the person, the offshore loan, 25 or other transfer, of the amount is an offshore banking transfer of 26 the person for the purposes of the definition of tainted interest 27 income. 28 86 Subsection 324(1) 29 Repeal the subsection, substitute: 30 (1) Subject to this section, for the purposes of this Part, a particular 31 item of income or profits derived by an entity is taken to be subject 32 to tax in a listed country in a particular tax accounting period if, 33 and only if, foreign tax (other than a withholding-type tax) is [Page Break] 2 because the item is included in the tax base of that law for the tax 3 accounting period. 4 87 Section 334 5 Repeal the section. 6 88 After section 334 7 Insert: 8 334A Voting interests in companies 9 (1) For the purposes of this section, a company is taken to have a 10 voting interest in another company if: 11 (a) the first-mentioned company is the beneficial owner of shares 12 (other than eligible finance shares or widely distributed 13 finance shares) in the other company that carry the right to 14 exercise any of the voting power in the other company; and 15 (b) there is no arrangement in force at the relevant time by virtue 16 of which any person is in a position, or may become in a 17 position, to affect that right; 18 and the extent of the voting interest is taken to be the total number 19 of votes that, by virtue of that right, can be cast on a poll at, or 20 arising out of, a general meeting of the other company as regards 21 all questions that could be submitted to such a poll. 22 (2) For the purposes of paragraph (1)(b), a person is taken to be in a 23 position to affect a right of a company if that person has a right, 24 power or option (whether by virtue of any provision in the 25 constituent document of any company or by virtue of any 26 agreement or instrument or otherwise) to acquire that right or do an 27 act or thing that would prevent the first-mentioned company from 28 exercising that right or receiving any benefits accruing by reason of 29 that right. 30 (3) Despite paragraph (1)(b) and subsection (2), in determining for the 31 purposes of this section: 32 (a) whether a company has a voting interest in another company; 33 and 34 (b) the extent of that interest; [Page Break] 2 to be disregarded. 3 (4) For the purposes of this section, the voting power in a company is 4 the maximum number of votes that can be cast on a poll at, or 5 arising out of, a general meeting of a company as regards all 6 questions that can be submitted to such a poll. 7 (5) In this section, arrangement includes: 8 (a) any agreement, arrangement, understanding, promise or 9 undertaking, whether expressed or implied, and whether or 10 not enforceable, or intended to be enforceable, by legal 11 proceedings; and 12 (b) any scheme, plan, proposal, action, course of action or course 13 of conduct, whether unilateral or otherwise. 14 89 Division 5 of Part X 15 Repeal the Division. 16 90 Paragraph 389(a) 17 Omit "6AC,". 18 91 Paragraph 401(1)(d) 19 Omit "subsection (5); and", substitute "subsection (5).". 20 92 Paragraph 401(1)(e) 21 Repeal the paragraph. 22 93 Subsection 401(6) 23 Repeal the subsection. 24 94 Section 424 25 Repeal the section. 26 95 Subsection 425(1) 27 Omit "of a particular class". 28 96 Subsection 425(1) 29 Omit "of that class". [Page Break] 2 Omit "sections 430 and", substitute "section". 3 98 Subsection 425(2) 4 Omit ", in relation to notional assessable income of a particular class,". 5 99 Subsection 425(2) 6 Omit "of that class" (wherever occurring). 7 100 Subsection 425(3) 8 Omit ", in relation to notional assessable income of a particular class,". 9 101 Subsection 425(3) 10 Omit ", in relation to notional assessable income of that class,". 11 102 Subsection 425(4) 12 Omit ", in relation to notional assessable income of a particular class,". 13 103 Subsection 425(4) 14 Omit ", in relation to notional assessable income of that class,". 15 104 Paragraph 426(a) 16 Omit "disregarding section 430,". 17 105 Paragraph 426(a) 18 Omit "in relation to notional assessable income of a particular class". 19 Note: The heading to section 426 is altered by omitting "in relation to a class of notional 20 assessable income". 21 106 Subparagraph 426(a)(i) 22 Omit "of that class". 23 107 Subparagraph 426(a)(ii) 24 Omit "of that class". 25 108 Section 426 26 Omit " in relation to notional assessable income of that class". [Page Break] 2 Omit "sections 79D and 79DA of this Act and". 3 110 Paragraph 427(b) 4 Omit "Subdivision 165-A,". 5 111 Paragraph 427(b) 6 Omit "175-A,". 7 112 Paragraph 427(ba) 8 Omit ";", substitute ".". 9 113 Paragraph 427(c) 10 Repeal the paragraph. 11 114 Section 429 12 Omit "in relation to notional assessable income of a particular class". 13 Note: The heading to section 429 is altered by omitting "of a particular class". 14 115 Section 429 15 Omit "of that class". 16 116 Section 430 17 Repeal the section. 18 117 Subsection 431(1) 19 Omit ", in relation to notional assessable income of a particular class,". 20 Note: The heading to section 431 is altered by omitting "in relation to a class of notional 21 assessable income". 22 118 Paragraph 431(2)(a) 23 Omit "of the class". 24 119 Paragraph 431(2)(b) 25 Repeal the paragraph, substitute: 26 (b) any excess is then a notional allowable deduction for the 27 eligible period, but only to the extent that the deduction does 28 not exceed the amount of the notional assessable income for [Page Break] 2 than under this section; 3 120 Subsections 431(4), (4A), (4B) and (4C) 4 Repeal the subsections, substitute: 5 (4) A loss for a statutory accounting period is to be taken into account 6 under subsection (2) only if: 7 (a) where the eligible CFC is a resident of a listed country at the 8 end of the eligible period: 9 (i) the eligible CFC is a resident of a listed country at the 10 end of that statutory accounting period; and 11 (ii) if there are any statutory accounting periods (the 12 intervening periods) occurring between that statutory 13 accounting period and the eligible period--the eligible 14 CFC was a resident of a listed country at the end of each 15 of the intervening periods; or 16 (b) where the eligible CFC is a resident of an unlisted country at 17 the end of the eligible period: 18 (i) the eligible CFC is a resident of an unlisted country at 19 the end of that statutory accounting period; and 20 (ii) if there are any statutory accounting periods (also the 21 intervening periods) occurring between that statutory 22 accounting period and the eligible period--the eligible 23 CFC was a resident of an unlisted country at the end of 24 each of the intervening periods. 25 (4A) If: 26 (a) at the end of both the eligible period and of a prior statutory 27 accounting period, the eligible CFC was a resident of the 28 same country; and 29 (b) the country was either: 30 (i) a listed country at the end of the eligible period and an 31 unlisted country at the end of that statutory accounting 32 period; or 33 (ii) an unlisted country at the end of the eligible period and 34 a listed country at the end of that statutory accounting 35 period; [Page Break] 2 period, or an earlier statutory accounting period, from being taken 3 into account under subsection (2). 4 (4B) If: 5 (a) the eligible CFC is a resident of an unlisted country at the 6 end of the eligible period; and 7 (b) that country emerged from the dissolution of another country; 8 and 9 (c) the other country was in existence at the end of a prior 10 statutory accounting period; and 11 (d) at the end of that statutory accounting period, the CFC was a 12 resident of the other country; and 13 (e) the other country was a listed country at the end of that 14 statutory accounting period; 15 subsection (4) does not prevent a loss for that statutory accounting 16 period, or an earlier statutory accounting period, from being taken 17 into account under subsection (2). 18 121 Subsections 431(4D) 19 Omit ", (4B) or (4C)", substitute "or (4B)". 20 122 Subsection 431(5) 21 Repeal the subsection, substitute: 22 (5) A loss for a statutory accounting period is not to be taken into 23 account under subsection (2) if, assuming that it were a tax loss 24 (within the meaning of the Income Tax Assessment Act 1997) of the 25 eligible CFC, it would not be taken into account or allowed as a 26 deduction in relation to the eligible period. 27 123 Paragraph 461(1)(f) 28 Omit "section 373; and", substitute "section 373.". 29 124 Paragraph 461(1)(g) 30 Repeal the paragraph. 31 125 Subsection 469(8) 32 Repeal the subsection. [Page Break] 2 Repeal the Division. 3 127 Section 245-110 in Schedule 2C (table items 2 and 3 of 4 the table in the definition of table of deductible revenue 5 losses) 6 Repeal the items. 7 Income Tax Assessment Act 1997 8 128 Subsection 4-15(2) (at the end of the table) 9 Add: 6. The Commissioner makes a section 24 of the determination of the amount of taxable International Tax income to prevent double taxation in Agreements Act certain treaty cases 1953 10 129 Section 10-5 (table item headed "dividends") 11 Omit: foreign taxes on, grossing up of ......................................... 6AC 12 130 Section 10-5 (table item headed "dividends") 13 Omit: repayments of foreign income tax deducted from .............. 26A 14 131 Section 10-5 (table item headed "foreign investment 15 funds (FIFs)") 16 Omit: foreign tax paid in respect of a foreign investment fund attribution account payment ......................................... 26D 17 132 Section 12-5 (table item headed "foreign income") 18 Repeal the item. 19 133 Section 12-5 (table item headed "foreign tax credits") 20 Repeal the item. 21 134 Section 12-5 (table item headed "offshore banking units") [Page Break] foreign tax deduction ......................................................... 121EI 2 135 Section 13-1 (table item headed "films") 3 Repeal the item. 4 136 Section 13-1 (table item headed "foreign tax") 5 Repeal the item, substitute: foreign income tax foreign income tax paid, tax offset for................................ Division 770 6 137 Section 13-1 (table item headed "overseas tax") 7 Repeal the item. 8 138 Section 13-1 (table item headed "shipping income") 9 Repeal the item. 10 139 Section 13-1 (table item headed "tax credit") 11 Repeal the item. 12 140 Section 36-10 (note 1) 13 Repeal the note, substitute: 14 Note 1: Some deductions are limited so that they cannot contribute to a tax 15 loss. See section 26-55 (Limit on certain deductions). 16 141 Section 36-25 (table items 1 and 2 in the table headed 17 "Tax losses of entities generally") 18 Repeal the items. 19 142 Paragraph 61-570(2)(c) 20 Omit "subsection 160AEA(1)", substitute "section 6". 21 143 Subsection 63-10(1) (after table item 20) 22 Insert: 22 *Tax offset for *foreign income tax You cannot get a refund of it, you under Division 770 cannot transfer it and you cannot carry it forward to a later income year [Page Break] 2 Repeal the item. 3 145 Subsection 63-10(1) (note 3) 4 Repeal the note. 5 146 Subsection 205-20(4) 6 Repeal the subsection, substitute: 7 (4) Subparagraphs (1)(b)(ii) and (3)(b)(ii) do not apply to the 8 application of a credit allowable under or by virtue of section 45-30 9 or 45-215 in Schedule 1 to the Taxation Administration Act 1953 10 (these sections deal with credits for *PAYG instalments payable 11 and credit on using a varied rate in certain cases). 12 147 Subsection 205-70(2) (example) 13 Omit "overseas tax paid", substitute "foreign income tax paid". 14 148 Subsection 205-70(2) (example) 15 Omit "(the foreign tax credit)", substitute "(the foreign income tax 16 offset)". 17 149 Subsection 205-70(2) (example) 18 Omit "the foreign tax credit", substitute "the foreign income tax offset". 19 150 Subsection 205-70(2) (example) 20 Omit "that credit", substitute "that offset". 21 151 Paragraph 220-400(1)(c) 22 Omit "under section 160AF (Credits in respect of foreign tax) of the 23 Income Tax Assessment Act 1936 to a credit", substitute "to a tax offset 24 under Division 770". 25 152 Paragraph 220-405(1)(d) 26 Omit "under section 160AF (Credits in respect of foreign tax) of the 27 Income Tax Assessment Act 1936 to a credit", substitute "to a tax offset 28 under Division 770". 29 153 Paragraph 305-75(2)(b) [Page Break] 2 154 Paragraph 305-75(3)(b) 3 Omit "*foreign tax", substitute "*foreign income tax". 4 155 Paragraph 305-75(5)(a) 5 Omit "*foreign tax", substitute "*foreign income tax". 