[pic] Income Tax Act 1986 Act No. 108 of 1986 as amended This compilation was prepared on 2 July 2008 taking into account amendments up to Act No. 45 of 2008 The text of any of those amendments not in force on that date is appended in the Notes section The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section Prepared by the Office of Legislative Drafting and Publishing, Attorney-General's Department, Canberra Contents 1 Short title [see Note 1] 1 2 Commencement [see Note 1] 1 3 Interpretation 1 4 Incorporation 1 5 Imposition of income tax 2 6 Adjustment where amount to be paid by, or refunded to, taxpayer would not exceed 49 cents 3 7 Levy of Tax 4 Notes 5 An Act to impose a tax upon incomes 1 Short title [see Note 1] This Act may be cited as the Income Tax Act 1986. 2 Commencement [see Note 1] This Act shall come into operation on the day on which it receives the Royal Assent. 3 Interpretation (1) In this Act, unless the contrary intention appears: Assessment Act means the Income Tax Assessment Act 1936; non-profit company means: (a) a company that is not carried on for the purposes of profit or gain to its individual members and is, by the terms of the company's constituent document, prohibited from making any distribution, whether in money, property or otherwise, to its members; or (b) a friendly society dispensary; prescribed unit trust means a trust estate that: (a) is a corporate unit trust within the meaning of Division 6B of Part III of the Assessment Act; or (b) is a public trading trust within the meaning of Division 6C of Part III of the Assessment Act; (2) In this Act, a reference to taxable income shall be read as a reference to taxable income of the year of income. 4 Incorporation The Assessment Act is incorporated, and shall be read as one, with this Act. 5 Imposition of income tax (1) Income tax is imposed in accordance with this Act and at the relevant rates declared by the Income Tax Rates Act 1986. (2) This Act does not impose tax payable in accordance with section 121H, 126, 128B, 128NA, 128NB or 128V of the Assessment Act. (2A) This Act does not impose tax payable in accordance with section 301-175 or 306-15, or Division 840, of the Income Tax Assessment Act 1997 or Division 840 of the Income Tax (Transitional Provisions) Act 1997. (2B) This Act does not impose tax payable in accordance with section 345-100 of the Income Tax Assessment Act 1997. (3) This Act does not impose tax upon the taxable income of a non- profit company where that taxable income does not exceed $416. (4) If this Act, insofar as it imposes tax upon the taxable income of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust (as defined in the Income Tax Assessment Act 1997), would, apart from this subsection, deal with 2 subjects of taxation (within the meaning of section 55 of the Constitution), namely: (a) the taxation of so much of the taxable income as is attributable to contributions that are included in assessable income under Subdivision 295-C of the Income Tax Assessment Act 1997; and (b) the taxation of the remainder of the taxable income; this Act imposes tax in respect of only that subject of taxation mentioned in paragraph (b). (5) This Act does not impose tax upon the taxable income of a non- complying superannuation fund within the meaning of the Income Tax Assessment Act 1997, to the extent that the taxable income is attributable to the inclusion of an amount in the fund's assessable income under table item 2 in section 295-320 of that Act. (6) This Act does not impose tax upon the taxable income of a Australian superannuation fund, to the extent that the taxable income is attributable to the inclusion of an amount in the fund's assessable income under table item 3 in section 295-320 of that Act. 6 Adjustment where amount to be paid by, or refunded to, taxpayer would not exceed 49 cents (1) This section applies for the purposes of the making of an assessment of tax (other than further tax payable under subsection 94(9), (11) or (12) of the Assessment Act) in respect of the income of a taxpayer of a year of income where, upon the making of the assessment and the serving of notice of the assessment upon the taxpayer, there would, but for this section, be a net amount of not more than 49 cents payable by the