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TAXATION LAWS AMENDMENT ACT (NO. 1) 1998 - SCHEDULE 5 Technical amendments of the Income Tax Assessment Act 1997

TAXATION LAWS AMENDMENT ACT (NO. 1) 1998 - SCHEDULE 5

Technical amendments of the Income Tax Assessment Act 1997

 

1   At the end of subsection 8 - 1(3)

Add:

Note:   If you receive an amount as insurance, indemnity or other recoupment of a loss or outgoing that you can deduct under this section, the amount may be included in your assessable income: see Subdivision 20 - A.

2   At the end of subsection 8 - 5(3)

Add:

Note:   If you receive an amount as insurance, indemnity or other recoupment of a deductible expense, the amount may be included in your assessable income: see Subdivision 20 - A.

3   Subsection 9 - 5(1) (before item 1 of the table)

Insert:

 

1A

An Australian resident individual with:

  eligible foreign remuneration under section 23AF ; or

  foreign earnings under section 23AG ;

(from working in a foreign country) is liable to pay income tax worked out by reference to his or her assessable income less some of his or her deductions.

section 23AF or 23AG

4   Section 12 - 5 (after the table item headed "bad debts")

Insert:

balancing adjustment

 

see buildings, capital allowances, depreciation, grape vines, industrial property, mining, petroleum prospecting and mining, quarrying, research & development, tax exempt entities and timber

 

5   Section 20 - 10

Repeal the section, substitute:

20 - 10   What this Subdivision is about

Recoupment of expenses you incurred and can deduct

Your assessable income may include an amount that you receive by way of insurance, indemnity or other recoupment if:

  ï‚·   it is for a deductible expense; and

  ï‚·   it is not otherwise assessable income.

Recoupment of expenses you did not incur but can deduct

Your assessable income may include an amount that another entity receives by way of insurance, indemnity or other recoupment if:

  ï‚·   it is for an expense that you can deduct; and

  ï‚·   it is not otherwise your assessable income.

6   Before subsection 20 - 15(1)

Insert:

If you incurred the deductible loss or outgoing

7   At the end of section 20 - 15

Add:

If another entity incurred a loss or outgoing you can deduct

  (3)   Sections 20 - 60 and 20 - 65 tell you how to apply this Subdivision.

8   Subsection 20 - 45(3)

Omit "20 - 40(3)", substitute "20 - 40(2)".

9   Subsection 20 - 45(3) (example)

Omit "20 - 40(3)" (wherever occurring), substitute "20 - 40(2)".

10   At the end of Subdivision 20 - A

Add:

What if you can deduct a loss or outgoing incurred by another entity?

20 - 60   If you are the only entity that can deduct an amount for the loss or outgoing

    This Subdivision applies in a different way if:

  (a)   an entity (other than you) incurs a loss or outgoing; and

  (b)   you can deduct the whole of the loss or outgoing for an income year, or you can deduct amounts for the loss or outgoing over 2 or more income years; and

  (c)   no other entity can deduct an amount for the loss or outgoing; and

  (d)   the entity that incurred the loss or outgoing receives one or more amounts as * recoupment of the loss or outgoing.

This Subdivision (except this section and section 20 - 65) applies as if you had incurred the loss or outgoing and had also received the * recoupment.

20 - 65   If 2 or more entities can deduct amounts for the loss or outgoing

  (1)   Special rules apply if:

  (a)   an entity (the first entity ) incurs a loss or outgoing; and

  (b)   2 or more entities (the deducting entities , which may include the first entity) have deducted or can deduct amounts for the loss or outgoing (whether for the same income year or for different income years); and

  (c)   the first entity receives one or more amounts as * recoupment of the loss or outgoing.

  (2)   This Subdivision (except this section and section 20 - 60) applies as if the first entity and the deducting entities together constituted a single entity (the notional entity ) that had:

  (a)   incurred the loss or outgoing; and

  (b)   received the amount or amounts as * recoupment; and

  (c)   included in its assessable income any amount included in the assessable income of any of the deducting entities under a * previous recoupment law or this Subdivision (except this section).

  (3)   If because of subsection (2) the notional entity's assessable income for an income year (the assessment year ) would include an amount under this Subdivision (the assessable amount ), the amount reverses in the assessment year the deductions for the loss or outgoing, in accordance with the rules in subsection (5).

