Commonwealth Numbered Acts Commonwealth Numbered ActsIncome Tax Assessment Act 1936
1 Section 109B
Omit "and provides a basis for a debit arising in the company's franking account (under item 8 of the table in section 205‑30 of the Income Tax Assessment Act 1997 )".
2 At the end of subsection 109C(3A)
Add:
Note: Payments converted to loans before the private company's lodgment day are treated as loans (see subsection 109D(4A)).
3 After subsection 109D(4)
Insert:
Payment converted to loan before lodgment day
(4A) If:
(a) a private company makes a payment to an entity at a time in a year of income; and
(b) the payment is converted to a loan before the end of the private company's lodgment day for the year of income;
for the purposes of this Division, treat the events mentioned in paragraphs (a) and (b) as the private company making a loan to the entity at the time mentioned in paragraph (a).
4 Paragraph 109E(1)(c)
Repeal the paragraph, substitute:
(c) the amount (if any) paid to the private company during the current year in relation to the amalgamated loan falls short of the minimum yearly repayment of the amalgamated loan worked out under subsection (5) for the current year; and
(d) section 109Q does not apply in relation to the current year.
5 Subsection 109E(2)
Omit "the amount of the amalgamated loan that has not been repaid at the end of the current year", substitute "the amount of the shortfall mentioned in paragraph (1)(c)".
6 After subsection 109E(3)
Insert:
(3A) Subsection (3B) applies if:
(a) a private company is taken to have made an amalgamated loan (the old amalgamated loan ) during a year of income (the original year of income ); and
(b) the maximum term of the old amalgamated loan under subsection 109N(3) was 7 years; and
(c) in a later year of income (the later year of income ):
(i) a constituent loan taken account of by the old amalgamated loan becomes secured by a mortgage over real property; and
(ii) the term of the constituent loan is extended; and
(d) as a result of the mortgage, the maximum term of the constituent loan under subsection 109N(3) is 25 years; and
(e) the term of the constituent loan after the extension (including the period before the extension during which the constituent loan was in existence) does not exceed 25 years.
(3B) For the purposes of this Division in relation to the later year of income and subsequent years of income:
(a) treat the constituent loan as a new amalgamated loan that takes account of that constituent loan; and
(b) treat the new amalgamated loan as having been made just before the start of the later year of income; and
(c) treat the amount of the new amalgamated loan just before the start of the later year of income as the amount of the constituent loan that had not been repaid at that time; and
(d) unless paragraph (e) applies--reduce the amount of the old amalgamated loan just before the start of the later year of income by the amount of the new amalgamated loan at that time; and
(e) if the constituent loan was the only constituent loan taken account of by the old amalgamated loan--disregard the old amalgamated loan.
7 Paragraph 109G(3)(a)
Omit "or 109E".
Note: The heading to subsection 109G(3) is altered by omitting " did give rise to dividend " and substituting " gives rise to dividend under section 109D ".
8 Paragraph 109G(3)(b)
Omit "subsection 108(1)", substitute "former subsection 108(1)".
9 After subsection 109G(3)
Insert:
Reduced dividend for forgiveness of loan debt if loan causes dividend under section 109E
(3A) Subsection (3B) applies if:
(a) a private company is taken under section 109F to pay a dividend at the end of a year of income because of the forgiveness of an amount of a debt resulting from a loan; and
(b) the private company is taken under section 109E to pay a dividend at the end of an earlier year of income in relation to the loan.
(3B) The amount of the dividend mentioned in paragraph (3A)(a) is reduced by the amount of the dividend mentioned in paragraph (3A)(b) (but not below zero).
Note: There may be more than one reduction under this subsection if the private company has been taken under section 109E to pay more than one dividend in relation to the loan.
10 After subsection 109N(3)
Insert:
(3A) Reduce the maximum term under paragraph (3)(a) for a loan (the new loan ) in accordance with subsection (3B) if:
(a) the new loan results from the refinancing of another loan (the old loan ); and
(b) the maximum term of the old loan under subsection (3) was 7 years; and
(c) the maximum term of the new loan under subsection (3) is 25 years (disregarding this subsection).
(3B) The amount of the reduction is equal to the length of the period:
(a) starting when the old loan was made; and
(b) ending when the old loan was refinanced.
(3C) Reduce the maximum term under paragraph (3)(b) for a loan (the new loan ) in accordance with subsection (3D) if:
(a) the new loan results from the refinancing of another loan (the old loan ); and
(b) the maximum term of the old loan under subsection (3) was 25 years; and
(c) the maximum term of the new loan under subsection (3) is 7 years (disregarding this subsection); and
(d) the length of the period:
(i) starting when the old loan was made; and
(ii) ending when the old loan was refinanced;
exceeds 18 years.
(3D) The amount of the reduction is the excess mentioned in paragraph (3C)(d).
