2010-2011
EXPOSURE DRAFT
TAX LAWS AMENDMENT (2011 MEASURES No. 2)
BILL 2011: MINOR AMENDMENTS
EXPLANATORY MATERIAL
Table of contents
Glossary ................................................................................................. 1
Chapter 1
Minor amendments ....................................................... 2
Glossary
The following abbreviations and acronyms are used throughout this
explanatory material.
Abbreviation
Definition
CGT
capital gains tax
Commissioner
Commissioner of Taxation
DVS
direct value shifting
ITAA 1936
Income Tax Assessment Act 1936
ITAA 1997
Income Tax Assessment Act 1997
TAA 1953
Taxation Administration Act 1953
TIES
Tax Issues Entry System
1
Chapter 1
Minor amendments
Outline of chapter
1.1
Schedule # of this exposure draft makes various minor
amendments to the taxation laws.
Context of amendments
1.2
The amendments seek to ensure the taxation law operates as
intended by correcting technical or drafting defects, removing anomalies,
and addressing unintended outcomes. The minor amendments are part of
the Government’s commitment to the care and maintenance of the
taxation laws.
1.3
Minor amendment packages include addressing issues raised
through the Tax Issues Entry System (TIES). The TIES website
(www.ties.gov.au), which the Australian Taxation Office (ATO) and
Treasury jointly operate, provides a way for tax professionals and the
general public to raise issues relating to the care and maintenance of the
tax system. The relevant part of the explanatory memorandum identifies
TIES issues.
Summary of new law
1.4
The issues these minor amendments deal with include:
• correcting grammatical, referencing and asterisking errors;
• ensuring that provisions are consistent with the original
policy intent; and
• repealing inoperative provisions.
1.5
The table below lists the titles of the various parts of this
Schedule.
Part
1
Title
A New Tax System (Goods and Services Tax) Act 1999
2
Minor amendments
Part
Title
2
Approved worker entitlement funds
3
Confidentiality of taxpayer information
4
Employee share schemes
5
General interest charge
6
Deductible gift recipients
7
Temporary residents
8
Definitions and signposts to related material
9
Repeal of redundant reference to Papua New Guinea
10
Repeal of redundant references to franking
11
Correction of cross-reference in provision about dividend streaming
etc.
12
Minor changes to provisions about concessional rebates
13
Fixing outdated references to Medicare levy
14
Repeal of reference to previously repealed provision
15
Correction of asterisking of reference to tax debts
16
Repeal of outdated provisions about exemption from income tax
17
Correction of asterisking of references to quarter
18
Inclusion of Commissioner’s discretion to extend main residence
exemption from CGT
19
Nomination of controllers of discretionary trust
20
Definitions mainly relevant to Subdivision 165-F of the Income Tax
Assessment Act 1997
21
Removal of definition from imputation provisions
22
Correction of outdated references to virtual PST assets
23
Repeal of spent provisions about land transport facilities borrowings
24
Prevention of double counting for direct value shifts
25
This part will be included at a later stage
26
Correction of references to chains of fixed trusts
27
Gender-specific language
28
Misdescribed amendments
29
References to Schedules
30
References to taxation laws
31
Other amendments
1.6
More significant amendments include:
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Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
• ensuring that the temporary resident provisions in
Subdivision 768-R of the Income Tax Assessment Act 1997
(ITAA 1997) operate as originally intended. Broadly, the
amendments ensure:
– a capital gain made by a temporary resident as a
beneficiary of a fixed trust is disregarded where the
capital gain is attributable to a CGT event happening to a
CGT asset of a fixed trust that is not taxable Australian
property;
– a trustee is not liable to pay tax in respect of an amount
that is a disregarded capital gain for a temporary resident
beneficiary (or would have been disregarded had the
temporary resident not been under a legal disability); and
– a trustee is not liable to pay tax in respect of an amount
that is non-assessable non-exempt income of a beneficiary
under section 768-910 of the ITAA 1997 (Part 7,
comprising items # to #). (This issue was identified
through TIES 0021-2008);
• providing the Commissioner of Taxation with a discretion to
extend the main residence exemption from capital gains tax
(CGT) (Part 18, comprising items # to #). (This issue was
identified through TIES 0056-2009); and
• allowing the nomination of controllers of discretionary trusts
for the purposes of the CGT small business concessions
(Part 19, comprising items # to #). (This issue was identified
through TIES 0059-2009).
1.7
All of the amendments in Schedule # commence from the date
of Royal Assent unless otherwise stated.
4
Minor amendments
Detailed explanation of new law
Schedule 2 — Other amendments
Part 1 — A New Tax System (Goods and Services Tax) Act 1999
Table 1.20 : Amendments to the A New Tax System (Goods and
Services Tax) Act 1999
Provision being amended
153-50(1)(d)(i)
What the amendment does
This amendment gives effect to the
suggestion made through TIES 0014-2010.
A technical amendment replacing the
reference to “agent’s” with a reference to
“intermediary’s”, which was the intention of
the legislation. [Schedule #, ....]
195-1(definition of
‘member’), and paragraph (b)
of that definition
Ensures that the definition of ‘member’ is
grammatically correct. The definition uses
the words ‘means’ in the opening line and
then has the words ‘has the meaning’ in
paragraphs (a) and (c). [Schedule #, ]
Part 2 — Approved worker entitlement funds
Table 1.21 : Amendments relating to approved worker entitlement
funds
Provision being amended
Fringe Benefits Tax
Assessment Act 1986
58PB(2) and (3)
58PB(4)
58PC
ITAA 1997
126-130(2)(b)
TAA 1953
426-5(b) in Schedule 1
426-55 in Schedule 1
(paragraph (b) of the note)
426-65(b) in Schedule 1
What the amendment does
Replaces the current approval arrangements
with provisions that allow the Commissioner
to endorse a fund as an approved worker
entitlement fund or an entity endorsed to
operate the fund when satisfied that it meets
the legislative requirements without the need
for the Governor-General to make a
regulation. The new arrangements will apply
from the date of Royal Assent. Existing funds
will be given a 6 month period to obtain an
Australian Business Number. The Australian
Business Registrar will be required to enter a
fund or entity as an endorsed fund or entity
on the Australian Business Register. The
Registrar will have 18 months from the
commencement date to make the changes to
accommodate these amendments. [Schedule #
...]
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Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Part 3 — Confidentiality of taxpayer information
Table 1.22 : Amendments relating to confidentiality of taxpayer
information
Provision being amended
What the amendment does
Income Tax Assessment
Act 1936
6(1)
Repeals the definitions of ‘Employment
Department’ and ‘Employment Minister’ to
reflect the fact that these terms are now being
defined in the ITAA 1997. The definition of
‘Employment Secretary’ is also amended so
that it links into the appropriate ITAA 1997
definitions. [Schedule #, ...]
Income Tax Assessment
Act 1997
995-1(1)
Inserts the definitions of ‘Employment
Department’, ‘Employment Minister’ and
‘Employment Secretary’. [Schedule # ...]
TAA 1953
Supplements the reference to Education
Secretary with a reference to Employment
Secretary. This clarifies that disclosure under
this provision can be made to the
Education/Employment Secretary in each
separate capacity.
355-65(2) in Schedule 1 (cell
at table item 4, column
headed “The record is made
for or the disclosure is to ...”)
355-65(2) in Schedule 1 (cell
at table item 6, column
headed “The record is made
for or the disclosure is to ...”)
Supplements the reference to the Families
Secretary to include a reference to the Chief
Executive Officer of Centrelink. This
recognises the reality that disclosures made to
the Family Assistance Office for the purpose
of administering family tax benefit payments
are made to Centrelink Officers.
355-65(5) in Schedule 1
(paragraph (b) of the cell at
table item 2, column headed
“and the record or disclosure
...”)