  (4)   The assessable income of each deducting entity for the assessment year includes the total amounts (if any) by which that entity's actual deductions for the loss or outgoing are reversed in that income year.

  (5)   Deductions for the loss or outgoing are reversed in the assessment year as follows:

  (a)   the amounts by which deductions are reversed total the assessable amount (unless all the deductions have been reversed);

  (b)   a deduction for an income year is not reversed until all deductions for earlier income years have been reversed;

  (c)   a deduction is not reversed in the assessment year to the extent that it has already been reversed in an earlier year;

  (d)   if each of 2 or more entities can deduct an amount for the loss or outgoing for the same income year, those deductions are reversed in the assessment year by amounts proportionate to the amounts of the deductions.

11   Subsection 25 - 5(1) (note)

Omit "Note", substitute "Note 1".

12   At the end of subsection 25 - 5(1)

Add:

Note 2:   If you receive an amount as recoupment of the expenditure, the amount may be included in your assessable income: see Subdivision 20 - A.

13   Subsection 25 - 5(5) (example)

Omit "section 54 (Depreciation) of the Income Tax Assessment Act 1936 ", substitute "Division 42".

14   Subsection 25 - 10(1)

Omit ", * plant, machinery, tools or articles", substitute "or * plant".

15   Subsection 25 - 35(5)

Omit "Your entitlement to deductions under this section may be affected by the rules described in the table.", substitute "The rules described in the table may affect your entitlement to deductions under this section, or may result in a deduction being reversed.".

16   Subsection 25 - 35(5) (at the end of the table)

Add:

4

If you receive an amount as recoupment of a bad debt that you can deduct under this section, the amount may be included in your assessable income.

Subdivision 20 - A

17   At the end of section 25 - 45

Add:

Note:   If you receive an amount as recoupment of the loss, the amount may be included in your assessable income: see Subdivision 20 - A.

18   Section 25 - 60 (note)

Repeal the note, substitute:

Note 1:   Entertainment expenses are excluded: see section 25 - 70.

Note 2:   If you receive an amount as recoupment of the expenditure, the amount may be included in your assessable income: see Subdivision 20 - A.

19   At the end of subsection 25 - 75(1)

Add:

Note:   If the entity receives an amount as recoupment of the rates or land tax, the amount may be included in its assessable income: see Subdivision 20 - A.

20   Section 28 - 15

Omit "On the next page", substitute "Below".

21   Subsection 40 - 30

Omit "on the next page", substitute "in this section".

22   Subsection 41 - 25(1) (note)

Repeal the note, substitute:

Note:   If there is a later disposal of the property where roll - over relief is not available, or the property is lost or destroyed, section 41 - 40 tells you how the balancing adjustment is affected.

23   Section 42 - 65 (example)

Omit "The market value of the car is $60,000.", substitute "If the parties had dealt at arm's length, the cost would have been $60,000.".

24   At the end of section 42 - 65

Add:

  (2)   An item in the table applies to a * quasi - ownership right only if it was granted by an * exempt Australian government agency or an * exempt foreign government agency.

25   At the end of section 42 - 205

Add:

  (2)   An item in the table applies to a * quasi - ownership right only if it was granted by an * exempt Australian government agency or an * exempt foreign government agency.

26   Paragraph 42 - 310(1)(b)

Repeal the paragraph, substitute:

  (b)   you either:

  (i)   acquired or constructed the plant and attached it to the land after you acquired the right; or

  (ii)   acquired the right from the entity that acquired or constructed the plant and attached it to the land or from a later successive holder of the right; and

27   Section 43 - 250

Repeal the section, substitute:

43 - 250   The amount of the balancing deduction

Method statement

Step 1.   Calculate the amount (if any) by which the * undeducted construction expenditure for the part of * your area that was destroyed exceeds the amounts you have received or have a right to receive for the destruction of that part.

Step 2.   Reduce the amount at Step 1 if one or more of these happened to that part of * your area:

  (a)   Step 2 or 4 in section 43 - 210, or Step 2 or 3 in section 43 - 215, applied to you or another person for it;

  (b)   you were, or another person was, not allowed a deduction for it under this Division;

  (c)   a deduction for it was not allowed or was reduced (for you or another person) under Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 .

  The reduction under this step must be reasonable.

