2008 The Parliament of the Commonwealth of Australia HOUSE OF REPRESENTATIVES Presented and read a first time Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 (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) ......................................................................................... 1 Schedule 1--Goods and services tax and real property 3 A New Tax System (Goods and Services Tax) Act 1999 3 Schedule 2--Thin capitalisation and inte rnational financial reporting standards 11 Income Tax Assessment Act 1997 11 Schedule 3--Interest withholding tax and state government bonds 17 Income Tax Assessment Act 1936 17 Schedule 4--Fringe benefits tax 18 Part 1--Main amendments 18 Fringe Benefits Tax Assessment Act 1986 18 Part 2--Technical amendments 27 Fringe Benefits Tax Assessment Act 1986 27 Schedule 5--Eligible investment business rules 30 Income Tax Assessment Act 1936 30 i Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [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 (2008 6 Measures No. 5) Act 2008. 7 2 Commence ment 8 This Act commences on the day on which it receives the Royal 9 Assent. 10 3 Schedule(s) 11 Each Act that is specified in a Schedule to this Act is amended or 12 repealed as set out in the applicable items in the Schedule Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 1 [Page Break] 2 according to its terms. 3 2 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 2 Schedule 1--Goods and services tax and real 3 property 4 5 A New Tax System (Goods and Services Tax) Act 1999 6 1 After subsection 75-5(1A) 7 Insert: 8 (1B) A supply that you make to your * associate is taken for the purposes 9 of subsection (1) to be a sale to your associate whether or not the 10 supply is for * consideration. 11 2 At the end of subsection 75-5(3) 12 Add: 13 ; or (e) it is a supply in relation to which all of the following apply: 14 (i) you acquired the interest, unit or lease from an entity as, 15 or as part of, a * supply of a going concern to you that 16 was * GST-free under Subdivision 38-J; 17 (ii) the entity was *registered or * required to be registered, 18 at the time of the acquisition; 19 (iii) the entity had acquired the entire interest, unit or lease 20 through a taxable supply on which the GST was worked 21 out without applying the margin scheme; or 22 (f) it is a supply in relation to which all of the following apply: 23 (i) you acquired the interest, unit or lease from an entity as, 24 or as part of, a supply to you that was GST-free under 25 Subdivision 38-O; 26 (ii) the entity was registered or required to be registered, at 27 the time of the acquisition; 28 (iii) the entity had acquired the entire interest, unit or lease 29 through a taxable supply on which the GST was worked 30 out without applying the margin scheme; or 31 (g) it is a supply in relation to which all of the following apply: 32 (i) you acquired the interest, unit or lease from an entity 33 who was your * associate, and who was registered or 34 required to be registered, at the time of the acquisition; Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 3 [Page Break] 1 (ii) the acquisition from your associate was without 2 * consideration; 3 (iii) the supply by your associate was not a taxable supply; 4 (iv) your associate made the supply in the course or 5 furtherance of an * enterprise that your associate *carried 6 on; 7 (v) your associate had acquired the entire interest, unit or 8 lease through a taxable supply on which the GST was 9 worked out without applying the margin scheme. 10 3 After subsection 75-5(3) 11 Insert: 12 (3A) Subparagraphs (3)(g)(iii) and (iv) do not apply if the acquisition 13 from your * associate was not by means of a supply by your 14 associate. 15 4 After subsection 75-11(4) 16 Insert: 17 Margin for supply of real property acquired as a GST-free going 18 concern or as GST-free farm land 19 (5) If: 20 (a) you acquired the interest, unit or lease in question from an 21 entity as, or as part of: 22 (i) a *supply of a going concern to you that was * GST-free 23 under Subdivision 38-J; or 24 (ii) a supply to you that was GST-free under 25 Subdivision 38-O; and 26 (b) the entity was *registered or * required to be registered, at the 27 time of the acquisition; and 28 (c) none of subsections (1) to (4) applies; 29 the margin for the supply you make is the amount by which the 30 * consideration for the supply exceeds: 31 (d) if that entity had acquired the interest, unit or lease before 32 1 July 2000 and on that day was registered or required to be 33 registered: 4 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 (i) if you choose to apply an * approved valuation to work 2 out the margin for the supply--an approved valuation of 3 the interest, unit or lease as at 1 July 2000; or 4 (ii) if subparagraph (i) does not apply--the * GST inclusive 5 market value of the interest, unit or lease as at 1 July 6 2000; or 7 (e) if that entity had acquired the interest, unit or lease on or after 8 1 July 2000 and had been registered or required to be 9 registered at the time of the acquisition: 10 (i) if the entity's acquisition was for consideration and you 11 choose to apply an approved valuation to work out the 12 margin for the supply--an approved valuation of the 13 interest, unit or lease as at the day on which the entity 14 had acquired it; or 15 (ii) if the entity's acquisition was for consideration and 16 subparagraph (i) does not apply--that consideration; or 17 (iii) if the entity's acquisition was without consideration-- 18 the GST inclusive market value of the interest, unit or 19 lease as at the time of the acquisition; or 20 (f) if that entity had not been registered or required to be 21 registered at the time of the entity's acquisition of the 22 interest, unit or lease (and paragraph (d) does not apply): 23 (i) if you choose to apply an approved valuation to work 24 out the margin for the supply--an approved valuation of 25 the interest, unit or lease as at the first day on which the 26 entity was registered or required to be registered; or 