6 156 Paragraph 701-1(4)(c) 7 Omit ";", substitute ".". 8 157 Paragraphs 701-1(4)(d) to (g) 9 Repeal the paragraphs. 10 158 Paragraph 707-110(2)(b) 11 Omit "; and", substitute ".". 12 159 Paragraph 707-110(2)(c) 13 Repeal the paragraph. 14 160 Subsection 707-130(1) (note 2) 15 Omit "(and, through section 160AFD of that Act, an overall foreign 16 loss)". 17 161 Subsection 707-310(3) (table items 2 and 6) 18 Repeal the items. 19 162 Subsection 713-225(6A) 20 Repeal the subsection. 21 163 Subdivision 717-A 22 Repeal the Subdivision, substitute: [Page Break] 2 717-1 What this Subdivision is about 3 If an entity becomes a subsidiary member of a consolidated group, 4 the head company receives any tax offsets under section 770-10 5 that arise because the entity pays foreign income tax while it is a 6 subsidiary member of the group. 7 Table of sections 8 Object 9 717-5 Object of this Subdivision 10 Foreign income tax on amounts in head company's assessable income 11 717-10 Head company taken to be liable for subsidiary member's foreign income 12 tax 13 Object 14 717-5 Object of this Subdivision 15 The object of this Subdivision is to allow the *head company of a 16 *consolidated group to get the benefit of *foreign income tax paid 17 in respect of amounts included in the head company's assessable 18 income because another entity is or was a *subsidiary member of 19 the group. 20 Foreign income tax on amounts in head company's assessable 21 income 22 717-10 Head company taken to be liable for subsidiary member's 23 foreign income tax 24 (1) This section operates if: 25 (a) an entity was a *subsidiary member of a *consolidated group 26 for all or part of an income year; and [Page Break] 2 income of the *head company of the group for that income 3 year; and 4 (c) the entity paid *foreign income tax (except *credit absorption 5 tax or *unitary tax) in respect of the amount. 6 (2) Division 770 operates as if: 7 (a) the *head company had paid the *foreign income tax; and 8 (b) the entity had not paid the foreign income tax. 9 Note: Division 770 provides a tax offset for foreign income tax paid. 10 (3) This section does not limit the operation of Division 770. 11 164 Section 717-200 12 Omit ", attributed tax account surplus, FIF attribution surplus and FIF 13 attributed tax account surplus", substitute "and FIF attribution surplus". 14 165 Paragraph 717-205(b) 15 Repeal the paragraph. 16 166 Paragraph 717-205(c) 17 Omit "joining time;", substitute "joining time.". 18 167 Paragraph 717-205(d) 19 Repeal the paragraph. 20 168 Section 717-215 21 Repeal the section. 22 169 Section 717-225 23 Repeal the section (including the note). 24 170 Section 717-235 25 Omit ", attributed tax account surplus, FIF attribution surplus and FIF 26 attributed tax account surplus", substitute "and FIF attribution surplus". 27 171 Paragraph 717-240(b) 28 Repeal the paragraph. [Page Break] 2 Omit "leaving time;", substitute "leaving time.". 3 173 Paragraph 717-240(d) 4 Repeal the paragraph. 5 174 Section 717-250 6 Repeal the section. 7 175 Section 717-260 8 Repeal the section (including the note). 9 176 Paragraph 768-550(1)(a) 10 Omit "section 160AFB", substitute "section 334A". 11 177 Paragraph 768-550(1)(a) 12 Omit "(within the meaning of that section)". 13 178 Subsection 768-550(2) 14 Omit "section 160AFB", substitute "section 334A". 15 179 Section 802-40 (heading) 16 Repeal the heading, substitute: 17 802-40 Effect of foreign income tax offset on conduit foreign income 18 180 Section 802-40 19 Omit "credit arose for the entity under section 160AF of the Income Tax 20 Assessment Act 1936", substitute "tax offset arose for the entity under 21 Division 770". 22 181 Section 802-40 (formula) 23 Omit "Credit", substitute "Offset". 24 182 Paragraph 830-1(a) 25 Omit "foreign tax", substitute "foreign income tax". 26 183 Paragraph 830-10(1)(b) [Page Break] 2 absorption tax or *unitary tax)". 3 184 Paragraph 830-10(1)(c) 4 Omit "foreign tax", substitute "foreign income tax (except credit 5 absorption tax or unitary tax)". 6 185 Paragraph 830-15(1)(b) 7 Omit "*foreign tax", substitute "*foreign income tax (except *credit 8 absorption tax or *unitary tax)". 9 186 Paragraph 830-15(2)(b) 10 Omit "*foreign tax", substitute "*foreign income tax (except *credit 11 absorption tax or *unitary tax)". 12 187 Paragraph 830-15(3)(b) 13 Omit "*foreign tax", substitute "*foreign income tax (except *credit 14 absorption tax or *unitary tax)". 15 188 Subsection 995-1(1) (definition of attribution percentage) 16 Repeal the definition, substitute: 17 attribution percentage: 18 (a) in relation to a *CFC or a *CFT--has the meaning given by 19 Part X of the Income Tax Assessment Act 1936; and 20 (b) in relation to a *FIF that is a company--has the meaning 21 given by section 581 of that Act. 22 189 Subsection 995-1(1) 23 Insert: 24 credit absorption tax has the meaning given by section 770-15. 25 190 Subsection 995-1(1) (definition of excess foreign tax 26 credits) 27 Repeal the definition. 28 191 Subsection 995-1(1) 29 Insert: [Page Break] 2 192 Subsection 995-1(1) (definition of foreign tax) 3 Repeal the definition. 4 193 Subsection 995-1(1) (at the end of the definition of tax 5 loss) 6 Add: 7 ; or (d) a tax loss determined under section 24 of the International 8 Tax Agreements Act 1953 (about relief from double taxation 9 where profits are adjusted). 10 194 Subsection 995-1(1) 11 Insert: 12 unitary tax has the meaning given by section 770-15. 13 Income Tax (Transitional Provisions) Act 1997 14 195 Subsection 701D-1(1) 15 After "overall foreign loss", insert "(as defined in former 16 section 160AFD of the Income Tax Assessment Act 1936)". 17 196 Paragraphs 701D-10(3)(a) and (b) 18 Before "section 160AFD", insert "former". 19 197 Paragraph 707-325(1)(d) 20 Before "section 160AFD", insert "former". 21 198 Subsection 707-325(9) 22 Before "section 160AFD", insert "former". 23 199 Paragraph 707-326(1)(b) 24 Before "section 160AFD", insert "former". 25 200 Subsection 707-328A(6) 26 Before "section 160AFD", insert "former". 27 201 Division 717 [Page Break] 2 202 Subsection 830-20(3) 3 After "paid foreign tax" (wherever occurring), insert "(within the 4 meaning of that Act)". 5 203 Paragraph 830-20(4)(c) 6 After "paid foreign tax", insert "(within the meaning of that Act)". 7 204 Subsection 830-20(4) 8 After "paid foreign tax," (last occurring), insert "(within the meaning of 9 that Act)". 10 205 Subsection 830-20(5) 11 After "paid foreign tax" (wherever occurring), insert "(within the 12 meaning of that Act)". 13 International Tax Agreements Act 1953 14 206 Subsection 3(5) 15 Repeal the subsection. 16 207 Subsection 3(6) 17 Repeal the subsection. 18 208 Subsection 4(2) 19 Omit "section 160AO or". 20 209 Subsection 11FA(3) 21 Before "Division 19", insert "former". 22 210 Subsection 11FB(3) 23 Before "Division 19", insert "former". 24 211 After section 23 25 Insert: [Page Break] 2 Application 3 (1) This section applies if: 4 (a) Australia has an agreement with one of the following (a 5 treaty partner): 6 (i) a foreign country or a constituent part of a foreign 7 country; 8 (ii) an overseas territory; and 9 (b) the treaty partner taxes profits, or purports to tax profits, in 10 accordance with, or consistent with the principles of: 11 (i) if the treaty partner is the United Kingdom--Article 9 of 12 the 2003 United Kingdom convention; or 13 (ii) otherwise--a corresponding provision of another 14 agreement. 15 Note: Article 9 of the 2003 United Kingdom Convention deals with 16 associated enterprises. 17 Object 18 (2) The object of this section is to prevent double taxation of the 19 profits, to the extent that the Commissioner considers the taxation 20 of the profits by the treaty partner to be in accordance with the 21 agreement. 22 Adjustment of taxable income or tax loss 23 (3) The Commissioner may determine the amount of a taxpayer's 24 taxable income or tax loss of a year of income to be an amount that 25 is appropriate having regard to the object of this section. 26 Note: The Commissioner may amend an assessment at any time to give 27 effect to this section: see subsection 170(11) of the Income Tax 28 Assessment Act 1936. 29 Taxation Administration Act 1953 30 212 Paragraph 14ZW(1)(aaa) 31 Before "section 160AL", insert "former". [Page Break] 2 1983 3 213 Subsection 3(1) (paragraph (a) of the definition of income 4 tax crediting amount) 5 Repeal the paragraph. 6 214 Subsection 3A(1) 7 Omit ", or the applying of an income tax crediting amount takes place,". 8 215 Subsection 3A(1) 9 After "provide correlative relief", insert "for juridical double taxation". 10 216 After subsection 3A(1) 11 Insert: 12 (1A) For the purposes of this Act, a decision to which this Act applies is 13 made to provide correlative relief for economic double taxation if: 14 (a) Australia has an agreement with one of the following (a 15 treaty partner): 16 (i) a foreign country or a constituent part of a foreign 17 country; 18 (ii) an overseas territory; and 19 (b) the treaty partner taxes profits, or purports to tax profits, in 20 accordance with, or consistent with the principles of: 21 (i) if the treaty partner is the United Kingdom--Article 9 of 22 the 2003 United Kingdom convention; or 23 (ii) otherwise--a corresponding provision of another 24 agreement; and 25 Note: Article 9 of the 2003 United Kingdom Convention deals with 26 associated enterprises. 27 (c) the decision is made in giving effect to subsection 24(3) of 28 the International Tax Agreements Act 1953. 29 217 Subsection 3A(2) 30 Omit ", or the applying of an income tax crediting amount takes place,". 31 218 Paragraph 3A(2)(c) [Page Break] 2 place,". 3 219 Section 8J 4 Repeal the section. 5 220 Paragraph 9(1A)(b) 6 After "provide correlative relief", insert ", for juridical double taxation 7 or economic double taxation,". 8 221 Paragraph 11(b) 9 After "provide correlative relief", insert ", for juridical double taxation 10 or economic double taxation,". 11 Note: The heading to section 11 is altered by inserting "income" after "foreign". [Page Break] 2 Part 5--Application 3 222 Application 4 Subject to items 223 and 224, the amendments made by this Schedule 5 apply in relation to income years, statutory accounting periods and 6 notional accounting periods starting on or after the first 1 July that 7 occurs after the day on which this Act receives the Royal Assent. 8 223 Application and transitional rules for section 802-40 of 9 the 1997 Act 10 (1) The amendments made by items 179 to 181 apply in relation to income 11 years starting one year later than the first income year (the transitional 12 year) covered by item 222. 13 (2) Section 802-40 of the Income Tax Assessment Act 1997 has effect in 14 relation to the transitional year as if section 160AF of the Income Tax 15 Assessment Act 1936 had not been repealed. 16 224 Application rule for credits arising under the 17 International Tax Agreements Act 1953 18 (1) Despite the repeal of Division 19 of Part III of the Income Tax 19 Assessment Act 1936, that Division continues to apply, after the 20 commencement of this item, in relation to: 21 (a) a determination made by a person under the Division before 22 the commencement of this item; or 23 (b) a credit to which the Division applied before the 24 commencement of this item; 25 as if the repeal had not happened. 26 (2) The Commissioner may make determinations under that Division as it 27 so continues to apply. 28 (3) Section 24 of the International Tax Agreements Act 1953, as inserted by 29 item 211 of this Schedule, applies from the commencement of this item 30 in relation to any income year. [Page Break] 2 Part 6--Savings provisions 3 225 Object 4 The object of this Part is to ensure that, despite the repeals and 5 amendments made by this Act, the full legal and administrative 6 consequences of: 7 (a) any act done or omitted to be done; or 8 (b) any state of affairs existing; or 9 (c) any period ending; 10 before such a repeal or amendment applies, can continue to arise and be 11 carried out, directly or indirectly through an indefinite number of steps, 12 even if some or all of those steps are taken after the repeal or 13 amendment applies. 