TAX LAWS AMENDMENT (TRANSFER OF PROVISIONS) BILL 2010

i Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Contents

1 Short

title

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2 Commencement

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3 Schedule(s)

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Schedule 1--Collection and recovery of tax

Part 1--Main amendments

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Taxation Administration Act 1953

Part 2--Consequential amendments

Administrative Decisions (Judicial Review) Act 1977

Corporations Act 2001

Higher Education Support Act 2003

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Social Security Act 1991

Student Assistance Act 1973

Taxation Administration Act 1953

Part 3--Application, transitional and saving provisions

Division 1--Preliminary

Division 2--Division 5 of the Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Division 3--Security deposits

Division 4--Estimates

Division 5--Directors' obligations

Division 6--Provisions relating to former provisions of the Income

Tax Assessment Act 1936

Schedule 2--Forgiveness of commercial debts

Part 1--Main amendments

Income Tax Assessment Act 1936

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 ii

Income Tax Assessment Act 1997

Income Tax (Transitional Provisions) Act 1997

Part 2--Consequential amendments

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Schedule 3--Leases of luxury cars

Part 1--Main amendments

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Part 2--Consequential amendments

101

Income Tax Assessment Act 1997

101

Part 3--Application and transitional provisions

109

Income Tax (Transitional Provisions) Act 1997

109

Schedule 4--Farm management deposits

110

Part 1--Main amendments

110

Income Tax Assessment Act 1936

110

Income Tax Assessment Act 1997

110

Taxation Administration Act 1953

127

Part 2--Consequential amendments

129

Farm Household Support Act 1992

129

Income Tax Assessment Act 1936

129

Income Tax Assessment Act 1997

132

Taxation Administration Act 1953

134

Part 3--Application and transitional provisions

135

Income Tax (Transitional Provisions) Act 1997

135

Schedule 5--General insurance

138

Part 1--Main amendments

138

Income Tax Assessment Act 1936

138

Income Tax Assessment Act 1997

138

2 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1. Sections 1 to 3

and anything in

this Act not

elsewhere covered

by this table

The day this Act receives the Royal Assent.

2. Schedule 1

1 July 2010.

1 July 2010

3. Schedule 2

Immediately after the commencement of the

provision(s) covered by table item 4.

1 July 2010

4. Schedules 3 to

1 July 2010.

1 July 2010

Note:

This table relates only to the provisions of this Act as originally

passed by both Houses of the Parliament and assented to. It will not be

expanded to deal with provisions inserted in this Act after assent.

(2) Column 3 of the table contains additional information that is not

part of this Act. Information in this column may be added to or

edited in any published version of this Act.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or

repealed as set out in the applicable items in the Schedule

concerned, and any other item in a Schedule to this Act has effect

according to its terms.

Collection and recovery of tax Schedule 1

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 3

Schedule 1--Collection and recovery of tax

Part 1--Main amendments

Income Tax Assessment Act 1936

1 After section 169

Insert:

169AA Consolidated assessments

(1) This section applies if 2 or more persons (the recipients) are in

receipt of income, or of profits or gains of a capital nature, for or

on behalf of:

(a) a non-resident; or

(b) a person absent from Australia.

(2) The Commissioner may, if it appears to him or her to be expedient

to do so:

(a) consolidate all or any of the assessments of the income,

profits or gains; and

(b) declare one of the recipients to be the agent of the

non-resident or absent person in respect of the consolidated

assessment; and

(3) If the Commissioner does so, the agent is liable to pay the tax.

2 Part VI

Repeal the Part.

Income Tax Assessment Act 1997

3 After Division 4

Insert:

Division 5--How to work out when to pay your income tax

Table of Subdivisions

Schedule 1 Collection and recovery of tax

Part 1 Main amendments

4 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Guide to Division 5

5-A

How to work out when to pay your income tax

Guide to Division 5

5-1 What this Division is about

If your assessed income tax liability exceeds the credits available

to you under the PAYG system, this Division explains when you

must pay the excess to the Commissioner.

If your assessment is amended so that you must pay income tax, or

pay more income tax than under the previous assessment, this

Division explains:

(a)

when you must pay the additional tax; and

(b)

when any associated interest charges must be paid.

Note:

For provisions about the collection and recovery of

income tax and other tax-related liabilities, see Part 4-15

in Schedule 1 to the Taxation Administration Act 1953.

Subdivision 5-A--How to work out when to pay your income

tax

Table of sections

5-5

When income tax is payable

5-10

When shortfall interest charge is payable

5-15

General interest charge payable on unpaid income tax or shortfall interest

charge

5-5 When income tax is payable

Scope

(1) This section tells you when income tax you must pay for a

financial year is due and payable.

Note:

The Commissioner may defer the time at which the income tax is due

and payable: see section 255-10 in Schedule 1 to the Taxation

Administration Act 1953.

Collection and recovery of tax Schedule 1

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 5

(2) The income tax is only due and payable if the Commissioner

makes an

assessment of your income tax for the year.

(3) However, if the Commissioner does make an

assessment of your

income tax for the year, the tax may be taken to have been due and

payable at a time before your assessment was made.

Note:

This is to ensure that general interest charge begins to accrue from the

same date for all like entities. General interest charge on unpaid

income tax is calculated from when the tax is due and payable, not

from when the assessment is made: see section 5-15.

Original assessments--self-assessment entities

(4) If you are a

self-assessment entity, the income tax is due and

payable on the first day of the sixth month after the end of the

income year.

Example: If your income year is the same as the financial year, your income tax

would be due and payable on 1 December.

Original assessments--other entities

(5) If you are not a

self-assessment entity, the income tax is due and

payable 21 days after the day (the return day) on or before which

you are required to lodge your

income tax return with the

Commissioner.

Note:

For rules about income tax returns and when they are due, see Part IV

of the Income Tax Assessment Act 1936.

(6) However, if you lodge your return on or before the return day and

the Commissioner gives you a notice of

assessment (other than an

amended assessment) after the return day, the income tax is due

and payable 21 days after the Commissioner gives you the notice.

Amended assessments

(7) If the Commissioner amends your

assessment, any extra income

tax resulting from the amendment is due and payable 21 days after

the day on which the Commissioner gives you notice of the

amended assessment.

Note:

Shortfall interest charge may be payable, on any amount of extra

income tax payable as a result of the amended assessment, for each

day in the period that:

(a) starts at the time income tax was due and payable on your

original assessment; and

Schedule 1 Collection and recovery of tax

Part 1 Main amendments

6 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(b) ends the day before the day on which the Commissioner gives

you notice of the amended assessment.

5-10 When shortfall interest charge is payable

An amount of

shortfall interest charge that you are liable to pay is

due and payable 21 days after the day on which the Commissioner

gives you notice of the charge.

Note:

Shortfall interest charge is imposed if the Commissioner amends an

assessment and the amended assessment results in an increase in some

tax payable. For provisions about liability for shortfall interest charge,

see Division 280 in Schedule 1 to the Taxation Administration Act

1953.

5-15 General interest charge payable on unpaid income tax or

shortfall interest charge

If an amount of income tax or

shortfall interest charge that you are

liable to pay remains unpaid after the time by which it is due to be

paid, you are liable to pay the

general interest charge on the

unpaid amount for each day in the period that:

(a) starts at the beginning of the day on which the amount was

due to be paid; and

(b) finishes at the end of the last day on which, at the end of the

day, any of the following remains unpaid:

(i) the income tax or shortfall interest charge;

(ii) general interest charge on any of the income tax or

shortfall interest charge.

Note 1:

The general interest charge is worked out under Part IIA of the

Taxation Administration Act 1953.

Note 2:

Shortfall interest charge is worked out under Division 280 in

Schedule 1 to that Act.

4 Subsection 995-1(1)

Insert:

self-assessment entity means a full self-assessment taxpayer

(within the meaning of subsection 6(1) of the Income Tax

Assessment Act 1936).

5 Subsection 995-1(1)

Insert:

Collection and recovery of tax Schedule 1

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 7

statutory demand has the same meaning as in the Corporations Act

2001.

Taxation Administration Act 1953

6 Before subsection 255-10(1) in Schedule 1

Insert:

Deferrals for particular taxpayers

7 After subsection 255-10(2) in Schedule 1

Insert:

Deferrals for classes of taxpayers

(2A) The Commissioner, having regard to the circumstances of the case,

may, by notice published on the Australian Taxation Office

website, defer the time at which amounts of

tax-related liabilities

are, or would become, due and payable by a class of taxpayers

(whether or not the liabilities have already arisen).

(2B) If the Commissioner does so, that time is varied accordingly.

Note:

General interest charge and any other relevant penalties, if applicable

for any unpaid amounts of the liabilities, will begin to accrue from the

time as varied. See, for example, paragraph 5-15(a) of the Income Tax

Assessment Act 1997.

(2C) A notice published under subsection (2A) is not a legislative

instrument.

Deferral does not affect time for giving form

8 Subsection 255-10(3) in Schedule 1

Omit "subsection (1)", substitute "this section".

9 At the end of Division 255 in Schedule 1

Add:

Subdivision 255-D--Security deposits

Table of sections

Schedule 1 Collection and recovery of tax

Part 1 Main amendments

8 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

255-100 Commissioner may require security deposit

255-105 Notice of requirement to give security

255-110 Offence

255-100 Commissioner may require security deposit

(1) The Commissioner may require you to give security for the due

payment of an existing or future

tax-related liability of yours if:

(a) the Commissioner has reason to believe that:

(i) you are establishing or

carrying on an

enterprise in

Australia; and

(ii) you intend to carry on that enterprise for a limited time

only; or

(b) the Commissioner reasonably believes that the requirement is

otherwise appropriate, having regard to all relevant

circumstances.

Note:

A requirement to give security under this section is not a tax-related

liability. As such, the collection and recovery provisions in this Part

do not apply to it.

(2) The Commissioner may require you to give the security:

(a) by way of a bond or deposit (including by way of payments

in instalments); or

(b) by any other means that the Commissioner reasonably

believes is appropriate.

(3) The Commissioner may require you to give security under this

section:

(a) at any time the Commissioner reasonably believes is

appropriate; and

(b) as often as the Commissioner reasonably believes is

appropriate.

Example: The Commissioner may require additional security if he or she

reasonably believes that the original security requirement

underestimated the amount of the likely tax-related liability.

Collection and recovery of tax Schedule 1

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 9

255-105 Notice of requirement to give security

Commissioner must give notice of requirement to give security

(1) If the Commissioner requires you to give security under

section 255-100, he or she must give you written notice of the

requirement.

Content of notice

(2) The notice must:

(a) state that you are required to give the security to the

Commissioner; and

(b) explain why the Commissioner requires the security; and

(d) describe the means by which you are required to give the

security under subsection 255-100(2); and

(e) specify the time by which you are required to give the

security; and

(f) explain how you may have the Commissioner's decision to

require you to give the security reviewed.

(3) To avoid doubt, a single notice may relate to security for the

payment of 2 or more existing or future

tax-related liabilities, but

must comply with subsection (2) in relation to each of them.

When notice is given

(4) Despite section 29 of the Acts Interpretation Act 1901, a notice

under subsection (1) is taken to be given at the time the

Commissioner leaves or posts it.

Note:

Section 28A of the Acts Interpretation Act 1901 may be relevant to

giving a notice under subsection (1).

Miscellaneous

(5) A failure to comply with this section does not affect the validity of

the requirement to give the security under section 255-100.

255-110 Offence

You commit an offence if:

Schedule 1 Collection and recovery of tax

Part 1 Main amendments

10 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(a) the Commissioner requires you to give security under

section 255-100; and

(b) you fail to give that security as required.

Penalty: 100 penalty units.

10 At the end of Part 4-15 in Schedule 1

Add:

Division 268--Estimates and recovery of PAYG

withholding liabilities

Table of Subdivisions

Guide to Division 268

268-A Object

268-B Making

estimates

268-C Liability to pay estimates

268-D Reducing and revoking estimates

268-E Late payment of estimates

268-F Miscellaneous

Guide to Division 268

268-1 What this Division is about

This Division enables the Commissioner to make an estimate of

amounts not paid as required by Part 2-5 (Pay as you go (PAYG)

withholding), and to recover the amount of the estimate.

If you are given an estimate, you are liable to pay the amount of

the estimate. That liability is distinct from your liability to pay the

amounts required by Part 2-5. However, you can ensure that the

Commissioner does not require you to pay more than the amounts

not paid under that Part.

Other Divisions of this Part provide for the recovery of amounts

payable under this Division.

Collection and recovery of tax Schedule 1

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 11

Subdivision 268-A--Object

Table of sections

268-5

Object of Division

268-5 Object of Division

The object of this Division is to enable the Commissioner to take

prompt and effective action to recover amounts not paid as

required by Part 2-5 (Pay as you go (PAYG) withholding).

Subdivision 268-B--Making estimates

Table of sections

268-10

Commissioner may make estimate

268-15 Notice

estimate

268-10 Commissioner may make estimate

Estimate

(1) The Commissioner may estimate the unpaid and overdue amount

of a liability (the underlying liability) of yours under

section 16-70.

Note:

Section 16-70 requires you to pay to the Commissioner amounts you

have withheld under the Pay as you go withholding rules.

Amount of estimate

(2) The amount of the estimate must be what the Commissioner thinks

is reasonable.

(3) In making the estimate, the Commissioner may have regard to

anything he or she thinks relevant.

Example: The Commissioner may have regard to information about amounts

you withheld under the Pay as you go rules before the period in

relation to which the underlying liability arose.

Only one estimate for each liability

(4) While the estimate is in force, the Commissioner cannot make

another estimate relating to the underlying liability.

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12 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(5) For the purposes of subsection (4), the estimate is in force if:

(a) the Commissioner has given you notice of the estimate; and

(b) the estimate has not been revoked; and

268-15 Notice of estimate

Commissioner must give notice of estimate

(1) The Commissioner must give you written notice of the estimate.

Content of notice

(2) The notice must:

(a) identify the underlying liability; and

(b) specify the date of the estimate; and

(d) state that the amount of the estimate is due and payable; and

(e) explain how you may have the amount of the estimate

reduced or the estimate revoked.

(3) To avoid doubt, a single notice may relate to 2 or more estimates,

but must comply with subsection (2) in relation to each of them.

When notice is given

(4) Despite section 29 of the Acts Interpretation Act 1901, a notice

under subsection (1) is taken to be given at the time the

Commissioner leaves or posts it.

Note:

Section 28A of the Acts Interpretation Act 1901 may be relevant to

giving a notice under subsection (1).

Subdivision 268-C--Liability to pay estimates

Table of sections

268-20

Nature of liability to pay estimate

268-25

Accuracy of estimate irrelevant to liability to pay

268-30

Estimate provable in bankruptcy or winding up

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Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 13

268-20 Nature of liability to pay estimate

Liability to pay amount of estimate

(1) You must pay to the Commissioner the amount of the estimate if

the Commissioner gives you notice of the estimate in accordance

with section 268-15. The amount is due and payable when the

Commissioner gives you the notice.

Note:

The amount of the estimate may be reduced, or the estimate revoked,

under Subdivision 268-D.

Liability to pay amount of estimate is distinct from underlying

liability

(2) Your liability to pay the amount of the estimate is separate and

distinct from the underlying liability. It is separate and distinct for

all purposes.

Example: The Commissioner may take:

(a) proceedings to recover the unpaid amount of the estimate; or

(b) proceedings to recover the unpaid amount of the underlying

liability; or

Discharging one liability discharges other liabilities

(3) Despite subsection (2), if, at a particular time, one of the liabilities

to which this subsection applies is discharged, to the extent of an

amount, for either of the following reasons, each of the other

liabilities to which this subsection applies is discharged to the

extent of the same amount:

(a) an amount is paid or applied towards discharging the

liability;

(b) the liability is discharged because of section 269-40 (Effect

of director paying penalty or company discharging liability).

(4) Subsection (3) applies to whichever of the following liabilities are

in existence at the particular time:

(a) your liability to pay the amount of the estimate;

(b) the underlying liability;

based on a liability referred to in paragraph (a) or (b).

Schedule 1 Collection and recovery of tax

Part 1 Main amendments

14 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(5) Subsection (3) does not discharge a liability to a greater extent than

the amount of the liability.

268-25 Accuracy of estimate irrelevant to liability to pay

You are liable to pay the unpaid amount of the estimate even if:

(a) the underlying liability never existed or has been discharged

in full; or

(b) the unpaid amount of the underlying liability is less than the

unpaid amount of the estimate.

Note 1:

Section 268-40 revokes the estimate if you give the Commissioner a

statutory declaration, or file an affidavit, to the effect that the

underlying liability never existed.

Note 2:

Subdivision 268-D provides ways in which you can challenge the

estimate or its amount.

268-30 Estimate provable in bankruptcy or winding up

(1) Your liability (the estimate liability) to pay the unpaid amount of

the estimate is provable in a bankruptcy or winding up, even if the

estimate was made after:

(a) the date of the bankruptcy; or

(b) the relevant date (within the meaning of the Corporations Act

2001).

(2) However, the estimate liability is provable only to the extent that

the underlying liability would be provable if the unpaid amount of

the underlying liability were the same as the unpaid amount of the

estimate.

Example: Subsection (2) prevents proof of the estimate liability if the underlying

liability could not be proved because, for example, of when it arose.

(3) Subsections (1) and (2) do not apply if:

(a) the underlying liability has already been admitted to proof;

and

(b) the proof has not been set aside.

(4) If the estimate liability has been admitted to proof at a particular

amount, the underlying liability is provable only to the extent the

unpaid amount of the underlying liability exceeds that particular

amount.

Collection and recovery of tax Schedule 1

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 15

(5) To the extent that a liability is provable because of this section, it is

taken, for the purposes of the Bankruptcy Act 1966, to be provable

in bankruptcy under that Act.

Subdivision 268-D--Reducing and revoking estimates

Table of sections

268-35

How estimate may be reduced or revoked--Commissioner's powers

268-40

How estimate may be reduced or revoked--statutory declaration or

affidavit

268-45

How estimate may be reduced or revoked--rejection of proof of debt

268-50

How estimate may be reduced--amount paid or applied

268-55

When reduction or revocation takes effect

268-60

Consequences of reduction or revocation--refund

268-65

Consequences of reduction or revocation--statutory demand changed or set

aside

268-70 Consequences

reduction

or revocation--underlying liability

268-35 How estimate may be reduced or revoked--Commissioner's

powers

Reduction

(1) The Commissioner may at any time reduce the amount of the

estimate, but is not obliged to consider whether or not to do so.

(2) If the Commissioner reduces the amount of the estimate under

subsection (1), he or she must give you a written notice that:

(a) identifies the underlying liability; and

(b) sets out the reduced amount of the estimate.

Note:

The estimate is taken always to have had effect as reduced: see

section 268-55.

Revocation

(3) The Commissioner may at any time revoke the estimate, but is not

obliged to consider whether or not to do so.

(4) If the Commissioner revokes the estimate under subsection (3), he

or she must give you a written notice that:

(a) identifies the underlying liability; and

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16 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(b) states that the estimate has been revoked.

Note:

The estimate is taken never to have been made: see section 268-55.

Matters for Commissioner to consider

(5) In exercising his or her power under this section to reduce the

amount of the estimate, or to revoke the estimate, the

Commissioner must have regard to:

(a) the following principles:

(i) the estimate is of the unpaid amount of the underlying

liability as at a particular time;

(ii) the purpose of reducing the amount of the estimate is to

bring it closer to the unpaid amount of the underlying

liability as at the time the estimate was made;

(iii) reductions of the unpaid amount of the underlying

liability that happen after the time the estimate was

made are dealt with by section 268-20 (Nature of

liability to pay estimate) and so should not be taken into

account in exercising such a power; and

(b) the effects of sections 268-55 and 268-70 (effect of reduction

or revocation on liabilities).

268-40 How estimate may be reduced or revoked--statutory

declaration or affidavit

Scope

(1) This section applies as set out in the following table:

Statutory declaration or affidavit

Item This

section

applies

if ...

and ...

within ...

1 the

Commissioner

gives

you notice of the estimate

you give the

Commissioner a statutory

declaration for the

purposes of this section

(a) 7 days after the

Commissioner

gives you the

notice; or

(b) a longer period

allowed by the

Commissioner.

you are a party to

proceedings before a court

you:

(a) file an affidavit for the

(a) 14 days after you

first take a

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Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 17

Statutory declaration or affidavit

Item This

section

applies

if ...

and ...

within ...

that relate to the recovery

of the unpaid amount of

the estimate

purposes of this

section; and

(b) serve a copy on the

Commissioner

procedural step as

a party to the

proceedings; or

(b) a longer period

allowed by the

court.

(a) the estimate is of the

unpaid amount of a

liability of a company;

and

(b) the Commissioner

serves on the company

statutory demand

relating to the

company's liability to

pay the unpaid amount

of the estimate; and

to a court under

section 234, 459P, 462

or 464 of the

Corporations Act 2001

for the company to be

wound up

the company:

(a) files an affidavit for

the purposes of this

section; and

(b) serves a copy on the

applicant

(a) 14 days after

notice of the

application was

served on the

company; or

(b) a longer period

allowed by the

court.

Example: For the purposes of item 2 of the table, taking a procedural step as a

party to proceedings includes entering an appearance, filing a notice of

intention to defend, or applying to set aside judgment entered in

default of appearance.

Note 1:

Section 459C of the Corporations Act 2001 creates a presumption that

a company is insolvent, and may be wound up, if the company fails to

comply with a statutory demand.

Note 2:

See section 268-90 for what the statutory declaration or affidavit must

contain and who must make, swear or affirm it.

Reduction

(2) The amount of the estimate is reduced if the statutory declaration is

to the effect, or the affidavit verifies facts sufficient to prove, that a

specified lesser amount is the unpaid amount of the underlying

liability.

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18 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Example: Subsection (2) will apply if the statutory declaration etc. is to the

effect that the underlying liability has been discharged in full (and

therefore the unpaid amount of the liability is nil).

(3) The amount of the reduction is the amount by which the unpaid

amount of the estimate (just before the reduction) exceeds the

amount specified.

Note:

The effect of subsection (3) is to reduce the unpaid amount of the

estimate to the amount specified.

Revocation

(4) The estimate is revoked if the statutory declaration is to the effect,

or the affidavit verifies facts sufficient to prove, that the underlying

liability never existed.

268-45 How estimate may be reduced or revoked--rejection of proof

of debt

Scope

(1) This section applies if:

(a) the Commissioner lodges a proof of debt relating to the

unpaid amount of the estimate; and

(b) section 268-95 applies to an entity (your supervising entity)

in relation to you.

Rejection of proof of debt

(2) Your supervising entity may give the Commissioner a statutory

declaration to the effect that:

(a) the underlying liability has been discharged in full; or

(b) the unpaid amount of the underlying liability is a specified,

lesser amount; or

Note:

See section 268-90 for what the statutory declaration must contain and

who must make it.

(3) If your supervising entity does so, he or she may reject the proof of

debt (in whole or in part) on the ground made out in the statutory

declaration.

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 19

(4) If the Commissioner appeals, or applies for review of, your

supervising entity's decision to reject the proof of debt, nothing in

subsection (2) or (3) prevents evidence being adduced to contradict

statements in the declaration.

Note:

Such evidence might also be relevant to a prosecution for an offence,

such as an offence against section 11 of the Statutory Declarations Act

1959 (False declarations).

Revocation or reduction of estimate

(5) The following table applies in relation to the outcome following all

(if any) appeals from, and applications for review of, your

supervising entity's decision to reject the proof of debt. (If there

are no appeals or applications for review, the outcome is your

supervising entity's decision as originally made.)

