Income Tax Assessment Act 1936

A body that is a State/Territory body (an STB) is exempt from income tax under this Division unless it is an excluded STB. There are 5 different ways in which a body can be an STB.

The following diagram is a guide to help work out whether a body is exempt from income tax under this Division:

The income of a State/Territory body (an STB) is exempt from income tax unless section 24AN applies to the STB.

Income derived by an STB is not exempt from income tax under this Division if, at the time that it is derived, the STB is an excluded STB.

2. Even though an excluded STB is not exempt from income tax under this Division, it may still be exempt under another provision of this Act.

Notes: 1. For the definition of excluded STB see section 24AT.

A body is an STB if:

it is a company limited solely by shares; and

all the shares in it are beneficially owned by one or more government entities.

Note: For the definition of government entity see section 24AT. Note that an excluded STB is not a government entity.

A body is an STB if:

it is established by State or Territory legislation; and

it is not a company limited solely by shares; and

the legislation provides that it must distribute all of its profits (if any) only to one or more government entities; and

if the legislation makes provision as to the way its net assets may be distributed if it is dissolved or wound up—the provision is that, if it is dissolved, all of its net assets (if any) must be distributed only to one or more government entities.

A body is an STB if:

it is established by State or Territory legislation; and

it is not a company limited solely by shares; and

the legislation gives the power to appoint or dismiss its governing person or body only to one or more government entities.

A body is an STB if:

it is established by State or Territory legislation; and

it is not a company limited solely by shares; and

the legislation gives the power to direct its governing person or body as to the conduct of its affairs only to one or more government entities.

A body is an STB if:

it is not a company limited solely by shares; and

it is not established by State or Territory legislation; and

all the legal and beneficial interests (including, but not limited to, interests as to income, profits, dividends, capital and distributions of capital) in it are held only by one or more government entities; and

all the rights or powers (if any) to vote, appoint or dismiss its governing person or body and direct its governing person or body as to the conduct of its affairs are held only by one or more government entities.

In this Division:

excluded STB means an STB that:

at a particular time, is prescribed as an excluded STB in relation to that time; or

(b) is a municipal corporation or other local governing body (Income Tax Assessment Act 1997); orwithin the meaning of section 50-25 of the

(c) is a public educational institution to which any of paragraphs 50-55(1)(a) to (c) of the Income Tax Assessment Act 1997 applies; or

(d) is a public hospital to which any of paragraphs 50-55(1)(a) to (c) of the Income Tax Assessment Act 1997 applies; or

is a superannuation fund.

government entity means:

a State; or

a Territory; or

(ba) a municipal corporation or other local governing body (Income Tax Assessment Act 1997); orwithin the meaning of section 50-25 of the

Note: The effect of this paragraph is that some bodies owned or controlled by a municipal corporation or other local governing body may be an STB even though the municipal corporation or other local governing body is an excluded STB.

another STB that is not an excluded STB.

Territory means the Northern Territory or the Australian Capital Territory.

For the purposes of sections 24AQ, 24AR and 24AS, if the power to appoint, dismiss or direct the governing body is given to, or is held by:

a Governor of a State; or

a Minister of the Crown of a State; or

a Minister of a Territory; or

the head of a Department of a State or a Territory; or

any combination of paragraphs (a) to (d);

the power is taken to be given to, or held by, a government entity.

States and Territories to consent to STBs being excluded STBs

The regulations may prescribe that an STB is an excluded STB only if all States and Territories consent to the STB being so prescribed.

Retrospective application of regulations prescribing excluded STBs

(2) Subsection 12(2) (retrospective application of legislative instruments) of the Legislation Act 2003 does not apply to a regulation prescribing an STB as an excluded STB.

If a body ceases to be an STB in a year of income (the cessation year), this Act applies to the body as if:

(a) the cessation were a change which requires a company to calculate its taxable income and tax loss under Subdivision 165-B of the Income Tax Assessment Act 1997; and

the references in that Subdivision to “company” were references to “body”; and

if the body is not a company—there were no further requirement for the body to calculate its taxable income for the year of income under that Subdivision; and

the amount of any notional loss of the body calculated under section 165-50 of that Act for the period before the cessation were nil; and

the body’s deductions for tax losses were attributed under section 165-55 of that Act to the period before the cessation and not to any other period; and

those deductions were taken not to be full year deductions under section 165-55 of that Act; and

(g) the application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 were modified, for the purposes of that Subdivision, in accordance with section 24AX of this Act.

Period after cessation date—prior net capital losses to be disregarded

(1) In determining if an amount is to be included in the assessable income of the body under Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 for a period that occurred after the cessation, any net capital losses incurred before the cessation are to be disregarded.

Special cases where net capital gain before cessation and net capital loss after cessation

Subsections (3) and (4) apply if:

a net capital gain accrued in the period before the cessation; and

if the period from the cessation until the end of the year of income were treated as a year of income—a net capital loss would have accrued in that period.

Special case 1—gain exceeds loss

If this subsection applies and the net capital gain exceeds the net capital loss:

the amount that is to be included in the assessable income of the body for the period that occurred before the cessation as a result of the net capital gain accruing to the body is taken to be the amount by which the net capital gain exceeds the net capital loss; and

no net capital gain is taken to have accrued, and no net capital loss is taken to have been incurred, in any period in the cessation year after the cessation; and

in determining if a net capital gain accrued to, or a net capital loss was incurred by, the body for the year following the cessation year, no net capital loss is taken to have been incurred by the body in the cessation year.

Special case 2—loss equal to or exceeds gain

If this subsection applies and the net capital gain does not exceed the net capital loss:

no amount is to be included in the assessable income of the body for any period in the cessation year as a result of a net capital gain accruing to the body; and

in determining if a net capital gain accrued to, or a net capital loss was incurred by, the body for the year following the cessation year, the net capital loss that the body incurred in the cessation year is taken to be the amount (if any) by which the net capital loss exceeds the net capital gain.

If a body is an STB on the last day of a year of income in which it incurs a tax loss, the tax loss is not allowable as a deduction from the body’s assessable income of a later year of income unless the body is an STB on the first day of that later year of income.

Note: This section prevents losses from years prior to the cessation year from being carried forward to years after the cessation year.

This section only applies to a tax loss incurred in the 1995-96 year of income or a later year of income.

(1) This section applies to a deduction under Income Tax Assessment Act 1997 in respect of a contribution made in relation to a person who was an employee of a prescribed excluded STB when it ceased to be an STB.section 290-60 of the

A deduction to which this section applies is not allowable to the body for any year of income unless the requirements of subsections (3) and (4) are complied with.

For the deduction to be allowable, the body must obtain a certificate by an authorised actuary stating the actuarial value, as at the time the body ceases to be an STB, of liabilities of the STB to provide superannuation benefits for, or for SIS dependants of, employees of the body, where the liabilities:

accrued after 30 June 1995 and before the time when the body ceased to be an STB; and

were, according to actuarial principles, unfunded at that time.

The certificate must be in a form approved in writing by the Commissioner. The body must obtain the certificate:

before the date of lodgment of its return of income of the year of income in which the body ceased to be an STB; or

within such further time as the Commissioner allows.

If the body obtains the certificate, a deduction to which this section applies is nevertheless not allowable for a year of income if the sum of all deductions to which this section applies for the year of income is less than or equal to the unfunded liability limit (see subsection (6)) for the year of income.

If the sum is greater than that limit, so much of the deduction as is worked out using the following formula is not allowable:

where:

Unfunded liability limit for a year of income is:

if the year of income is the one in which the body ceases to be an STB—the actuarial value of the liabilities set out in the actuary’s certificate; or

in any other case—that actuarial value as reduced by the total amount of deductions to which this section applies that, because of subsection (5), have not been allowable to the body for all previous years of income.

(7) Expressions used in this section that are also used in Income Tax Assessment Act 1997 have the same respective meanings as in that section.section 290-60 of the

In this Subdivision:

period means any of the periods into which the cessation year is divided under section 165-45 of the Income Tax Assessment Act 1997.

prescribed excluded STB means an STB that is an excluded STB as a result of regulations made for the purposes of paragraph (a) of the definition of excluded STB in section 24AT.

This section does not apply in respect of the sale of property acquired on or after 20 September 1985.

This section does not apply to a profit arising in the 1997-98 year of income or a later year of income from the carrying on or carrying out of a profit-making undertaking or scheme, even if the undertaking or scheme was entered into, or began to be carried on or carried out, before the 1997-98 year of income.

Note: Section 15-15 (Profit-making undertaking or plan) of the Income Tax Assessment Act 1997 deals with such a profit.

The assessable income of a taxpayer shall include profit arising from the sale by the taxpayer of any property acquired by the taxpayer for the purpose of profit-making by sale, or from the carrying on or carrying out of any profit-making undertaking or scheme.

Subject to subsection (3), where:

(a) after 23 August 1983, a taxpayer sold or sells property (in this subsection referred to as the relevant property) being:

shares in a private company;

an interest in a partnership; or

an interest in a private trust estate; and

at the time of sale of the relevant property:

the company, partnership or trustee of the trust estate, as the case may be, held property that:

(A) was acquired for the purpose of profit-making by sale by the company, partnership or trustee, as the case may be; and

(B) was not excepted property of the company, partnership or trust estate, as the case may be; or

the company, partnership or trustee of the trust estate, as the case may be, held an interest, through one or more interposed companies, partnerships or trusts, in property that:

(A) was acquired for the purpose of profit-making by sale by another private company, partnership or trustee of a private trust estate; and

(B) was not excepted property of that other company, partnership or trust estate, as the case may be;

the taxpayer shall, for the purposes of the application of this Act (including any application of any other provision of this section), be deemed to have acquired the relevant property for the purpose of profit-making by sale.

Subsection (2) does not apply in relation to the sale by a taxpayer of property where the Commissioner, having regard to:

the extent to which the assets of the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a), immediately before the time of sale, consisted of the property referred to in subparagraph (2)(b)(i) or the interest referred to in subparagraph (2)(b)(ii), as the case may be;

the nature and extent, immediately before the time of sale, of the taxpayer’s control of the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a) including, in the case of a company, the nature and extent of the taxpayer’s shareholding in the company;

the circumstances surrounding any other sale, whether or not by the taxpayer, of shares in the company, or an interest in the partnership or trust estate, as the case may be, referred to in paragraph (2)(a), being a sale at a time when the property of that company, partnership or trust estate included the property referred to in subparagraph (2)(b)(i) or the interest referred to in subparagraph (2)(b)(ii), as the case may be; and

such other matters as the Commissioner considers relevant;

considers that it is not appropriate that that subsection should apply in relation to the sale of the property by the taxpayer.

Where:

a taxpayer acquired or acquires property, being shares in a company, for the purpose of profit-making by sale; and

after 23 August 1983:

(i) the company issued or issues other shares (in this subsection referred to as the bonus shares) to the taxpayer in satisfaction of a dividend (including an amount debited against an amount standing to the credit of a share premium account) payable to the taxpayer in respect of the shares referred to in paragraph (a); or

by reason that the taxpayer was the owner of the shares referred to in paragraph (a), the company issued or issues to the taxpayer rights to acquire other shares in the company;

the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the bonus shares or the rights, as the case may be, for the purpose of profit-making by sale.

Where, after 23 August 1983, property was or is acquired by a taxpayer as a result of a transfer in the prescribed manner by a person who acquired the property for the purpose of profit-making by sale, the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the property for the purpose of profit-making by sale.

Where:

after 23 August 1983, a taxpayer sold or sells property; and

the property sold was:

an interest in property, being property acquired by the taxpayer for the purpose of profit-making by sale; or

property, or an interest in property, in which was merged an interest in property, being an interest acquired by the taxpayer for the purpose of profit-making by sale;

the taxpayer shall, for the purposes of the application of this Act (including any application of any other provision of this section), be deemed to have acquired the property sold for the purpose of profit-making by sale.

(7) For the purposes of subsection (2), where a company, partnership or trustee of a trust estate holds or held property (in this subsection referred to as the underlying property) consisting of:

an interest in property, being property acquired by the company, partnership or trustee for the purpose of profit-making by sale; or

property, or an interest in property, in which was merged an interest in property, being an interest acquired by the company, partnership or trustee for the purpose of profit-making by sale;

the company, partnership or trustee, as the case may be, shall be deemed to have acquired the underlying property for the purpose of profit-making by sale.

Where:

(a) property (in this subsection referred to as the acquired property) was or is acquired for the purpose of profit-making by sale; and

(b) after 23 August 1983, property (in this subsection referred to as the transferred property) being:

an interest in the acquired property; or

property, or an interest in property, in which was merged an interest in the acquired property;

was or is transferred to a taxpayer in the prescribed manner;

the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the transferred property for the purpose of profit-making by sale.

Where a taxpayer sold or sells property that, by virtue of any of the preceding provisions of this section, is deemed to have been acquired by the taxpayer for the purpose of profit-making by sale, so much (if any) of the proceeds of sale as, in the opinion of the Commissioner, is appropriate shall, for the purposes of this Act, be deemed to be profit arising from the sale by the taxpayer of the property.

(10) For the purposes of the application of subsection (9) in relation to the sale of property (in this subsection referred to as the relevant property) by a taxpayer:

if:

the relevant property is deemed by subsection (2) to have been acquired by the taxpayer for the purpose of profit-making by sale;

(ii) the property (in this paragraph referred to as the underlying property) to which sub-subparagraph (2)(b)(i)(A) or (2)(b)(ii)(A), as the case may be, applies was actually acquired for the purpose of profit-making by sale by the company, partnership or trustee referred to in that sub-subparagraph (which company, partnership or trustee is in this paragraph referred to as the underlying owner); and

the relevant property was not transferred to the taxpayer in the prescribed manner;

the Commissioner shall have regard to the extent to which, in the Commissioner’s opinion, the proceeds of sale of the relevant property are attributable to the amount of any increase in the value of the underlying property during the period (in this paragraph referred to as the relevant period) when the underlying property was held by the underlying owner and the relevant property was held by the taxpayer reduced by the amount of any capital expenditure incurred by the underlying owner in respect of the underlying property during the relevant period (not including expenditure in respect of which a deduction has been allowed, or is allowable, to the underlying owner);

(b) if the relevant property is deemed by subsection (5) to have been acquired by the taxpayer for the purpose of profit-making by sale and the relevant property was actually acquired for the purpose of profit-making by sale by the person (in this paragraph referred to as the transferor) who transferred the relevant property to the taxpayer in the prescribed manner—the Commissioner shall have regard to the extent to which the amount (if any) that would have been included in the assessable income of the transferor if the transferor had sold the relevant property at the time when it was sold by the taxpayer for an amount of consideration equal to the amount of the consideration received or receivable by the taxpayer in respect of the sale of the relevant property by the taxpayer exceeds the sum of:

any expenditure incurred by the taxpayer in respect of the relevant property, not including:

(A) any consideration given by the taxpayer in respect of the transfer of the relevant property to the taxpayer; or

(B) expenditure to which subparagraph (ii) applies;

where the taxpayer incurred expenditure of a capital nature in respect of the relevant property otherwise than:

(A) in acquiring property for the purpose of profit-making by sale; or

(B) as part of a profit-making undertaking or scheme;

an amount equal to so much of the consideration received or receivable by the taxpayer in respect of the sale of the relevant property by the taxpayer as exceeds the amount that, in the opinion of the Commissioner, would have been the consideration received or receivable by the taxpayer if the taxpayer had not incurred that capital expenditure; and

the amount of any profit included in the assessable income of the transferor in respect of the transfer of the relevant property to the taxpayer;

(c) if the relevant property is deemed to have been acquired by the taxpayer by virtue of the application of this section (either directly or indirectly) in relation to property (in this paragraph referred to as the related property) that was actually acquired by the taxpayer or by another person or other persons for the purpose of profit-making by sale—the Commissioner shall have regard to the extent to which the relevant property consists of, or is attributable to, the related property;

if the relevant property consists of rights to acquire shares in a company, being rights that the taxpayer is deemed by subsection (4) to have acquired for the purpose of profit-making by sale—the relevant property shall be deemed to have been acquired by the taxpayer at no cost; and

if the relevant property consists of bonus shares that the taxpayer is deemed by subsection (4) to have acquired for the purpose of profit-making by sale—the cost to the taxpayer of the relevant property shall be ascertained in accordance with section 6BA.

(11) For the purposes of this section, property shall be taken to have been transferred to a person (in this subsection referred to as the transferee) in the prescribed manner if:

the following conditions are satisfied:

the property is transferred by way of gift or for consideration the amount or value of which is less than the amount that, in the opinion of the Commissioner, is the value of the property immediately before the time of transfer;

the property is transferred otherwise than as a result of:

(A) a will, a codicil or an order of a court that varied or modified the provisions of a will or a codicil; or

(B) an intestacy or an order of a court that varied or modified the application, in relation to the estate of a deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate; and

the Commissioner is satisfied that the transferee and the person who transferred the property were not dealing with each other at arm’s length in relation to the transfer of the property; or

the property:

is transferred by way of a distribution of property of a private company or private trust estate made (whether in the course of the winding up of the company or trust estate or otherwise) to the transferee in the transferee’s capacity as a shareholder in the company or a beneficiary of the trust estate, as the case may be; and

is not excepted property of the company or trust estate, as the case may be.

In this section:

a reference to excepted property of a company, partnership or trust estate is a reference to:

trading stock of the company, partnership or trustee; or

(ii) property being plant Income Tax Assessment Act 1997 purchased for use by the company, partnership or trustee of the trust estate for the purpose of producing assessable income;within the meaning of section 45-40 of the

a reference to a private company is a reference to a company other than a company the shares in which are listed for quotation in the official list of a stock exchange in Australia or elsewhere;

a reference to a private trust estate is a reference to a trust estate other than a unit trust the units in which are listed for quotation in the official list of a stock exchange in Australia or elsewhere or are ordinarily available for subscription or purchase by the public; and

a reference to property generally or to a particular kind of property includes a reference to an estate or interest in property or in that kind of property, as the case may be.

For the purposes of assessments for the 1997-98 year of income and later years of income, this section applies only in relation to assignments of leases granted before 20 September 1985.

Note: The Income Tax Assessment Act 1997 does not contain a rewritten version of this section.

For the 1998-99 year of income and later years of income, Parts 3-1 and 3-3 (about CGT) deal with the income tax treatment of premiums for:

granting leases; and

assigning leases granted on or after 20 September 1985.

For the 1997-98 year of income, former Part IIIA of this Act (about CGT) dealt with the income tax treatment of such premiums.

(1) In this section, premium means a consideration payable in one amount, or each amount of a consideration payable in more than one amount, where the consideration is:

in the nature of a premium, fine or foregift payable for or in connexion with the grant or assignment of a lease; or

for or in connexion with an assent to the grant or assignment of a lease;

but does not include an amount in respect of goodwill or a licence.

Where, in the year of income, a taxpayer receives a premium that relates to the grant or assignment of a lease of property that was not, at the date on which the agreement to grant or assign the lease was made, or the assent to the grant or assignment of the lease was given, as the case may be, intended by the grantee or assignee to be used by the grantee or the assignee or some other person wholly or partly for the purpose of gaining or producing assessable income, the assessable income of the taxpayer shall include the premium.

Where, in the year of income, a taxpayer receives a premium that relates to the grant or assignment of a lease of property that was, at the date on which the agreement to grant or assign the lease was made, or the assent to the grant or assignment of the lease was given, as the case may be, intended by the grantee or assignee to be used by the grantee or assignee or some other person partly for the purpose of gaining or producing assessable income and partly for other purposes, the assessable income of the taxpayer shall include such part of the premium as the Commissioner considers may reasonably be attributed to the intended use of the property for purposes other than gaining or producing assessable income.

Where, in a case referred to in subsection (2) or (3), the taxpayer satisfies the Commissioner that, at the date on which the agreement to grant or assign the lease was made, or the assent to the grant or assignment of the lease was given, as the case may be, the taxpayer believed on reasonable grounds that the grantee or assignee intended a particular use of the property by the grantee or assignee or some other person for the purpose of gaining or producing assessable income, the Commissioner may apply this section on the basis that that intention existed.

This section does not apply in relation to:

a premium received in connexion with the assignment of a lease of land granted under a law of a State or Territory relating to mining;

a premium received in connexion with the grant or assignment of a lease that was, for the purposes of former section 88B, a grant or assignment for mining purposes; or

a premium received in connexion with the assignment from the Commonwealth or a State of a lease:

granted in perpetuity or for a term not less than 99 years; or

with a right of purchase; or

effecting improvements to be used for residential purposes only.

Where:

in a year of income and after 19 August 1980, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, a paragraph 23(ja) fund or a section 23FB fund;

(aa) if the fund is an exempt fund Superannuation Legislation Amendment (Simplification) Act 2007)—the benefit was received or obtained by the taxpayer before the proclaimed superannuation standards day;within the meaning of section 26AFB (as in force just before the commencement of Schedule 1 to the

the benefit is received or obtained otherwise than in accordance with approved terms and conditions applicable to the fund at the time when the benefit is received or obtained; and

the Commissioner is satisfied that the taxpayer received or obtained the benefit:

by reason that the taxpayer was, or had been, a member of the fund;

by reason that the taxpayer was, or had been, a dependant of a person who was, or had been, a member of the fund; or

by reason that the taxpayer was, or had been, associated with a person who was, or had been, a member of the fund;

the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.

(2) Where, in a year of income and after 19 August 1980, a taxpayer receives valuable consideration in respect of the transfer by the taxpayer to another person (whether by assignment, by declaration of trust or by any other means) of a right (whether vested or contingent) to receive a benefit from a fund, being a paragraph 23(ja) fund or a Superannuation Legislation Amendment (Simplification) Act 2007), the assessable income of the taxpayer of the year of income shall include the amount or value of that consideration.section 23FB fund and not being an exempt fund within the meaning of section 26AFB (as in force just before the commencement of Schedule 1 to the

In this section:

approved terms and conditions, in relation to a fund, means:

(a) in the case of a paragraph 23(ja) fund—terms and conditions approved by the Commissioner under subparagraph 23(ja)(ii) as in force at any time before the commencement of Taxation Laws Amendment Act (No. 4) 1987; orsection 1 of the

(b) in the case of a Taxation Laws Amendment Act (No. 4) 1987.section 23FB fund—terms and conditions approved by the Commissioner under subsection 23FB(2) as in force at any time before the commencement of section 1 of the

paragraph 23(ja) fund means a fund the income of which of any year of income is or has been exempt from tax by virtue of paragraph 23(ja) as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987 or would, but for the provisions of section 121C as in force at any time before the commencement of section 21 of the Taxation Laws Amendment Act 1985 and Division 9C, be, or have been, exempt from tax by virtue of that paragraph;

section 23FB fund means:

(a) a fund the income of which of any year of income is or has been exempt from tax by virtue of Taxation Laws Amendment Act (No. 4) 1987 or would, but for the provisions of Division 9C, be, or have been, exempt from tax by virtue of that section; andsection 23FB as in force at any time before the commencement of section 1 of the

(b) a fund that was a Income Tax Assessment Amendment Act (No. 3) 1984.section 79 fund for the purposes of this section as in force at any time before the commencement of the

(4) For the purposes of this section, where either of the following paragraphs applies in relation to an exempt fund Superannuation Legislation Amendment (Simplification) Act 2007) in relation to the year of income of the fund commencing on 1 July 1986 or a subsequent year of income:within the meaning of section 26AFB of this Act (as in force just before the commencement of Schedule 1 to the

(a) the year of income ended before the proclaimed superannuation standards day and the income of the fund of the year of income would, but for the amendments made by the Taxation Laws Amendment Act (No. 4) 1987, have been exempt from tax under paragraph 23(ja) or section 23FB of this Act, as in force at any time before the commencement of section 1 of that Act;

the proclaimed superannuation standards day occurred during the year of income and, if the year of income had ended on the proclaimed superannuation standards day, the income of the fund of the year of income would have been exempt from tax under paragraph 23(ja) or section 23FB of this Act, as in force at any time before the commencement of section 1 of that Act;

paragraph 23(ja) or section 23FB of this Act, as in force immediately before the commencement of section 1 of that Act, shall be taken to have continued to apply in relation to the fund in relation to the year of income of the fund.

Where:

in a year of income and on or after 7 December 1983, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, a section 23F fund;

(aa) if the fund is an exempt fund Superannuation Legislation Amendment (Simplification) Act 2007)—the benefit was received or obtained by the taxpayer before the proclaimed superannuation standards day;within the meaning of section 26AFB (as in force just before the commencement of Schedule 1 to the

the benefit:

is not a benefit that the taxpayer has a right to receive from the fund; or

is an excessive benefit; and

the Commissioner is satisfied that the taxpayer received or obtained the benefit:

by reason that the taxpayer was, or had been, a member of the fund;

by reason that the taxpayer was, or had been, a dependant of a person who was, or had been, a member of the fund;

by reason that the taxpayer was, or had been, associated with a person who was, or had been, a member of the fund; or

by reason that the taxpayer was, or had been, associated with a person who had made contributions to the fund, being contributions to which Subdivision AA of Division 3 applied;

the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.

Where:

subsection (1) would, but for this subsection, apply to the amount or value of an excessive benefit received or obtained by a taxpayer out of, or attributable to assets of, a section 23F fund; and

the Commissioner, having regard to:

the nature of the fund;

the circumstances by reason of which the benefit is an excessive benefit; and

such other matters relating to the receiving or obtaining of the benefit by the taxpayer as the Commissioner considers relevant;

is satisfied that it would be unreasonable for subsection (1) to apply to the whole or part of the benefit;

that subsection does not apply to the benefit, or to that part of the benefit, as the case may be.

(3) Where, in a year of income and on or after 7 December 1983, a taxpayer receives valuable consideration in respect of the transfer by the taxpayer to another person (whether by assignment, by declaration of trust or by any other means) of a right (whether vested or contingent) to receive a benefit from a fund, being a Superannuation Legislation Amendment (Simplification) Act 2007), the assessable income of the taxpayer of the year of income shall include the amount or value of that consideration.section 23F fund and not being an exempt fund within the meaning of section 26AFB (as in force just before the commencement of Schedule 1 to the

In this section:

dependant, in relation to a taxpayer, includes the spouse and any child of the taxpayer.

excessive benefit means a benefit of any kind that is excessive in amount or value having regard to the matters mentioned in subparagraphs 23F(2)(h)(i), (ii), (iii) and (iv) as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987.

section 23F fund means a fund to which section 23F (as in force at any time before the commencement of section 1 of the Taxation Laws Amendment Act (No. 4) 1987) applies, or has applied, in relation to any year of income.

(5) For the purposes of this section, where either of the following paragraphs applies in relation to an exempt fund Superannuation Legislation Amendment (Simplification) Act 2007) in relation to the year of income of the fund commencing on 1 July 1986 or a subsequent year of income:within the meaning of section 26AFB of this Act (as in force just before the commencement of Schedule 1 to the

(a) the year of income ended before the proclaimed superannuation standards day and Taxation Laws Amendment Act (No. 4) 1987, would, but for the amendments made by that Act, have applied in relation to the fund in relation to the year of income;section 23F of this Act, as in force immediately before the commencement of section 1 of the

the proclaimed superannuation standards day occurred during the year of income and, if the year of income had ended on the proclaimed superannuation standards day, section 23F of this Act, as in force immediately before the commencement of section 1 of that Act, would, but for the amendments made by that Act, have applied in relation to the fund in relation to the year of income;

section 23F of this Act, as in force immediately before the commencement of section 1 of that Act, shall be taken to have continued to apply in relation to the fund in relation to the year of income of the fund.

Where:

under a contract entered into on or after 1 October 1980, a taxpayer has expended, or is deemed by former section 124ZAP to have expended, capital moneys in producing, or by way of contribution to the cost of producing, a film;

by reason of the moneys having been expended, the taxpayer became the owner of an interest in the copyright in the film; and

a deduction has been allowed, or is allowable, to the taxpayer under former section 124ZAF or 124ZAFA in respect of some or all of those moneys;

this section applies, and shall be deemed always to have applied, in relation to the taxpayer in relation to a year of income (whether commencing before or after the commencement of this section), to:

any amount derived by the taxpayer in the year of income from sources in or out of Australia as consideration for the use of, or the right to use, the copyright or the film, to the extent to which the amount derived is attributable to the interest referred to in paragraph (b); and

any amount (other than an amount to which paragraph (d) applies) receivable by the taxpayer from sources in or out of Australia as consideration in respect of the disposal, in the year of income, of the whole or a part of the interest referred to in paragraph (b).

The assessable income of a taxpayer of a year of income shall include amounts to which this section applies in relation to the taxpayer in relation to the year of income.

Where:

for any reason, including:

the formation or dissolution of a partnership; or

a variation in the constitution of a partnership or in the interests of the partners;

a change has occurred in the ownership of, or in the interests of persons in, a copyright in a film;

the person, or one or more of the persons, who owned the copyright before the change has or have an interest in the copyright after the change; and

(c) any person (in this subsection referred to as the relevant person) who had an interest in the copyright before the change:

did not have an interest in the copyright after the change; or

had a lesser interest in the copyright after the change;

the following provisions have effect:

if the relevant person did not have an interest in the copyright after the change, the relevant person shall be deemed, for the purposes of subsection (1), to have disposed of the whole of his or her interest in the copyright at the time when the change occurred for an amount of consideration equal to:

if the change occurred in pursuance of an agreement and the agreement specified, as the value of the copyright for the purposes of the agreement, an amount greater than the value of the copyright at the time when the change occurred—so much of the amount specified in the agreement as bears to that amount the same proportion as the value, at the time when the change occurred, of the interest deemed to have been disposed of bears to the value of the copyright at the time when the change occurred; and

in any other case—the value, at the time when the change occurred, of the interest disposed of;

if the relevant person had a lesser interest in the copyright after the change, the relevant person shall be deemed, for the purposes of subsection (1), to have disposed of a part of his or her interest in the copyright at the time when the change occurred for an amount of consideration equal to:

if the change occurred in pursuance of an agreement and the agreement specified, as the value of the copyright for the purposes of the agreement, an amount greater than the value of the copyright at the time when the change occurred—so much of the amount specified in the agreement as bears to that amount the same proportion as the value, at the time when the change occurred, of the part of the interest deemed to have been disposed of bears to the value of the copyright at the time when the change occurred; and

in any other case—the value, at the time when the change occurred, of the part of the interest disposed of.

For the purposes of this section, where, in pursuance of a judgment of a court or otherwise, an amount is paid to a taxpayer in respect of an infringement, or an alleged infringement, of a copyright in a film, the taxpayer shall be deemed to have disposed of a part of his or her interest in the copyright, at the time of payment, in consideration of the payment of that amount.

(5) Subject to subsections (3) and (6), a reference in this section to the consideration receivable by a taxpayer in respect of the disposal of the whole or a part of the taxpayer’s interest in a copyright (which whole or part is in this subsection referred to as the unit) is a reference to:

where the unit is disposed of for a specified price—that price less:

the expenses of the disposal; and

if the disposal is a taxable supply—an amount equal to the GST payable on the supply; or

where the unit is disposed of together with other property and no separate price is allocated to the unit—such amount as the Commissioner determines.

Where:

(a) a taxpayer disposes of the whole or a part of the taxpayer’s interest in a copyright (which whole or part is in this subsection referred to as the unit) to another person;

the Commissioner is satisfied, having regard to any connection between the taxpayer and that other person or to any other relevant circumstances, that the taxpayer and that other person were not dealing with each other at arm’s length in relation to the disposal; and

there was no amount receivable by the taxpayer in respect of the disposal or the amount receivable by the taxpayer in respect of the disposal was less than the value of the unit at the time of the disposal;

the amount of the consideration receivable by the taxpayer in respect of the disposal shall be taken, for the purposes of this section, to be the amount that was the value of the unit at the time of the disposal.

If:

a non-resident taxpayer derives, from sources outside Australia, income in respect of a film; and

but for this subsection, subsection (2) would include the amount in the taxpayer’s assessable income of a year of income;

that subsection does not include in the taxpayer’s assessable income so much of the amount as:

is attributable to the exhibition of the film in the country from sources in which the income was derived; and

is not exempt from income tax in the country from sources in which the income was derived.

Where:

(a) an amount (in this subsection referred to as the relevant amount) is derived by a partnership in a year of income; and

if the relevant amount were derived by a partner in the partnership, the relevant amount, or a part of the relevant amount, would, by virtue of paragraph (1)(d), be an amount to which this section applies in relation to that partner in relation to the year of income;

the following provisions have effect:

the relevant amount shall not be taken into account, for the purposes of any provision of this Act, in calculating the net income of the partnership, or the partnership loss, of any year of income in accordance with section 90; and

for the purposes of the application of this Act in relation to a taxpayer being a partner in the partnership, an amount equal to:

so much of the relevant amount as the partners have agreed is derived for the benefit of the taxpayer; or

if the partners have not agreed as mentioned in subparagraph (i)—so much of the relevant amount as bears to the relevant amount the same proportion as the individual interest of the taxpayer in the net income of the partnership of the year of income in which the relevant amount was derived by the partnership bears to that net income or, as the case requires, the individual interest of the taxpayer in the partnership loss for that year of income bears to that partnership loss;

shall be taken to have been derived by the taxpayer.

Where:

a partnership has disposed of the whole or a part of the copyright or of an interest in the copyright in a film;

(b) an amount (in this subsection referred to as the relevant amount) is receivable by the partnership as consideration in respect of that disposal; and

if the relevant amount were receivable by a partner in the partnership, the relevant amount or a part of the relevant amount would, by virtue of paragraph (1)(e), be an amount to which this section applies in relation to that partner in relation to the year of income;

the following provisions have effect:

the relevant amount shall not be taken into account, for the purposes of any provision of this Act, in calculating the net income of the partnership, or the partnership loss, of any year of income in accordance with section 90;

for the purposes of the application of this Act in relation to a taxpayer being a partner in the partnership, an amount equal to:

so much of the relevant amount as the partners have agreed is receivable for the benefit of the taxpayer; or

if the partners have not agreed as mentioned in subparagraph (i)—so much of the relevant amount as bears to the relevant amount the same proportion as the individual interest of the taxpayer in the net income of the partnership of the year of income in which the disposal mentioned in paragraph (a) occurred bears to that net income, or, as the case requires, the individual interest of the taxpayer in the partnership loss for that year of income bears to that partnership loss;

shall be taken to be receivable by the taxpayer;

where the taxpayer had an interest in the copyright before the disposal and did not have an interest in the copyright after the disposal or had a lesser interest in the copyright after the disposal, the amount deemed to be receivable by the taxpayer shall be deemed to be receivable in respect of the disposal by the taxpayer of his or her interest in the copyright or of a part of his or her interest in the copyright, as the case may be;

where the disposal is deemed to have occurred by virtue of subsection (4) or is a disposal to which paragraph (13)(a) applies, the amount deemed to be receivable by the taxpayer shall be deemed to be receivable, in respect of the disposal by the taxpayer of a part of his or her interest in the copyright.

In determining for the purposes of subsection (10) whether a partnership has disposed of the whole or part of a copyright or of an interest in a copyright and in determining the amount of consideration receivable by the partnership in respect of the disposal, subsections (4), (5), (6) and (13) apply as if the partnership were a taxpayer.