28   Subsection 70 - 30(4)

Repeal the subsection, substitute:

  (4)   However, if you last acquired the item for no consideration, its cost is worked out using this table:

 

Cost of item acquired for no consideration

Item

In this case:

The cost is:

1        

your acquisition of the item involved a disposal of the item to you within the meaning of Part IIIA (Capital gains and capital losses) of the Income Tax Assessment Act 1936

the item's market value when you last acquired it

2        

your acquisition of the item involved the item passing to you:

(a)   as someone's * legal personal representative; or

(b)   as a beneficiary in a dead person's estate;

and, if you dispose of the item (within the meaning of Part IIIA (Capital gains and capital losses) of the Income Tax Assessment Act 1936 ), a capital gain or capital loss may result that would be taken into account in working out your net capital gain or net capital loss for the income year of the disposal

the dead person's indexed cost base for the item just before his or her death (but worked out disregarding section 160ZG (which affects the indexed cost base for a non - listed personal use asset) of the Income Tax Assessment Act 1936 )

3        

any other case where you last acquired the item for no consideration

a nil amount

29   At the end of section 70 - 90

Add:

Note 5:   This section and section 70 - 95 also apply to disposals of certain items on hand at the end of 1996 - 97 that are not trading stock but were trading stock as defined in the Income Tax Assessment Act 1936 : see section 70 - 10 of the Income Tax (Transitional Provisions) Act 1997 .

30   Subsection 175 - 5(2)

After "if", insert "the company".

31   Paragraph 175 - 5(2)(a)

Omit "the company".

32   Paragraph 175 - 5(2)(a)

After "in respect of", insert "the * loss year or".

33   Section 330 - 10

Omit "on the next page", substitute "below".

34   At the end of subsection 330 - 15(1)

Add:

Note 3:   If an amount of the expenditure is recouped, the amount may be included in your assessable income: see Subdivision 20 - A.

35   At the end of section 330 - 80

Add:

Note 3:   If an amount of the expenditure is recouped, the amount may be included in your assessable income: see Subdivision 20 - A.

36   Paragraph 330 - 110(1)(a)

Omit "330 - 85(1)(h)", substitute "330 - 85(h)".

37   Subsection 330 - 110(1) (note)

Omit "330 - 85(1)(h)", substitute "330 - 85(h)".

38   Paragraph 330 - 175(b)

Repeal the paragraph, substitute:

  (b)   the sum of:

    if the authority was granted to the person (whether or not the person holds the authority at the test time)--each * exploration or prospecting cash bidding payment paid before the test time in relation to the grant of the authority; and

    all amounts (if any) specified in agreements made (including after the test time) under section 330 - 180 in relation to the acquisition by the person of * qualifying interests in relation to the authority before the test time;

    exceeds:

    the sum of all amounts (if any) specified in agreements made (including after the test time) under section 330 - 180 in relation to the acquisition from the person of * qualifying interests in relation to the authority before the test time;

39   Paragraph 330 - 175(c)

Repeal the paragraph.

40   At the end of section 330 - 370

Add:

Note 3:   If an amount of the expenditure is recouped, the amount may be included in your assessable income: see Subdivision 20 - A.

41   At the end of subsection 330 - 435(1)

Add:

Note:   If an amount of the expenditure is recouped, the amount may be included in your assessable income: see Subdivision 20 - A.

42   Subsection 330 - 547(1) (note 3)

Omit "from the election".

43   Subsection 995 - 1(1) (definition of listed public company )

Repeal the definition, substitute:

"listed public company" means a company * shares in which (except shares that carry a right to a fixed rate of * dividend) are listed for quotation in the official list of an * approved stock exchange. However, a company is not a listed public company if:

  (a)   a person (who is not a company) controls, or is able to control, or up to 20 persons (none of them companies) between them control, or are able to control, 75% or more of the voting power in the company (whether directly, or indirectly through one or more interposed entities); or

  (b)   a person (who is not a company) has, or up to 20 persons (none of them companies) have between them, the right to receive for their own benefit (whether directly, or * indirectly through one or more interposed entities) 75% or more of any * dividends that the company may pay; or

  (c)   a person (who is not a company) has, or up to 20 persons (none of them companies) have between them, the right to receive for their own benefit (whether directly, or * indirectly through one or more interposed entities) 75% or more of any distribution of capital of the company.

44   Application

The amendments made by this Schedule apply to assessments for the 1997 - 98 income year and later income years.