Rejecting proof of debt

Item

If the outcome is that ...

then ...

the proof is rejected in whole on the

ground that the estimate has been

discharged in full

the amount of the estimate is

reduced by the unpaid amount of

the estimate (just before the

reduction).

the proof is rejected in part

the amount of the estimate is

reduced by so much of the unpaid

amount of the estimate (just

before the reduction) as is

rejected.

the proof is rejected in whole on the

ground that the underlying liability

never existed

the estimate is revoked.

Note 1:

The effect of item 1 of the table is to reduce the unpaid amount of the

estimate to nil.

Note 2:

The effect of item 2 of the table is to reduce the unpaid amount of the

estimate to the amount admitted to proof.

268-50 How estimate may be reduced--amount paid or applied

(1) This section applies if:

(a) an amount is paid or applied towards discharging your

liability to pay the amount of the estimate; and

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(b) the amount paid or applied exceeds the unpaid amount of the

underlying liability as at the time just before the payment or

application.

(2) The amount of the estimate is reduced so that it does not exceed

the unpaid amount, at the time mentioned in paragraph (1)(b), of

the underlying liability.

268-55 When reduction or revocation takes effect

Scope

(1) This section applies for the purposes of the following:

(a) Subdivision 268-C (Liability to pay estimates);

(b) section 268-60 (refund of overpayments);

(d) Division 269 (Penalties for directors of non-complying

companies).

When reduction or revocation takes effect

(2) If the amount of the estimate is reduced, the estimate has effect,

and is taken always to have had effect, as if the original amount of

the estimate had been the reduced amount.

(3) If the estimate is revoked, the estimate is taken never to have been

made.

268-60 Consequences of reduction or revocation--refund

(1) This section applies if:

(a) an amount is paid or applied towards discharging your

liability to pay the amount of the estimate; and

(b) the amount paid or applied exceeds the unpaid amount of the

estimate as at the time just before the payment or application.

Example: You pay an amount towards discharging the estimate and the estimate

is later reduced to a lesser amount.

Note:

Section 268-50 provides for the reduction of the amount of the

estimate in the case of overpayment.

(2) The Commissioner must pay you the excess.

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 21

Note:

See Division 3A of Part IIB of this Act for the rules about how the

Commissioner must pay you. Division 3 of that Part allows the

Commissioner to apply the amount owing as a credit against tax debts

that you owe the Commonwealth.

268-65 Consequences of reduction or revocation--statutory demand

changed or set aside

Scope

(1) This section applies if:

(a) the estimate is of the unpaid amount of a liability of a

company; and

(b) the Commissioner has served a

statutory demand on the

company relating to the company's liability to pay the unpaid

amount of the estimate; and

revoked.

Statutory demand changed

(2)

The

statutory demand is changed accordingly.

(3)

The

statutory demand is taken to have had effect (as so changed)

from the time the Commissioner served it on the company.

Statutory demand set aside

(4)

The

statutory demand is set aside if subsection (2) reduces the

amount of the debt (or the total of the amounts of the debts) below

the statutory minimum (within the meaning of the Corporations

Act 2001).

268-70 Consequences of reduction or revocation--underlying

liability

Reduction of the amount of the estimate, or revocation of the

estimate, does not affect the Commissioner's rights or remedies in

relation to the underlying liability (except to the extent that this

Division expressly provides otherwise).

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Subdivision 268-E--Late payment of estimates

Table of sections

268-75

Liability to pay the general interest charge

268-80

Effect of paying the general interest charge

268-75 Liability to pay the general interest charge

(1) This section applies if your liability to pay the amount of the

estimate remains undischarged at the end of 7 days after the

Commissioner gives you notice of the estimate.

(2) You are liable to pay the

general interest charge on the unpaid

amount of the estimate for each day in the period that:

(a) started at the beginning of the day by which the underlying

liability was due to be paid; and

(b) finishes at the end of the last day on which, at the end of the

day, any of the following remains unpaid:

(i) the amount of the estimate;

(ii) general interest charge on any of the amount of the

estimate.

Note:

The general interest charge is worked out under Part IIA of this Act.

268-80 Effect of paying the general interest charge

Scope

(1) If you are liable to pay the

general interest charge under

section 268-75 in relation to the estimate, this section applies to the

following liabilities:

(a) your liability to pay the general interest charge;

(b) a liability of yours to pay a general interest charge, under a

corresponding provision of Subdivision 16-B, because the

underlying liability remains undischarged;

liability referred to in paragraph (a) or (b);

(d) a liability of yours to pay interest carried by a judgment debt,

to the extent that the judgment debt is based on:

(i) the liability to pay the estimate; or

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 23

(ii) the liability to pay the general interest charge under

section 268-75 on an unpaid amount of the estimate.

Discharging one liability discharges other liabilities

(2) If, at a particular time, an amount is paid or applied towards

discharging one of the liabilities, each of the other liabilities that is

in existence at that time is discharged to the extent of the same

amount.

(3) However, this section does not discharge a liability to a greater

extent than the amount of the liability.

(4) If, because a judgment debt carries interest, section 8AAH of this

Act reduces the amount of a

general interest charge payable as

mentioned in paragraph (1)(b) of this section, the amount of the

reduction is taken, for the purposes of subsection (2) of this

section, to have been applied towards discharging your liability to

the charge.

Subdivision 268-F--Miscellaneous

Table of sections

268-85

Effect of judgment on liability on which it is based

268-90

Requirements for statutory declaration or affidavit

268-95

Liquidators, receivers and trustees in bankruptcy

268-100 Division not to limit or exclude Corporations or Bankruptcy Act

268-85 Effect of judgment on liability on which it is based

Estimate payable despite judgment

(1) The unpaid amount of the estimate, or of the underlying liability,

does not stop being payable merely because a judgment has been

given by, or entered in, a court.

Division applies to liability under judgment

(2) This Division applies in relation to liability under a judgment, to

the extent that it is based on your liability to pay the amount of the

estimate, in the same way as this Division applies to that estimate

liability.

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24 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(3) This Division applies in relation to liability under a judgment, to

the extent that it is based on the underlying liability, in the same

way as this Division applies to the underlying liability.

(4) Subsections (2) and (3) do not apply for the purposes of the

following:

(a) section 268-20 (Nature of liability to pay estimate);

(b) section 268-30 (Estimate provable in bankruptcy or winding

up);

Judgment conclusive as to amount of liability

(5) Nothing in this Division affects the conclusiveness of a judgment

as to the amount of a liability on which it is based.

268-90 Requirements for statutory declaration or affidavit

Scope

(1) This section applies to a statutory declaration given, or an affidavit

filed, for the purposes of section 268-40 or 268-45 in relation to the

estimate.

Content

(2) The statutory declaration or affidavit must verify the following

facts:

(a) whichever of the following are applicable:

(i) the sum of all amounts you withheld under Division 12

during the relevant period, or the fact that you did not

withhold any such amounts during the period;

(ii) the sum of all amounts you were required to pay under

Division 13 (Alienated personal services payments)

during the relevant period, or the fact that you were not

required to pay any such amounts during the period;

(iii) the sum of all amounts you were required to pay under

Division 14 (non-cash benefits and accruing gains)

during the relevant period, or the fact that you were not

required to pay any such amounts during the period;

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 25

(b) what has been done to comply with Division 16 (Payer's

obligations and rights) in relation to the amounts referred to

in paragraph (a).

Maker or deponent

(3) The statutory declaration or affidavit must be made, sworn or

affirmed by:

(a) an individual specified in the following table; or

(b) your liquidator, receiver or trustee in bankruptcy (if and as

applicable).

Who must make the statutory declaration or swear or affirm the affidavit

Item

A statutory declaration or

affidavit in relation to an estimate

of a liability of ...

must be made, sworn or affirmed

by ...

an individual

that individual.

a body corporate

(a) in the case of a company that has

a director or a company secretary

(within the meaning of the

Corporations Act 2001)--a

director of the company or the

company secretary; or

(b) in the case of an

Australian

government agency--an

individual prescribed by the

regulations; or

the body corporate (for the

purposes of the Income Tax

Assessment Act 1936).

a body politic

an individual prescribed by the

regulations.

a partnership

a partner of the partnership.

any other unincorporated association

or body of persons

(a) a member of the association's or

body's committee of

management; or

(b) the public officer of the

association or body (for the

purposes of the Income Tax

Assessment Act 1936).

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26 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Who must make the statutory declaration or swear or affirm the affidavit

Item

A statutory declaration or

affidavit in relation to an estimate

of a liability of ...

must be made, sworn or affirmed

by ...

6 a

trust

(a) the trustee of the trust; or

(b) the public officer of the trust (for

the purposes of the Income Tax

Assessment Act 1936).

superannuation fund or an

approved deposit fund

(a) the trustee of the fund; or

(b) if the fund does not have a

trustee--the entity managing the

fund.

(4) If the entity specified in the table in subsection (3) is not an

individual, the table is taken to specify the individual who, under

that subsection, would be eligible to make a statutory declaration in

relation to an estimate of a liability of that entity.

268-95 Liquidators, receivers and trustees in bankruptcy

Scope

(1) This section applies to an entity (your supervising entity), in

relation to you, if:

(a) the entity is your liquidator, receiver, trustee in bankruptcy or

administrator, or the administrator of a deed of company

arrangement executed by you; or

(b) your property is vested in the entity, or the entity has control

of your property.

(2) For the purposes of this Division, this section applies to an entity in

relation to a partnership if it applies to the entity in relation to a

partner of the partnership.

Notices from the Commissioner

(3) For the purposes of this Division, a notice given by the

Commissioner to your supervising entity is taken to have been

given to you.

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 27

(4) You must give your supervising entity a copy of any notice given

to you by the Commissioner under this Division. You must do so

as soon as practicable, and in any event within 7 days, after:

(a) if the Commissioner gave you the notice before the day when

your property vested in, or control of your property passed to,

the supervising entity--that day; or

(b) if subsection (2) applies and the Commissioner gave you the

notice before the day when the relevant partner's property

vested in, or control of the relevant partner's property passed

to, the supervising entity--that day; or

notice.

(5) If the Commissioner gives you and your supervising entity a notice

at different times, each notice is taken to have been given at the

later of those times.

Action taken by your supervising entity

(6) For the purposes of this Division, a statutory declaration given to

the Commissioner by your supervising entity is taken to have been

given by you.

(7) For the purposes of this Division, an affidavit filed by your

supervising entity is taken to have been filed by you.

(8) For the purposes of item 2 in the table in subsection 268-40(1)

(recovery proceedings), a procedural step taken by your

supervising entity is taken to have been taken by you.

Multiple supervising entities

(9) If you have 2 or more supervising entities, anything this Division

provides for to be done by or in relation to your supervising entity

may be done by or in relation to any of them.

268-100 Division not to limit or exclude Corporations or Bankruptcy

Act

This Division is not intended to limit or exclude the operation of

Chapter 5 of the Corporations Act 2001 (External administration),

or the Bankruptcy Act 1966, to the extent that Chapter or Act can

operate concurrently with this Division.

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28 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Note:

Section 268-30 and Subdivision 268-D affect the operation of

Chapter 5 of the Corporations Act 2001 and the Bankruptcy Act 1966.

Division 269--Penalties for directors of non-complying

companies

Table of Subdivisions

Guide to Division 269

269-A Object and scope

269-B Obligations and penalties

269-C Discharging

liabilities

269-D Miscellaneous

Guide to Division 269

269-1 What this Division is about

The directors of a company have a duty to ensure that the company

either:

(a)

meets its obligations under Subdivision 16-B

(obligation to pay withheld amounts to the

Commissioner) and Division 268; or

(b)

goes promptly into voluntary administration under

the Corporations Act 2001 or into liquidation.

The directors' duties are enforced by penalties.

Note:

The duties this Division imposes on the directors of the

company are in addition to the similar duties imposed on

the public officer of the company. See subsection 252(1)

of the Income Tax Assessment Act 1936.

Subdivision 269-A--Object and scope

Table of sections

269-5

Object of Division

269-10 Scope

Division

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269-5 Object of Division

The object of this Division is to ensure that a company either:

(a) meets its obligations under Subdivision 16-B (obligation to

pay withheld amounts to the Commissioner) and

Division 268; or

(b) goes promptly into voluntary administration under the

Corporations Act 2001 or into liquidation.

Note:

The directors' duties are enforced by penalties on the directors. A

penalty recovered under this Division is applied towards meeting the

company's obligation.

269-10 Scope of Division

(1) This Division applies as set out in the following table:

Obligations that directors must cause company to comply with

Item

This Division applies if, on a

particular day (the initial day), a

company registered under the

Corporations Act 2001 ...

and the company is obliged to pay to

the Commissioner on or before a

particular day (the due day) ...

withholds an amount under

Division 12

that amount in accordance with

Subdivision 16-B.

receives an

alienated personal

services payment

an amount in respect of that alienated

personal services payment in

accordance with Division 13 and

Subdivision 16-B.

provides a

non-cash benefit

an amount in respect of that benefit in

accordance with Subdivision 16-B.

is given notice of an estimate

under Division 268

the amount of the estimate.

Note:

In a case covered by item 2, 3 or 4 of the table, the due day is the same

as the initial day.

(2) This Division applies in relation to an amount that the company

purports to withhold under Division 12, but is not required to

withhold, as if the company were required to withhold the amount.

Subdivision 269-B--Obligations and penalties

Table of sections

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30 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

269-15 Directors'

obligations

269-20 Penalty

269-25 Notice

269-30

Remission of penalty before end of notice period

269-35 Defences

269-15 Directors' obligations

Directors' obligations

(1) The directors (within the meaning of the Corporations Act 2001) of

the company (from time to time) on or after the initial day must

cause the company to comply with its obligation.

(2) The directors of the company (from time to time) continue to be

under their obligation until:

(a) the company complies with its obligation; or

(b) an administrator of the company is appointed under

section 436A, 436B or 436C of the Corporations Act 2001;

that Act).

Instalment arrangements

(3) The Commissioner must not commence, or take a procedural step

as a party to, proceedings to enforce an obligation, or to recover a

penalty, of a director under this Division if an

arrangement that

covers the company's obligation is in force under section 255-15

(Commissioner's power to permit payments by instalments).

Note 1:

The arrangement may also cover other obligations of the company.

Note 2:

Subsection (3) does not prevent the Commissioner from giving a

director a notice about a penalty under section 269-25.

269-20 Penalty

Penalty for director on or before due day

(1) You are liable to pay to the Commissioner a penalty if:

(a) at the end of the due day, the directors of the company are

still under an obligation under section 269-15; and

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(b) you were under that obligation at or before that time (because

you were a director).

Note:

Paragraph (1)(b) applies even if you stopped being a director before

the end of the due day: see subsection 269-15(2).

(2) The penalty is due and payable at the end of the due day.

Note:

The Commissioner must not commence proceedings to recover the

penalty until the end of 21 days after the Commissioner gives you

notice of the penalty under section 269-25.

Penalty for new director

(3) You are also liable to pay to the Commissioner a penalty if:

(a) after the due day, you became a director of the company and

began to be under an obligation under section 269-15; and

(b) 14 days later, you are still under that obligation.

(4) The penalty is due and payable at the end of that 14th day.

Note:

The Commissioner must not commence proceedings to recover the

penalty until the end of 21 days after the Commissioner gives you

notice of the penalty under section 269-25.

Amount of penalty

(5) The amount of a penalty under this section is equal to the unpaid

amount of the company's liability under its obligation.

Note 1:

See section 269-40 for the effect on your penalty of the company

discharging its obligation, or of another director paying his or her

penalty.

Note 2:

See section 269-45 for your rights of indemnity and contribution.

269-25 Notice

Commissioner must give notice of penalty

(1) The Commissioner must not commence proceedings to recover

from you a penalty payable under this Subdivision until the end of

21 days after the Commissioner gives you a written notice under

this section.

Content of notice

(2) The notice must:

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32 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(a) set out what the Commissioner thinks is the unpaid amount

of the company's liability under its obligation; and

(b) state that you are liable to pay to the Commissioner, by way

of penalty, an amount equal to that unpaid amount because of

an obligation you have or had under this Division; and

remitted.

(3) To avoid doubt, a single notice may relate to 2 or more penalties,

but must comply with subsection (2) in relation to each of them.

When notice is given

(4) Despite section 29 of the Acts Interpretation Act 1901, a notice

under subsection (1) is taken to be given at the time the

Commissioner leaves or posts it.

Note 1:

Section 28A of the Acts Interpretation Act 1901 may be relevant to

giving a notice under subsection (1).

Note 2:

Section 269-50 of this Act is also relevant to giving a notice under

subsection (1).

269-30 Remission of penalty before end of notice period

A penalty of yours under this Division is remitted if the directors of

the company stop being under the relevant obligation under

section 269-15:

(a) before the Commissioner gives you notice of the penalty

under section 269-25; or

(b) within 21 days after the Commissioner gives you notice of

the penalty under that section.

269-35 Defences

Scope

(1) This section applies in relation to:

(a) proceedings to recover from you a penalty payable under this

Division; or

(b) proceedings against you in relation to a right referred to in

paragraph 269-45(2)(b) (directors jointly and severally liable

as guarantors).

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 33

Illness

(2) It is a defence in the proceedings if it is proved that, because of

illness or for some other good reason, it would have been

unreasonable to expect you to take part, and you did not take part,

in the management of the company at any time when:

(a) you were a director of the company; and

(b) the directors were under the relevant obligations under

section 269-15.

All reasonable steps

(3) It is a defence in the proceedings if it is proved that:

(a) you took all reasonable steps to ensure that the directors

complied with their relevant obligations under

section 269-15; or

(b) there were no such steps that you could have taken.

(4) In determining what are reasonable steps for the purposes of

subsection (3), have regard to:

(a) when, and for how long, you were a director and took part in

the management of the company; and

(b) all other relevant circumstances.

Power of courts to grant relief

(5) Section 1318 of the Corporations Act 2001 does not apply to an

obligation or liability of a director under this Division.

Subdivision 269-C--Discharging liabilities

Table of sections

269-40

Effect of director paying penalty or company discharging liability

269-45

Directors' rights of indemnity and contribution

269-40 Effect of director paying penalty or company discharging

liability

Liabilities

(1) This section applies to the following liabilities:

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34 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(a) the liability of the company under its obligation referred to in

section 269-10;

(b) the liability of each director (or former director) to pay a

penalty under this Division in relation to the liability of the

company referred to in paragraph (a);

liability referred to in paragraph (a) or (b).

Discharging one liability discharges other liabilities

(2) If an amount is paid or applied at a particular time towards

discharging one of the liabilities, each of the other liabilities in

existence at that time is discharged to the extent of the same

amount.

(3) If, because of section 268-20 (Nature of liability to pay estimate),

one of the liabilities is discharged at a particular time to the extent

of a particular amount, each of the other liabilities in existence at

that time is discharged to the extent of the same amount.

(4) This section does not discharge a liability to a greater extent than

the amount of the liability.

269-45 Directors' rights of indemnity and contribution

(1) This section applies if you pay a penalty under this Division in

relation to a liability of the company under an obligation referred

to in section 269-10.

(2) You have the same rights (whether by way of indemnity,

subrogation, contribution or otherwise) against the company or

anyone else as if:

(a) you made the payment under a guarantee of the liability of

the company; and

(b) under the guarantee you and every other person who has

paid, or from whom the Commissioner is entitled to recover,

a penalty under this Division in relation to the company's

obligation were jointly and severally liable as guarantors.

Subdivision 269-D--Miscellaneous

Table of sections

Collection and recovery of tax Schedule 1

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 35

269-50

How notice may be given

269-55

Division not to limit or exclude Corporations Act

269-50 How notice may be given

The Commissioner may give you a notice under section 269-25 by

leaving it at, or posting it to, an address that appears, from

information held by the Australian Securities and Investments

Commission, to be, or to have been within the last 7 days, your

place of residence or

business.

269-55 Division not to limit or exclude Corporations Act

To avoid doubt, this Division is not intended to limit or exclude the

operation of Chapter 5 of the Corporations Act 2001 (External

administration), to the extent that Chapter can operate concurrently

with this Division.

Schedule 1 Collection and recovery of tax

Part 2 Consequential amendments

36 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Part 2--Consequential amendments

Administrative Decisions (Judicial Review) Act 1977

11 Paragraph (ea) of Schedule 1

Repeal the paragraph.

12 After paragraph (ga) of Schedule 1

Insert:

(gaa) decisions of the Commissioner of Taxation under

Subdivision 268-B or section 268-35 in Schedule 1 to the

Taxation Administration Act 1953;

Note:

Subdivision 268-B and section 268-35 empower the

Commissioner to make, reduce and revoke estimates of certain

liabilities.

Corporations Act 2001

13 Subsection 443BA(2) (definition of unpaid amount)

Repeal the definition.

Higher Education Support Act 2003

14 Paragraph 154-60(a)

Omit ", and Division 1 of Part VI,".

15 After paragraph 154-60(a)

Insert:

(aa) Division 5 of the Income Tax Assessment Act 1997; and

16 Section 154-60 (note)

Repeal the note.

Income Tax Assessment Act 1936

17 Subsection 102AAM(14)

Repeal the subsection.

Collection and recovery of tax Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 37

18 At the end of Subdivision B of Division 6AAA of Part III

Add:

102AAN Collection etc. of interest

Sections 170, 172, 174, 254 and 255 of this Act, and Division 5 of

the Income Tax Assessment Act 1997 (How to work out when to

pay your income tax), apply to interest payable under

section 102AAM in the same way as they apply to income tax.

19 Subsection 159GZZZZH(4)

Omit "204,".

20 Subsection 159GZZZZH(4)

After "former sections", insert "204,".

21 At the end of section 159GZZZZH

Add:

(5) Division 5 of the Income Tax Assessment Act 1997 (How to work

out when to pay your income tax) applies to tax payable under this

section in the same way as that Division applies to income tax.

22 Subsection 163B(8)

Repeal the subsection, substitute:

Collection etc. of additional tax

(8) Former sections 204, 205, 206, 215, 216, 258 and 259, and

sections 254 and 255, apply to additional tax payable under this

section in the same way as they apply to income tax.

23 Subsection 163B(10) (definition of instalment taxpayer)

Before "Division 1C", insert "former".

24 Subsection 163B(10) (definition of relevant entity)

Before "Division 1B", insert "former".

25 Subsection 254(2)

Repeal the subsection, substitute:

Schedule 1 Collection and recovery of tax

Part 2 Consequential amendments

38 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(2) Subsection (1) applies to the following in the same way as it

applies to tax:

(a) the general interest charge under:

(i) section 163AA, former section 170AA, former

subsection 204(3), former subsection 221AZMAA(1),

former subsection 221AZP(1), former subsection

221YD(3) or former section 221YDB of this Act;

(ii) section 5-15 of the Income Tax Assessment Act 1997;

(b) additional tax under former Part VII of this Act;

Note 1:

The general interest charge is worked out under Part IIA of the

Taxation Administration Act 1953 and shortfall interest charge is

worked out under Division 280 in Schedule 1 to that Act.

Note 2:

Subsection 8AAB(4) of that Act lists the provisions that apply the

general interest charge.

26 Subsection 255(4)

Repeal the subsection, substitute:

(4) This section applies to the following in the same way as it applies

to tax:

(a) the general interest charge under:

(i) section 163AA, former section 170AA, former

subsection 204(3), former subsection 221AZMAA(1),

former subsection 221AZP(1), former subsection

221YD(3) or former section 221YDB of this Act;

(ii) section 5-15 of the Income Tax Assessment Act 1997;

(b) additional tax under former Part VII of this Act;

Note 1:

The general interest charge is worked out under Part IIA of the

Taxation Administration Act 1953 and shortfall interest charge is

worked out under Division 280 in Schedule 1 to that Act.