In recognition of the policy intent reflected in
the Tax Laws Amendment (Confidentiality of
Taxpayer Information) Act 2010 to enable
taxpayer information to be used in the
prosecution of serious (non tax related)
offences, this enables taxation officers to
disclose information directly to a court or
tribunal. In some circumstances, it may be
necessary for tax officers to provide evidence
directly to a court.
355-65(5) in Schedule 1 (table
item 6, column headed “The
record is made for or the
disclosure is to...”)
[Schedule #, items # to #, ...]
Part 4 —Employee share schemes
1.8
These amendments make some minor changes to ensure recent
reforms to the taxation of employee share schemes, introduced in Tax
6
Minor amendments
Laws Amendment (2009 Budget Measures No. 2) Act 2009, apply as
intended.
1.9
An employee share scheme provides employees with a financial
interest in the company they work for through the distribution of shares
in that company. Employee share schemes are concessionally taxed to
align the interests of employees with their employer.
Table 1.4 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
104-75(6)(note)
104-85(6)
130-90(1A)
130-90(2)
What the amendment does
Ensures that any capital gain or loss made by
an employee share trust (EST) is disregarded
if it arises as a result of a beneficiary of the
trust becoming absolutely entitled to an
employee share scheme share, or as a result
of a disposal of an employee share scheme
share or right to a beneficiary. [Schedule #,
items # to #, ...]
An EST is a trust which obtains employee
share scheme interests in a company, and
provides them on behalf of employers to
employees of that company or their
associates, or carries out activities incidental
to the holding and providing of ESS interests
(for example, bookkeeping, passing on
dividends or opening and closing employee
accounts). Use of an EST is a common
feature of employee share schemes, and
provides a convenient mechanism for issuing
shares that may later be forfeited.
An EST should not have to include capital
gains or losses made when providing shares
or rights to shares in the trust to a beneficiary
as a part of the operation of an employee
share scheme in their assessable income
(subject to certain integrity rules).
This is appropriate, because any gain is
subsequently used to provide remuneration to
employees and taxing these would otherwise
require the provision of an additional
deduction to employers to offset that
additional remuneration, which would
unnecessarily increase the complexity of the
tax system. Further, without this rule, the
EST may derive assessable income greater
than the deduction provided to the employer
(who claims a deduction equal to the amounts
contributed value of the interest at the time
the EST acquired it).
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Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Provision being amended
What the amendment does
Capital gains or losses are not disregarded if
the EST itself makes a cash profit from the
transaction. [Schedule #, item #, subsection 13090(1A) Income Tax Assessment Act 1997]
The omission of the provision at the time the
employee share scheme reforms were
introduced was unintended. The change does
not disadvantage any taxpayer.
The amendment applies from 1 July 2009,
when the reforms to employee share schemes
applied from. [Schedule #, items # to #, ...]
Table 1.5 Amendments to the Income Tax (Transitional Provisions)
Act 1997
Provision being amended
83A-5
What the amendment does
Ensures that shares or rights acquired while
an individual is undertaking employment
outside Australia prior to 1 July 2009, which
would have been qualifying shares or rights
under the previous employee share scheme
rules, are transitioned to the new employee
share scheme rules, regardless of whether the
period of employment that relates to Australia
is served after the old rules were repealed.
[Schedule #, item #, subsection 83A-5(2A)
Income Tax (Transitional Provisions) Act 1997]
Under the previous employee share scheme
rules, taxpayers who acquire employee shares
or rights while employed offshore, and then
later become Australian employees while still
engaged in employment or service that is
relevant to the acquisition of the shares or
rights, would have been subject to the
employee share scheme provisions at the
point of becoming an Australian employee.
Such taxpayers (inbound taxpayers) would
have either been assessed in the year of
becoming a relevant employee for the first
time or at a cessation time for qualifying
shares or rights where the relevant election is
not made. If assessed in the year of income
in which the taxpayer becomes an employee
in Australia, the discount will still be valued
as at acquisition.
Interests will be transitioned into the new
8
Minor amendments
Provision being amended
What the amendment does
rules if:
•
the interest was acquired before 1 July
2009;
•
at the pre-1 July 2009 time, the old
employee share scheme rules did not
apply in relation to the interest because
it was acquired while engaged in
foreign service, and the taxpayer in
question was not yet an employee;
•
after 1 July 2009, the old rules would
have applied in relation to the interest
if they were still in force, because the
taxpayer in question became an
employee (within the meaning of the
old rules); and
•
at the time the taxpayer became an
employee, the cessation time under the
previous law would not yet have
occurred.
Unlike taxpayers who came to Australia pre1 July 2009, the taxpayers to whom this
provision applies will not be able to make an
election to be taxed upfront in the year that
they arrive in Australia.
This provision clarifies how the transitional
rules apply to shares acquired before
1 July 2009. The need for this transitional
provision was not identified prior to the
passage of the principal reforms.
The amendment applies from 1 July 2009,
consistent with the application of the reforms
to employee share schemes.
[Schedule #, item #, Income Tax (Transitional
Provisions) Act 1997]
83A-15
Ensures that the Commissioner of Taxation
can amend an income tax assessment at any
time, for the purposes of taxing an
employment benefit which becomes an
employee share scheme interest (ESS
interest). [Schedule #, ,item #, subsection 83A15 Income Tax (Transitional Provisions)
Act 1997]
The employee share scheme reforms
introduced a new concept of ‘indeterminate
rights’.
Indeterminate rights are rights to employment
9
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Provision being amended
What the amendment does
benefits acquired by employees where at the
time the right is acquired it may be unclear
whether the right will result in receipt of an
ESS interest (e.g. the employer has a
discretion to provide shares or cash) or it may
be unclear how many ESS interests will be
received. The new law provides that if a right
acquired before 1 July 2009 becomes a right
to acquire a beneficial interest in a share on or
after 1 July 2009, the previous rules are taken
to have applied as if the right had always
been a right to acquire the beneficial interest
in the share.
Based on the treatment of a right as an ESS
interest from the time of acquisition, the
taxing point for the right under the employee
share scheme rules may have occurred in an
income year before the nature of the right
became clear.
If a taxpayer acquired a right prior to 1 July
2009, which only clearly became a right to
acquire a beneficial interest in a share in a
company after 1 July 2009, then that taxpayer
will be assessable under the previous rules, in
an earlier year, where:
•
an election made under the former rules
covers the right (the election may have
been made in an earlier year in respect of
other shares or rights acquired during the
year or the Commissioner may allow a
later election to be made in relation to the
indeterminate right); or
•
the indeterminate right did not meet the
qualifying conditions under the former
rules; or
•
the indeterminate right is a qualifying
right and a cessation event (ceasing
employment) occurs before 1 July 2009.
When the nature of the right to an
employment benefit as an ESS interest
becomes clear, the Commissioner may amend
an employee’s income tax assessment for the
income year in which the taxing point for the
ESS interest occurred (based on the treatment
of the right as an ESS interest from the time
of its acquisition). The Commissioner can
amend an assessment relating to an employee
10
Minor amendments
Provision being amended
What the amendment does
share scheme at anytime, for the purposes of
a taxing an employment benefit which
becomes an ESS interest.
The omission of this transitional provision at
the time the employee share scheme reforms
were introduced was an oversight. The
explanatory memorandum clearly explained
that is outcome was intended.
The amendment applies from 1 July 2009,
consistent with the application of the reforms
to employee share schemes.
Division 125
125-75
Ensures that all employee share scheme
shares or rights that would have been
disregarded from the CGT demerger
ownership tests before the commencement of
the amending Act (Tax Laws Amendment
(2009 Budget Measures No. 2) Act 2009) can
continue to be disregarded.