27 (ii) if subparagraph (i) does not apply--the GST inclusive 28 market value of the interest, unit or lease as at that day. 29 Margin for supply of real property acquired from associate 30 (6) If: 31 (a) you acquired the interest, unit or lease in question from an 32 entity who was your * associate, and who was * registered or 33 * required to be registered, at the time of the acquisition; and 34 (b) the acquisition from your associate was without 35 * consideration; and 36 (c) the supply by your associate was not a * taxable supply; and 37 (d) your associate made the supply in the course or furtherance 38 of an *enterprise that your associate * carried on; and Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 5 [Page Break] 1 (e) none of subsections (1) to (5) applies; 2 the margin for the supply you make is the amount by which the 3 consideration for the supply exceeds: 4 (f) if your associate had acquired the interest, unit or lease 5 before 1 July 2000 and on that day was registered or required 6 to be registered: 7 (i) if you choose to apply an * approved valuation to work 8 out the margin for the supply--an approved valuation of 9 the interest, unit or lease as at 1 July 2000; or 10 (ii) if subparagraph (i) does not apply--the * GST inclusive 11 market value of the interest, unit or lease as at 1 July 12 2000; or 13 (g) if your associate had acquired the interest, unit or lease on or 14 after 1 July 2000 and had been registered or required to be 15 registered at the time of the acquisition: 16 (i) if your associate's acquisition was for consideration and 17 you choose to apply an approved valuation to work out 18 the margin for the supply--an approved valuation of the 19 interest, unit or lease as at the day on which your 20 associate had acquired it; or 21 (ii) if your associate's acquisition was for consideration and 22 subparagraph (i) does not apply--that consideration; or 23 (iii) if your associate's acquisition was without 24 consideration--the GST inclusive market value of the 25 interest, unit or lease at the time of the acquis ition; or 26 (h) if your associate had not been registered or required to be 27 registered at the time of your associate's acquisition of the 28 interest, unit or lease (and paragraph (f) does not apply): 29 (i) if you choose to apply an approved valuation to work 30 out the margin for the supply--an approved valuation of 31 the interest, unit or lease as at the first day on which the 32 entity was registered or required to be registered; or 33 (ii) if subparagraph (i) does not apply--the GST inclusive 34 market value of the interest, unit or lease as at that day. 35 (6A) Paragraphs (6)(c) and (d) do not apply if the acquisition from your 36 * associate was not by means of a supply by your associate. 37 (6B) To avoid doubt, you cannot be taken, for the purposes of 38 paragraph (5)(f) or (6)(h), to be * registered or * required to be 39 registered on a day earlier than 1 July 2000. 6 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 5 Subsection 75-11(7) (heading) 2 Repeal the heading. 3 6 Subsection 75-11(8) 4 Omit "Subsection (7)", substitute "Subsection (6) or (7)". 5 7 Subsection 75-11(8) 6 Omit "subsection (7)", substitute "that subsection". 7 8 Section 75-13 8 After "for the supply", insert "(whether or not the supply was for 9 consideration)". 10 9 After section 75-15 11 Insert: 12 75-16 Margins for supplies of real property acquired through 13 several acquisitions 14 (1) If: 15 (a) you make a * taxable supply of * real property under the 16 * margin scheme; and 17 (b) the interest, unit or lease in question is one that you acquired 18 through 2 or more acquisitions (partial acquisitions); and 19 (c) one of the following provisions (a margin provision) applies 20 in relation to such a partial acquisition, or would so apply if 21 the partial acquisition had been an acquisition of the whole of 22 the interest, unit or lease: 23 (i) section 75-10; 24 (ii) subsection 75-11(1), (2), (2A), (2B), (3), (4), (5), (6) or 25 (7); 26 the margin provision applies, in working out the margin for the 27 supply you make, only to the extent that the supply is connected to 28 the partial acquisition. 29 (2) The application of a margin provision in relation to one of the 30 partial acquisitions does not prevent that margin provision or a 31 different margin provision applying in relation to another of the 32 partial acquisitions. Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 7 [Page Break] 1 10 At the end of section 75-22 2 Add: 3 (3) You have an increasing adjustment if: 4 (a) you make a * taxable supply of * real property under the 5 * margin scheme; and 6 (b) an acquisition that you made of part of the interest, unit or 7 lease in question was made through a supply that was 8 * ineligible for the margin scheme because of paragraph 9 75-5(3)(e), (f) or (g); and 10 (c) the entity from whom you made the acquisition had been 11 entitled to an input tax credit for its acquisition. 12 (4) You have an increasing adjustment if: 13 (a) you make a * taxable supply of * real property under the 14 * margin scheme; and 15 (b) the acquisition that you made of the interest, unit or lease in 16 question: 17 (i) was made through a supply that was * GST-free under 18 Subdivision 38-J or Subdivision 38-O; or 19 (ii) was made through a supply (other than a taxable supply) 20 from your * associate without * consideration and in the 21 course or furtherance of an * enterprise that your 22 associate *carried on; or 23 (iii) was made from your associate but not by means of a 24 supply from your associate; and 25 (c) the entity from whom you acquired the interest, unit or lease: 26 (i) acquired part of the interest, unit or lease through a 27 supply that would have been * ineligible for the margin 28 scheme if it had been a supply of the whole of the 29 interest, unit or lease; and 30 (ii) had been entitled to an input tax credit for its 31 acquisition; and 32 (iii) was * registered or *required to be registered, at the time 33 of your acquisition of the interest, unit or lease. 