Note 2:

Subsection 8AAB(4) of that Act lists the provisions that apply the

general interest charge.

Income Tax Assessment Act 1997

27 Subsection 3-5(3) (note to question 3)

Omit "sections 204, 213 and 219 of the Income Tax Assessment Act

1936", substitute "Division 5 of this Act".

Collection and recovery of tax Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 39

28 Sections 214-165 and 292-400

Repeal the sections.

29 Subsection 721-10(2) (table item 5)

Repeal the item, substitute:

section 5-5 of the Income Tax

Assessment Act 1997 (income tax, and

other amounts treated in the same way as

income tax under that section)

the

financial year to which

the income tax etc. relates

section 197-70 of the Income Tax

Assessment Act 1997 (untainting tax)

the

franking period of the

head company in which the

untainting tax became due

and payable

30 Subsection 721-10(2) (table item 25)

Repeal the item.

31 At the end of subsection 721-10(2)

Add:

Note:

The other amounts referred to in item 3 of the table are:

(a) interest payable under section 102AAM of the Income Tax

Assessment Act 1936 (distributions from certain non-resident

trust estates); and

(b) tax payable under section 159GZZZZH of that Act (Tax payable

where infrastructure borrowing certificate cancelled).

32 Subsection 995-1(1) (definition of full self-assessment

taxpayer)

Repeal the definition.

Income Tax (Transitional Provisions) Act 1997

33 Section 214-115

Repeal the section.

Social Security Act 1991

34 Section 1061ZZFG

Schedule 1 Collection and recovery of tax

Part 2 Consequential amendments

40 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Omit ", and section 204, of the Income Tax Assessment Act 1936,",

substitute "of the Income Tax Assessment Act 1936, Division 5 of the

Income Tax Assessment Act 1997,".

Student Assistance Act 1973

35 Section 12ZN

Omit "and section 204 of the Income Tax Assessment Act 1936",

substitute "of the Income Tax Assessment Act 1936, Division 5 of the

Income Tax Assessment Act 1997".

Taxation Administration Act 1953

36 Section 8AAA

Omit "(Most of the provisions are in the Income Tax Assessment Act

1936.)".

37 Subsection 8AAB(4) (table items 9 and 30)

Repeal the items.

38 Subsection 8AAB(5) (after table item 2)

Insert:

2AA

5-15

Income Tax Assessment Act 1997

39 Subsection 8AAB(5) (after table item 17L)

Insert:

17M 268-75

Schedule 1

Taxation Administration Act 1953

40 Paragraph 45-130(1)(b) in Schedule 1

Omit "

full self-assessment taxpayer", substitute "

self-assessment

entity".

41 Subparagraph 45-130(1)(c)(i) in Schedule 1

Omit "

full self-assessment taxpayer", substitute "self-assessment

entity".

42 Subsection 250-5(2) in Schedule 1 (example)

Collection and recovery of tax Schedule 1

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 41

Omit "Division 1 of Part VI of the Income Tax Assessment Act 1936",

substitute "Division 5 of the Income Tax Assessment Act 1997".

43 Subsection 250-10(1) in Schedule 1 (table items 55 and 65

to 85)

Repeal the items.

44 Subsection 250-10(1) in Schedule 1 (at the end of the

table)

Add:

100

interest payable under

section 102AAM (about distributions

from non-resident trust estates)

5-5 of the Income Tax

Assessment Act 1997

105

tax payable under section 159GZZZZH

(Tax payable where infrastructure

borrowing certificate cancelled)

5-5 of the Income Tax

Assessment Act 1997

45 Subsection 250-10(2) in Schedule 1 (after table item 36)

Insert:

36A compulsory

repayment

amount under the

Higher Education

Support Act 2003

5-5

Income Tax Assessment Act 1997

37 income

tax

5-5

Income Tax Assessment Act 1997

46 Subsection 250-10(2) in Schedule 1 (after table item 137)

Insert:

138 estimate

payable

amounts

268-20 in

Schedule 1

Taxation Administration Act 1953

139 penalty

under

Subdivision 269-B

269-20 in

Schedule 1

Taxation Administration Act 1953

47 Subsection 255-10(1) in Schedule 1 (note)

Omit "paragraph 204(3)(a) of the Income Tax Assessment Act 1936",

substitute "paragraph 5-15(a) of the Income Tax Assessment Act 1997".

48 Subsection 255-20(1) in Schedule 1 (note)

Omit "paragraph 204(3)(a) of the Income Tax Assessment Act 1936",

substitute "paragraph 5-15(a) of the Income Tax Assessment Act 1997".

Schedule 1 Collection and recovery of tax

Part 2 Consequential amendments

42 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

49 Subsection 280-100(3) in Schedule 1 (note)

Omit "section 204 of the Income Tax Assessment Act 1936", substitute

"Division 5 of the Income Tax Assessment Act 1997".

50 Subsection 280-100(3) in Schedule 1 (note)

Omit "That section", substitute "That Division".

51 Subsection 340-10(2) in Schedule 1 (table item 3)

Before "subsection 204(3)", insert "former".

52 Subsection 340-10(2) in Schedule 1 (after paragraph (a) in

the cell at table item 3, column headed "Provision(s)")

Insert:

(aa) section 5-15 in the Income Tax Assessment Act 1997; or

Collection and recovery of tax Schedule 1

Application, transitional and saving provisions Part 3

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 43

Part 3--Application, transitional and saving

provisions

Division 1--Preliminary

53 Meaning of commencement time

In this Part:

commencement time means the time this item commences.

Division 2--Division 5 of the Income Tax Assessment

Act 1997

Income Tax (Transitional Provisions) Act 1997

54 After Division 4

Insert:

Division 5--How to work out when to pay your income tax

Table of Subdivisions

5-A

How to work out when to pay your income tax

Subdivision 5-A--How to work out when to pay your income

tax

Table of sections

5-5

Application of Division 5 of the Income Tax Assessment Act 1997

5-7

References in tax sharing agreements to former section 204

5-10

General interest charge

5-5 Application of Division 5 of the Income Tax Assessment Act 1997

Division 5 of the Income Tax Assessment Act 1997, as originally

enacted, applies in relation to income tax or shortfall interest

charge you must pay for:

(a) the 2010-11 financial year; or

(b) a later financial year.

Schedule 1 Collection and recovery of tax

Part 3 Application, transitional and saving provisions

44 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

5-7 References in tax sharing agreements to former section 204

(1) A reference in an agreement to section 204 of the Income Tax

Assessment Act 1936 is taken, from the commencement of this

section, to be a reference to section 5-5 of the Income Tax

Assessment Act 1997, if:

(a) paragraph 721-25(1)(a) of the Income Tax Assessment Act

1997 applies to the agreement; and

(b) the agreement was in force just before the commencement of

this section.

(2) This section applies in relation to tax to which Division 5 of the

Income Tax Assessment Act 1997 applies.

5-10 General interest charge

(1) This section applies if, just before the commencement of this

section, you were liable, under subsection 204(3) (the old

provision) of the Income Tax Assessment Act 1936, to pay the

general interest charge on an unpaid amount (the liability) of any

tax or shortfall interest charge.

(2) On that commencement, the old provision ceases to apply to the

liability.

(3) From that commencement, section 5-15 (the new provision) of the

Income Tax Assessment Act 1997, as originally enacted, applies to

the liability as if:

(a) the liability remained unpaid at that time; and

(b) so much of the charge under the old provision as remained

unpaid at that time had been imposed under the new

provision and remained unpaid at that time.

55 At the end of Part 3-90

Add:

Division 721--Liability for payment of tax where head

company fails to pay on time

Table of Subdivisions

721-A Application of Division

Collection and recovery of tax Schedule 1

Application, transitional and saving provisions Part 3

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 45

Subdivision 721-A--Application of Division

Table of sections

721-25

References in tax sharing agreements to former table item 25

721-25 References in tax sharing agreements to former table item 25

(1) A reference in an agreement to item 25 of the table in subsection

721-10(2) of the Income Tax Assessment Act 1997 is taken, from

the commencement of this section, to be a reference to item 3 of

that table, if:

(a) paragraph 721-25(1)(a) of that Act applies to the agreement;

and

(b) the agreement was in force just before the commencement of

this section.

(2) This section applies in relation to tax to which Division 5 of the

Income Tax Assessment Act 1997 applies.

56 Transitional provision

Despite the repeal of section 204 of the Income Tax Assessment Act

1936 by this Schedule, that section (other than subsection 204(3))

continues to apply, from the commencement time, to income tax or

shortfall interest charge to which Division 5 of the Income Tax

Assessment Act 1997, as inserted by this Schedule, does not apply.

Division 3--Security deposits

57 Security deposits

If, just before the commencement time, a security requirement is in

force under section 213 of the Income Tax Assessment Act 1936, the

requirement has effect, from the commencement time, as if it had been

made under section 255-100 in Schedule 1 to the Taxation

Administration Act 1953, as added by this Schedule.

Division 4--Estimates

58 Estimates

Schedule 1 Collection and recovery of tax

Part 3 Application, transitional and saving provisions

46 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

New estimate

(1)

Section 268-10 in Schedule 1 to the Taxation Administration Act 1953,

as added by this Schedule, applies in relation to an amount you became

liable to pay to the Commissioner under section 16-70 in Schedule 1 to

that Act before, on or after the commencement time.

Existing estimate

(2)

Subitem (3) applies to an estimate that:

(a) was made under section 222AGA of the Income Tax

Assessment Act 1936 (whether or not notice of it has been

sent to you or your trustee); and

(b) was in force just before the commencement time.

(3)

The estimate remains in force, from the commencement time, as if it

had been made under section 268-10 in Schedule 1 to the Taxation

Administration Act 1953, as added by this Schedule.

59 Bankruptcy or winding up

Section 268-30 in Schedule 1 to the Taxation Administration Act 1953,

as added by this Schedule, applies whether the date of the bankruptcy,

or the relevant date, referred to in that section occurred before, on or

after the day on which the commencement time occurred.

60 Reducing and revoking estimates

(1)

Section 268-40 in Schedule 1 to the Taxation Administration Act 1953,

as added by this Schedule, applies in relation to:

(a) a notice given by the Commissioner before, on or after the

commencement time; or

(b) proceedings that relate to the recovery of the unpaid amount

of an estimate commenced before, on or after the

commencement time; or

the Corporations Act 2001 before, on or after the

commencement time.

(2)

Section 268-45 in Schedule 1 to the Taxation Administration Act 1953,

as added by this Schedule, applies in relation to a proof of debt lodged

before, on or after the commencement time.

Collection and recovery of tax Schedule 1

Application, transitional and saving provisions Part 3

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 47

61 General interest charge

New charge

(1)

Section 268-75 in Schedule 1 to the Taxation Administration Act 1953,

as added by this Schedule, applies in relation to an estimate of which

the Commissioner sends notice:

(a) on or after the commencement time; or

(b) no more than 7 days before the commencement time.

Existing charge

(2)

Subitems (3) and (4) apply if, just before the commencement time, you

were liable, under Subdivision E of Division 8 of Part VI of the Income

Tax Assessment Act 1936 (the old Subdivision), to pay the general

interest charge on an unpaid amount of an estimate.

(3)

At the commencement time, the old Subdivision stops applying to the

liability.

(4)

From the commencement time, Subdivision 268-E in Schedule 1 to the

Taxation Administration Act 1953 (the new Subdivision) applies to the

liability as if:

(a) the liability remained unpaid at the commencement time; and

(b) so much of the charge under the old Subdivision as remained

unpaid at that time:

(i) had been imposed under the new Subdivision; and

(ii) remained unpaid at that time.

62 Payment agreements

(1)

This item applies in relation to an agreement that:

(a) was made under section 222ALA of the Income Tax

Assessment Act 1936; and

(b) was in force just before the commencement time.

(2)

The agreement has effect, from the commencement time, as if the

agreement were an arrangement made under section 255-15 in

Schedule 1 to the Taxation Administration Act 1953.

63 Savings--regulations relating to government bodies

(1)

This item applies in relation to regulations:

Schedule 1 Collection and recovery of tax

Part 3 Application, transitional and saving provisions

48 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(a) made for the purposes of paragraph 222AGF(7)(c),

222AHE(5)(c) or 222AIH(4)(c) of the Income Tax

Assessment Act 1936; and

(b) in force just before the commencement time.

(2)

The regulations have effect from the commencement time as if they had

been made for the purposes of paragraph (b) of item 2, and item 3, of

the table in subsection 268-90(3) in Schedule 1 to the Taxation

Administration Act 1953, as added by this Schedule.

Division 5--Directors' obligations

64 Application--Division 269 in Schedule 1 to the Taxation

Administration Act 1953

Subject to item 65, Division 269 in Schedule 1 to the Taxation

Administration Act 1953, as added by this Schedule, applies in relation

to an amount payable by a company to the Commissioner before, on or

after the commencement time.

65 Transitional--penalties

No doubling-up of penalties

(1)

Subsection 269-20(1) in Schedule 1 to the Taxation Administration Act

1953, as added by this Schedule, does not apply if the due day referred

to in that subsection occurs before the commencement time.

(2)

Subsection 269-20(3) in Schedule 1 to that Act, as added by this

Schedule, does not apply if the 14th day referred to in that subsection

occurs before the commencement time.

New provisions apply to existing penalties

(3)

Subitem (4) applies in relation to a penalty that, just before the

commencement time, was payable under Division 9 of Part VI of the

Income Tax Assessment Act 1936.

(4)

Division 269 in Schedule 1 to the Taxation Administration Act 1953

(other than section 269-20) has effect, from the commencement time, as

if the penalty were payable under Subdivision 269-B in that Schedule.

Collection and recovery of tax Schedule 1

Application, transitional and saving provisions Part 3

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 49

Penalties remitted because of payment agreement

(5)

Subitem (6) applies if:

(a) a penalty payable by a director of a company was remitted

under section 222APF of the Income Tax Assessment Act

1936 because the company made an agreement with the

Commissioner as mentioned in paragraph 222APB(1)(b); and

(b) on or after the commencement time, the company

contravenes the agreement such that the director would have

been liable to pay a penalty under section 222AQA if that

section had continued to apply.

(6)

Division 269 in Schedule 1 to the Taxation Administration Act 1953

(other than section 269-20) has effect, from the commencement time, as

if the penalty:

(a) had not been remitted; and

(b) were payable under Subdivision 269-B in that Schedule.

Division 6--Provisions relating to former provisions of

the Income Tax Assessment Act 1936

66 Inoperative provisions

(1)

This item applies if:

(a) just before the commencement time, a person was liable to

pay an amount to the Commissioner under:

(i) former section 220AAE, 220AAM or 220AAR of the

Income Tax Assessment Act 1936; or

(ii) former subsection 221YHZD(1) or (1A) of that Act; or

(iii) former subsection 221YN(1) of that Act; or

(b) the Commissioner has reason to suspect that, just before the

commencement time, a person was so liable.

(2)

Despite the repeal of Divisions 8 and 9 of Part VI of the Income Tax

Assessment Act 1936 by this Schedule, but subject to item 62 of this

Schedule, those Divisions continue to apply, after the commencement

time, in relation to the liability or suspected liability, as if the repeal had

not happened.

(3)

Subsection 268-90(2) in Schedule 1 to the Taxation Administration Act

1953, as added by this Schedule, is taken to require a statutory

Schedule 1 Collection and recovery of tax

Part 3 Application, transitional and saving provisions

50 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

declaration or affidavit to which that subsection applies to verify any

facts:

(a) that relate to the liability, or suspected liability; and

(b) that the declaration or affidavit would have been required to

verify if subsection 222AHE(4), 222AID(4) or 222AIH(3) of

the Income Tax Assessment Act 1936, as in force just before

the commencement time, had applied to the declaration or

affidavit.

Forgiveness of commercial debts Schedule 2

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 51

Schedule 2--Forgiveness of commercial

debts

Part 1--Main amendments

Income Tax Assessment Act 1936

1 Schedule 2C

Repeal the Schedule.

Income Tax Assessment Act 1997

2 After Division 243

Insert:

Division 245--Forgiveness of commercial debts

Table of Subdivisions

Guide to Division 245

245-A Debts to which operative rules apply

245-B What constitutes forgiveness of a debt

245-C Calculation of gross forgiven amount of a debt

245-D Calculation of net forgiven amount of a debt

245-E Application of net forgiven amounts

245-F

Special rules relating to partnerships

245-G Record

keeping

Guide to Division 245

245-1 What this Division is about

When a creditor forgives a commercial debt you owe, you make a

gain. This is usually not included in your assessable income.

Instead, this Division offsets the forgiven amount against amounts

that could otherwise reduce your taxable income in the same or a

later income year. Those amounts are:

Schedule 2 Forgiveness of commercial debts

Part 1 Main amendments

52 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(a)

your tax losses and net capital losses; and

(b)

capital allowances and some similar deductions;

and

(c)

the cost bases of your CGT assets.

245-2 Simplified outline of this Division

(1) This Division applies to any commercial debt (or part of a

commercial debt) you owe that is forgiven.

Note:

This Division does not apply if:

(a) the debt is waived and the waiver constitutes a fringe benefit; or

(b) the amount of the debt has been, or will be, included in your

assessable income in any income year; or

(d) the debt is forgiven by will; or

(e) the debt is forgiven for reasons of natural love and affection; or

(f) the debt is a tax-related liability.

(2) The net forgiven amount of a debt is worked out by reducing the

value of your forgiven debt by:

(a) any consideration you provided for the forgiveness; and

(b) any amounts that this Act already brings to account because

of the forgiveness.

(3) The net forgiven amounts of all your forgiven debts in an income

year are added up. This total net forgiven amount is applied to

reduce the following amounts (in the following order):

(a) your tax losses from previous income years;

(b) your net capital losses from previous income years;

or in a later year, because of expenditure from a previous

year (e.g. the capital allowance deductions you would get for

the cost of a depreciating asset);

(d) the cost bases of your CGT assets.

(4) Any unapplied total net forgiven amount is disregarded.

(5) Special rules apply to debts of partnerships.

Forgiveness of commercial debts Schedule 2

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 53

Subdivision 245-A--Debts to which operative rules apply

Guide to Subdivision 245-A

245-5 What this Subdivision is about

This Division applies to a debt if you can deduct interest payable

on the debt.

Table of sections

Application of Division

245-10 Commercial

debts

245-15 Non-equity

245-20

Parts of debts

Application of Division

245-10 Commercial debts

Subdivisions 245-C to 245-G apply to a debt of yours if:

(a) the whole or any part of interest, or of an amount in the

nature of interest, paid or payable by you in respect of the

debt has been deducted, or can be deducted, by you; or

(b) interest, or an amount in the nature of interest, is not payable

by you in respect of the debt but, had interest or such an

amount been payable, the whole or any part of the interest or

amount could have been deducted by you; or

have been deducted by you apart from the operation of a

provision of this Act (other than paragraphs 8-1(2)(a), (b) and

(c)) that has the effect of preventing a deduction.

Note:

Paragraphs 8-1(2)(a), (b) and (c) prevent deductions for capital,

private or domestic outgoings and for outgoings relating to exempt

income or non-assessable non-exempt income.

Schedule 2 Forgiveness of commercial debts

Part 1 Main amendments

54 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

245-15 Non-equity shares

This Division applies to a

non-equity share issued by a company

as if it were a debt to which section 245-10 applies that is owed by

the company to the relevant shareholder.

245-20 Parts of debts

This Division applies to part of a debt in the same way as it applies

to a whole debt.

Note:

This Division treats interest, or an amount in the nature of interest,

payable on a debt as being a separate debt if the interest or amount has

accrued but has not been paid.

Subdivision 245-B--What constitutes forgiveness of a debt

Guide to Subdivision 245-B

245-30 What this Subdivision is about

A debt is forgiven if you no longer have to pay it.

However, this Division does not apply to some cases of

forgiveness, such as bankruptcy.

Table of sections

Operative provisions

245-35 What

constitutes

forgiveness of a debt

245-36 What

constitutes

forgiveness of a debt if the debt is assigned

245-37 What

constitutes

forgiveness of a debt if a subscription for shares enables

payment of the debt

245-40

Forgivenesses to which operative rules do not apply

245-45

Application of operative rules if forgiveness involves an arrangement

Operative provisions

245-35 What constitutes forgiveness of a debt

A debt is forgiven if and when:

Forgiveness of commercial debts Schedule 2

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 55

(a) the debtor's obligation to pay the debt is released or waived,

or is otherwise extinguished other than by repaying the debt

in full; or

(b) the period within which the creditor is entitled to sue for the

recovery of the debt ends, because of the operation of a

statute of limitations, without the debt having been paid.

245-36 What constitutes forgiveness of a debt if the debt is assigned

A debt is forgiven if and when the creditor assigns the right to

receive payment of the debt to another entity (the new creditor)

and the following conditions are met:

(a) either the new creditor is the debtor's

associate or the

assignment occurred under an

arrangement to which the new

creditor and debtor were parties;

(b) the right to receive payment of the debt was not acquired by

the new creditor in the ordinary course of

trading on a

market, exchange or other place on which, or facility by

means of which, offers to sell, buy or exchange securities

(within the meaning of Division 16E of Part III of the Income

Tax Assessment Act 1936) are made or accepted.

Note 1:

Division 16E of Part III of the Income Tax Assessment Act 1936

brings to account gains and losses on some securities on an accruals

basis.

Note 2:

This Division also applies if an assigned debt is subsequently forgiven

by the new creditor. Section 245-61 tells you how to work out the

value of the debt in that case.

245-37 What constitutes forgiveness of a debt if a subscription for

shares enables payment of the debt

If an entity subscribes for

shares in a company to enable the

company to make a payment in or towards discharge of a debt it

owes to the entity, the debt is forgiven when, and to the extent that,

the company applies any of the money subscribed in or towards

payment of the debt.

245-40 Forgivenesses to which operative rules do not apply

Subdivisions 245-C to 245-G do not apply to a

forgiveness of a

debt if:

Schedule 2 Forgiveness of commercial debts

Part 1 Main amendments

56 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(a) the debt is waived and the waiver constitutes a

fringe

benefit; or

Note:

The waiver by an employer of a debt owed by an employee is

usually a fringe benefit: see section 14 of the Fringe Benefits Tax

Assessment Act 1986.

(b) the amount of the debt has been, or will be, included in the

assessable income of the debtor in any income year; or

bankruptcy; or

(d) the forgiveness is effected by will; or

(e) the forgiveness is for reasons of natural love and affection; or

(f) the debt is a

tax-related liability or a civil penalty under

Division 290 in Schedule 1 to the Taxation Administration

Act 1953 (about penalties for promoters and implementers of

tax avoidance schemes).

Note:

If the forgiveness of your debt involved an arrangement which was

entered into before 28 June 1996, see section 245-10 of the Income

Tax (Transitional Provisions) Act 1997.

245-45 Application of operative rules if forgiveness involves an

arrangement

(1)

If:

(a) the debtor and the creditor in relation to a debt enter into an

arrangement; and

(b) under the arrangement, the debtor's obligation to pay the debt

is to cease at a particular future time; and

incurring any financial or other obligation (other than an

obligation that, having regard to the debtor's circumstances,

is of a nominal or insignificant amount or kind);

Subdivisions 245-C to 245-G apply as if the debt were

forgiven

when the arrangement is entered into.

(2) If, after the arrangement is entered into, the debt is forgiven, the

later forgiveness is disregarded for the purposes of those

Subdivisions.

Forgiveness of commercial debts Schedule 2

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 57

Subdivision 245-C--Calculation of gross forgiven amount of a

debt

Guide to Subdivision 245-C

245-48 What this Subdivision is about

The amount of forgiveness (called the gross forgiven amount) for

the debtor reflects the loss that the creditor makes for tax purposes.