Division 125 of the ITAA 1997 provides
‘CGT roll-over’ demerger relief rules for
certain company demerger events. Generally,
for the roll-over to be available, each owner’s
interest in the new demerged company has to
be proportional to their interest in the parent
company.
Shares or rights acquired under employee
share schemes are often subject to unique
contractual arrangements that may make
satisfying this proportional ownership rule
difficult. For instance, a particular scheme
might provide for the issue of shares in the
employer in the future (with no provisions to
take account of possible demergers).
Moreover, there is no policy incentive to
align the interests of parent company
employees with the interests of a demerged
entity. For these reasons, employee share
scheme interests are generally disregarded for
these ownership tests.
Before 1 July 2009, the law provided that
shares or rights acquired under an employee
share scheme were disregarded for the
purposes of the CGT demerger relief rules.
Specifically, this carve-out applied to
‘qualifying shares or rights’ acquired under
the previous employee share scheme tax
provisions. Shares or rights that would meet
11
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Provision being amended
What the amendment does
this test if not for being in a trust were also
disregarded.
The amending Act repealed these provisions,
and replaced them with updated provisions
reflecting new terminology. The amending
Act provided that shares or rights acquired
under previous taxing regimes, and over
which tax was deferred to the 2009-10
income year or later, were transitioned into
the new regime. This meant that transitioned
shares and rights were intentionally carved
out from the demerger ownership tests.
However, shares or rights acquired under
previous tax regimes over which tax was
payable in a previous income year did not
need to be transitioned.
The previous regimes continue to apply to
these shares or rights, and the carve-out does
not capture them. This amendment ensures
that all employee share scheme shares or
rights that would have been disregarded from
the CGT demerger ownership tests before the
commencement of the amending Act continue
to be disregarded. [Schedule #, item #,
section 125-75 Income Tax (Transitional
Provisions) Act 1997]
The amendment applies from 1 July 2009,
consistent with the application of the reforms
to employee share schemes.
[Schedule #, item #]
Part 5 — General interest charge
Table 1.6 : Amendments to the Taxation Administration Act 1953
Provision being amended
TAA 1953
8AAB(1)
8AAB(4) and (5)
What the amendment does
Provides an index of provisions of the laws
dealing with references that make a person
liable to general interest charge. [Schedule #,
items # and #, subsections 8AAB(1), (4) and (5)
Taxation Administration Act 1953]
12
Minor amendments
Part 6 — Deductible gift recipients
Table 1.7 : Amendments to the Income Tax Assessment Act 1997,
Income Tax (Transitional Provisions) Act 1997 and Tax Laws
Amendment (Repeal of Inoperative Provisions) Act 2006
Provision being amended
ITAA 1997
•
30-20(2) (cell at table item
1.2.4 headed “Fund,
authority or institution”
What the amendment does
Amends the specific listing of the following
DGRs listing to reflect a name change of the
listed organisation:
•
College of Radiologists in Australasia
[Schedule #, items # to #, ...]
ITAA 1997
•
30-120
Deems the following specifically listed
DGRs, which are eligible for endorsement
under the general categories, to have been
endorsed by the Commissioner of Taxation
as DGRs under the general categories on the
same day as the specific listing is repealed,
this does not prevent the Commissioner from
revoking that endorsement at a later time:
•
Breast Cancer Network Australia
•
Indigenous Community Volunteers
Limited
13
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Provision being amended
ITAA 1997
30-20(2) (table items 1.2.2,
1.2.3,1.2.4, 1.2.11, and
1.2.15)
30-25(2) (table items
2.2.15, 2.2.19 and 2.2.25)
What the amendment does
Repeals and updates the specific listings of
the following deductible gift recipients
(DGRs) listings that that have ceased to exist,
or have merged with other DGR eligible
organisations:
•
Australian College of Occupational Medicine
•
Australian Council for Children and Youth
Organisations Inc.
30- 45(2) (table items 4.2.5
and 4.2.15)
•
Australian Games Uniform Company Limited
•
Australian Human Rights Education Fund
30--50(2) (table items
5.5.16, 5.2.24, 5.2.25,
5,2,27)
•
Australian Postgraduate Federation in
Medicine
•
Australian National Travel Association
30-65 (table items 7.2.1,
7.2.2 and 7.2.4)
•
Australian Red Cross Society—US 2005
Hurricane Relief Appeal
30-80(2) (table items 9.2.2,
9.2.15, 9.2.16 and 9.2.20)
•
Australian Regional Council of Royal College
of Obstetricians and Gynaecologists
•
Bowral Vietnam Memorial Walk Trust
Incorporated
•
Business Against Domestic Violence Reserve
•
City of Onkaparinga Memorial Gardens
Association Incorporated
•
Commonwealth
•
Constitutional Centenary Foundation
Incorporated
•
Dunn and Lewis Youth Development
Foundation Limited
•
Foundation for Gambling Studies
•
Industrial Design Council of Australia
•
Nonprofit Australia Ltd
•
Pearl Watson Foundation Limited
•
Point Nepean Community Trust
•
Productivity Promotion Council of Australia
•
St Mary’s Cathedral Restoration Appeal
Incorporated.
•
St Michael’s Church Restoration Fund
•
St Paul’s Cathedral Restoration Fund
•
The Finding Sydney Foundation
•
The Salvation Army Hurricane Katrina Relief
Appeal
•
The Vietnam War Memorial of Victoria
Incorporated
•
World Youth Day 2008 Trust
30-40(2) (table item 3.2.3)
30-90 (table items 10.2.6)
30-105 (table items 13.2.4,
13.2.5, 13.2.11 and
13.2.14)
30-105 (table items 13.2.6,
13.2.11, 13.2.12, 13.2.13)
30-315 (table items 45AA,
49A, 81, 86F and 127AA)
30-315 (table items 5, 19,
20AA, 21, 21A, 24, 25,
25C, 26, 28A, 28AB,
28AAA, 31A, 34, 38, 50A,
60A, 61, 83, 91, 105B,
112AFA, 112AG, 112BA
and 121C)
Income Tax (Transitional
Provisions) Act 1997
126-155
Tax Laws Amendment
(Repeal of Inoperative
Provisions) Act 2006
Item 15 of Schedule 3
(heading)
[Schedule #, items # to #, ...]
14
Minor amendments
Part 7 — Taxation of temporary residents
The current law
1.10
The temporary resident provisions in Subdivision 768-R of the
ITAA 1997 are intended to treat temporary resident individuals in the
same way as foreign residents in respect of certain foreign source income
or capital gains. The current wording of the relevant provisions does not,
however, entirely achieve the intended outcome because:
• a temporary resident beneficiary of a fixed trust is unable to
disregard certain capital gains that a foreign resident
beneficiary would be able to disregard in similar
circumstances; and
• amounts of foreign source ordinary and statutory income and
certain capital gains attributable to temporary residents are
included in the net income of the trust and the trustee is liable
to pay tax on these amounts in certain circumstances.
Capital gains and losses
1.11
The temporary resident provisions disregard capital gains that a
temporary resident beneficiary makes from a CGT event in respect of its
interest in a fixed trust if that gain is attributable to a CGT event
happening to non-taxable Australian property (non-TAP) (sections
768-915 and 855-40 of the ITAA 1997). However, section 115-215 of the
ITAA 1997 applies to treat beneficiaries assessable on the net income of a
trust that includes a capital gain as having made an extra capital gain
attributable to the trust’s capital gain. There is some doubt as to whether
the temporary resident provisions as currently worded apply to this extra
capital gain because the temporary resident provisions apply to a capital
gain made from a CGT event.