14 226 Making and amending assessments, and doing other 15 things, in relation to past matters 16 Even though an Act is repealed or amended by this Act, the repeal or 17 amendment is disregarded for the purpose of doing any of the following 18 under any Act or legislative instrument (within the meaning of the 19 Legislative Instruments Act 2003): 20 (a) making or amending an assessment (including under a 21 provision that is itself repealed or amended); 22 (b) exercising any right or power, performing any obligation or 23 duty or doing any other thing (including under a provision 24 that is itself repealed or amended); 25 in relation to any act done or omitted to be done, any state of affairs 26 existing, or any period ending, before the repeal or amendment applies. 27 Example: For the 2006-07 income year, Smart Investor Pty Ltd, an Australian 28 resident private investment company, has assessable foreign income in 29 the passive income class on which it has paid foreign tax for which it 30 wishes to claim a foreign tax credit. The company also has a tax loss 31 for the year from its Australian investments. When it lodges its tax 32 return for the year it does not elect to claim a deduction for any of the 33 tax loss under section 79DA of the ITAA 1936, because the 34 Australian tax payable on its passive foreign income equals the 35 foreign tax it has paid. 36 In 2009 the amount of foreign tax payable in respect of some foreign 37 rental income it had included in its return for the 2006-07 year is 38 reduced and Smart Investor receives a refund of the difference in 39 foreign tax. Smart Investor Pty Ltd then applies to be able to make an [Page Break] 2 (2007 Measures No. 4) Act 2007 (which repeals section 79DA) 3 receives Royal Assent. The Commissioner allows Smart Investor to 4 submit an election to claim a deduction for so much of its 2006-07 tax 5 loss as to reduce the amount of Australian tax payable on its 2006-07 6 assessable foreign income to the revised foreign tax paid, by the end 7 of 2009. 8 Despite the repeal of section 79DA, item 226 allows the 9 Commissioner to permit an election to be lodged after the return for 10 2006-07 has been lodged, and to amend Smart Investor's assessment 11 for that year, because these actions relate to a thing done, and periods 12 ending, before the repeal of section 79DA applies. [Page Break] 2 Part 7--Sunsetting 3 Income Tax (Transitional Provisions) Act 1997 4 227 Division 770 5 Repeal the Division. [Page Break] 2 Schedule 2--Exchange of membership 3 interests in MDOs 4 Part 1--Amendments 5 Income Tax Assessment Act 1997 6 1 After section 112-53 7 Insert: 8 112-53A MDO roll-over 9 MDO roll-over Item In this situation: Element affected: See section: 1 Exchange of an interest in an First element of cost base 124-985 MDO for an interest in and reduced cost base another MDO 10 2 Section 112-115 (after table item 14BA) 11 Insert: 14BB Exchange of an interest in an MDO for an interest Subdivision 124-P in another MDO 12 3 Subsection 124-5(1) 13 Omit "124-O", substitute "124-P". 14 4 Subsection 124-5(2) (at the end of the note) 15 Add "The consequences of an exchange of a membership interest in an 16 MDO are set out in Subdivision 124-P.". 17 5 At the end of Division 124 18 Add: [Page Break] 2 MDO for a membership interest in another MDO 3 Guide to Subdivision 124-P 4 124-975 What this Subdivision is about 5 You can choose a roll-over if you exchange your interest as a 6 member of an MDO for an interest as a member of another MDO. 7 You can only choose the roll-over if you would have made a 8 capital gain from the exchange. 9 Table of sections 10 Operative provisions 11 124-980 Exchange of membership interests in an MDO 12 124-985 What the roll-over is for post-CGT interests 13 124-990 Partial roll-over 14 124-995 Pre-CGT interests 15 Operative provisions 16 124-980 Exchange of membership interests in an MDO 17 (1) There is a roll-over if: 18 (a) an entity exchanges: 19 (i) an interest (the original interest) in an *MDO (the 20 original MDO) as a member of the original MDO; for 21 (ii) a similar interest (the replacement interest) in another 22 MDO (the new MDO) as a member of the new MDO; 23 and 24 (b) both the original MDO and the new MDO are companies 25 limited by guarantee; and 26 (c) the exchange is in consequence of a single *arrangement that 27 satisfies subsection (3); and 28 (d) apart from the roll-over, the entity would make a *capital 29 gain from a *CGT event happening in relation to its original 30 interest; and [Page Break] 2 (f) the entity acquired the original interest on or after 3 20 September 1985. 4 Note: The entity can obtain only a partial roll-over if the capital proceeds for 5 its original interest include something other than its replacement 6 interest: see section 124-990. 7 (2) In working out whether an original interest is exchanged for a 8 similar interest, disregard a difference that consists only of a right 9 to receive distributions of income or capital. 10 Conditions for arrangement 11 (3) The *arrangement must: 12 (a) result in the new *MDO becoming the sole *member of the 13 original MDO; and 14 (b) be one in which participation was available on substantially 15 the same terms for all of the holders of interests as members 16 of the original MDO of a particular type. 17 124-985 What the roll-over is for post-CGT interests 18 (1) A *capital gain the entity makes from an original interest *acquired 19 on or after 20 September 1985 is disregarded. 20 (2) The entity works out the first element of the *cost base of each 21 replacement interest the entity received as a result of the exchange 22 by reasonably attributing to it the cost base (or the part of it) of the 23 entity's original interest for which it was exchanged and for which 24 the entity obtained the roll-over. 25 (3) In applying subsection (2), the entity reduces (but not below zero) 26 the *cost base of the original interest (just before stopping owning 27 it) by so much of that cost base as is attributable to an ineligible 28 part (see section 124-990). 29 (4) The first element of the *reduced cost base of a replacement 30 interest is worked out similarly. 31 124-990 Partial roll-over 32 (1) The entity can obtain only a partial roll-over if its *capital proceeds 33 for its original interest include something (the ineligible proceeds) [Page Break] 2 part (the ineligible part) of its original interest for which it 3 received ineligible proceeds. 4 (2) The *cost base of the ineligible part is that part of the cost base of 5 the original interest as is reasonably attributable to it. 6 124-995 Pre-CGT interests 7 If the entity exchanges an original interest that the entity *acquired 8 before 20 September 1985 for its replacement interest, the first 9 element of the *cost base and *reduced cost base of the replacement 10 interest is zero. [Page Break] 2 Part 2--Application of amendments 3 6 Application of amendments 4 The amendments made by this Schedule apply to CGT events 5 happening on or after 14 February 2007. [Page Break] 2 Schedule 3--Investment by superannuation 3 funds in instalment warrants 4 5 Superannuation Industry (Supervision) Act 1993 6 1 Before subsection 67(5) 7 Insert: 8 Exception--instalment warrants 9 (4A) Subsection (1) does not prohibit a trustee (the RSF trustee) of a 10 regulated superannuation fund from borrowing money, or 11 maintaining a borrowing of money, under an arrangement under 12 which: 13 (a) the money is or has been applied for the acquisition of an 14 asset (the original asset) other than one the RSF trustee is 15 prohibited by this Act or any other law from acquiring; and 16 (b) the original asset, or another asset (the replacement) that: 17 (i) is an asset replacing the original asset or any other asset 18 that met the conditions in this subparagraph and 19 subparagraph (ii); and 20 (ii) is not an asset the RSF trustee is prohibited by this Act 21 or any other law from acquiring; 22 is held on trust so that the RSF trustee acquires a beneficial 23 interest in the original asset or the replacement; and 24 (c) the RSF trustee has a right to acquire legal ownership of the 25 original asset or the replacement by making one or more 26 payments after acquiring the beneficial interest; and 27 (d) the rights of the lender against the RSF trustee for default on 28 the borrowing, or on the sum of the borrowing and charges 29 related to the borrowing, are limited to rights relating to the 30 original asset or the replacement; and 31 (e) if, under the arrangement, the RSF trustee has a right relating 32 to the original asset or the replacement (other than a right 33 described in paragraph (c))--the rights of the lender against 34 the RSF trustee for the RSF trustee's exercise of the RSF 35 trustee's right are limited to rights relating to the original 36 asset or replacement. [Page Break] 2 Add: 3 Limit on when investments in related trusts are in-house assets 4 (8) If, at a time: 5 (a) an asset (the investment asset) of a superannuation fund is an 6 investment in a related trust of the fund; and 7 (b) the related trust is one described in paragraph 67(4A)(b) in 8 connection with a borrowing, by the trustee of the fund, that 9 is covered by subsection 67(4A); and 10 (c) the only property of the related trust is the original asset or 11 replacement described in that subsection; 12 the investment asset is an in-house asset of the fund at the time 13 only if the original asset or replacement described in subsection 14 67(4A) would be an in-house asset of the fund if it were an asset of 15 the fund at the time. 16 (9) Subsections (1), (2) and (4) have effect subject to subsection (8). [Page Break] 2 Schedule 4--Trustee beneficiary reporting 3 rules 4 Part 1--Main amendments 5 Income Tax Assessment Act 1936 6 1 Subsection 102UA(1) 7 Repeal the subsection, substitute: 8 (1) The main purpose of this Division is to ensure that the trustee of a 9 closely held trust with one or more trustee beneficiaries that are 10 presently entitled to a share of the income or of a tax-preferred 11 amount of the trust advises the Commissioner soon after the end of 12 the year of income of certain details about those trustee 13 beneficiaries. This will allow the Commissioner to check whether 14 the assessable income of the trustee beneficiaries includes the 15 correct share of net income, and whether the net assets of the 16 trustee beneficiaries reflect the receipt of the tax-preferred 17 amounts. 18 2 Paragraph 102UA(2)(a) 19 Omit "ultimate", substitute "trustee". 20 3 Subsection 102UA(3) 21 Omit "there are in fact no ultimate beneficiaries of net income of the 22 closely held trust", substitute "the trustee of the closely held trust 23 becomes presently entitled to an amount that is reasonably attributable 24 to the whole or a part of the share of the net income of the closely held 25 trust". 26 4 Section 102UB 27 Insert: 28 correct TB statement has the meaning given by section 102UG. 29 5 Section 102UB (definition of correct UB statement) 30 Repeal the definition. [Page Break] 2 Repeal the definition. 3 7 Section 102UB 4 Insert: 5 TB statement period has the meaning given by section 102UH. 6 8 Section 102UB 7 Insert: 8 trustee beneficiary non-disclosure tax means tax payable under 9 paragraph 102UK(2)(a) or 102UM(2)(a). 10 9 Section 102UB (definition of UB statement period) 11 Repeal the definition. 12 10 Section 102UB (definition of ultimate beneficiary) 13 Repeal the definition. 14 11 Section 102UB (definition of ultimate beneficiary 15 non-disclosure tax) 16 Repeal the definition. 17 12 Section 102UB 18 Insert: 19 untaxed part, of a share of the net income of a closely held trust, 20 has the meaning given by section 102UE. 21 13 Subsection 102UC(4) (at the end of the definition of 22 excluded trust) 23 Add: 24 ; or (c) a family trust; or 25 (d) a trust in relation to which an interposed entity election has 26 been made and is in force in accordance with section 272-85 27 of Schedule 2F; or 28 (e) a trust that is covered by subsection 272-90(5) of 29 Schedule 2F. [Page Break] 2 Repeal the sections, substitute: 3 102UE Meaning of untaxed part 4 (1) The untaxed part of a share of the net income of a closely held 5 trust is so much of that share as is not covered by subsection (2). 