Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (No. 1) 1996No. 31, 1996 - SCHEDULE

Schedule 1-Various amendments of the Income Tax Assessment Act 1936 Part
1-Provisional tax uplift factor 1 Subsection 221YA(1) (definition of
provisional tax uplift factor) Repeal the definition, substitute: provisional
tax uplift factor has the meaning given by section 221YAAA. 2 After section
221YA Insert: 221YAAA Provisional tax uplift factor

(1) This section sets out the meaning of provisional tax uplift factor for a
year of income.

(2) The provisional tax uplift factor for the 1996-97 year of income is 6%.

(3) The provisonal tax uplift factor for a later year of income (the later
provisional tax year) is the percentage worked out using the formula:
Sum of GDP amounts for the quarters in the later
calendar year
100% X                                                          - 100%

Sum of GDP amounts for the quarters in the earlier
calendar year

(4) The GDP amount for a quarter is the amount published in the document
mentioned in subsection (5) as the original gross domestic product (GDP(I)) at
current prices for the quarter.

(5) The document for the purposes of subsection (4) is the first document
published by the Australian Statistician after the end of the later calendar
year that sets out amounts as mentioned in subsection (4) for all of the
quarters in both the later calendar year and the earlier calendar year.

(6) For the purposes of subsections (3) to (5): earlier calendar year means
the calendar year that occurs immediately before the later calendar year.
later calendar year means the calendar year ending on the 31 December
occurring most recently before the later provisional tax year. quarter means a
period of 3 months ending on 31 March, 30 June, 30 September or 31 December.

(7) In working out the percentage under subsection (3), any substituted
accounting period is disregarded.

(8) If the percentage worked out under subsection (3) is not a whole number,
it is rounded to the nearest whole number (rounding a number ending in .5
downwards).

(9) If the percentage worked out under subsection (3) is negative, it is
instead 0%. 3 Application The amendments made by this Part apply in relation
to provisional tax (including instalments) payable for the 1996-97 year of
income and for all later years of income. Part 2-Share buy-backs Division
1-Amendments 3 Subsection 159GZZZP(1) After "this Act", insert ", but subject
to subsection (1A)". 4 After subsection 159GZZZP(1) Insert:

(1A) If the dividend is included to any extent in the seller's assessable
income of any year of income, it is not taken into account to that extent
under paragraph 160ZA(4)(b). 5 Section 159GZZZQ Omit "If", substitute "Subject
to this section, if". 6 Section 159GZZZQ Omit "so much of the purchase price
in respect of the buy-back as is not a dividend", substitute "an amount equal
to the purchase price in respect of the buy-back". 7 At the end of section
159GZZZQ Add: Deemed consideration increased to market value

(2) If, apart from this section:

   (a)  the purchase price in respect of the buy-back; is less than:

   (b)  the amount that would have been the market value of the share at the
        time of the buy-back if the buy-back did not occur and was never
        proposed to occur; then, subject to subsection (3), in making the
        determinations mentioned in paragraphs (1)(a) and (b), the amount of
        consideration that the seller is taken to have received or to be
        entitled to receive in respect of the sale of the share is equal to
        the market value mentioned in paragraph (b) of this subsection. Deemed
        consideration reduced where dividend assessable etc.

(3) Subject to subsection (8), if there is a reduction amount in respect of
the buy-back (see subsection (4)), then, in making the determinations
mentioned in paragraphs (1)(a) and (b), the amount of consideration that the
seller is taken to have received or to be entitled to receive in respect of
the sale of the share, after any application of subsection (2), is reduced by
the reduction amount. Reduction amount

(4) The following steps are to be taken in working out whether there is a
reduction amount in respect of the buy-back:

   (a)  first, work out whether the whole or part of the purchase price in
        respect of the buy-back is taken to be a dividend by section 159GZZZP;

   (b)  second, for any amount satisfying paragraph (a), work out whether the
        whole or part of it is either:

        (i)    included in the seller's assessable income of any year of
               income (disregarding section 128D); or

        (ii)   an eligible non-capital amount (see subsection (5)). The amount
               worked out is the reduction amount in respect of the buy-back.
               Eligible non-capital amount

(5) An amount is an eligible non-capital amount if it is neither:

   (a)  debited against a share premium account, a share capital account or a
        reserve to the extent that it consists of profits from the revaluation
        of assets of the company that have not been disposed of by the
        company; nor

   (b)  attributable, either directly or indirectly, to amounts that were
        transferred from such an account or reserve of the company. Tainting
        of share premium account disregarded

(6) For the purposes of subsection (5), if an account would cease to be a
share premium account because the thing mentioned in paragraph (a) or (b) of
the definition of share premium account in subsection 6(1) happens, the
account does not so cease to be a share premium account. Debit for deemed
dividend

(7) For the purposes of subsection (5), an amount of the purchase price that
is taken to be a dividend by section 159GZZZP is taken to have been debited
against the accounts or reserves against which the purchase price was debited,
and to the same extent. Rebatable amount excluded from reduction where loss

(8) If:

   (a)  the amount of consideration that the seller is taken by subsection (1)
        or (2) to have received or to be entitled to receive in respect of the
        sale of the share is, apart from this subsection, reduced by a
        reduction amount under subsection (3); and

   (b)  the dividend mentioned in paragraph (4)(a), so far as it does not
        exceed the reduction amount, consists to any extent of a rebatable
        amount (see subsection (9)); and

   (c)  disregarding this subsection, as a result of the operation of this
        section:

        (i)    for the purposes of Part IIIA, the seller incurs a capital loss
               or an increased capital loss (which loss or increase is the
               loss amount) in respect of the buy-back; or