Commissioner to the taxpayer, or by the taxpayer to the Commissioner, under the law relating to income tax, after taking into account all liabilities of the taxpayer, and all rebates and credits allowable to the taxpayer, under that law. (2) Where this section applies in relation to the making of an assessment: (a) if the amount of not more than 49 cents would be an amount payable to the taxpayer-additional tax equal to that amount is imposed by this Act in respect of the income of the taxpayer of the year of income; and (b) if the amount of not more than 49 cents would be an amount payable to the Commissioner-the amount that, but for this section, would be the amount of income tax imposed in respect of the income of the taxpayer of the year of income before the allowance of any rebates to which the taxpayer is entitled, is reduced by so much of that amount of not more than 49 cents as does not exceed the amount calculated by deducting the amount of any such rebates from the sum of the amount that is to be so reduced and any amount of further tax payable by the taxpayer in respect of that year of income under subsection 94(9), (11) or (12) of the Assessment Act. (3) A reference in this section to a liability of the taxpayer shall be read as including a reference to a liability in respect of income tax or provisional tax notified to the taxpayer by the Commissioner, notwithstanding that the amount of the liability has not become due and payable. (4) For the purposes of any calculation under the law relating to income tax that depends upon the amount of tax paid or payable by, or assessed in respect of the income of, a taxpayer, the tax assessed and payable under an assessment in relation to which this section applies shall be deemed to be the tax that would have been so assessed and payable if this section had not applied. 7 Levy of Tax The tax imposed by subsection 5(1) is levied, and shall be paid, for the financial year commencing on 1 July 1986 and for all subsequent financial years until the Parliament otherwise provides Notes to the Income Tax Act 1986 Note 1 The Income Tax Act 1986 as shown in this compilation comprises Act No. 108, 1986 amended as indicated in the Tables below. All relevant information pertaining to application, saving or transitional provisions prior to 4 April 2002 is not included in this compilation. For subsequent information see Table A. Table of Acts |Act |Number |Date |Date of |Applica| | |and year|of Assent|commencement|tion, | | | | | |saving | | | | | |or | | | | | |transit| | | | | |ional | | | | | |provisi| | | | | |ons | |Income Tax Act |108, |4 Nov |4 Nov 1986 | | |1986 |1986 |1986 | | | |Income Tax |64, 1987|5 June |5 June 1987 |- | |Amendment Act | |1987 | | | |1987 | | | | | |Income Tax |109, |26 Nov |26 Nov 1987 |S. 6 | |Amendment Act |1987 |1987 | | | |(No. 2) 1987 | | | | | |Taxation Laws |11, 1988|26 Apr |Part III |- | |Amendment Act | |1988 |(ss. 6, 7): | | |1988 | | |Royal Assent| | | | | |(a) | | |Income Tax |92, 1988|24 Nov |24 Nov 1988 |- | |Amendment Act | |1988 | | | |1988 | | | | | |Income Tax |100, |30 June |30 June 1989|- | |Amendment Act |1989 |1989 | | | |1989 | | | | | |Income Tax |142, |23 Nov |23 Nov 1989 |- | |Amendment Act |1989 |1989 | | | |(No. 2) 1989 | | | | | |Income Tax |85, 1990|6 Nov |6 Nov 1990 |- | |Amendment Act | |1990 | | | |1990 | | | | | |Taxation Laws |181, |19 Dec |Schedule 1 |Sch. 3 | |Amendment Act |1994 |1994 |(items |(item 1| |(No. 4) 1994 | | |22-85): 13 |01) | | | | |Oct 1994 | | | | | |Remainder: | | | | | |Royal Assent| | |New Business Tax|89, 2000|30 June |Schedule 2 |- | |System | |2000 |(items 112, | | |(Miscellaneous) | | |113): Royal | | |Act (No. 2) 2000| | |Assent (b) | | |Taxation Laws |15, 2002|4 Apr |4 Apr 2002 |Sch. 1 | |Amendment | |2002 | |(item 2| |(Superannuation)| | | |1) [see| |Act (No. 1) 2002| | | |Table | | | | | |A] | |Tax Laws |101, |14 Sept |Schedule 2 |Sch. 6 | |Amendment |2006 |2006 |(item 117) | | |(Repeal of | | |and |(items | |Inoperative | | |Schedule 6 |1, | |Provisions) Act | | |(items 1, |6-11) | |2006 | | |6-11): Royal|[see | | | | |Assent |Table | | | | | |A] | |Income Tax |16, 2007|15 Mar |(c) |Sch. 1 | |Amendment Act | |2007 | |(item 9| |2007 | | | |) [see | | | | | |Table A| | | | | |] | |Tax Laws |32, 2008|23 June |Schedule 1 |Sch. 1 | |Amendment | |2008 |(items 3, |(item | |(Election | | |58): Royal |58) | |Commitments | | |Assent |[see | |No. 1) Act 2008 | | | |Table A| | | | | |] | |First Home Saver|45, 2008|25 June |Schedule 1 |- | |Accounts | |2008 |(item 1): 26| | |(Consequential | | |June 2008 | | |Amendments) Act | | | | | |2008 | | | | | (a) The Income Tax Act 1986 was amended by Part III (sections 6 and 7) only of the Taxation Laws Amendment Act 1988, subsection 2(1) of which provides as follows: (1) Subject to this section, this Act shall come into operation on the day on which it receives the Royal Assent. (b) The Income Tax Act 1986 was amended by Schedule 2 (items 112 and 113) only of the New Business Tax System (Miscellaneous) Act (No. 2) 2000, subsection 2(1) of which provides as follows: (1) Subject to this section, this Act commences on the day on which it receives the Royal Assent. (c) Section 2 of the Income Tax Amendment Act 2007 provides as follows: 2 This Act commences immediately after the commencement of Schedule 1 to the Tax Laws Amendment (Simplified Superannuation) Act 2007. Schedule 1 commenced on 15 March 2007. Table of Amendments |ad. = added or inserted am. = amended rep. = | |repealed rs. = repealed and substituted | |Provision affected|How affected | |S. 3 |am. No. 89, 2000 | |S. 5 |am. No. 109, 1987; No. 11, 1988; | | |No. 100, 1989; No. 181, 1994; | | |No. 89, 2000; No. 15, 2002; No. 101,| | |2006; No. 16, 2007; Nos. 32 and 45, | | |2008 | |S. 7 |am. No. 109, 1987 | | |rs. No. 92, 1988 | | |am. No. 142, 1989 | | |rs. No. 85, 1990 | |S. 8 |am. No. 64, 1987 | | |rep. No. 109, 1987 | |Ss. 9, 10 |rep. No. 109, 1987 | Table A Application, saving or transitional provisions Taxation Laws Amendment (Superannuation) Act (No. 1) 2002 (No. 15, 2002) Schedule 1 21 Application The amendments made by this Schedule apply to payments made on or after 1 July 2002. Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 (No. 101, 2006) Schedule 6 1 Application of Schedule 1 and 2 amendments Except as mentioned in items 2 and 3, the repeals and amendments made by Schedules 1 and 2 apply: (a) so far as they affect assessments-to assessments for the 2006-07 income year and all later income years; and (b) otherwise-to acts done or omitted to be done, or states of affairs existing, after the commencement of the repeals and amendments. 6 Object The object of this Part is to ensure that, despite the repeals and amendments made by this Act, the full legal and administrative consequences of: (a) any act done or omitted to be done; or (b) any state of affairs existing; or (c) any period ending; before such a repeal or amendment applies, can continue to arise and be carried out, directly or indirectly through an indefinite number of steps, even if some or all of those steps are taken after the repeal or amendment applies. 7 Making and amending assessments, and doing other things, in relation to past matters Even though an Act is repealed or amended by this Act, the repeal or amendment is disregarded for the purpose of doing any of the following under any Act or legislative instrument (within the meaning of the Legislative Instruments Act 2003): (a) making or amending an assessment (including under a provision that is itself repealed or amended); (b) exercising any right or power, performing any obligation or duty or doing any other thing (including under a provision that is itself repealed or amended); in relation to any act done or omitted to be done, any state of affairs existing, or any period ending, before the repeal or amendment applies. Example 1: On 31 July 1999, Greg Ltd lodged its annual return under former section 160ARE of the Income Tax Assessment Act 1936. The return stated that the company had a credit on its franking account and that no franking deficit tax was payable for the 1998-99 franking year. Under former section 160ARH of that Act, the Commissioner was taken to have made an assessment consistent with the return. Following an audit undertaken after the repeal of Part IIIAA of that Act, the Commissioner concludes that Greg Ltd fraudulently overfranked dividends it paid during the 1998- 99 franking year, and had a franking account deficit for that franking year. As a result, the Commissioner