Where:

a taxpayer has disposed of the whole or a part of the taxpayer’s interest in a copyright;

by reason of that disposal, an amount would, but for former subsection 124T(3), be included in the assessable income of the taxpayer of a year of income under former section 124P or would be applied, under former section 124N or 124S, in reducing the residual value, for the purposes of former Division 10B, of a unit of industrial property owned by the taxpayer; and

but for this subsection, this section would apply, in relation to a year of income, to the amount of the consideration receivable by the taxpayer in respect of the disposal;

the amount to which this section applies by virtue of the disposal is the amount of the consideration referred to in paragraph (c) reduced by the amount that would be included in the assessable income of the taxpayer, or would be applied under former section 124N or 124S, as mentioned in paragraph (b).

In this section:

a reference to a disposal by a taxpayer of the whole or a part of the taxpayer’s interest in a copyright in a film includes a reference to the assignment by the taxpayer of a right to receive amounts as consideration for the use of, or the right to use, the copyright or the film;

a reference to an amount derived by a taxpayer as consideration for the use of, or the right to use, a copyright in a film includes a reference to an amount derived as consideration for the granting of a licence in respect of copyright in the film that is to come into existence at a future time or upon the happening of a future event;

a reference to the value of property at a particular time shall, if there is insufficient evidence of the value of the property at that time, be read as a reference to such amount as, in the opinion of the Commissioner, is fair and reasonable;

a reference to the expenditure of capital moneys is a reference to the expenditure of moneys that is expenditure of a capital nature;

a reference to a taxpayer becoming the owner of an interest in copyright includes a reference to the taxpayer becoming the owner of the copyright; and

(f) a reference to copyright, in relation to a film, is a reference to the copyright subsisting in the film by virtue of Copyright Act 1968 and includes a reference to copyright subsisting in, or in relation to, the film or in any work comprised in the film, under the law of a country other than Australia.Part IV of the

In this section, unless the contrary intention appears:

agreement means any agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

assurance year, in relation to an eligible policy, means the period of 12 months commencing on, or on any anniversary of, the date of commencement of risk of the policy.

date of commencement of risk, in relation to an eligible policy, means the date of commencement of the period in respect of which the first or only premium paid under the policy was paid or, if the first or only premium was not paid in respect of a period, the date on which that premium was paid.

eligible period, in relation to an eligible policy, means the period of 10 years commencing on the date of commencement of risk of the policy.

eligible policy means a life assurance policy in relation to which the date of commencement of risk is after 27 August 1982, other than a funeral policy (as defined in the Income Tax Assessment Act 1997) issued on or after 1 January 2003.

eligible reckoning date, in relation to an eligible policy, means the date of commencement of an assurance year that, for the purposes of an application of subsection (13), is the premium increase year referred to in that subsection.

Where a paid-up life assurance policy is issued to a taxpayer in lieu of an eligible policy:

the paid-up policy shall, for the purposes of this section, be deemed to be a continuation of the eligible policy; and

no amount shall be taken for the purposes of subsection (4) to have been re-invested or otherwise dealt with on behalf of the taxpayer or as he or she directs in connection with the issue of the paid-up policy to the taxpayer in lieu of the eligible policy.

This section applies to any amount received after 27 August 1982 under an eligible policy.

For the purposes of this section, but subject to subsection (5), a taxpayer shall be taken to have received an amount under or in relation to an eligible policy although the amount is not actually paid to the taxpayer but is re-invested or otherwise dealt with on his or her behalf or as he or she directs.

Subsection (4) does not apply in relation to an amount in relation to an eligible policy if the amount is re-invested or otherwise dealt with on behalf of the taxpayer or as the taxpayer directs so as to increase the amount that might reasonably be expected to be received under the eligible policy on a surrender or maturity of the eligible policy.

(6) Where, during the eligible period in relation to an eligible policy, a taxpayer receives an amount (in this subsection referred to as the relevant amount) under the policy as or by way of a bonus, being an amount that, but for this section, would not be included in the assessable income of the taxpayer of any year of income, the assessable income of the taxpayer of the year of income in which the relevant amount is received shall include:

if the relevant amount is received during the first 8 years of the eligible period—an amount equal to the relevant amount;

if the relevant amount is received during the ninth year of the eligible period—an amount equal to two-thirds of the relevant amount; or

if the relevant amount is received during the tenth year of the eligible period—an amount equal to one-third of the relevant amount.

If, during the year of income, an amount referred to in subsection (6) is received during the eligible period in relation to an eligible policy held by the trustee of a non-complying superannuation fund:

subsection (6) does not apply to the amount; and

the amount is included in the assessable income of the fund of the year of income.

Subsection (6) does not apply to any amount received by a taxpayer in a year of income under an eligible policy where:

the amount is received in consequence of:

the death of the person on whose life the policy was effected; or

an accident, illness or other disability suffered by the person on whose life the policy was effected; or

the eligible policy is an RSA; or

the eligible policy is held by the trustee of:

a complying superannuation fund; or

a complying approved deposit fund; or

a pooled superannuation trust; or

the eligible policy is issued by a life assurance company and the company’s liabilities under the policy are to be discharged out of:

(i) complying superannuation assets within the meaning of the Income Tax Assessment Act 1997; or

segregated exempt assets within the meaning of that Act; or

except where the policy was effected, purchased or taken on assignment with a view to it being forfeited, surrendered or otherwise terminated, or to it maturing, within 10 years—the amount was received by the taxpayer by reason of the forfeiture, surrender or other termination of the whole or a part of the policy in circumstances arising out of serious financial difficulties of the taxpayer.

Where:

(a) subsection (6) would, but for this subsection, apply to an amount (in this subsection referred to as the relevant amount) received by a taxpayer by reason of the forfeiture, surrender or other termination of the whole or a part of an eligible policy; and

the Commissioner, having regard to:

the total amount of premiums paid under the eligible policy;

the total amounts received by the taxpayer or by any other person under the eligible policy and the total amounts of bonuses included in the amounts so received;

the amount of the surrender value of the eligible policy at the time when the forfeiture, surrender or other termination occurred; and

such other matters as the Commissioner considers relevant, is of the opinion that it would be unreasonable for subsection (6) to apply to the relevant amount or to a part of the relevant amount;

subsection (6) does not apply to the relevant amount, or to that part of the relevant amount, as the case may be.

Where:

(a) otherwise than as or by way of a bonus, a taxpayer receives an amount (in this subsection referred to as the relevant amount) under an eligible policy; and

the Commissioner is of the opinion that the relevant amount or a part of the relevant amount represents the whole or part of:

a bonus that has accrued or has been declared in respect of the policy; or

a bonus that can reasonably be expected to accrue in respect of the policy;

the relevant amount or the part of the relevant amount, as the case may be, shall, for the purposes of subsection (6), be deemed to have been received by the taxpayer under the policy as or by way of a bonus.

Where:

subsection (9) applies by reason that the Commissioner has formed an opinion under paragraph (9)(b) that the whole or a part of an amount received by a taxpayer represents the whole or a part of a bonus; and

(b) the taxpayer subsequently receives an amount (in this subsection referred to as the actual bonus), being the whole or a part of the bonus, or of the part of the bonus, as the case may be, referred to in paragraph (a) of this subsection;

the following provisions have effect:

the operation of subsection (9) is not affected by the receipt of the actual bonus; and

no part of the actual bonus shall be included in the assessable income of the taxpayer.

Where, in relation to an eligible policy, a taxpayer receives an amount from the assurer, or from another person at the request of, or under an agreement with, the assurer, by way of an advance or loan in respect of which interest is not payable or in respect of which interest is payable at a rate less than the rate of interest that could reasonably be expected to be payable in respect of a loan of the same amount made on similar terms and conditions by the assurer or the other person, as the case may be, to a person with whom the assurer or that other person was dealing at arm’s length, the amount shall, for the purposes of subsection (9), be deemed to be an amount to which paragraph (9)(a) applies.

Where an eligible policy, or any right to receive any benefits that have accrued, or will or may reasonably be expected to accrue, under an eligible policy, is sold or assigned in whole or in part by a taxpayer during the eligible period in relation to the policy:

the amount of any consideration received by the taxpayer in respect of that sale or assignment shall be deemed to be an amount to which paragraph (9)(a) applies; and

subsections (9) and (10) apply in relation to that consideration as if “represents” were omitted from paragraphs (9)(b) and (10)(a) and “is attributable” to were substituted.

(13) Where the amount of the premiums payable under an eligible policy in relation to an assurance year (in this subsection referred to as the premium increase year) exceeds by more than 25% the amount of the premiums payable under the policy in relation to the immediately preceding assurance year, the eligible period in relation to the policy shall, for the purposes of:

the application of subsection (6) in relation to any amount received under the policy after the date of commencement of the premium increase year and before the first subsequent eligible reckoning date (if any) in relation to the eligible policy; and

the application of subsection (12) in relation to any sale or assignment of the policy after the date of commencement of the premium increase year and before the first subsequent eligible reckoning date (if any) in relation to the eligible policy;

be reckoned from the date of commencement of the premium increase year.

This section has effect in relation to an eligible policy in relation to which the date of commencement of risk is on or before 7 December 1983 as if:

(a) “10 years” were omitted from the definition of eligible period in subsection (1) and “4 years” were substituted;

“8 years”, “ninth year” and “tenth year” were omitted from subsection (6) and “2 years”, “third year” and “fourth year” respectively were substituted; and

“10 years” were omitted from paragraph (7)(c) and “4 years” were substituted.

If:

either:

(i) a loan benefit is provided to a taxpayer, or to another person, in respect of a year of income (in this subsection called the current year of income); or

(ii) an amount (other than loan principal) is paid or credited to a taxpayer, or to another person, during a year of income (in this subsection also called the current year of income); or

(iii) other property or services are provided to a taxpayer, or to another person, during a year of income (in this subsection also called the current year of income); and

the making of a loan, the payment or crediting of the amount, or the provision of the property or services, as the case may be, is by way of winnings from:

betting (including pool betting); or

a lottery or other form of gambling; or

a game with prizes; and

(c) the chance to participate in the betting, lottery, gambling or game (in this subsection called the betting chance) was provided:

(i) wholly or partly in respect of an investment held by the taxpayer in or with a third person (who may be an associate of the taxpayer) (in this subsection called the investment body); or

wholly or partly in relation directly or indirectly to such an investment; and

the betting, lottery, gambling or game was organised by, or on behalf of:

the investment body (either acting alone or together with one or more other persons); or

an associate of the investment body (either acting alone or together with one or more other persons); and

if the recipient of the loan benefit, amount or property or services, as the case may be, is a person other than the taxpayer—either:

the other person is an associate of the taxpayer; or

the loan benefit, amount or property or services, as the case may be, is provided under an arrangement to which the taxpayer, or an associate of the taxpayer, is a party; and

no part of the value of the betting chance is included in the assessable income of the taxpayer of any year of income; and

the provision of the betting chance is neither:

a fringe benefit; nor

(ii) a benefit that, apart from paragraph (g) of the definition of fringe benefit in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986, would be a fringe benefit;

then:

if subparagraph (a)(i) applies—the taxpayer’s assessable income of the current year of income includes the amount (if any) by which the benchmark amount of interest in relation to the loan in respect of the current year of income exceeds the amount of interest that has accrued on the loan in respect of the current year of income; or

if subparagraph (a)(ii) applies—the taxpayer’s assessable income of the current year of income includes the amount paid or credited; or

if subparagraph (a)(iii) applies—the taxpayer’s assessable income of the current year of income includes the arm’s length value of the property or services, reduced by the recipient’s contribution (if any).

If:

(a) apart from this subsection, an amount (in this subsection called the gross assessable amount) is included in a taxpayer’s assessable income of a year of income under paragraph (1) (h) in respect of a loan benefit; and

assuming that:

(i) the recipient of the loan benefit had, on the last day of the period (in this subsection called the loan period) during the year of income when the recipient was under an obligation to repay the whole or any part of the loan, incurred and paid unreimbursed interest (in this subsection called the gross interest), in respect of the loan, in respect of the loan period; and

the amount of the gross interest was equal to the benchmark amount of interest in relation to the loan in respect of the year of income;

a once-only deduction (in this subsection called the gross deduction) would, or would apart from Subdivisions F and GA of Division 3 of this Part, and Divisions 28 and 900 of the Income Tax Assessment Act 1997, have been allowable to the recipient in respect of the gross interest;

the gross assessable amount is reduced by:

if no interest accrued on the loan in respect of the loan period—the amount of the gross deduction; or

in any other case—the amount worked out using the formula:

where:

Gross deduction means the amount of the gross deduction.

Reducing amount means the amount (if any) that would, or that would apart from Subdivisions F and GA of Division 3 of this Part, and Divisions 28 and 900 of the Income Tax Assessment Act 1997, have been allowable as a once-only deduction to the recipient in respect of the interest that accrued on the loan in respect of the loan period if that interest had been incurred and paid by the recipient on the last day of the loan period.

If:

(a) apart from this subsection, an amount (in this subsection called the gross assessable amount) is included in a taxpayer’s assessable income of a year of income under paragraph (1)(j) in respect of the provision of property or services; and

assuming that:

the recipient of the property or services had, at the time the property or services were provided, incurred and paid unreimbursed expenditure in respect of the provision of the property or services; and

the expenditure was equal to the amount of the arm’s length value of the property or services;

a once-only deduction would, or would apart from Subdivisions F and GA of Income Tax Assessment Act 1997, have been allowable to the recipient in respect of a percentage (in this subsection called the deductible percentage) of the expenditure;Division 3 of this Part, and Divisions 28 and 900 of the

the gross assessable amount is reduced by the deductible percentage.

(4) For the purposes of the application of this section to a taxpayer, if a person (in this subsection called the provider) makes a loan to another person (who may be the taxpayer) (in this subsection called the recipient):

the making of the loan is taken to constitute a loan benefit provided by the provider to the recipient; and

that loan benefit is taken to be provided in respect of each year of income of the taxpayer during the whole or part of which the recipient is under an obligation to repay the whole or any part of the loan.

(5) For the purposes of this section, if a person (in this subsection called the provider) makes a deferred interest loan (in this subsection called the principal loan) to another person (in this subsection called the recipient):

the provider is taken, at the end of:

the period of 6 months commencing on the day on which the principal loan was made; and

each subsequent period of 6 months;

(being in either case a period during the whole of which the recipient is under an obligation to repay the whole or any part of the principal loan) to have made a loan (in this subsection called the deemed loan) to the recipient; and

(b) the amount of the deemed loan is equal to the amount by which the interest (in this subsection called the accrued interest) that has accrued on the principal loan in respect of that period exceeds the amount (if any) paid in respect of the accrued interest before the end of that period; and

if any part of the accrued interest becomes payable or is paid after the time when the deemed loan is taken to have been made, the deemed loan is to be reduced accordingly; and

the deemed loan is taken to have been made at a nil rate of interest.

For the purposes of this section, if no interest is payable in respect of a loan, a nil rate of interest is taken to be payable in respect of the loan.

For the purposes of this section, a person is taken to be under an obligation to pay or repay an amount even though the amount is not due for payment or repayment.

For the purposes of this section, if a person does anything that results in the creation of property in another person, the first-mentioned person is taken to have provided that property to the other person at the time when the property comes into existence.

For the purposes of this section, if:

(a) a particular mode of application of money by a taxpayer in relation to another person (in this subsection called the investment body) would not, apart from this subsection, be an investment; and

a chance to participate in:

betting (including pool betting); or

a lottery or other form of gambling; or

a game with prizes;

is provided to the taxpayer or a third person:

wholly or partly in respect of the mode of application of money by the taxpayer; or

wholly or partly in relation directly or indirectly to the mode of application of money by the taxpayer; and

if a cash payment had been provided by the investment body to the taxpayer instead of that chance, the payment would constitute, to any extent, a return on an investment held by the taxpayer in or with the investment body;

the mode of application of money is taken to be an investment held by the taxpayer with the investment body.

If a ballot is held to determine the order in which loans are to be made by a Starr-Bowkett building society to its members, then the making of a loan in accordance with the ballot is not covered by paragraph (1)(b).

In this section:

arm’s length value, in relation to property or services, means:

the amount that the recipient could reasonably have been expected to have been required to pay to obtain the property or services from the provider under a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction; or

if such an amount cannot be practically determined—such amount as represents a reasonable valuation of the property or services.

arrangement means:

any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

associate has the same meaning in relation to a person as that expression has in relation to a person in section 318.

benchmark amount of interest, in relation to a loan, in relation to a year of income, means the amount of interest that would have accrued on the loan in respect of the year of income if the interest was calculated on the daily balance of the loan at the benchmark interest rate in relation to the year of income.

benchmark interest rate, in relation to a year of income, means the predominant per cent per annum interest rate on new, variable interest rate housing loans to individuals for owner-occupation that is specified, for the June immediately preceding the financial year to which the year of income relates, in the “Interest Rates and Yields: Banks” table in the Statistical Directory of the Reserve Bank of Australia Bulletin dated July in that financial year.

deferred interest loan means a loan in respect of which interest is payable at a rate exceeding nil, other than:

a loan where the whole of the interest is due for payment within 6 months after the loan is made; or

a loan where:

the interest is payable by instalments; and

the intervals between instalments do not exceed 6 months; and

the first instalment is due for payment within 6 months after the loan is made.

investment means any mode of application of money for the purpose of gaining a return.

loan includes:

an advance of money; and

the provision of credit or any other form of financial accommodation; and

the payment of an amount for, on account of, on behalf of or at the request of a person where there is an obligation (whether express or implied) to repay the amount; and

a transaction (whatever its terms or form) which in substance effects a loan of money.

loan benefit has the meaning given by subsection (4).

person means any of the following:

a company;

a partnership;

a person in the capacity of trustee;

any other person.

provide:

in relation to property—includes dispose of (whether by assignment, declaration of trust or otherwise); and

in relation to services—includes allow, confer, give, grant or perform.

recipient’s contribution, in relation to property or services, means the amount of any consideration paid to the provider by the recipient in respect of the provision of the property or services, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration.

return, in relation to an investment, includes interest, income or profit.

services includes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:

an arrangement for or in relation to:

the performance of work (including work of a professional nature), whether with or without the provision of property; or

the provision of, or the use of facilities for, entertainment, recreation or instruction; or

the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or

a contract of insurance; or

an arrangement for or in relation to the lending of money.

unreimbursed expenditure means expenditure no part of which has been reimbursed.

unreimbursed interest means interest no part of which has been reimbursed.

In this section:

acquire, in relation to a security, means acquire, on issue, purchase, transfer, assignment or otherwise, the security or the right to receive payment of the amount or amounts payable under the security.

connected entity has the same meaning as in the Income Tax Assessment Act 1997.

dispose, in relation to a security, means sell, transfer, assign or dispose of in any way the security or the right to receive payment of the amount or amounts payable under the security.

eligible return has the same meaning as in Division 16E.

periodic interest has the same meaning as in Division 16E.

security has the same meaning as in Division 16E.

traditional security, in relation to a taxpayer, means a security held by the taxpayer that:

is or was acquired by the taxpayer after 10 May 1989;

either:

does not have an eligible return; or

has an eligible return, where:

(A) the precise amount of the eligible return is able to be ascertained at the time of issue of the security; and

(B) that amount is not greater than 11/2 % of the amount calculated in accordance with the formula:

where:

Payments is the amount of the payment or of the sum of the payments (excluding any periodic interest) liable to be made under the security when held by any person; and

Term is the number (including any fraction) of years in the term of the security; and

is not trading stock of the taxpayer.

Where a taxpayer disposes of a traditional security or a traditional security of a taxpayer is redeemed, the amount of any gain on the disposal or redemption shall be included in the assessable income of the taxpayer of the year of income in which the disposal or redemption takes place.

Where the Commissioner, having regard to any connection between the parties to the transaction by which the taxpayer disposed of the traditional security or by which it was redeemed, or by which the taxpayer acquired the traditional security, is satisfied that the parties were not dealing with each other at arm’s length in relation to the transaction, then, for the purposes of determining under subsection (2) the amount of any gain on the disposal or redemption, the consideration for the transaction shall be taken to be:

the amount that might reasonably be expected for the transaction if the parties were independent parties dealing at arm’s length with each other; or

where, for any reason it is not possible or practicable for the Commissioner to ascertain that amount—such amount as the Commissioner determines.

Subsection (2) does not apply to a gain on the disposal or redemption of a traditional security if:

the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:

the issuer of the traditional security; or

a connected entity of the issuer of the traditional security; and

the traditional security was issued on the basis that it will or may convert into ordinary shares in:

the issuer of the traditional security; or

the connected entity.

Subsection (2) does not apply to a gain on the disposal or redemption of a traditional security if:

the disposal or redemption is in exchange for ordinary shares in a company that is neither:

the issuer of the traditional security; nor

a connected entity of the issuer of the traditional security; and

in the case of a disposal—the disposal is to:

the issuer of the traditional security; or

a connected entity of the issuer of the traditional security; and

the traditional security was issued on the basis that it will or may be:

disposed of to the issuer of the traditional security or to the connected entity; or

redeemed;

in exchange for ordinary shares in the company.

In this section:

convertible note:

in relation to a company—has the same meaning as in Division 3A; or

in relation to a unit trust—means a note issued by the trustee of the unit trust, being a note that, if the unit trust were a company, would be a convertible note issued by the company, and includes a note that would be a convertible note within the meaning of Division 3A if:

references in that Division to a company were references to a unit trust, or to the trustee of the unit trust, as the context requires; and

references in that Division to shares were references to units.

debenture, in relation to a unit trust, means an instrument issued by the trustee of the unit trust, being an instrument that, if the unit trust were a company, would be a debenture issued by the company.

distribution includes:

interest; or

a dividend; or

a share issued by a company to a shareholder in the company where the share is issued:

as a bonus share; or

in the circumstances mentioned in subsection 6BA(1); or

an amount credited by the trustee of a unit trust to a unit holder as a unit holder; or

(e) a unit issued by the trustee of a unit trust to which Income Tax Assessment Act 1997 applies (apart from subsection (4) of that section).section 130-20 of the

eligible security means:

a share, bond, debenture, convertible note, right, option or similar financial instrument issued by a public company; or

a unit, bond, debenture, convertible note, right, option or similar financial instrument issued by the trustee of:

a listed unit trust; or

a unit trust any of the units of which were offered to the public; or

a bond, debenture, right, option or similar financial instrument issued by a government or by an authority of a government.

government means:

the Commonwealth, a State or a Territory; or

the government of, or of a part of, a foreign country.

listed company means a company any of the shares of which are listed for quotation in the official list of a stock exchange in Australia or elsewhere.

listed unit trust means a unit trust any of the units of which are listed for official quotation in the official list of a stock exchange in Australia or elsewhere.

option:

in relation to a company—means an option to acquire shares in the company; or

in relation to a unit trust—means an option to acquire units in the unit trust; or

in relation to a government or an authority of a government—means an option to acquire a bond, debenture or similar financial instrument issued by the government or by the authority.

public company means:

a listed company; or

a mutual life assurance company; or

a company in which a government or an authority of a government has a controlling interest; or

a company that is a 100% subsidiary of a company covered by paragraph (a), (b) or (c).

right:

in relation to a company—means a right to acquire shares in the company or to acquire an option; or

in relation to a unit trust—means a right to acquire units in the unit trust or to acquire an option; or

in relation to a government or an authority of a government—means a right to acquire a bond, debenture or similar financial instrument issued by the government or by the authority or to acquire an option.

If an eligible security is held by a person as trustee for another person who is absolutely entitled to the eligible security as against the trustee, this section applies as if the eligible security were vested in the other person and any acts of the trustee were the acts of that other person.

This section applies where:

under a written agreement of the kind known as a securities lending arrangement, being an agreement that was entered into after 9 May 1990:

(i) at a particular time (in this section called the original disposal time), a taxpayer (in this section called the lender) disposed of an eligible security (in this section called the borrowed security) to another taxpayer (in this section called the borrower); and

(ii) at a later time (in this section called the re-acquisition time), being less than 12 months after the original disposal time, the lender:

(A) re-acquired the borrowed security (which re-acquired security is in this section called the replacement security) from the borrower; or

(B) acquired an identical security (which acquired security is in this section also called the replacement security) from the borrower; and

both the borrower and the lender were dealing with each other at arm’s length in relation to each of the transactions mentioned in paragraph (a); and

(c) if any of the following events occurred during the period (in this section called the borrowing period) commencing at the original disposal time and ending at the re-acquisition time:

the making or payment of a distribution (whether in property or money) in respect of the borrowed security;

the issue, by the company, trustee, government or government authority concerned, of a right or option in respect of the borrowed security;

if the borrowed security is a right or option:

(A) the giving of a direction by the lender to the borrower to exercise the right or option; or

(B) the giving of a direction by the lender to the borrower to exercise an identical right or option;

then (even if the event occurred after the borrowed security was disposed of by the borrower to a third party), the lender receives from the borrower, under the agreement:

if subparagraph (i) applies:

(A) the distribution; or

(B) if the distribution is in property—identical property; or

(C) a payment (in this section called the compensatory payment) equal to the value to the lender of the distribution; or

if subparagraph (ii) applies:

(A) the right or option; or

(B) an identical right or option; or

(C) a payment (in this section also called the compensatory payment) equal to the value to the lender of the right or option; or

if subparagraph (iii) applies:

(A) the shares, units, bonds, debentures or financial instruments that resulted from exercising the right or option; or

(B) shares, units, bonds, debentures or financial instruments that are identical to those that resulted from, or that would have resulted from, exercising the right or option; or

(C) a payment (in this section also called the compensatory payment) equal to the value to the lender of the shares, units, bonds, debentures or financial instruments that resulted from, or would have resulted from, exercising the right or option; and

if the total consideration payable or to be given by the borrower under the agreement consists of:

the transfer of, or the promise to transfer, the replacement security or replacement securities concerned; and

(ii) other consideration (in this paragraph called the notifiable consideration);

the agreement contains:

if the notifiable consideration is wholly covered by one of the following categories:

(A) a fee;

(B) an adjustment for variations in the market value of eligible securities;

(C) other consideration;

a statement specifying the category concerned and setting out such information as will enable the amount or value of the notifiable consideration to be readily ascertained; or

if the notifiable consideration is covered by 2 or more of the following categories:

(A) a fee;

(B) an adjustment for variations in the market value of eligible securities;

(C) other consideration;

a statement dissecting the notifiable consideration into those categories in such a manner as will enable the amount or value of each category to be readily ascertained; and

the lender does not dispose of (by transfer, declaration of trust or otherwise) the right to receive any part of the total consideration payable or to be given by the borrower under the agreement.

For the purposes of paragraph (3)(c), if, apart from this subsection, either of the following events occurred after the commencement of the borrowing period:

the making or payment of a distribution (whether in property or money) in respect of the borrowed security;

the issue, by the company, trustee, government or government authority concerned, of a right or option in respect of the borrowed security;

(even if the event occurred after the borrowed security was disposed of by the borrower to a third party), the event is taken to have occurred during the borrowing period if, and only if, (assuming that the borrower had held the borrowed security at all times during the borrowing period) the entitlement to the distribution or issue would have been attributable to the borrower’s holding of the borrowed security at a particular time during the borrowing period.

In determining:

(a) whether an amount (other than a fee payable under the securities lending arrangement) is included in the assessable income of the lender under a provision of this Act other than Income Tax Assessment Act 1997 (about CGT); orPart 3-1 or 3-3 of the

whether an amount is allowable as a deduction to the lender;

in respect of either or both of the transactions covered by paragraph (3)(a), the lender is to be treated as if:

neither of those transactions had been entered into; and

the lender had held the borrowed security at all times during the borrowing period; and

if the replacement security is not the borrowed security—the replacement security were the borrowed security.

(4A) If the lender receives a compensatory payment covered by sub-subparagraph (3)(c)(v)(C), then, in determining whether an amount is included in the assessable income of the lender under a provision of this Act other than Income Tax Assessment Act 1997, the lender is to be treated as if:Part 3-1 or 3-3 of the

the lender had held the borrowed security at all relevant times during the borrowing period; and

the right or option had been issued directly to the lender in respect of the borrowed security; and

the lender had disposed of the right or option immediately after its issue for a consideration equal to the compensatory payment.

(4B) If the lender receives a compensatory payment covered by sub-subparagraph (3)(c)(vi)(C), then, in determining whether an amount is included in the assessable income of the lender under a provision of this Act other than Income Tax Assessment Act 1997, the lender is to be treated as if:Part 3-1 or 3-3 of the

the lender had held the right or option at all relevant times during the borrowing period; and

the lender had exercised the right or option; and

the lender had immediately disposed of the shares, units, bonds, debentures or financial instruments that resulted from exercising the right or option for a consideration equal to the compensatory payment.

In determining:

(a) whether an amount is included in the assessable income of the borrower under a provision of this Act other than Income Tax Assessment Act 1997; orPart 3-1 or 3-3 of the

an amount (other than a fee payable under the securities lending arrangement) is allowable as a deduction to the borrower;

in respect of either or both of the transactions covered by paragraph (3)(a):

if the borrowed security was disposed of by the borrower to a third party:

the borrower is to be treated as if the borrower had acquired the borrowed security from the lender for a consideration equal to the market value of the borrowed security at the time of its acquisition; and

the borrower is to be treated as if the borrower had disposed of the replacement security to the lender for a consideration equal to the market value of the borrowed security at the time of its acquisition from the lender; or

in any other case—the borrower is to be treated as if neither of the transactions referred to in paragraph (3)(a) had been entered into.

Any capital gain or capital loss from the disposal of the borrowed security by the lender is disregarded.

(6A) If the lender acquired the borrowed security before 20 September 1985, the lender is taken (for the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997) to have acquired the replacement security before that day.

If the lender acquired the borrowed security on or after 20 September 1985, the first element of the cost base of the replacement security is the cost base of the borrowed security just before the acquisition of the replacement security. The reduced cost base of the replacement security is worked out similarly.

If:

the borrowed security was acquired on or after 20 September 1985; and

a CGT event (other than one involving a transaction covered by subsection (3)) happens in relation to the replacement security at least 12 months after the lender acquired a paired security in relation to the replacement security (otherwise than under a transaction covered by subsection (3));

Income Tax Assessment Act 1997 (about the requirement for 12 months ownership) does not apply to the CGT event.section 114-10 of the

For the purposes of subsection (7):

if CGT event A1 happens (involving a transaction covered by subsection (3)) by the lender disposing of an eligible security to the borrower, that security is a paired security in relation to the replacement security subsequently acquired or re-acquired by the lender; and

a security is a paired security in relation to a second security if the first security is a paired security in relation to a third security that is a paired security in relation to the second security (including a pairing with the second security by another application or other applications of this paragraph).

(9) For the purpose of applying Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to the borrower:

if the borrower disposes of the borrowed security to a third party:

the first element of the cost base and reduced cost base of the borrowed security (in the hands of the borrower) is taken to be its market value when the borrower acquired it; and

when the borrower disposes of a replacement security to the lender, the capital proceeds from that CGT event are taken to be that market value; and

if no third party is involved—the transactions referred to in paragraph (3)(a) are ignored.

(9A) For the purpose of applying Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to the borrower, the incidental costs to the borrower of the acquisition of an eligible security covered by sub-subparagraph (3)(a)(ii)(B) include a compensatory payment incurred by the borrower (to the extent that the borrower has not deducted and cannot deduct it).

(9B) For the purposes of the application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to a right or option received by the lender as mentioned in subparagraph (3)(c)(v), the borrower and lender are to be treated as if the eligible security in respect of which the right or option was issued had been held by the lender at the time of the acquisition of the right or option.

(9C) For the purposes of the application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to a share, unit, bond, debenture or financial instrument received by the lender as mentioned in subparagraph (3)(c)(vi), the borrower and the lender are to be treated as if:

the share, unit, bond, debenture or financial instrument had been received as the result of the exercise of the borrowed security; and

the borrowed security had been held by the lender at the time of the exercise; and

the lender had exercised the borrowed security; and

the lender had exercised the borrowed security at the time the direction concerned was given; and

the amount of the contribution (if any) made by the lender to the borrower in respect of the carrying out of the direction were an amount paid as consideration by the lender in respect of the exercise.

(9D) If a distribution covered by subparagraph (3)(c)(i) consists of one or more shares issued by a company to the borrower or to a third party in the circumstances mentioned in subsection 6BA(1), then, for the purposes of the application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to a share (in this subsection called the notional bonus share) received by the lender in relation to the distribution in the circumstances mentioned in sub-subparagraph (3)(c)(iv)(A) or (B), the borrower and the lender are to be treated as if:

the company had issued the notional bonus share to the lender instead of the borrower or the third party, as the case requires; and

the notional bonus share had been issued in the circumstances mentioned in subsection 6BA(1); and

the notional bonus share had been issued in respect of the borrowed security; and

the lender had held the borrowed security at the time the notional bonus share was issued.

(9E) If a distribution covered by subparagraph (3)(c)(i) consists of one or more units issued by the trustee of a unit trust to the borrower or to a third party in the circumstances covered by Income Tax Assessment Act 1997, then, for the purposes of the application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to a unit (in this subsection called the notional bonus unit) received by the lender in relation to the distribution in the circumstances mentioned in sub-subparagraph (3)(c)(iv)(A) or (B), the borrower and the lender are to be treated as if:section 130-20 of the

the trustee had issued the notional bonus unit to the lender instead of the borrower or the third party, as the case requires; and

(b) the notional bonus unit had been issued in the circumstances covered by Income Tax Assessment Act 1997; andsection 130-20 of the

the notional bonus unit had been issued in respect of the borrowed security; and

the lender had held the borrowed security at the time the notional bonus unit was issued.

(9F) If the lender receives a compensatory payment covered by sub-subparagraph (3)(c)(v)(C), then, for the purposes of the application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to the lender, the lender is to be treated as if:

the lender had held the borrowed security at all relevant times during the borrowing period; and

the right or option had been issued directly to the lender in respect of the borrowed security; and

the lender had disposed of the right or option immediately after its issue and had received capital proceeds of an amount equal to the compensatory payment.

(9G) If the lender receives a compensatory payment covered by sub-subparagraph (3)(c)(vi)(C), then, for the purposes of the application of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 to the lender, the lender is to be treated as if:

the lender had held the right or option at all relevant times during the borrowing period; and

the lender had exercised the right or option; and

the lender had immediately disposed of the shares, units, bonds, debentures or financial instruments that resulted from exercising the right or option and had received capital proceeds of an amount equal to the compensatory payment.

If:

the lender receives from the borrower a distribution or identical property covered by subparagraph (3)(c)(iv); and

(b) assuming that the borrowed security had continued to be held by the lender, an amount (in this subsection called the otherwise assessable amount) would have been included in the lender’s assessable income of a year of income in respect of the distribution concerned;

the lender’s assessable income of the year of income includes an amount equal to the otherwise assessable amount.

If:

the lender receives from the borrower a compensatory payment covered by sub-subparagraph (3)(c)(iv)(C); and

(b) assuming that the borrowed security had continued to be held by the lender, an amount (in this subsection called the otherwise assessable amount) would have been included in the lender’s assessable income of a year of income in respect of the distribution concerned;

the lender’s assessable income of the year of income includes an amount equal to the otherwise assessable amount.