6 (2) The share of the net income of the closely held trust is covered by 7 this subsection to the extent that: 8 (a) the trustee of the closely held trust is assessed and liable to 9 pay tax under subsection 98(4) in respect of the share; or 10 (b) the share is reasonably attributable to a part of the net income 11 of another trust estate in respect of which the trustee of the 12 other trust estate is assessed and liable to pay tax under 13 subsection 98(4); or 14 (c) the share is represented by or reasonably attributable to an 15 amount from which an entity was required to withhold an 16 amount under Subdivision 12-H in Schedule 1 to the 17 Taxation Administration Act 1953; or 18 (d) the share is reasonably attributable to a part of the net income 19 of another trust estate in respect of which the trustee of the 20 other trust estate was liable to pay trustee beneficiary 21 non-disclosure tax. 22 15 Section 102UG 23 Repeal the section, substitute: 24 102UG Correct TB statement 25 Share of net income case 26 (1) This section applies if a share of the net income of a closely held 27 trust for a year of income is included in the assessable income of a 28 trustee beneficiary of the trust under section 97 and the share 29 comprises or includes an untaxed part. [Page Break] 2 (2) This section also applies if a trustee beneficiary of a closely held 3 trust is presently entitled at the end of a year of income to a share 4 of a tax-preferred amount of the trust. 5 Correct TB statement 6 (3) If this section applies, the trustee of the closely held trust makes a 7 correct TB statement about the share if the trustee correctly states, 8 in the approved form: 9 (a) if the trustee beneficiary is a resident at the end of the year of 10 income: 11 (i) the name and tax file number of the trustee beneficiary; 12 and 13 (ii) the amount of the untaxed part of the share or the 14 amount of the share of the tax-preferred amount; and 15 (b) if the trustee beneficiary is a non-resident at the end of the 16 year of income: 17 (i) the name and address of the trustee beneficiary; and 18 (ii) the amount of the untaxed part of the share or the 19 amount of the share of the tax-preferred amount. 20 Note: If a closely held trust has multiple trustee beneficiaries, the 21 requirements in subsection (3) will have to be met for each of them for 22 the trustee of the closely held trust to avoid paying any trustee 23 beneficiary non-disclosure tax. 24 16 Section 102UH 25 Repeal the section, substitute: 26 102UH TB statement period 27 The TB statement period, for the trustee of a trust in relation to a 28 year of income, is the period from the end of the year of income 29 until the end of: 30 (a) the period within which the trustee is required to give to the 31 Commissioner the trust's return of income for the year of 32 income; or 33 (b) such further period as the Commissioner allows. 34 17 Section 102UJ [Page Break] 2 102UJ Extended concept of present entitlement to capital of a trust 3 For the purposes of this Division, section 95A applies in relation to 4 capital of a trust in the same way as it applies to income of the 5 trust. 6 18 Subdivision C of Division 6D of Part III (heading) 7 Repeal the heading, substitute: 8 Subdivision C--Trustee beneficiary non-disclosure tax on 9 share of net income 10 19 Subsections 102UK(1), (2) and (2A) 11 Repeal the subsections, substitute: 12 (1) Subject to subsection (2A), this section applies if: 13 (a) a share of the net income of a closely held trust for a year of 14 income is included in the assessable income of a trustee 15 beneficiary of the trust under section 97; and 16 (b) the share comprises or includes an untaxed part; and 17 (c) the trustee of the closely held trust is not covered by a 18 determination under subsection (1A) for the year of income; 19 and 20 (d) during the TB statement period in relation to the year of 21 income, the trustee of the closely held trust does not make 22 and give to the Commissioner a correct TB statement about 23 the share. 24 Determination that a class of trustees is not required to give a 25 correct TB statement 26 (1A) The Commissioner may, by legislative instrument, determine that a 27 specified class of trustees is not required to make a correct TB 28 statement for a year of income. 29 (1B) A determination under subsection (1A): 30 (a) may be expressed to be subject to conditions; and 31 (b) may be for one or more years of income. [Page Break] 2 (2) If this section applies: 3 (a) either: 4 (i) if the trustee of the closely held trust is the only person 5 in the trustee group (see subsection (3))--the trustee is 6 liable to pay tax; or 7 (ii) if the trustee of the closely held trust is not the only 8 person in the trustee group--the persons in the trustee 9 group are jointly and severally liable to pay tax; 10 as imposed by the Taxation (Trustee Beneficiary 11 Non-disclosure Tax) Act (No. 1) 2007, on the untaxed part; 12 and 13 (b) except for the purposes of sections 99, 99A and 99B and this 14 Division, the untaxed part is not included in the assessable 15 income of the trustee beneficiary under section 97. 16 Note: Provisions dealing with the payment etc. of the tax under 17 paragraph (a) (known as trustee beneficiary non-disclosure tax) are set 18 out in Subdivision D. 19 Amendment of incorrect statement 20 (2A) If: 21 (a) during the TB statement period in relation to a year of 22 income, the trustee of a closely held trust makes and gives to 23 the Commissioner a statement, that the trustee believes on 24 reasonable grounds is a correct TB statement, about a share 25 of the net income of the trust; and 26 (b) the statement is not a correct TB statement about the share, 27 with the result that, apart from this subsection, this section 28 applies; and 29 (c) either: 30 (i) the trustee could not reasonably have foreseen the event 31 that caused the statement not to be a correct TB 32 statement; or 33 (ii) the statement is not a correct TB statement because of 34 an inadvertent error; and 35 (d) either: 36 (i) before any trustee beneficiary non-disclosure tax 37 becomes due and payable on the untaxed part as a result 38 of this section applying; or [Page Break] 2 and payable; 3 the trustee advises the Commissioner in writing of any 4 change that is necessary to make the statement a correct TB 5 statement about the share; 6 this section does not apply, and is taken never to have applied, to 7 the untaxed part. 8 Note: The heading to section 102UK is replaced by the heading "Trustee beneficiary 9 non-disclosure tax where no correct TB statement". 10 20 Subsection 102UL(2) 11 Omit "UB", substitute "TB". 12 21 Paragraphs 102UL(3)(a), (4)(a), (4)(c) and (5)(a) 13 Omit "UB", substitute "TB". 14 22 Subparagraphs 102UL(5)(b)(i) and (ii) 15 Omit "UB", substitute "TB". 16 23 Subsections 102UM(1) and (2) 17 Repeal the subsections, substitute: 18 (1) This section applies if: 19 (a) a share of the net income of a closely held trust for a year of 20 income is included in the assessable income of a trustee 21 beneficiary of the trust under section 97; and 22 (b) the trustee of the closely held trust becomes presently entitled 23 to an amount that is reasonably attributable to the whole or a 24 part of the untaxed part of the share; and 25 (c) trustee beneficiary non-disclosure tax is not payable by the 26 trustee of the closely held trust on the untaxed part under 27 paragraph 102UK(2)(a). 28 Consequences of section applying 29 (2) If this section applies: 30 (a) either: 31 (i) if the trustee of the closely held trust is the only person 32 in the trustee group (see subsection (3))--the trustee is 33 liable to pay tax; or [Page Break] 2 person in the trustee group--the persons in the trustee 3 group are jointly and severally liable to pay tax; 4 as imposed by the Taxation (Trustee Beneficiary 5 Non-disclosure Tax) Act (No. 2) 2007, on the whole or that 6 part of the untaxed part; and 7 (b) except for the purposes of sections 99, 99A and 99B and this 8 Division, the whole or that part of the untaxed part is not 9 included in the assessable income of the trustee beneficiary 10 under section 97. 11 Note: Provisions dealing with the payment etc. of the tax under 12 paragraph (a) (known as trustee beneficiary non-disclosure tax) are set 13 out in Subdivision D. 14 Note: The heading to section 102UM is replaced by the heading "Trustee beneficiary 15 non-disclosure tax where share is distributed to trustee of closely held trust". 16 24 Subdivision D of Division 6D of Part III (heading) 17 Repeal the heading, substitute: 18 Subdivision D--Payment etc. of trustee beneficiary 19 non-disclosure tax 20 25 Subsections 102UN(1) and (2) 21 Omit "ultimate", substitute "trustee". 22 Note: The heading to section 102UN is altered by omitting "ultimate" and substituting 23 "trustee". 24 26 Subsection 102UO(1) 25 Omit "Ultimate", substitute "Trustee". 26 Note: The heading to section 102UO is altered by omitting "ultimate" and substituting 27 "trustee". 28 27 Paragraph 102UO(1)(a) 29 Omit "UB", substitute "TB". 30 28 Subsection 102UO(2) 31 Omit "Ultimate", substitute "Trustee". 32 29 Subsection 102UO(3) 33 Omit "ultimate", substitute "trustee". [Page Break] 2 Omit "ultimate", substitute "trustee". 3 31 Subsection 102UO(4) (note) 4 Omit "ultimate", substitute "trustee". 5 32 Section 102UP 6 Omit "ultimate" (wherever occurring), substitute "trustee". 7 Note: The heading to section 102UP is altered by omitting "ultimate" and substituting 8 "trustee". 9 33 Paragraph 102UR(1)(a) 10 Omit "ultimate", substitute "trustee". 11 34 Subsections 102UR(2) and 102URA(1) 12 Omit "ultimate", substitute "trustee". 13 35 Paragraph 102US(1)(d) 14 Omit "ultimate", substitute "trustee". 15 36 Section 102USA 16 Repeal the section, substitute: 17 102USA Recovery of trustee beneficiary non-disclosure tax from 18 trustee beneficiaries providing incorrect information etc. 19 to head trustee 20 (1) This section applies if the requirements in subsections (2) and (3) 21 are satisfied. 22 Requirement for payment of trustee beneficiary non-disclosure tax 23 (2) A requirement for this section to apply is that: 24 (a) the trustee of a closely held trust does not make a correct TB 25 statement about a share of the net income of the trust of a 26 year of income during the TB statement period in relation to 27 the year of income; and 28 (b) as a result, the trustee becomes liable, or the persons in the 29 trustee group become jointly and severally liable, under [Page Break] 2 and 3 (c) the trustee or any of the persons in the trustee group pays an 4 amount (the recoverable amount), being some or all of the 5 tax or any general interest charge under section 102UP in 6 relation to the tax. 7 Requirement for refusal etc. to provide information or for incorrect 8 statement 9 (3) A requirement for this section to apply is that: 10 (a) either: 11 (i) the trustee of the closely held trust was unable to make a 12 correct TB statement about the share of the net income 13 during the TB statement period because the trustee 14 beneficiary in whose assessable income the share is 15 included under section 97, when requested to do so, 16 refused or failed to give information to the trustee; or 17 (ii) the trustee of the closely held trust purported to make a 18 correct TB statement about the share of the net income 19 during the TB statement period but the statement was 20 not a correct TB statement because it contained 21 incorrect information given to the trustee of the closely 22 held trust by the trustee beneficiary in whose assessable 23 income the share is included under section 97, and the 24 trustee honestly believed on reasonable grounds that the 25 information was correct; and 26 (b) the trustee of the closely held trust distributed to the trustee 27 beneficiary an amount representing some or all of the share 28 of the net income without withholding an amount under 29 section 254 in respect of the recoverable amount. 30 Consequences of section applying 31 (4) If this section applies, the trustee or the person in the trustee group 32 mentioned in paragraph (2)(c) may, in a court of competent 33 jurisdiction, sue for the recoverable amount and recover it from the 34 trustee beneficiary. 35 37 Subdivision E of Division 6D of Part III (heading) 36 Repeal the heading, substitute: [Page Break] 2 beneficiaries of tax-preferred amounts 3 38 Subsection 102UT(1) 4 Repeal the subsection, substitute: 5 (1) If, at the end of a year of income: 6 (a) a trustee beneficiary of a closely held trust is presently 7 entitled to a share of a tax-preferred amount of the trust; and 8 (b) the trustee of the closely held trust is not covered by a 9 determination under subsection 102UK(1A) for the year of 10 income; 11 the trustee of the closely held trust must, during the TB statement 12 period, make and send to the Commissioner a correct TB statement 13 covering the share. 