34 (5) The amount of the * increasing adjustment under subsection (3) or 35 (4) is an amount equal to 1 /11 of: 36 (a) if you choose to apply an * approved valuation to work out the 37 amount--an approved valuation of the part of the interest, 8 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 unit or lease referred to in paragraph (3)(b) or 2 subparagraph (4)(c)(i) as at the day on which the entity had 3 acquired it; or 4 (b) otherwise--the *consideration for the entity's acquisition of 5 that part of the interest, unit or lease. 6 11 At the end of section 165-5 7 Add: 8 Creating circumstances or states of affairs 9 (3) A * GST benefit that the avoider gets or got from a *scheme is not 10 taken, for the purposes of paragraph (1)(b), to be attributable to a 11 choice, election, application or agreement of a kind referred to in 12 that paragraph if: 13 (a) the scheme, or part of the scheme, was entered into or carried 14 out for the sole or dominant purpose of creating a 15 circumstance or state of affairs; and 16 (b) the existence of the circumstance or state of affairs is 17 necessary to enable the choice, election, application or 18 agreement to be made. 19 12 Section 195-1 (definition of margin) 20 Omit "and 75-11", substitute ", 75-11 and 75-16". 21 13 Application 22 (1) The amendments made by items 1 to 10 and 12 of this Schedule apply 23 in relation to supplies that are supplies of things that the supplier 24 acquired through a new supply to the supplier. 25 (2) Division 75 of the A New Tax System (Goods and Services Tax) Act 26 1999 as in force immediately before the commencement of this 27 Schedule continues to apply in relation to supplies that are not supplies 28 of things that the supplier acquired through a new supply to the 29 supplier. 30 (3) The amendment made by item 11 of this Schedule applies in relation to 31 choices, elections, applications and agreements made on or after the 32 commencement of this Schedule. 33 (4) In this item: Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 9 [Page Break] 1 new supply means a supply that: 2 (a) is made on or after the commencement of this Schedule; and 3 (b) is not made: 4 (i) under a written agreement entered into before that 5 commencement; or 6 (ii) pursuant to a right or option granted before that 7 commencement; 8 that specifies in writing the consideration, or a way of 9 working out the consideration, for the supply. 10 10 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 2 Schedule 2--Thin capitalisation and 3 international financial reporting 4 standards 5 6 Income Tax Assessment Act 1997 7 1 At the end of subsection 820-680(1) 8 Add: 9 Note: This requirement to comply with the accounting standards is modified 10 in certain cases (see sections 820-682, 820-683 and 820-684). 11 2 At the end of subsection 820-680(1A) 12 Add: 13 Note: This application of the accounting standards is modified in certain 14 cases (see sections 820-682 and 820-683). 15 3 Subsection 820-680(2) (note) 16 Repeal the note, substitute: 17 Note 1: The entity must also keep records in accordance with section 820-985 18 about the revaluation, unless the exception in subsection (2A) of this 19 section applies. 20 Note 2: This subsection also applies to some revaluations that are not allowed 21 by the accounting standards (see subsection 820-684(5)). 22 4 At the end of subsection 820-680(2B) 23 Add: 24 Note: This subsection also applies to some revaluations that are not allowed 25 by the accounting standards (see subsection 820-684(5)). 26 5 After section 820-680 27 Insert: Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 11 [Page Break] 1 820-682 Recognition of assets and liabilities--modifying application 2 of accounting standards 3 Deferred tax assets and deferred tax liabilities 4 (1) Despite subsections 820-680(1) and (1A), an entity must not 5 recognise: 6 (a) a deferred tax liability (within the meaning of the * accounting 7 standards) as a liability for the purposes of this Division; or 8 (b) a deferred tax asset (within the meaning of the accounting 9 standards) as an asset for the purposes of this Division. 10 Note: Subsections 820-680(1) and (1A) require compliance with accounting 11 standards. 12 Surpluses and deficits in defined benefit superannuation plans 13 (2) Despite subsections 820-680(1) and (1A), an entity must not 14 recognise an amount relating to a defined benefit plan (within the 15 meaning of the * accounting standards) as: 16 (a) a liability for the purposes of this Division; or 17 (b) an asset for the purposes of this Division. 18 Note: Subsections 820-680(1) and (1A) require compliance with accounting 19 standards. 20 Not applicable to ADIs 21 (3) This section does not apply in relation to an entity for a period if, 22 for the period, the entity is an * outward investing entity (ADI) or 23 an * inward investing entity (ADI). 24 Not applicable to records about Australian permanent 25 establishments 26 (4) This section does not apply for the purposes of section 820-960. 12 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 820-683 Recognition of internally generated intangible items-- 2 modifying application of accounting standards 3 Accounting standards prevent recognition of some items 4 (1) Subsection (2) applies in relation to an item, other than internally 5 generated goodwill (within the meaning of * accounting standard 6 AASB 138), if: 7 (a) the item cannot be recognised under that standard as an 8 internally generated intangible asset (within the meaning of 9 that standard) because that standard determines that the cost 10 of the item cannot be distinguished from the cost of 11 developing the entity's business as a whole; and 12 (b) the item would otherwise meet criteria under that standard for 13 recognition as such an asset. 14 Note 1: As a general rule, an entity must comply with the accounting 15 standards when recognising its assets for the purposes of this Division 16 (see subsections 820-680(1) and (1A)). 17 Note 2: This section does not apply to ADIs (see subsection (6)). 