1.12
These amendments make it clear that a capital gain made by a
trust that gives rise to an extra capital gain for a beneficiary under
subsection 115-215(3) of the ITAA 1997 will be disregarded if the capital
gain would have been disregarded under section 855-40 of the ITAA 1997
if the beneficiary was a foreign resident when they made the gain.
[Schedule #, items # and #, section 768-915 of the ITAA 1997]
1.13
It is also intended that, in situations where a trustee is liable to
tax in relation to the income to which the temporary resident beneficiary is
presently entitled, the relief provided to the temporary resident beneficiary
to disregard certain capital gains on non-TAP assets also extends to the
trustee. The rules applying to foreign residents in subsection 855-40(3) of
the ITAA 1997 currently operate to make a trustee not liable to pay tax on
15
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
amounts that give rise to a capital gain that is disregarded for a beneficiary
under subsection 855-40(2) (broadly, non-TAP amounts). However, the
temporary resident rules do not include such a provision to allow for
comparable tax relief at the trustee level. As a result, Australian tax is
imposed on a resident trustee in respect of a non-TAP capital gain
attributable to a temporary resident beneficiary, even though such a gain is
intended to be disregarded at the beneficiary level.
1.14
These amendments ensure that a trustee of a fixed trust is not
liable to pay tax in respect of an amount that is a disregarded capital gain
for a temporary resident beneficiary. Therefore, the relief provided to the
temporary resident beneficiary for gains on non-TAP assets is also to
extend to the trustee. [Schedule #, item #, paragraph 768-977(2)(a) of the ITAA
1997]
Example 7.1
Jamie was born in a foreign country and recently moved to Australia
with his parents under a temporary resident visa. Jamie is a minor and
therefore under a legal disability. Jamie and his parents have been
living in Australia continuously for more than 6 months. Jamie is a
beneficiary of a fixed trust established in his country of birth. Jamie’s
father is the trustee of the trust and the trust is therefore a resident trust
for Australian income tax purposes.
Jamie has interest income from a bank deposit in Australia, and is
presently entitled to an amount of net income of the trust which
includes a capital gain made by the trust (the trust amount) on
non-TAP assets. This share of net income from the trust is included in
Jamie’s assessable income under section 100 of the ITAA 1936. Jamie
has an extra capital gain equal to the trust amount (subsection
115-215(3) of the ITAA 1997). This extra capital gain is disregarded
for Jamie under subsection 768-915(2) of the ITAA 1997. Further,
although the trustee is assessed under subsection 98(1) of the ITAA
1936, as the amount is a capital gain that is disregarded for Jamie
(under subsection 768-915(2)) the trustee is not liable to pay tax in
respect of this capital gain.
1.15
Further, these amendments ensure that a trustee of a fixed trust
is not liable to pay tax in respect of an amount that would, in respect of a
temporary resident beneficiary presently entitled to an amount (but which
is not included in the beneficiary’s assessable income because, although
the beneficiary is presently entitled, the beneficiary is under a legal
disability and does not have income from any other source), give rise to a
capital gain under subsection 115-215(3) that would be disregarded under
subsection 768-915(2) if the amount was included in the assessable
income of the beneficiary. [Schedule #, item #, paragraph 768-977(2)(b) of the
ITAA 1997]
16
Minor amendments
Example 7.2
Assume the same facts as Example 7.1, however, Jamie’s only income
is his share of net income of the trust. Although this amount is not
included in the assessable income of Jamie (as he is under a legal
disability and does not have income from any other source), the trustee
is assessed under subsection 98(1) of the ITAA 1936. However, had
Jamie not been under a legal disability the amount would have been
included in his assessable income (under subsection 97(1) of the
ITAA 1936), with Jamie making an extra capital gain under subsection
115-215(3) of the ITAA 1997 which would have been disregarded
under subsection 768-915(2) of the ITAA 1997. Therefore, the trustee
will not be liable to pay tax on this amount.
Non-assessable non-exempt income
1.16
A similar issue in respect of trustee taxation arises where a
temporary resident is presently entitled to certain other ordinary and
statutory (non-CGT) foreign source income. Broadly, the general trust
rules in Division 6 of the ITAA 1936 operate to ensure that a trustee or
beneficiary is not liable to tax in respect of a share of foreign source
income to which a foreign resident beneficiary is presently entitled.
However, the temporary resident rules in Subdivision 768-R of the
ITAA 1997 and the general trust rules do not currently provide for similar
treatment of the trustee where a temporary resident beneficiary is
presently entitled to non-assessable non-exempt foreign source income
and where the trustee may be assessed. Typical examples of where the
trustee may be assessed in relation to income to which a beneficiary is
presently entitled is where the beneficiary is under a legal disability
(subsection 98(1) of the ITAA 1936) or where the beneficiary is deemed
to be presently entitled under subsection 95A(2) of the ITAA 1936
(subsection 98(2) of the ITAA 1936).
1.17
These amendments ensure that a trustee is not liable to pay tax
in respect of an amount that is non-assessable non-exempt income of a
beneficiary under section 768-910 of the ITAA 1997. This includes
amounts of ordinary and statutory income attributable to a temporary
resident beneficiary where they are required to include these amounts in
their assessable income (for example, because they are a beneficiary in
more than one trust estate or have income from other sources), as well as
situations where amounts are only assessable to the trustee. Therefore, the
relief provided to the temporary resident beneficiary in respect of amounts
under section 768-910 is also to extend to the trustee.
[Schedule #, item #, subsection 768-977(1) of the ITAA 1997]
Example 7.3
17
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Assume the same facts as Example 7.1, however, the trust has no capital gains
and Jamie is presently entitled to an amount of ordinary income from the trust
which has a foreign source. Jamie has no other assessable income. The
trustee is assessed under subsection 98(1) of the ITAA 1936 in respect of
Jamie’s share of the net income. However, as the foreign source ordinary
income is non-assessable non-exempt income for Jamie under
section 768-910 the trustee will not be liable to pay tax in respect of this
amount.
1.18
Similarly to the foreign resident rules (subsection 855-40(4) of
the ITAA 1997) the amendments that turn off trustee taxation do not
affect the operation of subsections 98A(1) and (3) of the ITAA 1936
(about taxing beneficiaries who are foreign residents at the end of an
income year). [Schedule #, item #, subsection 768-977(3) of the ITAA 1997]
Minor technical amendments
1.19
Notes directing attention to the potential operation of the
temporary resident rules in Subdivision 768-R (about temporary residents)
of the ITAA 1997 are inserted into section 98 of the ITAA 1936 and
section 118-1 of the ITAA 1997. A note directing attention to the
potential operation of the foreign resident rules in Division 855 (about
capital gains and foreign residents) of the ITAA 1997 is inserted into
section 118-1. [Schedule #, items #, # and #, subsection 98(4) of the ITAA 1936 and
section 118-1 of the ITAA 1997]
1.20
A minor technical correction is made to subsection 768-910(1)
of the ITAA 1997 to remove the reference to ‘subsection (5)’.
Subsection 768-910(5) was repealed by the Tax Laws Amendment (2009
Budget Measures No. 2) Act 2009. [Schedule #, item #, subsection768-910(1) of
the ITAA 1997]
Application
1.21
The amendments that apply to disregard extra capital gains made
by a temporary resident beneficiary of a trust apply to capital gains made
in respect of a CGT event happening on or after 1 July 2006. This is
consistent with the application date for section 768-915 of the ITAA 1997.