        (ii)   a loss, or an increased loss, (which loss or increase is also
               the loss amount) in respect of the buy-back is allowable as a
               deduction to the seller under a provision of a Part of this Act
               other than Part IIIA; or

        (iii)  the amount of a deduction allowable from the seller's
               assessable income of any year of income in respect of the issue
               or acquisition of the share exceeds, or exceeds by a greater
               amount, (the excess or increased excess is also the loss
               amount) the amount included in the seller's assessable income
               of any year of income in respect of the buy-back of the share;
               then the reduction in the amount of the consideration under
               subsection (3) is instead a reduction equal to:

   (d)  the reduction amount; less:

   (e)  so much of the rebatable amount as does not exceed the loss amount.
        Meaning of rebatable amount

(9) For the purposes of subsection (8), if the seller is entitled to a rebate
of tax under section 46 or 46A in the seller's assessment for a year of income
in respect of the dividend, the dividend consists of a rebatable amount worked
out using the formula:
amount of rebate
general company tax rate
(within the meaning of section 160APA) 8 Section 160APA (paragraph (ba) of the
definition of frankable dividend) Repeal the paragraph, substitute:

   (ba) if any of the purchase price in respect of the buy-back of a share is
        taken by section 159GZZZP to be a dividend:

        (i)    where the purchase price exceeds the amount that would be the
               market value of the share at the time of the buy-back if the
               buy-back did not take place and was never proposed to take
               place-the amount that is taken to be a dividend, reduced by the
               amount of the excess; or

        (ii)   in any other case-the amount that is taken to be a dividend; 9
               After subsection 160ZZRM(2) Insert: Where subsection
               159GZZZQ(2) applies to share buy-back

(2A) If:

   (a)  it is reasonable to conclude that a decrease in the market value of a
        share is caused by a proposed buy-back of the share by the company;
        and

   (b)  the buy-back of the share takes place; and

   (c)  subsection 159GZZZQ(2) applies in respect of the buy-back; then the
        decrease in market value is disregarded for the purposes of this
        section. Division 2-Application, transitional etc. 10 Interpretation
        In this Division: starting time means 7.30 pm, by legal time in the
        Australian Capital Territory, on 9 May 1995. 11 Application Subject to
        item 12, the amendments made by this Part apply to buy-backs of shares
        taking place after the starting time. 12 Excluded transitional
        arrangements

(1) The amendments made by this Part do not apply to buy-backs of shares under
an excluded transitional arrangement.

(2) An excluded transitional arrangement is an arrangement, plan or proposal
where:

   (a)  notice of the arrangement, plan or proposal was given before the
        starting time:

        (i)    at a general meeting of the company; or

        (ii)   in writing available to all shareholders in the company; or

        (iii)  in writing to the Commissioner of Taxation or to an officer of
               the Australian Taxation Office; and

   (b)  the arrangement, plan or proposal began to be implemented before the
        starting time; and

   (c)  it is not the case that the purpose, or one of the purposes, of any
        party to the arrangement, plan or proposal was to ensure that, as a
        result of the operation of Division 16K of Part III of the Income Tax 
        Assessment Act 1936 as in force before the commencement of this Part:

        (i)    there would be a capital loss, or an increased capital loss,
               under Part IIIA of that Act in respect of the buy-back of any
               share under the arrangement, plan or proposal; or

        (ii)   a loss, or an increased loss, in respect of the buy-back of any
               share under the arrangement, plan or proposal would be an
               allowable deduction under that Act other than Part IIIA; or

        (iii)  the amount of an allowable deduction in respect of the issue or
               acquisition of a share bought-back under the arrangement, plan
               or proposal would exceed, or exceed by a greater amount, any
               amount included in assessable income in respect of the
               buy-back. 13 Effect of item 4 on previous law The amendment
               made by item 4 is to be disregarded in applying paragraph
               160ZA(4)(b) of the Income Tax Assessment Act 1936, as in force
               before the commencement of that item, to buy-backs of shares
               taking place before the starting time. Part 3-Deductions for
               gifts 14 Subsection 78(3) (after the entry relating to
               Australian Conservation Foundation Incorporated) Insert:
   Australian Games Uniform             (4) - Table 10, item 10.2.6

Company Limited 15 Subsection 78(3) (after the entry relating to Child
Accident Prevention Foundation of Australia) Insert:
   Cobram and District War              (4) - Table 5, item 5.2.7

Memorial Incorporated Fund 16 Subsection 78(3) (after the entry relating to
political parties) Insert:
   Polly Farmer Foundation (Inc)        (4) - Table 2, item 2.2.16
17 Subsection 78(4) (after item 2.2.15 of Table 2) Insert:
  2.2.16    the Polly Farmer            the gift must be made after

            Foundation (Inc)            6 September 1995
18 Subsection 78(4) (item 5.2.1 of Table 5, column headed special conditions)
Omit "before 1 July 1995", substitute "after 24 November 1992 and before 1
July 1999". 19 Subsection 78(4) (item 5.2.2 of Table 5, column headed special
conditions) Omit "30 July 1995", substitute "30 July 1997". 20 Subsection
78(4) (after item 5.2.6 of Table 5) Insert:
  5.2.7    the Cobram and District War   the gift must be made after

           Memorial Incorporated Fund    18 October 1995 and before

19 October 1997 21 Subsection 78(4) (after item 10.2.5 of Table 10) Insert:
  10.2.6   the Australian Games Uniform  the gift must be made after

           Company Limited               6 September 1995