Where:

a taxpayer has entered into a transaction of a kind referred to in subparagraph (3)(a)(i); and

at the time of making an assessment in respect of income of the taxpayer of the year of income in which the transaction occurred, the Commissioner is of the opinion that, at a later time, circumstances will exist because of which this section will apply in connection with that transaction;

the Commissioner may apply the provisions of this section as if those circumstances existed at the time of making the assessment.

Where:

in the making of an assessment, this section has been applied on the basis that a circumstance that did not exist at the time of making the assessment would exist at a later time; and

after the making of the assessment, the Commissioner becomes satisfied that the circumstance will not exist;

then, in spite of anything in the Commissioner may amend the assessment at any time for the purpose of ensuring that this section is to be taken always to have applied on the basis that the circumstance did not exist.section 170,

All benefits provided in respect of, and amounts that are paid from, an RSA (including amounts taken to be paid from an RSA under subsection (2)) are taken to have an Australian source.

If the premiums of an insurance policy are paid from an RSA, any amounts paid by the insurer under the policy are taken to be paid by the RSA provider as a benefit of the RSA.

(1) Subject to Income Tax Assessment Act 1997, the assessable income of a taxpayer of a year of income shall include:Division 54 of the

the amount of any annuity derived by the taxpayer during the year of income excluding, in the case of an annuity that has been purchased, any amount that, in accordance with the succeeding provisions of this section, is the deductible amount in relation to the annuity in relation to the year of income; and

the amount of any payment made to the taxpayer during the year of income as a supplement to an annuity, whether the payment is made voluntarily, by agreement or by compulsion of law and whether or not the payment is one of a series of recurrent payments.

Note: Income Tax Assessment Act 1997 provides a tax exemption for certain payments under structured settlements and structured orders.Division 54 of the

Subject to subsections (3) and (3A), the deductible amount in relation to an annuity derived by a taxpayer during a year of income is the amount (if any) ascertained in accordance with the

A is the relevant share in relation to the annuity in relation to the taxpayer in relation to the year of income.

B is the amount of the undeducted purchase price of the annuity.

C is:

if there is a residual capital value in relation to the annuity and that residual capital value is specified in the agreement by virtue of which the annuity is payable or is capable of being ascertained from the terms of that agreement at the time when the annuity is first derived—that residual capital value; or

in any other case—nil; and

D is the relevant number in relation to the annuity.

Subject to subsection (3A), where the Commissioner is of the opinion that the deductible amount ascertained in accordance with subsection (2) is inappropriate having regard to:

the terms and conditions applying to the annuity; and

such other matters as the Commissioner considers relevant;

the deductible amount in relation to the annuity derived by the taxpayer during the year of income is so much of the annuity as, in the opinion of the Commissioner, represents the undeducted purchase price having regard to:

the terms and conditions applying to the annuity;

any certificate or certificates of an actuary or actuaries stating the extent to which, in the opinion of the actuary or actuaries, the amount of the annuity derived by the taxpayer during the year of income represents the undeducted purchase price; and

such other matters as the Commissioner considers relevant.

For the purposes of this section, where the annuity derived by a taxpayer during a year of income is part of an annuity of which a part has been commuted in the year of income or a preceding year of income, the deductible amount ascertained under subsection (2) or (3) shall be reduced by such amount as, in the opinion of the Commissioner, is appropriate having regard to:

any deductible amount ascertained under this section in relation to the annuity in relation to a preceding year of income; and

such other matters as the Commissioner considers relevant.

In this section:

actuary means a Fellow or Accredited Member of the Institute of Actuaries of Australia.

agreement means any agreement, arrangement or understanding whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

annuity means an annuity, a pension paid from a foreign superannuation fund (within the meaning of the Income Tax Assessment Act 1997) or a pension paid from a scheme mentioned in paragraph 290-5(c) of that Act, but does not include:

an annuity that is a qualifying security for the purposes of Division 16E; or

(b) a superannuation income stream (within the meaning of the Income Tax Assessment Act 1997).

life expectation factor, in relation to a person in relation to an annuity, means the number of years in the complete expectation of life of the person as ascertained by reference to the prescribed Life Tables at the time at the beginning of the period to which the first payment of the annuity relates.

purchase price means:

in relation to a pension—the sum of:

contributions made by any person to a foreign superannuation fund to obtain the pension; and

so much as the Commissioner considers reasonable of contributions made by any person to a foreign superannuation fund to obtain superannuation benefits including the pension; and

in relation to an annuity other than a pension—the sum of:

payments made solely to purchase the annuity; and

so much as the Commissioner considers reasonable of payments made to purchase the annuity and to obtain other benefits.

relevant number, in relation to an annuity in relation to a year of income, means:

where the annuity is payable for a term of years certain—the number of years in the term;

where the annuity is payable during the lifetime of a person and not thereafter—the life expectation factor of the person; and

in any other case—the number that the Commissioner considers appropriate having regard to the number of years in the total period during which the annuity will be, or may reasonably be expected to be, payable.

relevant share, in relation to an annuity derived by a taxpayer during a year of income, means:

(a) in a case where the annuity derived by the taxpayer is a share of an annuity (which annuity is in this paragraph referred to as the total annuity) payable to the taxpayer and another person or other persons—the fraction ascertained by dividing the number of whole dollars in the amount of the annuity derived by the taxpayer during the year of income by the number of whole dollars in the amount of the total annuity derived during the year of income by the taxpayer and the other person or persons; or

in any other case—the number 1.

residual capital value, in relation to an annuity, means the capital amount payable on the termination of the annuity.

undeducted purchase price, in relation to an annuity, has the meaning given by section 27A immediately before the commencement of Schedule 1 to the Superannuation Legislation Amendment (Simplification) Act 2007.

(5) In the definition of purchase price in subsection (4):

a reference to contributions made by any person to a foreign superannuation fund to obtain a pension does not include a reference to contributions made to a foreign superannuation fund by an employer, or by another person under an agreement to which the employer is a party, for the purpose of providing superannuation benefits for, or for dependants of, an employee of the employer; and

a reference to payments made to purchase, or solely to purchase, an annuity (other than a pension) does not include a reference to payments made by an employer, or by another person under an agreement to which the employer is a party, to purchase, or solely to purchase, the annuity for, or for dependants of, an employee of the employer.

For the purposes of subsection (5), in determining whether a person is an employer of another person, treat the holding of an office by the other person as employment of that person.

This Subdivision has effect subject to the provisions of Income Tax Assessment Act 1997 (which describes cum dividend sales in which a distribution to a member of a corporate tax entity is treated as having been made to someone else).Division 216 of the

This Subdivision:

applies to a non-share equity interest in the same way as it applies to a share; and

applies to an equity holder in the same way as it applies to a shareholder; and

applies to a non-share dividend in the same way as it applies to a dividend.

Subsection (1) does not apply to section 47A.

Paragraph (1)(c) does not apply to subsection 44(1).

Subsection (1) has effect subject to the special provision that is made for non-share dividends in subsection 44(1).

The assessable income of a shareholder in a company (whether the company is a resident or a non-resident) includes:

if the shareholder is a resident:

dividends (other than non-share dividends) that are paid to the shareholder by the company out of profits derived by it from any source; and

all non-share dividends paid to the shareholder by the company; and

if the shareholder is a non-resident:

dividends (other than non-share dividends) paid to the shareholder by the company to the extent to which they are paid out of profits derived by it from sources in Australia; and

non-share dividends paid to the shareholder by the company to the extent to which they are derived from sources in Australia; and

if the shareholder is a non-resident carrying on business in Australia at or through a permanent establishment of the shareholder in Australia, and the company is a resident:

dividends (other than non-share dividends) that are paid to the shareholder by the company and are attributable to the permanent establishment, to the extent to which they are paid out of profits derived by the company from sources outside Australia; and

non-share dividends that are paid to the shareholder by the company and are attributable to the permanent establishment, to the extent to which they are derived from sources outside Australia.

This subsection does not apply to a dividend (or non-share dividend) to the extent to which another provision of this Act that expressly deals with dividends includes some or all of the dividend (or non-share dividend) in, or excludes some or all of the dividend (or non-share dividend) from, the shareholder’s assessable income.

Note 1: Some other provisions that expressly deal with dividends are sections 23AI, 23AK and 128D of this Act and Income Tax Assessment Act 1997.section 768-5 of the

Note 2: An amount declared to be conduit foreign income is not included in assessable income under paragraph (1)(b) or (c): see Income Tax Assessment Act 1997.section 802-15 of the

For the purposes of this Act, a dividend paid out of an amount other than profits is taken to be a dividend paid out of profits.

Where:

the amount of the moneys or of the value of other property of which a dividend paid by a company consists is debited against an amount standing to the credit of a share capital account of the company; or

a dividend paid by a company is a repayment by the company of an amount paid-up on a share;

the dividend shall, for the purposes of this section, be deemed to have been paid by the company out of profits derived by it.

Subsections (3) and (4) apply to a demerger dividend unless the head entity elects in writing, within one month after it decides which of its shareholders will receive ownership interests in the demerged entity under the demerger, that those subsections do not apply to the total demerger dividend for all shareholders.

This section applies to the demerger dividend as if it had not been paid out of profits.

A demerger dividend is not assessable income or exempt income.

However, subsections (3) and (4) do not apply to a demerger dividend unless, just after the demerger, CGT assets owned by the demerged entity or a demerger subsidiary representing at least 50% by market value of all the CGT assets (or a reasonable approximation of market value) owned by the demerged entity and its demerger subsidiaries are used, directly or indirectly, in one or more businesses carried on by one or more of those entities.

In applying subsection (5), disregard any assets that are ownership interests in a demerger subsidiary unless they are used in a business referred to in that subsection.

In this section:

permanent establishment of a person:

has the same meaning as in a double tax agreement (as defined in Part X) that relates to a foreign country and affects the person; or

has the meaning given by subsection 6(1), if there is no such agreement.

Application of section

This section applies in respect of a company that, whether in the same year of income or in different years of income, streams the provision of shares (other than shares to which subsection 6BA(5) applies) and the payment of minimally franked dividends to its shareholders in such a way that:

the shares are received by some shareholders but not all shareholders; and

some or all of the shareholders who do not receive the shares receive or will receive minimally franked dividends.

(2) The value of the share at the time that the shareholder is provided with the share is taken, for the purposes of this Act, to be a dividend that is unfrankable (Income Tax Assessment Act 1997) and that is paid by the company, out of profits of the company, to the shareholder at that time.within the meaning of subsection 995-1(1) of the

(3) A dividend is minimally franked if it is not franked, or is franked to less than 10%, in accordance with section 202-5 or 208-60 of the Income Tax Assessment Act 1997.

Application of section

This section applies in respect of a company that, whether in the same year of income or in different years of income, streams the provision of capital benefits and the payment of dividends to its shareholders in such a way that:

(a) the capital benefits are, or apart from this section would be, received by shareholders (the advantaged shareholders) who would, in the year of income in which the capital benefits are provided, derive a greater benefit from the capital benefits than other shareholders; and

(b) it is reasonable to assume that the other shareholders (the disadvantaged shareholders) have received, or will receive, dividends.

However, it does not apply if section 45 applies in relation to the streaming or in the circumstances set out in subsection (5).

Commissioner to determine that section 45C applies

The Commissioner may make, in writing, a determination that section 45C applies in relation to the whole, or a part, of the capital benefits. A determination does not form part of an assessment.

Note: Subsection (6) limits the determination to a part of the capital benefit in certain cases.

Meaning of provision of capital benefit

(3) A reference to the provision of a capital benefit to a shareholder in a company is a reference to any of the following:

the provision to the shareholder of shares in the company;

the distribution to the shareholder of share capital or share premium;

something that is done in relation to a share that has the effect of increasing the value of a share (which may or may not be the same share) held by the shareholder.

For the purposes of this section, a non-share distribution to an equity holder is taken to be the distribution to the equity holder of share capital to the extent to which it is a non-share capital return.

Meaning of greater benefit from capital benefits

(4) The circumstances in which a shareholder would, in a year of income, derive a greater benefit from capital benefits than another shareholder include, but are not limited to, any of the following circumstances existing in relation to the first shareholder and not in relation to the other shareholder:

some or all of the shares in the company held by the shareholder were acquired, or are taken to have been acquired, before 20 September 1985;

the shareholder is a non-resident;

the cost base (for the purposes of Part IIIA) of the relevant share is not substantially less than the value of the applicable capital benefit;

the shareholder has a net capital loss for the year of income in which this capital benefit is provided;

the shareholder is a private company who would not have been entitled to a rebate under former section 46F if the shareholder had received the dividend that was paid to the disadvantaged shareholder;

the shareholder has income tax losses.

Certain capital benefits not covered

This section does not apply where the capital benefit provided to the advantaged shareholders is the provision of shares and it is reasonable to assume that the disadvantaged shareholders have received, or will receive, fully franked dividends.

Determination limited in certain cases

If the capital benefit provided to the advantaged shareholders is the provision of shares and it is reasonable to assume that the disadvantaged shareholders have received, or will receive, partly franked dividends, the Commissioner may only make a determination under subsection (2) in relation to so much of the capital benefit as the Commissioner considers relates to the unfranked part of the dividend.

Purpose of section

The purpose of this section is to ensure that relevant amounts are treated as dividends for taxation purposes if:

components of a demerger allocation as between capital and profit do not reflect the circumstances of a demerger; or

certain payments, allocations and distributions are made in substitution for dividends.

Application of section

This section applies if:

there is a scheme under which a person is provided with a demerger benefit or a capital benefit by a company; and

(b) under the scheme, a taxpayer (the relevant taxpayer), who may or may not be the person provided with the demerger benefit or the capital benefit, obtains a tax benefit; and

(c) having regard to the relevant circumstances of the scheme, it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for a purpose (whether or not the dominant purpose but not including an incidental purpose) of enabling a taxpayer (the relevant taxpayer) to obtain a tax benefit.

Commissioner to determine that section 45BA or 45C applies

The Commissioner may make, in writing, a determination that:

section 45BA applies in relation to the whole, or a part, of the demerger benefit; or

section 45C applies in relation to the whole, or a part, of the capital benefit.

A determination does not form part of an assessment.

Meaning of provided with a demerger benefit

Note: If section 45BA applies in relation to the whole, or a part, of a demerger benefit, this benefit may be a capital benefit.

(4) A person is provided with a demerger benefit if in relation to a demerger:

a company provides the person with ownership interests in that or another company; or

something is done in relation to an ownership interest owned by the person that has the effect of increasing the value of an ownership interest (which may or may not be the same ownership interest) owned by the person.

Meaning of provided with a capital benefit

(5) A reference to a person being provided with a capital benefit is a reference to any of the following:

the provision of ownership interests in a company to the person;

the distribution to the person of share capital or share premium;

something that is done in relation to an ownership interest that has the effect of increasing the value of an ownership interest (which may or may not be the same interest) that is held by the person.

(6) However, a person is not provided with a capital benefit to the extent that the provision of interests, the distribution or the thing done referred to in subsection (5) involves the person receiving a demerger dividend.

For the purposes of this section, a non-share distribution to an equity holder is taken to be the distribution to the equity holder of share capital to the extent to which it is a non-share capital return.

Meaning of relevant circumstances of scheme

(8) The relevant circumstances of a scheme include the following:

the extent to which the demerger benefit or capital benefit is attributable to capital or the extent to which the demerger benefit or capital benefit is attributable to profits (realised and unrealised) of the company or of an associate (within the meaning in section 318) of the company;

the pattern of distributions of dividends, bonus shares and returns of capital or share premium by the company or by an associate (within the meaning in section 318) of the company;

(c) whether the relevant taxpayer has capital losses that, apart from the scheme, would be unutilised (within the meaning of the Income Tax Assessment Act 1997) at the end of the relevant year of income;

whether some or all of the ownership interests in the company or in an associate (within the meaning in 20 September 1985;section 318) of the company held by the relevant taxpayer were acquired, or are taken to have been acquired, by the relevant taxpayer before

whether the relevant taxpayer is a non-resident;

(f) whether the cost base (for the purposes of the Income Tax Assessment Act 1997) of the relevant ownership interest is not substantially less than the value of the applicable demerger benefit or capital benefit;

if the scheme involves the distribution of share capital or share premium—whether the interest held by the relevant taxpayer after the distribution is the same as the interest would have been if an equivalent dividend had been paid instead of the distribution of share capital or share premium;

if the scheme involves the provision of ownership interests and the later disposal of those interests, or an increase in the value of ownership interests and the later disposal of those interests:

the period for which the ownership interests are held by the holder of the interests; and

when the arrangement for the disposal of the ownership interests was entered into;

for a demerger only:

whether the profits of the demerging entity and demerged entity are attributable to transactions between the entity and an associate (within the meaning in section 318) of the entity; and

whether the assets of the demerging entity and demerged entity were acquired under transactions between the entity and an associate (within the meaning in section 318) of the entity;

any of the matters referred to in subsection 177D(2).

Meaning of obtaining a tax benefit

(9) A relevant taxpayer obtains a tax benefit if an amount of tax payable, or any other amount payable under this Act, by the relevant taxpayer would, apart from this section, be less than the amount that would have been payable, or would be payable at a later time than it would have been payable, if the demerger benefit had been an assessable dividend or the capital benefit had been an assessable dividend.

In this section:

scheme has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

If the Commissioner makes a determination under subsection 45B(3), the amount of the demerger benefit, or the part of the benefit, is taken not to be a demerger dividend for the purposes of this Act for the owner of the ownership interest or the relevant taxpayer at the time when the owner or relevant taxpayer is provided with the demerger benefit.

The amount of the demerger benefit is:

if the benefit is the provision of an ownership interest—the market value of the interest at the time that it is provided; or

if the benefit is an increase in the value of an ownership interest—the increase in the market value of the interest as a result of the change; or

if the benefit is a distribution to the shareholder of share capital or share premium—the amount debited to the share capital account or share premium account of the company in connection with the provision of the benefit.

If the Commissioner makes a determination under subsection 45A(2) or 45B(3), the amount of the capital benefit, or the part of the benefit, is taken, for the purposes of this Act, to be an unfranked dividend that is paid by the company to the shareholder or relevant taxpayer at the time that the shareholder or relevant taxpayer is provided with the capital benefit.

The dividend is taken to have been paid out of profits of the company.

If the Commissioner has made a determination under section 45B in respect of the whole or a part of a capital benefit and the Commissioner makes a further written determination that the capital benefit, or the part of the capital benefit, was paid under a scheme for which a purpose, other than an incidental purpose, was to avoid franking debits arising in relation to the distribution from the company:

on the day on which notice of the determination is served in writing on the company, a franking debit of the company arises in respect of the capital benefit; and

the amount of the franking debit is the amount that, if the company had:

paid a dividend of an amount equal to the amount of the capital benefit, or the part of the capital benefit, at the time when it was provided; and

fully franked the dividend;

would have been the amount of the franking credit of the company that would have arisen as a result of the dividend.

The amount of the capital benefit is:

if the benefit is the provision of an ownership interest—the market value of the interest at the time that it is provided; or

if the benefit is an increase in the market value of an ownership interest—the increase in the market value of the interest as a result of the change; or

if the benefit is a distribution to the shareholder of share capital or share premium—the amount debited to the share capital account or share premium account of the company in connection with the provision of the benefit.

For the purposes of this section:

a non-share distribution to an equity holder is taken to be the distribution to the equity holder of share capital to the extent to which it is a non-share capital return; and

the debit to the company’s non-share capital account, in respect of the non-share distribution, is taken to be a debit to the company’s share capital account.

Notice by Commissioner of determination

If the Commissioner makes a determination under section 45A, 45B or 45C, the Commissioner must give a copy of the determination to the company concerned (which, in the case of a demerger benefit referred to in section 45B, is the head entity of the demerger group).

Notice by company of determination

That company must, in the case of a determination under section 45A or 45B, give a copy of the notice to:

the advantaged shareholder referred to in section 45A; or

the relevant taxpayer referred to in section 45B.

Publication of determination in relation to listed public company

If the Commissioner makes a determination under section 45A, in respect of a dividend paid by a listed public company, the Commissioner is taken to have served notice in writing of the determination on the advantaged shareholder if the Commissioner causes the notice to be published in a manner that results in the notice being accessible to the public and reasonably prominent. The notice is taken to have been served on the day on which the publication takes place.

Evidence of determination

The production of:

a notice of a determination; or

a document signed by the Commissioner, a Second Commissioner or a Deputy Commissioner purporting to be a copy of a determination;

is conclusive evidence of:

the due making of the determination; and

(d) except in proceedings under Taxation Administration Act 1953 on an appeal or review relating to the determination, that the determination is correct.Part IVC of the

Objections

(4) If a taxpayer to whom a determination relates is dissatisfied with the determination, the taxpayer may object against it in the manner set out in Taxation Administration Act 1953.Part IVC of the

Allowable deduction

(1) An amount is allowable as a deduction from the assessable income of a company (the resident company) if:

(a) the resident company is paid a dividend (the original dividend) that:

is paid by a company that is a resident; and

is a non-portfolio dividend; and

is not a fully-franked dividend; and

the resident company is not a group company in relation to the company that paid the original dividend in relation to the year of income in which the dividend is paid; and

neither the resident company, nor the company that pays the dividend, is a prescribed dual resident; and

(c) ignoring the amendments made by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006, but for subsection 46AB(1) or 46AC(2) or subparagraph 46F(2)(a)(i) of this Act as in force just before the commencement of those amendments, the resident company would have been entitled to a rebate under section 46 of this Act as so in force in respect of the unfranked amount of the original dividend; and

(d) the resident company pays a dividend (the flow-on dividend) to a company that is not a resident (the non-resident company); and

the flow-on dividend is not a fully-franked dividend; and

the resident company declares that the unfranked amount of the flow-on dividend is an on-payment of the unfranked amount of the original dividend to the extent of a specified percentage (not exceeding 100%); and

when the original dividend is paid, when the declaration is made and when the flow-on dividend is paid, the resident company is:

a resident; and

wholly owned by the non-resident company.

The deduction is from assessable income of the year of income in which the flow-on dividend is paid. The amount of the deduction is equal to the flow-on amount worked out using subsection (2).

(2) The flow-on amount is:

Flow-on declarations

(3) The declaration under paragraph (1)(f) (the flow-on declaration) must be made:

in writing; and

before the flow-on dividend is paid.

The declaration cannot be revoked or varied.

The flow-on declaration is effective only to the extent to which the flow-on amount does not exceed the surplus in the resident company’s unfranked non-portfolio dividend account immediately before the declaration is made.

Note: See section 46FB for the unfranked non-portfolio dividend account.

Unfranked amount of flow-on dividend unfrankable

(5) Income Tax Assessment Act 1997 (the imputation system) applies to the unfranked amount of the flow-on dividend as if it were an unfrankable distribution within the meaning of section 202-45 of that Act if a deduction is allowed to the resident company in relation to the flow-on dividend.Part 3-6 of the

Wholly owned by non-resident company

The resident company is wholly owned by the non-resident company if all the shares in the resident company are held by and beneficially owned by the non-resident company.

However, the company is not wholly owned by the non-resident company if a person is in a position to affect rights, in relation to the resident company, of the non-resident company.

The resident company is also not wholly owned by the non-resident company if at some future time a person will be in a position to affect rights as described in subsection (7).

A person in a position to affect rights

A person is in a position to affect rights of a company in relation to another company if the person has a right, power or option:

to acquire those rights from one or other of those companies; or

to do something that would prevent one or other of those companies from exercising its rights for its own benefit, or from receiving any benefit arising from having those rights.

It does not matter whether the person has the right, power or option because of the constitution of one or other of those companies, any agreement or otherwise.

Definitions

In this section:

fully-franked dividend means a dividend whose franking percentage (within the meaning of section 203-35 of the Income Tax Assessment Act 1997) is 100%.

group company has the same meaning as in former section 160AFE as in force immediately before 1 July 2002.

non-portfolio dividend has the same meaning as in section 317.

non-resident company means a company that is not a resident.

unfranked amount of a dividend (including an unfrankable distribution within the meaning of section 202-45 of the Income Tax Assessment Act 1997) means the amount of the dividend less the franked part.

Company may establish account

A company may establish an unfranked non-portfolio dividend account.

Account surplus

An unfranked non-portfolio dividend account surplus exists for a company at a particular time if the company’s total unfranked non-portfolio dividend credits arising before that time exceed its total unfranked non-portfolio dividend debits arising before that time.

The amount of the surplus is equal to the amount of the excess.

Credits

An unfranked non-portfolio dividend credit arises for a company if:

the company is paid an unfranked non-portfolio dividend; and

the company is not a group company in relation to the company that paid the dividend in relation to the year of income in which the dividend is paid; and

(c) ignoring the amendments made by Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006, but for subsection 46AB(1) or 46AC(2) or subparagraph 46F(2)(a)(i) of this Act as in force just before the commencement of those amendments, the company would have been entitled to a rebate under section 46 of this Act as so in force in respect of the unfranked amount of the dividend.

The amount of the credit is the unfranked amount of the dividend. The credit arises when the dividend is paid to the company.

Debits

An unfranked non-portfolio dividend debit arises for a company if the company makes a declaration under paragraph 46FA(1)(f) in relation to a dividend paid on a particular day. The amount of the debit is the flow-on amount under subsection 46FA(2). The debit arises when the declaration is made.

Definitions

In this section:

group company has the same meaning as in former section 160AFE as in force immediately before 1 July 2002.

non-portfolio dividend has the same meaning as in section 317.

unfranked amount of a dividend (including an unfrankable distribution within the meaning of section 202-45 of the Income Tax Assessment Act 1997) means the amount of the dividend less the franked part.

Distributions to shareholders of a company by a liquidator in the course of winding-up the company, to the extent to which they represent income derived by the company (whether before or during liquidation) other than income which has been properly applied to replace a loss of paid-up share capital, shall, for the purposes of this Act, be deemed to be dividends paid to the shareholders by the company out of profits derived by it.

A reference in subsection (1) to income derived by a company includes a reference to:

an amount (except a net capital gain) included in the company’s assessable income for a year of income; or

(b) a net capital gain that would be included in the company’s assessable income for a year of income if the Income Tax Assessment Act 1997 required a net capital gain to be worked out as follows:

Method statement

Step 1. Work out each capital gain (except a capital gain that is disregarded) that the company made during that year of income. Do so without indexing any amount used to work out the cost base of a CGT asset.

Step 2. Total the capital gain or gains worked out under Step 1. The result is the net capital gain for that year of income.

Those distributions shall, to the extent to which they are made out of any profits or income, be deemed to have been paid wholly and exclusively out of those profits or that income.

Where:

the business of a company has been, or is in the course of being, discontinued otherwise than in the course of a winding up of the company under any law relating to companies;

in connexion with the discontinuance, any moneys of the company have been or other property of the company has been, on or after 19 October 1967, distributed, otherwise than by the company, to shareholders of the company; and

the moneys or other property so distributed are not, for the purposes of this Act, dividends;

the distribution shall, subject to subsection (2B), be deemed to be, for the purposes of this section, a distribution to the shareholders by a liquidator in the course of winding up the company.

Where:

subsection (2A) would, but for this subsection, apply in relation to any moneys or other property of a company distributed to shareholders of the company; and

the company does not cease to exist within a period of 3 years after the distribution, or within such further period as the Commissioner allows;

subsection (2A) shall not apply, and shall be deemed never to have applied, in relation to those moneys or that other property, and those moneys or that other property so distributed shall, for the purposes of this Act, be deemed to be dividends paid by the company to the shareholders out of profits derived by it.

(3) For the purposes of this section, paid-up share capital includes capital which has been paid up in money or by other valuable consideration and which has been cancelled and has not been repaid by the company to the shareholders.

Subject to subsection (2), if:

(a) a company (in this section called the first company) has profits immediately before a distribution time for a distribution benefit in relation to the first company; and

the distribution time occurred after 3 June 1990; and

the first company is a CFC at the distribution time; and

the first company is a resident of an unlisted country at the distribution time;

so much of the distribution payment in relation to the distribution time as would not otherwise be a dividend and does not exceed the amount of those profits is taken, for the purposes of this Act, to be a dividend paid by the first company:

to the recipient of the benefit as a shareholder in the first company; and

out of profits derived by the first company; and

at the distribution time.

If:

any of the following subparagraphs applies:

by virtue of subsection (1), the whole or a part of the distribution payment is included in the assessable income of a taxpayer of the year of income in which the distribution time occurred under section 44;

(ii) by virtue of subsection (1), the whole or a part of the distribution payment would, apart from Income Tax Assessment Act 1997, be included in the assessable income of a taxpayer of the year of income in which the distribution time occurred under section 44; andsection 23AI or section 768-5 of the

both of the following subparagraphs apply:

the taxpayer’s return of income for the year of income was not prepared on the basis that the distribution payment had the consequence specified in subsection (1);

the taxpayer has not notified the Commissioner, in writing, within 12 months after the end of the year of income, that the distribution payment had the consequence specified in subsection (1);

that subsection has effect in relation to the taxpayer and in relation to that distribution payment as if the reference in that subsection to the purposes of this Act were a reference to the purposes of this Act (other than Income Tax Assessment Act 1997).section 365 of this Act and Division 770 of the

Subject to subsections (9) and (12), a reference in this section to a distribution benefit in relation to the first company is a reference to an eligible benefit where the following conditions are satisfied:

the eligible benefit was provided to:

an associated entity in relation to the first company; or

another entity that, immediately after the time of the provision of the eligible benefit, was an associated entity in relation to the first company;

the eligible benefit was provided by:

the first company; or

(ii) an entity (in this subsection called the arranger) other than the first company under an arrangement between:

(A) the first company; and

(B) the arranger or another entity;

(c) if subparagraph (b)(ii) applies—the first company made, or entered into an undertaking to make, one or more transfers of property or services to the arranger or to another entity (which transfers are in this section called the arrangement transfers) that are attributable, in whole or in part, to the provision of the eligible benefit.

Where the first company entered into an undertaking to make one or more arrangement transfers, the time of the arrangement transfers is the time the undertaking was entered into.

(5) Where, at a particular time, an entity (in this subsection called the provider) waives or releases the obligation of another entity (in this subsection called the recipient) to pay or repay to the provider an amount:

the waiver or release is taken to constitute an eligible benefit provided at that time by the provider to the recipient; and

if the eligible benefit is a distribution benefit in relation to the first company—each of the following times is a distribution time for the eligible benefit:

if the eligible benefit was provided by the first company—the time of the provision of the eligible benefit; or

in any other case—the time, or each of the times, of the arrangement transfers concerned;

if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

if the benefit was provided by the first company—the amount the payment or repayment of which is waived or released; or

in any other case—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

For the purposes of subsection (5), an entity is taken to be under an obligation to pay or repay an amount even if the amount is not due for payment or repayment.

(7) Where, at a particular time, an entity (in this subsection called the provider) makes a loan to another entity (in this subsection called the recipient), where:

the parties to the loan are not at arm’s length with each other in relation to the loan; or

(b) the purpose, or one of the purposes, of the making of the loan was to facilitate, directly or indirectly (through one or more interposed companies, partnerships or trusts), the payment of a dividend that is, or would be, non-assessable non-exempt income under Income Tax Assessment Act 1997 (in whole or in part); orsection 768-5 of the

the purpose, or one of the purposes, of the making of the loan was to facilitate, directly or indirectly, the provision of an eligible benefit by the recipient, being an eligible benefit that is a distribution benefit in relation to any company;

the following provisions have effect:

the making of the loan is taken to constitute an eligible benefit provided by the provider to the recipient at that time;

if the eligible benefit is a distribution benefit in relation to the first company—each of the following times is a distribution time for the eligible benefit:

if the benefit was provided by the first company—the time of the provision of the benefit; or

in any other case—the time, or each of the times, of the arrangement transfers concerned;

if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

if the benefit was provided by the first company—the amount of the loan; or

in any other case—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

Where, at a particular time:

(a) an entity (in this subsection called the provider) acquires from a company (in this subsection called the recipient):

a share in the recipient;

a right to acquire a share in the recipient;

an option to acquire a share in the recipient; or

(b) an entity (in this subsection also called the provider) acquires from the trustee of a unit trust (in this subsection also called the recipient):

a unit in the recipient;

a right to acquire a unit in the recipient;

an option to acquire a unit in the recipient;

the following provisions have effect:

the acquisition is taken to constitute an eligible benefit provided by the provider to the recipient at that time;

if the eligible benefit is a distribution benefit in relation to the first company—each of the following is a distribution time for the eligible benefit:

if the benefit was provided by the first company—the time of the provision of the benefit; or

in any other case—the time, or each of the times, of the arrangement transfers concerned;

if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

if the benefit was provided by the first company—the amount or market value of the consideration paid or given by the first company in respect of the acquisition; or

in any other case—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit;

if:

the eligible benefit is a distribution benefit in relation to the first company; and

the provider transferred property or services to the recipient in respect of the acquisition;

in determining the profits of the company immediately before the distribution time, or the first distribution time, as the case requires, for the distribution benefit, the following assumptions are to be made:

if the benefit was provided by the first company—the assumption that, immediately before the distribution time, the company had:

(A) disposed of the property or services to an entity other than the recipient; and

(B) received, in respect of that disposal, consideration equal to the market value of the property or services;

if subparagraph (iii) does not apply—the assumption that, immediately before the distribution time, the company had:

(A) disposed of equivalent property or services to an entity other than the recipient or the entity who provided the eligible benefit; and

(B) received, in respect of that disposal, consideration equal to the market value of the property or services.

An eligible benefit that is covered by subsection (8) and provided at a particular time is not a distribution benefit in relation to the first company if, at that time, there is no entity (other than the provider referred to in that subsection) who is:

either:

the holder of an eligible equity interest in the first company; or

an associate of an entity who is the holder of an eligible equity interest in the first company; and

the holder of an eligible equity interest in the recipient referred to in that subsection.

Where:

(a) an entity (in this subsection called the provider) transfers property or services to another entity (in this subsection called the recipient); and

the property or services are transferred:

for no consideration; or

for a consideration less than the market value of the property or services; and

in the case of a transfer of services—the services do not consist of the making of a loan; and

in any case—the property or services are not transferred by way of consideration for the acquisition from a company of:

a share in the company; or

a right to acquire a share in the company; or

an option to acquire a share in the company; and

in any case—the property or services are not transferred in respect of the acquisition from the trustee of a unit trust of:

a unit in the unit trust; or

a right to acquire a unit in the unit trust; or

an option to acquire a unit in the unit trust; and

in the case of a transfer of property—the property does not consist of a payment in respect of a call on a share in a company;

the following provisions have effect:

the transfer is taken to constitute an eligible benefit provided by the provider to the recipient at that time;

if the eligible benefit is a distribution benefit in relation to the first company—each of the following is a distribution time for the eligible benefit:

if the benefit was provided by the first company—the time of the provision of the benefit; or

in any other case—the time, or each of the times, of the arrangement transfers concerned;

if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

if the benefit was provided by the first company—the amount by which the amount or market value of the property or services exceeds the consideration (including nil consideration) mentioned in paragraph (b); or

if subparagraph (i) does not apply and there is only one arrangement transfer—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit; or

if subparagraph (i) does not apply and there are 2 or more arrangement transfers—the amount worked out in relation to the arrangement transfer using the following formula:

where:

Total Excess means so much of the total amount or market value of all the arrangement transfers as is attributable to the provision of the eligible benefit.

Arrangement transfer means the amount or market value of the arrangement transfer concerned.