Applying these amendments retrospectively will benefit taxpayers as the
law will operate to disregard certain trust capital gains which were
originally intended to be disregarded under section 768-915. [Schedule #,
item #]
1.22
The amendments to ensure that a trustee is not liable to pay tax
in respect of amounts that are non-assessable non-exempt income of a
temporary resident beneficiary under section 768-910 of the ITAA 1997
or are disregarded capital gains for a temporary resident beneficiary under
subsection 768-915(2) of the ITAA 1997, apply for the income year in
18
Minor amendments
which the Bill receives Royal Assent and later income years. [Schedule #,
item #]
1.23
The further minor technical amendments made to the
ITAA 1936 and ITAA 1997 apply for the income year in which the Bill
receives Royal Assent and later income years. [Schedule #, item #]
Part 8 — Definitions and signposts to related material
Table 1.8 : Amendments to the Income Tax Assessment Act 1936
Provision being amended
6(1) (at the end of the
definition of dividend)
6(1) (at the end of the
definition of permanent
establishment)
6(1) (definition of RSA)
What the amendment does
Ensures that the additional information
contained in subsections 6(4) and 6(6) is
considered with the definitions of ‘dividend’
and ‘permanent establishment’ respectively.
[Schedule #, items # and #, subsection 6(1)]
Replaces the definitions of ‘RSA’ and ‘RSA
provider’ in the ITAA 1936 with a cross
reference to the meanings given by
subsection 995-1(1) of the ITAA97. [Schedule
#, items # and # subsection 6(1)]
Part 9 — Repeal of redundant reference to Papua New Guinea
Table 1.9 : Amendments to the Income Tax Assessment Act 1936
Provision being amended
6AA(1)(d)
6AA(1)(e)
6AA(1)(f)
What the amendment does
Repeals the reference to Papua New Guinea, as
it is inoperative. [Schedule #, items # to #,
paragraphs 6AA(1)(d), (e) and (f)]
19
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Part 10 — Repeal of redundant references to franking
Table 1.10 : Amendments to the Income Tax Assessment Act 1936
Provision being amended
45C(3)(a)
45C(5) and (6)
What the amendment does
Repeals subsections 45C(5) and 45C(6).
Subsection 45C(5) is a transitional rule that is
no longer required. Subsection 45C(6) refers
to definitions in Part IIIAA of the ITAA
1936. Part IIIAA was previously removed as
an inoperative provision. [Schedule #, item #,
subsections 45C(5) and (6)]
Modifies paragraph 45C(3)(a) to replace a
redundant reference to ‘a class C franking
debit’ with a reference to ‘a franking debit’.
This amendment will apply from 1 July 2002,
which is the time when class C franking
debits ceased to exist. [Schedule #, items # and
#, paragraph 45C(3)(a)]
Under the simplified imputation system,
introduced from 1 July 2002, the way that
companies keep franking accounts changed
from a taxed income basis to a tax paid basis.
This removed the requirement for companies
to maintain different classes of franking
accounts. The amendment to update the
terminology in section 45C will have no
adverse impact on taxpayers as it confirms
existing practice and removes uncertainty.
20
Minor amendments
Part 11 — Correction of cross-references in provisions about dividend
streaming
Table 1.11 : Amendments to the Income Tax Assessment Act 1936
Provision being amended
45D(2)
What the amendment does
Replaces an incorrect reference in subsection
45D(2) to a determination made under
paragraph 45D(1)(b) with a reference to a
determination made under section 45A.. This
amendment applies to determinations made
by the Commissioner on or after 24 October
2002. [Schedule #, item #, subsection 45D(2)].
Paragraph 45D(1)(b) was removed when the
demerger provisions were introduced in 2002.
However, a consequential amendment to
update subsection 45D(2) was overlooked.
This amendment will not have an adverse
impact on taxpayers, as it confirms existing
practice and removes uncertainty. [Schedule
#, items # to #, ...].
Part 12 — Minor changes to provisions about concessional rebates
Table 1.12 : Amendments to the Income Tax Assessment Act 1936
Provision being amended
159HA (heading)
159J(1B)
What the amendment does
Removes the references to 159K from the
heading of section 159HA and fixes
duplication of the word ‘the’.
[Schedule #, items # to #, ...]
Part 13 — Fixing outdated references to Medicare levy
Table 1.13 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
3(1)
3-5(1)(note 1)
What the amendment does
Repeals the redundant provision and fixes the
note to subsection 3-5(1) to signpost
references to the Medicare levy. [Schedule #,
items # to #, ...]
21
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Part 14 — Repeal of references to previously repealed provisions
Table 1.14 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
11-15 (table item headed
“United Nations”
What the amendment does
Removes the item referring to section
23ADA, which was repealed by Tax Laws
Amendment (Repeal of Inoperative
Provisions) Act 2006. [Schedule #, items # to
#, ...]
830-75
####
Part 15 — Correction of asterisking of reference to tax debts
Table 1.15 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
25-5(7)
What the amendment does
Corrects the asterisking of the reference to
‘tax debts’. [Schedule #, items # to #, ...]
Part 16 — Repeal of outdated provisions about exemptions from income
tax
Table 1.16 : Amendments to repeal inoperative exemptions from
income tax
Provision being amended
ITAA 1936
128B(3)(ab)
ITAA 1997
11-5 (table item headed
“mining”)
11-5 (table item headed
“film”)
50-35 (table item 7.1)
50-45 (heading)
50-45 (table items 9.3 and 9.4)
What the amendment does
Repeals outdated provisions that covered
exemptions from income tax. The Phosphate
Mining Company of Christmas Island
Limited no longer exists; the Australian Film
Finance Corporation Pty Limited was
deregistered and subsumed into Screen
Australia; and the Commonwealth Games
Federation entitlement to tax exemptions
expired on 1 July 2007. The provisions
relating to these are inoperative and are
therefore being repealed. [Schedule #, items #
to #, ...]
22
Minor amendments
Part 17 — Correction of asterisking of reference to quarter
Table 1.17 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
114-15(2)
114-15(3)(method statement,
steps 1 and 3)
114-15(5) and (6)
114-20
What the amendment does
Corrects the asterisking of the references to
‘quarter’. [Schedule #, items # to #,
subsection 114-15(2),
subsection 114-15(3)(method statement, steps 1
and 3), subsections 14-15(5) and (6), and section
114-20]
23
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Part 18 — Inclusion of Commissioner’s discretion to extend main
residence exemption from CGT
Table 1.18 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
24
What the amendment does
Minor amendments
Provision being amended
118-150(4)(a)
What the amendment does
This amendment gives effect to the
suggestion made through TIES 0056-2009.
Section 118-150 of the ITAA 1997 extends
the CGT main residence exemption to allow a
taxpayer to treat land as their main residence
for up to four years if they build, repair or
renovate a dwelling on the land that
subsequently becomes their main residence.
This amendment gives the Commissioner of
Taxation (the Commissioner) discretion to
extend this period where the taxpayer does
not build, repair or renovate a dwelling and
establish it as their main residence within four
years. [Schedule #, item #, paragraph
118-150(4)(a) ITAA 1997]
The Commissioner would be expected to
exercise the discretion in situations such as
the following:
•
When the taxpayer is unable to build,
repair or renovate the dwelling within this
time period due to circumstances outside
their control. For example, the relevant
builder becomes bankrupt and is unable to
complete the building, repairs or
renovations.
•
When the taxpayer is unable to build,
repair or renovate the dwelling due to
unforeseen circumstances arising during
this period. For example, the taxpayer or a
family member has a severe illness or
injury.
•
When building, repairing or renovating
the dwelling within the four years would
impose a severe financial burden on the
taxpayer. For example, the taxpayer
would be required to incur an excessively
high level of debt relative to their income.
Consequently, the taxpayer may spend
time accumulating sufficient savings
(relative to their income) to build, repair
or renovate a reasonable dwelling relative
to their circumstances.
These examples are not exhaustive.
This amendment will apply in relation to
CGT events happening on or after Royal
assent. [Schedule #, items # to #, ...]
25
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Part 19 — Nomination of controllers of discretionary trust
1.24
These amendments give effect to the suggestion made through
TIES 0059-2009.