It is worked out in 2 steps:

(a)

the value of the debt when it was forgiven is

worked out on the basis that you were solvent both

then and when you incurred the debt; and

(b)

the value of the debt is then offset by any

consideration given for the forgiveness of the debt.

The difference between the value of the debt and the amount offset

is the gross forgiven amount.

If the debt was owed by several debtors, the gross forgiven amount

is divided between them equally.

Table of sections

Working out the value of a debt

245-50

Extent of forgiveness if consideration is given

245-55

General rule for working out the value of a debt

245-60

Special rule for working out the value of a non-recourse debt

245-61

Special rule for working out the value of a previously assigned debt

Working out if an amount is offset against the value of the debt

245-65

Amount offset against amount of debt

Working out the gross forgiven amount

245-75

Gross forgiven amount of a debt

245-77

Gross forgiven amount shared between debtors

Schedule 2 Forgiveness of commercial debts

Part 1 Main amendments

58 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Working out the value of a debt

245-50 Extent of forgiveness if consideration is given

If any consideration is paid or given in respect of the

forgiveness

of a debt, the debt that is forgiven is:

(a) the obligation that existed before the forgiveness to pay so

much of the debt as is expressed, or is taken, to be forgiven;

and

(b) the obligation that existed before the forgiveness to pay any

part of the debt to which paragraph (a) does not apply but

which ceases to be payable as a result of the payment or

giving of the consideration.

Example: Daniel owes Samara $100. Samara agrees to accept $60 in full

payment of the debt.

If their agreement specifies that Samara forgives the whole debt in

return for $60, paragraph (a) provides that the forgiven debt is $100.

If their agreement instead requires Daniel to repay $60 and specifies

that Samara forgives the remaining $40, paragraph (a) would deal with

the $40 and paragraph (b) would add the remaining $60, again

producing a forgiven amount of $100.

In either case, the $60 Daniel pays is offset against the forgiven

amount of $100 in working out the gross forgiven amount of the debt:

see sections 245-65 and 245-75.

245-55 General rule for working out the value of a debt

(1)

The value of your debt at the time (the forgiveness time) when it is

forgiven is the amount that would have been its

market value

(considered as an asset of the creditor) at the forgiveness time,

assuming that:

(a) when you incurred the debt, you were able to pay all your

debts (including that one) as and when they fell due; and

(b) your capacity to pay the debt is the same at the forgiveness

time as when you incurred it.

(2) However, the value of the debt at the forgiveness time is the sum of

the following amounts, if that sum is less than the amount

applicable under subsection (1):

(a) what would have been the amount applicable under

subsection (1) if there had been no change, from the time the

debt was incurred until the forgiveness time, in any rate of

Forgiveness of commercial debts Schedule 2

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 59

interest, or rate of exchange between currencies, that affects

the

market value of the debt;

(b)

each

amount:

(i) that you have deducted or can deduct as a result of the

forgiveness of the debt; and

(ii) that is attributable to such a change.

(3) Paragraph (1)(a) does not apply to the debt if:

(a)

either:

(i) the creditor was an Australian resident at the

forgiveness time; or

(ii)

the

forgiveness of the debt was a

CGT event involving

CGT asset that was

taxable Australian property; and

(b) you and the creditor were not dealing with each other at

arm's length in respect of you incurring the debt; and

moneylending debt.

Note:

This subsection reduces your gross forgiven amount to reflect the

reduction in the creditor's loss on the forgiven debt under the capital

gains tax regime.

(4) This section has effect subject to sections 245-60 and 245-61

(about non-recourse and assigned debts).

245-60 Special rule for working out the value of a non-recourse debt

(1)

The

value of a debt when it is

forgiven is the lesser of:

(a) the amount of the debt outstanding at that time; and

(b)

the

market value at that time of the creditor's rights

mentioned in paragraph (2)(b).

(2) Subsection (1) applies to a debt if:

(a) you incurred the debt directly in respect of financing:

(i) the acquisition of property by you; or

(ii) the construction or development of property by you;

(but not including the manufacture of goods); and

(b) the creditor's rights against you in the event of default in the

payment of the debt or interest were, just before the debt was

forgiven, limited to all or any of the following:

(i) rights (including the right to money payable) in relation

to all or any of the matters mentioned in subsection (3);

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(ii) rights in respect of a mortgage or other security over the

property;

(iii) rights arising out of any

arrangement relating to the

financial obligations, in relation to the property, of the

end user of the property to you.

(3) For the purposes of subparagraph (2)(b)(i), the matters are as

follows:

(a) the property or the use of the property;

(b) goods produced, supplied, carried, transmitted or delivered

by means of the property;

(d) the loss or

disposal of the whole or a part of the property or

of your interest in the property.

245-61 Special rule for working out the value of a previously

assigned debt

If your debt has been assigned as mentioned in section 245-36 and

is later

forgiven by the new creditor, the value of that debt when it

is later forgiven is:

(a) if the debt was not a

moneylending debt and the creditor and

the new creditor were not dealing with each other at

arm's

length in connection with the assignment--the

market value

of the debt at the time of the assignment; or

(b) in any other case--the sum of:

(i) the amount or market value of the consideration (if any)

you paid or gave, or are required to pay or give, to the

creditor in respect of the assignment; and

(ii) the amount or market value of the consideration (if any)

the new creditor paid or gave in respect of the

assignment.

Working out if an amount is offset against the value of the debt

245-65 Amount offset against amount of debt

(1) The table explains how to work out the amount (if any) that is

offset against the value of a debt when it is forgiven (calculated

under section 245-55, 245-60 or 245-61) in working out the

gross

forgiven amount of the debt.

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Amount offset against value of debt

Item Column

In this case:

Column 2

the amount offset is:

the debt is a

moneylending debt,

and neither of items 4 and 6 applies

the sum of:

(a) each amount that the debtor has

paid; and

(b) the

market value, at the time of

the

forgiveness, of each item of

property (other than money) that

the debtor has given; and

each obligation of the debtor to

pay an amount, or to give such

an item of property;

as a result of, or in respect of, the

forgiveness of the debt.

the debt is not a

moneylending

debt, and none of items 3, 4, 5 and 6

applies

the sum of:

(a) each amount that the debtor has

paid, or is required to pay; and

(b) the

market value, at the time of

the

forgiveness, of each item of

property (other than money) that

the debtor has given, or is

required to give;

as a result of, or in respect of, the

forgiveness of the debt.

the debt is not a

moneylending

debt, the conditions in subsection (2)

are met and none of items 4, 5 and 6

applies

the

market value of the debt at the

time of the

forgiveness.

the debt is assigned as mentioned in

section 245-36, and item 5 does not

apply

the sum of:

(a) the amount or

market value of

the consideration (if any) that the

debtor has paid or given, or is

required to pay or give, in

respect of the assignment; and

(b) the amount or market value of

the consideration (if any) paid or

given by the new creditor in

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Amount offset against value of debt

Item Column

In this case:

Column 2

the amount offset is:

respect of the assignment.

the debt is assigned as mentioned in

section 245-36, and:

(a) the debt is not a

moneylending

debt; and

(b) the creditor and the new creditor

were not dealing with each other

arm's length in connection

with the assignment

the

market value of the debt at the

time of the assignment.

the debt is

forgiven by subscribing

for

shares in a company as

mentioned in section 245-37

the amount worked out using the

formula in subsection (3).

(2) The conditions for the purposes of item 3 of the table in

subsection (1) are:

(a) at least one of the following is satisfied:

(i) at the time when the debt was

forgiven, the creditor

was an Australian resident;

(ii) the forgiveness of the debt was a

CGT event involving

CGT asset that was

taxable Australian property; and

(b) at least one of the following is satisfied:

(i) there is no amount, and no property, covered by column

2 of item 2 of the table;

(ii) the amount worked out under item 2 of the table is

greater or less than the

market value of the debt at the

time of the forgiveness and the debtor and creditor did

not deal with each other at

arm's length in connection

with the forgiveness.

(3) The formula for the purposes of item 6 of the table in

subsection (1) is:

Amount applied

Market value of shares subscribed for

Amount subscribed

�

where:

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amount applied means the amount applied by the company as

mentioned in section 245-37.

amount subscribed means the amount subscribed as mentioned in

section 245-37.

market value of shares subscribed for means the

market value of

all the shares in the company that were subscribed for as

mentioned in section 245-37, immediately after those shares were

issued.

Working out the gross forgiven amount

245-75 Gross forgiven amount of a debt

(1)

The

gross forgiven amount of a debt is:

(a) if section 245-65 does not apply to the debt--the value of the

debt when it was

forgiven (worked out under

section 245-55, 245-60 or 245-61); or

(b) if the value of the debt when it was forgiven exceeds the

amount offset under section 245-65 in relation to the debt--

the excess.

(2) If the value of the debt when it was

forgiven is equal to or less

than the amount offset:

(a) there is no gross forgiven amount in respect of the debt; and

(b) Subdivisions 245-D to 245-F (about how to work out the net

forgiven amount of a debt and how to treat it) do not apply in

respect of the debt.

245-77 Gross forgiven amount shared between debtors

If 2 or more entities were liable (except as partners in a

partnership) to pay a debt, whether their liability was joint or

several, or joint and several, this Subdivision applies as if each

entity had a

gross forgiven amount worked out using the formula:

*Gross forgiven amount in relation to the debt

Number of entities liable to pay the debt

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Subdivision 245-D--Calculation of net forgiven amount of a

debt

Guide to Subdivision 245-D

245-80 What this Subdivision is about

The net forgiven amount of a debt is worked out by subtracting,

from the gross forgiven amount of the debt, any amount that this

Act already takes into account for the debtor because the debt was

forgiven (for example, if some part of the forgiven amount is

treated as the debtor's ordinary income).

If the debtor and creditor were companies under common

ownership, they may agree to transfer some of the net forgiven

amount from the debtor to the creditor. The creditor must apply

that amount to reduce the capital loss or deduction it has because of

the forgiveness.

Table of sections

Operative provisions

245-85

Reduction of gross forgiven amount

245-90

Agreement between companies under common ownership for creditor to

forgo capital loss or deduction

Operative provisions

245-85 Reduction of gross forgiven amount

(1)

The

gross forgiven amount of your debt is reduced by the sum of

the following amounts:

(a) any amount that, under a provision of this Act other than this

Division, has been, or will be, included in your assessable

income for any income year as a result of the

forgiveness of

the debt;

(b) any amount by which, under a provision of this Act other

than this Division, an amount you could otherwise have

deducted for any income year has been, or will be, reduced as

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a result of the forgiveness of the debt (except a reduction

under Division 727 (about indirect value shifting));

cost base of any of your

CGT

assets has been, or will be, reduced under Part 3-1 or 3-3 as a

result of the forgiveness of the debt.

Note:

Paragraph (1)(c) does not cover a reduction under Division 727

(indirect value shifting) because that Division is not in Part 3-1 or 3-3.

(2) Subject to section 245-90, the amount remaining after reducing the

gross forgiven amount under subsection (1) is the net forgiven

amount of the debt.

245-90 Agreement between companies under common ownership for

creditor to forgo capital loss or deduction

(1) This section applies if:

(a) a debt owed by a company to another company is

forgiven;

and

(b) from the time when the debt was incurred until the time when

the debt is forgiven, the companies were

under common

ownership.

(2) If, apart from this subsection, the creditor would have made a

capital loss as a result of the

forgiveness of the debt:

(a) the debtor and creditor may agree that the creditor is to forgo

so much of the loss as is stated in the agreement and does not

exceed the amount that would be the net forgiven amount of

the debt apart from this section (the provisional net forgiven

amount of the debt); and

(b) if such an agreement is made:

(i) the creditor's capital loss is reduced by the agreed

amount; and

(ii) the provisional net forgiven amount of the debt is also

reduced by the agreed amount; and

(iii) the amount remaining after the reduction of the

provisional net forgiven amount of the debt under

subparagraph (ii) is the net forgiven amount of the debt.

(3) If, apart from this subsection, the creditor could deduct an amount

in respect of the debt under section 8-1 (about general deductions)

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or section 25-35 (about bad debts) for the

forgiveness income

year:

(a) the debtor and creditor may agree that the creditor is to forgo

so much of the deduction as is stated in the agreement and

does not exceed the amount that would be the net forgiven

amount of the debt apart from this section (the provisional

net forgiven amount of the debt); and

(b) if such an agreement is made:

(i) the amount the creditor can deduct is reduced by the

agreed amount; and

(ii) the provisional net forgiven amount of the debt is also

reduced by the agreed amount; and

(iii) the amount remaining after the reduction of the

provisional net forgiven amount of the debt under

subparagraph (ii) is the net forgiven amount of the debt.

(4) Neither subsection (2) nor (3) applies in relation to an agreement

unless the agreement:

(a) is in writing and signed by the public officer of each

company; and

(b) is made before:

(i) the first of those companies lodges its

income tax

return for the

forgiveness income year; or

(ii) any later day that the Commissioner determines in

writing.

(5) A determination made under subparagraph (4)(b)(ii) is not a

legislative instrument.

Subdivision 245-E--Application of net forgiven amounts

Guide to Subdivision 245-E

245-95 What this Subdivision is about

The total of the net forgiven amounts of all your debts forgiven in

an income year is applied to reduce 4 classes of amounts that could

otherwise reduce your taxable income in the same or a later income

year. It is applied in the following order:

(a)

to your tax losses from previous income years;

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(b)

to your net capital losses from previous income

years;

(c)

to the deductions you would otherwise get in the

income year, or in a later income year, because of

expenditure from a previous year (for example, the

capital allowance deductions you would get for

expenditure on acquiring a depreciating asset);

(d)

to the cost bases of your CGT assets.

You can choose the order in which the net forgiven amounts

reduce the amounts within each class.

If all the amounts in the 4 classes are reduced to nil, any remaining

net forgiven amounts are disregarded.

Table of sections

General operative provisions

245-100 Subdivision

not

apply to calculation of attributable income

245-105 How

total net forgiven amount is applied

Reduction of tax losses

245-115 Total net forgiven amount is applied in reduction of tax losses

245-120 Allocation of total net forgiven amount in respect of tax losses

Reduction of net capital losses

245-130 Remaining total net forgiven amount is applied in reduction of net capital

losses

245-135 Allocation of remaining total net forgiven amount in respect of net capital

losses

Reduction of expenditure

245-145 Remaining total net forgiven amount is applied in reduction of expenditure

245-150 Allocation of remaining total net forgiven amount in respect of expenditures

245-155 How expenditure is reduced--straight line deductions

245-157 How expenditure is reduced--diminishing balance deductions

245-160 Amount applied in reduction of expenditure included in assessable income

in certain circumstances

Reduction of cost bases of assets

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245-175 Remaining total net forgiven amount is applied in reduction of cost bases of

CGT assets

245-180 Allocation of remaining total net forgiven amount among relevant cost

bases of CGT assets

245-185 Relevant cost bases of investments in associated entities are reduced last

245-190 Reduction of the relevant cost bases of a CGT asset

Unapplied total net forgiven amount

245-195 No further consequences if there is any remaining unapplied total net

forgiven amount

General operative provisions

245-100 Subdivision not to apply to calculation of attributable

income

This Subdivision does not apply to the calculation of:

(a) attributable income of a non-resident trust estate within the

meaning of section 102AAB of the Income Tax Assessment

Act 1936; or

(b)

attributable income of a

CFC.

245-105 How total net forgiven amount is applied

(1)

Your

total net forgiven amount for the

forgiveness income year is

the total of the

net forgiven amounts of all your debts that are

forgiven in that year.

Note 1:

The total net forgiven amount may be reduced under section 707-415.

Note 2:

The total net forgiven amount of a partner in a partnership is affected

by section 245-215.

(2)

Your

total net forgiven amount is applied, in accordance with

sections 245-115 to 245-195, for the

forgiveness income year.

Reduction of tax losses

245-115 Total net forgiven amount is applied in reduction of tax

losses

The

total net forgiven amount is applied first, to the maximum

extent possible, in reduction, in accordance with section 245-120,

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of your

tax losses (if any) for any income years, if the tax losses

could, if you had enough assessable income, be deducted in:

(a)

the

forgiveness income year; or

(b) a later income year.

245-120 Allocation of total net forgiven amount in respect of tax

losses

(1) You may choose:

(a) the order in which your

tax losses are reduced; and

(b) the amount applied to reduce each of those losses;

so long as the

total net forgiven amount is applied, to the

maximum extent possible, in reduction of those losses.

(2) If you do not make a choice for the purposes of subsection (1), the

Commissioner may make the choice on your behalf in a reasonable

way.

Reduction of net capital losses

245-130 Remaining total net forgiven amount is applied in reduction

of net capital losses

(1)

The

total net forgiven amount (if any) remaining after being

applied under section 245-115 is applied, to the maximum extent

possible, in reduction, in accordance with section 245-135, of your

net capital losses (if any) specified in subsection (2).

(2)

Those

net capital losses are your net capital losses for income

years before the

forgiveness income year that you could apply in

working out your

net capital gain for the forgiveness income year

if you had enough capital gains.

245-135 Allocation of remaining total net forgiven amount in respect

of net capital losses

(1) You may choose:

(a) the order in which your

net capital losses are reduced; and

(b) the amount applied in reduction of each of those losses;

so long as the

total net forgiven amount remaining is applied, to

the maximum extent possible, in reduction of those losses.

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(2) If you do not make a choice for the purposes of subsection (1), the

Commissioner may make the choice on your behalf in a reasonable

way.

Reduction of expenditure

245-145 Remaining total net forgiven amount is applied in reduction

of expenditure

(1)

The

total net forgiven amount (if any) remaining after being

applied under sections 245-115 and 245-130 is applied, to the

maximum extent possible, in reduction, in accordance with

sections 245-150, 245-155 and 245-157, of your expenditure that:

(a) is mentioned in the following table (other than expenditure

covered by subsection (2)) and was incurred by you before

the

forgiveness income year; and

(b) apart from this Subdivision, could be deducted by you for the

forgiveness income year or a later income year if no event or

circumstance (other than a

recoupment of the expenditure by

you in the forgiveness income year) occurred that would

affect its deductibility.

Table of expenditure

Item

Column 1

General description of

expenditure

Column 2

Provision under which a

deduction is available for the

expenditure

1 Expenditure

deductible

under

Division 40 (Capital allowances)

Division 40 of this Act

Expenditure incurred in

borrowing

money to produce assessable income

Section 25-25 of this Act

Expenditure on scientific research

Subsection 73A(2) of the Income

Tax Assessment Act 1936

Expenditure on

research and

development activities

Section 73B, 73BA, 73BH, 73QA or

73QB of the Income Tax Assessment

Act 1936

Advance revenue expenditure

Subdivision H of Division 3 of

Part III of the Income Tax

Assessment Act 1936

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Table of expenditure

Item

Column 1

General description of

expenditure

Column 2

Provision under which a

deduction is available for the

expenditure

Expenditure on acquiring a unit of

industrial property to produce

assessable income

Subsection 124M(1) of the Income

Tax Assessment Act 1936

Expenditure on Australian films

Section 124ZAFA of the Income Tax

Assessment Act 1936

8 Expenditure

assessable

income-producing buildings and

other capital works

Section 43-10 of this Act

Note:

If the asset to which the expenditure relates was disposed of, lost or

destroyed before 28 June 1996 or the expenditure was recouped before

28 June 1996, see section 245-10 of the Income Tax (Transitional

Provisions) Act 1997.

(2) Expenditure is covered by this subsection if:

(a) it was incurred in respect of an asset you

disposed of to an

entity that you dealt with at

arm's length in respect of the

disposal; and

(b) the disposal occurred during the

forgiveness income year

before the

forgiveness of any debt owed by you, and the

forgiveness resulted in a

net forgiven amount; and

assessable income, or allows you a deduction, as a result of

the disposal.

245-150 Allocation of remaining total net forgiven amount in respect

of expenditures

(1) You may choose:

(a) the order in which your expenditures are reduced; and

(b) the amount applied in reduction of each of those

expenditures;

so long as that the

total net forgiven amount remaining is applied,

to the maximum extent possible, in reduction of your expenditures.

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(2) If you do not make a choice for the purposes of subsection (1), the

Commissioner may make the choice on your behalf in a reasonable

way.

245-155 How expenditure is reduced--straight line deductions

(1) This section applies in respect of the reduction under

section 245-145 of an expenditure of yours, if:

(a) the amount that you could deduct, apart from this

Subdivision, in respect of the expenditure is a percentage,

fraction or proportion of an amount (the base amount); and

(b) the base amount is worked out without regard to any amount

or amounts you previously deducted in respect of that

expenditure.

(2) The amount of the reduction of the expenditure must not exceed:

(a) the base amount; less

(b) the amount of that part of the expenditure in respect of which

you have deducted (disregarding subsection (4)), or can

deduct, an amount for any income year before the

forgiveness income year.

(3) For the purpose of working out your deductions for the

forgiveness income year and later income years, any amount that

is applied in reduction of your expenditure is taken to reduce the

base amount.

(4) You are taken to have deducted the amount of the reduction in

respect of the expenditure:

(a)

before

the

forgiveness income year; and

(b) for the purposes of any provision of this Act that includes an

amount in your assessable income or allows you a deduction:

(i) because of the

disposal, loss or destruction of the asset

in respect of which the expenditure was incurred; or

(ii) because of the

recoupment of any of the expenditure;

(iii) because use of the asset for a particular purpose has

been otherwise terminated; or

(iv)

because

balancing adjustment event occurs for that

asset.

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(5) The amount of that part of the expenditure in respect of which you

have deducted (disregarding subsection (4), or can deduct, an

amount for all income years (including income years before the

forgiveness income year) must not exceed the base amount as

reduced under subsection (3).

245-157 How expenditure is reduced--diminishing balance

deductions

Any amount applied in reduction under section 245-145 of an

expenditure of yours is taken to have been deducted by you in

respect of the expenditure before the

forgiveness income year, if

the amount you could deduct, apart from this Subdivision, in

respect of the expenditure is a percentage, fraction or proportion of

an amount that is worked out after taking into account any amount

previously deducted by you in respect of the expenditure.

245-160 Amount applied in reduction of expenditure included in

assessable income in certain circumstances

If:

(a)

after

the

forgiveness income year you

recoup an amount of

expenditure that is subject to reduction under

section 245-145; and

(b) as a result of the recoupment, this Act applies to disallow any

amount you have deducted in respect of the expenditure;

an amount equal to the amount, or the sum of the amounts, applied

under this Subdivision in reduction of the expenditure is included

in your assessable income in the income year in which the

expenditure is recouped.

Reduction of cost bases of assets

245-175 Remaining total net forgiven amount is applied in reduction

of cost bases of CGT assets

(1)

The

total net forgiven amount (if any) remaining after being

applied under sections 245-115, 245-130 and 245-145 is applied, to

the maximum extent possible, in reduction, in accordance with

sections 245-180 to 245-190, of the

cost base and

reduced cost

base of your

CGT assets.

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(2) Subsection (1) does not apply to the following

CGT assets:

(a)

pre-CGT asset;

(b) a CGT asset you

acquire after the start of the

forgiveness

income year;

(c)

personal use asset;

(d)

dwelling that was your main residence at any time before

the forgiveness income year;

(e)

goodwill;

(f) a right of yours covered by section 118-305 (which exempts

from CGT certain rights relating to a superannuation fund or

approved deposit fund);

(g) a CGT asset that, throughout the period before the

forgiveness income year when it was owned by you, was

your

trading stock;

(h) a CGT asset if:

(i) expenditure by you (of a kind which is subject to

reduction under section 245-145) relates to the asset;

and

(ii)

CGT event in relation to the asset would result in an

amount being included in your assessable income, or in

you being able to deduct an amount;

(i) if you are a foreign resident at the beginning of the

forgiveness income year--an asset of yours that is not

taxable Australian property.

