Commonwealth Consolidated Acts Commonwealth Consolidated ActsThis Division has effect notwithstanding anything contained in any law of the Commonwealth other than this Act.
Contents
Part III--Liability to taxation i
Division 10B--Industrial property 1
124K..... Interpretation ...................................................................................... 1
124KAADivision subject to Division 245 of Schedule 2C ............................... 4
124KA.. Application of Division where deduction allowable under former section 124ZAF or section 124ZAFA 4
5>12 4L...... Application ......................................................................................... 6
124M.... Annual deductions .............................................................................. 7
124N..... Deductions on the disposal or lapse of a unit of industrial property 8
124P...... Amount to be included in assessable income on disposal of a unit of industrial property 9
124PA... Roll‑over relief .................................................................................. 10
124Q..... Disposal of part of a unit of industrial property ............................. 12
124R..... Cost of a unit of industrial property ................................................ 12
124S...... Residual value ................................................................................... 15
124T..... Consideration receivable on disposal ................................................ 16
124UA.. Effective life of certain units of industrial property ......................... 17
124V..... Interest by licence in patent etc. ....................................................... 18
124W.... Disposal of unit of industrial property on change of partnership etc. 19
124WA. Disposal of unit of industrial property where deduction allowable under former section 124ZAF or section 124ZAFA .......................................................................................................... 20
124Y..... Damages for infringement ................................................................. 25
124Z..... Benefit from overseas rights ............................................................. 25
Division 10BA--Australian films 26
Subdivision A--Preliminary 26
124ZAA........................................................................................ Interpretation 26
124ZAB Provisional certificates ...................................................................... 29
124ZAC Final certificates ................................................................................ 31
124ZAD.......................................................... Determination of content of film 32
124ZADAADelegation by Arts Minister ....................................................... 33
124ZADABReview of decisions of Arts Minister ......................................... 33
124ZADADeclarations ................................................................................... 34
124ZADBNotification regarding non‑completion of film ............................... 38
124ZAE Election that Division not apply ...................................................... 38
124ZAEATransfer by way of security ........................................................... 39
Subdivision B--Deductions for capital expenditure 39
124ZAFAASubdivision subject to Division 245 of Schedule 2C ................... 39
124ZAFADeductions for capital expenditure under post 12 January 1983 contracts 39
124ZAG................................................................ Expenditure of contributions 44
124ZAGASatisfaction of Commissioner as to the future application of certain provisions 45
124ZAH................................................... Allocation of contributions expended 46
124ZAJ. Non‑arm's length transactions .......................................................... 47
124ZAK................................................. Amounts expended in acquiring assets 48
124ZAL Deduction reduced if future copyright assigned ............................... 48
124ZAMNo deduction unless expenditure at risk .......................................... 49
Subdivision C--Miscellaneous 51
124ZAO.................................. Limitation on deductibility of revenue expenses 51
124ZAP Special provisions relating to partnerships ...................................... 52
Division 10E--PDFs (pooled development funds) 54
Subdivision A--Shares in PDFs 54
124ZM. Treatment distributions to shareholders in PDF .............................. 54
124ZN.. Exemption of income from sale of shares in a PDF .......................... 57
124ZO.. Shares in a PDF are not trading stock ............................................... 57
124ZQ.. Effect of company becoming a PDF ................................................. 57
124ZR... Effect of company ceasing to be a PDF ........................................... 58
Subdivision B--The taxable income of PDFs 58
124ZS... Definitions ........................................................................................ 58
124ZTA Taxable income in first year as PDF if PDF component is nil ......... 59
124ZT... SME assessable income .................................................................... 59
124ZU.. SME income component .................................................................. 60
124ZV... Unregulated investment component ................................................. 60
Subdivision C--Adjustments of the tax treatment of capital gains and capital losses of PDFs 61
124ZW.. Definitions ........................................................................................ 61
124ZX.. Companies to which this Subdivision applies .................................. 62
124ZY... Classes of assessable income ............................................................ 62
124ZZ... Treatment of capital gains ................................................................ 63
124ZZA Allocation of gain amounts and loss amounts to classes of assessable income 63
124ZZB Assessable income etc. in relation to capital gains ........................... 64
124ZZD No net capital loss ............................................................................ 64
Division 11--Interest paid by companies on bearer debentures 65