Total arrangement transfers means the total amount or market value of all of the arrangement transfers.

if the eligible benefit is a distribution benefit in relation to the first company—in determining the profits of the company immediately before a distribution time for the distribution benefit, the following assumptions are to be made:

if the benefit was provided by the first company—the assumption that, immediately before the distribution time, the company had:

(A) disposed of the property or services to an entity other than the recipient; and

(B) received, in respect of that disposal, consideration equal to the market value of the property or services;

if subparagraph (i) does not apply and there is only one arrangement transfer—the assumption that, immediately before the distribution time, the company had:

(A) disposed of the property or services covered by the arrangement transfer to an entity other than the entity who provided the eligible benefit; and

(B) received, in respect of that disposal, consideration equal to the market value of the property or services;

if subparagraph (i) does not apply and there are 2 or more arrangement transfers—the assumption that, immediately before each distribution time, the company had:

(A) disposed of the property or services covered by the arrangement transfer concerned to an entity other than the entity who provided the eligible benefit; and

(B) received, in respect of that disposal, consideration equal to the market value of the property or services.

(10A) Subsection (10) does not apply to a transfer that is taken by Income Tax Assessment Act 1997 to have occurred.section 70-30 or 70-110 of the

(11) Where, at a particular time, an entity (in this subsection called the provider) makes a payment to another entity, being a company (in this subsection called the recipient), in respect of a call on a share in the recipient:

the making of the payment is taken to constitute an eligible benefit provided by the provider to the recipient at that time; and

if the eligible benefit is a distribution benefit in relation to the first company—each of the following is a distribution time for the eligible benefit:

if the benefit was provided by the first company—the time of the provision of the benefit; or

in any other case—the time, or each of the times, of the arrangement transfers concerned;

if the eligible benefit is a distribution benefit in relation to the first company—the distribution payment in relation to the distribution time is:

if the benefit was provided by the first company—the amount of the payment; or

in any other case—so much of the amount or market value of the arrangement transfer as is attributable to the provision of the eligible benefit.

An eligible benefit that is covered by subsection (11) and provided at a particular time is not a distribution benefit in relation to the first company if, at that time, there is no entity (other than the provider referred to in that subsection) who is:

either:

the holder of an eligible equity interest in the first company; or

an associate of an entity who is the holder of an eligible equity interest in the first company; and

the holder of an eligible equity interest in the recipient referred to in that subsection.

If:

apart from this subsection, a particular eligible benefit that is covered by subsection (8) or (11) and provided at a particular time is not a distribution benefit in relation to the first company only because of subsection (9) or (12); and

at a later time, there is an entity (other than the provider referred to in subsection (8) or (11), as the case may be) who is:

either:

(A) the holder of an eligible equity interest in the first company; or

(B) an associate of an entity who is the holder of an eligible equity interest in the first company; and

the holder of an eligible equity interest in the recipient referred to in whichever of subsections (8) and (11) is applicable; and

if the eligible benefit consists of the acquisition of a share or unit—at that later time, the share or unit has not been redeemed or bought back by the recipient mentioned in subsection (8) for a consideration equal to or greater than the arm’s length value of the share or unit;

the following provisions have effect:

this section has effect as if subsection (9) or (12), as the case requires, had never applied in relation to that eligible benefit;

section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

If:

(a) apart from this subsection, a particular eligible benefit (in this subsection called the first eligible benefit) that is covered by subsection (8) or (11) and provided at a particular time is not a distribution benefit in relation to the first company only because of subsection (9) or (12); and

(b) the recipient referred to in whichever of subsections (8) and (11) is applicable provides an eligible benefit (in this subsection called the second eligible benefit) to:

the first company; or

the provider referred to in whichever of those subsections is applicable; or

an associated entity in relation to:

(A) the first company; or

(B) that provider; and

the provision of the first eligible benefit facilitated, directly or indirectly, the provision of the second eligible benefit; and

if the second eligible benefit is covered by subsection (8) or (11):

the second eligible benefit is provided on or after 13 September 1990; or

both:

(A) the second eligible benefit was provided before 13 September 1990; and

(B) the Commissioner is of the opinion that the provision of the second eligible benefit had, or would be likely to have, the effect of enabling any taxpayer to avoid tax;

the following provisions have effect:

this section has effect as if subsection (9) or (12), as the case requires, had never applied in relation to the first eligible benefit;

section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

In determining whether a company has profits at a particular time, it is to be assumed that the accounts of the company had been drawn up immediately before that time.

For the purposes of this section, where:

(a) the first company has profits (in this subsection called the original profits) immediately before a distribution time for a distribution benefit in relation to the first company; and

(b) by virtue of subsection (1), an amount (in this subsection called the original assessable amount) is included in the assessable income of a taxpayer (in this subsection called the original taxpayer) of a year of income (in this subsection called the original year of income) under section 44 in respect of the distribution payment in relation to the distribution time; and

any of the following subparagraphs applies:

the original taxpayer is:

(A) a resident at any time during the original year of income; and

(B) a company or a natural person (other than a company or a natural person in the capacity of a trustee);

the original taxpayer is the trustee of a public trading trust in relation to the original year of income;

the original taxpayer is the trustee of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust in relation to the original year of income;

the original taxpayer is the trustee of a resident trust estate (within the meaning of Division 6) in relation to the year of income who is liable to be assessed and pay tax under section 99 or 99A in respect of a part of the net income of the trust estate;

then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the original assessable amount.

For the purposes of this section, where:

(a) the first company has profits (in this subsection called the original profits) immediately before a distribution time for a distribution benefit in relation to the first company; and

(b) by virtue of subsection (1), an amount (in this subsection called the original assessable amount) is included in the assessable income of a taxpayer (in this subsection called the original taxpayer) of a year of income (in this subsection called the original year of income) under section 44 in respect of the distribution payment in relation to the distribution time; and

all of the following conditions are satisfied:

the original taxpayer is the trustee of a trust estate who is liable to be assessed and pay tax under section 98 in respect of a share in the net income of the trust estate of the original year of income;

the beneficiary who was entitled to that share was a resident at any time during the original year of income;

(iii) the whole or a part (which whole or part is in this subsection called the beneficiary’s portion of the original assessable amount) of the share of the net income is attributable to the original assessable amount;

then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the beneficiary’s portion of the original assessable amount.

For the purposes of this section, where:

(a) the first company has profits (in this subsection called the original profits) immediately before a distribution time for a distribution benefit in relation to the first company; and

(b) by virtue of subsection (1), an amount (in this subsection called the original assessable amount) is included in the assessable income of a taxpayer (in this subsection called the original taxpayer) of a year of income (in this subsection called the original year of income) under section 44 in respect of the distribution payment in relation to the distribution time; and

the original taxpayer is the trustee of a trust estate or a partnership; and

(d) the following conditions are satisfied in relation to another taxpayer (in this subsection called the actual taxpayer):

(i) an amount is included in the assessable income of the actual taxpayer of a year of income (in this subsection called the assessment year of income) under subsection 92(1) or section 97 or 100;

the actual taxpayer is:

(A) a resident at any time during the assessment year of income, being a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(C) the trustee of a public trading trust in relation to the assessment year of income; or

(D) the trustee of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust in relation to the assessment year of income; or

(E) the trustee of a trust estate who is liable to be assessed and pay tax under section 98 in respect of a share in the net income of a trust estate; or

(F) the trustee of a trust estate who is liable to be assessed and pay tax under section 99 or 99A in respect of a part of the net income of a trust estate; or

(G) the trustee of a trust estate where trustee beneficiary non-disclosure tax is payable under Division 6D on the whole or part of the net income of the trust estate;

(iii) if sub-subparagraph (ii)(A), (B), (C) or (D) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the actual taxpayer’s portion of the original assessable amount) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

if sub-subparagraph (ii)(E) applies:

(A) the beneficiary who was entitled to the share concerned was a resident at any time during the assessment year of income; and

(B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer’s portion of the original assessable amount) of the share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

if sub-subparagraph (ii)(F) applies:

(A) the trust estate was a resident trust estate (within the meaning of Division 6) in relation to the assessment year of income; and

(B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer’s portion of the original assessable amount) of the part of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

if sub-subparagraph (ii)(G) applies:

(A) the trust estate was a resident trust estate (within the meaning of Division 6) in relation to the assessment year of income; and

(B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer’s portion of the original assessable amount) of the whole or the part of the share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;

then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the actual taxpayer’s portion of the original assessable amount.

An assessment may be made of a taxpayer on the assumption that subsection (2) will not be applicable in relation to a particular distribution payment made during a year of income of the taxpayer.

Where:

the assessment mentioned in subsection (18A) is made; and

after the making of the assessment, the Commissioner becomes aware that subsection (2) was applicable in relation to the distribution payment concerned;

then, in spite of anything in the Commissioner may amend the assessment at any time for the purposes of ensuring that the assessment is made as if subsection (18A) of this section were disregarded.section 170,

The provisions of section 102AAJ apply for the purposes of this section in like manner as they apply for the purposes of Division 6AAA.

For the purposes of this section, the question whether a company is a resident of an unlisted country is to be determined in the same manner in which that question is determined for the purposes of Part X.

In this section:

arm’s length value, in relation to the redemption or buy-back of a share in a company or a unit in a unit trust, means the amount that the company or trustee could reasonably be expected to have been required to pay to obtain the redemption or buy-back of the share or unit under a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction.

arrangement means:

any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved.

associate has the same meaning as in Part X.

associated entity, in relation to a company, means either of the following entities:

a shareholder in the company;

an entity who is an associate of a shareholder in the company.

CFC has the same meaning as in Part X.

distribution benefit has the meaning given by subsection (3) of this section.

eligible equity interest:

in relation to a company, means any of the following:

a share, or an interest in a share, in the company;

a right to acquire a share, or an interest in a share, in the company;

an option to acquire a share, or an interest in a share, in the company; or

in relation to a unit trust, means any of the following:

a unit, or an interest in a unit, in the unit trust;

a right to acquire a unit, or an interest in a unit, in the unit trust;

an option to acquire a unit, or an interest in a unit, in the unit trust; or

entity has the same meaning as in Part X.

loan includes:

an advance of money; and

the provision of credit or any other form of financial accommodation; and

the payment of an amount for, on account of, on behalf or at the request of an entity where there is an obligation (whether expressed or implied) to repay the amount; and

a transaction (whatever its terms or form) which in substance effects a loan of money.

property has the same meaning as in Division 6AAA.

services has the same meaning as in Division 6AAA.

statutory accounting period has the same meaning as in Part X.

transfer has the same meaning as in Division 6AAA.

Where:

(a) an amount is included in the assessable income of a taxpayer of a year of income by Income Tax Assessment Act 1997 (about net capital gains) or subsection 124ZZB(1) of this Act (about notional capital gains of PDFs);section 102-5 of the

a deduction would, but for this section, be allowable under a provision listed in the table in subsection (2) to the taxpayer; and

if the amount had not been included in the assessable income the deduction would not be allowable;

the deduction is not allowable.

(2) The table lists provisions allowing deductions that are affected by subsection (1). Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold, are provisions of the Income Tax Assessment Act 1936.

In this section:

arrangement includes:

any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

associate has the same meaning in relation to a person as that expression has in relation to a person in section 318.

construction includes manufacture.

control means effectively control.

goods includes whatever is capable of being owned or used.

hire-purchase agreement means a hire purchase agreement to which Division 240 of the Income Tax Assessment Act 1997 applies.

lease, in relation to property, includes:

any arrangement under which a right to use the property is granted by the owner to another person; and

any arrangement under which a right to use the property, being a right derived directly or indirectly from a right referred to in paragraph (a), is granted by a person to another person;

but does not include a hire-purchase agreement.

owner, in relation to property, includes a person who has taken, and holds, the property on hire under a hire-purchase agreement.

person includes a person in the capacity of a trustee.

prescribed time means one o’clock in the afternoon, by standard time in the Australian Capital Territory, on 24 June 1982.

Note: This section applies to deductions under Income Tax Assessment Act 1997 as if you were the owner of an asset you hold (under that Division) instead of any other person: see section 40-135 of that Act.Division 40 (Capital allowances) and Division 43 (Capital works) of the

(1A) This section does not apply to property that is put to a tax preferred use (within the meaning of the Income Tax Assessment Act 1997) if the tax preferred use:

starts on or after 1 July 2007; and

does not occur under a legally enforceable arrangement entered into before 1 July 2007.

(1B) This section does not apply to property that is put to a tax preferred use (within the meaning of the Income Tax Assessment Act 1997) if:

the tax preferred use starts on or after 1 July 2007; and

the tax preferred use occurs under a legally enforceable arrangement that was entered into before 1 July 2007; and

(c) an election is made under item 71 of Schedule 1 to the Tax Laws Amendment (2007 Measures No. 5) Act 2007 to have subitem 71(2) of that Schedule apply to the property.

This section does not apply to property on or after 1 July 2007 if:

1 July 2007; orDivision 16D applied to the property immediately before

this section did not apply to the property immediately before 1 July 2007 and Division 16D would apply to the property on or after 1 July 2007 but for subsection 159GH(2).

For the purposes of applying paragraph (b), disregard the operation of section 159GL.

Subparagraph (4)(a)(iii) and sub-subparagraph (4)(b)(ii)(D) do not apply to property acquired by a taxpayer if:

the property is acquired by the taxpayer on or after 1 July 2007; and

the property is not acquired under a legally enforceable arrangement entered into before 1 July 2007.

In this section, a reference to the acquisition of property by a person is a reference to:

the person becoming the owner of the property; or

the construction of the property for the person by another person or other persons on premises of the first-mentioned person.

In this section, a reference to property being held for use includes a reference to property that is installed ready for use and held in reserve.

For the purpose of this section, disregard an acquisition or disposal of property by way of the transfer of the property for the provision or redemption of a security. Consequently this section applies as if the person who was the owner of the property before the transfer continues to be the owner after the transfer.

Subject to subsections (1A), (1B), (1C), (1D) and (8), this section applies, in relation to a taxpayer, to property acquired or constructed by the taxpayer, being property acquired by the taxpayer under a contract entered into after the prescribed time or property constructed by the taxpayer, construction having commenced after that time, if:

(a) at a time when the property is owned by the taxpayer, a person (which person is in this section referred to as the end-user) holds rights as lessee under a lease of the property, and:

in a case where the end-user is not a resident of Australia—while the lease is in force, the property is, or is to be, used by a person other than the taxpayer wholly or principally outside Australia;

while the lease is in force, the property is, or is to be, used by a person other than the taxpayer otherwise than wholly and exclusively for the purpose of producing assessable income; or

in a case where the property was acquired by the taxpayer—the property was, prior to its acquisition by the taxpayer, owned, and used or held for use, by the end-user; or

in a case to which paragraph (a) does not apply:

at a time when the property is owned by the taxpayer, the property is, or is to be, used (whether or not by the taxpayer) wholly or partly in or in connection with the production, supply, carriage, transmission or delivery of goods or the provision of services; and

(ii) a person other than the taxpayer (which person is in this section also referred to as the end-user) controls, will control, or is or will be able to control, directly or indirectly, that use of the property, and:

(A) in a case where the end-user is not a resident of Australia—that use of the property takes place, or is to take place, wholly or principally outside Australia;

(B) in a case where some or all of the goods are, or are to be, produced for the end-user or supplied, carried, transmitted or delivered to or for the end-user, or some or all of the services are, or are to be, provided to or for the end-user—any of those goods or services are, or are to be, used by the end-user otherwise than wholly and exclusively for the purpose of producing assessable income;

(C) in relation to the production, supply, carriage, transmission or delivery of goods, or the provision of services, as mentioned in subparagraph (i), the end-user derives, or is to derive, no income or income that is wholly or partly exempt from income tax; or

(D) in a case where the property was acquired by the taxpayer—the property was, prior to its acquisition by the taxpayer, owned, and used or held for use, by the end-user.

In subparagraph (4)(a)(iii) and sub-subparagraph (4)(b)(ii)(D), a reference to the end-user is a reference to the end-user, any of the end-users (where there are 2 or more end-users), any associate of the end-user or of any of those end-users, or any 2 or more such persons.

For the purposes of subsection (4), property shall be taken not to have been, prior to its acquisition by the taxpayer, owned, and used or held for use, by a person if:

the property was first used or held for use by the person at a time within 6 months before the acquisition of the property by the taxpayer; and

at that time there was in existence an arrangement that the property would be sold to another person and leased by that person to the first-mentioned person.

Where:

the end-user consists of all or any of the partners in a partnership; and

a condition of paragraph (4)(a) or (b), as the case may be, is satisfied in relation to any of the partners in the partnership;

that condition shall be taken to be satisfied in relation to all the partners in the partnership.

(8) This section does not apply to property, in relation to a taxpayer, unless the whole or a predominant part of the cost of the acquisition or construction, as the case may be, of the property by the taxpayer is financed directly or indirectly by a debt or debts (which debt is, or debts are, referred to in this subsection as the non-recourse debt) and the rights of the creditor or creditors as against the taxpayer in the event of default in the repayment of principal or payment of interest:

are limited wholly or predominantly to any or all of the following:

rights (including the right to moneys payable) in relation to any or all of the following:

(A) the property or the use of the property;

(B) goods produced, supplied, carried, transmitted or delivered, or services provided, by means of the property;

(C) the loss or disposal of the whole or a part of the property or of the taxpayer’s interest in the property;

rights in respect of a mortgage or other security over the property;

rights arising out of any arrangement relating to the financial obligations of the end-user of the property towards the taxpayer, being financial obligations in relation to the property;

are in the opinion of the Commissioner capable of being so limited, having regard to either or both of the following:

the assets of the taxpayer;

any arrangement to which the taxpayer is a party; or

where paragraphs (a) and (b) do not apply—are limited by reason that not all of the assets of the taxpayer (not being assets that are security for debts of the taxpayer other than the non-recourse debt) would be available for the purpose of the discharge of the whole of the non-recourse debt (including the payment of interest) in the event of any action or actions by the creditor or creditors against the taxpayer arising out of that debt.

Where:

property has been financed by a debt or debts as mentioned in subsection (8); and

the rights of the creditor or creditors as against the taxpayer are, or are capable of being, limited as mentioned in that subsection;

the Commissioner may treat those rights as not being, or capable of being, so limited if the Commissioner is of the opinion, having regard to the circumstances in which the debt was, or debts were, incurred and any other matters that the Commissioner thinks relevant, that it would be reasonable to do so.

Subject to subsections (11), (12), (13) and (15), where this section has applied to property, in relation to a taxpayer, at any time, the taxpayer shall be deemed not to have occupied or used the property, or held the property for use, at that time, for the purpose of producing assessable income or in carrying on a business for that purpose.

Where this section has applied to property, in relation to a taxpayer, at any time during a year of income by reason of subparagraph (4)(a)(ii) or sub-subparagraph (4)(b)(ii)(B), and for any part of that time the end-user held, occupied or used the property referred to in that subparagraph, or held it for use, or used any goods or services referred to in that sub-subparagraph, as the case may be, partly for the purpose of producing assessable income, the taxpayer shall be deemed, for the whole of the time during the year of income when this section applied to the property, to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose, to the extent that the Commissioner considers appropriate.

Where this section has applied to property, in relation to a taxpayer, at any time during a year of income by reason of sub-subparagraph (4)(b)(ii)(C), and for any part of that time the end-user derived assessable income in relation to the production, supply, carriage, transmission or delivery of goods, or the provision of services, as mentioned in subparagraph (4)(b)(i), the taxpayer shall be deemed, for the whole of the time during the year of income when this section applied to the property, to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose, to the extent that the Commissioner considers appropriate.

Where:

this section has applied to property, in relation to a taxpayer, at any time during a year of income by reason of subparagraph (4)(a)(ii) or sub-subparagraph (4)(b)(ii)(B) or (C);

the end-user referred to in that subparagraph or sub-subparagraph, as the case may be, consisted of all or any of the partners in a partnership; and

for any part of that time one or more of the partners in the partnership was a person in respect of whom, but for the operation of subsection (7), that subparagraph or sub-subparagraph, as the case may be, would not have applied;

the taxpayer shall be deemed, for the whole of the time during the year of income when this section applied to the property, to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose, to the extent that the Commissioner considers appropriate.

In considering, for the purposes of subsection (13), the extent to which the taxpayer shall be deemed to have held, occupied or used property, or held if for use, for the purpose of producing assessable income, or in carrying on a business for that purpose, the Commissioner shall have regard:

to the interest or interests of the partner or partners referred to in paragraph (13)(c) in the net income, or the partnership loss, of the partnership of the year of income corresponding to the year of income referred to in paragraph (13)(a);

the extent to which, for any part of the time referred to in paragraph (13)(a), a partner or partners other than the partner or partners referred to in paragraph (13)(c) held, occupied or used the property, or held it for use, or used the goods or services referred to in sub-subparagraph (4)(b)(ii)(B), as the case may be, for the purpose of producing assessable income; and

the extent to which, for any part of the time referred to in paragraph (13)(a), a partner or partners other than the partner or partners referred to in paragraph (13)(c) derived assessable income in relation to the production, supply, carriage, transmission or delivery of goods, or the provision of services, as mentioned in subparagraph (4)(b)(i).

Notwithstanding anything contained in subsections (10), (11) and (13), at any time when this section applies to property by reason of subparagraph (4)(a)(ii), the property shall be deemed not to be held, occupied or used, or held for use, by the taxpayer for the purpose of producing assessable income, or in carrying on a business for that purpose, if, at that time:

2 or more end-users hold rights as lessees under the lease of the property;

(b) one or more of the end-users (which end-user is, or end-users are, referred to in this subsection as the exempt end-user) is a company, or are companies, the income of which is ordinarily exempt from income tax;

the property is, or is to be, used wholly or principally in or in connection with the conduct of operations or transactions of a kind that the exempt end-user ordinarily engages in;

the exempt end-user controls, will control, or is or will be able to control, directly or indirectly, that use of the property; and

in relation to those operations or transactions, the exempt end-user derives, or is to derive, no income or income that is exempt from income tax.

(16) Where a taxpayer has incurred expenditure for repairs to property to which this section applies or has applied in relation to the taxpayer and, but for this section, a deduction would be allowable under Income Tax Assessment Act 1997 in respect of that expenditure, so much of the expenditure as the Commissioner considers appropriate shall be deemed not to be allowable, having regard to:section 25-10 (Repairs) of the

the period for which the taxpayer owned the property before the repairs were commenced and any part of that period during which this section applies or applied to the property in relation to the taxpayer; and

in a case to which subsection (11), (12) or (13) of this section applies or applied—the extent to which, for the time during the part of the period referred to in paragraph (a), the taxpayer was deemed to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose.

(17) Where a taxpayer has incurred expenditure in borrowing money to finance the acquisition or construction of property to which this section applies or has applied in relation to the taxpayer and a deduction has been allowed, or would but for this section be allowable, under Income Tax Assessment Act 1997 in relation to that expenditure, so much of the deduction as the Commissioner considers appropriate shall be deemed not to have been, or not to be, allowable, as the case may be, having regard to:section 25-25 (Borrowing expenses) of the

the period for which the money was borrowed or, by the operation of subsection 25-25(6) of that Act, is deemed to have been borrowed and any part of that period during which this section applies, applied or, in the opinion of the Commissioner, will apply to the property; and

in a case to which subsection (11), (12), or (13) of this section applies or applied—the extent to which, for the time during the part of the period referred to in paragraph (a), the taxpayer is, or in the opinion of the Commissioner will be, deemed to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose.

(18) Where a taxpayer has incurred expenditure for the preparation, registration and stamping of a lease, or of an assignment or surrender of a lease, of property to which this section applies or has applied in relation to the taxpayer and a deduction has been allowed, or would but for this section be allowable, under Income Tax Assessment Act 1997 in respect of that expenditure, so much of the deduction as the Commissioner considers appropriate shall be deemed not to have been, or not to be, allowable, as the case may be, having regard to:section 25-20 (Lease document expenses) of the

the period of the lease and any part of that period during which this section applies, applied or, in the opinion of the Commissioner, will apply to the property; and

in a case to which subsection (11), (12) or (13) of this section applies or applied—the extent to which, for the time during the part of the period mentioned in paragraph (a), the taxpayer is, or in the opinion of the Commissioner will be, deemed to have held, occupied or used the property, or held it for use, for the purpose of producing assessable income, or in carrying on a business for that purpose.

Where:

(a) the individual interest of a taxpayer in the net income of a partnership has been or is to be included in the assessable income of the taxpayer of a year of income (in this subsection referred to as the relevant year of income), or the individual interest of a taxpayer in a partnership loss has been allowed or is allowable as a deduction from the assessable income of the taxpayer of a year of income (in this subsection also referred to as the relevant year of income);

a deduction was taken into account in calculating that net income or partnership loss;

(c) the deduction or a part of the deduction (which deduction or part of the deduction, as the case may be, is referred to in this subsection as the relevant deduction) would not have been taken into account for the purpose of that calculation if this section applied in relation to particular property acquired or constructed by the partnership;

this section does not apply in relation to the property by reason only that the property was acquired by the partnership under a contract entered into at or before the prescribed time or was constructed by the partnership, construction having commenced at or before that time; and

the taxpayer became a partner in the partnership under a contract entered into by the taxpayer after the prescribed time;

there shall be included in the assessable income of the taxpayer of the relevant year of income an amount that bears to the amount of the relevant deduction the same proportion as the individual interest of the taxpayer in that net income bears to that net income or, as the case requires, as the individual interest of the taxpayer in that partnership loss bears to that partnership loss.

Where:

(a) the individual interest of a taxpayer in the net income of a partnership has been or is to be included in the assessable income of the taxpayer of a year of income (in this subsection referred to as the relevant year of income), or the individual interest of a taxpayer in a partnership loss has been allowed or is allowable as a deduction from the assessable income of the taxpayer of a year of income (in this subsection also referred to as the relevant year of income);

a deduction was taken into account in calculating that net income or partnership loss;

(c) the deduction or a part of the deduction (which deduction or part of the deduction, as the case may be, is referred to in this subsection as the relevant deduction) would not have been taken into account for the purpose of that calculation if this section applied in relation to particular property acquired or constructed by the partnership;

this section does not apply in relation to the property by reason only that the property was acquired by the partnership under a contract entered into at or before the prescribed time or was constructed by the partnership, construction having commenced at or before that time;

the taxpayer became a partner in the partnership under a contract entered into by the taxpayer before the prescribed time; and

(f) after the prescribed time, the taxpayer made or agreed to make a contribution or contributions (which contribution is or contributions are in this subsection referred to as the additional contribution) to the capital of the partnership in addition to any contribution or contributions to the capital of the partnership that, under a contract or contracts entered into at or before that time, the taxpayer had made or agreed to make; and

by reason of making or agreeing to make the additional contribution, the individual interest of the taxpayer in that net income or partnership loss, being that individual interest expressed as a fraction of the aggregate of the individual interests of the partners in that net income or partnership loss, is greater than it would otherwise have been;

there shall be included in the assessable income of the taxpayer of the relevant year of income an amount ascertained in accordance with the formula A (B – C), where:

A is the amount of the relevant deduction.

B is the individual interest of the taxpayer in that net income or partnership loss, being that individual interest expressed as a fraction of the aggregate of the individual interests of the partners in that net income or partnership loss; and

C is the fraction that would be B if another partner, and not the taxpayer, had made or agreed to make the additional contribution.

For the purposes of determining if this section applies to property, the income of a prescribed excluded STB (within the meaning of Division 1AB) is taken to be exempt.

(1) If a meal entertainment fringe benefit arises for a taxpayer for an FBT year and the taxpayer elects that Fringe Benefits Tax Assessment Act 1986 applies to the taxpayer for the FBT year, and has not elected that Subdivision C of that Division applies:Division 9A of Part III of the

for each expense incurred in the FBT year by the taxpayer in providing meal entertainment, a deduction equal to 50% of that expense is allowable to the taxpayer for the year of income in which it is incurred; and

no other deduction under any provision of this Act is allowable to the taxpayer for the expense.

(2) Expressions used in this section have the same meaning as in the Fringe Benefits Tax Assessment Act 1986.

(1) If a taxpayer has made an election under Fringe Benefits Tax Assessment Act 1986:section 37CA of the

for each expense incurred in the FBT year by the taxpayer in providing meal entertainment, a deduction equal to the amount worked out using the following formula is allowable to the taxpayer for the year of income in which it is incurred:

no other deduction under any provision of this Act is allowable to the taxpayer for the expense.

(2) The register percentage is the percentage worked out using the formula:

where:

Total deductions for register meal entertainment means the total of deductions that would (but for this section and section 51AEA) be allowable to the taxpayer for expenses incurred by the taxpayer in providing meal entertainment in the 12 week period covered by the register kept by the employer under Subdivision C of Division 9A of the Fringe Benefits Tax Assessment Act 1986.

Total register meal entertainment expenses means the total of expenses incurred by the taxpayer in providing meal entertainment during that 12 week period.

(3) Expressions used in this section have the same meaning as in the Fringe Benefits Tax Assessment Act 1986.

(1) If a taxpayer has made an election under Fringe Benefits Tax Assessment Act 1986:section 152B of the

for each entertainment facility leasing expense incurred in the FBT year by the taxpayer, a deduction equal to 50% of that expense is allowable to the taxpayer for the year of income in which it is incurred; and

no other deduction under any provision of this Act is allowable to the taxpayer for entertainment facility leasing expenses incurred in the FBT year.

(2) Expressions used in this section have the same meaning as in the Fringe Benefits Tax Assessment Act 1986.

Where:

during a particular period, an employer provides a car for the exclusive use of a person who is, or of persons any of whom is, an employee of the employer or a relative of such an employee; and

at any time during that period, the employee or a relative of the employee is entitled to use the car for private purposes;

a deduction is not allowable under this Act in respect of a car expense that relates to the car and:

is incurred by the employee during that period; or

is incurred by the employee and is wholly or partly attributable to that period.

In this section:

car has the meaning given by section 995-1 of the Income Tax Assessment Act 1997, but does not include a car covered by section 28-165 of that Act.

car expense has the meaning given by section 28-13 of the Income Tax Assessment Act 1997, but does not include a car expense covered by section 28-165 of that Act.

employee means a person who receives, or is entitled to receive, work and income support related withholding payments and benefits.

employer means a person who pays or is liable to pay work and income support related withholding payments and benefits, and includes:

in the case of an unincorporate body of persons other than a partnership—the manager or other principal officer of that body; and

in the case of a partnership—each partner; and

(c) an Australian government agency Income Tax Assessment Act 1997.as defined in subsection 995-1(1) of the

No deduction

A deduction is not allowable to an employee under this Act in respect of expenditure to the extent to which it is incurred in respect of the provision of car parking facilities for a car on a day if:

on that day, the employee has a primary place of employment; and

on that day, the car is parked for one or more daylight periods exceeding 4 hours in total at, or in the vicinity of, that primary place of employment; and

the expenditure is in respect of the provision of the parking facilities to which that parking relates; and

on that day, the car was used in connection with travel by the employee between:

the place of residence of the employee; and

that primary place of employment; and

the provision of parking facilities for the car during the period or periods is not taken, under the regulations, to be excluded from this section; and

the day is on or after 1 July 1993.

Definitions

In this section:

car has the same meaning as in the Fringe Benefits Tax Assessment Act 1986.

daylight period has the same meaning as in the Fringe Benefits Tax Assessment Act 1986.

employee has the same meaning as in the Fringe Benefits Tax Assessment Act 1986.

place of residence has the same meaning as in the Fringe Benefits Tax Assessment Act 1986.

primary place of employment has the same meaning as in the Fringe Benefits Tax Assessment Act 1986.

Where:

either of the following subparagraphs applies:

a person makes a payment in discharge, in whole or in part, of an obligation of the taxpayer to pay an amount to a third person in respect of an amount of a loss or outgoing incurred by the taxpayer;

a person reimburses the taxpayer, in whole or in part, in respect of an amount of a loss or outgoing incurred by the taxpayer;

the payment or reimbursement, as the case may be, constitutes:

a fringe benefit; or

(ii) a benefit that, but for paragraph (g) of the definition of fringe benefit in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986, would be a fringe benefit; and

(c) in the case of a reimbursement—the amount of the reimbursement is not included in the taxpayer’s assessable income under Income Tax Assessment Act 1997;section 15-70 of the

the amount of the deduction that, but for this section, has been allowed or would be allowable in respect of the loss or outgoing shall be:

if it would be concluded that the amount of the payment or reimbursement would have been the same even if the loss or outgoing were not incurred in producing assessable income of the taxpayer—calculated as if the loss or outgoing were reduced by the amount of the payment or reimbursement; or

in any other case—reduced by the amount of the payment or reimbursement.

(2) Expressions (other than “fringe benefit”) used in this section and in the Fringe Benefits Tax Assessment Act 1986 have the same respective meanings in this section as they have in that Act.

(3) This section does not apply to deductions under Income Tax Assessment Act 1997 (about capital allowances).Division 40 of the

Where:

any of the following benefits is provided in respect of the employment of an employee of an employer:

an airline transport benefit;

a board benefit;

a loan benefit;

a property benefit;

a residual benefit;

the benefit is:

a fringe benefit; or

(ii) a benefit that, but for paragraph (g) of the definition of fringe benefit in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986, would be a fringe benefit;

(c) in the case of a loan benefit—the taxpayer, being the recipient or the employee, incurs interest (in this section called the recipients interest) in respect of the loan;

(d) in the case of a benefit other than a loan benefit—the taxpayer, being the recipient or the employee, incurs consideration (in this section called the recipients contribution) to the provider or to the employer in respect of the provision of the recipients transport, the recipients meal, the recipients property or the recipients benefit, as the case may be;

it would be concluded that, in calculating the amount of the recipients interest, or the amount of the recipients contribution, as the case may be, the provider or the employer made an allowance for a particular level of application or use of the benefit in producing assessable income of the taxpayer; and

it would be concluded that the amount of the recipients interest, or the amount of the recipients contribution, as the case may be, would have been greater if it had been calculated without making that allowance;

the following provisions have effect:

if the extent of the application or use of the benefit concerned in producing assessable income of the taxpayer is equal to, or less than, that level—a deduction is not allowable to the taxpayer under this Act in respect of the recipients interest or the recipients contribution;

if the extent of the application or use of the benefit concerned in producing assessable income of the taxpayer exceeds that level—the amount of the deduction that, but for this section, has been allowed or would be allowable to the taxpayer under this Act in respect of the recipients interest or the recipients contribution shall not exceed the amount calculated in accordance with the formula:

where:

D is the amount of the deduction that, but for this section, would have been allowable to the taxpayer under this Act in respect of the amount of the recipients interest or the amount of the recipients contribution if it had been calculated without making that allowance; and

A is the amount of that allowance.

(2) Expressions (other than “recipients contribution” and “fringe benefit”) used in this section and in the Fringe Benefits Tax Assessment Act 1986 have the same respective meanings in this section as they have in that Act.

Subject to this section, where:

under an agreement:

a taxpayer incurs expenditure; and

a non-cash business benefit is provided to the taxpayer or another person; and

that benefit is not exclusively for use or application for the purpose of producing assessable income of the taxpayer;

the taxpayer shall be treated, for the purposes of this Act, as if so much of the expenditure as does not exceed the arm’s length value of the benefit had been incurred by the taxpayer exclusively in respect of that benefit.