245-180 Allocation of remaining total net forgiven amount among

relevant cost bases of CGT assets

(1) Subject to section 245-185, you may choose:

(a)

your

CGT assets whose

cost base and

reduced cost base

are subject to reduction under section 245-175; and

(b) the amount applied in reduction of the cost base and reduced

cost base of each of those assets;

so long as the

total net forgiven amount remaining is applied, to

the maximum extent possible, in reduction of the cost base and

reduced cost base of such assets.

(2) If you do not make a choice for the purposes of subsection (1), the

Commissioner may make the choice on your behalf in a reasonable

way.

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245-185 Relevant cost bases of investments in associated entities are

reduced last

your

CGT assets that are subject to reduction under

section 245-175 include investments in, or in relation to, an

associate of yours (including

membership interests, or

debt

interests, in your associate), the:

(a)

cost base; and

(b)

reduced cost base;

of those assets are not subject to reduction under section 245-175

until the

total net forgiven amount (if any) remaining has been

applied, to the maximum extent possible, in reduction of the cost

bases of your other CGT assets.

245-190 Reduction of the relevant cost bases of a CGT asset

(1) Subject to subsection (3), if you choose to apply an amount in

reduction of the

cost base and

reduced cost base of a particular

CGT asset, the cost base and reduced cost base of the asset, as at

any time on or after the beginning of the

forgiveness income year,

are reduced by that amount.

(2) The reduction by a particular amount of the

cost base and

reduced cost base of a particular

CGT asset is, for the purpose of

working out the amount by which the

total net forgiven amount

remaining is applied, taken to be a reduction by the particular

amount (and not by the sum of the amounts by which those cost

bases are reduced).

(3) The maximum amount by which the

cost base and

reduced cost

base of a

CGT asset may be reduced is the amount that, apart from

sections 245-175 to 245-185, would be the reduced cost base of the

asset calculated as if a

CGT event had happened to the asset:

(a) subject to paragraph (b), on the first day of the

forgiveness

income year; or

(b) if, after the beginning of that income year, an event occurred

that would cause the reduced cost base of the asset to be

reduced--on the day on which the event occurred;

and the asset had been

disposed of at its

market value on the day

concerned.

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Unapplied total net forgiven amount

245-195 No further consequences if there is any remaining

unapplied total net forgiven amount

(1) If any part of the

total net forgiven amount remains after the

application of that amount in making reductions under the

preceding provisions of this Subdivision, the remaining part is

disregarded.

(2) This section has effect subject to section 245-215 (about

partnerships and transferring the remaining part to the partners).

Subdivision 245-F--Special rules relating to partnerships

Guide to Subdivision 245-F

245-200 What this Subdivision is about

Any part of a partnership's total net forgiven amount left over after

applying it under Subdivision 245-E is divided between the

partners. Each partner treats the partner's share as a net forgiven

amount the partner has for the income year.

Table of sections

Operative provisions

245-215 Unapplied total net forgiven amount of a partnership is transferred to

partners

Operative provisions

245-215 Unapplied total net forgiven amount of a partnership is

transferred to partners

(1) This section applies if any part (the residual amount) of the

total

net forgiven amount in relation to a partnership in respect of the

forgiveness income year remains after the total net forgiven

amount has been applied in accordance with Subdivision 245-E.

Forgiveness of commercial debts Schedule 2

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 77

(2) If there is a

net income in relation to the partnership in respect of

the

forgiveness income year:

(a) each partner is taken to have had a debt

forgiven during the

forgiveness income year; and

(b) there is taken to be, in respect of the debt of each partner, a

net forgiven amount worked out in accordance with the

following formula:

Partner's share of net income

Residual amount

Net income

�

where:

partner's share of net income means the part of the net

income of the partnership for the forgiveness income year

that is included in the partner's assessable income.

(3) If there is a

partnership loss in relation to the partnership in

respect of the

forgiveness income year:

(a) each partner is taken to have had a debt

forgiven during the

forgiveness income year; and

(b) there is taken to be, in respect of the debt of each partner, a

net forgiven amount worked out in accordance with the

following formula:

Partner's share of partnership loss

Residual amount

Partnership loss

�

where:

partner's share of partnership loss means the part of the

partnership loss that the partner has deducted or can deduct.

(4)

The

total net forgiven amount of a partner for the

forgiveness

income year as worked out under subsection 245-105(1) includes

the

net forgiven amount worked out in relation to the partner

under this section.

(5) This section has effect in relation to a partnership irrespective of

any agreement between the partners as to the operation of this

section.

Schedule 2

Forgiveness of commercial debts

Part 1

Main amendments

78 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Subdivision 245-G--Record keeping

245-265 Keeping and retaining records

(1) If you incur a debt, you must keep any records that are necessary to

enable the following matters to be readily found out:

(a) the date on which you incurred the debt;

(b) the identity of the creditor;

(d) the terms of repayment of the debt;

(e) if the debt is not a

moneylending debt and you and the

creditor were not dealing with each other at

arm's length in

respect of the incurring of the debt--your capacity at the time

when the debt was incurred to pay the debt when it falls due;

(f) if your debt is

forgiven--the date of the forgiveness and the

amount offset under section 245-65 (if any) in respect of the

debt.

Note:

There is an administrative penalty if you do not keep or retain records

as required by this section: see section 288-25 in Schedule 1 to the

Taxation Administration Act 1953.

(2) If a company and another company that are

under common

ownership cease to be under common ownership, each company

must keep any records that are necessary to enable the following

matters to be readily found out:

(a) the date on which the companies ceased to be under common

ownership;

(b) the identity of each entity that was a

controller (for CGT

purposes) of the company immediately before the companies

ceased to be under common ownership;

purposes) of the company immediately after the companies

ceased to be under common ownership.

(3) You must keep the records required by subsection (1) or (2) in

writing in the English language or so as to enable them to be

readily accessible and convertible into writing in the English

language.

(4) Subject to subsection (5), you must keep the records required by

subsection (1) until:

Forgiveness of commercial debts Schedule 2

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 79

(a) if paragraph (b) does not apply--the end of 5 years after the

debt was

forgiven; or

(b) if the period within which the Commissioner may, under

section 170 of the Income Tax Assessment Act 1936, amend

your assessment for the income year to which the records

relate, or in which a transaction or act to which the records

relate was completed, is extended under subsection 170(7) of

that Act--the later of:

(i) the end of the assessment period as so extended; and

(ii) the end of the period of 5 years mentioned in

paragraph (a).

(5) Subsection (4) does not require you to keep records after the debt is

paid.

(6) Subject to subsection (7), each company that keeps any records

required by subsection (2) must retain the records until the end of

the second income year after the income year in which the

companies ceased to be

under common ownership.

(7) If a debt of one of the companies mentioned in subsection (2) was

forgiven at any time after the companies ceased to be

under

common ownership and before the end of the second income year

after the income year in which the cessation occurred, each

company that keeps records required by that subsection must retain

the records until the time specified in subsection (4).

(8) You commit an offence if you fail to comply with a provision of

this section.

Penalty: 30 penalty units.

(9) An offence against subsection (8) is an offence of strict liability.

Note:

For strict liability, see section 6.1 of the Criminal Code.

(10) This section does not limit the application of any other provision of

this Act relating to the keeping or retention of records.

3 Subsection 995-1(1)

Insert:

forgive a debt has the meaning given by sections 245-35, 245-36

and 245-37.

Schedule 2

Forgiveness of commercial debts

Part 1

Main amendments

80 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Note:

Subdivisions 245-C to 245-G (about forgiveness of commercial debts)

apply to certain arrangements as if the arrangements were forgiveness

of debts: see section 245-45.

4 Subsection 995-1(1)

Insert:

forgiveness income year, in relation to a debt that is

forgiven,

means the income year in which the debt is forgiven.

5 Subsection 995-1(1)

Insert:

gross forgiven amount has the meaning given by section 245-75.

6 Subsection 995-1(1)

Insert:

moneylending debt means a debt resulting from a loan of money in

the ordinary course of a

business of lending money carried on by

the creditor.

7 Subsection 995-1(1)

Insert:

net forgiven amount, of a debt, has the meaning given by

sections 245-85 and 245-90.

8 Subsection 995-1(1)

Insert:

total net forgiven amount has the meaning given by subsection

245-105(1).

Income Tax (Transitional Provisions) Act 1997

9 Before Division 247

Insert:

Division 245--Forgiveness of commercial debts

Table of Subdivisions

Forgiveness of commercial debts Schedule 2

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 81

245-A Application of Division 245 of the Income Tax Assessment

Act 1997

Subdivision 245-A--Application of Division 245 of the Income

Tax Assessment Act 1997

Table of sections

245-5

Application and saving

245-10

Pre-28 June 1996 arrangements etc.

245-5 Application and saving

(1) Division 245 of the Income Tax Assessment Act 1997 applies to

debts forgiven in:

(a) the 2010-11 income year; and

(b) later income years.

(2) Despite the repeal of Schedule 2C to the Income Tax Assessment

Act 1936, that Schedule continues to apply to debts forgiven in:

(a) the 2009-10 income year; and

(b) earlier income years.

(3) Subsection (2) does not limit the effect of section 8 of the Acts

Interpretation Act 1901 in relation to the repeal.

245-10 Pre-28 June 1996 arrangements etc.

(1) Subdivisions 245-C to 245-G of the Income Tax Assessment Act

1997 do not apply to a forgiveness of a debt if the forgiveness

occurs in accordance with the terms of an arrangement that:

(a) was entered into on or before 27 June 1996; and

(b) is evidenced in writing otherwise than by a document

evidencing the arrangement or transaction under which the

debt arose.

(2) Those Subdivisions also do not apply to reduce your expenditure:

(a) if the asset in respect of which the expenditure was incurred

was disposed of by you, or was lost or destroyed, on or

before 27 June 1996; or

(b) to the extent (if any) to which the expenditure was recouped

by you on or before 27 June 1996.

Schedule 2

Forgiveness of commercial debts

Part 2

Consequential amendments

82 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Part 2--Consequential amendments

Income Tax Assessment Act 1936

10 Subsections 73A(1A) and 82KZM(2)

Omit "Schedule 2C", substitute "the Income Tax Assessment Act 1997".

11 Paragraph 82KZMA(6)(b)

Omit "Schedule 2C to this Act", substitute "that Act".

12 Paragraph 82KZMF(2)(b)

Omit "Schedule 2C to this Act", substitute "the Income Tax Assessment

Act 1997".

13 Subsection 109F(3)

Omit "(except subsection 245-35(4)) of Schedule 2C, assuming the

amount were a commercial debt for the purposes of Division 245 of that

Schedule", substitute "or 245-37 of the Income Tax Assessment Act

1997, assuming the amount were a debt to which Subdivisions 245-C to

245-G of that Act apply".

14 Subsection 109F(3) (note)

Omit "of Schedule 2C", substitute "of the Income Tax Assessment Act

1997".

15 Subsection 109F(8) (example)

Omit "subsection 245-35(2) of Schedule 2C", substitute "paragraph

245-35(b) of the Income Tax Assessment Act 1997".

16 Sections 124KAA and 124ZAFAA

Omit "Schedule 2C", substitute "the Income Tax Assessment Act 1997".

Note:

The headings to sections 124KAA and 124ZAFAA are altered by omitting

"Schedule 2C" and substituting "the 1997 Act".

Income Tax Assessment Act 1997

17 Section 12-5 (table item headed "bad debts")

Omit "245-90 of Schedule 2C", substitute "245-90".

Forgiveness of commercial debts Schedule 2

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 83

18 Subsection 25-25(1) (note)

Omit "of Schedule 2C to the Income Tax Assessment Act 1936".

19 Subsection 25-35(5) (cell at table item 3, column headed

"See:")

Repeal the cell, substitute:

section 245-90

20 Subsections 36-15(7) and 36-17(9) (note)

Omit "of Schedule 2C to the Income Tax Assessment Act 1936".

21 Subsection 40-90(1)

Omit "deductible".

22 Subsection 40-90(1)

Omit "(within the meaning of Division 245 of Schedule 2C to the

Income Tax Assessment Act 1936) under section 245-155 of that

Schedule", substitute "under section 245-155 or 245-157".

23 Subsection 40-645(3) (note 1)

Omit "of this Act" (first and second occurring).

24 Subsection 40-645(3) (note 1)

Omit "of Schedule 2C to the Income Tax Assessment Act 1936".

25 Subsection 43-50(7)

Omit "of Schedule 2C to the Income Tax Assessment Act 1936".

26 Section 102-30 (table item 3)

Omit "of Schedule 2C to the Income Tax Assessment Act 1936".

27 Subsection 104-25(5) (note 2)

Omit "of Schedule 2C to the Income Tax Assessment Act 1936".

28 Section 112-97 (table item 19)

Omit "CGT assets of the debtor (except assets that are excluded assets

under Schedule 2C)", substitute "certain CGT assets of the debtor".

Schedule 2

Forgiveness of commercial debts

Part 2

Consequential amendments

84 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

29 Section 112-97 (cell at table item 19, column headed

"See:")

Repeal the cell, substitute:

sections 245-175

to 245-190

30 Paragraph 165-115ZA(2)(b)

Omit "section 245-10 in Schedule 2C to the Income Tax Assessment Act

1936 (which relates", substitute "Subdivisions 245-C to 245-G (which

relate".

31 Paragraph 204-30(2)(c)

Omit "forgiving", substitute "

forgiving".

32 Section 230-470

Omit "forgiveness of a debt (as defined in Subdivision 245-B of

Schedule 2C to the Income Tax Assessment Act 1936)", substitute

forgiveness of a debt to which Subdivisions 245-C to 245-G apply".

33 Paragraphs 230-470(a) and (b)

Repeal the paragraphs, substitute:

(a) if section 245-90 (about agreements to forgo capital losses or

deductions) applies--the debt's provisional net forgiven

amount mentioned in that section; or

(b) if that section does not apply--the debt's

net forgiven

amount.

34 Paragraphs 230-515(2)(e) and (f)

Repeal the paragraphs, substitute:

(e) item 3 of the table in subsection 245-65(1) of this Act;

(f) section 775-40 of this Act.

35 Subsection 243-75(1)

Omit "Schedule 2C to the Income Tax Assessment Act 1936", substitute

"Division 245".

36 Paragraph 243-75(2)(a)

Omit "that Schedule", substitute "Division 245".

Forgiveness of commercial debts Schedule 2

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 85

37 Paragraph 243-75(2)(b)

Omit "of that Schedule".

38 Subsection 707-140(3)

Omit "forgiven (as defined in Subdivision 245-B in Schedule 2C to the

Income Tax Assessment Act 1936)", substitute "

forgiven".

39 Subsection 707-140(3)

Omit "subsections 245-105(5) and (6) in that Schedule", substitute

"sections 245-115 and 245-130".

40 Subsection 707-415(2) (table item 1)

Repeal the item, substitute:

(a) the joining entity owed

a debt just before the

joining time to an entity

that was not a

member

of the group at the

joining time; and

(b) the loss is wholly or

partly attributable to the

debt; and

(about applying the total

net forgiven amount to

reduce other amounts)

applies in relation to the

debt (or another debt

that is reasonably

connected to the debt)

because the debt is

forgiven after the

joining time

the

total net forgiven

amount

applying that total

net forgiven

amount in

accordance with

sections 245-115,

245-130, 245-145

and 245-175

41 Subsection 707-415(4)

Omit "gross forgiven amount (within the meaning of section 245-75 in

Schedule 2C to the Income Tax Assessment Act 1936)", substitute

gross forgiven amount".

Schedule 2

Forgiveness of commercial debts

Part 2

Consequential amendments

86 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

42 Subsection 995-1(1) (note at the end of the definition of

company)

After "Note", insert "1".

43 Subsection 995-1(1) (at the end of the definition of

company)

Add:

Note 2:

A reference to a company includes a reference to a corporate limited

partnership: see section 94J of the Income Tax Assessment Act 1936.

44 Subsection 995-1(1) (note at the end of the definition of

partnership)

After "Note", insert "1".

45 Subsection 995-1(1) (at the end of the definition of

partnership)

Add:

Note 2:

A reference to a partnership does not include a reference to a

corporate limited partnership: see section 94K of the Income Tax

Assessment Act 1936.

Leases of luxury cars Schedule 3

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 87

Schedule 3--Leases of luxury cars

Part 1--Main amendments

Income Tax Assessment Act 1936

1 Schedule 2E

Repeal the Schedule.

Income Tax Assessment Act 1997

2 After Division 240

Insert:

Division 242--Leases of luxury cars

Table of Subdivisions

Guide to Division 242

242-A Notional sale and loan

242-B Amount to be included in lessor's assessable income

242-C Deductions allowable to lessee

242-D Adjustments if total amount assessed to lessor differs from

amount of interest

242-E Extension, renewal and final ending of the lease

Guide to Division 242

242-1 What this Division is about

A luxury car is one whose market value exceeds the car limit set

for a car's capital allowance deductions by section 40-230.

If the lessor of a luxury car is tax exempt, or taxed at a lower rate

than the lessee, the lease could be structured to give both parties a

better after-tax outcome than if the lessee had bought the car. The

lessee could fully deduct the lease payments, thereby avoiding the

Schedule 3

Leases of luxury cars

Part 1

Main amendments

88 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

capital allowance limit for luxury cars, and the lessor would

receive higher lease payments.

This Division removes the tax benefit for the lessee by putting both

parties in the same position as if the lessor had sold the car to the

lessee and lent the lessee the purchase price.

Subdivision 242-A--Notional sale and loan

Guide to Subdivision 242-A

242-5 What this Subdivision is about

A leased luxury car is treated for income tax purposes as if it had

been sold by the lessor to the lessee for the car's market value. The

lessor is treated as having lent the lessee the money to buy the car,

and the lease payments are treated as payments of the principal and

interest on that notional loan.

Table of sections

Operative provisions

242-10 Application

242-15

Notional sale and acquisition

242-20

Consideration for notional sale, and cost, of car

242-25

Notional loan by lessor to lessee

Operative provisions

242-10 Application

(1) This Division applies to a

car that:

(a) is leased (but not under a

short-term hire agreement or a

hire purchase agreement) for consideration; and

(b)

was

luxury car when the lessor first leased it; and

(c)

not

trading stock of the lessee; and

(d) is not a car covered by subsection 40-230(2) (about cars

modified to carry individuals with a disability).

Leases of luxury cars Schedule 3

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 89

(2) The provisions of this Division do not have effect for the purposes

of Division 11A of Part III of the Income Tax Assessment Act 1936

(about withholding tax on dividends, interest and royalties).

Note:

This subsection prevents interest on the notional loan that this

Division creates being subject to withholding tax under Division 11A.

(3) For the purposes of paragraph (1)(a), the question whether an

agreement is a

short-term hire agreement is determined on the

basis that an employee or employer of an entity is an

associate of

the entity.

Note:

Under the definition of short-term hire agreement in subsection

995-1(1), successive agreements for the hire of the same asset to an

entity or its associates are not short-term hire agreements if they result

in substantial continuity of hiring.

242-15 Notional sale and acquisition

(1) This Act has effect as if:

(a)

the

car had been disposed of (the notional sale) by the lessor

to the lessee; and

(b) the car had been acquired by the lessee;

at the start of the term of the lease.

Note:

This Act will apply as it would have if the lessor had actually disposed

of the car to the lessee. For example, if the lessor had been deducting

an amount for the car's decline in value, the notional disposal will

activate the balancing adjustment rules in Subdivision 40-D because

the lessor would be treated as no longer holding the car.

(2) This Act also has effect as if the lessee owns the

car until:

(a) the lease (not including any extension or renewal of the

lease) ends; or

(b) the lessee enters into a sublease of the car and this Division

applies to the car in relation to the sublease.

Note 1:

This means that the lessee (and not the lessor) may be able to deduct

amounts for the decline in value of the car under Division 40.

Note 2:

The lessee will be treated as continuing to own the car until the end of

any extension or renewal: see section 242-80.

242-20 Consideration for notional sale, and cost, of car

(1) The consideration for the notional sale by the lessor, and the first

element of the

cost of the

car for the lessee, are the car's

market

value at the start of the term of the lease.

Schedule 3

Leases of luxury cars

Part 1

Main amendments

90 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(2)

If:

(a) the lease is a sublease; and

(b) the lessee is one or more of the following:

(i)

associate of the lessor;

(ii) an employer of the lessor;

(iii) an employee of the lessor;

the first element of the

cost of the

car to the lessee is the sum of:

adjustable value

at the start of the term of the lease for the purposes of

applying this Act to the lessor if the lessor were not taken

under this Division to have disposed of the car; and

(d) any amount that is included in the lessor's assessable income

under section 40-285 as a balancing adjustment because the

lessor is treated as having disposed of the car.

Note:

Section 242-20 of the Income Tax (Transitional Provisions) Act 1997

extends paragraph (2)(d) to cover amounts included in assessable

income under former provisions corresponding to section 40-285.

242-25 Notional loan by lessor to lessee

(1) This Act has effect as if, on the grant of the lease, the lessor had

made a loan (the notional loan) to the lessee:

(a) for a period equal to the term of the lease (not including the

term of any extension or renewal); and

(b) of an amount (the notional loan principal) equal to the

consideration for the notional sale of the

car less any amount

paid, or credited by the lessor as having been paid, by the

lessee to the lessor, at or before the start of the term of the

lease, for the first element of the

cost of the car to the lessee;

and

Note:

There is a further notional loan if the lease is extended or renewed: see

section 242-80.

(2) This Act has effect as if the notional loan principal were repaid,

and the interest were paid, by the making of the

luxury car lease

payments.

Leases of luxury cars Schedule 3

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 91

Subdivision 242-B--Amount to be included in lessor's

assessable income

Guide to Subdivision 242-B

242-30 What this Subdivision is about

The lessor's assessable income includes the interest on the notional

loan.

The lease payments to the lessor are non-assessable non-exempt

income.

Note:

If the consideration for a notional sale of a car exceeds

the adjustable value of the car to the lessor, the excess

will be included in the lessor's assessable income under

section 40-285.

There would be a similar result if the lessor is treated as

having reacquired the car and then sells the car for more

than the cost of reacquisition.

Table of sections

Operative provisions

242-35

Amount to be included in lessor's assessable income

242-40

Treatment of lease payments

Operative provisions

242-35 Amount to be included in lessor's assessable income

Accrual amounts

(1) The lessor's assessable income for an income year includes:

(a)

luxury car lease payment period for the lease of a

car

occurs wholly during that income year--the amount (an

accrual amount) worked out under subsection (2) for that

luxury car lease payment period; and

(b) if part of a luxury car lease payment period for the lease of a

car occurs during that income year--so much of the amount

(also an accrual amount) worked out under subsection (2)

for that luxury car lease payment period as may appropriately

Schedule 3

Leases of luxury cars

Part 1

Main amendments

92 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

be related to that income year in accordance with generally

accepted accounting principles.

(2) The amount is:

Outstanding notional loan principal at

Implicit interest rate

the start of the lease payment period �

where:

implicit interest rate is the implicit interest rate under the lease for

the

luxury car lease payment period, taking into account the

payments to be made by the lessee under the lease and any

termination amounts.

outstanding notional loan principal at the start of the lease

payment period is:

(a) the sum of the notional loan principal and the accrual

amounts for earlier

luxury car lease payment periods; less

(b) the sum of the

luxury car lease payments that the lessee was

required to make before the start of the relevant luxury car

lease payment period.