1.25
All references to legislative provisions in this Part are references
to the Income Tax Assessment Act 1997 unless otherwise stated.
1.26
Section 152-42 currently allows a trustee of a discretionary trust
to nominate up to four beneficiaries of the trust as controllers of the trust
for an income year in which the trustee did not make a distribution of
income or capital and the trust had a tax loss or no taxable income for that
year.
1.27
The result of nominating a beneficiary to be a controller of a
discretionary trust is that the beneficiary and discretionary trust are
connected entities for the income year but only for the purpose of
applying the definition of active asset in subparagraph 152-40(1)(a)(iii) or
paragraph 152-40(1)(b).
1.28
This allows a capital gain made on a passively held CGT asset
(that is, an asset that is owned by one entity and used in the business of an
affiliate of, or an entity connected with, the asset-owning entity) to qualify
for the small business CGT concessions via the maximum net asset value
test where the asset is:
• owned by a nominated beneficiary (or beneficiaries) or by an
entity connected with a nominated beneficiary; and
• used or held ready for use in the discretionary trust’s
business.
1.29
However, where a beneficiary is a controller of a discretionary
trust only because of the nomination in section 152-42, this does not make
the beneficiary a controller of the trust for calculating the maximum net
asset value of the entity that owns the asset.
1.30
Currently, section 152-42 does not apply to
paragraph 152-10(1A)(a), which is part of the provisions that extend
access to the small business CGT concessions via the small business
entity test to passively-held assets.
1.31
This means that an entity that does not carry on a business (other
than as a partner in partnership) and that is not connected with a
discretionary trust cannot access the small business CGT concessions via
the small business entity test for a capital gain made on a CGT asset it
owned that was used in the business of the discretionary trust.
26
Minor amendments
1.32
The amendments, which repeal section 152-42 with effect from
Royal Assent, introduce a new provision to allow a trustee of a
discretionary trust to nominate up to four beneficiaries of the trust as
controllers of the trust for an income year in which the trustee did not
make a distribution of income or capital and the trust had a tax loss or no
net income for that year. The nomination must be in writing and signed
by the trustee and by each nominated beneficiary. The proposed provision
relates to ‘net income’ rather than ‘taxable income’, which is used in
section 152-42. ‘Taxable income’ is technically incorrect because, under
subsection 95(1) of the ITAA 1936, a trust has net income rather than
taxable income. [Schedule #, items #, # and subitem 105(2), sections 152-42 and
152-78]
1.33
The amendments also extend the scope of the nomination so that
it applies for the purposes of Subdivision 152-A and for sections 328-110,
328-115 and 328-125 as they relate to that Subdivision. [Schedule #, item #,
subsection 152-78(1)]
1.34
Where the trustee has made a nomination under the new
provision, its extended scope allows an entity that does not carry on a
business (other than as a partner in partnership) whose asset is used in the
trust’s business to access the small business CGT concessions via the
small business entity test through the operation of subsection 152-10(1A).
1.35
The extended scope of a nomination also means that it applies
for determining whether one entity is connected with another entity for
calculating the maximum net asset value of the entity that owned the asset
or the aggregated turnover of the discretionary trust that used the asset in
its business.
1.36
Various notes in the legislation have been changed and new
notes inserted to indicate the location and effect of the amendments.
[Schedule #, items # to #, ...]
1.37
For access to the small business CGT concessions generally, the
amendments apply in relation to CGT events that happen on or after the
day this Bill receives Royal Assent. [Schedule #, item #, subitem (1)(a)]
1.38
For access to the small business CGT concessions via the small
business entity test only, the amendments also apply in relation to CGT
events that happen before the day this Bill receives Royal Assent but after
the start of the 2007-08 income year. [Schedule #, item #, subitem 105(1)(b)]
1.39
The combination of the two application rules results in:
• the amendments applying, for access to the concessions via
the small business entity test, in relation to CGT events that
happen in the 2007-08 income year and later income years
27
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
(which aligns with the date of effect of the amendments that
extended access to the concessions via the small business
entity test to passively held assets); and
• taxpayers who accessed the concessions where a trustee
made a nomination under section 152-42 prior to Royal
Assent not being disadvantaged by the increased scope of the
new nomination, which includes determining whether one
entity is connected with another entity for calculating the
maximum net asset value of the entity that owned the
relevant asset.
1.40
The retrospective component of the amendments will be
beneficial to discretionary trust beneficiaries who, following the trustee of
the trust making a nomination, will have the opportunity to access the
small business CGT concessions via the small business entity test.
1.41
The small business CGT concessions require taxpayers to make
choices. For example, the small business retirement exemption and small
business roll-over are available only if the taxpayer chooses to obtain
them.
1.42
Subsection 103-25(1) limits the date for making a choice to the
day an entity lodges its income tax return for the income year in which the
relevant CGT event happened or a later date allowed by the
Commissioner.
1.43
Taxpayers who become eligible to make a choice under Division
152 due to these amendments will have an extended period, under a
transitional rule, to make such a choice in relation to CGT events
happening before the day on which this Bill receives Royal Assent.
[Schedule #, subitem 105(3)]
1.44
The time limit for a choice an entity becomes eligible to make as
a result of these amendments is the latest of:
• the day the entity lodges its income tax return for the income
year in which the relevant CGT event happened;
• 12 months after the day this Bill receives the Royal Assent;
and
• a later day allowed by the Commissioner of Taxation.
[Schedule #, subitem 105(4)]
28
Minor amendments
Part 20 — Definitions mainly relevant to Subdivision 165-F of the ITAA97
Table 1.19 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
ITAA 1997
115-50(2)(a), 3(a) and 4(a)
121-30(2)
124-810(3)(a)
165-45(4)(note 2)
165-215(2)(a)(i)
165-215(2)(a)(ii)
165-215(2)(b)(i)
165-215(3)
165-215(4)(a)
165-215(5)
165-220(2)(a)(i)
165-220(2)(a)(ii)
165-220(2)(b)(i)
165-220(2)(b)(ii)
165-220(3)
165-220(4)(a)
165-220(5)
165-225
165-230(2)(a)(i)
165-230(2)(a)(ii)
165-230(2)(b)(i)
165-230(2)(b)(ii)
165-230(3)
165-230(4)(a)
165-230(5)
165-235(3)
165-235(4)(a)
165-240(1)
165-245
207-130(6)(f)
707-130(1)(note 1)
995-1(1)
995-1(1) (definition of fixed
entitlement)
995-1(1) (definition of more
than a 50% stake)
TAA 1953
45-287(1)(a) in Schedule 1
45-287(4)(a) in Schedule 1
What the amendment does
Section 165-45 is repealed and the terms that
were contained in that section are now defined
in either the ITAA97 or the ITAA36 with
cross references as required.
Inserts definitions of ‘control a non-fixed
trust’ and ‘excepted trust’ and ‘more than a
50% stake’.
[Schedule #, Part 20, items #, # and #,
subsection 995-1(1)]
Corrects the asterisking of the references to
‘fixed entitlement’, ‘fixed trust’, ‘non-fixed
trusts’, ‘fixed entitlements’, ‘family trusts’,
‘excepted trust’, and ‘more than a 50% stake’.
[Schedule #, Part 20, items # to #, sections 165225 and 165-245, subsections 121-30(2), 16545(4)(note 2), 165-215(3), and (5), 165-220(3) and
(5), 165-230(3), 165-230(5), 165-235(3), 165240(1), 295-550(4) and (5), and 707-130(1)(note
1), paragraphs 115-50(2)(a), 3(a) and 4(a), 124810(3)(a), 165_215(4)(a), 165-220(4)(a), 165230(4)(a), 165-235(4)(a) and 207-130(6)(f),
subparagraphs 165-215(2)(a)(i), (ii) and 165215(2)(b)(i), 165-220(2)(a)(i) and (ii),
165-220(2)(b)(i) and (ii), 165-230(2)(a)(i) and (ii),
165-230(2)(b)(i) and (ii).]