18 Entity may choose to recognise the item as an intangible asset 19 (2) Despite subsections 820-680(1) and (1A), the entity may choose to 20 recognise the item as such an asset for a period for the purposes of 21 this Division (other than section 820-960). 22 Note: Section 820-960 is about records for Australian permanent 23 establishments. 24 (3) A choice under subsection (2): 25 (a) must be in writing and may cover more than one item; and 26 (b) must be made before the due day for lodging the entity's 27 * income tax return for the income year that is, or that 28 includes, the period; and 29 (c) subject to subsection (4), has effect, for the entity and the 30 item, for the period and each later period. 31 (4) The entity may, in writing, revoke a choice under subsection (2). 32 The revocation has effect: 33 (a) for each period in the income year for which the entity is next 34 required to lodge an * income tax return; and 35 (b) for each later period. Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 13 [Page Break] 1 (5) When: 2 (a) recognising an item as an asset under this section; and 3 (b) calculating the value of the asset (including revaluing the 4 asset); 5 the entity must, to the maximum extent possible, comply with the 6 * accounting standards as if the recognition were allowed by those 7 standards. This subsection has effect subject to section 820-684. 8 Note: Section 820-684 will allow the entity to revalue the asset even if 9 accounting standard AASB 138 would prevent this because of the 10 absence of an active market. 11 Choice not available to ADIs 12 (6) An entity cannot make a choice under subsection (2) for a period 13 if, for the period, the entity is an * outward investing entity (ADI) or 14 an * inward investing entity (ADI). 15 820-684 Valuation of intangible assets if no active market-- 16 modifying application of accounting standards 17 Accounting standards prevent revaluation of some assets 18 (1) Subsection (2) applies if complying with * accounting standard 19 AASB 138 would prevent an entity from revaluing an intangible 20 asset (within the meaning of that standard) because of the absence 21 of an active market (within the meaning of that standard). 22 Note 1: As a general rule, an entity must comply with the accounting 23 standards when revaluing its assets for the purposes of this Division 24 (see subsection 820-680(1)). 25 Note 2: This section does not apply to ADIs (see subsection (7)). 26 Entity may choose to revalue the asset 27 (2) Despite subsection 820-680(1), the entity may choose to revalue 28 the asset for a period for the purposes of this Division (other than 29 section 820-960). 30 Note: Section 820-960 is about records for Australian permanent 31 establishments. 32 (3) A choice under subsection (2): 33 (a) must be in writing and may cover more than one asset; and 14 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 (b) must be made before the due day for lodging the entity's 2 * income tax return for the income year that is, or that 3 includes, the period; and 4 (c) subject to subsection (4), has effect, for the entity and the 5 item, for the period and each later period. 6 (4) The entity may, in writing, revoke a choice under subsection (2). 7 The revocation has effect: 8 (a) for each period in the income year for which the entity is next 9 required to lodge an * income tax return; and 10 (b) for each later period. 11 Requirements for such revaluations 12 (5) Subsections 820-680(2) and (2B) apply in relation to a revaluation 13 under subsection (2) in a corresponding way to the way they apply 14 in relation to a revaluation mentioned in paragraph 820-680(1)(a). 15 Note 1: Subsections 820-680(2) and (2B) set out requirements and other 16 matters in relation to revaluations under subsection 820-680(1). 17 Note 2: The entity must also keep records in accordance with section 820-985 18 about the revaluation. 19 (6) When revaluing an asset under subsection (2), the entity must, to 20 the maximum extent possible, comply with the * accounting 21 standards as if the revaluation were allowed by those standards. 22 Choice not available to ADIs 23 (7) An entity cannot make a choice under subsection (2) for a period 24 if, for the period, the entity is an * outward investing entity (ADI) or 25 an * inward investing entity (ADI). 26 6 Section 820-690 27 After "* accounting standards", insert "and this Subdivision". 28 7 Subsection 820-985(1) 29 After "820-680(2A))", insert "or 820-684(2)". 30 8 At the end of subsection 820-985(3) 31 Add: Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 15 [Page Break] 1 This subsection extends to subsection 820-680(2B) as it applies 2 because of subsection 820-684(5). 3 Note: Section 820-684 allows some revaluations that are not allowed by the 4 accounting standards. 5 9 Application 6 The amendments made by this Schedule apply to assessments for each 7 income year starting on or after the commencement of this Schedule. 8 16 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 2 Schedule 3--Interest withholding tax and state 3 government bonds 4 5 Income Tax Assessment Act 1936 6 1 After subsection 128F(5A) 7 Insert: 8 (5B) Subsection (5A) does not apply to a bond issued in Australia by a 9 central borrowing authority of a State or Territory. In this 10 subsection bond includes debenture stock and notes. 11 Note: The heading to subsection (5A) is altered by omitting "No exemption for central" and 12 substituting "Central". 13 2 Application 14 The amendment made by this Schedule applies to interest paid on or 15 after the commencement of this Schedule. 16 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 17 [Page Break] Part 1 Main amendments 1 2 Schedule 4--Fringe benefits tax 3 Part 1--Main amendments 4 Fringe Benefits Tax Assessment Act 1986 5 1 Subsection 19(1) (paragraph (e) of the definition of ND) 6 After "applies", insert "and paragraph (i) does not apply". 7 2 Subsection 19(1) (paragraph (f) of the definition of ND) 8 After "applies", insert "and paragraph (i) does not apply". 