considers that franking deficit tax and a penalty by way of additional tax are payable. The Commissioner can amend the assessment under former section 160ARN of that Act, because item 7 of this Schedule disregards the repeal of that section for the purposes of making an assessment in relation to the 1998-99 franking year. Item 7 will also disregard the repeal of Division 11 of former Part IIIAA to the extent necessary for the Commissioner to assess Greg Ltd's liability to a penalty by way of additional tax. Despite the repeal of sections 160ARU and 160ARV, item 9 will ensure that the general interest charge will accrue on the unpaid franking deficit tax and penalty until they are paid. Item 7 will also preserve Greg Ltd's right, under former section 160ART of that Act, to object against the Commissioner's amended assessment (including the penalty), since the objection is the exercise of a right in relation to a franking year that ended before the repeal of Part IIIAA. Example 2: During the 1997-98 income year, Duffy Property Ltd withheld amounts from its employees' wages as required by former Divisions 1AAA and 2 of Part VI of the Income Tax Assessment Act 1936. The company failed to notify the Commissioner of those amounts, and failed to remit them to the Commissioner. Following an audit undertaken after the repeal of those Divisions, the Commissioner discovers that the withheld amounts have not been remitted. The company's records are incomplete and the Commissioner is unable to completely ascertain the extent of its liability for the withheld amounts. Under section 222AGA of that Act, the Commissioner makes an estimate of the liability. Item 7 will disregard the repeal of section 220AAZA of that Act (which empowered the Commissioner to recover the amount of the estimate). Even though the estimate is made after the repeal, it relates to amounts withheld before the repeal. 8 Saving of provisions about effect of assessments If a provision or part of a provision that is repealed or amended by this Act deals with the effect of an assessment, the repeal or amendment is disregarded in relation to assessments made, before or after the repeal or amendment applies, in relation to any act done or omitted to be done, any state of affairs existing, or any period ending, before the repeal or amendment applies. 9 Saving of provisions about general interest charge, failure to notify penalty or late reconciliation statement penalty If: (a) a provision or part of a provision that is repealed or amended by this Act provides for the payment of: (i) general interest charge, failure to notify penalty or late reconciliation statement penalty (all within the meaning of the Income Tax Assessment Act 1936); or (ii) interest under the Taxation (Interest on Overpayments and Early Payments) Act 1983; and (b) in a particular case, the period in respect of which the charge, penalty or interest is payable (whether under the provision or under the Taxation Administration Act 1953) has not begun, or has begun but not ended, when the provision is repealed or amended; then, despite the repeal or amendment, the provision or part continues to apply in the particular case until the end of the period. 10 Repeals disregarded for the purposes of dependent provisions If the operation of a provision (the subject provision) of any Act or legislative instrument (within the meaning of the Legislative Instruments Act 2003) made under any Act depends to any extent on an Act, or a provision of an Act, that is repealed by this Act, the repeal is disregarded so far as it affects the operation of the subject provision. 11 Schedule does not limit operation of section 8 of the Acts Interpretation Act 1901 This Schedule does not limit the operation of section 8 of the Acts Interpretation Act 1901. Income Tax Amendment Act 2007 (No. 16, 2007) Schedule 1 9 Application The amendments made by this Schedule apply to the 2007-2008 income year and later years. Tax Laws Amendment (Election Commitments No. 1) Act 2008 (No. 32, 2008) Schedule 1 58 Application The amendments made by this Schedule apply to fund payments made in relation to the first income year starting on or after the first 1 July after the day on which this Act receives the Royal Assent and later income years.