This section does not apply so as to treat particular expenditure, or the cost of particular property, to be a particular amount for a particular purpose if there is another provision of this Act that deems that expenditure, or the cost of that property, to be a lesser amount for that purpose.

A reference in this section to producing assessable income includes a reference to:

gaining assessable income; or

carrying on a business for the purpose of gaining or producing assessable income.

Expressions used in this section and in section 21A have the same respective meanings in this section as they have in that section.

In this section:

agreement means any agreement, arrangement or understanding, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

expenditure includes a loss or outgoing.

(1AA) This section does not apply to a loss arising in the 1997-98 year of income or a later year of income from the carrying on or carrying out of a profit-making undertaking or scheme, even if the undertaking or scheme was entered into, or began to be carried on or carried out, before the 1997-98 year of income.

Note: Section 25-40 (Loss from profit-making scheme) of the Income Tax Assessment Act 1997 deals with such a loss.

This section does not apply in respect of the sale of property acquired on or after 20 September 1985.

Any loss incurred by the taxpayer in the year of income upon the sale of any property or from the carrying on or carrying out of any undertaking or scheme, the profit (if any) from which sale, undertaking or scheme would have been included in the taxpayer’s assessable income, shall be an allowable deduction:

Provided that, in respect of property acquired by the taxpayer after the date of the commencement of this proviso, no deduction shall be allowable under this section (except where the Commissioner, being satisfied that the property was acquired by the taxpayer for the purpose of profit-making by sale or for the carrying on or carrying out of any profit-making undertaking or scheme, otherwise directs) unless the taxpayer, not later than the date upon which he or she lodges his or her first return under this Act after having acquired the property, notifies the Commissioner that the property has been acquired by the taxpayer for the purpose of profit-making by sale or for the carrying on or carrying out of any profit-making undertaking or scheme.

Where:

(a) a taxpayer sells property (in this subsection referred to as the relevant property) that is deemed by subsection 25A(5) or (8) to have been acquired by the taxpayer for the purpose of profit-making by sale;

the Commissioner is satisfied that the relevant property has not been held or used by the taxpayer in a manner inconsistent with such a purpose; and

the Commissioner, having regard to:

the amount of the consideration paid by the person who transferred the relevant property or, in a case to which subsection 25A(8) applies, the property referred to in paragraph 25A(8)(b), to the taxpayer in respect of the purchase of the property so transferred; and

such other matters as the Commissioner considers relevant;

considers that it is appropriate that a loss be deemed to be incurred by the taxpayer upon the sale of the relevant property;

the taxpayer shall be deemed, for the purposes of this section, to have incurred a loss upon the sale of the relevant property of such amount as the Commissioner considers appropriate.

Except as provided by subsection (2), a deduction is not allowable to a taxpayer under this section in respect of a loss incurred upon a sale of property to which paragraph (2)(a) applies.

Where:

(a) a loss is incurred by a taxpayer upon the sale of property (in this subsection referred to as the relevant property); and

the taxpayer is deemed to have acquired the relevant property for the purpose of profit-making by sale by virtue of the application of subsection 25A(6) in accordance with subparagraph (b)(ii) of that subsection;

the deduction that would, but for this subsection, be allowable to the taxpayer under subsection (1) in respect of the loss shall be reduced by such amount (if any) as the Commissioner considers reasonable having regard to the extent to which the relevant property is attributable to the interest in property that was acquired by the taxpayer for the purpose of profit-making by sale as mentioned in that subparagraph.

A deduction is not allowable to a taxpayer under subsection (1) in respect of a loss incurred by the taxpayer upon the sale of property if:

the sale is a transfer in the prescribed manner by the taxpayer for the purposes of section 25A; or

the property is deemed by subsection 25A(2) to have been acquired by the taxpayer for the purposes of profit-making by sale and was not actually acquired by the taxpayer for that purpose.

(1) Notwithstanding Income Tax Assessment Act 1997, losses or outgoings consisting of expenditure incurred by a taxpayer in the purchase or acquisition, after 7 April 1978, of any prescribed property as trading stock of the taxpayer shall, if the Commissioner considers that it would be unreasonable that a deduction be allowable to the taxpayer in respect of the whole of those losses or outgoings, be allowable as a deduction to the taxpayer to the extent only that the Commissioner considers that it is reasonable in the circumstances that a deduction be allowable to the taxpayer in respect of those losses or outgoings.section 8-1 of the

Where:

expenditure incurred by a taxpayer in the purchase or acquisition, after 7 April 1978, of any prescribed property that was purchased or acquired in the carrying on or carrying out of any profit-making undertaking or scheme would, but for this subsection, be taken into account for the purpose of ascertaining whether any profit arose, or any loss was incurred, from the carrying on or carrying out of the undertaking or scheme and for the purpose of ascertaining the amount of any such profit or loss; and

the Commissioner considers that it would be unreasonable that the whole of that expenditure be taken into account for those purposes;

that expenditure shall be taken into account for those purposes to the extent only that the Commissioner considers that it is reasonable in the circumstances that the expenditure be taken into account for those purposes.

Where:

prescribed property that was acquired by a taxpayer after 24 September 1978 and before the commencement of this subsection or is acquired after the commencement of this subsection was or is treated or used by the taxpayer as an asset of a business carried on by the taxpayer;

but for this subsection, a deduction would be allowable to the taxpayer in respect of the value of that property; and

the Commissioner considers that it would be unreasonable that a deduction be allowable to the taxpayer in respect of the value of the property to the extent to which, but for this subsection, a deduction would be allowable to the taxpayer in respect of the value of the property;

a deduction shall be allowable to the taxpayer in respect of the value of the property to the extent only that the Commissioner considers that it is reasonable in the circumstances that a deduction be allowable to the taxpayer in respect of that value.

Where:

the value of any prescribed property that:

was acquired by a taxpayer after 24 September 1978 and before the commencement of this subsection or is acquired after the commencement of this subsection; and

was or is used by the taxpayer in the carrying on or carrying out of any profit-making undertaking or scheme;

would, but for this subsection, be taken into account for the purpose of ascertaining whether or not any profit arose, or any loss was incurred, from the carrying on or the carrying out of the undertaking or scheme and for the purpose of ascertaining the amount of any such profit or loss; and

the Commissioner considers that it would be unreasonable that the value of the property be taken into account for those purposes to the extent to which the value would, but for this subsection, be taken into account for those purposes;

the value of the property shall be taken into account for those purposes to the extent only that the Commissioner considers that it is reasonable in the circumstances that that value be taken into account for those purposes.

In forming an opinion for the purposes of subsection (1) or (2A) as to the extent to which it is reasonable that a deduction be allowable to a taxpayer in respect of expenditure incurred in the purchase or acquisition of prescribed property or in respect of the value of prescribed property, as the case may be, or in forming an opinion for the purposes of subsection (2) or (2B) as to the extent to which it is reasonable that expenditure incurred by a taxpayer in the purchase or acquisition of prescribed property should be taken into account for the purposes referred to in subsection (2) or that the value of prescribed property should be taken into account for the purposes referred to in subsection (2B), as the case may be:

if the taxpayer expended moneys in purchasing or acquiring the prescribed property—the Commissioner shall have regard to the circumstances in which, and the person or persons from whom, the taxpayer obtained moneys:

that were expended by the taxpayer in purchasing or acquiring the prescribed property; or

that, in the opinion of the Commissioner, were obtained by, or paid to, the taxpayer to enable the taxpayer to expend moneys in purchasing or acquiring the prescribed property;

(b) if the taxpayer borrowed from another person (in this paragraph referred to as the lender) moneys that were expended by the taxpayer in purchasing or acquiring the prescribed property or moneys that, in the opinion of the Commissioner, were obtained by, or paid to, the taxpayer to enable the taxpayer to expend moneys in purchasing or acquiring the prescribed property—the Commissioner shall have regard to:

the circumstances in which, and the terms and conditions on which, the taxpayer borrowed those moneys from the lender; and

whether, in the opinion of the Commissioner, the taxpayer and the lender were dealing with each other at arm’s length in connexion with the borrowing of those moneys by the taxpayer;

if, either before or after the purchase or acquisition of the prescribed property by the taxpayer, an agreement or arrangement (whether or not enforceable by legal proceedings and whether or not intended to be so enforceable) was entered into, or an understanding was reached, as a result of which there has been, or there could reasonably be expected to be, a substantial reduction in the value of the prescribed property—the Commissioner shall have regard to that agreement, arrangement or understanding;

if the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that a person who, if the transaction, operation, undertaking, scheme or arrangement, had not been entered into or carried out, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than that person would have been liable to pay if the transaction, operation, undertaking, scheme or arrangement had not been entered into or carried out—the Commissioner shall have regard to that transaction, operation, undertaking, scheme or arrangement;

if the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement that the Commissioner is satisfied was by way of dividend stripping or was similar to a transaction, operation, undertaking, scheme or arrangement by way of dividend stripping—the Commissioner shall have regard to that transaction, operation, undertaking, scheme or arrangement;

if:

the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement under which, or in the course of which, money was to be paid, or other property was to be transferred or made available by a person other than the taxpayer, whether before or after the purchase or acquisition of the prescribed property, to the taxpayer, to the taxpayer and a person or persons other than the taxpayer or to a person or persons other than the taxpayer;

the Commissioner is satisfied that the amount of money so to be paid, or the value of the property so to be transferred or made available, as the case may be, was to be not less than, or not substantially less than, the amount expended by the taxpayer in the purchase or acquisition of the prescribed property;

the Commissioner shall have regard to the fact that the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of such a transaction, operation, undertaking, scheme or arrangement;

if the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement under which, or in the course of which, other prescribed property was to be issued or allotted by a company (whether to the taxpayer or any other person or persons) and it could reasonably be expected that, as a result of the issue or allotment of that other prescribed property, the value of the prescribed property purchased or acquired by the taxpayer would be substantially reduced—the Commissioner shall have regard to that transaction, operation, undertaking, scheme or arrangement;

if the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement under which, or in the course of which, rights in respect of the prescribed property or in respect of other prescribed property (whether that other prescribed property had been issued or allotted before the time of the purchase or acquisition by the taxpayer of the first-mentioned prescribed property or was to be issued or allotted at a later time) were to be withdrawn or varied and it could reasonably be expected that, as a result of a withdrawal or variation of those rights, the value of the prescribed property purchased or acquired by the taxpayer would be substantially reduced—the Commissioner shall have regard to that transaction, operation, undertaking, scheme or arrangement; and

the Commissioner shall have regard to any other matters that he or she considers relevant.

(4) In this section, prescribed property means any chose in action.

In the preceding provisions of this section, references to the value of any prescribed property shall, unless the contrary intention appears, be read as including references to part of the value of that prescribed property.

For the purposes of this section:

a person to whom prescribed property is issued or allotted by a company shall be taken to have acquired that prescribed property;

a person upon whom prescribed property devolves by reason of the death of a person shall be taken to have acquired that prescribed property; and

a person in whom prescribed property vests by the operation of any trust or the exercise of any power under a trust shall be taken to have acquired that prescribed property.

The reference in paragraph (3)(b) to terms and conditions shall be read as including a reference to implied terms and conditions and to terms and conditions that are not enforceable by legal proceedings whether or not they were intended to be so enforceable.

(7) Where, by virtue of the application of the preceding provisions of this section, the amount (in this subsection referred to as the relevant amount) of the deduction that is allowable to a taxpayer in respect of losses or outgoings incurred by the taxpayer in the purchase or acquisition of prescribed property is less than the amount of those losses and outgoings, the cost of that prescribed property shall, for the purposes of the application of Divisions 70 (Trading stock) and 385 (Primary production) of the Income Tax Assessment Act 1997 in relation to that property in relation to the taxpayer, be taken to be an amount that is the same as the relevant amount.

References in this section to expenditure incurred by a taxpayer in the purchase or acquisition of any prescribed property shall, in the case of prescribed property being a share or stock in the capital of a company, be read as including references to any payment made or other consideration given by the taxpayer to the company in respect of the prescribed property, whether as a payment of unpaid capital in respect of the prescribed property or otherwise and whether on application for or allotment of the prescribed property, to meet calls or otherwise.

Subsection (8) applies to a non-share equity interest in the same way as it applies to a share.

Where a debt in respect of the whole or a part of a payment that has, or will, become liable to be made under a qualifying security within the meaning of Income Tax Assessment Act 1997, there is taken to have been included in the taxpayer’s assessable income of a year of income so much of the debt as equals the amount (if any) ascertained in accordance with the formula A – B, where:Division 16E is written off as a bad debt by a taxpayer during a year of income, then, for the purposes of paragraph 25-35(1)(a) of the

A is the amount (if any) or the sum of the amounts (if any) included in the assessable income of the taxpayer of any year or years of income under section 159GQ that is or are attributable to the payment or to the part of the payment, as the case requires; and

B is the amount (if any) or the sum of the amounts (if any) allowable as a deduction or deductions from the assessable income of the taxpayer of any year or years of income under section 159GQ that is or are attributable to the payment or to the part of the payment, as the case requires.

Subject to section 63F, if:

apart from this section and section 63F, a deduction would be allowable to a taxpayer:

(i) under Income Tax Assessment Act 1997 in respect of the writing off of a debt as bad; orsection 8-1 or 25-35 of the

under section 63E of this Act in respect of a debt/equity swap in relation to a debt; and

the debt was created or acquired in the ordinary course of a money-lending business of the taxpayer who carries on that business; and

(c) during any part or parts (the foreign country branch period) of the period since the debt was so created or acquired (the debt holding period), it is the case that, if income had been derived by the taxpayer in respect of the debt, the income would not, because of section 23AH of this Act, have been included in the assessable income of the taxpayer;

then only a proportion of the deduction is allowable, being the proportion calculated using the formula:

where:

debt holding period means the number of days in the debt holding period.

eligible debt term means:

where the debt was acquired from a person other than an associate, within the meaning of section 318 of this Act—the number of days in the debt holding period; or

in any other case—the number of days in the period beginning on the day on which the debt was created (whether by the taxpayer or another person) and ending at the end of the day on which it was written off.

foreign country branch period means the number of days in the foreign country branch period.

(2) Where a debt that is written off, or in respect of which there is a debt/equity swap (eligible debt term in subsection (1).within the meaning of section 63E), was acquired from another person, the creation, and any previous acquisition, of the debt is to be disregarded for the purposes of applying subsection (1), other than paragraph (b) of the definition of

Where a part of a debt is written off as bad, this section applies as if the part were an entire debt that is written off as bad.

Meaning of debt/equity swap

(1) For the purposes of this section, a debt/equity swap occurs if:

under an arrangement (defined in subsection (6)), a taxpayer discharges, releases or otherwise extinguishes the whole or part of a debt owed to the taxpayer in return for the issue by the debtor to the taxpayer of shares (other than redeemable preference shares), or units, in the debtor; and

the debtor is:

a company; or

a trading trust (within the meaning of section 102N), or a public unit trust (within the meaning of section 102P), in relation to the year of income in which the units are issued; and

the debt either:

has been brought to account by the taxpayer as assessable income of any year of income; or

is in respect of money lent in the ordinary course of the business of the lending of money by the taxpayer who carries on that business.

Meaning of equity value and swap loss

For the purposes of this section:

(a) the equity value of the shares or units is the greater of:

their market value at the time of their issue to the taxpayer; and

their value shown in the accounts of the taxpayer as at the time of their issue to the taxpayer; and

(b) a swap loss occurs if the amount of the whole or the part of the debt that is extinguished is greater than the equity value of the shares or units.

Swap loss is deductible etc.

If a debt/equity swap occurs:

subject to section 63F, any swap loss is allowable as a deduction from the taxpayer’s assessable income of the year of income in which the shares or units are issued; and

(b) no amount is allowable as a deduction from the assessable income of the taxpayer of any year of income under Income Tax Assessment Act 1997 in respect of the writing off of the whole or part of the debt as bad in connection with the debt/equity swap; andsection 8-1 or 25-35 of the

(c) for the purposes of any application of Subdivision 20-A of the Income Tax Assessment Act 1997 in relation to the issue of the shares or units to the taxpayer, the amount received in respect of the issue is taken to be the same as the equity value of the shares or units.

Effect of debt/equity swap on later equity disposal etc.

If a debt/equity swap occurs and the taxpayer later disposes of any of the shares or units or they are cancelled or redeemed:

except in accordance with paragraph (b), no amount is included in, or allowable as a deduction from, the taxpayer’s assessable income of any year of income under this Act in respect of the later disposal, cancellation or redemption; and

if the consideration received or receivable by the taxpayer in respect of the disposal, cancellation or redemption is different from the equity value of the shares or units:

if the consideration is greater—the difference is included in the taxpayer’s assessable income of the year of income in which the disposal, cancellation or redemption occurs; or

if it is less—the difference is allowable as a deduction from that assessable income.

Consideration of a nil amount

For the purposes of subsection (4), if no consideration is received or receivable by the taxpayer in respect of the disposal, cancellation or redemption, then consideration of a nil amount is taken to have been so received or receivable.

(5A) Subdivisions 165-C, 166-C and 175-C of the Income Tax Assessment Act 1997 apply to an allowable deduction under this section in respect of the whole or part of a debt that is extinguished, in the same way as they apply to a debt (or part of a debt) that is written off as bad.

Meaning of arrangement

In this section:

arrangement means any agreement, arrangement, understanding, promise, undertaking or scheme, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings.

Situations where limit is to be applied

If:

(a) apart from this section, a deduction (the current deduction) would be allowable to a taxpayer:

(i) under Income Tax Assessment Act 1997 in respect of the writing off of the whole or part of a debt as bad; orsection 8-1 or 25-35 of the

under section 63E of this Act in respect of a debt/equity swap relating to the whole or part of a debt; and

(b) a deduction (a previous deduction) was allowed or allowable to the taxpayer under any of those sections, under former section 51 of this Act or under section 63 in respect of any number of occurrences of either or both of the following:

(i) a previous writing off as bad of the whole or part of a debt (a previous debt) that was the same as, or included, the debt mentioned in subparagraph (a)(i) or (ii);

(ii) a previous debt/equity swap relating to a part of a debt (a previous debt) that was the same as, or included, the debt mentioned in subparagraph (a)(i) or (ii); and

the current deduction or at least one previous deduction is a deduction allowable under section 63E of this Act in respect of a debt/equity swap;

then the current deduction is only allowable to the extent that it does not exceed the limit worked out under subsection (2).

Calculation of limit

The limit is worked out as follows:

If:

a deduction is allowable from a trust’s assessable income of any year of income:

(i) under former Income Tax Assessment Act 1997 in respect of the writing off of the whole or part of a debt as bad; orsection 51 of this Act, under section 63 of this Act or under section 8-1 or 25-35 of the

under subsection 63E(3) or (4) in respect of the extinguishment of the whole or part of a debt; and

the debt was incurred as well as written off or extinguished on the last day of the year of income;

the deduction is not allowable.

Schedule 2F may also prevent a taxpayer deducting an amount in respect of a debt in other circumstances.

(1B) Where, by virtue of Income Tax Assessment Act 1997, an amount is not allowable as a deduction in calculating in accordance with section 90 of this Act the net income, or a partnership loss, of a partnership in which a company, being a private company in relation to the year of income of the company to which the individual interest of the company in the net income of the partnership or in the partnership loss relates, is a partner:section 26-35 (Reduction of deduction for amounts paid to related entities) of the

the company shall, for the purposes of this Act other than Division 11A, be deemed to have paid, on the last day of that year of income, a dividend of an amount ascertained in accordance with subsection (1C); and

(b) subsection 26-35(4) of the Income Tax Assessment Act 1997 does not apply in relation to so much of the amount that is not so allowable as a deduction as is equal to the amount of the dividend that the company is to be so deemed to have paid.

For the purposes of subsection (1B), the amount of the dividend that the company is to be deemed to have paid is:

where the effect of the disallowance of the deduction has been to increase the net income of the partnership—an amount equal to the difference between the amount of the individual interest of the company in the net income of the partnership and the amount that would have been the individual interest of the company in the net income of the partnership if the deduction had been allowed;

where the effect of the disallowance of the deduction has been to reduce the partnership loss—an amount equal to the difference between the amount of the individual interest of the company in the partnership loss and the amount that would have been the individual interest of the company in the partnership loss if the deduction had been allowed;

where there is net income of the partnership and the amount of the deduction that was disallowed is equal to that net income—an amount equal to the individual interest of the company in the net income of the partnership;

where there is net income of the partnership and, but for the disallowance of the deduction, there would have been a partnership loss—an amount equal to the sum of the amount of the individual interest of the company in the net income of the partnership and the amount that would have been the individual interest of the company in the partnership loss if the deduction had been allowed; and

where there is no net income of the partnership and, but for the disallowance of the deduction, there would have been a partnership loss—an amount equal to the amount that would have been the individual interest of the company in the partnership loss if the deduction had been allowed.

Expressions used in this section that are also used in section 26BB have the same meanings in this section as in section 26BB.

Where a taxpayer disposes of a traditional security or a traditional security of a taxpayer is redeemed, the amount of any loss on the disposal or redemption is allowable as a deduction from the assessable income of the taxpayer of the year of income in which the disposal or redemption takes place.

A deduction is not allowable under subsection (2) for a loss on the disposal or redemption of traditional securities that are:

(a) segregated exempt assets (for the purposes of the Income Tax Assessment Act 1997) of a life assurance company; or

(b) segregated current pension assets (as defined in the Income Tax Assessment Act 1997) of a complying superannuation fund.

A deduction is not allowable under subsection (2) for a loss on the disposal or redemption of a traditional security if:

the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:

the issuer of the traditional security; or

a connected entity of the issuer of the traditional security; and

the traditional security was issued on the basis that it will or may convert into ordinary shares in:

the issuer of the traditional security; or

the connected entity.

A deduction is not allowable under subsection (2) for a loss on the disposal or redemption of a traditional security if:

the disposal or redemption is in exchange for ordinary shares in a company that is neither:

the issuer of the traditional security; nor

a connected entity of the issuer of the traditional security; and

in the case of a disposal—the disposal is to:

the issuer of the traditional security; or

a connected entity of the issuer of the traditional security; and

the traditional security was issued on the basis that it will or may be:

disposed of to the issuer of the traditional security or to the connected entity; or

redeemed;

in exchange for ordinary shares in the company.

Where the Commissioner, having regard to any connection between the parties to the transaction by which the taxpayer disposed of the traditional security or by which it was redeemed, or by which the taxpayer acquired the traditional security, is satisfied that the parties were not dealing with each other at arm’s length in relation to the transaction, then, for the purposes of determining under subsection (2) the amount of any loss on the disposal or redemption, the consideration for the transaction shall be taken to be:

the amount that might reasonably be expected for the transaction if the parties were independent parties dealing at arm’s length with each other; or

where, for any reason it is not possible or practicable for the Commissioner to ascertain that amount—such amount as the Commissioner determines.

If:

a taxpayer disposes of a traditional security or a traditional security of a taxpayer is redeemed; and

there is a loss on the disposal or redemption; and

in the case of a disposal or redemption of a marketable security:

the taxpayer did not acquire the security in the ordinary course of trading on a securities market; and

at the time the taxpayer acquired the security, it was not open to the taxpayer to acquire an identical security in the ordinary course of trading on a securities market; and

in the case of a disposal of a marketable security—the disposal did not take place in the ordinary course of trading on a securities market; and

having regard to:

the financial position of the issuer of the security; and

perceptions of the financial position of the issuer of the security; and

other relevant matters;

it would be concluded that the disposal or redemption took place for the reason, or for reasons that included the reason, that there was an apprehension or belief that the issuer was, or would be likely to be, unable or unwilling to discharge all liability to pay amounts under the security;

a deduction is not allowable to the taxpayer under this section in respect of so much of the amount of the loss as is a loss of capital or a loss of a capital nature.

A reference in this section to the disposal by a taxpayer of a security, or to the redemption of a security of a taxpayer, does not include a reference to the waiver or release by the taxpayer of:

the whole or a part of the debt the subject of the security; or

any other right of the taxpayer under the security.

Subsection (5) does not, by implication, affect the meaning of an expression used in:

a provision of this Act other than this section; or

any other law of the Commonwealth.

In this section:

issuer, in relation to a security at a particular time, means the person who, if the amount or amounts payable under the security were due and payable at that time, would be liable to pay the amount or amounts.

marketable security means a traditional security that is covered by paragraph (a) of the definition of security in subsection 159GP(1).

securities market means a market, exchange or other place at which, or a facility by means of which, offers to sell, purchase or exchange marketable securities are regularly made or accepted.

(1A) This section has effect subject to Income Tax Assessment Act 1997.Division 245 of the

The following payments made, and expenditure incurred, during the year of income (other than any amount which is allowable as a deduction under any other section of this Act) by a person carrying on a business for the purpose of gaining or producing assessable income shall be allowable deductions:

Payments to:

an approved research institute for scientific research related to that business; or

an approved research institute, the object of which is the undertaking of scientific research related to the class of business to which that business belongs; and

Expenditure of a capital nature on scientific research related to that business (except to the extent that it is expenditure on plant, machinery, land or buildings or on alterations, additions or extensions to buildings or in the acquisition of rights in or arising out of scientific research).

Where, on or after the first day of the year of income ending on 30 June 1946, a taxpayer carrying on a business for the purpose of gaining or producing assessable income incurs expenditure of a capital nature in the construction or acquisition of a building, or part of a building, or in making any alteration or addition to a building, in which scientific research related to that business is to be carried on by or on behalf of the taxpayer, and the building, part of a building, alteration or addition, as the case may be, is of use for scientific research purposes only, an amount equal to one-third of that expenditure shall be an allowable deduction:

from the assessable income of the year of income in which the building, part of a building, alteration or addition is first used by or on behalf of the taxpayer for such scientific research; and

from the assessable income of each of the 2 years of income next succeeding that year of income, if the taxpayer continues to carry on that business during the year in which that assessable income was derived.

Subsection (2) does not apply to expenditure incurred by a taxpayer in the construction of a building or part of a building, in the making of an alteration or addition to a building or in the acquisition of a building or part of a building unless:

either of the following subparagraphs applies:

that construction or making commenced, or that acquisition occurred, before 21 November 1987;

any contract in respect of that construction, making or acquisition was entered into before 21 November 1987; and

if the expenditure was incurred after 20 November 1987—the taxpayer intended, on 20 November 1987, that:

scientific research, being research related to a business carried on by the taxpayer for the purpose of gaining or producing assessable income, would be carried on by or on behalf of the taxpayer in the building; and

the building, part of the building, alteration or addition, as the case may be, would be of use for scientific research purposes only.

Where any expenditure or payment to which this section refers is incurred or made outside Australia and the business in relation to which it is so incurred or made is carried on partly in and partly out of Australia, the deduction allowable under this section shall be such part of the amount which would otherwise be allowable as the Commissioner considers reasonable in the circumstances.

Where any expenditure has been allowed or is allowable as a deduction under subsection (2) and:

the taxpayer sells, transfers or otherwise disposes of the building or any part thereof; or

the building or any part thereof is destroyed;

the termination value of the building or part shall, to the extent of the expenditure so allowed or allowable as a deduction, be included in the assessable income of the year of income in which the disposal or destruction occurs:

Provided that where the Commissioner is of opinion that part only, or no part, of that termination value relates to the disposal or destruction of any property which was acquired or created by that expenditure, that part only, or no part, as the case may be, of the termination value shall be taken into account for the purposes of this subsection.

If:

a person has purchased from another person a building, or part of a building, where the vendor had incurred capital expenditure of a kind in respect of which deductions are or have been allowable under subsection (2); and

it would be concluded that, having regard to any connection between the vendor and the purchaser or to any other relevant circumstances, those persons were not dealing with each other at arm’s length; and

the purchase price is greater or lesser than the market value of the building, or the part of the building, at the time of the purchase;

the purchase price is, for all purposes of the application of this Act in relation to the vendor, taken to have been the amount of the market value of the property at the time of the purchase.

If the purchase of the building is a creditable acquisition by the vendor, references in subsection (4A) to the purchase price are taken to be references to that price reduced by the amount of the net input tax credit to which the purchaser is entitled for the acquisition.

In this section:

an approved research institute means the Commonwealth Scientific and Industrial Research Organization, or any university, college, institute, association or organization which is approved in writing for the purposes of this section by that Organization, by the Chief Executive Officer of the NHMRC or by the Research Secretary, as an institution, association or organization for undertaking scientific research which is or may prove to be of value to Australia.

NHMRC means the National Health and Medical Research Council established by section 5B of the National Health and Medical Research Council Act 1992.

Research Secretary means the Secretary of the Department administered by the Minister administering the Australian Research Council Act 2001.

scientific research means any activities in the fields of natural or applied science for the extension of knowledge.

termination value has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997.

An approval for the purposes of subsection (6) may:

operate as from a date, whether before or after the date of the approval, specified in the instrument of approval; and

be withdrawn at any time.

In this section, any reference to scientific research related to a business or class of business shall be read as including a reference to:

any scientific research which may lead to or facilitate an extension, or an improvement in the technical efficiency, of that business, or, as the case may be, of businesses of that class; and

any scientific research of a medical nature which is of special relation to the welfare of workers employed in that business or, as the case may be, in businesses of that class.

This section does not apply in relation to payments made, or expenditure incurred, after 30 June 1995.

Roll-over relief where CGT roll-over relief allowed

(1) This section applies to the disposal of a building, or part of a building, by a taxpayer (in this section called the transferor) to another taxpayer (in this section called the transferee) if:

subject to subsection (7), deductions have been allowed or are allowable under subsection 73A(2) to the transferor in respect of the building or the part of the building; and

the disposal involves a CGT event; and

the conditions in an item in the table are satisfied.

No balancing charges

Subsection 73A(4) (which deals with balancing charges) does not apply to the disposal of the building or the part of the building by the transferor.

Transferee to inherit certain characteristics from transferor

Section 73A applies as if:

the transferee had acquired the building or the part of the building for a consideration equal to the cost of the building or the part of the building to the transferor; and

deductions were not allowable to the transferee under subsection 73A(2) in respect of:

so much of the cost of the building or the part of the building to the transferor as was allowed or allowable as a deduction to the transferor under that subsection in respect of the building or the part of the building; or

if there have been 2 or more prior successive applications of this section—so much of the cost of the building or the part of the building to the transferor as was allowed or allowable as a deduction to the prior successive transferors under that subsection in respect of the building or the part of the building; and

deductions were not allowable to the transferor under subsection 73A(2) in respect of the building or the part of the building for the year of income in which the disposal took place or for a subsequent year of income.

Subsection 73A(2A)—special rules

If subsection 73A(2A) applies to the transferor and in relation to the building or the part of the building, that subsection applies in relation to the transferee and in relation to the building or the part of the building.

Disposal by transferee where no roll-over relief—inheritance of deductions

If:

after the disposal of the building or the part of the building to the transferee, the building or the part of the building is lost or destroyed or the transferee disposes of the building or the part of the building; and

in the case of a disposal by the transferee—this section does not apply to the disposal;

then, for the purposes of the application of subsection 73A(4) in relation to the loss, destruction or disposal, the total of:

the deductions allowed or allowable to the transferor under subsection 73A(2) in relation to the building or the part of the building; and

if there have been 2 or more prior successive applications of this section—the deductions allowed or allowable to the prior successive transferors under subsection 73A(2) in relation to the building or the part of the building;

are taken to have been deductions allowed or allowable to the transferee under subsection 73A(2) in relation to the building or the part of the building.

Meaning of cost

A reference in this section to the cost of a building or of a part of a building to the transferor is a reference to expenditure of a capital nature incurred by the transferor in the construction or acquisition of the building or the part of the building, or in making any alteration or addition to the building or to the part of the building.

Second or subsequent application of section—paragraph (1)(b) does not apply

If, apart from this subsection, this section has applied to the disposal of the building or the part of the building to the transferee, then, in working out whether this section applies to a subsequent disposal of the building or the part of the building by:

the transferee; or

one or more subsequent successive transferees;

this section has effect as if paragraph (1)(b) (which deals with deductions) had not been enacted.

In this section:

agreement includes any agreement, arrangement or understanding, whether formal or informal or express or implied, and whether or not enforceable by legal proceedings (whether or not the agreement, arrangement or understanding was intended to be so enforceable).

associate, in relation to the donor of a gift, means:

in the case of a donor being a natural person:

a relative of the donor;

a partner of the donor;

if a partner of the donor is a natural person—the spouse of that partner;

a trustee of a trust estate where the donor or a person who is an associate of the donor by virtue of subparagraph (i), (ii), (iii) or (v) benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts; or

a company where:

(A) the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the donor, of a person who is an associate of the donor by virtue of subparagraph (i), (ii), (iii) or (iv) or of a company that is an associate of the donor by virtue of another application of this subparagraph; or

(B) the donor is, the persons who are associates of the donor by virtue of subparagraphs (i), (ii), (iii) and (iv) are, or the donor and the persons who are associates of the donor by virtue of those paragraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company; or

in the case of a donor being a company:

a partner of the donor company;

if a partner of the donor company is a natural person—the spouse of that partner;

another person where:

(A) the donor company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person, whether those directions, instructions or wishes are communicated directly to the donor company or its directors, or through any interposed companies; or

(B) that person is, or that person and the persons who, if that person were the donor, would be associates of that person by virtue of paragraph (a) or by virtue of another subparagraph of this paragraph are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the donor company;

a trustee of a trust estate where the donor company or a person who is an associate of the donor company by virtue of subparagraph (i), (ii), (iii), (v) or (vi) benefits, or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts;

another company where:

(A) the other company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the donor company, of a person who is an associate of the donor company by virtue of subparagraph (i), (ii), (iii), (iv) or (vi) or of a company that is an associate of the donor company by virtue of another application of this subparagraph; or

(B) the donor company is, the persons who are associates of the donor company by virtue of subparagraphs (i), (ii), (iii), (iv) and (vi) are, or the donor company and the persons who are associates of the donor company by virtue of those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other company; or

another person who, if a third person who is an associate of the donor company by virtue of subparagraph (iii) were the donor, would be an associate of that third person by virtue of paragraph (a) or by virtue of another subparagraph of this paragraph.

(2) Subject to this section, a gift of money, or of property other than money, made by a person (in this section referred to as the donor) to a fund, authority, institution or person is not an allowable deduction under Division 30 of the Income Tax Assessment Act 1997 where:

by reason of any act, transaction or circumstance that has occurred, will occur, or may reasonably be expected to occur, being an act, transaction or circumstance occurring as part of, in connexion with or as a result of:

the making or receipt of the gift; or

any agreement or scheme entered into in association with the making or receipt of the gift;

the amount or value of the benefit derived by the fund, authority, institution or person as a consequence of the gift is, will be, or may reasonably be expected to be, less than the amount or value at the time when the gift was made of the property comprising the gift;

by reason of any act, transaction or circumstance of a kind referred to in paragraph (a), any fund, authority, institution or person other than the fund, authority, institution or person to which the gift was made, makes, becomes liable to make, or may reasonably be expected to make or to become liable to make, a payment, or transfers, becomes liable to transfer, or may reasonably be expected to transfer or to become liable to transfer, any property, to any person or incurs, becomes liable to incur, or may reasonably be expected to incur or to become liable to incur, any other detriment, disadvantage, liability or obligation;

(c) by reason of any act, transaction or circumstance of a kind referred to in paragraph (a), the donor or an associate of the donor has obtained, will obtain or may reasonably be expected to obtain any benefit, advantage, right or privilege other than the benefit of any deduction that, but for this section, would be allowable from the assessable income of the donor under Income Tax Assessment Act 1997; orDivision 30 of the

by reason of any agreement or scheme entered into as part of or in association with the making of the gift, any property, other than property comprising the gift, has been acquired or will be acquired, whether directly or indirectly, from the donor or an associate of the donor by that fund, authority, institution or person or by another fund, authority, institution or person.