11 Section 109P (note)
Repeal the note, substitute:
Note: A shortfall in a minimum yearly repayment of an amalgamated loan may be treated as a dividend under section 109E.
12 At the end of section 109R
Add:
(5) Subsection (2) does not apply to a payment if:
(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and
(b) the entity to which the old loan was made has another loan (the primary loan) from another entity; and
(c) the old loan becomes subordinated to the primary loan; and
(d) the refinancing of the old loan mentioned in paragraph (a) took place in connection with that subordination; and
(e) that subordination arose as a result of circumstances beyond the control of the entity to which the old loan was made; and
(f) the entity to which the old loan was made and the other entity dealt with each other at arm's length in relation to that subordination; and
(g) the private company and the other entity dealt with each other at arm's length in relation to that subordination.
(6) Subsection (2) does not apply to a payment if:
(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and
(b) the refinancing results in another loan (the new loan ); and
(c) the maximum term of the old loan under subsection 109N(3) was 7 years; and
(d) the maximum term of the new loan under subsection 109N(3) is 25 years (reduced in accordance with subsection 109N(3B)).
(7) Subsection (2) does not apply to a payment if:
(a) the payment is made to refinance the loan mentioned in subsection (1) (the old loan ); and
(b) the refinancing results in another loan (the new loan ); and
(c) the maximum term of the old loan under subsection 109N(3) was 25 years; and
(d) the maximum term of the new loan under subsection 109N(3) is:
(i) unless subparagraph (ii) applies--7 years; or
(ii) if subsection 109N(3D) applies--7 years reduced in accordance with that subsection.
13 After Subdivision DA of Division 7A
Insert:
Subdivision DB -- Other exceptions
109RB Commissioner may disregard operation of Division or allow dividend to be franked
(1) The Commissioner may make a decision under subsection (2) if:
(a) this Division (disregarding this section) operates with the result that:
(i) a private company is taken to pay a particular dividend to a particular entity (the recipient ) under this Division; or
(ii) a particular amount is included, as if it were a dividend, in the assessable income of a particular entity (also the recipient ) in relation to a private company under Subdivision EA; and
(b) the result mentioned in paragraph (a) arises because of an honest mistake or inadvertent omission by any of the following entities:
(i) the recipient;
(ii) the private company;
(iii) any other entity whose conduct contributed to that result.
(2) The Commissioner may decide in writing that:
(a) the result mentioned in paragraph (1)(a) should be disregarded (see subsection (4)); or
(b) the dividend mentioned in subparagraph (1)(a)(i) may be franked in accordance with Part 3‑6 of the Income Tax Assessment Act 1997 (see subsection (6)).
(3) In making a decision under subsection (2) (or refusing to make such a decision), the Commissioner must have regard to the following:
(a) the circumstances that led to the mistake or omission mentioned in paragraph (1)(b);
(b) the extent to which any of the entities mentioned in paragraph (1)(b) have taken action to try to correct the mistake or omission and if so, how quickly that action was taken;
(c) whether this Division has operated previously in relation to any of the entities mentioned in paragraph (1)(b), and if so, the circumstances in which this occurred;
(d) any other matters that the Commissioner considers relevant.
(4) The Commissioner may make a decision under subsection (2) subject to any of the following kinds of condition:
(a) a condition that the recipient or another entity must make specified payments to the private company or another entity within a specified time;
(b) a condition that a specified requirement in this Division must be met within a specified time.
(5) This Division is taken not to operate with the result mentioned in paragraph (1)(a) if:
(a) the Commissioner makes a decision under paragraph (2)(a); and
(b) if the Commissioner makes the decision subject to a condition under subsection (4)--the condition is satisfied.
(6) If the Commissioner makes a decision under paragraph (2)(b), subparagraph 202‑45(g)(i) of the Income Tax Assessment Act 1997 does not make the dividend mentioned in subparagraph (1)(a)(i) unfrankable.
(7) Despite subsection 33(3A) of the Acts Interpretation Act 1901 , each decision made under subsection (2) must relate only to one amount that would (disregarding this section):
(a) be taken to be a dividend paid by the private company; or
(b) be included, as if it were a dividend, in the assessable income of an entity.
109RC Dividend may be franked if taken to be paid because of family law obligation
(1) This section applies if a dividend is taken to be paid under this Division because of a family law obligation.
(2) Subparagraph 202‑45(g)(i) of the Income Tax Assessment Act 1997 does not make the amount of the dividend unfrankable.
(3) The dividend can be franked in accordance with Part 3‑6 of the Income Tax Assessment Act 1997 only if:
(a) the dividend is franked at the private company's benchmark franking percentage for the franking period in which the dividend is taken to be paid; or
(b) if the private company does not have a benchmark franking percentage for the period--the dividend is franked at a franking percentage of 100%.