14 Note: The heading to section 102UT is replaced by the heading "Requirement to make 15 correct TB statement about trustee beneficiaries of tax-preferred amounts". 16 39 Subsection 102UT(3) 17 Omit "or statements" (wherever occurring). 18 40 Paragraph 102UT(3)(c) 19 Omit "UB", substitute "TB". 20 41 Sections 102UU and 102UV 21 Repeal the sections, substitute: 22 102UU Trustee beneficiary may quote tax file number to trustee of 23 closely held trust 24 A trustee beneficiary in respect of: 25 (a) a share of the net income of a closely held trust for a year of 26 income that is included in the assessable income of the 27 trustee beneficiary of the trust under section 97; or 28 (b) a share of a tax-preferred amount of a closely held trust to 29 which the trustee beneficiary of the trust is presently entitled 30 at the end of a year of income; 31 may quote his or her tax file number to the trustee of the closely 32 held trust in connection with that trustee making a correct TB 33 statement about that share. [Page Break] 2 offence for a person to require or request another person to quote the 3 other person's tax file number unless provision is made by a taxation 4 law for the other person to quote the number. 5 102UV Trustee of closely held trust may record etc. tax file number 6 (1) This section applies if a trustee beneficiary in respect of: 7 (a) a share of the net income of a closely held trust for a year of 8 income that is included in the assessable income of the 9 trustee beneficiary of the trust under section 97; or 10 (b) a share of a tax-preferred amount of a closely held trust to 11 which the trustee beneficiary of the trust is presently entitled 12 at the end of a year of income; 13 quotes his or her tax file number to the trustee of the closely held 14 trust in connection with that trustee making a correct TB statement 15 about that share. 16 (2) Section 8WB of the Taxation Administration Act 1953 does not 17 prohibit the trustee of the closely held trust from: 18 (a) recording the tax file number or maintaining such a record; or 19 (b) using the tax file number in a manner connecting it with the 20 identity of the trustee beneficiary; or 21 (c) divulging or communicating the tax file number to a third 22 person; 23 in connection with that trustee making a correct TB statement 24 about that share. [Page Break] 2 Part 2--Consequential amendments 3 Income Tax Assessment Act 1936 4 42 Sub-subparagraph 47A(18)(d)(i)(G) 5 Omit "ultimate", substitute "trustee". 6 43 Subparagraph 102AAE(2)(c)(i) 7 Omit "ultimate", substitute "trustee". 8 44 Sub-subparagraph 102AAU(1)(c)(i)(C) 9 Omit "ultimate", substitute "trustee". 10 45 Subsection 170(10) (table item 18, column headed "Brief 11 description") 12 Omit "Ultimate", substitute "Trustee". 13 46 Paragraph 254(3)(a) 14 Omit "ultimate", substitute "trustee". 15 Taxation Administration Act 1953 16 47 Subsection 8AAB(4) (table item 1AA, column headed 17 "Topic") 18 Omit "ultimate", substitute "trustee". 19 48 Subsection 250-10(1) in Schedule 1 (table item 5, column 20 headed "Topic") 21 Omit "ultimate", substitute "trustee". [Page Break] 2 Part 3--Repeal of Acts 3 A New Tax System (Ultimate Beneficiary Non-disclosure 4 Tax) Act (No. 1) 1999 5 49 The whole of the Act 6 Repeal the Act. 7 A New Tax System (Ultimate Beneficiary Non-disclosure 8 Tax) Act (No. 2) 1999 9 50 The whole of the Act 10 Repeal the Act. [Page Break] 2 Part 4--Application and transitional 3 51 Application 4 The amendments made by this Schedule apply to the first income year 5 starting on or after the day on which this Act receives the Royal Assent 6 and later income years. 7 52 Transitional 8 (1) This item applies in relation to income years starting on or after 1 July 9 2006 and before the first income year to which the amendments made 10 by this Schedule apply in accordance with item 51. 11 (2) The trustee of a closely held trust is not liable to pay tax under 12 section 102UK or 102UM of the Income Tax Assessment Act 1936 in 13 respect of a share of the net income of the trust to the extent to which: 14 (a) the trustee of the closely held trust is assessed and liable to 15 pay tax under subsection 98(4) of that Act in respect of the 16 share; or 17 (b) the share is reasonably attributable to a part of the net income 18 of another trust estate in respect of which the trustee of the 19 other trust estate is assessed and liable to pay tax under that 20 subsection; or 21 (c) the share is represented by or reasonably attributable to an 22 amount from which an entity was required to withhold an 23 amount under Subdivision 12-H in Schedule 1 to the 24 Taxation Administration Act 1953; or 25 (d) the share is represented by or reasonably attributable to an 26 amount which was liable to tax under section 255 of the 27 Income Tax Assessment Act 1936. [Page Break] 2 Schedule 5--Superannuation amendments 3 Part 1--Main amendments 4 Income Tax Assessment Act 1997 5 1 Section 290-70 (heading) 6 Repeal the heading, substitute: 7 290-70 Employment activity conditions 8 2 Before paragraph 290-70(a) 9 Insert: 10 (aa) your employee (within the expanded meaning of employee 11 given by section 12 of the Superannuation Guarantee 12 (Administration) Act 1992); or 13 3 Subsection 290-90(4) 14 Omit "either". 15 4 Before paragraph 290-90(4)(a) 16 Insert: 17 (aa) an employee (within the expanded meaning of employee 18 given by section 12 of the Superannuation Guarantee 19 (Administration) Act 1992) of the other person's employer; or 20 5 At the end of section 295-385 21 Add: 22 (6) However, assets of a *complying superannuation fund that are 23 supporting a *superannuation income stream benefit that is 24 prescribed by the regulations for the purposes of this section are 25 not segregated current pension assets to the extent that the 26 *market value of the assets exceeds the account balance supporting 27 the benefit. 28 6 At the end of subsection 295-485(1) 29 Add: [Page Break] 2 assessable income under Subdivision 295-C included a reference to 3 amounts included in assessable income under former section 274 of 4 the Income Tax Assessment Act 1936: see section 295-485 of the 5 Income Tax (Transitional Provisions) Act 1997. 6 7 Section 295-615 7 Before "An individual", insert "(1)". 8 8 At the end of section 295-615 9 Add: 10 (2) An individual is taken to have quoted (for superannuation 11 purposes) a *tax file number to an entity at a time if the 12 Commissioner gives notice of the individual's tax file number to 13 the entity at that time. 14 9 Paragraph 307-5(3)(c) 15 Omit "the later of", substitute "the latest of the following". 16 10 Subparagraph 307-5(3)(c)(i) 17 Omit "or". 18 11 Subparagraph 307-5(3)(c)(ii) 19 Omit "estate.", substitute "estate;". 20 12 At the end of paragraph 307-5(3)(c) 21 Add: 22 (iii) if the payment of the benefit is delayed because of legal 23 action about entitlement to the benefit--6 months after 24 the legal action ceases; 25 (iv) if the payment of the benefit is delayed because of 26 reasonable delays in the process of identifying and 27 making initial contact with potential recipients of the 28 benefit--6 months after that process is completed; and 29 13 At the end of subsection 307-5(3) 30 Add: 31 (d) the Commissioner has not made a decision about the benefit 32 under subsection (3A). [Page Break] 2 Insert: 3 (3A) For the purposes of paragraph (3)(d), the Commissioner may make 4 a decision in writing that the superannuation benefit is not a 5 superannuation member benefit under subsection (3), if: 6 (a) both of these conditions are satisfied: 7 (i) the payment of the benefit is delayed because of legal 8 action about entitlement to the benefit; 9 (ii) the benefit is paid more than 6 months after the legal 10 action ceases; or 11 (b) both of these conditions are satisfied: 12 (i) the payment of the benefit is delayed because of 13 reasonable delays in the process of identifying and 14 making initial contact with potential recipients of the 15 benefit; 16 (ii) the benefit is paid more than 6 months after that process 17 is completed. 18 (3B) In making a decision under subsection (3A), the Commissioner 19 must have regard to the following matters: 20 (a) whether there was any action taken to try to pay the benefit 21 within the 6 months after the cessation of the legal action or 22 the completion of the process, and if so, the nature of that 23 action; 24 (b) whether there were any factors beyond the control of the 25 entity that paid the benefit, or of the person to whom the 26 benefit was paid, that prevented the payment of the benefit 27 within those 6 months; 28 (c) the circumstances of the person to whom the benefit was 29 paid, and the actions of that person in relation to the benefit. 30 15 Subsection 307-290(1) (note) 31 Repeal the note, substitute: 32 Note 1: Those sections allow deductions for insurance premiums that have 33 been paid, and for liability for future benefits. 34 Note 2: Deductions made under former section 279 or 279B of the Income Tax 35 Assessment Act 1936 are treated for the purposes of this section as 36 having been made under section 295-465 or 295-470 (see 37 section 307-290 of the Income Tax (Transitional Provisions) Act 38 1997). [Page Break] 2 superannuation fund) 3 Repeal the definition, substitute: 4 non-complying superannuation fund means a *superannuation 5 fund that: 6 (a) is a fund; and 7 (b) is not a *complying superannuation fund. 8 Income Tax (Former Non-resident Superannuation Funds) 9 Act 1994 10 17 At the end of section 3 11 Add "of that Act". 12 Income Tax (Transitional Provisions) Act 1997 13 18 After section 295-465 14 Insert: 15 295-485 Deductions for increased amount of superannuation lump 16 sum death benefit 17 Paragraph 295-485(1)(b) of the Income Tax Assessment Act 1997 18 has effect as if the reference in that paragraph to amounts included 19 in assessable income under Subdivision 295-C of that Act included 20 a reference to amounts included in assessable income under former 21 section 274 (taxable contributions) of the Income Tax Assessment 22 Act 1936. 23 19 Paragraph 307-125(4)(b) 24 Omit "under subsection (6)", substitute "under subsections (6) and 25 (6A)". 26 20 Paragraph 307-125(6)(b) 27 Omit "within the meaning of section 27A", substitute "within the 28 meaning of paragraph (a) of the definition of that term in subsection 29 27A(1)". [Page Break] 2 After "of this section", insert ", and disregarding paragraphs (b) and (c) 3 of that definition". 4 22 Paragraph 307-125(6)(b) 5 Omit "stream", substitute "stream, reduced by the tax free components 6 (worked out under subsection (2)) of any benefits paid from the 7 superannuation income stream after 30 June 2007". 8 23 Paragraph 307-125(6)(c) 9 Omit "However, treat this amount as nil for the purposes of this 10 paragraph if at least one superannuation income stream benefit was paid 11 from the superannuation income stream before 1 July 1994.". 12 24 After subsection 307-125(6) 13 Insert: 14 (6A) Despite subsection (6), if: 15 (a) at least one superannuation income stream benefit was paid 16 from the superannuation income stream before 1 July 1994; 17 or 18 (b) section 27AAAA of the Income Tax Assessment Act 1936 (as 19 in force just before 1 July 2007) applied to the 20 superannuation income stream just before 1 July 2007; 21 for the purposes of paragraph (4)(b), the tax free component is 22 equal to the amount worked out under paragraph (6)(b). 23 25 After section 307-125 24 Insert: 25 307-290 Taxed and untaxed elements of death benefit 26 superannuation lump sums 27 For the purposes of section 307-290 of the Income Tax Assessment 28 Act 1997: 29 (a) treat a deduction made under former section 279 of the 30 Income Tax Assessment Act 1936 as having been made under 31 section 295-465 of the Income Tax Assessment Act 1997 32 instead; and [Page Break] 2 Income Tax Assessment Act 1936 as having been made under 3 section 295-470 of the Income Tax Assessment Act 1997 4 instead. 5 Retirement Savings Accounts Act 1997 6 26 After section 140 7 Insert: 8 140A Holder taken to have quoted where Commissioner gives notice 9 (1) A holder, or a person applying to become a holder, of an RSA is 10 taken to have quoted his or her tax file number to an RSA provider 11 in connection with the operation or the possible future operation of 12 this Act and the other Superannuation Acts if the Commissioner of 13 Taxation gives to the provider notice of the person's tax file 14 number. 