Without limiting the application of subsection (2), where the terms and conditions on which a gift of property other than money is made are such that the fund, authority, institution or person to which the gift is made does not receive immediate custody and control of the property, does not have the unconditional right to retain custody and control of the property in perpetuity to the exclusion of the donor or an associate of the donor or does not obtain an immediate, indefeasible and unencumbered legal and equitable title to the property, paragraph (2)(c) shall be deemed to apply in relation to that gift.

(4) Paragraph (2)(a) does not prevent a deduction under Income Tax Assessment Act 1997 from being allowed from the assessable income of the donor where the amount or value of the benefit derived by the fund, authority, institution or person as a consequence of the gift is, will be, or may reasonably be expected to be, less than the amount or value at the time when the gift was made of the property comprising the gift by reason only that the fund, authority, institution or person has incurred, will incur, or may reasonably be expected to incur, expenses for the purpose of obtaining or soliciting the gift, being expenses that, in the opinion of the Commissioner, are reasonable in relation to the value of the gift.Division 30 of the

(5) This section does not prevent a deduction under Income Tax Assessment Act 1997 (because of item 4, 5 or 6 of the table in that section) from being allowed from the assessable income of the donor in respect of a gift of property other than money by reason only that the terms and conditions on which the gift was made are such, or the effect of any arrangement (within the meaning of that Act) entered into in association with the making or receipt of the gift is such, that the value of the gift may be reduced in accordance with section 30-220 of that Act.section 30-15 of the

Income Tax Assessment Act 1936

No. 27, 1936

Compilation No.   191

Compilation date: 1 April 2026

Includes amendments: Act No. 12, 2026

This compilation is in 7 volumes

Volume 1: sections 1-78A

Volume 2: sections   79A - 121L

Volume 3: sections 124ZM-204

Volume 4: sections 251R-468

Volume 5: Schedules

Volume 6: Endnotes 1-4

Volume 7: Endnote 5

Each volume has its own contents

About this compilation

This compilation

This is a compilation of the Income Tax Assessment Act 1936 that shows the text of the law as amended and in force on 1 April 2026 (the compilation date).

The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au).

Application, saving and transitional provisions

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Editorial changes

For more information about any editorial changes made in this compilation, see the endnotes.

Presentational changes

The Legislation Act 2003 provides for First Parliamentary Counsel to make presentational changes to a compilation. Presentational changes are applied to give a more consistent look and feel to legislation published on the Register, and enable the user to more easily navigate those documents.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. Any modifications affecting the law are accessible on the Register.

Self -repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

Contents

Part III—Liability to taxation 1

Division 3—Deductions 1

79A Rebates for residents of isolated areas 1

79B Rebates for members of Defence Force serving overseas 6

82 Double deductions 10

Subdivision D—Losses and outgoings incurred under certain tax avoidance schemes 10

82KH Interpretation 10

82KJ Deduction not allowable in respect of certain pre-paid outgoings 36

82KK Schemes designed to postpone tax liability 37

82KL Tax benefit not allowable in respect of certain recouped expenditure 39

Subdivision H—Period of deductibility of certain advance expenditure 42

82KZL Interpretation 42

82KZLA Subdivision does not apply to financial arrangements to which Subdivision 250-E applies 45

82KZLB How this Subdivision applies to deductible R&D expenditure incurred to associates in earlier income years 45

82KZM Expenditure by small and medium business entities and individuals incurring non-business expenditure 45

82KZMA Application of section 82KZMD 47

82KZMD Business expenditure and non-business expenditure by non-individual 49

82KZME Expenditure under some agreements 49

82KZMF Proportional deduction 52

82KZMG Deductions for certain forestry expenditure 53

82KZMGA Deductions for certain forestry expenditure 54

82KZMGB CGT event in relation to interest in 82KZMG agreement 55

82KZN Transfer etc. of rights under agreement 56

82KZO Partnership changes where entire interest in agreement rights is not transferred 57

Division 3A—Convertible notes 59

82LA Application of Division 59

82L Interpretation 59

82M New loans and replacement loans 63

82P Bonus share allotments 65

82Q Classes of shares 66

82R Interest on certain convertible notes not to be an allowable deduction 67

82SA Interest on certain convertible notes to be an allowable deduction—where loan made on or after 1 January 1976 68

82T Value of shares 72

Division 5—Partnerships 74

90 Interpretation 74

91 Liability of partnerships 74

92 Income and deductions of partner 74

92A Deductions in respect of outstanding subsection 92(2AA) amounts 77

94 Partner not having control and disposal of share in partnership income 78

Division 5A—Income of certain limited partnerships 90

Subdivision A—Preliminary 90

94A Object 90

94B Interpretation 90

94C Continuity of limited partnership not affected by changes in composition 90

Subdivision B—Corporate limited partnerships 91

94D Corporate limited partnerships 91

94E Continuity of business test 93

94F Change in composition of limited partnership—election that partnership not be treated as an eligible limited partnership 93

94G Continuity of ownership test 94

Subdivision C—Corporate tax modifications applicable to corporate limited partnerships 94

94H Corporate tax modifications applicable to corporate limited partnerships 94

94J Company includes corporate limited partnership 94

94K Partnership does not include corporate limited partnership 95

94L Dividend includes distribution of corporate limited partnership 95

94M Drawings etc. deemed to be dividends paid out of profits 95

94N Private company does not include corporate limited partnership 96

94P Share includes interest in corporate limited partnership 96

94Q Shareholder includes partner in corporate limited partnership 96

94R Liquidator may include partner in corporate limited partnership 96

94S Continuity of corporate limited partnership not affected by changes in composition 96

94T Residence of corporate limited partnership 97

94U Incorporation 97

94V Obligations and offences 97

94X Modification of loss provisions 98

Division 6—Trust income 99

95AAA Simplified outline of the relationship between this Division, Income Tax Assessment Act 1997 99Division 6E and Subdivisions 115-C and 207-B of the

95AAB Adjustments under Subdivision 115-C or 207-B of the Income Tax Assessment Act 1997—references in this Act to assessable income under section 97, 98A or 100 100

95AAC Adjustments under Subdivision 115-C or 207-B of the Income Tax Assessment Act 1997—references in this Act to liabilities under section 98, 99 or 99A 101

95AAD Division does not apply in relation to AMIT 102

95 Interpretation 102

95AB Modifications for special disability trusts 104

95A Special provisions relating to present entitlement 104

95B Certain beneficiaries deemed not to be under legal disability 105

96 Trustees 105

97 Beneficiary not under any legal disability 105

97A Beneficiaries who are owners of farm management deposits 107

98 Liability of trustee 108

98A Non-resident beneficiaries assessable in respect of certain income 110

98B Deduction from beneficiary’s tax 112

99 Certain trust income to be taxed as income of an individual 113

99A Certain trust income to be taxed at special rate 115

99B Receipt of trust income not previously subject to tax 118

99C Determining whether property is applied for benefit of beneficiary 120

99D Refund of tax to non-resident beneficiary 121

99E Later trust not taxed on income already taxed under subsection 98(4) 122

99G Amounts covered by withholding requirement 122

99GA Amounts covered by sovereign immunity exemption 122

99H Late payments 123

100 Beneficiary assessable in respect of certain trust income 124

100AA Failure to pay or notify present entitlement of exempt entity 126

100AB Adjusted Division 6 percentage exceeding benchmark percentage: present entitlement of exempt entity 128

100A Present entitlement arising from reimbursement agreement 130

101 Discretionary trusts 136

101A Income of deceased received after death 136

102 Revocable trusts 137

Division 6AAA—Special provisions relating to non-resident trust estates etc. 139

Subdivision A—Preliminary 139

102AAA Object of Division 139

102AAB Interpretation 139

102AAC Each listed country and unlisted country to be treated as a separate foreign country 146

102AAD Subject to tax—application of subsection 324(2) 146

102AAE Listed country trust estates 146

102AAF Public unit trusts 149

102AAG When entity is in a position to control a trust estate 150

102AAH Non-resident family trusts 151

102AAJ Transfer of property or services 154

102AAK Deemed transfers of property or services to trust estate 155

102AAL Division not to apply to transfers by trustees of deceased estates 159

Subdivision B—Payment of interest by taxpayer on distributions from certain non-resident trust estates 160

102AAM Payment of interest by taxpayer on distributions from certain non-resident trust estates 160

102AAN Collection etc. of interest 170

Subdivision D—Accruals system of taxation of certain non-resident trust estates 171

102AAS Object of Subdivision 171

102AAT Accruals system of taxation—attributable taxpayer 171

102AAU Attributable income of a trust estate 176

102AAV Double tax agreements to be disregarded 179

102AAW Certain provisions to be disregarded in calculating attributable income 179

102AAY Modified application of trading stock provisions 179

102AAZ Modified application of depreciation provisions 179

102AAZB General modifications—CGT 180

102AAZBA Modified application of CGT—effect of certain changes of residence 180

102AAZC Modified application of loss provisions—pre-1990-91 losses 181

102AAZD Assessable income of attributable taxpayer to include attributable income of trust estate to which taxpayer has transferred property or services 182

102AAZE Accruals system of taxation does not apply to small amounts 187

102AAZF Only resident partners, beneficiaries etc. liable to be assessed as a result of attribution 188

102AAZG Keeping of records 188

Division 6AA—Income of certain children 191

102AA Interpretation 191

102AB Application of Division 192

102AC Persons to whom Division applies 192

102AD Taxable income to which Division applies 195

102AE Eligible assessable income 196

102AF Employment income and business income 201

102AG Trust income to which Division applies 202

102AGA Transfer of property as the result of a family breakdown 207

Division 6A—Alienation of income 210

102A Interpretation 210

102B Certain income transferred for short periods to be included in assessable income of transferor 212

102C Effect of certain transfers of rights to receive income from property 214

102CA Consideration in respect of transfer to be included in assessable income of transferor in certain cases 215

Division 6C—Income of certain public trading trusts 216

102M Interpretation 216

102MA Arrangements not covered 218

102MB Investing in land 221

102MC When trading business not carried on 222

102MD Exempt institution that is eligible for a refund not treated as exempt entity 222

102N Trading trusts 223

102NA Certain interposed trusts not trading trusts 223

102P Public unit trusts 224

102Q Resident unit trusts 230

102R Public trading trusts 230

102S Taxation of net income of public trading trust 232

102T Modified application of Act in relation to certain unit trusts 232

Division 6D—Provisions relating to certain closely held trusts 237

Subdivision A—Overview 237

102UA What this Division is about 237

Subdivision B—Interpretation 238

102UB Definitions—general 238

102UC Closely held trust 238

102UD Trustee beneficiary 240

102UE Meaning of untaxed part 240

102UG Correct TB statement 240

102UH TB statement period 241

102UI Tax-preferred amount 242

102UJ Extended concept of present entitlement to capital of a trust 242

Subdivision C—Trustee beneficiary non-disclosure tax on share of net income 242

102UK Trustee beneficiary non-disclosure tax where no correct TB statement 242

102UL Exclusion of directors of closely held trust from liability to pay tax 245

102UM Trustee beneficiary non-disclosure tax where share is distributed to trustee of closely held trust 246

Subdivision D—Payment etc. of trustee beneficiary non-disclosure tax 247

102UN Amount of trustee beneficiary non-disclosure tax reduced by notional tax offset 247

102UO Payment of trustee beneficiary non-disclosure tax 248

102UP Late payment of trustee beneficiary non-disclosure tax 248

102UR Notice of liability 249

102URA Request for notice of liability 250

102USA Recovery of trustee beneficiary non-disclosure tax from trustee beneficiaries providing incorrect information etc. to head trustee 250

Subdivision E—Making correct TB statement about trustee beneficiaries of tax-preferred amounts 252

102UT Requirement to make correct TB statement about trustee beneficiaries of tax-preferred amounts 252

Subdivision F—Special provisions about tax file numbers 253

102UU Trustee beneficiary may quote tax file number to trustee of closely held trust 253

102UV Trustee of closely held trust may record etc. tax file number 254

Division 6E—Adjustment of Division 6 assessable amount in relation to capital gains, franked distributions and franking credits 255

102UW Application of Division 255

102UX Adjustment of Division 6 assessable amount in relation to capital gains, franked distributions and franking credits 255

102UY Interpretation 256

Division 7—Private companies 258

102V Application of Division to non-share dividends 258

103 Interpretation 258

103A Private companies 260

109 Excessive payments to shareholders, directors and associates deemed to be dividends 270

Division 7A—Distributions to entities connected with a private company 272

Subdivision A—Overview of this Division 272

109B Simplified outline of this Division 272

Subdivision AA—Application of Division 273

109BA Application of Division to non-share dividends 273

109BB Application of Division to closely-held corporate limited partnerships 273

109BC Application of Division to non-resident companies 274

Subdivision B—Private company payments, loans and debt forgiveness are treated as dividends 275

109C Payments treated as dividends 275

109CA Payment includes provision of asset 277

109D Loans treated as dividends 280

109E Amalgamated loan from a previous year treated as dividend if minimum repayment not made 283

109F Forgiven debts treated as dividends 287

Subdivision C—Forgiven debts that are not treated as dividends 289

109G Debt forgiveness that does not give rise to a dividend 289

Subdivision D—Payments and loans that are not treated as dividends 291

109H Simplified outline of this Subdivision 291

109J Payments discharging pecuniary obligations not treated as dividends 292

109K Inter-company payments and loans not treated as dividends 292

109L Certain payments and loans not treated as dividends 293

109M Loans made in the ordinary course of business on arm’s length terms not treated as dividends 293

109N Loans meeting criteria for minimum interest rate and maximum term not treated as dividends 293

109NA Certain liquidator’s distributions and loans not treated as dividends 295

109NB Loans to purchase shares under employee share schemes not treated as dividends 296

109P Amalgamated loans not treated as dividends in the year they are made 296

109Q Commissioner may allow amalgamated loan not to be treated as dividend 296

109R Some payments relating to loans not taken into account 297

Subdivision DA—Demerger dividends not treated as dividends 300

109RA Demerger dividends not treated as dividends 300

Subdivision DB—Other exceptions 300

109RB Commissioner may disregard operation of Division or allow dividend to be franked 300

109RC Dividend may be franked if taken to be paid because of family law obligation 302

109RD Commissioner may extend period for repayments of amalgamated loan 302

Subdivision E—Payments and loans through interposed entities 303

109S Simplified outline of this Subdivision 303

109T Payments and loans by a private company to an entity through one or more interposed entities 304

109U Payments and loans through interposed entities relying on guarantees 305

109UA Certain liabilities under guarantees treated as payments 306

109V Amount of private company’s payment to target entity through one or more interposed entities 308

109W Private company’s loan to target entity through one or more interposed entities 308

109X Operation of Subdivision D in relation to payment or loan 309

Subdivision EA—Unpaid present entitlements 310

109XA Payments, loans and debt forgiveness by a trustee in favour of a shareholder etc. of a private company with an unpaid present entitlement 310

109XB Amounts included in assessable income 315

109XC Modifications 316

109XD Forgiveness of loan debt does not give rise to assessable income if loan gives rise to assessable income 317

Subdivision EB—Unpaid present entitlements—interposed entities 318

109XE Simplified outline of this Subdivision 318

109XF Payments through interposed entities 319

109XG Loans through interposed entities 320

109XH Amount and timing of payment or loan through interposed entities 322

109XI Entitlements to trust income through interposed trusts 323

Subdivision F—General rules applying to all amounts treated as dividends 325

109Y Proportional reduction of dividends so they do not exceed distributable surplus 325

109Z Characteristics of dividends taken to be paid under this Division 328

109ZA No dividend taken to be paid for withholding tax purposes 328

109ZB Amount treated as dividend is not a fringe benefit 328

109ZC Treatment of dividend that is reduced on account of an amount taken under this Division to be a dividend 329

109ZCA Treatment of dividend that is reduced on account of an amount included in assessable income under Subdivision EA 330

Subdivision G—Defined terms 331

109ZD Defined terms 331

109ZE Interpretation rules about entities 332

Division 9—Co-operative and mutual companies 333

117 Co-operative companies 333

118 Company not co-operative if less than 90% of business with members 334

119 Sums received to be taxed 334

120 Deductions allowable to co-operative company 334

121 Mutual insurance associations 336

Division 9AA—Demutualisation of insurance companies and affiliates 337

Subdivision A—What this Division is about 337

121AA What this Division is about 337

Subdivision B—Key concepts and related definitions 337

121AB Insurance company definitions 337

121AC Mutual affiliate company 338

121AD Demutualisation and demutualisation resolution day 339

121AE Demutualisation methods, the policyholder/member group and the listing period 340

121AEA Replacement of policyholders by persons exercising certain rights 343

121AF Demutualisation method 1 343

121AG Demutualisation method 2 344

121AH Demutualisation method 3 347

121AI Demutualisation method 4 348

121AJ Demutualisation method 5 350

121AK Demutualisation method 6 353

121AL Demutualisation method 7 355

121AM Embedded value of a mutual life insurance company 357

121AN Net tangible asset value of a general insurance company or mutual affiliate company 360

121AO Treasury bond rate, capital reserve adequacy level, eligible actuary and security 361

121AP Subsidiary and wholly-owned subsidiary 362

121AQ Other definitions 363

121AR List of definitions 363

Subdivision C—Tax consequences of demutualisation 364

121AS CGT consequences of demutualisation 364

121AT Other tax consequences of demutualisation 383

121AU This Subdivision does not apply to demutualisation of friendly society health or life insurers 394

Division 9A—Offshore banking units 395

Subdivision A—Object and simplified outline 395

121B Simplified outline 395

Subdivision B—Interpretation 396

121C Interpretation 396

121D Meaning of OB activity 399

121DA Meaning of expressions relevant to investment activity 404

121DB Meaning of OB eligible contract activity 405

121DC Meaning of OB advisory activity 406

121DD Meaning of OB leasing activity 406

121E Meaning of offshore person 407

121EA OBU requirement 407

121EAA Activities recorded in domestic books not OB activities 407

121EB Internal financial dealings of an OBU 409

121EC Meaning of OBU resident-owner money 410

121ED Meaning of trade with a person 410

121EDA Meaning of OB income 411

121EE Definitions relating to assessable income of an OBU 412

121EF Definitions relating to allowable deductions of an OBU 412

Subdivision C—Operative provisions 414

121EJ Source of income derived from OB activities 414

121EK Deemed interest on 90% of certain OBU resident-owner money 414

121EL Exemption of income etc. of OBU offshore investment trusts 415

121ELA Exemption of income etc. of overseas charitable institutions 417

121ELB Adjustment of capital gains and losses from disposal of units in OBU offshore investment trusts 417

Division 9C—Assessable income diverted under certain tax avoidance schemes 419

121F Interpretation 419

121G Diverted income and diverted trust income 421

121H Assessment of diverted income and diverted trust income 429

121J Ascertainment of diverted income or diverted trust income deemed to be an assessment 429

121K Application of International Tax Agreements Act 429

121L Division applies notwithstanding exemption under other laws 430

In this Subdivision, unless the contrary intention appears:

additional benefit means the additional benefit, or the aggregate of the additional benefits, as the case may be, referred to in paragraph (1F)(b) in relation to that eligible relevant expenditure.

agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

associate, in relation to a taxpayer, means:

in the case of a taxpayer who is a natural person, other than a taxpayer in the capacity of a trustee:

a relative of the taxpayer;

a partner of the taxpayer;

if a person who is an associate of the taxpayer by virtue of subparagraph (ii) is a natural person—the spouse or a child of that person;

a trustee of a trust estate where the taxpayer or another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts; or

a company where:

(A) the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the taxpayer, of another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph, of a company that is an associate of the taxpayer by virtue of another application of this subparagraph or of any 2 or more such persons; or

(B) the taxpayer is, the persons who are associates of the taxpayer by virtue of sub-subparagraph (A) and the preceding subparagraphs of this paragraph are, or the taxpayer and the persons who are associates of the taxpayer by virtue of that sub-subparagraph and those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company;

in the case of a taxpayer being a company, other than a taxpayer in the capacity of a trustee:

a partner of the taxpayer;

if a person who is an associate of the taxpayer by virtue of subparagraph (i) is a natural person—the spouse or a child of that person;

a trustee of a trust estate where the taxpayer or another person who is an associate of the taxpayer by virtue of another subparagraph of this paragraph benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts;

another person where:

(A) the taxpayer company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person, or of that person and another person or other persons, whether those directions, instructions or wishes are communicated directly to the taxpayer company or its directors, or through any interposed companies, partnerships or trusts; or

(B) that person is, or that person and the persons who, if that person were the taxpayer, would be associates of that person by virtue of paragraph (a), by virtue of sub-subparagraph (A), by virtue of another subparagraph of this paragraph or by virtue of paragraph (c) are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the taxpayer company;

another company where:

(A) the other company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the taxpayer company, of a person who is an associate of the taxpayer company by virtue of another subparagraph of this paragraph, of a company that is an associate of the taxpayer company by virtue of another application of this subparagraph or of any 2 or more such persons; or

(B) the taxpayer company is, the persons who are associates of the taxpayer company by virtue of sub-subparagraph (A) and the other subparagraphs of this paragraph are, or the taxpayer company and the persons who are associates of the taxpayer company by virtue of that sub-subparagraph and those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other company; or

any other person who, if a third person who is an associate of the taxpayer company by virtue of subparagraph (iv) were the taxpayer, would be an associate of that third person by virtue of paragraph (a), by virtue of another subparagraph of this paragraph or by virtue of paragraph (c);

in the case of a taxpayer in the capacity of a trustee of a trust estate:

any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust estate, either directly or through any interposed companies, partnerships or trusts;

where a person who is an associate of the taxpayer by virtue of subparagraph (i) is a natural person—any person who, if that natural person were the taxpayer, would be an associate of that natural person by virtue of paragraph (a) or this paragraph; or

where a person who is an associate of the taxpayer by virtue of subparagraph (i) or (ii) is a company—any person who, if that company were the taxpayer, would be an associate of that company by virtue of paragraph (b) or this paragraph; or

in the case of a taxpayer being a partnership:

a partner in the partnership;

where any partner in the partnership is a natural person—any person who, if that natural person were the taxpayer, would be an associate of that natural person by virtue of paragraph (a) or (c); or

where any partner in the partnership is a company—any person who, if the company were the taxpayer, would be an associate of the company by virtue of paragraph (b) or (c).

consumable supplies means property other than: trading stock; or choses in action.

trading stock; or

choses in action.

expected tax saving, in relation to an amount of eligible relevant expenditure incurred by a taxpayer, means:

where only one amount is, under subsection (1B), a tax saving amount for the purposes of the application of this definition in relation to the eligible relevant expenditure—that tax saving amount; and

where 2 or more amounts are, under subsection (1B), tax saving amounts for the purposes of the application of this definition in relation to the eligible relevant expenditure—the sum of those tax saving amounts.

film means an aggregate of images, or of images and sounds, embodied in any material.

market research means:

the undertaking of research to ascertain the location, extent, value or other characteristics of the market, or the potential market, for goods or services; and

the provision of information, advice or assistance in connection with the marketing of particular goods or services or of goods or services generally.

property includes a chose in action and also includes any estate, interest, right or power, whether at law or in equity, in or over property.

relevant expenditure, in relation to a taxpayer, means:

(a) expenditure in respect of which a deduction would, apart from Income Tax Assessment Act 1997;section 82KL, be allowable to the taxpayer under section 25-25 (Borrowing expenses) of the

(b) expenditure in respect of which a deduction would, apart from Income Tax Assessment Act 1997;section 82KL, be allowable to the taxpayer under section 25-30 (Expenses of discharging a mortgage) of the

(c) a loss or outgoing incurred by the taxpayer in the purchase by the taxpayer of property (not being a chose in action) that, for the purposes of the application of this Act in relation to the taxpayer, is trading stock, to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

(d) a loss or outgoing incurred by the taxpayer in respect of interest to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

(e) a loss or outgoing incurred by the taxpayer in respect of rent to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

(f) a bad debt incurred by the taxpayer in respect of money lent by the taxpayer in the course of carrying on a business to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the bad debt;section 82KL, be allowable to the taxpayer under section 8-1 or section 25-35 of the

a loss or outgoing incurred by the taxpayer in respect of:

the production, marketing or distribution of a film; or

the acquisition of a copyright subsisting in a film;

to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

expenditure incurred by the taxpayer in respect of a unit of industrial property, being a unit of industrial property that relates to copyright subsisting in a film, to the extent to which the amount of that expenditure is taken into account, or would, apart from former subsections 124R(2) and (3), be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under former section 124M or 124N in respect of the residual value of the unit of industrial property;

(ka) expenditure incurred by the taxpayer in respect of an item of intellectual property (as defined in of the Income Tax Assessment Act 1997) that relates to copyright subsisting in a film, but only to the extent described at the end of this definition;

(k) a loss or outgoing incurred by the taxpayer in the purchase of consumable supplies to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

(m) a loss or outgoing incurred by the taxpayer in respect of market research to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

expenditure incurred by the taxpayer in respect of the acquisition of a unit of industrial property, being a licence under a copyright subsisting in computer software, to the extent to which the amount of that expenditure is taken into account, or would, apart from former subsection 124R(3) be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under former section 124M or 124N in respect of the residual value of the unit of industrial property;

(oa) expenditure incurred by the taxpayer in respect of acquiring an item of intellectual property (as defined in of the Income Tax Assessment Act 1997) that is a licence under a copyright subsisting in computer software, but only to the extent described at the end of this definition;

(o) a loss or outgoing or expenditure incurred by the taxpayer by way of commission for collecting assessable income of the taxpayer to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing or the expenditure;section 82KL, be allowable to the taxpayer under section 8-1 of the

(p) a loss or outgoing incurred by the taxpayer in respect of the growing, care or supervision of trees on behalf of the taxpayer to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

(pa) a loss or outgoing incurred by the taxpayer in respect of the establishment and tending of trees for felling on behalf of the taxpayer to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 394-10 of the

(q) a loss or outgoing incurred by the taxpayer for the purpose of increasing the value of shares in a company, being shares held or beneficially owned by the taxpayer as trading stock, to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

a loss or outgoing incurred by the taxpayer in respect of:

the production by another person of a master sound recording; or

the procuration of the production by another person of a master sound recording;

to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing;section 82KL, be allowable to the taxpayer under section 8-1 of the

(s) calls paid by the taxpayer on shares owned by the taxpayer in respect of which a deduction would, apart from Income Tax Assessment Act 1997;section 82KL, be allowable to the taxpayer under Division 30 (which is about gifts) of the

expenditure (other than expenditure to which a preceding paragraph of this definition applies) incurred by the taxpayer in respect of a unit of industrial property to the extent to which the amount of that expenditure is taken into account, or would, apart from former subsections 124R(2) and (3), be taken into account, in calculating the residual value of the unit of industrial property in ascertaining whether, apart from section 82KL, a deduction would be allowable to the taxpayer under former section 124M or 124N in respect of the residual value of the unit of industrial property; or

(wa) expenditure (unless covered by an earlier paragraph of this definition) incurred by the taxpayer in respect of an item of intellectual property (as defined in of the Income Tax Assessment Act 1997), but only to the extent described at the end of this definition;

(w) a loss or outgoing (other than a loss or outgoing referred to in subsection 52A(1) or to which a preceding paragraph of this definition applies) incurred by the taxpayer to the extent to which a deduction would, apart from Income Tax Assessment Act 1997 in respect of the loss or outgoing.section 82KL, be allowable to the taxpayer under section 8-1 of the

However, paragraph (ka), (oa) or (wa) only covers expenditure to the extent that:

(x) it is taken into account in working out under Income Tax Assessment Act 1997 the adjustable value of the item to the taxpayer in determining whether, apart from section 82KL of this Act, the taxpayer could deduct an amount under that Division for the item for a year of income; orDivision 40 of the

it would be so taken into account apart from item 8 in the table in subsection 40-180(2), or item 1 in the table in subsection 40-190(3) (both about non-arm’s length transactions).

rent means rent in respect of land or premises.

tax avoidance agreement means an agreement that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that a person who, if the agreement had not been entered into or carried out, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than that person would have been liable to pay if the agreement had not been entered into or carried out.

unit of industrial property has the same meaning as in former Division 10B.

In determining for the purposes of this Subdivision whether an agreement is a tax avoidance agreement, no regard shall be had to a purpose that is a merely incidental purpose.

(1AA) A reference in this Subdivision to the incurring by a taxpayer of a bad debt shall be read as a reference to a debt, or a part of a debt, owed to the taxpayer becoming a bad debt.

(1AB) A reference in:

subsection 82KL(2); or

former section 80 in relation to this Subdivision;

to the incurring by a taxpayer of a loss or outgoing shall be read as including a reference to the incurring by a taxpayer of a bad debt.

(1ABA) This section has the same effect in relation to an allowable deduction under Income Tax Assessment Act 1997 in respect of the writing off of the whole or part of a debt as bad.section 63E in respect of the extinguishing of the whole or part of a debt as it has in respect of an allowable deduction under section 8-1 or 25-35 of the

(1AC) In this Subdivision:

a reference to a copyright subsisting in a film shall be read as including a reference to:

a licence under a copyright subsisting in a film; and

an interest, whether at law or in equity, in respect of a copyright, or in respect of a licence under a copyright, subsisting in a film; and

a reference to a licence under a copyright subsisting in computer software shall be read as including a reference to an interest, whether at law or in equity, in a licence under a copyright subsisting in computer software.

(1AD) A reference in this Subdivision to a tax benefit being allowed or allowable or not being allowed or allowable in respect of relevant expenditure incurred by a taxpayer shall be read as a reference to:

(a) in a case where the relevant expenditure is relevant expenditure to which paragraph (h), (n) or (v) of the definition of relevant expenditure in subsection (1) applies—a deduction being allowed or allowable or not being allowed or allowable, as the case may be, to the taxpayer under former section 124M or 124N in respect of the residual value of a unit of industrial property where that residual value would be calculated by reference to the relevant expenditure; and

(b) if paragraph (ka), (oa) or (wa) of the definition of relevant expenditure in subsection (1) covers the expenditure—the taxpayer deducting or being able to deduct, or not deducting or not being able to deduct, as appropriate, an amount under Division 40 of the Income Tax Assessment Act 1997 for an item of intellectual property for a year of income because the taxpayer’s adjustable value of the item would be calculated under that Division by reference to the relevant expenditure; and

in any other case—a deduction being allowed or allowable or not being allowed or allowable, as the case may be, to the taxpayer in respect of the relevant expenditure.

(1B) For the purposes of the application of the definition of expected tax saving in subsection (1) in relation to an amount of eligible relevant expenditure incurred by a taxpayer:

where:

if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would be liable to pay income tax in respect of a year of income; and

if a tax benefit or tax benefits were allowable under this Act in respect of that eligible relevant expenditure, that person would be liable to pay a lesser amount of income tax in respect of that year of income;

the amount by which the amount of the tax referred to in subparagraph (i) exceeds the amount of the tax referred to in subparagraph (ii) is a tax saving amount; and

where:

if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would be liable to pay income tax in respect of a year of income; and

if a tax benefit or tax benefits were allowable under this Act in respect of that eligible relevant expenditure, that person would not be liable to pay income tax in respect of that year of income;

the amount of the tax referred to in subparagraph (i) is a tax saving amount.

(1BA) In the application of subsection (1B) in determining whether there is a tax saving amount in relation to an amount of eligible relevant expenditure incurred by a taxpayer in a case where, if a tax benefit or tax benefits were allowable in respect of that eligible relevant expenditure, a person (whether the taxpayer or another person and whether in the capacity of a trustee of a trust estate or otherwise) would:

have a tax loss for a year of income that the person would not have; or

have a greater tax loss for a year of income than the person would have;

if a tax benefit were not allowable in respect of any part of that eligible relevant expenditure, apply Income Tax Assessment Act 1997 as if the amount were relevant expenditure but not eligible relevant expenditure.Division 36 and former Subdivision 375-G of the

Subject to subsection (1E), where, in respect of any 2 or more amounts of eligible relevant expenditure (whether incurred by one taxpayer or by 2 or more taxpayers and whether incurred in one year of income or in 2 or more years of income), the following conditions are satisfied, namely:

if subsection (1B) were applied in relation to one of those amounts of eligible relevant expenditure in relation to a person (whether or not that person is the person or one of the persons who incurred the eligible relevant expenditure) in relation to a year of income on the assumption that no tax benefit is or was allowable in respect of any part of the other amount of eligible relevant expenditure, or in respect of any part of any of the other amounts of eligible relevant expenditure, as the case may be, the tax saving amount determined in accordance with that subsection would be greater than the tax saving amount that would be determined in accordance with that subsection in relation to that amount of eligible relevant expenditure in relation to that person in relation to that year of income if that subsection were applied on the assumption that a tax benefit or tax benefits were allowable under this Act in respect of the other amount of eligible relevant expenditure, or in respect of each of the other amounts of eligible relevant expenditure, as the case may be; and

if paragraph (a) of this subsection were applied in relation to that person in relation to that year of income in relation to the other amount of eligible relevant expenditure, or in relation to each of the other amounts of eligible relevant expenditure, as the case may be, the condition specified in that paragraph would be satisfied in relation to that other amount or in relation to each of those other amounts, as the case may be;

then, in the application of subsection (1B) in calculating the tax saving amount in relation to that person in relation to the year of income in relation to any one of the amounts of eligible relevant expenditure first referred to in this subsection, it shall be assumed that no tax benefit is or was allowable in respect of any part of the other of those amounts or in respect of any part of any of the other of those amounts, as the case may be.

Where:

(a) but for this subsection, subsection (1D) would apply to require it to be assumed, for the purposes of the application of subsection (1B) in relation to an amount of eligible relevant expenditure, that no tax benefit is or was allowable in respect of any part of another amount of eligible relevant expenditure (in this subsection referred to as the allowable relevant expenditure); and

section 82KL does not and will not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of the allowable relevant expenditure;

subsection (1D) shall not apply and shall be taken never to have applied so as to require it to be assumed, in the application of subsection (1B) in relation to an amount of eligible relevant expenditure other than the allowable relevant expenditure, that no tax benefit is or was allowable in respect of any part of the allowable relevant expenditure.