9 3 Subsection 19(1) (at the end of subparagraph (g)(ii) of the 10 definition of ND) 11 Add "and". 12 4 Subsection 19(1) (after subparagraph (g)(ii) of the definition 13 of ND) 14 Insert: 15 (iia) paragraph (i) does not apply; 16 5 Subsection 19(1) (at the end of subparagraph (h)(ii) of the 17 definition of ND) 18 Add "and". 19 6 Subsection 19(1) (after subparagraph (h)(ii) of the definition 20 of ND) 21 Insert: 22 (iia) paragraph (i) does not apply; 23 7 At the end of subsection 19(1) 24 Add: 25 ; or (i) if, under subsection 138(3), the loan fringe benefit is deemed 26 to have been provided to the recipient only--the amount 27 calculated in accordance with subsection (5). 28 8 At the end of section 19 18 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] Main amendments Part 1 1 Add: 2 (5) For the purposes of paragraph (1)(i) (which applies to a loan fringe 3 benefit that, under subsection 138(3), is deemed to have been 4 provided to an employee only), the amount is calculated in 5 accordance with the formula: 6 Unadjusted ND Employee's percentage of interest 7 where: 8 employee's percentage of interest: 9 (a) is the percentage of the interest held by the employee, during 10 a period (in this subsection called the holding period) in the 11 year of tax, in the asset or other thing that: 12 (i) is purchased or paid for using all or part of the loan to 13 which the loan fringe benefit relates; and 14 (ii) is applied or used for the purpose of producing 15 assessable income of the employee; and 16 (b) does not include the percentage of the interest held in that 17 asset or other thing by the employee's associate or associates 18 during the holding period. 19 unadjusted ND is the amount that would be ascertained as 20 representing the component ND in the formula in subsection (1) if 21 paragraph (1)(i) did not apply in relation to the loan fringe benefit. 22 9 Application 23 (1) The amendments made by items 1 to 8 apply to a loan benefit that is 24 provided after 7.30 pm, by legal time in the Australian Capital 25 Territory, on 13 May 2008 (the commencing time). 26 (2) However, those amendments do not apply to a loan benefit that is 27 provided after the commencing time and before 1 April 2009 if the loan 28 was entered into before the commencing time. 29 10 Subsection 24(1) 30 Omit "the taxable value, but for this subsection and Division 14, of the 31 expense payment fringe benefit in relation to the year of tax shall be 32 reduced by:", substitute: Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 19 [Page Break] Part 1 Main amendments 1 the taxable value, but for Division 14, of the expense payment 2 fringe benefit in relation to the year of tax is the amount calculated 3 in accordance with the formula: 4 TV ND 5 where: 6 TV is the amount that, but for this subsection and Division 14, 7 would be the taxable value of the expense payment fringe benefit 8 in relation to the year of tax; and 9 ND is: 10 11 Paragraph 24(1)(g) 11 After "applies", insert "and paragraph (l) does not apply". 12 12 Paragraph 24(1)(h) 13 After "applies", insert "and paragraph (l) does not apply". 14 13 At the end of subparagraph 24(1)(j)(ii) 15 Add "and". 16 14 After subparagraph 24(1)(j)(ii) 17 Insert: 18 (iia) paragraph (l) does not apply; 19 15 At the end of subparagraph 24(1)(k)(ii) 20 Add "and". 21 16 After subparagraph 24(1)(k)(ii) 22 Insert: 23 (iia) paragraph (l) does not apply; 24 17 At the end of subsection 24(1) 25 Add: 26 ; or (l) if, under subsection 138(3), the expense payment fringe 27 benefit is deemed to have been provided to the recipient 28 only--the amount calculated in accordance with 29 subsection (9). 20 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] Main amendments Part 1 1 18 Paragraph 24(7)(b) 2 Omit "the amount (in this subsection called the reducing amount) by 3 which the taxable value, but for subsection (1) and Division 14, of the 4 fringe benefit is reduced under", substitute "representing the component 5 ND in the formula in". 6 19 Subparagraph 24(7)(b)(i) 7 Omit "the reducing amount", substitute "representing that component". 8 20 Subparagraph 24(7)(b)(ii) 9 Omit "the reducing amount", substitute "representing that component". 10 21 Subsection 24(7) 11 Omit "the reducing amount had", substitute "the amount represented by 12 that component had". 13 22 At the end of section 24 14 Add: 15 (9) For the purposes of paragraph (1)(l) (which applies to an expense 16 payment fringe benefit that, under subsection 138(3), is deemed to 17 have been provided to an employee only), the amount is calculated 18 in accordance with the formula: 19 Unadjusted ND Employee's percentage of interest 20 where: 21 employee's percentage of interest: 22 (a) is the percentage of the interest held by the employee, during 23 a period (in this subsection called the holding period) in the 24 year of tax, in the asset or other thing that: 25 (i) relates to the matter in respect of which the expense 26 payment fringe benefit is provided; and 27 (ii) is applied or used for the purpose of producing 28 assessable income of the employee; and 29 (b) does not include the percentage of the interest held in that 30 asset or other thing by the employee's associate or associates 31 during the holding period. 32 unadjusted ND is the amount that would be ascertained as 33 representing the component ND in the formula in subsection (1) if Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 21 [Page Break] Part 1 Main amendments 1 paragraph (1)(l) did not apply in relation to the expense payment 2 fringe benefit. 3 23 Application 4 (1) The amendments made by items 10 to 22 apply to an expense payment 5 benefit that is provided after 7.30 pm, by legal time in the Australian 6 Capital Territory, on 13 May 2008 (the commencing time). 