15 (2) The holder or applicant is taken to have quoted that tax file number 16 at the time when the Commissioner of Taxation gave the notice. 17 Superannuation Industry (Supervision) Act 1993 18 27 After section 299S 19 Insert: 20 299SA Beneficiary taken to have quoted where Commissioner gives 21 notice 22 (1) A beneficiary, or an applicant to become a beneficiary, of an 23 eligible superannuation entity or of a regulated exempt public 24 sector superannuation scheme is taken to have quoted his or her tax 25 file number to a trustee of the entity or scheme in connection with 26 the operation or the possible future operation of this Act and the 27 other Superannuation Acts if the Commissioner of Taxation gives 28 to the trustee notice of the person's tax file number. 29 (2) The beneficiary or applicant is taken to have quoted that tax file 30 number at the time when the Commissioner of Taxation gave the 31 notice. [Page Break] 2 2007 3 28 Item 12 of Schedule 2 4 Repeal the item, substitute: 5 12 Application 6 (1) The amendments made by items 1 to 9 of this Schedule apply to: 7 (a) individuals who: 8 (i) make the choice referred to in subsection 152-305(1) of 9 the Income Tax Assessment Act 1997; or 10 (ii) receive capital proceeds from a CGT event; and 11 (b) companies or trusts that make a payment referred to in 12 section 152-325 of the Income Tax Assessment Act 1997; 13 after 30 June 2007, regardless of when the relevant CGT event 14 happened. 15 (2) The amendments made by items 10 and 11 of this Schedule apply to 16 CGT events happening in the 2006-07 income year and later income 17 years. 18 Taxation Administration Act 1953 19 29 After subsection 45-325(1) 20 Insert: 21 Notional tax if you have no-TFN contributions income 22 (1A) In working out the notional tax of a *complying superannuation 23 fund, *non-complying superannuation fund or *RSA provider for 24 the *base year, assume that the entity had no *no-TFN 25 contributions income for the base year and that the entity was not 26 entitled to a *tax offset for the base year under Subdivision 295-J 27 of the Income Tax Assessment Act 1997. 28 30 After subsection 45-365(1) 29 Insert: [Page Break] 2 (1A) In working out the benchmark tax of a *complying superannuation 3 fund, *non-complying superannuation fund or *RSA provider for 4 the variation year, assume that the entity had no *no-TFN 5 contributions income for the variation year and that the entity was 6 not entitled to a *tax offset for the variation year under 7 Subdivision 295-J of the Income Tax Assessment Act 1997. [Page Break] 2 Part 2--Technical corrections 3 Income Tax Assessment Act 1997 4 31 Section 9-1 (table item 9) 5 Omit "section 94J", substitute "section 94J". 6 32 Section 9-1 (table item 10, column headed "because of 7 this provision:") 8 Omit "section 121", substitute "section 121". 9 33 Section 9-1 (table item 11) 10 Omit "sections 98, 99, 99A and 102", substitute "sections 98, 99, 99A 11 and 102". 12 34 Subsection 9-5(1) (table item 5) 13 Omit "section 23AF or 23AG", substitute "section 23AF or 23AG". 14 35 Subsection 9-5(1) (table item 6) 15 Omit "sections 98, 99 and 99A", substitute "sections 98, 99 and 99A". 16 36 Subsection 9-5(1) (table item 7) 17 Omit "section 102K", substitute "section 102K". 18 37 Subsection 9-5(1) (table item 8) 19 Omit "section 102S", substitute "section 102S". 20 38 Subsection 9-5(1) (table item 9) 21 Omit "section 121H", substitute "section 121H". 22 39 Subsection 9-5(1) (table item 10) 23 Omit "section 148", substitute "section 148". 24 40 Section 12-5 (table item headed "interest") 25 Omit "26-85", substitute "26-85". 26 41 Section 12-5 (table item headed "interest") [Page Break] 2 42 Section 20-5 (table item 8) 3 Omit "290-100", substitute "290-100". 4 43 Subsection 295-390(3) (definition of average value of 5 superannuation liabilities) 6 Omit "*superannuation income stream benefits", substitute 7 "*superannuation benefits". 8 44 Subsection 295-485(3) 9 Insert: 10 low tax component rate is the rate of tax imposed on the *low tax 11 component of the fund's taxable income for the income year. 12 45 Subsection 295-485(3) (definition of low tax component 13 tax rate) 14 Repeal the definition. 15 46 Subsection 995-1(1) (definition of index number) 16 Repeal the definition, substitute: 17 index number: 18 (a) for an amount mentioned in a provision listed at items 8 to 12 19 in section 960-265--index number has the meaning given by 20 section 960-285; or 21 (b) for an amount mentioned in a provision listed at another item 22 in section 960-265--index number has the meaning given by 23 section 960-280. 24 Taxation Administration Act 1953 25 47 Subsection 16-165(1) 26 Omit "payee", substitute "payer". [Page Break] 2 Part 3--Application 3 48 Application 4 (1) The amendments made by this Schedule apply to the 2007-2008 income 5 year and later years. 6 (2) Despite subitem (1), the amendments made by items 9 to 16, and 19 to 7 25, of this Schedule apply on and after 1 July 2007. 8 (3) Despite subitem (1), the amendments made by items 7, 8, 26 and 27 of 9 this Schedule apply to notices given by the Commissioner on or after 10 1 June 2007. 11 (4) Despite subitem (1), the amendment made by item 29 of this Schedule 12 applies in relation to an entity's 2007-2008 base year and later base 13 years. 14 (5) Despite subitem (1), the amendment made by item 30 of this Schedule 15 applies in relation to an entity's 2007-2008 variation year and later 16 variation years. [Page Break] 2 Schedule 6--Specific listings of deductible 3 gift recipients 4 5 Income Tax Assessment Act 1997 6 1 Subsection 30-55(2) (table item 6.2.23) 7 Omit "AAP Mawson's Huts Foundation Limited", substitute 8 "Mawson's Huts Foundation Limited". 9 2 Section 30-105 (at the end of the table) 10 Add: 13.2.15 Australian Peacekeeping Memorial Project the gift must be made Incorporated after 29 April 2007 and before 1 January 2009 13.2.16 Social Ventures Australia Limited the gift must be made after 3 May 2007 11 3 Subsection 30-315(2) (table item 1A) 12 Repeal the item. 13 4 Subsection 30-315(2) (after table item 24A) 14 Insert: 24B Australian Peacekeeping Memorial Project item 13.2.15 Incorporated 15 5 Subsection 30-315(2) (after table item 70) 16 Insert: 70A Mawson's Huts Foundation Limited item 6.2.23 17 6 Subsection 30-315(2) (after table item 111A) 18 Insert: 111AA Social Ventures Australia Limited item 13.2.16 [Page Break] 2 Schedule 7--Minor amendments 3 Part 1--Main amendments 4 A New Tax System (Australian Business Number) Act 1999 5 1 Section 41 (subparagraph (e)(ii) of the definition of 6 government entity) 7 Omit "enterprise", substitute "*enterprise". 8 A New Tax System (Goods and Services Tax) Act 1999 9 2 Paragraph 38-90(2)(a) 10 Omit "a *Masters or Doctoral course,". 11 3 Section 195-1 (paragraph (e) of the definition of education 12 course) 13 Repeal the paragraph. 14 4 Section 195-1 (definition of Masters or Doctoral course) 15 Repeal the definition. 16 5 Section 195-1 (after paragraph (a) of the definition of 17 tertiary course) 18 Insert: 19 (aa) a course of study or instruction accredited at Masters or 20 Doctoral level and supplied by a *higher education institution 21 or a *non-government higher education institution; or 22 6 Section 195-1 (definition of tertiary residential college 23 course) 24 Repeal the definition, substitute: 25 tertiary residential college course means a course supplied in 26 connection with a *tertiary course at premises that are used to 27 provide accommodation to students undertaking tertiary courses. [Page Break] 2 Note: The headings to sections 5 and 7 are altered by omitting "old sales tax" and substituting 3 "income tax". 4 Fringe Benefits Tax Assessment Act 1986 5 7 Subsection 11(1AA) 6 Repeal the subsection, substitute: 7 (1AA) The formula for working out the amount of B for the person and 8 the car for subsection (1) is: DV percentage 9 Effective life of the car 10 where: 11 DV percentage is the percentage applicable in using the 12 diminishing value method (within the meaning of the Income Tax 13 Assessment Act 1997) as at the start of the year of tax. 14 effective life of the car is the number of years in the period 15 specified as the effective life of the car in a determination made by 16 the Commissioner under section 40-100 of the Income Tax 17 Assessment Act 1997 and in effect at the most recent time (before 18 the end of the year of tax) the person became the owner of the car. 19 8 Application 20 The amendment made by item 7 applies to the FBT year starting on 21 1 April 2008 and to all later FBT years. 22 Income Tax Assessment Act 1936 23 9 Section 23GA 24 Repeal the section. 25 10 Subsection 46A(8AA) 26 Omit "sections 23A and 23B", substitute "section 23A". 27 Note: The heading to section 97A is altered by omitting "income equalization deposits or". 28 11 Subsection 128B(3A) [Page Break] 2 12 Subsections 139E(2) and (4) 3 Omit "in a form approved by the Commissioner", substitute "in the 4 approved form". 5 13 Paragraphs 139GA(3)(a) to (d) 6 Repeal the paragraphs, substitute: 7 (a) a person who pays, or is liable to pay, work and income 8 support related withholding payments and benefits; or 9 (b) a person who engages another person in foreign service. 10 14 Application 11 The amendment made by item 13 applies to assessments for the 12 2006-07 income year and later income years. 13 15 Section 202DDA 14 Repeal the section. 15 16 Paragraph 202EE(1)(d) 16 Omit "paragraph 128B(3)(a), (b) or (ga)", substitute "paragraph 17 128B(3)(a), (b), (ga) or (jb)". 18 17 Application 19 The amendment made by item 16 applies to income derived in the 20 2006-07 income year and later income years. 21 Income Tax Assessment Act 1997 22 18 Section 11-10 (table item headed "interest") 23 Omit ", 23GA". 24 19 Section 11-15 (table item headed "foreign aspects of 25 income taxation") 26 Omit: Defence Force member, non-resident, pay and allowances of ................................................................ 842-105 27 substitute: [Page Break] allowances of ................................................................ 842-105 1 20 Section 12-5 (table item headed "dividends") 2 Omit: franking credits, companies and non-residents................... 207-95(2), 207-95(3), 220-405(3) 3 substitute: franking credits, companies and foreign residents.............. 207-95(2), 207-95(3), 220-405(3) 4 21 Paragraphs 15-55(1)(b) and 15-60(4)(b) 5 Omit "320-15(k)", substitute "320-15(1)(k)". 6 22 Application 7 The amendments made by item 21 apply to assessments for the income 8 year including 1 January 2003 and later income years. 9 23 Paragraph 30-60(c) 10 Omit "Secretary to the Department of the Environment, Sport and 11 Territories", substitute "*Environment Secretary". 12 24 Section 30-255 13 Omit "Secretary to the Department of the Environment, Sport and 14 Territories", substitute "*Environment Secretary". 15 25 Subsection 30-265(4) 16 Omit "Minister for Environment, Sport and Territories", substitute 17 "*Environment Minister". 18 26 Subsection 30-270(4) 19 Omit "Secretary to the Department of the Environment, Sport and 20 Territories", substitute "*Environment Secretary". 21 27 Paragraph 30-275(c) [Page Break] 2 "*Environment Minister". 3 28 Subsection 30-280(1) 4 Omit "Secretary to the Department of the Environment, Sport and 5 Territories", substitute "*Environment Secretary". 6 29 Subsection 30-280(1) 7 Omit "Minister for Environment, Sport and Territories", substitute 8 "*Environment Minister". 9 30 Subsection 30-280(4) 10 Omit "Minister for Environment, Sport and Territories", substitute 11 "*Environment Minister". 12 31 Subsection 30-285(1) 13 Omit "Minister for Environment, Sport and Territories", substitute 14 "*Environment Minister". 15 32 Subsection 30-285(1) 16 Omit "Secretary to the Department of the Environment, Sport and 17 Territories", substitute "*Environment Secretary". 18 33 Paragraph 31-5(5)(c) 19 Omit "Minister for the Environment and Heritage", substitute 20 "*Environment Minister". 21 34 Section 50-70 (heading) 22 Repeal the heading, substitute: 23 50-70 Special conditions for items 1.7, 2.1, 9.1 and 9.2 24 35 Subsection 51-57(1) 25 Omit "a law of the Commonwealth, a State or Territory", substitute "an 26 *Australian law". 