Excessive periods

(3) If, apart from this subsection, a

luxury car lease payment period

for the lease of a

car would exceed 6 months, this Division applies

as if each of the following were a separate luxury car lease

payment period:

(a) the first 6 months of the original luxury car lease payment

period;

(b) if the original luxury car lease payment period was not longer

than 12 months--the remaining part of the original luxury car

lease payment period;

than 12 months--each successive 6 month period in the

original luxury car lease payment period;

(d) the period (if any) after the end of the last of the periods to

which paragraph (c) applies.

Leases of luxury cars Schedule 3

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 93

242-40 Treatment of lease payments

(1)

The

luxury car lease payments under the lease are not assessable

income and are not

exempt income of the lessor.

Note:

Those lease payments are instead taken into account in calculating

accrual amounts that are included in the lessor's assessable income

under section 242-35.

(2) In working out the amounts the lessor can deduct for any income

year, ignore the fact that subsection (1) makes the

luxury car lease

payments

non-assessable non-exempt income.

Note:

This allows the lessor to continue to deduct amounts related to earning

the lease payments (such as interest on an amount the lessor borrowed

to acquire the car), just as if the amounts related to earning interest on

the notional loan to the lessee.

Subdivision 242-C--Deductions allowable to lessee

Guide to Subdivision 242-C

242-45 What this Subdivision is about

The lessee is entitled to deduct the interest on the notional loan to

the same extent that the lessee would have been able to deduct the

lease payments apart from this Division.

Table of sections

Operative provisions

242-50

Extent to which deductions are allowable to lessee

242-55

Lease payments not deductible

Operative provisions

242-50 Extent to which deductions are allowable to lessee

(1)

luxury car lease payment period for the lease of a

car occurs

wholly during an income year of the lessee, the lessee can deduct

the accrual amount for that period for that income year.

Note 1:

If a luxury car lease payment period would otherwise be longer than 6

months, subsection 242-35(3) divides the original period into periods

of no longer than 6 months.

Schedule 3

Leases of luxury cars

Part 1

Main amendments

94 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Note 2:

For accrual amount, see subsection 242-35(1).

(2) If part of a

luxury car lease payment period for the lease of a

car

occurs during an income year of the lessee, the lessee can deduct

so much of the accrual amount for that period as may appropriately

be related to that income year in accordance with generally

accepted accounting principles.

(3) The lessee can deduct an accrual amount, or part of an accrual

amount, for a

luxury car lease payment period under

subsection (1) or (2) for an income year only to the extent that the

lessee could deduct the luxury car lease payments made for that

year apart from this Division.

242-55 Lease payments not deductible

The lessee cannot deduct the

luxury car lease payments that the

lessee makes under the lease for any income year.

Note:

Those payments are instead taken into account in calculating accrual

amounts that are deductible under section 242-50.

Subdivision 242-D--Adjustments if total amount assessed to

lessor differs from amount of interest

Guide to Subdivision 242-D

242-60 What this Subdivision is about

When a luxury car lease is extended, renewed or ends, the overall

nominal gain to the lessor is compared to the nominal interest so

far paid under the lease.

If the overall nominal gain is greater, the difference is assessable

income of the lessor, and the lessee may be able to deduct it.

If the overall nominal gain is less, the lessor can deduct the

difference, which may also be assessable income of the lessee.

This process ensures that the right amount has been taxed over the

term of the lease.

Leases of luxury cars Schedule 3

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 95

Table of sections

Operative provisions

242-65 Adjustments

for

lessor

242-70 Adjustments

for

lessee

Operative provisions

242-65 Adjustments for lessor

(1) This section applies at the following times:

(a) if the term of the lease is extended--when the extension

takes effect;

(b) if the lease is renewed--when the renewal takes effect;

lease) ends.

(2) If the sum of all amounts (whether

luxury car lease payments, a

termination amount or any other payments) that were paid or

payable to the lessor under the lease exceeds the amount worked

out under subsection (4), the excess is included in the lessor's

assessable income for the income year in which the relevant time

occurs.

Note:

Subsection 242-80(8) treats the amount of a notional loan that is taken

to be made by an extended or renewed lease to be a termination

amount paid under the previous lease.

(3) If the sum of all amounts (whether

luxury car lease payments, a

termination amount or any other payments) that were paid or

payable to the lessor under the lease is less than the amount worked

out under subsection (4), the lessor can deduct the difference for

the income year in which the relevant time occurs.

(4) The amount for the purposes of subsections (2) and (3) is the sum

of:

(a) the notional loan principal; and

(b) the sum of the accrual amounts that have been or are to be

included in the lessor's assessable income of any income

year.

Note: For

accrual amount, see subsection 242-35(1).

Schedule 3

Leases of luxury cars

Part 1

Main amendments

96 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

242-70 Adjustments for lessee

(1)

If:

(a) an amount is included in the lessor's assessable income for

an income year under subsection 242-65(2); or

(b) an amount would have been so included if the lessor had

been subject to tax on assessable income;

the lessee can deduct a corresponding amount for the same income

year.

(2)

If:

(a) the lessor can deduct an amount for an income year under

subsection 242-65(3); or

(b) the lessor could have deducted an amount under that

subsection if the lessor had been subject to tax on assessable

income;

a corresponding amount is included in the lessee's assessable

income for the same income year.

(3) The lessee cannot deduct an amount for any income year under

subsection (1), and an amount is not included in the lessee's

assessable income of any income year under subsection (2), except

to the extent (if any) that the lessee could deduct the

luxury car

lease payments made apart from this Division.

Subdivision 242-E--Extension, renewal and final ending of the

lease

Guide to Subdivision 242-E

242-75 What this Subdivision is about

When a luxury car lease ends (whether it expires or is terminated

before its expiry date), one of 3 things will happen:

(a)

if the lease is extended or renewed--the original

notional loan is treated as having been repaid and

the lessor is treated as having made a new loan to

the lessee; or

Leases of luxury cars Schedule 3

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 97

(b)

if the lessee acquires the car from the lessor--the

lessee continues to own the car for tax purposes,

and the actual transfer and the termination payment

to acquire the car are ignored for tax purposes; or

(c)

if the lessee's right to use the car ends--the lessee

is treated as having sold the car back to the lessor.

In each case, there may be adjustments under Subdivision 242-D to

ensure that the right amount has been taxed over the term of the

lease.

Table of sections

Operative provisions

242-80

What happens if the term of the lease is extended or the lease is renewed

242-85

What happens if an amount is paid by the lessee to acquire the car

242-90

What happens if the lessee stops having the right to use the car

Operative provisions

242-80 What happens if the term of the lease is extended or the lease

is renewed

(1) The rules in this section have effect if, after the end of the lease (or

the end of any extension of the lease term or renewal of the lease),

the lessee continues to have the

right to use the

car because the

term of the lease is extended (or further extended) or the lease is

renewed (or further renewed).

(2) This Act has effect as if the lessee continued to be the owner of the

car until the end of the lease as extended or renewed.

(3) However, this Act has effect as if the lessee stopped being the

owner of the

car if:

(a) the lessee enters into a sublease in respect of the car; and

(b) this Division applies to the car in respect of that sublease.

(4) This Act has effect as if the notional loan that arose because of the

grant of the lease, or because of the previous extension or renewal,

had been repaid.

Schedule 3

Leases of luxury cars

Part 1

Main amendments

98 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Note: Also,

Subdivision

242-D (about balancing adjustments) will apply to

the ending, extension or renewal.

(5) This Act has effect as if, on the grant of the extension or renewal,

the lessor had made a new loan (the notional loan) to the lessee:

(a) for the period of the extension of the term of the lease or the

period of the renewed lease, as the case may be; and

(b) of an amount (the notional loan principal) equal to the

car's

market value when the extension or renewal is granted; and

(6) This Act has effect as if the notional loan principal were repaid,

and the interest were paid, by the making of the

luxury car lease

payments under the lease as extended or renewed (or further

extended or renewed).

(7) In determining whether subsection (1) applies to the lessee,

disregard any period after the end of the lease (or the end of any

extension of the lease term or renewal of the lease) and before the

extension or renewal (or further extension or renewal) is granted

and during which the lessee did not have the

right to use the

car if

the extension or renewal (or further extension or renewal):

(a) has effect from the time immediately after the end of that

term, extension or renewal; or

(b) otherwise results in substantial continuity of the leasing of

the car to the lessee.

(8) The amount of the notional loan is treated, for the purposes of

section 242-65 (about the lessor's balancing adjustments), as a

termination amount paid to the lessor under the lease or under the

previous extension or renewal.

242-85 What happens if an amount is paid by the lessee to acquire

the car

If, at the end of the lease or, if it is extended or renewed, at the end

of any extension or renewal (the end time), an amount is paid to

the lessor by, or on behalf of, the lessee to acquire the

car, the

following provisions have effect:

(a) the amount paid is not included in the lessor's assessable

income;

(b) the lessee cannot deduct the payment;

Leases of luxury cars Schedule 3

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 99

(i) the lessee continued to be the owner of the car until the

lessee disposes of it; and

(ii) the transfer to the lessee of legal title to the car were not

a disposal of the car by the lessor.

242-90 What happens if the lessee stops having the right to use the

car

(1) If, at the end time:

(a) the lessee stops having the

right to use the

car; and

(b) no amount is paid to the lessor by, or on behalf of, the lessee

to acquire the car;

the following provisions have effect.

Note: For

end time, see section 242-85.

(2) This Act has effect as if the

car:

(a) were sold by the lessee to the lessor; and

(b) were acquired by the lessor;

at the end time.

(3) The consideration for the sale of the

car by the lessee, and the first

element of the

cost of the car to the lessor, are the

market value

of the car at the end time.

(4)

the

car is afterwards acquired by an

associate of the lessee or

an employer or employee of the lessee, this Act has effect as if the

first element of the

cost of the car as a

depreciating asset were the

lesser of:

(a) the sum of:

(i) the amount that would have been the

adjustable value

of the car at that time for the purposes of applying this

Act to the lessee if the lessee were not treated under this

Division as having disposed of the car; and

(ii) any amount that is included in the lessee's assessable

income under section 40-285 as a balancing adjustment

because the lessee is treated as having disposed of the

car; and

(b) the cost of the acquisition of the car by the associate,

employer or employee.

Schedule 3

Leases of luxury cars

Part 1

Main amendments

100 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Note:

Section 242-20 of the Income Tax (Transitional Provisions) Act 1997

extends subparagraph (a)(ii) to cover amounts included in assessable

income under former provisions corresponding to section 40-285.

(5) For the purposes of paragraph (1)(a), the lessee is not treated as

having stopped to have the

right to use the

car if:

(a) the term of the lease is extended (or further extended), or the

lease is renewed (or further renewed), at a time after, but not

immediately after, the end of that term, extension or renewal

with effect from the time immediately after that end; or

(b) the extension or renewal (or further extension or renewal)

otherwise results in substantial continuity of the leasing of

the car to the lessee.

Leases of luxury cars Schedule 3

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 101

Part 2--Consequential amendments

Income Tax Assessment Act 1997

3 Section 10-5 (table item headed "leases of luxury cars")

Repeal the item, substitute:

leases of luxury cars

accrual amounts ................................................................... 242-35

adjustment amounts (lessee) ................................................ 242-70

adjustment amounts (lessor) ................................................ 242-65

4 Section 11-55 (table item headed "notional sale and loan")

Omit "42A-40 in Schedule 2E", substitute "242-40".

5 Section 12-5 (table item headed "leases of luxury cars")

Repeal the item, substitute:

leases of luxury cars

accrual amounts ................................................................... 242-35

adjustment amounts (lessee) ............................................... 242-70

adjustment amounts (lessor)................................................ 242-65

lease payments not deductible ............................................. 242-55

payments to acquire car not deductible ............................... 242-85

6 Subsection 25-35(4A)

Omit "lease payments", substitute "

luxury car lease payments".

7 Subsection 25-35(4A)

Omit "Division 42A of Schedule 2E to the Income Tax Assessment Act

1936", substitute "Division 242 (about luxury car leases)".

8 Subsection 25-35(4B)

Omit "finance charge", substitute "interest".

9 Subsection 25-35(4B)

Omit "lease payments", substitute "

luxury car lease payments".

10 Subsection 25-35(4C)

Repeal the subsection.

Schedule 3

Leases of luxury cars

Part 2

Consequential amendments

102 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

11 Subsection 28-12(1) (note 2)

Omit "subsection 42A-15(2) in Division 42A of Schedule 2E to the

Income Tax Assessment Act 1936", substitute "subsection 242-15(2)".

12 Subsection 28-45(1) (note 1)

Omit "Division 42A of Schedule 2E to the Income Tax Assessment Act

1936 applies is to be worked out under section 42A-20 in that

Division", substitute "Division 242 applies is to be worked out under

section 242-20".

13 Subsection 28-90(6) (note 1)

Omit "subsection 42A-15(2) in Division 42A of Schedule 2E to the

Income Tax Assessment Act 1936", substitute "subsection 242-15(2)".

14 Section 40-40 (table item 1)

Repeal the item, substitute:

car in respect of which a lease has been granted

that was a

luxury car when the lessor first leased it

The lessee (while the

lessee has the

right

to use the car) and not

the lessor

15 Subsection 40-185(1) (note 1)

Omit "is terminated under subsection 42A-105(3) of Schedule 2E to the

Income Tax Assessment Act 1936", substitute "ends under subsection

242-90(3)".

16 Subsection 40-305(1) (note 1)

Omit "is terminated under subsection 42A-105(3) of Schedule 2E to the

Income Tax Assessment Act 1936", substitute "ends under subsection

242-90(3)".

17 Paragraph 40-755(4)(b)

Omit "right to use", substitute "

right to use".

18 Paragraph 43-175(2)(a)

Omit "right to use or occupy", substitute "

right to use or a right to

occupy".

19 After subparagraph 118-12(2)(a)(vi)

Leases of luxury cars Schedule 3

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 103

Insert:

(via) section 242-40 (about luxury car lease payments);

20 Subparagraphs 118-12(2)(b)(viii) and (ix)

Repeal the subparagraphs, substitute:

(viii) subsection 271-105(3) in Schedule 2F (amounts subject

to family trust distribution tax).

21 Paragraph 230-460(2)(a)

Omit "Division 42A (about leases of luxury cars) of Schedule 2E to the

Income Tax Assessment Act 1936", substitute "Division 242 (about

luxury car leases)".

22 Paragraphs 230-460(2)(b) and (c)

Omit "of this Act".

23 Section 240-10

Omit "

notional loan", substitute "notional loan".

24 Subsection 240-25(4)

Omit "a charge (the finance charge)", substitute "interest".

25 Subsection 240-25(6)

Omit "

notional loan principal is taken to be repaid, and the

finance

charge", substitute "notional loan principal is taken to be repaid, and the

interest".

26 Paragraph 240-30(a)

Omit "finance charge", substitute "interest".

27 Subsection 240-60(1) (method statement, step 1)

Omit "

notional loan principal", substitute "notional loan principal".

28 Subsection 240-60(1) (method statement, step 3)

Repeal the step, substitute:

Step 3. Work out the implicit interest rate for the

arrangement

payment period, taking into account the

arrangement

Schedule 3

Leases of luxury cars

Part 2

Consequential amendments

104 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

payments payable by the

notional buyer under the

arrangement and any

termination amounts.

29 Subsection 240-60(1) (method statement, step 4)

Omit "

notional loan principal", substitute "notional loan principal".

30 Section 240-78

Repeal the section.

31 Subsection 240-80(4)

Omit "

notional loan principal", substitute "notional loan principal".

32 Subsection 240-80(5)

Omit "

notional loan for", substitute "notional loan for".

33 Subsection 240-80(5)

Omit "

notional loan principal", substitute "notional loan principal".

34 Paragraph 240-90(4)(a)

Omit "

notional loan principal", substitute "notional loan principal".

35 Subdivision 240-G (heading)

Repeal the heading, substitute:

Subdivision 240-G--Adjustments if total amount assessed to

notional seller differs from amount of interest

36 Section 240-100

Omit "finance charge", substitute "interest".

37 Subsection 240-105(4) (formula)

Omit "

Notional loan principal", substitute "Notional loan principal".

38 Paragraph 240-115(2)(b)

Omit "Division 42A of Schedule 2E to the Income Tax Assessment Act

1936", substitute "Division 242 (about luxury car leases)".

39 Subsection 243-15(5)

Leases of luxury cars Schedule 3

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 105

Repeal the subsection (including the note), substitute:

(5) A notional loan arising because of Division 240 (about

arrangements treated as a sale and loan) is taken to be a debt that

has been used to wholly or partly finance or refinance expenditure.

40 Subsection 243-20(4)

Repeal the subsection, substitute:

(4) A notional loan arising because of Division 240 (about

arrangements treated as a sale and loan) under a

hire purchase

agreement is also a limited recourse debt.

41 Subsection 243-25(2)

Repeal the subsection, substitute:

(2) However, a debt arrangement that is a notional loan arising

because of Division 240 (about arrangements treated as a sale and

loan) is not taken to have terminated merely because it has been

renewed or extended.

Note:

Under Division 240, notional loans are taken to have ended if the

relevant arrangement is renewed or extended.

42 Subsection 243-30(2)

Repeal the subsection, substitute:

(2) If the debt agreement is a notional loan arising under Division 240

(about arrangements treated as a sale and loan), the property that is

the subject of the agreement is the financed property.

43 Section 830-75 (heading)

Repeal the heading, substitute:

830-75 Extended meaning of subject to foreign tax

44 Section 830-75

Omit "subject to tax" (wherever occurring), substitute "subject to

foreign tax".

45 Subsection 855-55(4)

Schedule 3

Leases of luxury cars

Part 2

Consequential amendments

106 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Omit "subject to tax (within the meaning of Part X of the Income Tax

Assessment Act 1936)", substitute "

subject to foreign tax".

46 Subparagraphs 974-130(4)(a)(iii) and (iv)

Repeal the subparagraphs, substitute:

(iii) the lease or bailment is not an

arrangement to which

Division 240 of this Act (about arrangements treated as

a sale and loan), or Division 242 of this Act (about

luxury car leases), applies;

47 Subsection 995-1(1) (definition of depreciating asset

lease)

Omit "right to use", substitute "

right to use".

48 Subsection 995-1(1) (definition of finance charge)

Repeal the definition.

49 Subsection 995-1(1) (definition of in-house software)

Omit "right to use", substitute "

right to use".

50 Subsection 995-1(1) (definition of IRU)

Omit "right to use", substitute "

right to use".

51 Subsection 995-1(1)

Insert:

luxury car lease payment, in relation to a

car to which

Division 242 (about luxury car leases) applies, means an amount

that the lessee under the lease is required to pay for the rental or

hire of the car, but does not include:

(a) an amount in the nature of a penalty payable for failure to

make a payment for rental or hire on time; or

(b)

termination amount.

52 Subsection 995-1(1)

Insert:

luxury car lease payment period means a period for which a

luxury car lease payment under the lease is allocated or expressed

to be payable.

Leases of luxury cars Schedule 3

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 107

Note:

If a luxury car lease payment period for a lease of a luxury car would

otherwise be longer than 6 months, subsection 242-35(3) divides the

original period into periods of no longer than 6 months.

53 Subsection 995-1(1) (definition of luxury car)

Repeal the definition, substitute:

luxury car: a

car is a luxury car at a time if section 40-230 would

reduce its

cost as a

depreciating asset if an entity acquired it at

that time for its

market value.

Note 1:

Division 242 treats a lease of a luxury car as a notional sale of the car

by the lessor to the lessee financed by a notional loan by the lessor to

the lessee.

Note 2:

Section 242-10 of the Income Tax (Transitional Provisions) Act 1997

extends this definition to cover reductions of cost under former

provisions corresponding to section 40-230.

54 Subsection 995-1(1) (definition of notional loan)

Repeal the definition.

55 Subsection 995-1(1) (definition of notional loan principal)

Repeal the definition.

56 Subsection 995-1(1) (definition of special accrual amount)

Repeal the definition, substitute:

special accrual amount means an amount that is included in

assessable income, or an amount that can be deducted from

assessable income, under any of the following:

(a) Division 230 (about taxation of financial arrangements),

other than Subdivision 230-B;

(b) Subdivision 230-A if:

(i) the accruals method provided for in Subdivision 230-B

is applied to take account of the gain or loss concerned;

and

(ii)

all

the

financial benefits provided and received under

the

financial arrangement concerned are denominated

in a particular

foreign currency;

(d) Division 242 (about luxury car leases);

Schedule 3

Leases of luxury cars

Part 2

Consequential amendments

108 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(e) Division 16D of Part III of the Income Tax Assessment Act

1936 (about certain arrangements relating to the use of

property);

(f) Division 16E of Part III of the Income Tax Assessment Act

1936 (about accruals assessability in respect of certain

security payments).

57 Subsection 995-1(1)

Insert:

subject to foreign tax has the meaning given to the expression

"subject to tax" by Part X of the Income Tax Assessment Act 1936.

58 Subsection 995-1(1) (definition of subject to tax)

Repeal the definition.

59 Subsection 995-1(1) (definition of termination amount)

Repeal the definition, substitute:

termination amount means an amount payable because an

arrangement in relation to property ends and includes:

(a) if, at the end of the arrangement, one party to the

arrangement acquires the property from the other party--an

amount payable for the acquisition; or

(b) if, at the end of the arrangement, the property is lost or

destroyed--any amounts paid to the owner of the property as

a result of the loss or destruction; or

(c)

otherwise--the

market value of the property at the end of

the arrangement.

Leases of luxury cars Schedule 3

Application and transitional provisions Part 3

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 109

Part 3--Application and transitional provisions

Income Tax (Transitional Provisions) Act 1997

60 Before Division 247

Insert:

Division 242--Leases of luxury cars

Table of sections

242-10 Application

242-20 Balancing

adjustments

242-10 Application

(1) Division 242 of the Income Tax Assessment Act 1997 (the new

Division) applies to assessments for the 2010-11 income year and

later years.

(2) However, the new Division does not apply to a lease of a car if the

lease was granted on or before 7.30 pm, by legal time in the

Australian Capital Territory, on 20 August 1996 unless the lease

was extended after that time (whether the extension took effect

before or after that time).

(3) The definition of luxury car in subsection 995-1(1) of the Income

Tax Assessment Act 1997 applies to a reduction under former

section 57AF of the Income Tax Assessment Act 1936 or former

section 42-80 of the Income Tax Assessment Act 1997 in the same

way as it applies to a reduction under section 40-230 of the Income

Tax Assessment Act 1997.

242-20 Balancing adjustments

Sections 242-20 and 242-90 of the Income Tax Assessment Act

1997 apply to an amount included in assessable income under

former Subdivision 42-F or 42-G of the Income Tax Assessment

Act 1997 and former subsection 59(2) of the Income Tax

Assessment Act 1936 in the same way as they apply to an amount

included in assessable income under section 40-285 of the Income

Tax Assessment Act 1997.

Schedule 4

Farm management deposits

Part 1

Main amendments

110 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Schedule 4--Farm management deposits

Part 1--Main amendments

Income Tax Assessment Act 1936

1 Schedule 2G

Repeal the Schedule.

Income Tax Assessment Act 1997

2 After Division 392

Insert:

Division 393--Farm management deposits

Table of Subdivisions

Guide to Division 393

393-A Tax consequences of farm management deposits

393-B Meaning of farm management deposit and owner

393-C Special rules relating to financial claims scheme for

account-holders with insolvent ADIs

Guide to Division 393

393-1 What this Division is about

You can deduct a farm management deposit you make, if:

(a)

you are an individual carrying on a primary

production business (including a primary

production business you carry on as a partner in a

partnership or as a beneficiary of a trust); and

(b)

you hold the deposit for at least 12 months; and

(c)

you meet some other tests.