126........ Interest paid by a company on bearer debentures ............................ 65
127........ Credit for tax paid by company ....................................................... 65
128........ Assessments of tax ........................................................................... 66
Division 11A--Dividends, interest and royalties paid to non‑residents and to certain other persons 67
Subdivision A--General 67
128AAAApplication of Division to non‑share dividends .............................. 67
128A..... Interpretation .................................................................................... 67
128AA.. Deemed interest in respect of transfers of certain securities ............ 72
128AB.. Certificates relating to issue price of certain securities ..................... 72
128AC.. Deemed interest in respect of hire‑purchase and certain other agreements 74
128AD.. Indemnification etc. agreements in relation to bills of exchange and promissory notes 77
128AE... Interpretation provisions relating to offshore banking units ............ 78
128AF... Payments through interposed entities .............................................. 83
128B..... Liability to withholding tax .............................................................. 84
128C..... Payment of withholding tax .............................................................. 94
128D..... Certain income not assessable .......................................................... 95
128F...... Division does not apply to interest on certain publicly offered company debentures or debt interests 96
128FA... Division does not apply to interest on certain publicly offered unit trust debentures or debt interests 105
128GB.. Division not to apply to interest payments on offshore borrowings by offshore banking units 110
128NA.. Special tax payable in respect of certain securities and agreements 110
128NB.. Special tax payable in respect of certain dealings by current and former offshore banking units 111
128NBACredits in respect of amounts assessed in relation to certain financial arrangements 113
128P...... Objections ....................................................................................... 115
128Q..... Power of Commissioner to obtain information .............................. 115
128R..... Informal arrangements .................................................................... 116
Division 11B--Equity investments in small‑medium enterprises 117
128TG.. Summary of this Division ............................................................... 117
128TH.. When Division applies ................................................................... 117
128TI.... Consequences of Division applying ............................................... 118
128TJ.... Acquiring a threshold interest in an SME ....................................... 119
128TK.. SME or small‑medium enterprise ................................................... 119
128TL... Subsidiary and direct ownership group .......................................... 120
Division 11C--Payments in respect of mining operations on Aboriginal land 121
128U..... Interpretation .................................................................................. 121
128V..... Liability to mining withholding tax ................................................. 124
128W.... Payment of mining withholding tax ................................................ 124
128X..... Power of Commissioner to obtain information .............................. 125
Division 12--Oversea ships 126
129........ Taxable income of ship‑owner or charterer .................................... 126
130........ Master or agent to make return ...................................................... 126
131........ Determination by Commissioner .................................................... 126
132........ Assessment of tax ........................................................................... 126
133........ Master liable to pay ....................................................................... 126
134........ Notice of assessment ...................................................................... 127
135........ Clearance of ship ............................................................................ 127
135A..... Freights payable under certain agreements ..................................... 127
Division 13--International agreements and determination of source of certain income 128
136AA.. Interpretation .................................................................................. 128
136AB.. Operation of Division ..................................................................... 130
136AC.. International agreements ................................................................. 130
136AD.. Arm's length consideration deemed to be received or given ........... 131
136AE... Determination of source of income etc. .......................................... 133
136AF... Consequential adjustments to assessable income and allowable deductions 139
Division 13A--Employee share schemes 142
Subdivision A--Key principle and overview of Division 142
139........ The key principle ........................................................................... 142
139A..... Overview of Division ..................................................................... 142
Subdivision B--Inclusion of discount in assessable income 143
139B..... Discount to be included in assessable income ................................ 143
139BA.. Reduction of amounts included--elections .................................... 144
Subdivision C--Key concepts: employee share scheme, discount, cessation time, qualifying shares and rights and exemption conditions 144
139C..... Employee share schemes ................................................................ 144
139CA.. Cessation time--shares .................................................................. 145
139CB... Cessation time--rights ................................................................... 146
139CC... Calculation of discount ................................................................... 147
139CD.. Meaning of qualifying shares and qualifying rights ........................ 148