27 36 Section 61-560 (note) 28 Omit "have you", substitute "you have". [Page Break] 2 Insert: 3 (ia) section 59-35 (amounts that would be mutual receipts 4 but for prohibition on distributions to members); 5 38 Application 6 The amendment made by item 37 applies to assessments for income 7 years commencing on or after 1 July 2000. 8 39 Paragraph 165-12(7)(b) 9 Omit "direct or indirect equity interests", substitute "*direct equity 10 interests or *indirect equity interests". 11 40 Subsection 165-12(8) 12 Omit "direct or indirect equity interest", substitute "*direct equity 13 interest or *indirect equity interest". 14 41 Subsection 165-12(9) 15 Repeal the subsection. 16 42 Paragraph 165-37(4)(b) 17 Omit "direct or indirect equity interests", substitute "*direct equity 18 interests or *indirect equity interests". 19 43 Subsection 165-37(5) 20 Omit "direct or indirect equity interest", substitute "*direct equity 21 interest or *indirect equity interest". 22 44 Subsection 165-37(6) 23 Repeal the subsection. 24 45 Paragraph 165-115C(4)(b) 25 Omit "direct or indirect equity interests", substitute "*direct equity 26 interests or *indirect equity interests". 27 46 Subsection 165-115C(5) 28 Omit "direct or indirect equity interest", substitute "*direct equity 29 interest or *indirect equity interest". [Page Break] 2 Repeal the subsections. 3 48 Paragraph 165-115GB(2)(a) 4 Omit "direct or indirect equity interest", substitute "*direct equity 5 interest or *indirect equity interest". 6 49 Paragraph 165-123(7)(b) 7 Omit "direct or indirect equity interests", substitute "*direct equity 8 interests or *indirect equity interests". 9 50 Subsection 165-123(8) 10 Omit "direct or indirect equity interest", substitute "*direct equity 11 interest or *indirect equity interest". 12 51 Subsections 165-123(9) and (10) 13 Repeal the subsections. 14 52 Paragraph 166-272(8)(b) 15 Omit "direct or indirect equity interests", substitute "*direct equity 16 interests or *indirect equity interests". 17 53 Subsection 166-272(8) (note) 18 Repeal the note. 19 54 Subsection 166-272(10) 20 Omit "direct or indirect equity interest", substitute "*direct equity 21 interest or *indirect equity interest". 22 55 Subsection 166-272(10) (note) 23 Repeal the note. 24 56 Subsection 166-272(11) 25 Repeal the subsection. 26 57 Paragraph 197-20(b) 27 Omit "a law of the Commonwealth, or of a State or Territory,", 28 substitute "an *Australian law". [Page Break] 2 Omit "320-15(h)", substitute "320-15(1)(h)". 3 59 Subsection 713-545(6) (definition of ordinary class tax 4 rate) 5 Omit "subparagraph 23A(a)(ii)", substitute "paragraph 23A(a)". 6 60 Paragraph 727-95(b) 7 Omit "direct or indirect equity interests", substitute "*direct equity 8 interests or *indirect equity interests". 9 61 Subsections 820-37(2) and (3) 10 Omit "*foreign permanent establishments", substitute "*overseas 11 permanent establishments". 12 62 Subsection 820-946(3) 13 Omit "that time", substitute "the particular time mentioned in 14 subsection (2) or (2A)". 15 63 Subsection 995-1(1) 16 Insert: 17 direct equity interests in a company are *shares in the company. 18 64 Subsection 995-1(1) 19 Insert: 20 Environment Minister means the Minister administering the 21 Environment Protection and Biodiversity Conservation Act 1999. 22 65 Subsection 995-1(1) (definition of GST joint venture) (the 23 definition inserted by item 59 of Schedule 3 to the A 24 New Tax System (Indirect Tax and Consequential 25 Amendments) Act 1999) 26 Repeal the definition. 27 66 Subsection 995-1(1) 28 Insert: [Page Break] 2 company if it has *shares or other interests in entities interposed 3 between the entity and the company. 4 67 Subsection 995-1(1) (paragraph (d) of the definition of 5 member) 6 Omit "person who" (wherever occurring), substitute "entity that". 7 68 Subsection 995-1(1) (all the definitions of share) 8 Repeal the definitions, substitute: 9 share: 10 (a) in a company means a share in the capital of the company, 11 and includes stock; and 12 (b) of an *exempting credit has the meaning given by 13 section 208-180; and 14 (c) of a *franked distribution has the meaning given by 15 section 207-55; and 16 (d) of a *franking credit has the meaning given by 17 section 207-57. 18 Income Tax (Dividends, Interest and Royalties Withholding 19 Tax) Act 1974 20 69 Section 3 21 Repeal the section. 22 70 Section 4 23 Omit "Income Tax Assessment Act 1936-1974", substitute "Income Tax 24 Assessment Act 1936". 25 71 Paragraph 7(a) 26 Repeal the paragraph, substitute: 27 (a) in respect of income to which subsection 128B(4) of the 28 Assessment Act applies--30%; and 29 72 Section 8 30 Repeal the section. [Page Break] 2 73 Subsection 3(1) (definition of AD/RLA component) 3 Repeal the definition. 4 74 Subsection 3(1) (definition of CS/RA component) 5 Repeal the definition. 6 75 Subsection 3(1) (definition of EIB component) 7 Repeal the definition. 8 76 Subsection 3(1) (definition of general fund component) 9 Repeal the definition. 10 77 Subsection 3(1) (definition of NCS component) 11 Repeal the definition. 12 78 Subsection 3(1) (definition of registered organisation) 13 Repeal the definition. 14 79 Subsection 3(1) (definition of RSA category A component) 15 Repeal the definition. 16 80 Subsection 3(1) (definition of RSA category B component) 17 Repeal the definition. 18 81 Subsection 3(1) (definition of RSA combined component) 19 Repeal the definition. 20 82 Subsection 3(1) (definition of RSA component) 21 Repeal the definition, substitute: 22 RSA component has the same meaning as in the Income Tax 23 Assessment Act 1997. 24 83 Subsection 3(1) (definition of standard component) 25 Repeal the definition, substitute: [Page Break] 2 Assessment Act 1997. 3 84 Subsection 23(1A) 4 Omit "sections 23A, 23B and 23C", substitute "section 23A". 5 85 Paragraphs 23(2)(a) and (b) 6 Repeal the paragraphs. 7 86 Paragraphs 23(2)(c), (ca) and (d) 8 Reletter as paragraphs (a), (b) and (c). 9 87 Subsections 23(3), (4), (4A) and (4B) 10 Repeal the subsections. 11 88 Subsection 23(4BA) 12 Omit "or a registered organization". 13 89 Subsections 23(4BA), (4C), (4D), (5) and (6) 14 Renumber as subsections (3), (4), (5), (6) and (7). 15 90 Subsection 23(6) (as renumbered) 16 Omit ", not being a registered organization,". 17 91 Section 23A 18 Omit "Subject to sections 23B and 23C, the", substitute "The". 19 92 Paragraphs 23A(a) and (b) 20 Repeal the paragraphs, substitute: 21 (a) in respect of the ordinary class--30%; and 22 (b) in respect of the complying superannuation class--15%. 23 93 Sections 23B and 23C 24 Repeal the sections. 25 94 Subparagraph 29(2)(c)(iii) 26 Omit "paragraph 23(4BA)(a)", substitute "paragraph 23(3)(a)". 27 95 Subparagraph 29(2)(c)(iv) [Page Break] 2 96 Application 3 The amendments made by items 73 to 95 apply to assessments for the 4 2007-08 income year and later income years. 5 Income Tax (Transitional Provisions) Act 1997 6 97 Division 136 (heading) 7 Repeal the heading, substitute: 8 Division 136--Foreign residents 9 Note 1: The heading to section 701C-10 is replaced by the heading "Additional membership 10 rules where entities are interposed between the head company and a subsidiary 11 member--case where an interposed entity is a foreign resident and the subsidiary 12 member is a company". 13 Note 2: The heading to section 701C-15 is replaced by the heading "Additional membership 14 rules where entities are interposed between the head company and a subsidiary 15 member--case where an interposed entity is a foreign resident and the subsidiary 16 member is a trust or partnership". 17 98 The whole of the Act 18 Omit "*" (wherever occurring). 19 Taxation Administration Act 1953 20 99 Section 14ZQ (paragraph (b) of the definition of delayed 21 administration (trustee) objection) 22 Reletter as paragraph (a). 23 100 Section 14ZQ (paragraphs (c) to (f) of the definition of 24 delayed administration (trustee) objection) 25 Repeal the paragraphs. 26 101 Section 14ZQ (paragraph (g) of the definition of delayed 27 administration (trustee) objection) 28 Reletter as paragraph (b). 29 102 Subsection 288-80(4) in Schedule 1 (definition of 30 applicable withholding tax rate) [Page Break] 2 Taxation (Interest on Overpayments and Early Payments) Act 3 1983 4 103 Paragraph 9(6)(b) 5 After "at a later", insert "time". [Page Break] 2 Part 2--Penalty unit conversion 3 104 Penalty unit conversion 4 (1) The provisions of the Fringe Benefits Tax Assessment Act 1986 listed in 5 the table are amended as set out in the table. 6 Penalty unit conversion Item Provision Omit: Substitute: 1 Subsection 121(1) (penalty) $1,000 10 penalty units 2 Subsection 121(2) (penalty) $1,000 10 penalty units 3 Subsection 121(2B) (penalty) $1,000 10 penalty units 4 Subsection 122(1) (penalty) $1,000 10 penalty units 5 Section 135 $500 5 penalty units 7 (2) The provisions of the Income Tax Assessment Act 1936 listed in the 8 table are amended as set out in the table. 9 Penalty unit conversion Item Provision Omit: Substitute: 1 Section 16 (penalty) $10,000 100 penalty units 2 Subsection 124ZADA(3) (penalty) $200 2 penalty units 3 Subsection 124ZADB(1) (penalty) $200 2 penalty units 4 Subsection 202CD(1) (penalty) $1,000 10 penalty units 5 Subsection 202CD(4) (penalty) $1,000 10 penalty units 6 Subsection 202EE(2) (penalty) $1,000 10 penalty units 7 Subsection 202EF(4) (penalty) $1,000 10 penalty units 8 Subsection 213(2) (penalty) $2,000 20 penalty units 9 Section 251A (sub- $2,000 20 penalty units subparagraph (c)(ii)(A) of the definition of serious taxation offence) 10 Subsection 251KG(1) (penalty) $500 5 penalty units 11 Subsection 251KH(1) (penalty) $500 5 penalty units 12 Section 251KJ (penalty) $500 5 penalty units [Page Break] Item Provision Omit: Substitute: 13 Subsection 251KK(2) (penalty) $500 5 penalty units 14 Subsections 251N(1), (2) and (2B) $1,000 10 penalty units (penalty) 15 Subsection 251O(1) (penalty) $1,000 10 penalty units 16 Subsection 252(3) $50 1 penalty unit 17 Subsection 252A(1) $50 1 penalty unit 18 Section 266 $500 5 penalty units 1 (3) The provisions of the Taxation Administration Act 1953 listed in the 2 table are amended as set out in the table. 3 Penalty unit conversion Item Provision Omit: Substitute: 1 Subsection 3D(21) $10,000 100 penalty units 2 Subsection 8E(1) $2,000 20 penalty units 3 Subsection 8E(2) $4,000 40 penalty units 4 Subsection 8E(3) $5,000 50 penalty units 5 Subsection 8H(1) $5,000 50 penalty units 6 Subsection 8M(1) $2,000 20 penalty units 7 Subsection 8M(2) $4,000 40 penalty units 8 Subsection 8R(1) $3,000 30 penalty units 9 Subsection 8R(2) $5,000 50 penalty units 10 Subsection 8V(1) $5,000 50 penalty units 11 Subsection 8V(2) $10,000 100 penalty units 12 Subsection 8WA(1) (penalty) $10,000 100 penalty units 13 Subsection 8WB(1) (penalty) $10,000 100 penalty units 14 Subsection 8WC(1) (penalty) $10,000 100 penalty units 15 Section 8XA (penalty) $10,000 100 penalty units 16 Subsection 8XB(1) (penalty) $10,000 100 penalty units 17 Subsection 13F(4) (penalty) $1,000 10 penalty units 18 Subsection 14J(3) (penalty) $1,000 10 penalty units 19 Subsection 14R(1) (penalty) $5,000 50 penalty units [Page Break] Item Provision Omit: Substitute: 20 Subsection 14ZA(1) (penalty) $500 5 penalty units [Page Break] 2 Schedule 8--Family trusts 3 4 Income Tax Assessment Act 1936 5 1 After paragraph 270-25(1)(d) in Schedule 2F 6 Insert: 7 (da) a trust with the same individual specified in its family trust 8 election; or 9 2 Subsection 272-80(5) in Schedule 2F 10 Repeal the subsection, substitute: 11 Election generally cannot be varied or revoked 12 (5) Subject to subsections (5A), (5B), (5C), (6) and (6A), the election 13 cannot be varied or revoked. 14 Variation cases 15 (5A) The trustee of a trust may, in respect of an income year during the 16 period specified in subsection (6B), vary an election so that a 17 different individual (the new individual) is specified for the 18 purposes of subsection (3) as the individual whose family group is 19 to be taken into account in relation to the election if: 20 (a) the new individual was a member of the family of the 21 individual originally specified in the election at the election 22 commencement time; and 23 (b) any conferrals of present entitlement to income or capital of: 24 (i) the trust; and 25 (ii) an entity for which an interposed entity election has 26 been made in relation to the trust; 27 during the period in which the election has been in force have 28 been made on the new individual or on persons who would 29 have been members of the new individual's family group at 30 the time of the conferral; and 31 (c) any distributions of income or capital of: 32 (i) the trust; and 33 (ii) an entity for which an interposed entity election has 34 been made in relation to the trust; [Page Break] 2 been made to the new individual or to persons who would 3 have been members of the new individual's family group at 4 the time of the distribution. 