Farm management deposits Schedule 4

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 111

The amount of the deposit withdrawn is included in your

assessable income in the income year in which it is repaid. Special

rules apply if the deposit is repaid in exceptional circumstances.

Farm management deposits allow you to carry over income from

years of good cash flow and to draw down on that income in years

when you need the cash. This enables you to defer the income tax

on your taxable primary production income from the income year

in which you make the deposit until the income year in which the

deposit is repaid.

Note:

An FMD provider must, every quarter, give certain

information to the Agriculture Secretary about farm

management deposits: see section 398-5 in Schedule 1 to

the Taxation Administration Act 1953.

Subdivision 393-A--Tax consequences of farm management

deposits

Table of sections

393-5

Deduction for making farm management deposit

393-10

Assessability on repayment of deposit

393-15

Transactions to which the deduction, assessment and 12 month rules have

modified application

393-5 Deduction for making farm management deposit

Entitlement to deduction

(1) You can deduct the amount of a

farm management deposit for an

income year if:

(a) you are the

owner of the deposit; and

(b) the deposit is made at a time during the year when you are an

individual carrying on a

primary production business in

Australia; and

stopped carrying on a primary production business in

Australia--you started carrying on such a business again

within 120 days (whether or not during the year); and

(d)

your

taxable non-primary production income for the year is

not more than $65,000; and

Schedule 4

Farm management deposits

Part 1

Main amendments

112 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(e) you do not die or become bankrupt during the year.

Note 1:

This section does not apply if a deposit is reinvested, the term of a

deposit is extended, or a deposit is transferred at the depositor's

request: see section 393-15.

Note 2:

This Division applies to certain partners and beneficiaries as if they

were individuals who carried on a primary production business: see

subsections 393-25(2) and (3).

Sum of deductions not to exceed taxable primary production

income

(2) The sum of the deductions that you would otherwise be entitled to

under this section for

farm management deposits made in the

income year must not exceed your

taxable primary production

income for the income year.

Amounts to be deducted in order of deposits

(3) If you are entitled to deduct amounts in respect of 2 or more

deposits, deduct the amounts in the order in which the deposits

were made (until you reach the limit imposed by subsection (2)).

393-10 Assessability on repayment of deposit

Amount assessable

(1) Your assessable income for an income year includes the amount

worked out using the following formula, if:

(a) you are the

owner of a

farm management deposit; and

(b) the deposit is repaid in full or in part in the year; and

Unrecouped FMD deduction in

Amount (if any) of

respect of the deposit

the deposit that remains

just before the repayment

just after the repayment

Note 1:

This subsection does not apply if the deposit is reinvested, the term of

the deposit is extended, or the deposit is transferred at the depositor's

request: see section 393-15.

Note 2:

In a case where not all of the deposit is deductible under

section 393-5, repayment of the non-deductible amount can take place

without the amount being assessable. Once that amount is repaid, the

remainder is assessable when it is repaid, so that the deduction is

recouped.

Farm management deposits Schedule 4

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 113

Example: Matt makes a farm management deposit of $120,000 on 1 April 2011.

His taxable primary production income for the 2010--11 income year

is $50,000; therefore, the deposit is only partly deductible in the year

because it exceeds his taxable primary production income. Matt makes

the following withdrawals from the deposit: $45,000 on 1 May 2013,

$40,000 on 1 March 2014 and $35,000 on 1 September 2015.

The unrecouped FMD deduction immediately before the first

repayment of $45,000 is $50,000. No amount is included in his

assessable income for the 2012-2013 income year because the

difference between the unrecouped FMD deduction ($50,000) and the

amount of the deposit remaining after the repayment ($75,000) is less

than nil.

The unrecouped FMD deduction immediately before the second

repayment of $40,000 is $50,000. $15,000 is included in Matt's

assessable income for the 2013-2014 income year because the

difference between the unrecouped FMD deduction ($50,000) and the

amount of the deposit remaining after the second repayment ($35,000)

is $15,000, which is greater than nil.

The unrecouped FMD deduction immediately before the third

repayment of $35,000 is $35,000; that is, $50,000 less $15,000.

$35,000 is included in Matt's assessable income for the 2015-2016

income year; that is, the difference between the unrecouped FMD

deduction ($35,000) and the amount of the deposit remaining after the

third repayment ($0).

Unrecouped FMD deduction

(2)

The

unrecouped FMD deduction in respect of a

farm

management deposit at a particular time is:

(a) if no part of the deposit has been repaid before that time--the

amount of the deduction under section 393-5 for making the

deposit; or

(b) if one or more parts of the deposit have been repaid before

that time--the unrecouped FMD deduction in respect of the

deposit just before the most recent such repayment, reduced

by any amount included in the

owner's assessable income

under this section as a result of that repayment.

Example: Mia makes a deposit of $3,000, all of which is deductible. The

deposit's unrecouped FMD deduction just before a first repayment of

$1,000 is the amount of the deduction (that is, $3,000--see

paragraph (2)(a)). The deposit's unrecouped FMD deduction just

before a second repayment is $2,000 (that is, according to

paragraph (2)(b), the unrecouped FMD deduction immediately before

the first repayment ($3,000) reduced by the $1,000 included in Mia's

assessable income as a result of the first repayment).

Note 1:

If the deposit was originally an income equalisation deposit, see

section 393-10 of the Income Tax (Transitional Provisions) Act 1997.

Schedule 4

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114 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Note 2:

Section 393-55 affects the unrecouped FMD deduction of a new

deposit linked to an old deposit affected by Division 2AA (Financial

claims scheme for account-holders with insolvent ADIs) of Part II of

the Banking Act 1959.

Application of Division to transfer, reinvestment or other dealing

(3) This Division applies to a transfer, reinvestment or other dealing

with a

farm management deposit as if it were a repayment of the

deposit, if:

(a) you are the depositor; and

(b) the transfer, reinvestment or other dealing is on your behalf

or at your request.

Note:

Section 393-15 modifies the application of the deduction, assessment

and 12 month rules to certain transfers, reinvestments and other

dealings.

Deemed repayment because of death, bankruptcy etc.

(4) This section applies as if a

farm management deposit had been

repaid when it became repayable, rather than when it is actually

repaid, if the deposit became repayable because of the requirement

contained in the relevant agreement as set out in item 11 of the

table in section 393-35 (death, bankruptcy etc.).

Note 1:

This means that the amount of the deposit is included in your

assessable income for the income year when the death, bankruptcy etc.

occurs, rather than for any later year in which the deposit might be

repaid.

Note 2:

This also means that, under subsection 45-120(5) in Schedule 1 to the

Taxation Administration Act 1953 (about Pay as you go (PAYG)

instalments), the amount of the deposit is included in your instalment

income for the period in which the death, bankruptcy etc. occurs.

However, under section 12-140 in that Schedule, an amount may also

be required to be withheld from the actual payment if you do not quote

your tax file number or ABN to the relevant FMD provider.

Note 3:

Section 393-60 of this Act may limit the operation of subsection (4) if

the farm management deposit is with an ADI that becomes a declared

ADI under Division 2AA (Financial claims scheme for

account-holders with insolvent ADIs) of Part II of the Banking Act

1959.

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 115

393-15 Transactions to which the deduction, assessment and 12

month rules have modified application

(1) The provisions mentioned in subsection (2) do not apply in relation

to the following transactions:

(a) the immediate reinvestment of a

farm management deposit

as a farm management deposit with the same

FMD provider;

(b) the extension of the term of a farm management deposit

(even if other terms such as those relating to interest payable

are also varied);

a requirement of the relevant agreement as set out in item 13

of the table in section 393-35 (which allows for transfers of

deposits at the request of the depositor).

Note:

This means that these transactions:

(a) will not result in assessable income for the owner; and

(b) will not give rise to a deduction; and

of the day the deposit is made, result in the deposit losing its

status as a farm management deposit.

(2) The provisions are:

(a) section 393-5 (about deductions for making a farm

management deposit); and

(b) subsection 393-10(1) (about assessability of the repayment of

a farm management deposit); and

management deposit within the first 12 months); and

(d) subsections 393-40(3) and (4) (about repayment of a farm

management deposit in exceptional circumstances).

(3) For the purposes of working out the

unrecouped FMD deduction

for a deposit that is subject to a transaction mentioned in

subsection (1), the transaction does not cause the deposit to be a

different deposit.

Note:

This ensures that the unrecouped FMD deduction (which affects how

much income tax is assessed in the event of a repayment) equals the

deduction for the original deposit, less any amount included in your

assessable income because of a previous repayment of the deposit.

Schedule 4

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Part 1

Main amendments

116 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Subdivision 393-B--Meaning of farm management deposit and

owner

Table of sections

393-20

Farm management deposits

393-25

Owners of farm management deposits

393-30

Effect of contravening requirements

393-35

Requirements of agreement for a farm management deposit

393-40

Repayment of deposit within first 12 months

393-45

Partly repaid farm management deposits

393-20 Farm management deposits

Meaning of farm management deposit

(1) A deposit with an

FMD provider is a farm management deposit

if:

(a) the depositor applies to make the deposit in accordance with

subsection (2); and

(b) the deposit is made under an agreement between the FMD

provider and the depositor that:

(i) describes the deposit as a farm management deposit;

and

(ii) at all times while the deposit is with the FMD provider,

contains requirements to the effect set out in the table in

section 393-35.

The agreement may also contain additional requirements that are

not inconsistent with those set out in that table.

Depositor to provide information in application form

(2) For the purposes of paragraph (1)(a), the depositor must apply to

the

FMD provider to make the deposit by completing and signing

a form that:

(a) permits the depositor to state the

owner's

tax file number in

the form; and

(b) requires the depositor to provide any other information

required by regulations for the purposes of this paragraph;

and

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purposes of this paragraph, that are to be read by the

depositor when completing the form.

Note 1:

A depositor who makes a false or misleading statement in such a form

commits an offence against section 8K or 8N of the Taxation

Administration Act 1953.

Note 2:

If the owner does not quote his or her tax file number or ABN to the

FMD provider, the Pay as you go (PAYG) withholding required under

section 12-140 in Schedule 1 to the Taxation Administration Act 1953

from a repayment of the deposit is at the highest marginal tax rate.

Note 3:

Division 4A of Part VA of the Income Tax Assessment Act 1936 sets

out rules for quoting tax file numbers in connection with farm

management deposits.

Meaning of FMD provider

(3) In this Act:

FMD provider means an entity that:

(a)

ADI; or

(b) carries on in Australia the

business of banking, so long as

the Commonwealth, a State or a Territory guarantees the

repayment of any deposit taken in the course of that business;

taking money on deposit, so long as the Commonwealth, a

State or a Territory guarantees the repayment of any deposit

taken in the course of that business.

393-25 Owners of farm management deposits

Meaning of owner

(1)

The

owner of a

farm management deposit is:

(a) if paragraph (b) does not apply--the individual who made or

is making the deposit; or

(b) in the case of a deposit made or being made by the trustee of

a trust on behalf of a beneficiary who is an individual--the

beneficiary.

Schedule 4

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118 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Primary production businesses carried on by partnerships and

trusts

(2) This Division applies to you as if you were an individual who is

carrying on a

primary production business that is actually carried

on by a partnership, if you are an individual who is a partner in the

partnership.

(3) This Division, and section 97A of the Income Tax Assessment Act

1936 (about beneficiaries who are owners of farm management

deposits), apply to you as if you were an individual who is carrying

on a

primary production business that is actually carried on by a

trustee, if you are an individual who is a beneficiary presently

entitled to a share of the income of the trust.

Application of Division to beneficiary no longer under legal

disability

(4)

If:

(a)

farm management deposit was made by a trustee on behalf

of a beneficiary of a trust; and

(b) the beneficiary was under a legal disability when the deposit

was made; and

then this Division, and Division 4A of Part VA of the Income Tax

Assessment Act 1936, apply as if the beneficiary had made the

deposit.

Note:

Division 4A of Part VA of the Income Tax Assessment Act 1936 is

about quotation of tax file numbers in connection with farm

management deposits.

393-30 Effect of contravening requirements

(1) A deposit is not a farm management deposit if, when the deposit

was accepted, a requirement contained in the relevant agreement as

set out in items 1 to 6 of the table in section 393-35 was

contravened.

(2) A deposit is not, and is taken never to have been, a farm

management deposit if a requirement contained in the relevant

agreement as set out in items 7 to 9 of the table in section 393-35 is

contravened at any time in relation to the deposit.

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 119

(3) So much of a deposit as causes a requirement contained in the

relevant agreement as set out in item 10 of the table in

section 393-35 to be contravened is not a farm management

deposit.

393-35 Requirements of agreement for a farm management deposit

An agreement mentioned in paragraph 393-20(1)(b) must contain

requirements to the effect of those set out in the following table:

Requirements of agreement for a farm management deposit

Item Requirement

The

owner must be an individual who is carrying on a

primary production

business in Australia when the deposit is made.

Note:

This Division applies to certain partners and beneficiaries as if they were

individuals who carried on a primary production business: see subsections

393-25(2) and (3).

2 The

deposit:

(a) must not be made by 2 or more individuals jointly; and

(b) must not be made on behalf of 2 or more individuals.

The deposit must not be made by a trustee on behalf of a beneficiary unless

the beneficiary is:

(a) under a legal disability; and

(b) presently entitled to a share of the income of the trust.

The deposit must be $1,000 or more when it is made, unless the deposit is:

(a) the immediate reinvestment of a

farm management deposit as a farm

management deposit with the same

FMD provider; or

(b) the extension of the term of a farm management deposit (even if other

terms such as those relating to interest payable are also varied).

The

owner must not, at any time while the deposit is with the

FMD

provider, have any

farm management deposits with any other FMD

provider.

Rights of the depositor in respect of the deposit must not be transferable to

another entity.

The deposit must not be the subject of a charge or other encumbrance to

secure any amount.

Amounts that would otherwise accrue as interest or other earnings on the

deposit must not reduce liabilities of the depositor to pay interest to the

FMD provider in respect of loans or other debts of the depositor.

Schedule 4

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120 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Requirements of agreement for a farm management deposit

Item Requirement

Interest or other earnings on the deposit must not be invested as a

farm

management deposit with the

FMD provider without having first been paid

to the depositor.

The deposit must not be more than $400,000, and the sum of the balances

from time to time of the deposit and all other

farm management deposits of

the

owner with the

FMD provider must not be more than $400,000.

The deposit must be repaid if:

(a) the

owner dies or becomes bankrupt; or

(b) the owner ceases to carry on a

primary production business in Australia

and does not start carrying on such a business again within 120 days.

The amount of any repayment of the deposit must be $1,000 or more, except

if the entire amount of the deposit is repaid.

The

FMD provider must transfer the deposit by electronic means to another

FMD provider that agrees to accept the deposit as a

farm management

deposit, if the first FMD provider is:

(a) requested in writing by the depositor to do so; and

(b) given any information or other assistance from the depositor necessary

for the purpose.

The

FMD provider must not deduct from the deposit (whether at the time it

is made, while it is with the FMD provider or at the time of its repayment)

any administration fee or other amount required by the FMD provider to be

paid in respect of the deposit or otherwise.

393-40 Repayment of deposit within first 12 months

Partial repayment within first 12 months

(1) Any part of a deposit repaid within 12 months after the end of the

day the deposit is made is not, and is taken never to have been, part

of a farm management deposit.

Note 1:

A repayment covered by subsection (3) or (5) is disregarded in

applying this subsection. The normal rules in sections 393-5 (about

deductions for making a farm management deposit) and 393-10 (about

assessability of the repayment of a farm management deposit) apply

instead.

Note 2:

This subsection does not apply if a deposit is reinvested, the term of a

deposit is extended, or a deposit is transferred at the depositor's

request: see section 393-15.

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 121

Deposit not to be reduced to less than $1,000 within first 12

months

(2) A deposit is not, and is taken never to have been, a farm

management deposit if the amount of the deposit is reduced to less

than $1,000 because of one or more repayments within 12 months

after the end of the day the deposit is made.

Note 1:

A repayment covered by subsection (3) or (5) is disregarded in

applying this subsection.

Note 2:

This subsection does not apply if a deposit is reinvested, the term of a

deposit is extended, or a deposit is transferred at the depositor's

request: see section 393-15.

Repayment in exceptional circumstances

(3) Subsections (1) and (2) do not apply to a repayment of the whole

or a part of a

farm management deposit if all of the following

circumstances are satisfied:

(a) the repayment is made in the income year following the

income year in which the deposit is made with the

FMD

provider;

(b) at the time of the repayment, the

owner of the deposit is

eligible for the issue of an exceptional circumstances

certificate (within the meaning of subsection 8A(2) of the

Farm Household Support Act 1992) that relates to a

primary

production business of that owner;

which the repayment is made, such an exceptional

circumstances certificate is issued in respect of that owner;

(d) a declaration of exceptional circumstances (as referred to in

paragraph 8(c) of the Rural Adjustment Act 1992) was not in

force in relation to that primary production business when the

deposit was made.

(4) Any later deposit that is made by, or on behalf of, that

owner in

the income year in which the repayment is made is not, and is

taken never to have been, a farm management deposit.

Repayment in the case of death, bankruptcy or ceasing to carry on

a primary production business

(5) Subsections (1) and (2) do not apply to a repayment of a

farm

management deposit because of the requirement contained in the

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122 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

relevant agreement as set out in item 11 of the table in

section 393-35 (death, bankruptcy etc.).

Certain transactions do not affect the day the deposit was made

(6) Subsections (1) to (4) apply as if a

farm management deposit that:

(a) is made as a result of a transaction mentioned in subsection

393-15(1) (about reinvesting a deposit, extending the term of

a deposit and transferring a deposit at the depositor's

request); or

(b) is affected by such a transaction;

were made on the day on which the original deposit was made.

Example: A farm management deposit is made on 1 July 2010 for a term of 6

months, but is extended in December 2010 for another 6 months. For

the purposes of subsections (1) to (4), the day the extended deposit

was made remains as 1 July 2010.

Note:

Section 393-40 of the Income Tax (Transitional Provisions) Act 1997

provides for a special rule for deposits transferred under the repealed

Loan (Income Equalization Deposits) Act 1976.

393-45 Partly repaid farm management deposits

A reference to a farm management deposit is a reference to so

much of the deposit as has not been repaid.

Subdivision 393-C--Special rules relating to financial claims

scheme for account-holders with insolvent ADIs

Guide to Subdivision 393-C

393-50 What this Subdivision is about

A deposit (the new deposit) arising from:

(a)

an entitlement under Division 2AA (Financial

claims scheme for account-holders with insolvent

ADIs) of Part II of the Banking Act 1959 relating

to a farm management deposit (the old deposit); or

(b)

a distribution from liquidation of an ADI that is

attributable to a farm management deposit (also the

old deposit);

Farm management deposits Schedule 4

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 123

is treated as a transfer of the old deposit and does not give rise to

new assessable income or deductions.

Table of sections

Operative provisions

393-55

Farm management deposits arising from farm management deposits with

ADIs subject to financial claims scheme

393-60

Repayment if owner of farm management deposit with insolvent ADI dies,

is bankrupt or ceases to be a primary producer

Operative provisions

393-55 Farm management deposits arising from farm management

deposits with ADIs subject to financial claims scheme

Application

(1) This section applies if an entitlement arises under Division 2AA

(Financial claims scheme for account-holders with insolvent ADIs)

of Part II of the Banking Act 1959 in connection with an account

containing a

farm management deposit (the old deposit) with an

ADI (the old ADI) and either:

(a) an amount (the new deposit) is deposited into either of the

following to meet, in whole or part, so much of the

entitlement as relates to the old deposit:

(i) an existing account for a farm management deposit;

(ii) an account established under section 16AH of that Act

for the purposes of meeting (in whole or part) the

entitlement; or

(b) an amount (also the new deposit) is deposited by a liquidator

of the old ADI into either of the following as so much of a

distribution from the liquidation of the old ADI as relates to

the old deposit:

(i) an existing account for a farm management deposit;

(ii) an account established under section 16AR of that Act

for the payment of the distribution.

Note:

If an amount is deposited in connection with an account with the old

ADI containing 2 or more old deposits, the amount is to be

apportioned between each old deposit, so that so much of the amount

Schedule 4

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Main amendments

124 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

as is attributable to a particular old deposit is regarded as a distinct

new deposit relating to that old deposit.

New deposit is a farm management deposit

(2) This Division (except this section) applies to the new deposit as if

the new deposit were a transfer of the old deposit in accordance

with a requirement contained in the relevant agreement for the old

deposit as set out in item 13 of the table in section 393-35 (which

allows for transfers of deposits at the request of the depositor). To

avoid doubt, this Division applies in that way as if the amount

transferred were the amount of the new deposit, even if that is

more or less than the amount of the old deposit.

Note 1:

The effects of this include the following:

(a) section 393-5 (about deductions for making a farm management

deposit) does not apply in relation to the making of the new

deposit (see paragraphs 393-15(1)(c) and (2)(a));

(b) subsection 393-10(1) (about assessability of the repayment of a

farm management deposit) can only apply to the extent of any

difference between the amount transferred and the amount of the

old deposit (see paragraphs 393-15(1)(c) and (2)(b));

management deposit within the first 12 months) can only apply

to the extent of any difference between the amount transferred

and the amount of the old deposit (see paragraphs 393-15(1)(c)

and (2)(c) and (d));

(d) the day the old deposit was made, for the purposes of subsections

393-40(1) and (2) (about repayment of a farm management

deposit within the first 12 months) and (3) and (4) (about

repayment in exceptional circumstances), is maintained for the

new deposit (see subsection 393-40(6)).

Note 2:

Also, the unrecouped FMD deduction in respect of the new deposit is

the same as the unrecouped FMD deduction in respect of the old

deposit (see subsection 393-15(3)), unless subsection (6) or (7) of this

section applies because the new deposit is less than the old deposit.

(3) In determining whether either of the following is a

farm

management deposit, disregard a requirement contained in an

agreement as set out in item 4 of the table in section 393-35

(requiring the deposit to be $1,000 or more):

(a) the new deposit;

(b) a deposit made later directly by the transfer of the new

deposit in accordance with a requirement of the relevant

agreement for the new deposit as mentioned in item 13 of

that table.

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 125

(4) In determining whether a deposit made after the entitlement arises

is a

farm management deposit, disregard the old deposit when

determining whether a requirement contained in an agreement as

set out in item 5 of the table in section 393-35 (prohibiting farm

management deposits with other FMD providers) has been

complied with.

Note:

Subsection (4) means that a deposit made with a financial institution

other than the old ADI after the entitlement arises can be a farm

management deposit (despite subsection 393-30(1)) even though the

owner of the deposit still has the old deposit with the old ADI.

(5) A requirement contained in an agreement as set out in item 5 of the

table in section 393-35 does not apply to the new deposit to prevent

it from being a

farm management deposit.

Note:

Subsections (4) and (5) mean that, despite subsection 393-30(1)

(which prevents a deposit, or part of a deposit, from being a farm

management deposit if certain requirements are not met), the fact that

you are the owner of both the new deposit with one financial

institution and the old deposit with another financial institution does

not prevent the new deposit from being a farm management deposit.

Unrecouped FMD deduction for new deposit less than old deposit

(6) Despite subsection (2) and subsection 393-15(3), if the new deposit

is less than the old deposit at the time (the declaration time) the

old ADI became a declared ADI under the Banking Act 1959, the

unrecouped FMD deduction in respect of the new deposit is the

amount worked out using the following formula:

Unrecouped FMD deduction

New deposit

in respect of old deposit

Old deposit just

just before declaration time

before declaration time

�

Note:

The new deposit could be less than the old deposit if the entitlement is

paid in instalments (each of which will be a separate new deposit).