(4) For the purposes of subsection (3), if the recipient of the dividend is not a member of the private company for the purposes of Part 3‑6 of the Income Tax Assessment Act 1997 , treat that recipient as such a member.
109RD Commissioner may extend period for repayments of amalgamated loan
(1) The Commissioner may make a decision under subsection (2) if:
(a) section 109E operates with the result that a private company is taken to pay a particular dividend to a particular entity (the recipient ); and
(b) the shortfall mentioned in paragraph 109E(1)(c) arises because the recipient is unable to pay the private company the minimum yearly repayment mentioned in that paragraph because of circumstances beyond the recipient's control.
(2) The Commissioner may decide in writing that the result mentioned in paragraph (1)(a) should be disregarded (see subsection (4)) if the recipient pays the private company the amount of the shortfall within a specified time.
(3) In making a decision under subsection (2) (or refusing to make such a decision), the Commissioner must have regard to the following:
(a) the nature of the circumstances mentioned in paragraph (1)(b);
(b) any other matters that the Commissioner considers relevant.
(4) This Division is taken not to operate with the result mentioned in paragraph (1)(a) if:
(a) the Commissioner makes a decision under subsection (2); and
(b) the recipient pays the private company the amount of the shortfall within the specified time.
(5) Despite subsection 33(3A) of the Acts Interpretation Act 1901 , each decision made under subsection (2) must relate only to one amount that would be taken to be a dividend paid by the private company (disregarding this section).
14 At the end of section 109UA
Add:
(5) Subsection (1) does not apply if:
(a) as a result of the first entity's liability mentioned in that subsection, the target entity has a liability (other than a contingent liability) to make a payment to the first entity; and
(b) because of section 109N, the liability to make a payment to the first entity is not treated under this Division as giving rise to a dividend paid to the first entity.
15 Subsection 109X(2)
Repeal the subsection, substitute:
(2) Subsections (3) and (4) apply if a notional loan arises under section 109W because an entity interposed between the private company and the target entity makes a loan (the actual loan ) to the target entity.
(3) For the purposes of section 109N, treat the agreement under which the actual loan was made as the agreement under which the notional loan was made.
(4) For the purposes of section 109E:
(a) treat the notional loan as an amalgamated loan from the private company to the target entity; and
(b) treat the amount of the notional loan worked out under subsection 109W(1) as the amount of the amalgamated loan; and
(c) treat the agreement under which the actual loan was made as the agreement under which the amalgamated loan was made; and
(d) treat repayments by the target entity of the amount of the notional loan worked out under subsection 109W(3) as payments by the target entity to the private company in relation to the amalgamated loan.
Note: The heading to section 109X is replaced by the heading " Operation of Subdivision D in relation to payment or loan ".
16 Subsection 109Y(2) (definition of net assets )
Omit "undervalue", substitute "undervalue or overvalue".
17 Subsection 109Y(2) (definition of net assets )
Omit "overvalue", substitute "undervalue or overvalue".
18 Subsection 109Y(2) (paragraph (a) of the definition of repayments of non‑commercial loans )
After "loans", insert "or amounts".
19 After subsection 109ZC(1)
Insert:
(1A) This section also sets out special rules for dealing with a dividend (also the later dividend ) distributed by a private company if:
(a) the private company distributes the later dividend to a shareholder in the company; and
(b) the shareholder applies the amount of the dividend to repay all or part of a loan:
(i) that was obtained from the private company by an associate of the shareholder; and
(ii) in relation to which a dividend was previously taken under this Division to have been paid by the private company.
20 Subsection 109ZC(2)
After "set off" (wherever occurring), insert "or applied".
21 Section 109ZD
Insert:
"benchmark franking percentage" has the same meaning as in the Income Tax Assessment Act 1997 .
22 Section 109ZD
Insert:
"deficit" has the same meaning as in the Income Tax Assessment Act 1997 .
23 Section 109ZD
Insert:
"family law obligation" means an order, agreement or award mentioned in paragraph 126-5(1)(a), (b), (c), (d), (e) or (f) of the Income Tax Assessment Act 1997 .
24 Section 109ZD
Insert:
"franking account" has the same meaning as in the Income Tax Assessment Act 1997 .
25 Section 109ZD
Insert:
"franking percentage" has the same meaning as in the Income Tax Assessment Act 1997 .
26 Section 109ZD
Insert:
"franking period" has the same meaning as in the Income Tax Assessment Act 1997 .
27 Section 109ZD
Insert:
"unfrankable" has the same meaning as in the Income Tax Assessment Act 1997 .
Income Tax Assessment Act 1997
28 Subparagraph 202‑45(g)(i)
Before "Division", insert "unless subsection 109RB(6) or 109RC(2) applies in relation to the amount--".