Section 165-245 is being inserted as
replacement rules to better explain what
holding fixed entitlements directly or
indirectly means when an entity has fixed
entitlement to income or capital of a company.
[Schedule #, items # to #, ...]
Corrects the asterisking of references to ‘fixed
entitlement’. [Schedule #, items # to #, ...]
29
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Part 21 — Removal of definition from imputation provisions
Table 1.20 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
204-70
204-75(1) and (2)
204-80(1)
What the amendment does
Removes the definition of the term 'differs
significantly' from the imputation provisions.
[Schedule #, items # to #, ...]
Part 22 — Correction of outdated references to virtual PST assets
Table 1.21 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
320-141(2)(a)(i)
320-141(2)(a)(ii)
What the amendment does
These amendments give effect to a suggestion
made through TIES 0057-2009.
Replaces outdated references in
subsection 320-141(2) to ‘virtual PST assets’
with references to ‘complying
superannuation/FHSA assets’. This
amendment applies on and after 26 June
2008. [Schedule #, items # to #, subparagraphs
320-141(2)(a)(i) and (ii) ITAA 1997]
The concept of a ‘virtual PST asset’ was
replaced with the concept of a ‘complying
superannuation/FHSA asset’ when the first
home savers account amendments were
introduced in 2008. The amendments to
update the terminology in subsection
320-141(2), which were sought by taxpayers
through the TIES system, will have no
adverse impact on taxpayers as they confirm
existing practice and remove uncertainty.
30
Minor amendments
Part 23 — Repeal of spent provision about land transport facilities
borrowings
Table 1.22 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
What the amendment does
13-1(table item headed “land
transport facilities
borrowings”
250-60(3)
Division 396
995-1(1) (definition of land
transport facilities borrowings
agreement)
995-1(1) (definition of land
transport facility)
995-1(1) (definition of LTF
interest)
995-1(1) (definition of related
facility)
Repeals the provisions that provided the basis
for the land transport facilities borrowings
scheme. That scheme provided tax offsets to
resident financiers on interest received from
eligible land transport infrastructure
borrowings provided that the borrower agreed
to forego the tax deductibility of that interest.
The scheme is no longer operative. Since
2004 no new projects have been approved
under the scheme and no projects currently
receive assistance under it. [Schedule #, items
# to #, Division 396, section 13-1 (table item
headed “land transport facilities borrowings”,
subsections 250-60(3), 995-1(1) (definition of
land transport facilities borrowings agreement),
995-1(1) (definition of land transport facility),
995-1(1) (definition of LTF interest), and 9951(1) (definition of related facility), paragraphs
250-60(3)(d) and (e)]
Part 24 — Prevention of double counting for direct value shifts
Table 1.23 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
725-250
725-255(2)
725-335(3)
725-340(2)
What the amendment does
In certain circumstances, the direct value
shifting (DVS) rules could apply where an
amount is already included in the adjustable
value (such as the cost base or reduced cost
base) of an up interest.
This could happen where, for example, a
shareholder makes a payment to another
shareholder for an impairment of their share
rights. This expenditure could qualify for
inclusion in the fourth element of the cost
base (and reduced cost base) of the paying
shareholder’s shares.
Providing that all of the conditions under the
DVS rules are satisfied, the payer shareholder
would also be able to make an adjustment to
increase the cost base of their shares
reflecting in whole or part the increase in the
market value of their interest. This can
duplicate the effect of the inclusion of an
31
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Provision being amended
What the amendment does
amount in the fourth element of the cost base.
This amendment will ensure that where an
amount is included in the adjustable value of
an up interest, the value will not adjust the
cost base of the up interest under the DVS
rules.
This amendment applies in relation to
schemes entered into on or after Royal
Assent.
[Schedule #, items # to #, section 725-250 and
subsections 725-255(2), 725-335(3) and
725-340(2)]
Part 25 — This part will be included at a later stage
Table 1.24 : Amendments to the ####
Provision being amended
What the amendment does
Part 26 — Correction of references to chains of fixed trusts
Table 1.25 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
855-40(2)(b)(i) and (ii)
855-40(6)(b)
What the amendment does
Corrects the references to “chains of fixed
trusts”. [Schedule #, items # to #, subparagraphs
855-40(2)(b)(i) and (ii) and paragraph 85540(6)(b)]
Part 27 — Gender specific language
Table 1.26 : Amendments to the Income Tax Assessment Act 1936
Provision being amended
Various provisions
32
What the amendments do
Ensures gender neutral references in the tax
law provisions. [Schedule #, items # to #]
Minor amendments
Part 28 — Misdescribed amendments
Table 1.27 : Amendments to the Tax Laws Amendment (2010
Measures No.1) Act 2010
Provision being amended
Item 105 of Schedule 5
Item 173 of Schedule 5
Item 201 of Schedule 5
Item 11 of Schedule 6
(heading)
What the amendment does
Corrects grammatical and other errors, such
as asterisking. [Schedule #, items #, # to #, Item
105 of Schedule 5, Item 173 of Schedule 5, Item
201 of Schedule 5, and Item 11 of Schedule 6
(heading)]
Table 1.28 : Amendments to the Tax Laws Amendment (Transfer of
Provisions) Act 2010
Provision being amended
Item 16 of Schedule 2
What the amendment does
Repeals an item that amends provisions that
have been repealed. [Schedule #, item #, Item
16 of Schedule 2]
Part 29 — References to Schedules
Table 1.29 : Amendments to the Family Trust Distribution Tax
(Primary Liability) Act 1998 and to the Family Trust Distribution Tax
(Secondary Liability) Act 1998
Provision being amended
What the amendment does
Corrects the wording of how to refer to a
Schedule. [Schedule #, item #, section 3 Family
Trust Distribution Tax (Primary Liability) Act
1998, item #, section 3 Family Trust Distribution
Tax (Secondary Liability) Act 1998]
3
Table 1.30 : Amendments to the Fringe Benefits Tax Assessment Act
1986
Provision being amended
136(1) (paragraph (q) of the
definition of fringe benefit)
What the amendment does
Corrects the wording of how to refer to a
Schedule. [Schedule #, item #, subsection 136(1)
(definition of fringe benefit)]
33
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Table 1.31 Amendments to the Income Tax Assessment Act 1936
Provision being amended
95(1) (note at the end of the
definition of net income)
Corrects the wording of how to refer to a
Schedule. [Schedule #, items # to #, subsection
102D(1) (note at the end of the
definition of net income)
95(1) (definition of net income), subsection
102D(1) (note at the end of the definition of net
income), section 102M (note at the end of the
definition of net income), subsection 102UC(4)
(definition of discretionary trust), subsection
102UC(4) (paragraphs (a), (d) and (e) of the
definition of excluded trust, subsection 102UC(4)
(definition of fixed entitlement), and subsection
102UC(4) (definition of indirectly)]
102M (note at the end of the
definition of net income)