(7) However, if the amount worked out under subsection (6) is more

than the difference (if any) between:

(a)

the

unrecouped FMD deduction in respect of the old deposit

just before the declaration time; and

(b) the total of the amounts worked out under all previous

applications of subsection (6) in relation to that old deposit;

the unrecouped FMD deduction in respect of the new deposit is

equal to the difference (if any).

Schedule 4

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126 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Note:

This ensures that when new deposits linked to the old deposit are

repaid, the total amount included in assessable income will not exceed

the unrecouped FMD deduction in respect of the old deposit.

Relationship with other provisions

(8) This section has effect despite Division 253 (about tax treatment of

entitlements under the financial claims scheme for insolvent

ADIs).

393-60 Repayment if owner of farm management deposit with

insolvent ADI dies, is bankrupt or ceases to be a primary

producer

Subsection 393-10(4) does not apply in relation to so much of a

farm management deposit with an

ADI as is equal to the sum of

the amounts described in subparagraphs (d)(i) and (ii) of this

section if:

(a) you are the

owner of the deposit; and

(b) the deposit becomes repayable during an income year

because of the requirement contained in the relevant

agreement as set out in item 11 of the table in section 393-35

(death, bankruptcy etc.); and

under Division 2AA (Financial claims scheme for

account-holders with insolvent ADIs) of Part II of the

Banking Act 1959; and

(d) at the end of the income year, you have either or both of the

following:

(i) an unmet entitlement under that Division connected

with the account for the farm management deposit;

(ii) an unmet claim against the ADI, or an unpaid debt owed

to you by the ADI, in the winding up of the ADI

connected with the account for the deposit.

Note:

Subsection 393-10(4) makes the repayment of a farm management

deposit assessable in the income year when the death, bankruptcy etc.

occurs, rather than in any later year in which it might be repaid.

3 Subsection 995-1(1) (definition of farm management

deposit)

Repeal the definition, substitute:

Farm management deposits Schedule 4

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 127

farm management deposit has the meaning given by

Subdivision 393-B.

4 Subsection 995-1(1)

Insert:

FMD provider (short for farm management deposit provider) has

the meaning given by subsection 393-20(3).

5 Subsection 995-1(1)

Insert:

owner of a

farm management deposit has the meaning given by

subsection 393-25(1).

6 Subsection 995-1(1)

Insert:

unrecouped FMD deduction (short for unrecouped farm

management deposit deduction) has the meaning given by

subsections 393-10(2) and 393-55(6) and (7).

Taxation Administration Act 1953

7 At the end of Part 5-25 in Schedule 1

Add:

Division 398--Miscellaneous reporting obligations

Table of Subdivisions

Guide to Division 398

398-A Farm Management Deposit reporting

Guide to Division 398

398-1 What this Division is about

This Division contains reporting obligations not covered by other

Divisions of this Part.

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128 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Subdivision 398-A--Farm Management Deposit reporting

Table of sections

398-5

Reporting to Agriculture Department

398-5 Reporting to Agriculture Department

FMD provider must provide quarterly information

(1)

FMD provider must, within 60 days after the end of a

quarter,

give in writing to the

Agriculture Secretary the information

specified in subsection (3) if the provider holds a

farm

management deposit at the end of any month in the quarter.

Penalty: 10 penalty units.

(2) An offence under subsection (1) is an offence of strict liability.

Note:

For strict liability, see section 6.1 of the Criminal Code.

Information required

(3) The information is:

(a) the number of

farm management deposits held at the end of

each month in the

quarter; and

(b) the number of depositors in respect of such deposits at the

end of each month in the quarter; and

month in the quarter; and

(d) any other information, in relation to farm management

deposits held by the

FMD provider at any time in the

quarter, that is required by the regulations for the purposes of

this section.

Regulations not to require identity of depositor

(4) Regulations made for the purposes of paragraph (3)(d) must not

require information:

(a) that discloses the identity of a depositor; or

(b) from which the identity of a depositor could reasonably be

inferred.

Farm management deposits Schedule 4

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Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 129

Part 2--Consequential amendments

Farm Household Support Act 1992

8 Subsection 3(2) (paragraph (aa) of the definition of exempt

livestock proceeds)

Omit "Schedule 2G to the Income Tax Assessment Act 1936)",

substitute "the Income Tax Assessment Act 1997)".

Income Tax Assessment Act 1936

9 Subsection 6(1)

Insert:

farm management deposit has the meaning given by the Income

Tax Assessment Act 1997.

10 Subsection 6(1)

Insert:

FMD provider has the meaning given by the Income Tax

Assessment Act 1997.

11 Subsection 6(1) (definition of income from personal

exertion or income derived from personal exertion)

Omit "section 393-15 of Schedule 2G", substitute "section 393-10 of

the Income Tax Assessment Act 1997".

12 Subsection 6(1)

Insert:

owner of a farm management deposit has the meaning given by the

Income Tax Assessment Act 1997.

13 Subsection 95(1) (definition of net income)

Omit "under Schedule 2G", substitute "under Division 393 of the

Income Tax Assessment Act 1997 (Farm management deposits)".

14 At the end of paragraph 97A(1)(a)

Add "and".

Schedule 4

Farm management deposits

Part 2

Consequential amendments

130 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

15 Paragraph 97A(1)(b)

Omit "and".

16 Paragraph 97A(1)(c)

Repeal the paragraph.

17 At the end of paragraph 97A(1A)(a)

Add "and".

18 Paragraph 97A(1A)(b)

Omit "and".

19 Paragraph 97A(1A)(c)

Repeal the paragraph.

20 Subsection 97A(2)

Repeal the subsection.

21 At the end of section 97A

Add:

Note:

This section applies to certain beneficiaries as if they were individuals

who are carrying on a primary production business: see subsection

393-25(3) of the Income Tax Assessment Act 1997.

22 Subsection 101A(4)

Omit "(within the meaning of Schedule 2G)".

23 Subsection 170(10) (table item 29)

Repeal the item.

24 Subsection 170(10AA) (at the end of the table)

Add:

210

Division 393

Farm management deposits

25 Subsections 177B(1) and (2)

Repeal the subsections, substitute:

(1) Nothing in the following limit the operation of this Part:

(a) the provisions of this Act (other than this Part);

Farm management deposits Schedule 4

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 131

(b)

the

International Tax Agreements Act 1953;

(c)

the

Petroleum (Timor Sea Treaty) Act 2003.

(2) This Part does not affect the operation of Division 393 of the

Income Tax Assessment Act 1997 (Farm management deposits).

26 Section 202DK

Repeal the section.

27 Section 202DL

Omit "financial institution" (first occurring), substitute "FMD

provider".

28 Paragraph 202DL(a)

Omit "393-30(3) of Schedule 2G", substitute "393-20(2) of the Income

Tax Assessment Act 1997".

29 Paragraph 202DL(b)

Omit "financial institution", substitute "FMD provider".

30 At the end of section 202DL

Add:

Note:

If a farm management deposit was made by a trustee on behalf of a

beneficiary who was under a legal disability when the deposit was

made, and the beneficiary is no longer under a legal disability, this

Division applies as if the beneficiary had made the deposit: see

subsection 393-25(4) of the Income Tax Assessment Act 1997.

31 Paragraph 202DM(1)(a)

Omit "a financial institution", substitute "an FMD provider".

Note:

The heading to subsection 202DM(1) is altered by omitting "financial institution" and

substituting "FMD provider".

32 Subsection 202DM(1)

Omit "the financial institution", substitute "the FMD provider".

33 Paragraph 202DM(3)(a)

Omit "a financial institution", substitute "an FMD provider".

Note:

The heading to subsection 202DM(3) is altered by omitting "financial institution" and

substituting "FMD provider".

Schedule 4

Farm management deposits

Part 2

Consequential amendments

132 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

34 Subsection 202DM(3)

Omit "the financial institution", substitute "the FMD provider".

35 Section 264AA

Repeal the section.

36 Paragraph 268-35(5)(j) in Schedule 2F

Omit "Farm Management Deposits", substitute "farm management

deposits".

37 Paragraph 268-35(5)(j) in Schedule 2F (note)

Repeal the note, substitute:

Note:

See Division 393 of the Income Tax Assessment Act 1997.

Income Tax Assessment Act 1997

38 Section 10-5 (table item headed "farm management

deposits")

Omit:

repayments of ..................................................................... 393-1 of

Schedule 2G

substitute:

repayments of ..................................................................... 393-10

39 Section 12-5 (table item headed "primary production")

Omit:

farm management deposits .................................................. 393-1 to 393-65 of

Schedule 2G

substitute:

farm management deposits .................................................. Division 393

40 Paragraph 26-55(2)(c)

Repeal the paragraph, substitute:

section 393-5 (which provides for deductions for making

farm management deposits).

Farm management deposits Schedule 4

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 133

41 Subparagraph 61-570(1)(a)(iii)

Omit "section 393-15 of Schedule 2G to the Income Tax Assessment Act

1936", substitute "section 393-10".

42 Paragraph 165-55(5)(j)

Omit "Farm Management Deposits", substitute "

farm management

deposits".

43 Paragraph 165-55(5)(j) (note)

Repeal the note, substitute:

Note: See

Division

393.

44 Subsection 230-460(15)

Repeal the subsection, substitute:

Farm management deposits

(15) A right to receive, or an obligation to provide,

financial benefits is

the subject of an exception if:

(a) the right or obligation is the right or obligation of an

owner

of a

farm management deposit; and

(b) the right or obligation relates to the deposit.

45 Subsection 253-5(1) (paragraph (b) of the note)

Omit "Subdivision 393-D in Schedule 2G to the Income Tax Assessment

Act 1936", substitute "Subdivision 393-C".

46 Subsection 392-80(3)

Repeal the subsection, substitute:

Primary production deductions

(3)

Your

primary production deductions for the

current year are:

(a) all amounts you can deduct that relate exclusively to your

assessable primary production income for the current year;

and

(b) so much of any other amounts you can deduct (other than

apportionable deductions) to the extent that they reasonably

relate to your assessable primary production income for the

current year.

Schedule 4

Farm management deposits

Part 2

Consequential amendments

134 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Taxation Administration Act 1953

47 Subsections 8J(18) and (19)

Repeal the subsections.

48 Subsection 45-120(4) in Schedule 1

Omit "section 393-10 in Schedule 2G to the Income Tax Assessment Act

1936", substitute "section 393-5 of the Income Tax Assessment Act

1997".

49 Subsection 45-120(5) in Schedule 1

Omit "section 393-15 in Schedule 2G to the Income Tax Assessment Act

1936", substitute "section 393-10 of the Income Tax Assessment Act

1997".

Farm management deposits Schedule 4

Application and transitional provisions Part 3

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 135

Part 3--Application and transitional provisions

Income Tax (Transitional Provisions) Act 1997

50 After Division 392

Insert:

Division 393--Farm management deposits

Table of Subdivisions

393-A Tax consequences of farm management deposits

393-B Meaning of farm management deposit and owner

Subdivision 393-A--Tax consequences of farm management

deposits

Table of sections

393-1

Application of Division 393 of the Income Tax Assessment Act 1997

393-5 Unrecouped

FMD

deduction

393-10

Unrecouped FMD deduction for deposits made as a result of section 25B of

the Loan (Income Equalization Deposits) Act 1976

393-1 Application of Division 393 of the Income Tax Assessment Act

1997

Division 393 of the Income Tax Assessment Act 1997 (about farm

management deposits) applies to assessments for:

(a) the 2010-11 income year; and

(b) later income years.

393-5 Unrecouped FMD deduction

A reference in Division 393 of the Income Tax Assessment Act

1997 to a deduction under section 393-5 of that Act for making a

farm management deposit is taken to include a reference to a

deduction under section 393-10 in Schedule 2G to the Income Tax

Assessment Act 1936, as in force just before the commencement of

this section, if the deposit was made before the 2010-11 income

year.

Schedule 4

Farm management deposits

Part 3

Application and transitional provisions

136 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

393-10 Unrecouped FMD deduction for deposits made as a result of

section 25B of the Loan (Income Equalization Deposits)

Act 1976

Despite subsection 393-10(2) of the Income Tax Assessment Act

1997, if:

(a) no part of a farm management deposit has been repaid before

a particular time; and

(b) the deposit was made with an FMD provider as a result of a

request to which section 25B of the Loan (Income

Equalization Deposits) Act 1976, as in force on 21 February

2005, applied;

the unrecouped FMD deduction in respect of the deposit at that

time is equal to the amount of the unrecouped deduction (within

the meaning of the former subsection 159GA(3) of the Income Tax

Assessment Act 1936) in respect of the deposit immediately before

it ceased to be a deposit under the Loan (Income Equalization

Deposits) Act 1976.

Note:

This means that the unrecouped deduction relating to the deposit

under the Loan (Income Equalization Deposits) Act 1976 continues to

apply (by becoming an unrecouped FMD deduction) when the deposit

is transferred to an FMD provider as a farm management deposit. The

Loan (Income Equalization Deposits) Act 1976 was repealed on

22 February 2005.

Subdivision 393-B--Meaning of farm management deposit and

owner

Table of sections

393-40

The day the deposit was made for deposits made as a result of section 25B

of the Loan (Income Equalization Deposits) Act 1976

393-40 The day the deposit was made for deposits made as a result

of section 25B of the Loan (Income Equalization Deposits)

Act 1976

If a farm management deposit was made with an FMD provider as

a result of a request under section 25B of the Loan (Income

Equalization Deposits) Act 1976, as in force on 21 February 2005,

then:

(a) subsections 393-40(1) to (4) of the Income Tax Assessment

Act 1997 apply as if the day the deposit was made was the

Farm management deposits Schedule 4

Application and transitional provisions Part 3

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 137

day on which the deposit was originally made under the Loan

(Income Equalization Deposits) Act 1976; and

(b) subsection 393-40(6) does not apply to the deposit.

Note: The

Loan (Income Equalization Deposits) Act 1976 was repealed on

22 February 2005.

51 Application of other amendments

The amendments made by Parts 1 and 2 of this Schedule (other than

item 2) apply to assessments for:

(a) the 2010-11 income year; and

(b) later income years.

Schedule 5

General insurance

Part 1

Main amendments

138 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Schedule 5--General insurance

Part 1--Main amendments

Income Tax Assessment Act 1936

1 Schedule 2J

Repeal the Schedule.

Income Tax Assessment Act 1997

2 After Division 320

Insert:

Division 321--General insurance companies and

companies that self-insure in respect of workers'

compensation liabilities

Table of Subdivisions

321-A Provision for, and payment of, claims by general insurance

companies

321-B Premium income of general insurance companies

321-C Companies that self-insure in respect of workers'

compensation liabilities

Subdivision 321-A--Provision for, and payment of, claims by

general insurance companies

Table of sections

321-10

Assessable income to include amount for reduction in outstanding claims

liability

321-15

Deduction for increase in outstanding claims liability

321-20

How value of outstanding claims liability is worked out

321-25

Deduction for claims paid during current year

General insurance Schedule 5

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 139

321-10 Assessable income to include amount for reduction in

outstanding claims liability

general insurance company's assessable income for the

current

year includes an amount equal to the amount (if any) by which:

(a) the value, at the end of the previous income year, of the

company's liability for

outstanding claims under

general

insurance policies; exceeds

(b) the value, at the end of the current year, of that liability.

Note:

Those values are worked out under section 321-20.

321-15 Deduction for increase in outstanding claims liability

general insurance company can deduct for the

current year an

amount equal to the amount (if any) by which:

(a) the value, at the end of the current year, of the company's

liability for

outstanding claims under

general insurance

policies; exceeds

(b) the value, at the end of the previous income year, of that

liability.

Note:

Those values are worked out under section 321-20.

321-20 How value of outstanding claims liability is worked out

Work out the value, at the end of an income year, of a

general

insurance company's liability for

outstanding claims under

general insurance policies in this way:

Method statement

Step 1. Add up the amounts that, at the end of the income year,

the company determines, based on proper and reasonable

estimates, to be appropriate to set aside and invest in

order to meet:

(a)

liabilities for outstanding claims under those

policies; and

(b)

direct settlement costs associated with those

outstanding claims.

Schedule 5

General insurance

Part 1

Main amendments

140 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

Step 2. Reduce the step 1 amount by so much of it as the

company expects at the end of the income year to

recover:

(a)

under a contract of reinsurance; or

(b)

in any other way;

other than under a contract of reinsurance to which

subsection 148(1) of the Income Tax Assessment Act

1936 (about reinsurance with non-residents) applies.

321-25 Deduction for claims paid during current year

general insurance company can deduct for the

current year

amounts paid during that year in respect of claims under

general

insurance policies.

Subdivision 321-B--Premium income of general insurance

companies

Table of sections

321-45

Assessable income to include gross premiums

321-50

Assessable income to include amount for reduction in value of unearned

premium reserve

321-55

Deduction for increase in value of unearned premium reserve

321-60

How value of unearned premium reserve is worked out

321-45 Assessable income to include gross premiums

general insurance company's assessable income for the

current

year includes the gross premiums received or receivable by the

company during the current year in respect of

general insurance

policies.

321-50 Assessable income to include amount for reduction in value

of unearned premium reserve

general insurance company's assessable income for the

current

year includes an amount equal to the amount (if any) by which:

General insurance Schedule 5

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 141

(a) the value, at the end of the previous income year, of the

company's unearned premium reserve; exceeds

(b) the value, at the end of the current year, of that reserve.

Note:

Those values are worked out under section 321-60.

321-55 Deduction for increase in value of unearned premium

reserve

general insurance company can deduct for the

current year an

amount equal to the amount (if any) by which:

(a) the value, at the end of the current year, of the company's

unearned premium reserve; exceeds

(b) the value, at the end of the previous income year, of that

reserve.

Note:

Those values are worked out under section 321-60.

321-60 How value of unearned premium reserve is worked out

Work out the value, at the end of an income year, of a

general

insurance company's unearned premium reserve in this way:

Method statement

Step 1. Add up the gross premiums received or receivable by the

company, in relation to

general insurance policies issued

in the course of carrying on

insurance business, in that

or an earlier income year.

Step 2. Reduce the step 1 amount by so much of the costs

incurred by the company in connection with the issue of

those policies as relate to the gross premiums, including,

for example, costs such as:

(a)

commission and brokerage fees; and

(b)

administration costs of processing insurance

proposals and renewals; and

(c)

administration costs of collecting premiums; and

(d)

selling and underwriting costs; and

Schedule 5

General insurance

Part 1

Main amendments

142 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

(e)

fire brigade charges; and

(f)

stamp duty; and

(g)

other charges, levies and contributions imposed by

governments or governmental authorities that

directly relate to general insurance policies.

Step 3. Reduce the step 2 amount by any premiums (the relevant

reinsurance premiums) paid or payable by the company,

in that or an earlier income year, for the reinsurance of

risks covered by those policies, except:

(a)

reinsurance premiums that the company cannot

deduct because of subsection 148(1) of the Income

Tax Assessment Act 1936 (about reinsurance with

non-residents); and

(b)

reinsurance premiums that were paid or payable in

respect of a particular class of

insurance business

where, under the contract of reinsurance, the

reinsurer agreed to pay, in respect of a loss

incurred by the company that is covered by the

relevant policy, some or all of the excess over an

agreed amount.

Step 4. Add to the step 3 amount any reinsurance commissions

received or receivable by the company that relate to the

relevant reinsurance premiums.

Step 5. The value, at the end of an income year, of the unearned

premium reserve is so much of the step 4 amount as the

company determines, based on proper and reasonable

estimates, to relate to risks covered by the policies in

respect of later income years.

Subdivision 321-C--Companies that self-insure in respect of

workers' compensation liabilities

Table of sections

General insurance Schedule 5

Main amendments Part 1

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 143

321-80

Assessable income to include amount for reduction in outstanding claims

liability

321-85

Deduction for outstanding claims liability

321-90

How value of outstanding claims liability is worked out

321-95

Deductions for claims paid during current year

321-80 Assessable income to include amount for reduction in

outstanding claims liability

The assessable income for the

current year of a company that is

not required by law to insure, and does not insure, against liability

for workers' compensation claims includes an amount equal to the

amount (if any) by which:

(a) the value, at the end of the previous income year, of the

company's liability for such claims that:

(i) arose from events that occurred in that or an earlier

income year; and

(ii) were not paid in full before the end of the previous

income year; exceeds

(b) the value, at the end of the current year, of that liability.

Note:

Those values are worked out under section 321-90.

321-85 Deduction for outstanding claims liability

A company that is not required by law to insure, and does not

insure, against liability for workers' compensation claims can

deduct for the

current year an amount equal to the amount (if any)

by which:

(a) the value, at the end of the current year, of the company's

liability for such claims that:

(i) arose from events that occurred in the current or an

earlier income year; and

(ii) were not paid in full before the end of the current year;

exceeds

(b) the value, at the end of the previous income year, of that

liability.

Note:

Those values are worked out under section 321-90.

Schedule 5

General insurance

Part 1

Main amendments

144 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

321-90 How value of outstanding claims liability is worked out

Work out the value, at the end of an income year, of a company's

liability for claims covered by section 321-80 or 321-85 by adding

up the amounts that, at the end of that income year, the company

determines, based on proper and reasonable estimates, to be

appropriate to set aside and invest in order to meet:

(a) liabilities for those claims; and

(b) direct settlement costs associated with those claims.

321-95 Deductions for claims paid during current year

A company that is not required by law to insure, and does not

insure, against liability for workers' compensation claims can

deduct for the

current year amounts paid during that year in

respect of such claims.

General insurance Schedule 5

Consequential amendments Part 2

Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010 145

Part 2--Consequential amendments

Income Tax Assessment Act 1936

3 Subsection 6(1) (definition of outstanding claims)

Repeal the definition.

4 Subsection 6(1) (both the definitions of value of the

outstanding claims liability)

Repeal the definitions.

5 Subsection 6(1) (definition of value of the unearned

premium reserve)

Repeal the definition.

Income Tax Assessment Act 1997

6 Section 10-5 (table item headed "general insurance")

Repeal the item, substitute:

general insurance companies and companies that self insure

gross premiums .................................................................... 321-45

reduction in value of outstanding claims liability ............... 321-10 and 321-80

reduction in value of unearned premium reserve ................ 321-50

7 Section 12-5 (table item headed "general insurance")

Repeal the item, substitute:

general insurance companies and companies that self

insure

claims paid ........................................................................... 321-25 and 321-95

increase in value of outstanding claims liability ................. 321-15 and 321-85

increase in value of unearned premium reserve .................. 321-55

8 Section 713-710

Omit "in Schedule 2J to the Income Tax Assessment Act 1936"

(wherever occurring).

9 Paragraph 713-710(b)

Omit "in that Schedule".

Schedule 5

General insurance

Part 2

Consequential amendments

146 Tax Laws Amendment (Transfer of Provisions) Bill 2010 No. , 2010

10 Section 713-710 (note 1)

Omit "in that Schedule".

11 Section 713-710 (note 2)

Omit "in that Schedule".

12 Subsection 995-1(1) (definition of contract of reinsurance)

Repeal the definition, substitute:

contract of reinsurance, in respect of

life insurance policies, does

not include a contract of reinsurance in respect of:

(a) the parts of

complying superannuation/FHSA life insurance

policies in respect of which the liabilities of the company that

issued the policies are to be discharged out of a

complying

superannuation/FHSA asset pool; or

(b) policies that are

exempt life insurance policies.

13 Application

The amendments made by this Schedule apply to the first income year

starting on or after the day on which this Act receives the Royal Assent

and later income years.

Commonwealth of Australia Bills

TAX LAWS AMENDMENT (TRANSFER OF PROVISIONS) BILL 2010