29 Section 205‑30 (table item 8)
Repeal the item.
Fringe Benefits Tax Assessment Act 1986
30 At the end of subsection 16(1)
Add:
Note: A loan benefit that is taken under this subsection to be provided in respect of a year of tax may not be provided as a fringe benefit if:
(a) the loan was made in that year of tax or a previous year of tax; and
(b) a dividend is not taken to be paid under section 109D of the Income Tax Assessment Act 1936 in relation to the loan, because of section 109N of that Act.
See paragraph (s) of the definition of fringe benefit in subsection 136(1) of this Act.
31 Subsection 136(1) (paragraph (r) of the definition of fringe benefit )
Omit "dividend.", substitute "dividend; or".
32 Subsection 136(1) (at the end of the definition of fringe benefit )
Add:
(s) a loan (within the meaning of section 109D of the Income Tax Assessment Act 1936 ), if:
(i) a dividend is not taken to be paid under that section in relation to the loan, but would be if section 109N of that Act were disregarded; or
(ii) an amount is not included, as if it were a dividend, in the assessable income of an entity under section 109XB of that Act in relation to the loan, but would be if section 109N of that Act were disregarded.
Income Tax Assessment Act 1936
33 Section 108
Repeal the section.
34 Subsection 109Y(2) (definition of non‑commercial loans )
Omit "section 108", substitute "former section 108".
35 Subsection 109Y(2) (definition of repayments of non‑commercial loans )
Omit "section 108" (wherever occurring), substitute "former section 108, or section".
36 Subsection 109Y(2) (subparagraph (b)(i) of the definition of repayments of non‑commercial loans )
Omit "subsection 108(2)", substitute "former subsection 108(2)".
37 Paragraph 160AEA(1)(d)
Omit "or 108".
38 Paragraph 268‑40(5)(b) in Schedule 2F
Repeal the paragraph.
Income Tax Assessment Act 1997
39 Section 10‑5 (table item headed "shareholders")
Omit " 108, ".
40 Paragraph 165‑60(5)(b)
Repeal the paragraph.
41 Subparagraph 202‑45(g)(ii)
Repeal the subparagraph.
Part 3 -- Time limit for making franking assessments
Income Tax Assessment Act 1997
42 After subsection 214‑60(1)
Insert:
(1A) However, the Commissioner must not make an assessment under subsection (1) for an entity for an income year if:
(a) the entity is not required under Subdivision 214‑A to give the Commissioner a * franking return for the income year; and
(b) the entity is not required under Division 214 of the Income Tax (Transitional Provisions) Act 1997 to give the Commissioner a franking return for the balancing period ending within the income year; and
(c) the entity was required to lodge an * income tax return for the income year by a particular time; and
(d) the entity has lodged that income tax return; and
(e) 3 years have passed since the later of the following:
(i) the time mentioned in paragraph (c);
(ii) the time when the entity lodged that income tax return.
43 Application
(1) The amendments made by this Schedule apply to assessments for the income year in which 1 July 2006 occurred and later income years.
(2) Despite subitem (1), the amendments made by this Schedule to the Fringe Benefits Tax Assessment Act 1986 apply to benefits provided in a year of tax that begins on or after 1 April 2007.
(3) If:
(a) a loan was made in a year of tax that began before 1 April 2007; and
(b) the loan is covered under paragraph (s) of the definition of fringe benefit in the Fringe Benefits Tax Assessment Act 1986 (as added by this Schedule); and
(c) because of the loan, a loan benefit is taken under subsection 16(1) of the Fringe Benefits Tax Assessment Act 1986 to be provided in respect of a year of tax that begins on or after 1 April 2007;
treat the loan benefit as not being a fringe benefit for the purposes of that Act.
(4) Despite subitem (1), the following rules apply:
(a) the amendments made by this Schedule, to they extent that they relate to section 109RB of the Income Tax Assessment Act 1936 , apply in relation to the 2001‑02 income year and later income years;
(b) the Commissioner may make decisions under that section on and after the commencement of that section in relation to events that occurred before that commencement;
(c) however, the Commissioner cannot make a decision under paragraph 109RB(2)(b) of that Act if the dividend mentioned in subparagraph 109RB(1)(a)(i) of that Act is taken to have been paid before 1 July 2002;
(d) the Commissioner may amend a franking assessment made before the commencement of this item for the purpose of giving effect to a decision under section 109RB of that Act, if the amendment is made within 4 years after that commencement.
(5) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment if:
(a) the assessment was made before the commencement of this item; and
(b) the amendment is made within 4 years after that commencement; and
(c) the amendment is made for the purpose of giving effect to a decision of the Commissioner under section 109RB of that Act.
(6) Despite subitem (1), the amendment made by Part 3 of this Schedule applies to franking assessments for the income year in which 1 July 2006 occurred and later income years.