7 (2) However, those amendments do not apply to an expense payment 8 benefit that is provided to an employee after the commencing time and 9 before 1 April 2009 if: 10 (a) the benefit is provided: 11 (i) because the employee agreed to receive the benefit in 12 return for a reduction in the employee's salary or wages 13 that would not have happened apart from the agreement; 14 or 15 (ii) as part of the employee's remuneration package, in 16 circumstances where is it reasonable to conclude that 17 the employee's salary or wages would be greater if the 18 benefit were not made part of that package; and 19 (b) the agreement was made, or the remuneration package was 20 agreed to, before the commencing time. 21 24 Subsection 44(1) (paragraph (f) of the definition of ND) 22 After "applies", insert "and paragraph (k) does not apply". 23 25 Subsection 44(1) (paragraph (g) of the definition of ND) 24 After "applies", insert "and paragraph (k) does not apply". 25 26 Subsection 44(1) (at the end of subparagraph (h)(ii) of the 26 definition of ND) 27 Add "and". 28 27 Subsection 44(1) (after subparagraph (h)(ii) of the 29 definition of ND) 30 Insert: 31 (iia) paragraph (k) does not apply; 22 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] Main amendments Part 1 1 28 Subsection 44(1) (at the end of subparagraph (j)(ii) of the 2 definition of ND) 3 Add "and". 4 29 Subsection 44(1) (after subparagraph (j)(ii) of the 5 definition of ND) 6 Insert: 7 (iia) paragraph (k) does not apply; 8 30 At the end of subsection 44(1) 9 Add: 10 ; or (k) if, under subsection 138(3), the property fringe benefit is 11 deemed to have been provided to the recipient only--the 12 amount calculated in accordance with subsection (5). 13 31 At the end of section 44 14 Add: 15 (5) For the purposes of paragraph (1)(k) (which applies to a property 16 fringe benefit that, under subsection 138(3), is deemed to have 17 been provided to an employee only), the amount is calculated in 18 accordance with the formula: 19 Unadjusted ND Employee's percentage of interest 20 where: 21 employee's percentage of interest: 22 (a) is the percentage of the interest held by the employee, during 23 a period (in this subsection called the holding period) in the 24 year of tax, in the asset or other thing that: 25 (i) is the property to which the property fringe benefit 26 relates; and 27 (ii) is applied or used for the purpose of producing 28 assessable income of the employee; and 29 (b) does not include the percentage of the interest held in that 30 asset or other thing by the employee's associate or associates 31 during the holding period. 32 unadjusted ND is the amount that would be ascertained as 33 representing the component ND in the formula in subsection (1) if Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 23 [Page Break] Part 1 Main amendments 1 paragraph (1)(k) did not apply in relation to the property fringe 2 benefit. 3 32 Application 4 (1) The amendments made by items 24 to 31 apply to a property benefit 5 that is provided after 7.30 pm, by legal time in the Australian Capital 6 Territory, on 13 May 2008 (the commencing time). 7 (2) However, those amendments do not apply to a property benefit that is 8 provided to an employee after the commencing time and before 1 April 9 2009 if: 10 (a) the benefit is provided: 11 (i) because the employee agreed to receive the benefit in 12 return for a reduction in the employee's salary or wages 13 that would not have happened apart from the agreement; 14 or 15 (ii) as part of the employee's remuneration package, in 16 circumstances where is it reasonable to conclude that 17 the employee's salary or wages would be greater if the 18 benefit were not made part of that package; and 19 (b) the agreement was made, or the remuneration package was 20 agreed to, before the commencing time. 21 33 Subsection 52(1) (paragraph (f) of the definition of ND) 22 After "applies", insert "and paragraph (k) does not apply". 23 34 Subsection 52(1) (paragraph (g) of the definition of ND) 24 After "applies", insert "and paragraph (k) does not apply". 25 35 Subsection 52(1) (at the end of subparagraph (h)(ii) of the 26 definition of ND) 27 Add "and". 28 36 Subsection 52(1) (after subparagraph (h)(ii) of the 29 definition of ND) 30 Insert: 31 (iia) paragraph (k) does not apply; 24 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] Main amendments Part 1 1 37 Subsection 52(1) (at the end of subparagraph (j)(ii) of the 2 definition of ND) 3 Add "and". 4 38 Subsection 52(1) (after subparagraph (j)(ii) of the 5 definition of ND) 6 Insert: 7 (iia) paragraph (k) does not apply; 8 39 At the end of subsection 52(1) 9 Add: 10 ; or (k) if, under subsection 138(3), the residual fringe benefit is 11 deemed to have been provided to the recipient only--the 12 amount calculated in accordance with subsection (5). 13 40 At the end of section 52 14 Add: 15 (5) For the purposes of paragraph (1)(k) (which applies to a residual 16 fringe benefit that, under subsection 138(3), is deemed to have 17 been provided to an employee only), the amount is calculated in 18 accordance with the formula: 19 Unadjusted ND Employee's percentage of interest 20 where: 21 employee's percentage of interest: 22 (a) is the percentage of the interest held by the employee, during 23 a period (in this subsection called the holding period) in the 24 year of tax, in the asset or other thing: 25 (i) to which the residual fringe benefit relates; and 26 (ii) that is applied or used for the purpose of producing 27 assessable income of the employee; and 28 (b) does not include the percentage of the interest held in that 29 asset or other thing by the employee's associate or associates 30 during the holding period. 31 unadjusted ND is the amount that would be ascertained as 32 representing the component ND in the formula in subsection (1) if 33 paragraph (1)(k) did not apply in relation to the residual fringe 34 benefit. Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 25 [Page Break] Part 1 Main amendments 1 41 Application 2 (1) The amendments made by items 33 to 40 apply to a benefit that is 3 provided after 7.30 pm, by legal time in the Australian Capital 4 Territory, on 13 May 2008 (the commencing time). 