102UC(4) (definition of
discretionary trust)
102UC(4) (paragraphs (a), (d)
and (e) of the definition of
excluded trust)
102UC(4) (definition of fixed
entitlement)
102UC(4) (definition of
indirectly)
34
What the amendment does
Minor amendments
Table 1.32 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
25-35(5) (cell at table item 5,
column headed “See:”)
36-25
109-60 (cell at table item 9,
column headed “See:”)
109-60 (cell at table item 10,
column headed “See:”)
112-97 (cell at table item 5A,
column headed “See:”)
112-97 (cell at table item 20,
column headed “See:”)
128-15(1) (note 2)
165-215(5)
165-220(5)
165-230(5)
180-10(1)
180-20(1)
230-460(7)
328-10(1) (cell at table item 12,
column headed “Provision”)
328-110(4) (paragraph (a) of the
note)
995-1(1) (definition of family
trust)
995-1(1) (paragraph (a) of the
definition of income for surcharge
purposes)
995-1(1) (note 1 to paragraph (a)
of the definition of tax loss)
What the amendment does
Corrects the wording of how to refer to a
Schedule. [Schedule #, items # to # and SS97 to
SS110, subsection 25-35(5) (cell at table item 5,
column headed “See:”), section 36-25, section
109-60 (cell at table item 9, column headed
“See:”), section 109-60 (cell at table item 10,
column headed “See:”), section 112-97 (cell at
table item 5A, column headed “See:”), section
112-97 (cell at table item 20, column headed
“See:”), subsection 128-15(1) (note 2),
subsections 165-215(5), 165-220(5), 165-230(5),
180-10(1) and 180-20(1), subsection 328-10(1)
(cell at table item 12, column headed
“Provision”), subsection 328-110(4) (paragraph
(a) of the note), subsection 995-1(1) (definition of
family trust), subsection 995-1(1) (paragraph (a)
of the definition of income for surcharge
purposes), and subsection 995-1(1) (note 1 to
paragraph (a) of the definition of tax loss)]
Updates a reference to the old Schedule 2J in
the Income Tax Assessment Act 1936, which
has since been rewritten into Subdivision
321-C in the Income Tax Assessment Act
1997. [Schedule #, item #, subsection
230-460(7)]
Table 1.33 : Amendments to the Income Tax (Transitional Provisions)
Act 1997
Provision being amended
40-285(2)(a)(ii)
What the amendment does
Corrects the wording of how to refer to a
Schedule. [Schedule #, item #, subparagraph 40285(2)(a)(ii)]
Table 1.34 : Amendments to the Medicare Levy Act 1986
Provision being amended
3(2A)
What the amendment does
Corrects the wording of how to refer to a
Schedule. [Schedule #, item #, subsection 3(2A)]
35
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Table 1.35 : Amendments to the Superannuation Contributions Tax
(Assessment and Collection) Act 1997
Provision being amended
7A(3)(b) and (c)
7B(3)(b) and (c)
What the amendment does
Corrects the wording of how to refer to a
Schedule. [Schedule #, item #, paragraphs
7A(3)(b) and (c), and paragraphs 7B(3)(b) and
(c)]
Part 30 — References to taxation laws
Table 1.36 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
995-1(1)
What the amendment does
Inserts a definition of ‘Excise Act’. [Schedule
#, item #, subsection 995-1(1)]
Table 1.37 : Amendments to the Taxation Administration Act 1953
36
Provision being amended
What the amendment does
2(1) (at the end of the definition
of taxation law)
2(2)
284-75(1)(a) in Schedule 1
284-75(1) in Schedule 1 (note 1)
284-75(1) in Schedule 1 (note 2)
284-75(4)(a)(ii) in Schedule 1
284-75(4)(b) in Schedule 1
284-75(6)(d)(i) in Schedule 1
284-75(6)(d)(ii) in Schedule 1
284-80(1) in Schedule 1 (table
item 2)
284-90(1) in Schedule 1 (cells at
table items 1, 2 and 3, column
headed “In this situation:”)
Clarifies the limiting of the definition of taxation
law so as to exclude Excise Acts. [Schedule #,
items # to #, subsection 2(1) (at the end of the
definition of taxation law), subsection 2(2),
paragraph 284-75(1)(a) in Schedule 1, subsection
284-75(1) in Schedule 1 (note 1), subsection 28475(1) in Schedule 1 (note 2), subparagraphs 28475(4)(a)(ii) and (b)(ii),284-75(d)(i) and (ii),
subsection 284-80(1) in Schedule 1 (table item 2),
subsection 284-90(1) in Schedule 1 (table items 1,
2 and 3, column headed “In this situation:”)]
Minor amendments
Part 31 — Other Amendments
Table 1.38 : Amendments to the Income Tax Assessment Act 1936
Provision being amended
23AB(5)(a
23AB(7)
23AB(7)(a)
23AB(10)(a)
170(10AA) (table items 24,
25, 30 and 35)
202DR(2)
What the amendment does
Adds conjunctions that had been omitted at
the end of some paragraphs. [Schedule #, items
#, # and #, at the end of paragraph 23AB(5)(a), at
the end of paragraph 23AB(7)(a), and at the end
of paragraph 23AB(10)(a)]
Corrects an ambiguity in the wording of the
provision, as the previous text did not
explicitly state that the rebate was to be
calculated as provided in the provision.
[Schedule #, item #, subsection 23AB(7)]
Corrects the numbering and ordering of items
in the table. [Schedule #, item #, subsection
170(10AA) (table items #, #, # and #)]
Corrects a grammatical error. [Schedule #, item
#, subsection 202DR(2)]
Table 1.39 : Amendments to the Income Tax Assessment Act 1997
Provision being amended
112-20(3) (note 1)
Division 240 (the heading of
Subdivision H)
376-170(4)(a)(i)
705-25(5)(c)(ii)
974-150(2)
What the amendment does
Corrects a typographical error. [Schedule #,
items #, # and #, subsection 112-30(3) (note 1),
the heading of subdivision H of division 240, and
subparagraph 705-25(5)(c)(ii)]
Repeals a provision that related to a
corporation that no longer exists. [Schedule #,
item #, subparagraph 376-170(4)(a)(i)]
Corrects an incorrect cross-reference.
[Schedule #, item #, subsection 974-150(2)]
Table 1.40 : Amendments to the Income Tax (Transitional Provisions)
Act 1997
Provision being amended
126-155
What the amendment does
Repeals a spent provision. [Schedule #, item #,
section 126-155]
Table 1.41 : Amendments to the Superannuation Legislation
Amendment Act 2010
Provision being amended
21(1) in Schedule 1
What the amendment does
Corrects an incorrect cross-reference.
[Schedule #, item #, subsection 21(1) in
Schedule 1]
37
Tax laws amendment (2011 measures No. 2) Bill 2011: minor amendments
Table 1.42 : Amendments to the Taxation Administration Act 1953
Provision being amended
2(1)
14ZQ (definition of ineligible
income tax remission decision)
14ZS(1)
14ZS(2)
14ZS(5)
388-65(3A) in Schedule 1
What the amendment does
Moves the definition of ineligible income tax
remission decision from section 14ZQ to
subsection 2(1). [Schedule #, items # and # to #,
subsection 2(1), section 14ZQ (definition of
ineligible income tax remission decision),
subsections 14ZS(1), (2) and (5)]
Corrects an incorrect cross-reference, and
will apply to determinations made on or after
1 April 2004. [Schedule #, items # to #,
subsection 388-65(3A) in Schedule 1]
Table 1.43 : Amendments to the Taxation (Interest on Overpayments
and Early Payments) Act 1983
Provision being amended
3C (definition of relevant tax)
(table item 50)
What the amendment does
Corrects an incorrect cross-reference.
[Schedule #, item #, section 3C (definition of
relevant tax) (table item 50)]
Table 1.44 : Amendments to the Tax Laws Amendment (2007
Measures No. 5) Act 2007
38
Provision being amended
What the amendment does
Part 2 of Schedule 12 (heading
relating to the Industrial
Research and Development
Incentives Act 1976)
Repeals a heading which refers to an Act that
is not being amended. [Schedule #, item #, Part
2 of Schedule 12 (heading relating to the
Industrial Research and Development Incentives
Act 1976)]