For the purposes of this Subdivision, an amount of relevant expenditure incurred by a taxpayer shall be taken to be an amount of eligible relevant expenditure if:

that amount of relevant expenditure was incurred after 24 September 1978 by reason of, as a result of or as part of a tax avoidance agreement entered into after that date;

by reason of, as a result of or as part of the tax avoidance agreement the taxpayer has obtained, in relation to that relevant expenditure being incurred, a benefit or benefits in addition to:

in a case to which subparagraph (ii) does not apply:

(A) the benefit in respect of which the relevant expenditure was incurred; and

(B) any benefit that resulted directly or indirectly from the benefit in respect of which the relevant expenditure was incurred and is a benefit that, in the opinion of the Commissioner, might reasonably be expected to have resulted if the benefit in respect of which the relevant expenditure was incurred had been obtained otherwise than by reason of, as a result of or as part of a tax avoidance agreement; or

(ii) in a case where the relevant expenditure is relevant expenditure to which paragraph (w) of the definition of relevant expenditure in subsection (1) applies—any benefit that resulted directly or indirectly from the incurring of the relevant expenditure and is a benefit that, in the opinion of the Commissioner, might reasonably be expected to have resulted if the relevant expenditure had been incurred otherwise than by reason of, as a result of or as part of a tax avoidance agreement; and

(c) in a case where the relevant expenditure is relevant expenditure to which paragraph (s), (v) or (w) of the definition of relevant expenditure in subsection (1) applies—that amount of relevant expenditure was incurred by reason of, as a result of or as part of a tax avoidance agreement entered into before 28 May 1981.

(1FA) For the purposes of the application of subsection (1F) in relation to an amount of relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, any benefit obtained by the taxpayer in relation to the making of the loan in respect of which the bad debt is incurred shall be taken to be a benefit obtained by the taxpayer in relation to that relevant expenditure being incurred.

The reference in subsection (1F) to the benefit in respect of which relevant expenditure was incurred by a taxpayer shall be read as a reference to:

(a) in a case where the relevant expenditure is expenditure incurred by the taxpayer in borrowing money, being expenditure in respect of which a deduction would, apart from Income Tax Assessment Act 1997—the making available to the taxpayer of the money borrowed by the taxpayer;section 82KL, be allowable to the taxpayer under section 25-25 (Borrowing expenses) of the

(b) in a case where the relevant expenditure is expenditure incurred by the taxpayer in connection with the discharge of a mortgage, being expenditure in respect of which a deduction would, apart from Income Tax Assessment Act 1997—the discharge of the mortgage;section 82KL, be allowable to the taxpayer under section 25-30 (Expenses of discharging a mortgage) of the

in a case where the relevant expenditure was incurred by the taxpayer in the purchase of property that, for the purposes of the application of this Act in relation to the taxpayer, is or was trading stock—the acquisition of that property by the taxpayer;

in a case where the relevant expenditure was incurred by the taxpayer in respect of interest—the availability to the taxpayer of the money borrowed by the taxpayer;

in a case where the relevant expenditure was incurred by the taxpayer in respect of rent—the use of the property in respect of which the rent was paid;

in a case where the relevant expenditure incurred by the taxpayer was in respect of a bad debt—any interest received or receivable by the taxpayer in respect of the loan in respect of which the bad debt was incurred;

(g) in a case where the relevant expenditure was incurred by the taxpayer in respect of the production, marketing or distribution of a film or the acquisition of a copyright subsisting in a film and is relevant expenditure to which paragraph (g) of the definition of relevant expenditure in subsection (1) applies—the production, marketing or distribution of the film, or the acquisition of the copyright by the taxpayer, as the case may be;

(h) in a case where the relevant expenditure was incurred by the taxpayer in respect of a unit of industrial property, being a unit of industrial property that relates to copyright subsisting in a film, and is relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies—the ownership by the taxpayer of the unit of industrial property;

in a case where the relevant expenditure was incurred by the taxpayer in the purchase of consumable supplies—the acquisition of those consumable supplies by the taxpayer;

in a case where the relevant expenditure was incurred by the taxpayer in respect of market research—the undertaking of the research, or the provision of the information, advice or assistance, in respect of which the relevant expenditure was incurred;

in a case where the relevant expenditure was incurred by the taxpayer in respect of the acquisition of a unit of industrial property, being a licence under a copyright subsisting in computer software—the acquisition by the taxpayer of the unit of industrial property;

in a case where the relevant expenditure was incurred by the taxpayer by way of commission for collecting assessable income of the taxpayer—the collection on behalf of the taxpayer of assessable income of the taxpayer;

in a case where the relevant expenditure was incurred by the taxpayer in respect of the growing, care or supervision of trees on behalf of the taxpayer—the growing, care or supervision of the trees on behalf of the taxpayer;

in a case where the relevant expenditure was incurred by the taxpayer in respect of the establishment and tending of trees for felling on behalf of the taxpayer—the establishment and tending of trees for felling on behalf of the taxpayer;

in a case where the relevant expenditure was incurred by the taxpayer for the purpose of increasing the value of shares in a company, being shares held or beneficially owned by the taxpayer as trading stock—the increase in the value of those shares;

in a case where the relevant expenditure was incurred by the taxpayer in respect of the production of, or the procuration of the production of, a master sound recording—any amount payable to the taxpayer in respect of the master sound recording, being an amount that, in the opinion of the Commissioner, would be payable to the taxpayer as a result of the incurring by the taxpayer of the relevant expenditure if that expenditure had been incurred by reason of, as a result of or as part of an agreement other than a tax avoidance agreement;

(s) in a case where the relevant expenditure consists of calls paid by the taxpayer on shares owned by the taxpayer and is relevant expenditure to which paragraph (s) of the definition of relevant expenditure in subsection (1) applies—the satisfaction of any liability of the taxpayer to pay the calls and the taxpayer’s continuing ownership of the shares; and

(u) in a case where the relevant expenditure was incurred by the taxpayer in respect of a unit of industrial property and is relevant expenditure to which paragraph (v) of the definition of relevant expenditure in subsection (1) applies—the ownership by the taxpayer of the unit of industrial property.

For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:

an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;

in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, the taxpayer or an associate of the taxpayer acquires from another person the right to recover the amount of a debt that was owed to that other person; and

by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, no consideration was paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of that right or the amount or value of the consideration paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of that right was less than the amount of the debt;

the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit having a value equal to:

in a case where no consideration was paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of the right to recover the amount of the debt—the amount of the debt; and

in any other case—the amount by which the amount of the debt exceeds the amount or value of the consideration paid or given by the taxpayer or the associate of the taxpayer, as the case may be, in respect of the acquisition of the right to recover the amount of the debt.

For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:

an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;

in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement:

a debt becomes owing by the taxpayer or an associate of the taxpayer; or

a debt became owing, before or at the time of the incurring of the relevant expenditure, by the taxpayer or an associate of the taxpayer; and

it may reasonably be expected that, by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, the person to whom the debt is owed will release, abandon or fail to demand repayment of the debt or of a part of the debt;

the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit of an amount equal to the amount of the debt or that part of the debt, as the case may be.

(1JA) For the purposes of the application of subsection (1H) in relation to an amount of relevant expenditure incurred by a taxpayer, being relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, a reference in paragraph (1H)(b) to the acquisition by the taxpayer or an associate of the taxpayer, in relation to that relevant expenditure being incurred, of the right to recover a debt shall be read as including a reference to the acquisition by the taxpayer or an associate of the taxpayer, in relation to the making by the taxpayer of the loan in respect of which the relevant expenditure was incurred, of such a right.

(1JB) For the purposes of the application of subsection (1J) in relation to an amount of relevant expenditure incurred by a taxpayer, being relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies, a reference in paragraph (1J)(b) to a debt becoming owing, or having become owing, by the taxpayer or an associate of the taxpayer in relation to that relevant expenditure being incurred, shall be read as including a reference to a debt becoming owing, or having become owing, by the taxpayer or an associate of the taxpayer, in relation to the making by the taxpayer of the loan in respect of which the relevant expenditure was incurred.

(1JE) For the purposes of paragraph (1F)(b), but without limiting the generality of that paragraph, where:

an amount of relevant expenditure is incurred by a taxpayer by reason of, as a result of or as part of a tax avoidance agreement;

(b) that relevant expenditure consists of calls paid by the taxpayer on shares owned by the taxpayer and is relevant expenditure to which paragraph (s) of the definition of relevant expenditure in subsection (1) applies; and

(c) in relation to that relevant expenditure being incurred and by reason of, as a result of or as part of the tax avoidance agreement or by reason of an act, transaction or circumstance occurring as part of, in connection with or as a result of the tax avoidance agreement, consideration (in this subsection referred to as the relevant consideration) is paid or given to the taxpayer or an associate of the taxpayer in respect of the acquisition by any person from the taxpayer of:

all or any of those shares;

the right to purchase all or any of those shares; or

the right to require a person to vote, in a meeting of shareholders of the company, in favour of a resolution to vary the rights attached to all or any of those shares;

the taxpayer shall be deemed to have obtained, by reason of the tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer, a benefit in addition to the benefits referred to in subparagraphs (1F)(b)(i) and (ii) having a value equal to the amount or value of the relevant consideration reduced by the amount or value of the part (if any) of that relevant consideration that, in the opinion of the Commissioner, is attributable to expenditure (other than the relevant expenditure) incurred by the taxpayer in respect of the shares.

Where:

2 or more amounts of relevant expenditure are incurred by a taxpayer (whether in the same year of income or in different years of income) by reason of, as a result of or as part of the same tax avoidance agreement;

(b) the same paragraph of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts; and

those amounts were incurred in respect of the same benefit;

those amounts shall, for the purposes of this Subdivision, be treated as together constituting one amount of relevant expenditure.

For the purposes of subsection (1K), 2 or more amounts of relevant expenditure shall be taken to have been incurred in respect of the same benefit if:

(a) in a case where paragraph (a) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;

(b) in a case where paragraph (b) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the discharge of the same mortgage;

(c) in a case where paragraph (c) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in the purchase of the same property;

(d) in a case where paragraph (d) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;

(e) in a case where paragraph (e) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same property;

(f) in a case where paragraph (f) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same loan;

(g) in a case where paragraph (g) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same film;

(h) in a case where paragraph (h) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same film;

(k) in a case where paragraph (k) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in the purchase of the same property;

(m) in a case where paragraph (m) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same market research;

(n) in a case where paragraph (n) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same unit of industrial property;

(o) in a case where paragraph (o) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same source of assessable income;

(p) in a case where paragraph (p) or paragraph (pa) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of trees on the same parcel of land;

(q) in a case where paragraph (q) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same shares;

(r) in a case where paragraph (r) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were payable to the same person;

(s) in a case where paragraph (s) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were calls paid on shares in the same company;

(v) in a case where paragraph (v) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same unit of industrial property; and

(w) in a case where paragraph (w) of the definition of relevant expenditure in subsection (1) applies in relation to each of those amounts—those amounts were incurred in respect of the same source of assessable income or in carrying on the same business.

For the purposes of this Subdivision, a person who obtains a benefit by reason of an act, transaction or circumstance that occurs as part of, in connection with or as a result of a tax avoidance agreement shall be deemed to have obtained that benefit by reason of the tax avoidance agreement.

(1N) Where, for the purposes of the application of any provision of this Subdivision, it is required to be assumed that a tax benefit is not or was not allowable in respect of any part of an amount of eligible relevant expenditure and that expenditure is expenditure that was incurred in the acquisition of property that, for the purposes of the application of this Act in relation to the person who incurred the expenditure, is or was trading stock, it shall also be assumed, for the purposes of the application of that provision, that, for the purposes of the application of Income Tax Assessment Act 1997 in relation to that property in relation to the person who incurred the expenditure, that the cost of that property is, and at all times was, nil.Division 70 (Trading stock) or 385 (Primary production) of the

For the purposes of this Subdivision, any benefit that has been obtained by an associate of a taxpayer by reason of, as a result of or as part of a tax avoidance agreement, being a benefit that was obtained in relation to the incurring by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of relevant expenditure, not being relevant expenditure to which subsection (1Q) applies, shall be taken to be a benefit that was obtained by the taxpayer by reason of that tax avoidance agreement and in relation to that relevant expenditure being incurred by the taxpayer.

For the purposes of this Subdivision, any benefit that has been obtained by an associate of a taxpayer by reason of, as a result of or as part of a tax avoidance agreement, being a benefit that was obtained in relation to:

(a) the incurring by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of relevant expenditure to which paragraph (f) of the definition of relevant expenditure in subsection (1) applies; or

the making by the taxpayer, by reason of, as a result of or as part of that tax avoidance agreement, of the loan in respect of which relevant expenditure to which that paragraph applies was incurred;

shall be taken to be a benefit that was obtained by the taxpayer by reason of that tax avoidance agreement and in relation to the relevant expenditure being incurred by the taxpayer or that loan being made by the taxpayer, as the case may be.

(1S) For the purposes of the application of this section in determining the amount of any additional benefit obtained by a taxpayer in relation to an amount of relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies being incurred, being expenditure that, by virtue of the expenditure of moneys (in this subsection referred to as the partnership moneys) by a partnership, is deemed by former section 124KA to have been incurred by the taxpayer:

the partnership shall be taken to be an associate of the taxpayer;

a reference to the relevant expenditure being incurred by the taxpayer shall be read as including a reference to the partnership moneys being expended by the partnership; and

any benefit obtained by the partnership in relation to the partnership moneys being expended by the partnership shall be taken to have been obtained by the taxpayer in relation to the relevant expenditure being incurred by the taxpayer to such extent only as the Commissioner considers fair and reasonable.

Where:

(a) a taxpayer expends moneys (in this subsection referred to as the film moneys) in producing, or by way of contribution to the cost of producing, a film; and

(b) by virtue of the operation of former subsection 124K(2), a part only of the film moneys is taken to be an amount of relevant expenditure to which paragraph (h) of the definition of relevant expenditure in subsection (1) applies;

for the purposes of the application of this section in determining the amount of any additional benefit obtained by the taxpayer in relation to the relevant expenditure being incurred:

a reference to the relevant expenditure being incurred by the taxpayer shall read as including a reference to the film moneys being expended by the taxpayer; and

any benefit obtained by the taxpayer in relation to the film moneys being expended by the taxpayer shall be taken to have been obtained by the taxpayer in relation to the relevant expenditure being incurred by the taxpayer to such extent only as the Commissioner considers fair and reasonable.

A reference in this Subdivision to the supply of goods or the provision of services shall be read as not including a reference to the making available of money by way of loan.

For the purposes of this Subdivision, an agreement shall be taken to have been entered into or carried out for a particular purpose, or for purposes that included a particular purpose, if any of the parties to the agreement entered into or carried out the agreement for that purpose, or for the purposes that included that purpose, as the case may be.

A reference in this Subdivision to a person shall be read as including a reference to a person in the capacity of a trustee.

(5) A reference in this Subdivision to a provision of the Income Tax Assessment Act 1997 includes a reference to the corresponding provision of the Income Tax Assessment Act 1936.

Where:

a loss or outgoing in respect of which a deduction would, but for this Subdivision, be allowable, was incurred by a taxpayer after 19 April 1978 by reason of, as a result of or as part of a tax avoidance agreement;

having regard to the benefit in respect of which the loss or outgoing was incurred (but without regard to any benefit relating to the acquisition or possible acquisition of the property referred to in paragraph (c)), the amount of the loss or outgoing was greater than the amount (if any) that might reasonably be expected to have been incurred, at the time when the loss or outgoing was incurred, in respect of that benefit if the loss or outgoing had not been incurred by reason of, as a result of or as part of a tax avoidance agreement;

property has been, will be, or may reasonably be expected to be, acquired by the taxpayer or by an associate of the taxpayer as a result of, by reason of, or as part of the tax avoidance agreement; and

the consideration (if any) that was payable in respect of the acquisition of that property was less, or the consideration that may reasonably be expected to be payable in respect of the acquisition of that property is less, than the consideration that might reasonably be expected to have been payable, or to be payable, as the case may be, in respect of the acquisition of that property if the loss or outgoing had not been incurred;

notwithstanding any other provision of this Act, a deduction is not allowable to the taxpayer in respect of the loss or outgoing.

This section applies to a loss or outgoing incurred by a taxpayer if:

the loss or outgoing was incurred after 19 April 1978 and was incurred to an associate of the taxpayer;

a deduction is allowable to the taxpayer in respect of that loss or outgoing; and

the deduction allowable in respect of that loss or outgoing would, but for this section, be allowable to the taxpayer in the year of income in which the loss or outgoing was incurred and:

in a case where the loss or outgoing is in respect of interest that, if it had actually been paid, would be subject to withholding tax under Division 11A—the withholding tax payable in respect of the whole or a part of the interest is not payable until a time occurring in a subsequent year of income; and

in any other case—the whole or a part of the amount incurred to the associate will not be included in the assessable income of the associate until a subsequent year of income.

Notwithstanding any other provision of this Act, where:

(a) a taxpayer incurs in a year of income (in this subsection referred to as the relevant year of income) a loss or outgoing (not being a loss or outgoing in respect of the supply of goods or the provision of services at a time that occurs after, or during a period that occurs after or extends beyond, the end of the relevant year of income) and the loss or outgoing is a loss or outgoing to which this section applies; and

the loss or outgoing was incurred by reason of, as a result of, as part of or in connection with an agreement, course of conduct or course of business that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that:

in a case where the loss or outgoing is in respect of interest that, if it had actually been paid, would be subject to withholding tax under Division 11A—the withholding tax payable in respect of the whole or a part of the interest will not be payable until a time occurring in a subsequent year of income; and

in any other case—the whole or a part of the amount incurred to the associate would not be included in the assessable income of the associate until a subsequent year of income;

the loss or outgoing shall, for the purposes of this Act, be deemed to have been incurred by the taxpayer in the relevant year of income and in any subsequent year of income only to the extent to which the loss or outgoing represents an amount actually paid during the relevant year of income or that subsequent year of income by the taxpayer to the person to whom the loss or outgoing is incurred.

Notwithstanding any other provision of this Act but subject to subsection (4), where:

a taxpayer incurs in a year of income a loss or outgoing in respect of the supply of goods or the provision of services at a time that occurs after, or during a period that occurs after or extends beyond, the end of the year of income and the loss or outgoing is a loss or outgoing to which this section applies; and

the loss or outgoing was incurred by reason of, as a result of or as part of an agreement that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that:

a deduction would be allowable to the taxpayer in a year of income in respect of the loss or outgoing; and

the whole or a part of the amount of the loss or outgoing would not be included in the assessable income of the person to whom the loss or outgoing was incurred until a subsequent year of income;

that loss or outgoing shall, for the purposes of this Act, be deemed to have been incurred by the taxpayer in the year of income in which, or in the years of income in which, goods to which the loss or outgoing relates are supplied or services to which the loss or outgoing relates are provided.

Where, by virtue of subsection (3), a loss or outgoing incurred by a taxpayer in respect of the supply of goods or the provision of services is deemed to have been incurred by the taxpayer in each of 2 or more years of income, there shall be allowable as a deduction to the taxpayer in each such year of income so much only of the amount that, apart from this section, would be allowable as a deduction in respect of the loss or outgoing as the Commissioner considers reasonable having regard to the extent to which the goods in respect of which the loss or outgoing was incurred were supplied or the services in respect of which the loss or outgoing was incurred were provided, in each of those years of income.

In determining whether paragraph (2)(b) or (3)(b) applies in relation to a loss or outgoing, no regard shall be had to a purpose that is a merely incidental purpose.

Where the sum of the amount or value of the additional benefit in relation to an amount of eligible relevant expenditure incurred by a taxpayer and the expected tax saving in relation to that amount of eligible relevant expenditure is equal to or greater than the amount of the eligible relevant expenditure, notwithstanding any other provision of this Act but subject to this section, a tax benefit is not and shall be deemed never to have been, allowable in respect of any part of that amount of eligible relevant expenditure.

Where, at any time, the Commissioner is of the opinion that, apart from this subsection, subsection (1) might reasonably be expected, at a later time, to operate to deem a tax benefit not to be allowable and never to have been allowable in respect of expenditure or a loss or outgoing incurred by a taxpayer then, notwithstanding any other provision of this Act but subject to this section, a tax benefit is not allowable and shall be deemed never to have been allowable in respect of that expenditure or that loss or outgoing, as the case may be.

Where, in the making of an assessment, subsection (2) has been applied by reason that the Commissioner was of the opinion that a particular circumstance would exist and the Commissioner later becomes satisfied that that circumstance will not exist, then, notwithstanding anything contained in section 170, the Commissioner may amend the assessment at any time for the purposes of ensuring that this Subdivision shall be taken always to have applied on the basis that that circumstance did not, and would not, exist.

Where:

an amount of eligible relevant expenditure is incurred by a partnership;

apart from this subsection, this section would not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of that amount of eligible relevant expenditure; and

the Commissioner is satisfied that any partner in the partnership became a partner in the partnership by reason of or as a result of an agreement (whether or not that agreement was the agreement by virtue of which the partner became a partner in the partnership) that was entered into by any of the parties to the agreement for the purpose, or primarily for the purpose, of ensuring that this section would not operate to deem a tax benefit not to be allowable and never to have been allowable in respect of any part of the amount of the eligible relevant expenditure;

then, notwithstanding any other provision of this Act, a tax benefit is not allowable and shall be deemed never to have been allowable in respect of any part of that amount of eligible relevant expenditure.

Where:

in the making of an assessment, this section has been applied on the basis that a taxpayer was to be taken to have obtained a benefit by reason that it was reasonable to expect that a person to whom a debt was owed by the taxpayer or an associate of the taxpayer would release, abandon or fail to demand repayment of the debt or of a part of the debt; and

the whole or a part of that debt or of that part of the debt is repaid;

then, notwithstanding anything contained in the Commissioner may amend the assessment at any time for the purposes of ensuring that this Subdivision shall be taken never to have applied on the basis that it was reasonable to expect that the person to whom the debt was owed would release, abandon or fail to demand repayment of the amount that was repaid.section 170,

(6) Where subsection (1), (2) or (4) deems a tax benefit not to be and never to have been allowable in respect of a loss or outgoing incurred by a taxpayer in the purchase of property that, for the purposes of the application of this Act and the Income Tax Assessment Act 1997 in relation to the taxpayer is or was trading stock, then, notwithstanding any other provision of this Act or that Act, the cost or cost price of that property, for the purposes of the application of (Primary production) of the Income Tax Assessment Act 1997 Subdivision B of Division 2 of Part III of this Act or Division 70 (Trading stock) or 385 in relation to that property in relation to the taxpayer, shall be taken to be, and at all times to have been, nil.

Where, at any time after the making of an assessment in relation to a taxpayer, the taxpayer considers that the Commissioner ought to amend the assessment in accordance with subsection (3) or (5), the taxpayer may post to or lodge with the Commissioner a request in writing for an amendment of the assessment in accordance with subsection (3) or (5) or in accordance with subsections (3) and (5).

The Commissioner shall consider the request and shall serve on the taxpayer, by post or otherwise, a written notice of the Commissioner’s decision on the request.

(9) If the taxpayer is dissatisfied with the Commissioner’s decision on the request, the taxpayer may object against it in the manner set out in Taxation Administration Act 1953.Part IVC of the

In this Subdivision, unless the contrary intention appears:

agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings.

associate has the meaning given by section 318.

eligible service period means the period from the beginning of: the day, or the first day, on which the thing to be done under the agreement in return for the amount of expenditure is required, or permitted, as the case may be, to commence being done; or if the expenditure is incurred on a later day—the day on which the expenditure is incurred; until the end of: the day, or the last day, on which the thing to be done under the agreement in return for the amount of expenditure is required, or permitted, as the case may be, to cease being done; or if that day or last day ends more than 10 years after the beginning of the period—10 years after the beginning of the period.

the day, or the first day, on which the thing to be done under the agreement in return for the amount of expenditure is required, or permitted, as the case may be, to commence being done; or

if the expenditure is incurred on a later day—the day on which the expenditure is incurred;

until the end of:

the day, or the last day, on which the thing to be done under the agreement in return for the amount of expenditure is required, or permitted, as the case may be, to cease being done; or

if that day or last day ends more than 10 years after the beginning of the period—10 years after the beginning of the period.

excluded expenditure means an amount of expenditure: less than $1,000; or required to be incurred by a law, or by an order of a court, of the Commonwealth, a State or a Territory; or under a contract of service; or to the extent that it is of a capital nature and cannot be deducted under: section 355-205 (R&D expenditure); or section 355-480 (earlier year associate R&D expenditure); of the Income Tax Assessment Act 1997; or to the extent that it is of a private or domestic nature; or that has been or is incurred after 21 September 1999 by a general insurance company in connection with the issue of a general insurance policy and was related or relates to the gross premiums derived by the company in respect of the policy; or that has been or is incurred after 21 September 1999 by a general insurance company in payment of reinsurance premiums in respect of the reinsurance of risks covered by general insurance policies, other than reinsurance premiums that were or are paid in respect of a particular class of insurance business where, under the contract of reinsurance, the reinsurer agrees, in respect of a loss incurred by the company that is covered by the relevant policy, to pay only some or all of the excess over an agreed amount.

less than $1,000; or

required to be incurred by a law, or by an order of a court, of the Commonwealth, a State or a Territory; or

under a contract of service; or

to the extent that it is of a capital nature and cannot be deducted under:

section 355-205 (R&D expenditure); or

section 355-480 (earlier year associate R&D expenditure);

of the Income Tax Assessment Act 1997; or

to the extent that it is of a private or domestic nature; or

that has been or is incurred after 21 September 1999 by a general insurance company in connection with the issue of a general insurance policy and was related or relates to the gross premiums derived by the company in respect of the policy; or

that has been or is incurred after 21 September 1999 by a general insurance company in payment of reinsurance premiums in respect of the reinsurance of risks covered by general insurance policies, other than reinsurance premiums that were or are paid in respect of a particular class of insurance business where, under the contract of reinsurance, the reinsurer agrees, in respect of a loss incurred by the company that is covered by the relevant policy, to pay only some or all of the excess over an agreed amount.

pre-RBT obligation means a contractual obligation that: exists under an agreement at or before (by legal time in the ) on 21 September 1999; and requires the payment of an amount for the doing of a thing under the agreement; and requires the payment to be made before the doing of the thing; and cannot be escaped by unilateral action by the party bound by the obligation to make the payment. R&D activities has the same meaning as in the Income Tax Assessment Act 1997.

exists under an agreement at or before (by legal time in the ) on 21 September 1999; and

requires the payment of an amount for the doing of a thing under the agreement; and

requires the payment to be made before the doing of the thing; and

cannot be escaped by unilateral action by the party bound by the obligation to make the payment.

R&D activities has the same meaning as in the Income Tax Assessment Act 1997.

transfer includes assign.

Without otherwise limiting the generality of references in this Subdivision to expenditure being incurred under an agreement in return for the doing of a thing under the agreement:

where expenditure incurred under an agreement consists of a payment of loan interest or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the making available or continued making available, as the case requires, of the loan principal, or other amount of a similar kind, under the agreement during the period to which the payment relates; and

where expenditure incurred under an agreement consists of a payment of rent, a lease payment or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the making available or continued making available, as the case requires, of the thing rented or leased, or other thing of a similar kind, under the agreement during the period to which the payment relates; and

where expenditure incurred under an agreement consists of a payment of an insurance premium or a payment of a similar kind, the expenditure shall, for the purposes of this Subdivision, be taken to be incurred in return for the provision or continued provision, as the case requires, of insurance against the risk concerned, or of a thing of a similar kind, under the agreement during the period to which the payment relates.

This Subdivision has effect as if conducting R&D activities were carrying on a business.

To avoid doubt, this Subdivision does not apply to:

(a) a Income Tax Assessment Act 1997); orDivision 230 financial arrangement (within the meaning of the

a financial benefit (within the meaning of that Act) that is provided or received in relation to such an arrangement.

Note: See Income Tax Assessment Act 1997.section 250-210 of the

In addition to its application apart from this section, this Subdivision applies to expenditure deductible under Income Tax Assessment Act 1997 as if:section 355-480 of the

references in this Subdivision to incurring the expenditure were references to paying the expenditure; and

references in this Subdivision to the expenditure year were references to the payment year.

Where:

a taxpayer incurs expenditure under an agreement entered into after 25 May 1988; and

at least one of the following applies:

the taxpayer is a small business entity, or is covered by subsection (1A), for the year of income and has not chosen to apply section 82KZMD to the expenditure;

the taxpayer is an individual and the expenditure is not incurred in carrying on a business;

the expenditure meets a pre-RBT obligation (see subsection 82KZL(1)); and

the expenditure is not excluded expenditure; and

either:

the eligible service period for the expenditure is longer than 12 months; or

the eligible service period for the expenditure i2 months or shorter but ends after the last day of the year of income after the one in which the expenditure was incurred; and

apart from this section, a deduction under:

section 8-1; or

section 355-205 (R&D expenditure) or 355-480 (earlier year associate R&D expenditure);

of the Income Tax Assessment Act 1997, in respect of the expenditure, would be allowable from the taxpayer’s assessable income for the year of income in which the expenditure is incurred;

then, for the purposes of this Act, instead of the deduction being allowable as mentioned in paragraph (c), a proportion of the deduction is allowable from the assessable income of the taxpayer of each year of income during which the whole or part of the eligible service period in relation to the expenditure occurs, being a proportion ascertained in accordance with the formula:

where:

Period in year is the number of days in the whole or the part of the eligible service period that occurs in the year of income.

Eligible service period is the number of days in the eligible service period.

A taxpayer is covered by this subsection for a year of income if:

the taxpayer is not a small business entity for the year of income; and

the taxpayer would be a small business entity for the year of income if:

(i) each reference in Subdivision 328-C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and

the reference in paragraph 328-110(5)(b) of that Act to a small business entity were instead a reference to a taxpayer covered by this subsection.

(2) Subsection (1) has effect subject to Income Tax Assessment Act 1997.Division 245 of the

Overview

(1) Section 82KZMD sets the amount and timing of deductions for expenditure that a taxpayer incurs in a year of income (the expenditure year), if:

apart from that section, the taxpayer could deduct the expenditure for the expenditure year under:

section 8-1; or

section 355-205 (R&D expenditure) or 355-480 (earlier year associate R&D expenditure);

of the Income Tax Assessment Act 1997; and

the requirements in subsections (2), (3), (4) and (5) are met.

Requirements for taxpayer

The taxpayer:

must:

carry on a business; or

be a taxpayer that is not an individual and that does not carry on a business; and

if the taxpayer is a small business entity, or is covered by subsection (2A), for the expenditure year—must, before lodging its return of income for that year or within such further time as the Commissioner allows, choose to apply section 82KZMD to the expenditure.

A taxpayer is covered by this subsection for the expenditure year if:

the taxpayer is not a small business entity for the expenditure year; and

the taxpayer would be a small business entity for the expenditure year if:

(i) each reference in Subdivision 328-C (about what is a small business entity) of the Income Tax Assessment Act 1997 to $10 million were instead a reference to $50 million; and

the reference in paragraph 328-110(5)(b) of that Act to a small business entity were instead a reference to a taxpayer covered by this subsection.

The expenditure must be:

either:

incurred in carrying on a business; or

incurred otherwise than in carrying on a business by a taxpayer that is not an individual; and

incurred under an agreement (see subsection 82KZL(1); and

incurred in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.

Requirement for expenditure not to be excluded expenditure

The expenditure must not be excluded expenditure (see subsection 82KZL(1)).

Requirement for expenditure not to meet pre-RBT obligation

The expenditure must not meet a pre-RBT obligation (see subsection 82KZL(1)).

Relationship with other provisions

Section 82KZMD has effect:

(a) despite Income Tax Assessment Act 1997; andsection 8-1 of the

subject to Division 245 of that Act.

For each year of income containing all or part of the eligible service period for the expenditure, the taxpayer may deduct the amount worked out using the formula:

Note: This section does not apply to expenditure incurred by a small or medium business entity unless the entity chooses to apply this section to the expenditure: see paragraph 82KZMA(2)(b).

(1) Section 82KZMF applies to set the amount and timing of deductions for expenditure that a taxpayer incurs in a year of income (the expenditure year) if:

apart from that section, the taxpayer could deduct the expenditure for the expenditure year under:

section 8-1; or

section 355-205 (R&D expenditure) or 355-480 (earlier year associate R&D expenditure);

of the Income Tax Assessment Act 1997; and

the requirements of subsections (2) and (3) are met.

Note: There are some exceptions: see subsections (5), (7), (8) and (9).

General requirements for expenditure

The expenditure must be incurred:

after (by legal time in the ) on 11 November 1999 under an agreement; and

in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.

Requirements for agreement

There are these requirements for the agreement:

the taxpayer’s allowable deductions for the expenditure year that are attributable to the agreement must exceed the taxpayer’s assessable income (if any) for the expenditure year that is attributable to the agreement; and

the taxpayer does not have day to day control over the operation of the agreement (whether or not the taxpayer has the right to be consulted or give directions); and

at least one of these must be satisfied:

there is more than one participant in the agreement in the same capacity as the taxpayer;

the person who manages, arranges or promotes the agreement, or an associate of that person, manages, arranges or promotes similar agreements for other taxpayers.

Activities that relate to the agreement

Without affecting the operation of any other section in this Subdivision, an agreement referred to in this section includes all activities that relate to the agreement, including those that give rise to deductions or assessable income.

Exception 1: certain negatively geared investments

The expenditure must not be:

a premium for building insurance, contents insurance or rent protection insurance; or

interest on money borrowed to acquire:

real property or an interest in real property; or

shares that are listed for quotation in the official list of an approved stock exchange; or

units in a trust that has at least 300 beneficiaries and is a widely held unit trust as defined in section 272-105 in Schedule 2F;

where:

the taxpayer has obtained, or can reasonably be expected to obtain, rent, dividends or trust income from the agreement; and

the taxpayer has not obtained and will not obtain any other kind of assessable income from the agreement (except a capital gain or an insurance receipt); and

all aspects of the agreement have been conducted at arm’s length.

Exception 3: expenditure is excluded expenditure

The expenditure must not be excluded expenditure (see subsection 82KZL(1)).

Exception 4: expenditure meets a pre-existing obligation

The expenditure by the taxpayer must not meet a contractual obligation that:

exists under an agreement at or before (by legal time in the ) on 11 November 1999; and

requires the payment of an amount for the doing of a thing under the agreement; and

requires the payment to be made before the doing of the thing; and

cannot be escaped by unilateral action by the taxpayer.

Exception 5: agreement to which a product ruling applies

The expenditure must not be under an agreement to which a product ruling applies, describing expenditure under the agreement as being allowable as a deduction.

The product ruling must be made:

on or before (by legal time in the ) on 11 November 1999; or

in response to an application for a product ruling where:

the application was received by the Commissioner on or before the time specified in paragraph (a); and

the Commissioner acknowledged receiving the application.

In this section:

product ruling means a public ruling made under Part IVAAA of the Taxation Administration Act 1953 about a particular investment product.

If this section applies to expenditure incurred by a taxpayer in a year of income:

the taxpayer cannot deduct all of the expenditure for the expenditure year; and

instead, the taxpayer can deduct, for each year of income during which part of the eligible service period for the expenditure occurs, an amount worked out using this formula:

This section has effect:

(a) despite Income Tax Assessment Act 1997; andsection 8-1 of the

(b) subject to Income Tax Assessment Act 1997.Division 245 of the

Note: Deductions under Income Tax Assessment Act 1997 for R&D expenditure are subject to this section (see subsection 8-5(2) and section 355-105 of that Act).section 355-205 or 355-480 of the

(1) Sections 82KZMD and 82KZMF do not affect the timing of a deduction for expenditure incurred by a taxpayer in a year of income (the expenditure year) to the extent that the requirements of this section are met.