139CDAAdditional requirement for shares or rights acquired while engaged in foreign service 149
139CE... Exemption conditions ..................................................................... 149
Subdivision D--Special provisions 150
139D..... Discount assessable to associate if share acquired by taxpayer in respect of associate's employment 150
139DA.. Acquisition of legal interest in shares or rights--certain discounts not assessable 151
139DB.. No deduction until share or right acquired ...................................... 152
139DC.. Deduction for provider of certain qualifying shares or rights ......... 152
139DD.. No benefit where rights lost ........................................................... 153
139DE... Amount not assessable under other provisions .............................. 154
139DF... Anti‑avoidance--certain shares and rights not qualifying shares and qualifying rights 154
139DG.. Amendment of assessments to account for reductions of amounts included in assessable income 154
Subdivision DA--Takeovers and restructures 155
139DP... Object of this Subdivision .............................................................. 155
139DQ.. The effect of 100% takeovers and restructures on employee share schemes 155
139DR.. Conditions for the continuation of shares or rights ........................ 156
139DS... Apportionment rules ...................................................................... 157
Subdivision DB--Stapled securities 158
139DSA Object of this Subdivision .............................................................. 158
139DSB Application of Division to stapled securities ................................. 158
139DSC Discount not to be included in assessable income unless stapled security or right is qualifying 159
139DSD Division does not also apply to share part of stapled security ..... 159
139DSE. Modifications relating to employment ........................................... 159
139DSF. Modification relating to legal or beneficial interest ......................... 160
139DSG Modification relating to voting rights ............................................. 160
139DSH Cessation time when stapling arrangement ceases .......................... 161
139DSI.. Deduction to be apportioned .......................................................... 161
Subdivision E--Elections 162
139E...... Taxpayer may make election .......................................................... 162
Subdivision F--Special provisions about the market value of a share or right 163
139F...... Meaning of market value of a share or right ................................... 163
139FA... Listed shares or rights--market value ............................................ 163
139FAA Listed shares--market value where public offer ............................ 164
139FB... Unlisted shares--market value ....................................................... 165
139FC... Unlisted rights--market value ........................................................ 165
139FD... Conditions and restrictions to be disregarded ................................. 166
139FE... Value of right nil or can not be determined ..................................... 166
139FF... Value of legal and beneficial interests ............................................. 167
139FG... Meaning of qualified person ........................................................... 167
139FI.... Provision of information about market value ................................. 167
139FJ.... Outline of remainder of Subdivision ............................................... 167
139FK... Step 1--calculate the calculation percentage .................................. 167
139FL... Step 2--how to use calculation percentage .................................... 168
139FM.. Table 1 and instructions ................................................................. 168
139FN... Table 2 and instructions ................................................................. 170
Subdivision G--Definitions 172
139G..... Meaning of acquiring or providing a share or right ........................ 172
139GA.. Meaning of employee and employer ................................................ 172
139GB.. Meaning of permanent employee .................................................... 173
139GBAMeaning of foreign service ............................................................. 173
139GC.. Meaning of holding company ......................................................... 173
139GCAMeaning of subsidiary .................................................................... 174
139GCB Meaning of 100% takeover ............................................................ 174
139GCC Meaning of restructure ................................................................... 174
139GCDMeaning of stapled security and stapled entity ................................ 174
139GD.. Meaning of approved stock exchange ............................................ 174
139GE... Meaning of associate ...................................................................... 175
139GF... Meaning of conducting a scheme on a non‑discriminatory basis ... 175
139GG.. Meaning of provision of financial assistance ................................. 176
139GH.. Index of definitions ......................................................................... 176
Division 15--Insurance with non‑residents 178
141........ Interpretation .................................................................................. 178
142........ Income derived by non‑resident insurer ......................................... 178
143........ Taxable income of non‑resident insurer .......................................... 179
144........ Liability of agents of insurer ........................................................... 179
145........ Deduction of premiums .................................................................. 179
146........ Exporter to furnish information ...................................................... 179
147........ Rate of tax in special circumstances ............................................... 180
148........ Reinsurance with non‑residents ...................................................... 180
Division 16--Averaging of incomes 183