5 (5B) A variation of an election under subsection (5A) in relation to a 6 trust can only be made once. 7 (5C) The trustee of a trust may vary an election so that a different 8 individual (the new individual) is specified for the purposes of 9 subsection (3) as the individual whose family group is to be taken 10 into account in relation to the election if: 11 (a) an order; or 12 (b) an agreement; or 13 (c) an award; 14 of a kind mentioned in paragraphs 126-5(1)(a) to (f) of the Income 15 Tax Assessment Act 1997 results in the new individual, or a group 16 comprising the new individual and members of the new 17 individual's family, having control of the trust under 18 subsection (5D). 19 (5D) The new individual, or a group comprising the new individual and 20 members of the new individual's family, have control of the trust 21 for the purposes of subsection (5C) if any of paragraphs 22 272-87(2)(a) to (g) are satisfied in relation to a group consisting of: 23 (a) the new individual; or 24 (b) the new individual and members of the new individual's 25 family. 26 3 After subsection 272-80(6) in Schedule 2F 27 Insert: 28 (6A) The trustee of a trust may, in respect of an income year during the 29 period specified in subsection (6B), revoke the election unless: 30 (a) the trust, or another entity, has incurred a tax loss and had its 31 assessable income reduced by part or all of the loss in an 32 income year or years during the period: 33 (i) starting at the beginning of the income year specified in 34 the election; and [Page Break] 2 prior to the income year from which the revocation is to 3 be effective (see subsection (8)); 4 and the trust, or the other entity, could not have had its 5 assessable income so reduced had the election not been in 6 force; or 7 (b) the trust, or another entity, has claimed a deduction for bad 8 debts in an income year or years during the period specified 9 in paragraph (a) and the trust, or the other entity, could not 10 have claimed the deduction had the election not been in 11 force; or 12 (c) a beneficiary of the trust in an income year during the period 13 specified in paragraph (a) received a franked distribution 14 indirectly through the trust and paragraph 207-150(1)(a) of 15 the Income Tax Assessment Act 1997 would have applied in 16 relation to the distribution had the election not been in force. 17 Period to vary or revoke the election 18 (6B) The trustee of a trust cannot vary or revoke the election under 19 subsections (5A) or (6A) unless the variation or revocation is in 20 respect of an income year that occurs during the period: 21 (a) starting at the beginning of the income year specified in the 22 election and finishing at the end of the fourth income year 23 after the income year specified in the election; or 24 (b) starting at the beginning of the income year in which 25 Schedule 8 to the Tax Laws Amendment (2007 Measures 26 No. 4) Act 2007 commenced and finishing at the end of the 27 subsequent income year. 28 Note: The heading to subsection 272-80(6) is altered by omitting "case" and substituting 29 "cases". 30 4 Subsections 272-80(7), (8) and (9) in Schedule 2F 31 Repeal the subsections, substitute: 32 How to vary or revoke the election 33 (7) To revoke an election under subsection (6), the revocation must be 34 made in the trust's return of income for the income year in which 35 the later time occurs. If the trustee is not required to give a return 36 for the income year, the revocation must: [Page Break] 2 (b) specify the later time; and 3 (c) be given to the Commissioner before the end of: 4 (i) 2 months after the end of the income year in which the 5 later time occurs; or 6 (ii) such later day as the Commissioner allows. 7 (8) To vary or revoke an election under subsection (5A), (5C) or (6A), 8 the variation or revocation must be made in the trust's return of 9 income for the income year from which the variation or revocation 10 is to be effective. If the trustee is not required to give a return for 11 the income year, the variation or revocation must: 12 (a) be in writing and in the approved form; and 13 (b) specify the income year from which the variation or 14 revocation is to be effective; and 15 (c) be given to the Commissioner on or before: 16 (i) 2 months after the end of that income year; or 17 (ii) such later day as the Commissioner allows. 18 When election is in force 19 (9) The election is in force: 20 (a) if it is not revoked--at all times after the election 21 commencement time (see subsection (10)); or 22 (b) if it is revoked under subsection (6)--at all times from the 23 election commencement time until the later time specified in 24 the revocation; or 25 (c) if it is revoked under subsection (6A)--at all times from the 26 election commencement time until the end of the income year 27 immediately prior to the income year from which the 28 revocation is to be effective (see subsection (8)). 29 5 Subsection 272-85(1) in Schedule 2F 30 Omit "in accordance with subsection 272-80(3)". 31 6 Subsections 272-85(5) and (6) in Schedule 2F 32 Repeal the subsections, substitute: [Page Break] 2 (5) Subject to subsections (5A) and (5B), the election cannot be 3 revoked. 4 Revocation cases 5 (5A) A company, the partners in any partnership or the trustee of a trust 6 may, in respect of an income year during the period specified in 7 subsection (5C), revoke the election if at the election 8 commencement time, or at a later time, the entity was, or becomes, 9 a member of the family group (within the meaning of subsection 10 272-90(3A) or (5)) of the individual specified in the family trust 11 election. 12 (5B) The election is taken to be revoked if the family trust election to 13 which it relates is revoked. 14 Period to revoke the election 15 (5C) A company, the partners in any partnership or the trustee of a trust 16 cannot revoke an election under subsection (5A) unless the 17 revocation is in respect of an income year that occurs during the 18 period: 19 (a) starting at the later of: 20 (i) the beginning of the income year specified in the 21 election; and 22 (ii) the beginning of the income year in which the entity 23 became a member of the family group; 24 and finishing at the end of the fourth income year after the 25 income year referred to in subparagraph (i) or (ii); or 26 (b) starting at the beginning of the income year in which 27 Schedule 8 to the Tax Laws Amendment (2007 Measures 28 No. 4) Act 2007 commenced and finishing at the end of the 29 subsequent income year. 30 How revocation is made 31 (6) A revocation must be made in the entity's return of income for the 32 income year from which the revocation is to be effective. If the 33 entity is not required to give a return for the income year, the 34 revocation must: 35 (a) be in writing and in the approved form; and [Page Break] 2 effective; and 3 (c) be given to the Commissioner on or before: 4 (i) 2 months after the end of that income year; or 5 (ii) such later day as the Commissioner allows. 6 When election is in force 7 (6A) The election is in force: 8 (a) if it is not revoked--at all times after the election 9 commencement time (see subsection (6B)); or 10 (b) if it is revoked under subsection (5A)--at all times from the 11 election commencement time to the end of the income year 12 immediately prior to the income year from which the 13 revocation is to be effective (see subsection (6)); or 14 (c) if the family trust election to which it relates is revoked under 15 subsection 272-80(6)--at all times from the election 16 commencement time until the later time specified in that 17 revocation; or 18 (d) if the family trust election to which it relates is revoked under 19 subsection 272-80(6A)--at all times from the election 20 commencement time to the end of the income year 21 immediately prior to the income year from which the family 22 trust revocation is to be effective (see subsection 272-80(8)). 23 Election commencement time 24 (6B) The election commencement time is: 25 (a) if the company, partnership or trust does not pass the family 26 control test at all times in the specified income year--the 27 later of: 28 (i) the beginning of the specified day; and 29 (ii) the earliest time from which the company, partnership 30 or trust does pass the family control test for the 31 remainder of the specified income year; or 32 (b) in any other case--the beginning of the specified day. 33 7 At the end of section 272-85 in Schedule 2F 34 Add: [Page Break] 2 been revoked under subsection (5A) or (5B). 3 8 After subsection 272-90(2) in Schedule 2F 4 Insert: 5 Certain former family members 6 (2A) The following persons are members of the primary individual's 7 family group in relation to the conferral or distribution: 8 (a) a person who was a spouse of either the primary individual or 9 of a member of the primary individual's family before a 10 breakdown in the marriage; and 11 (b) a person who was a widow or widower (whichever is 12 applicable) of either the primary individual or of a member of 13 the primary individual's family and who is now the spouse of 14 a person who is not a member of the primary individual's 15 family; and 16 (c) a person who was a step-child of either the primary 17 individual or of a member of the primary individual's family 18 before a breakdown in the marriage of the primary individual 19 or the member of the primary individual's family. 20 Note: The fact that a person is a member of the family group of an 21 individual under this subsection does not mean that the person is a 22 member of the individual's family under section 272-95. 23 9 After subsection 272-90(3) in Schedule 2F 24 Insert: 25 Trust with same primary individual 26 (3A) A trust with the same primary individual specified in its family 27 trust election is a member of the primary individual's family group 28 in relation to the conferral or distribution. 29 10 Section 272-95 in Schedule 2F 30 Repeal the section, substitute: 31 272-95 Family 32 (1) The family of an individual (the test individual) consists of the test 33 individual and all of the following (if applicable): [Page Break] 2 individual or the test individual's spouse; 3 (b) any nephew, niece or child of the test individual or the test 4 individual's spouse; 5 (c) any lineal descendant of a nephew, niece or child referred to 6 in paragraph (b); 7 (d) the spouse of the test individual or of anyone who is a 8 member of the test individual's family because of 9 paragraphs (a), (b) and (c). 10 Note: Child and spouse are defined in subsection 6(1). 11 (2) A person does not cease to be a family member merely because of 12 the death of any other family member. 13 (3) In this section, an adopted child, step-child or ex-nuptial child of a 14 person is taken to be a lineal descendant of that person for the 15 purposes of determining the lineal descendants of that person or 16 any other person. 17 Note: A person who is no longer a member of an individual's family under 18 this section may still be a member of the individual's family group 19 under subsection 272-90(2A). 20 11 Section 272-140 in Schedule 2F 21 Before "In this Schedule", insert "(1)". 22 12 Section 272-140 in Schedule 2F 23 Insert: 24 specified individual in relation to a family trust election has the 25 meaning given by subsection (2). 26 13 At the end of section 272-140 in Schedule 2F 27 Add: 28 (2) A reference in this Schedule to a person specified in a family trust 29 election is a reference to: 30 (a) if the family trust election has not been varied--the person 31 specified for the purposes of subsection 272-80(3); or 32 (b) if the family trust election has been varied--the person most 33 recently specified under subsection 272-80(5A) or (5C). [Page Break] 2 The amendments made by this Schedule apply to the income year in 3 which this Act receives the Royal Assent and to later income years.