5 (2) However, those amendments do not apply to a benefit that is provided 6 to an employee after the commencing time and before 1 April 2009 if: 7 (a) the benefit is provided: 8 (i) because the employee agreed to receive the benefit in 9 return for a reduction in the employee's salary or wages 10 that would not have happened apart from the agreement; 11 or 12 (ii) as part of the employee's remuneration package, in 13 circumstances where is it reasonable to conclude that 14 the employee's salary or wages would be greater if the 15 benefit were not made part of that package; and 16 (b) the agreement was made, or the remuneration package was 17 agreed to, before the commencing time. 18 26 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] Technical amend ments Part 2 1 2 Part 2--Technical amendments 3 Fringe Benefits Tax Assessment Act 1986 4 42 At the end of paragraphs 19(1)(a), (b), (ba) and (c) 5 Add "and". 6 43 At the end of sub-subparagraph 19(1)(d)(i)(A) 7 Add "and". 8 44 Subsection 19(1) (at the end of paragraph (e) of the 9 definition of ND) 10 Add "or". 11 45 Subsection 19(1) (at the end of subparagraph (f)(ii) of the 12 definition of ND) 13 Add "or". 14 46 At the end of sub-subparagraph 19(3)(b)(ii)(A) 15 Add "and". 16 47 At the end of paragraphs 24(1)(a), (b) and (ba) 17 Add "and". 18 48 At the end of sub-subparagraphs 24(1)(c)(ia)(A) and (C) 19 Add "or". 20 49 At the end of subparagraph 24(1)(c)(ii) 21 Add "and". 22 50 At the end of paragraph 24(1)(d) 23 Add "and". 24 51 At the end of subparagraphs 24(1)(e)(i), (ia), (ii) and (iii) 25 Add "or". 26 52 At the end of paragraph 24(1)(e) Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 27 [Page Break] Part 2 Technical amend ments 1 Add "and". 2 53 At the end of sub-subparagraph 24(1)(f)(i)(A) 3 Add "and". 4 54 At the end of paragraph 24(1)(g) 5 Add "or". 6 55 At the end of sub-subparagraph 24(1)(h)(ii)(B) 7 Add "or". 8 56 At the end of sub-subparagraph 24(1)(j)(v)(B) 9 Add "or". 10 57 At the end of sub-subparagraph 24(7)(b)(ii)(A) 11 Add "and". 12 58 At the end of paragraphs 44(1)(a), (b) and (ba) 13 Add "and". 14 59 At the end of subparagraphs 44(1)(c)(i) and (ia) 15 Add "or". 16 60 At the end of paragraphs 44(1)(c) and (d) 17 Add "and". 18 61 At the end of sub-subparagraph 44(1)(e)(i)(A) 19 Add "and". 20 62 Subsection 44(1) (at the end of paragraph (f) of the 21 definition of ND) 22 Add "or". 23 63 Subsection 44(1) (at the end of subparagraph (g)(ii) of the 24 definition of ND) 25 Add "or". 26 64 At the end of sub-subparagraph 44(3)(b)(ii)(A) 28 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] Technical amend ments Part 2 1 Add "and". 2 65 At the end of paragraphs 52(1)(a), (b) and (ba) 3 Add "and". 4 66 At the end of subparagraphs 52(1)(c)(i) and (ia) 5 Add "or". 6 67 At the end of paragraphs 52(1)(c) and (d) 7 Add "and". 8 68 At the end of sub-subparagraph 52(1)(e)(i)(A) 9 Add "and". 10 69 Subsection 52(1) (at the end of paragraph (f) of the 11 definition of ND) 12 Add "or". 13 70 Subsection 52(1) (at the end of subparagraph (g)(ii) of the 14 definition of ND) 15 Add "or". 16 71 At the end of sub-subparagraph 52(3)(b)(ii)(A) 17 Add "and". 18 72 Paragraph 152A(2)(b) 19 Omit "subparagraph 24(1)(b)(iii)", substitute "paragraph 24(1)(b)". 20 73 Paragraph 152A(3)(b) 21 Omit "subparagraph 44(1)(b)(i)", substitute "paragraph 44(1)(b)". 22 74 Paragraph 152A(4)(b) 23 Omit "subparagraph 52(1)(b)(i)", substitute "paragraph 52(1)(b)". 24 75 Subsection 152A(9) (definition of gross deduction) 25 Omit "subparagraph 24(1)(b)(iii), 44(1)(b)(i) or 52(1)(b)(i)", substitute 26 "paragraph 24(1)(b), 44(1)(b) or 52(1)(b)". 27 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 29 [Page Break] 1 2 Schedule 5--Eligible investment business 3 rules 4 5 Income Tax Assessment Act 1936 6 1 Section 102M 7 Insert: 8 arrangement has the same meaning as in the Income Tax 9 Assessment Act 1997. 10 2 Section 102M (definition of eligible investment business) 11 Omit "either or both of", substitute "one or more of". 12 3 Section 102M (subparagraph (b)(iii) of the definition of 13 eligible investment business) 14 After "company", insert ", including shares in a foreign hybrid company 15 (as defined in the Income Tax Assessment Act 1997)". 16 4 Section 102M (at the end of the definition of eligible 17 investment business) 18 Add: 19 ; or (c) investing or trading in financial instruments (not covered by 20 paragraph (b)) that arise under financial arrangements, other 21 than arrangements excepted by section 102MA. 22 5 Section 102M 23 Insert: 24 excluded rent means rent worked out by reference to the profits or 25 receipts of an entity that uses any of the relevant land under an 26 arrangement that is designed to result in the transfer of all, or 27 substantially all, of what would otherwise be the profits of the 28 entity to another party to the arrangement. 29 6 Section 102M 30 Insert: 30 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 financial arrangement has the same meaning as in the Income Tax 2 Assessment Act 1997. 3 7 Section 102M (at the end of the definition of land) 4 Add "and fixtures on land". 5 8 After section 102M 6 Insert: 7 102MA Arrange ments not covered 8 (1) For the purposes of paragraph (c) of the definition of eligible 9 investment business in section 102M, the excepted arrangements 10 are those specified in this section. 11 Note: This section does not affect an arrangement that satisfies paragraph (a) 12 or (b) of that definition. 13 Leasing or property arrangement 14 (2) A right or obligation arising under: 15 (a) an arrangement to which Division 42A (about leases of 16 luxury cars) in Schedule 2E applies; or 17 (b) an arrangement to which Division 240 of the Income Tax 18 Assessment Act 1997 (about arrangements treated as a sale 19 and loan) applies; or 20 (c) a financial arrangement in the form of a loan that is taken to 21 exist by subsection 250-155(1) of the Income Tax Assessment 22 Act 1997; or 23 (d) an arrangement that, in substance or effect, depends on the 24 use of a specific asset that is: 25 (i) real property; or 26 (ii) goods or a personal chattel (other than money or a 27 money equivalent); or 28 (iii) intellectual property; 29 and gives a right to control the use of the asset; or 30 (e) an arrangement that is a licence to use: 31 (i) real property; or 32 (ii) goods or a personal chattel (other than money or a 33 money equivalent); or 34 (iii) intellectual property. Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 31 [Page Break] 1 Interest in partnership or trust estate 2 (3) A right carried by an interest in a partnership or a trust estate, or an 3 obligation that corresponds to such a right, if: 4 (a) there is only one class of interest in the partnership or trust 5 estate; or 6 (b) the interest is an equity interest in the partnership or trust 7 estate; or 8 (c) for a right or obligation relating to a trust estate--the trust 9 estate is managed by a funds manager or custodian, or a 10 responsible entity (as defined in the Corporations Act 2001) 11 of a registered scheme (as so defined). 12 General insurance policies 13 (4) A right or obligation under a general insurance policy. 14 Guarantees and indemnities 15 (5) A right or obligation under a guarantee or indemnity unless: 16 (a) the financial arrangement is one where: 17 (i) its value changes in response to changes in a specified 18 variable or variables (such as an interest rate, foreign 19 exchange rate, credit rating, index or commodity or 20 financial instrument price); and 21 (ii) there is no requirement for a net investment, or there is 22 such a requirement but the net investment is smaller 23 than would be required for other types of financial 24 arrangement that would be expected to have a similar 25 response to changes in market factors; or 26 (b) the guarantee or indemnity is given or entered into in relation 27 to a financial arrangement. 28 Superannuation and pension income 29 (6) A right to receive, or an obligation to provide, a financial benefit 30 (as defined in the Income Tax Assessment Act 1997) if the right or 31 obligation arises from a person's membership of a superannuation 32 or pension scheme. 32 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 Retirement village arrangements 2 (7) A right or obligation arising under: 3 (a) a contract that gives rise to a right to occupy residential 4 premises in a retirement village (as defined in the A New Tax 5 System (Goods and Services Tax) Act 1999); or 6 (b) a contract under which a resident of such a retirement village 7 is provided with general or personal services in the retirement 8 village. 9 102MB Investing in land 10 Moveable property 11 (1) For the purposes of this Division, investments in moveable 12 property, being property that is: 13 (a) incidental to and relevant to the renting of land; and 14 (b) customarily supplied or provided in connection with the 15 renting of land; and 16 (c) ancillary to the ownership and use of land; 17 are taken to be investments in land. 18 Safe harbour rule 19 (2) For the purposes of this Division, an entity's investments in land 20 are taken to be for the purpose, or primarily for the purpose, of 21 deriving rent during a year of income if: 22 (a) each of those investments is for purposes (other than the 23 purpose of trading) that include a purpose of deriving rent; 24 and 25 (b) at least 75% of the gross revenue from those investments for 26 the year of income consists of rent (except excluded rent); 27 and 28 (c) none of the remaining gross revenue from those investments 29 for the year of income is: 30 (i) excluded rent; or 31 (ii) from the carrying on of a business that is not incidental 32 and relevant to the renting of the land. 33 (3) In working out the gross revenue referred to in paragraph (2)(b), 34 payments for the provision of services that: Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 33 [Page Break] 1 (a) are incidental to and relevant to the renting of land; and 2 (b) are ancillary to the ownership and use of the land; 3 are taken to be rent derived from the land. 4 Example: Payments as reimbursement for expenses incurred by the lessor in 5 providing security services for a shopping centre would be covered by 6 this subsection. 7 (4) In working out the gross revenue referred to in subsection (2), 8 disregard any capital gains and capital losses from a CGT event 9 arising from a disposal or other realisation of ownership of land. 10 Meaning of entity 11 (5) In this section: 12 entity has the same meaning as in the Income Tax Assessment Act 13 1997. 14 102MC When trading business not carried on 15 A trustee of a unit trust that would, apart from this section, carry on 16 a trading business at a time during a year of income is taken for the 17 purposes of this Division not to carry on a trading business at a 18 time during that year if, for that year, not more than 2% of the 19 gross revenue of the trustee (as trustee of the unit trust) was income 20 from things other than eligible investment business (except from 21 the carrying on of a business that is not incidental and relevant to 22 the eligible investment business). 23 9 Application 24 The amendments made by this Schedule apply to assessments for the 25 income year (the application year) in which this Act receives the Royal 26 Assent and later income years. 27 10 Transitional 28 (1) Subsections 102MB(2), (3) and (4), and section 102MC, of the Income 29 Tax Assessment Act 1936 do not apply to a unit trust for the application 30 year if the trustee of the trust chooses that those provisions are not to 31 apply. 34 Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 [Page Break] 1 (2) A choice the trustee can make under subitem (1) must be made by the 2 day the trustee lodges the trustee's return of income for the application 3 year. 4 (3) The way the trustee prepares the trustee's return of income for the 5 application year is sufficient evidence of the making of the choice. 6 Example: A unit trust that would cease to be a public trading trust because of the 7 safe harbour rule could make a choice under this provision so that it is 8 taxed as a public trading trust for the application year. Tax Laws Amendment (2008 Measures No. 5) Bill 2008 No. , 2008 35