149........ Average income ............................................................................... 183
149A..... Capital gains, abnormal income and certain death benefits to be disregarded 183
150........ First average year ............................................................................ 184
151........ First application of Division in relation to a taxpayer ................... 184
152........ Taxpayer not in receipt of assessable income ................................ 184
153........ Taxpayer with no taxable income ................................................... 184
154........ Excess of allowable deductions ....................................................... 185
155........ Permanent reduction of income ...................................................... 185
156........ Rebate of tax for, or complementary tax payable by, certain primary producers 185
157........ Application of Division to primary producers .............................. 192
158........ Application of Division .................................................................. 193
158A..... Election that Division not apply .................................................... 193
Division 16D--Certain arrangements relating to the use of property 194
159GE... Interpretation .................................................................................. 194
159GEA Division applies to certain State/Territory bodies ......................... 201
159GF... Residual amounts ............................................................................ 201
159GG.. Qualifying arrangements ................................................................. 205
159GH.. Application of Division in relation to property ............................. 208
159GJ... Effect of application of Division on certain deductions etc. .......... 209
159GK.. Effect of application of Division on assessability of arrangement payments 218
159GL... Special provision relating to Division 10C or 10D property ......... 221
159GM. Special provision where cost of plant etc. is also eligible capital expenditure 222
159GN.. Effect of use of property under qualifying arrangement for producing assessable income 223
159GO.. Special provisions relating to partnerships .................................... 226
Division 16E--Accruals assessability etc. in respect of certain security payments 230
159GP... Interpretation .................................................................................. 230
159GQ.. Tax treatment of holder of qualifying security ............................... 235
159GQAAccrual period ................................................................................ 235
159GQBAccrual amount ............................................................................... 236
159GQCImplicit interest rate for fixed return security ................................. 238
159GQDImplicit interest rate for variable return security ............................ 238
159GR.. Consequences of actual payments .................................................. 241
159GS... Balancing adjustments on transfer of qualifying security ............... 241
159GT.. Tax treatment of issuer of a qualifying security ............................. 243
159GU.. Effect of Division on certain transfer profits and losses ................ 244
159GV.. Consequence of variation of terms of security ............................... 245
159GW. Effect of Division in relation to non‑residents ............................... 247
159GX.. Effect of Division where certain payments not assessable ............ 248
159GY.. Effect of Division where qualifying security is trading stock ........ 248
159GZ.. Stripped securities .......................................................................... 248
Division 16J--Effect of cancellation of subsidiary's shares in holding company 251
159GZZZCInterpretation--general .............................................................. 251
159GZZZDMeaning of eligible entity , eligible interest and eligible proportion 252
159GZZZEShare cancellations to which this Division applies .................... 252
159GZZZFEffect on subsidiary of share cancellations to which this Division applies 252
159GZZZGPre‑cancellation disposals of eligible interests ........................... 253
159GZZZHPost‑cancellation disposals of eligible interests etc. .................. 254
159GZZZIAdditional application of sections 159GZZZG and 159GZZZH to associates 255
Division 16K--Effect of buy‑backs of shares 257
Subdivision AA--Application of Division to non‑share equity interests 257
159GZZZIAApplication of Division to non‑share dividends ...................... 257
Subdivision A--Interpretation 257
159GZZZJInterpretation .............................................................................. 257
159GZZZKExplanation of terms .................................................................. 257
159GZZZL Special buy‑backs not made in ordinary course of trading on a stock exchange 258
159GZZZMPurchase price in respect of buy‑back ...................................... 258
Subdivision B--Company buying‑back shares 259
159GZZZNBuy‑back and cancellation disregarded for certain purposes ..... 259
Subdivision C--Off‑market purchases 259
159GZZZPPart of off‑market purchase price is a dividend ......................... 259
159GZZZQConsideration in respect of off‑market purchase ...................... 260
Subdivision D--On‑market purchases 263
159GZZZRNo part of on‑market purchase price is a dividend .................... 263
159GZZZSConsideration in respect of on‑market purchase ........................ 263
Division 16L--Tax‑exempt infrastructure borrowings 264
159GZZZZDInterpretation .......................................................................... 264
159GZZZZEInfrastructure borrowings to be non‑assessable and non‑deductible 265
159GZZZZFTax exemption to be disregarded for certain purposes ............ 267
159GZZZZGRebate election ........................................................................ 267
159GZZZZHTax payable where infrastructure borrowing certificate cancelled 270
Division 17--Rebates 272
Subdivision A--Concessional rebates 272
159H..... Application ..................................................................................... 272
159HA.. Indexation of rebate amounts in sections 159J, 159K and 159L .... 272
159J...... Rebates for dependants .................................................................. 274
159K..... Sole parent rebate ........................................................................... 281
159L...... Housekeeper ................................................................................... 282
159M.... Double concessional rebates ........................................................... 285
159N..... Rebate for certain low‑income taxpayers ....................................... 286
159P...... Rebate for medical expenses ........................................................... 286
Subdivision AB--Lump sum payments in arrears 290
159ZR... Interpretation .................................................................................. 290
159ZRA Eligibility for rebate ........................................................................ 292
159ZRB Calculation of rebate ....................................................................... 292
159ZRC Notional tax amount for recent accrual years ................................. 293
159ZRD Notional tax amount for distant accrual years ................................ 293
Subdivision B--Miscellaneous 295
160AAAATax rebate for low income aged persons ...................................... 295
160AAABTax rebate for low income aged persons--trustees assessed under section 98 296
160AAARebate in respect of certain pensions, benefits etc. ........................ 297
160AABRebate in respect of amounts assessable under section 26AH ....... 299
160AD.. aximum amount of rebates .............................................................. 301
160ADAMost tax offsets under the 1997 Assessment Act are treated as rebates 301
Part IIIB--Australian branches of foreign banks 302
Division 1--Preliminary 302
160ZZVAObject ........................................................................................... 302
160ZZVBApplication ................................................................................... 302
160ZZV Definitions ...................................................................................... 303
160ZZW Certain provisions to apply as if Australian branch of foreign bank were a separate legal entity 304
Division 2--Provisions relating to income tax 306
160ZZX Income of branch to have Australian source ................................... 306
160ZZZ Notional borrowing by branch from bank ...................................... 306
160ZZZANotional payment of interest by branch to bank ......................... 306
160ZZZCOffshore banking units .................................................................. 308
160ZZZENotional derivative transactions between branch and bank .......... 308
160ZZZFNotional foreign exchange transactions between branch and bank 309
160ZZZGLosses ........................................................................................... 309
160ZZZHNet capital losses .......................................................................... 309
160ZZZI.................................................. Certain transactions to be disregarded 309
Division 3--Provisions relating to withholding tax 310
160ZZZJWithholding tax on interest paid by branch to bank ...................... 310
Division 4--Extension of Part to Australian branches of foreign financial entities 311
160ZZZKTreatment like Australian branches of foreign banks ................... 311
Part IV--Returns and assessments 312
161........ Annual returns ................................................................................ 312
161A..... Form and content of returns ........................................................... 312
161AA.. Contents of returns of full self‑assessment taxpayers ................... 313
161G..... Tax agent to give taxpayer copy of notice of assessment .............. 313
162........ Further returns and information ..................................................... 313
163........ Special returns ................................................................................ 314
163A..... Late lodgement penalty--relevant entities, instalment taxpayers and full self‑assessment taxpayers 314
163AA.. General interest charge on unpaid penalty ..................................... 316
163B..... Late lodgment of returns by persons other than relevant entities, instalment taxpayers and full self‑assessment taxpayers ........................................................................................ 316
164........ Returns deemed to be duly made .................................................... 319
166........ Assessment ..................................................................................... 319
166A..... Deemed assessment ........................................................................ 319
167........ Default assessment ......................................................................... 321
168........ Special assessment .......................................................................... 321
169........ Assessments on all persons liable to tax ........................................ 321
169A..... Reliance by Commissioner on returns and statements ................... 322
170........ Amendment of assessments ........................................................... 323
170C..... Power of Commissioner to reduce amount of tax payable in certain cases 335
171........ Where no notice of assessment served ........................................... 335
171A..... Limited period to make assessments for nil liability returns for the 2003‑04 year of income or earlier 336
172........ Refunds of amounts overpaid ......................................................... 338
173........ Amended assessment to be an assessment ..................................... 339
174........ Notice of assessment ...................................................................... 339
175........ Validity of assessment .................................................................... 339
175A..... Objections against assessments ...................................................... 339
176........ Judicial notice of signature .............................................................. 340
177........ Evidence .......................................................................................... 340
Part IVA--Schemes to reduce income tax 342
177A..... Interpretation .................................................................................. 342
177B..... Operation of Part ............................................................................ 343
177C..... Tax benefits .................................................................................... 343
177CA.. Withholding tax avoidance .............................................................. 348
177D..... Schemes to which Part applies ....................................................... 348
177E...... Stripping of company profits ......................................................... 349
177EA... Creation of franking debit or cancellation of franking credits ......... 351
177EB... Cancellation of franking credits--consolidated groups .................. 358
177F...... Cancellation of tax benefits etc. ...................................................... 361
177G..... Amendment of assessments ........................................................... 365
Part VA--Tax file numbers 366
Division 1--Preliminary 366
202........ Objects of this Part ......................................................................... 366
202A ..... Interpretation .................................................................................. 368
202AA.. Definition of eligible PAYG payment .............................................. 372
Division 2--Issuing of tax file numbers 373
202B..... Application for tax file number ...................................................... 373
202BA.. Issuing of tax file numbers .............................................................. 373
202BB... Current tax file number ................................................................... 374
202BC... Deemed refusal by Commissioner .................................................. 374
202BD.. Interim notices ................................................................................ 374
202BE... Cancellation of tax file numbers ...................................................... 375
202BF... Alteration of tax file numbers ......................................................... 375
Division 3--Quotation of tax file numbers by recipients of eligible PAYG payments 376
202C..... TFN declarations by recipients of eligible PAYG payments ......... 376
202CA.. Operation of TFN declaration ........................................................ 376
202CB... Quotation of tax file number in TFN declaration ........................... 377
202CC... Making a replacement TFN declaration in place of an ineffective declaration 379
202CD.. Sending of TFN declaration to Commissioner ................................ 379
202CE... Effect of incorrect quotation of tax file number .............................. 380
202CF... Payer must notify Commissioner if no TFN declaration by recipient 381
Division 4--Quotation of tax file numbers in connection with certain investments 383
202D..... Explanation of terms: investment, investor, investment body ....... 383
202DA.. Phasing‑in period for Division ........................................................ 386
202DB.. Quotation of tax file numbers in connection with investments ...... 386
202DC.. Method of quoting tax file number ................................................. 387
202DD.. Investor excused from quoting tax file number in certain circumstances 387
202DDBQuotation of tax file number in connection with indirectly
held
investment
..............................................................................
388
202DE... Securities dealer to inform the investment body of tax file number 390
202DF... Effect of incorrect quotation of tax file number .............................. 390
202DG.. Investments held jointly ................................................................. 391
202DH.. Tax file number quoted for superannuation or surcharge purposes taken to be quoted for purposes of the taxation of eligible termination payments ......................................................... 392
202DHATax file number quoted for Division 3 purposes taken to have been quoted for superannuation purposes 393
202DI.... Tax file number quoted for RSA purposes taken to be quoted for purposes of the taxation of superannuation benefits ........................................................................................................ 393
202DJ... Tax file number quoted for purposes of taxation of superannuation benefits taken to be quoted for surcharge purposes ........................................................................................................ 393
Division 4A--Quotation of tax file numbers in connection with farm management deposits 395
202DK.. Interpretation .................................................................................. 395
202DL... Quotation of tax file number ........................................................... 395
202DM. Effect of incorrect quotation of tax file number .............................. 395
Division 5--Exemptions 397
202EA... Persons receiving certain pensions etc.--employment .................. 397
202EB... Persons receiving certain pensions etc.--investments ................... 398
202EC... Entities not required to lodge income tax returns ........................... 399
202EE... Non‑residents ................................................................................. 401
202EF... Territory residents etc. ................................................................... 401
202EG... Manner of completing declarations ................................................ 402
202EH... Declarations under this Division to be retained in certain circumstances 402
Division 6--Review of decisions 404
202F...... Review of decisions ........................................................................ 404
202FA... Statements to accompany notification of decisions ...................... 405
Division 7--Manner of providing information 406
202G..... Transmission of information in accordance with
specifications
..................................................................................
406