General requirements for expenditure

There are these requirements for the expenditure:

it must be incurred on or after 2 October 2001 and on or before 30 June 2008 under an agreement; and

the eligible service period for the expenditure must be 12 months or shorter and must end on or before the last day of the year of income after the expenditure year; and

it must be incurred in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.

Requirements for agreement

There are these requirements for the agreement:

the agreement must be for planting and tending trees for felling; and

the taxpayer must not have day to day control over the operation of the agreement (whether or not the taxpayer has the right to be consulted or give directions); and

at least one of these must be satisfied:

there is more than one participant in the agreement in the same capacity as the taxpayer;

(ii) the person (the manager) who manages, arranges or promotes the agreement, or an associate of that person, manages, arranges or promotes similar agreements for other taxpayers.

Requirements for expenditure

The expenditure incurred by the taxpayer must be paid for seasonally dependent agronomic activities undertaken by the manager during the establishment period for the relevant planting of trees for felling.

Example: Examples of seasonally dependent agronomic activities include:

tending the seedlings prior to planting, and planting them;

ripping and mounding the site where the planting is to occur;

applying fertiliser, herbicide or pesticide in conjunction with the planting.

(5) The establishment period for a particular planting of trees starts on the day when the first seasonally dependent agronomic activity for that planting is done and ends on the later of:

the day when the last seedling is planted as part of that planting, not including replacement of seedlings already planted; and

the day when any fertiliser, herbicide or pesticide is applied to the seedlings in conjunction with that planting.

A taxpayer cannot deduct expenditure in relation to which the requirements in section 82KZMG (apart from paragraph 82KZMG(2)(a)) are met if:

the taxpayer holds the taxpayer’s interest in the agreement mentioned in section 82KZMG as an initial participant in the agreement; and

a CGT event happens in relation to that interest within 4 years after the end of the year of income in which the taxpayer first incurred expenditure under the agreement; and

the expenditure is incurred on or before 30 June 2008.

Paragraph (1)(b) does not apply to a CGT event if:

the CGT event happens because of circumstances outside the taxpayer’s control; and

Example: The interest is compulsorily acquired.

when the taxpayer acquired the interest, the taxpayer could not reasonably have foreseen the CGT event happening.

Despite the Commissioner may amend the taxpayer’s assessment at any time within 2 years after the end of the year of income in which the CGT event happens, for the purpose of giving effect to this section.section 170,

This section applies if:

a taxpayer holds an interest in an agreement mentioned in section 82KZMG as an initial participant in the agreement; and

at least one of these conditions is satisfied:

the taxpayer can deduct or has deducted an amount for a year of income in relation to the interest;

the condition in subparagraph (i) would be satisfied if section 82KZMGA were disregarded; and

subsection 82KZMG(1) applies to the timing of the deduction (or would apply if section 82KZMGA were disregarded); and

a CGT event happens in relation to the interest, other than a CGT event that happens in respect of thinning.

The taxpayer’s assessable income for the year of income in which the CGT event happens includes:

if, as a result of the CGT event, the taxpayer no longer holds the interest—the market value of the interest (worked out as at the time of the event); or

otherwise—the decrease (if any) in the market value of the interest as a result of the CGT event.

Any amount that the taxpayer actually receives because of the CGT event is not included in the taxpayer’s assessable income (nor is it exempt income).

Where:

(a) under an agreement entered into either before or after the commencement of this section, a taxpayer (in this section called the original taxpayer) incurs expenditure in return for the doing of a thing during a period after the incurring of the expenditure; and

either:

(i) the original taxpayer transfers to another taxpayer (in this section called the recipient taxpayer) all of his or her rights under the agreement in relation to the doing of the thing during the remainder of the period; or

the agreement is discharged (whether by performance or otherwise) in so far as it relates to the doing of the thing during the remainder of the period;

the following provisions have effect for the purpose of this Subdivision:

(c) if the whole or part of a deduction under former Income Tax Assessment Act 1997 in respect of the expenditure is, because of this Subdivision, allowable from the assessable income of the original taxpayer of any year of income occurring after the year of income in which the transfer or discharge occurs—that deduction is instead allowable from the assessable income of the year of income in which the transfer, assignment or discharge occurs;section 51 of this Act or section 8-1 of the

if the recipient taxpayer incurs expenditure in return for the transfer—the recipient taxpayer shall be taken to have incurred, under an agreement entered into at the time of the transfer, so much of that expenditure as is not of a capital, private or domestic nature in return for the doing of the thing during the remainder of the period.

Where:

(a) under an agreement entered into after 25 May 1988, a person (in this section called the original person), or the partners in a partnership (in this section called the original partnership), incurs or incur expenditure in return for the doing of a thing during a period after the incurring of the expenditure;

(b) either of the following (in this section called a partnership change) happens:

a partnership is formed or the original partnership is dissolved, or both; or

the constitution of the original partnership, or the interests of the partners in the original partnership, is or are varied;

with the result that, after the partnership change:

(iii) a person (in this section called the later person), or the partners in a partnership (in this section called the later partnership), holds or hold all of any rights under the agreement to have the thing done during the period after the partnership change; and

the original person, or one or more of the partners in the original partnership, has an interest in the rights after the partnership change; and

(c) the whole or part of a deduction under former Income Tax Assessment Act 1997 in respect of the expenditure (which whole or part is in this section called a spread deduction) is, because of the application of this Subdivision, allowable from the assessable income of the original person or the original partnership of the year of income in which the partnership change happens or a subsequent year of income;section 51 of this Act or section 8-1 of the

the following provisions have effect:

if a spread deduction is allowable in relation to the year of income in which the partnership change occurs—the entitlement to the deduction shall, for the purposes of this Act but subject to any later application of this section, be apportioned between the original person or original partnership and the later person or later partnership according to the portions of the eligible service period in the year of income (or, if the case requires, of so much of the period as occurs after a partnership change resulting from a previous application of this section) that occur before and after the partnership change;

if a spread deduction relates to a subsequent year of income—the later person or later partnership, instead of the original person or original partnership, shall, for the purposes of this Act but subject to any later application of this section, be entitled to the deduction;

for the purposes of any later application of this section or section 82KZN, the later person or later partnership, instead of the original person or original partnership, shall be taken to have incurred the expenditure under the agreement.

The object of this Division is to provide for certain limited partnerships to be treated as companies for tax purposes.

In this Division:

income tax law means:

(a) this Act (other than this Division and Income Tax Assessment Act 1997); andDivision 830 of the

an Act that imposes any tax payable under this Act; and

(c) the Income Tax Rates Act 1986; and

(d) the Taxation Administration Act 1953, so far as it relates to an Act covered by paragraph (a), (b) or (c); and

any other Act, so far as it relates to an Act covered by paragraph (a), (b), (c) or (d); and

regulations under an Act covered by any of the preceding paragraphs.

year of income means (except in paragraph 94L(b)) the year of income in which 19 August 1992 occurred or a later year of income.

For the purposes of this Division, a change in the composition of a limited partnership does not affect the continuity of the partnership.

For the purposes of this Division, a limited partnership is a corporate limited partnership in relation to a year of income of the partnership if:

the year of income is the 1995-96 year of income or a later year of income; or

the partnership was formed on or after 19 August 1992; or

both:

the partnership was formed before 19 August 1992; and

the partnership does not pass the continuity of business test set out in section 94E; or

all of the following apply:

the partnership was formed before 19 August 1992;

a change in the composition of the partnership occurs during the period:

(A) beginning on 19 August 1992; and

(B) ending at the end of the year of income;

the partners do not elect, in accordance with section 94F, that the partnership is not to be treated as a corporate limited partnership in relation to the year of income.

However, a partnership that is a VCLP, an ESVCLP, an AFOF or a venture capital management partnership cannot be a corporate limited partnership.

Note 1: This subsection can apply without the partnership meeting the applicable registration requirements under the Venture Capital Act 2002. It must be registered under that Act in order to be a VCLP, an ESVCLP or an AFOF, but it is possible for it to remain registered while the requirements are not met.

Note 2: VCLPs, ESVCLPs, AFOFs and VCMPs are taxed as ordinary partnerships under Division 5.

Note 3: If the partnership’s registration as a VCLP, ESVCLP or AFOF is unconditional, some partners’ share in capital gains and losses from CGT events relating to some investments may be disregarded: see Subdivision 118-F of the Income Tax Assessment Act 1997.

(3) A venture capital management partnership is a limited partnership that:

is a general partner of one or more of the following:

one or more VCLPs;

one or more ESVCLPs;

one or more AFOFs; and

only carries on activities that are related to being such a general partner.

A limited partnership ceases to be a venture capital management partnership if it ceases to meet the requirements of paragraphs (a) and (b).

Note: In this Act, the term “venture capital management partnership” is usually abbreviated to “VCMP”.

The place of residence of a VCMP is the place at which the partnership has its central management and control.

(5) A limited partnership that is a foreign hybrid limited partnership in relation to a year of income because of subsection 830-10(1) of the Income Tax Assessment Act 1997 is not a corporate limited partnership in relation to the year of income.

Note: As result, both the normal partnership provisions and special provisions relating to foreign hybrid limited partnerships will apply to the entity.

(6) If, for the purpose of applying this Act and the Income Tax Assessment Act 1997 in relation to a partner’s interest in a limited partnership, the partnership is a foreign hybrid limited partnership in relation to a year of income because of subsection 830-10(2) of that Act, the partnership is not a corporate limited partnership in relation to the partner’s interest in relation to the year of income.

Note: As result, both the normal partnership provisions and special provisions relating to foreign hybrid limited partnerships will apply to the entity, but only in relation to the partner’s interest.

In determining whether a limited partnership is a corporate limited partnership in relation to a year of income, the partnership passes the continuity of business test if, and only if:

at all times during the period:

beginning on 19 August 1992; and

ending at the end of the year of income;

the partnership carried on the same business as it carried on immediately before the beginning of that period; and

the partnership did not, at any time during that period, derive income from a business of a kind that it did not carry on, or from a transaction of a kind that it had not entered into in the course of its business operations, before that period.

An election referred to in paragraph 94D(1)(d) in relation to a limited partnership and in relation to a year of income has no effect unless:

the partnership passes the continuity of ownership test set out in section 94G; and

the election is made:

within 6 months after the end of the later of the following years of income:

(A) the year of income to which the election relates;

(B) the year of income in which the Taxation Laws Amendment Act (No. 6) 1992 received the Royal Assent; or

within such further period as the Commissioner allows.

In determining whether a limited partnership is a corporate limited partnership in relation to a year of income, the partnership passes the continuity of ownership test if, and only if:

at all times during the period:

beginning on 19 August 1992; and

ending at the end of the year of income;

more than 50% of the interests in the partnership were held by persons who, immediately before that period, held more than 50% of the interests in the partnership; or

the condition set out in paragraph (a) is not satisfied only because of the acquisition during so much of that period as occurred before 1 July 1993 of interests in the partnership, where the acquisitions are in response to, and in accordance with the terms of:

a prospectus, offer or invitation issued before 19 August 1992; or

if that prospectus, offer or invitation was varied before 19 August 1992—that prospectus, offer or invitation as so varied.

If a partnership is a corporate limited partnership in relation to a year of income, the income tax law has effect, in relation to the partnership and in relation to the year of income, subject to the changes set out in the following provisions of this Subdivision.

A reference in the income tax law (other than the definitions of dividend, and resident or resident of , in section 6 of this Act and other than Division 355 of the Income Tax Assessment Act 1997) to a company or to a body corporate includes a reference to the partnership.

A reference in the income tax law to a partnership does not include a reference to the partnership.

A reference in the income tax law (other than subsection 44(1A) of this Act) to a dividend or to a dividend within the meaning of section 6:

includes a reference to a distribution made by the partnership, whether in money or in other property, to a partner in the partnership; and

does not include a reference to a distribution to the extent to which the distribution is attributable to profits or gains arising during a year of income in relation to which the partnership was not a corporate limited partnership.

If the partnership pays or credits an amount to a partner in the partnership:

against the profits or anticipated profits of the partnership; or

otherwise in anticipation of the profits of the partnership;

(whether or not the amount of the profits or anticipated profits is ascertainable), the amount paid or credited is taken, for the purposes of the income tax law, to be a dividend paid by the partnership to the partner out of profits derived by the partnership.

If the partnership makes a subsequent distribution, the Commissioner must take such steps (if any) as are necessary to ensure that the partner is not subject to double taxation.

A reference in the income tax law to a private company in relation to the year of income does not include a reference to the partnership.

Note: Division 7A (Distributions to entities connected with a private company) applies to certain corporate limited partnerships in the same way as it applies to private companies: see section 109BB.

A reference in the income tax law to a share includes a reference to an interest in the partnership.

A reference in the income tax law to a shareholder includes a reference to a partner in the partnership.

For the purposes of the income tax law:

a reference to the liquidator of the partnership includes a reference to a partner in the partnership who carries out the winding-up of the partnership; and

a reference to distributions made by a liquidator in the course of winding up the partnership includes a reference to distributions made by such a partner to himself or herself in the course of winding-up the partnership.

For the purposes of the income tax law, a change in the composition of the partnership does not affect the continuity of the partnership.

For the purposes of the income tax law, the partnership is:

a resident; and

a resident within the meaning of section 6; and

a resident of ; and

a resident of within the meaning of section 6;

if and only if:

the partnership was formed in ; or

either:

the partnership carries on business in ; or

the partnership’s central management and control is in .

(2) In determining whether the partnership carries on business in Australia for the purposes of subparagraph (1)(f)(i), if, for the year of income, the partnership is an IMR entity (within the meaning of the Income Tax Assessment Act 1997, but disregarding paragraph 842-220(a) of that Act), disregard business that:

is carried on by the partnership (either by itself directly or by another entity on its behalf); and

solely relates to IMR financial arrangements (within the meaning of that Act).

For the purposes of the income tax law, the partnership is taken to have been incorporated:

in the place where it was formed; and

under a law in force in that place.

The application of the income tax law to the partnership as if the partnership were a company is subject to the following changes:

obligations that would be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners;

the partners are jointly and severally liable to pay any amount that would be payable by the partnership;

any offence against the income tax law that would otherwise be committed by the partnership is taken to have been committed by each of the partners.

In a prosecution of a person for an offence that the person is taken to have committed because of paragraph (1)(c), it is a defence if the person proves that the person:

did not aid, abet, counsel or procure the relevant act or omission; and

was not in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the person).

Subdivisions 165-A and 165-B of the Income Tax Assessment Act 1997 apply in relation to the partnership as if the provisions relating to voting power had not been enacted.

The object of this Division is to set out rules relating to the following:

the payment of interest on distributions from certain non-resident trust estates (Subdivision B);

the winding-up of certain non-resident trust estates in existence on 12 April 1989 (Subdivision C);

an accruals system of taxation of certain non-resident trust estates (Subdivision D).

In this Division, unless the contrary intention appears:

1 July 1990 net worth, in relation to a trust estate, means the market value, as at the beginning of 1 July 1990, of the assets of the trust estate, reduced by the liabilities of the trust estate as at the beginning of that day.

accounts has the same meaning as in Part X.

actual transfer means a transfer of the property or services other than a transfer that is taken to have been made because of subsection 102AAK(1), (2), (5), (6), (8), (10) or (11).

arm’s length amount, in relation to an actual transfer of property or services to a trust estate, means the amount that the trustee could reasonably be expected to have been required to pay to obtain the property or the services concerned from the transferor under a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction.

associate has the same meaning as in Part X.

attributable income, in relation to a trust estate, has the meaning given by section 102AAU.

attributable taxpayer has the meaning given by section 102AAT.

attribution account payment has the same meaning as in Part X.

attribution debit has the same meaning as in Part X.

Australian entity has the same meaning as in Part X.

Australian trust has the same meaning as in Part X.

base interest rate for a day has the same meaning as in section 8AAD of the Taxation Administration Act 1953.

CFC has the same meaning as in Part X.

controlled foreign trust has the same meaning as in Part X.

de facto relationship means:

(a) a relationship between 2 persons (whether of the same sex or different sexes) that is registered under a law of a State or Territory prescribed for the purposes of Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; orsection 2E of the

a relationship between 2 persons (whether of the same sex or different sexes) who, although not legally married to each other, live with each other on a genuine domestic basis in a relationship as a couple.

depreciation provision means:

(a) any provision of Income Tax Assessment Act 1997 (other than Subdivision 40-E); orDivision 40 of the

any provision of Division 43 of that Act.

designated concession income has the same meaning as in Part X.

discretionary trust estate means a trust estate where: both of the following conditions are satisfied: a person (who may include the trustee) is empowered (either unconditionally or on the fulfilment of a condition) to exercise any power of appointment or other discretion; the exercise of the power or discretion, or the failure to exercise the power or discretion, has the effect of determining, to any extent, either or both of the following: (A) the identities of those who may benefit under the trust; (B) how beneficiaries are to benefit, as between themselves, under the trust; or one or more of the beneficiaries under the trust have a contingent or defeasible interest in some or all of the corpus or income of the trust estate; or the trustee of another trust estate, being a trust estate where both of the conditions in paragraph (a) are satisfied, benefits, or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the first-mentioned trust estate.

both of the following conditions are satisfied:

a person (who may include the trustee) is empowered (either unconditionally or on the fulfilment of a condition) to exercise any power of appointment or other discretion;

the exercise of the power or discretion, or the failure to exercise the power or discretion, has the effect of determining, to any extent, either or both of the following:

(A) the identities of those who may benefit under the trust;

(B) how beneficiaries are to benefit, as between themselves, under the trust; or

one or more of the beneficiaries under the trust have a contingent or defeasible interest in some or all of the corpus or income of the trust estate; or

the trustee of another trust estate, being a trust estate where both of the conditions in paragraph (a) are satisfied, benefits, or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the first-mentioned trust estate.

eligible designated concession income has the same meaning as in Part X.

entity means any of the following: a company; a partnership; a person in the capacity of trustee; any other person.

a company;

a partnership;

a person in the capacity of trustee;

any other person.

exempt income means the exempt income of the trust estate calculated as if the trustee were a taxpayer who was a resident.

IP time means , by standard time in the , on 12 April 1989.

listed country has the same meaning as in Part X.

listed country trust estate has the meaning given by section 102AAE.

net income, in relation to a trust estate, in relation to a year of income, means:

if the trust estate is a public trading trust in relation to the year of income—the net income (within the meaning of Division 6C) of the public trading trust of the year of income; or

in any other case—the net income (within the meaning of Division 6) of the trust estate.

non-attributable year of income means a non-resident year of income of the trust estate where no amount calculated by reference to the attributable income of the trust estate of that year of income is included in the assessable income of any taxpayer under subsection 102AAZD(1).

non-discretionary trust estate means a trust estate other than a discretionary trust estate.

non-resident family trust has the meaning given by section 102AAH.

non-resident trust estate (except in section 102AAA) means a trust estate that is not a resident trust estate in relation to the year of income.

non-resident year of income means a year of income in relation to which the trust estate is a non-resident trust estate.

profits includes gains, whether of an income or capital nature.

property includes money.

public trading trust means a unit trust that is a public trading trust in relation to the year of income for the purposes of Division 6C.

public unit trust has the meaning given by section 102AAF.

resident trust estate, in relation to a year of income, means:

a resident trust estate in relation to the year of income within the meaning of Division 6; or

a unit trust that is a public trading trust, in relation to the year of income; or

a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust in relation to the year of income.

scheme means:

any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved.

services includes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a benefit, right, privilege, service or facility that is, or is to be, provided under: an arrangement for or in relation to: the performance of work (including work of a professional nature), whether with or without the provision of property; or the provision of, or of the use of facilities for, entertainment, recreation or instruction; or the conferring of benefits, rights or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or a contract of insurance; or an arrangement for or in relation to the lending of money.

an arrangement for or in relation to:

the performance of work (including work of a professional nature), whether with or without the provision of property; or

the provision of, or of the use of facilities for, entertainment, recreation or instruction; or

the conferring of benefits, rights or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or

a contract of insurance; or

an arrangement for or in relation to the lending of money.

subject to tax has the same meaning as in Part X.

tax accounting period has the same meaning as in Part X.

tax law, in relation to a listed country or an unlisted country, has the same meaning as in Part X.

tax offset has the same meaning as in the Income Tax Assessment Act 1997.

transfer:

in relation to property—includes dispose of (whether by assignment, declaration of trust or otherwise) or provide; and

in relation to services—includes allow, confer, give, grant, perform or provide.

trust estate means the trust estate or, as the case requires, the trustee of the trust estate.

underlying transfer, in relation to a transfer of property or services to a trust estate, means:

if that transfer was an actual transfer—the actual transfer; or

if that transfer was taken to have been made because of subsection 102AAK(1)—the actual transfer referred to in that subsection; or

if that transfer was taken to have been made because of subsection 102AAK(2)—the actual transfer referred to in paragraph 102AAK(2)(d); or

if that transfer was taken to have been made because of subsection 102AAK(5)—the actual transfer referred to in paragraph 102AAK(5)(b); or

if that transfer was taken to have been made because of the application of subsection 102AAK(6) or (8) to an actual transfer—the actual transfer; or

if that transfer was taken to have been made because of the application of subsection 102AAK(6) or (8) to a transfer that was taken to have been made because of subsection 102AAK(1)—the actual transfer referred to in subsection 102AAK(1); or

if that transfer was taken to have been made because of the application of subsection 102AAK(6) or (8) to a transfer that was taken to have been made because of subsection 102AAK(5)—the actual transfer referred to in paragraph 102AAK(5)(b); or

if that transfer was taken to have been made because of subsection 102AAK(10)—the actual transfer referred to in paragraph 102AAK(10)(b); or

if that transfer was taken to have been made because of one or more applications of subsection 102AAK(11) to an actual transfer—the actual transfer; or

(k) if that transfer was taken to have been made because of one or more applications of subsection 102AAK(11) to a transfer (in this paragraph called the deemed transfer) that was taken to have been made because of subsection 102AAK(1), (2), (5), (6), (8) or (10)—the actual transfer that, under a preceding paragraph of this definition, is the underlying transfer in relation to the deemed transfer.

underlying transferor means the entity who made the underlying transfer concerned.

unlisted country has the same meaning as in Part X.

weighted statutory interest rate, in relation to a year of income, means:

if there is only one base interest rate in relation to the year of income—that rate; or

if there are 2 or more base interest rates in relation to the year of income—the weighted average of the base rates for the year of income.

For the purposes of the application of section 6AB to this Division, each listed country and each unlisted country is to be treated as a separate foreign country.

Subsection 324(2) applies in relation to this Division in a corresponding way to the way in which it applies in relation to Part X.

For the purposes of this Division, a trust estate is taken to be a listed country trust estate in relation to a year of income if, and only if, either of the following paragraphs applies to each item of income or profit derived by the trust estate in the year of income:

the income or profit is either:

subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

designated concession income in relation to any listed country;

both of the following conditions are satisfied:

a part of the income or profit is either:

(A) subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

(B) designated concession income in relation to any listed country;

the remaining part, or each of the remaining parts, of the income or profit:

(A) is subject to tax in another listed country or in different listed countries, as the case may be, in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

(B) is designated concession income in relation to any listed country.

(2) For the purposes of the application of subparagraph (1)(b)(ii) to a trust estate, if a particular part of an item of income or profit (which part is in this subsection called the item part) derived by the trust estate is included, or would apart from Subdivision 50-A or section 51-5, 51-10 or 51-30 of the Income Tax Assessment Act 1997 be included, in the assessable income of the trust estate of a year of income (in this subsection called the trust’s year of income) and one of the following paragraphs applies:

both of the following conditions are satisfied:

the trustee of the trust estate is liable to be assessed and pay tax under section 98, 99 or 99A in respect of a part of, or a share in, the net income of the trust estate of the trust’s year of income;

the whole or a part of the part or share of the net income is attributable to the item part;

all of the following conditions are satisfied:

(i) an amount is included in the assessable income of another taxpayer of the trust’s year of income or the next following year of income (which taxpayer is in this subsection called the actual taxpayer) under subsection 92(1) or section 97, 98A or 100;

the actual taxpayer is:

(A) a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(B) the trustee of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust in relation to the year of income concerned; or

(D) the trustee of a public trading trust in relation to the year of income concerned; or

(E) the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99A in respect of a part of, or a share in, the net income of a trust estate;

if sub-subparagraph (ii)(A), (B), (C) or (D) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the item part;

if sub-subparagraph (ii)(E) applies—the whole or a part of the part or share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the item part;

both of the following conditions are satisfied:

(i) trustee beneficiary non-disclosure tax is payable under net income amount) of a share of the net income of the trust estate of the trust’s year of income;Division 6D on the whole or part (the

the whole or part of the net income amount is attributable to the item part;

the item part is to be treated as if it were subject to tax in a listed country in a tax accounting period ending before the end of the trust’s year of income.

For the purposes of this section, where a part of a particular item of income or profits derived by an entity would, if it were a separate item of income or profits, be taken to be subject to tax in a listed country in a particular tax accounting period, that part is taken to be subject to tax in that listed country in that tax accounting period.

Subject to this section, for the purposes of this Division, a unit trust is a public unit trust at all times during a year of income if either of the following conditions are satisfied:

at any time during the year of income:

any of the units in the unit trust were listed for quotation in the official list of a stock exchange in or elsewhere; or

any of the units in the unit trust were offered to the public;

at all times during the year of income, the units in the unit trust were held by not fewer than 50 persons.

In determining whether a unit trust is a public unit trust at all times during a year of income for the purposes of this Division, subsections 102P(3) to (9) (inclusive) and (11) apply as if:

a reference in those subsections to Division 6C were a reference to this Division; and

a reference in those subsections to subsection 102P(1) were a reference to subsection (1) of this section; and

a reference in those subsections to a public unit trust in relation to a year of income were a reference to a public unit trust at all times during a year of income.

(3) In determining whether a unit trust (in this subsection called the first unit trust) is a public unit trust at all times during a year of income for the purposes of this Division, the following provisions have effect:

the following entities are taken to be one person:

an entity, whether or not it holds units in the first unit trust; and

the entity or entities who are the associate or associates of the entity;

where any units in the first unit trust are held by the trustee of another trust that, apart from this paragraph, is a public unit trust at all times during the year of income—a person who has a beneficial interest in property of that other trust that consists of those units is taken to hold those units;

where any units in the first unit trust are held by the trustee of another trust that:

apart from paragraph (b); or

by virtue of the application of paragraph (b);

is a public unit trust at all times during the year of income—a person who has a beneficial interest in the property of that other trust that consists of those units (whether or not that beneficial interest is taken to be held by virtue of the application of this paragraph) is taken to hold those units.

For the purposes of this Division, an entity is taken to be in a position to control a trust estate if, and only if:

a group in relation to the entity had the power by means of the exercise by the group of any power of appointment or revocation or otherwise, to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust estate; or

a group in relation to the entity was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust estate; or

a group in relation to the entity was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (a) or (b); or

a trustee of the trust estate was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the entity; or

a group in relation to the entity was able to remove or appoint the trustee, or any of the trustees, of the trust estate.

In subsection (1), a reference to a group in relation to an entity is a reference to:

the entity acting alone; or

an associate of the entity acting alone; or

the entity and one or more associates of the entity acting together; or

2 or more associates of the entity acting together.

Subject to subsections (4) and (5), for the purposes of this Division, a trust estate is a non-resident family trust in relation to a natural person at a particular time if, and only if, at that time:

the trust estate is either:

a post-marital or post-relationship family trust in relation to the natural person; or

a family relief trust in relation to the natural person; and

the trust is constituted by:

a deed of trust or other instrument; or

an order or declaration of a court.

For the purposes of this section, a trust estate is a post-marital or post-relationship family trust in relation to a natural person at a particular time if:

either of the following conditions is satisfied:

the trust was created pursuant to:

(A) a decree or order of dissolution or annulment of marriage, being a dissolution or annulment that, because of the Family Law Act 1975, has effect, or continues to have effect in Australia or is recognised as valid in Australia; or

(B) a decree or order of judicial separation or a similar decree or order;

the trust was created in consequence of the break-down of a de facto relationship; and

(b) at that time, the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the primary potential beneficiaries) are natural persons who:

are non-residents at that time; and

are covered by any of the following categories:

(A) the spouse or former spouse of the natural person;

(B) a child of the natural person;

(C) a child of the former spouse of the natural person, being a child who was such a child at a time when the former spouse was the spouse of the natural person;

(D) a child of the spouse of the natural person.

(3) For the purposes of this section, a trust estate is a family relief trust in relation to a natural person at a particular time (in this subsection called the test time) if:

(a) the only persons who benefit, or are capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust (which persons are in subsections (4) and (5) called the primary potential beneficiaries) are natural persons who:

are identified by name in the trust deed or instrument, or in the court order or declaration, constituting the trust; and

are non-residents at that time; and

are covered by any of the following categories:

(A) the spouse or former spouse of the natural person;

(B) a parent of the natural person or of the natural person’s spouse or former spouse;

(C) a child of the natural person or of the natural person’s spouse or former spouse;

(D) a grandparent of the natural person;

(E) a grandchild of the natural person;

(F) a brother or sister of the natural person or of the natural person’s spouse or former spouse;

(G) a child of a brother or sister mentioned in sub-subparagraph (F); and

the trust was established, and is operated, for the relief of persons who are in necessitous circumstances; and

any of the following conditions is satisfied:

at the test time, the assets of the trust are not excessive having regard to the requirements, or likely requirements, of the primary potential beneficiaries;

(ii) no transfers of property or services to the trust estate were made during the period (in this paragraph called the test period) commencing at the IP time and ending at the test time;

immediately after each transfer of property or services to the trust estate made during the test period, the assets of the trust were not excessive having regard to the requirements, or likely requirements, of the beneficiaries at the time of the transfer.

Note: Section 960-255 of the Income Tax Assessment Act 1997 may be relevant to determining relationships for the purposes of subparagraph (3)(a)(iii).

(4) Subsection (1) does not prevent a trust estate from being a non-resident family trust in relation to a natural person at a particular time if, in the event of the death of a particular primary potential beneficiary at that time, one or more natural persons (which persons are in subsection (5) called the secondary potential beneficiaries) who:

are non-residents at that time; and

are children of the primary potential beneficiary;

would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.

(5) Subsections (1) and (4) do not prevent a trust estate from being a non-resident family trust in relation to a natural person at a particular time if, in the event of the death of all of the primary potential beneficiaries and all of the secondary potential beneficiaries at that time, there are one or more deductible gift recipients covered by an item in any of the tables in Subdivision 30-B of the Income Tax Assessment Act 1997, or item 2 of the table in section 30-15 of that Act, that would benefit, or be capable (whether by the exercise of a power of appointment or otherwise) of benefiting, under the trust.

For the purposes of this section, if, at a particular time, an entity holds an interest in, or right to benefit under, a trust that is dependent on the death of one or more natural persons, then, the entity is taken to be an entity who, in the event of the death of that natural person or those natural persons immediately after that time, would benefit under the trust.

A reference in this section to a natural person does not include a reference to a natural person in the capacity of a trustee.

A reference in this Division to the transfer of property or services to a trust estate includes a reference to the transfer of such property or services by way of the creation of the trust estate.

For the purposes of this Division, where an entity acquires property that did not previously exist, the property is taken to have existed immediately before the acquisition and to have been transferred by the entity who created the property.

For the purposes of this Division, property or services are taken to have been transferred to an entity if the property or services have been applied for the benefit of, or in accordance with the directions of, the entity.

Without limiting the generality of subsection (3), a reference in that subsection to the application of property or services for the benefit of an entity includes a reference to the application of property or services in the discharge, in whole or in part, of a debt due by the entity.

Unless the contrary intention appears, a reference in this Division to a transfer of property or services includes a reference to a transfer made before the commencement of this Division.

A reference in this Division to a transfer of property or services made before the IP time includes a reference to a transfer made at the IP time.

(1) For the purposes of this Division, where an entity (in this subsection called the prime entity) causes another entity to actually transfer property or services to a trust estate, the prime entity is taken to have transferred the property or services (instead of the other entity).

For the purposes of this Division, where:

(a) the trustee of a trust estate issues units in the trust to an entity (in this subsection called the first entity) in the first entity’s capacity as a manager, underwriter or dealer in relation to the marketing or placement of the units; and

(b) in the course of the marketing or placement of the units, the units are disposed of by the first entity to another entity (in this subsection called the second entity); and

(c) at a particular time (in this subsection called the second entity’s transfer time), the second entity transfers property or services to the first entity as consideration for the acquisition of the units; and

(d) the first entity has actually transferred, or actually transfers, property or services (in this subsection called the original property or services) to the trust estate for the sole purpose of acquiring the units;

the second entity is taken to have transferred the original property or services (instead of the first entity) at the second entity’s transfer time.

A reference in subsection (2) to a unit in a trust estate is a reference to an interest (however described) in any of the income or property of the trust estate.

Subsections (1) and (2) do not limit the operation of subsection (5).

Where, under a scheme:

(a) an entity (in this subsection called the scheme entity) actually transfers property or services to another entity; and

property or services are actually transferred to a trust estate at a particular time otherwise than by the scheme entity;

the Commissioner may, for the purposes of this Division, treat the property or services mentioned in paragraph (b) as having been transferred by the scheme entity to the trust estate (instead of by any other entity) at that time to such extent as the Commissioner considers reasonable.

For the purposes of this Division, if (apart from subsections (8), (10) and (11)) an entity, being a partnership, transfers property or services to a trust estate at a particular time:

each partner in the partnership is taken to have transferred a part of the property or services to the trust estate at that time; and

the market value of the part transferred by a particular partner is calculated using the formula:

where:

Market value means the market value, immediately before the transfer, of the property or services transferred by the partnership.

Partner’s interest means:

the partner’s percentage interest in the profits of the partnership as at that time; or

the partner’s percentage interest in the property of the partnership as at that time;

or, if they are different, whichever is the higher.

Nothing in paragraph (6)(a) affects the application of this Division to the transfer made by the partnership concerned.

For the purposes of this Division, if:

(a) apart from this subsection, subsections (6), (10) and (11), an entity being the trustee of a trust estate (in this subsection called the transferor trust estate) transfers property or services (in this subsection called the transferred property or services) to another trust estate (in this subsection called the transferee trust estate) at a particular time (in this subsection called the transfer time); and

the transferor trust estate was an Australian trust, or a controlled foreign trust, at the transfer time; and

the transferor trust estate was a discretionary trust estate at the transfer time; and

apart from this subsection, subsections (6), (10) and (11), one or more other entities transferred property or services to the transferor trust estate at or before the transfer time;

each of those other entities is taken to have transferred the transferred property or services to the transferee trust estate at the transfer time.

Nothing in subsection (8) affects the application of this Division to the transfer mentioned in paragraph (8)(a).

For the purposes of this Division, where:

any of the following subparagraphs applies:

(i) any of the following events occurs in relation to a company (which company is in this subsection called the transferor):

(A) the company passes a resolution for its winding-up;

(B) an order is made for the winding-up of the company;

(C) any similar event;

(ii) a partnership (in this subsection also called the transferor) ceases to exist for the purposes of this Act;

(iii) either of the following sub-subparagraphs applies in relation to the trustee of a trust estate (in this subsection also called the transferor):

(A) the trust estate commences to be wound-up;

(B) the trust estate ceases to exist for the purposes of this Act; and

(b) an actual transfer of property or services is made to a trust estate (in this subsection called the transferee) as a consequence of the transferor being wound-up or ceasing to exist;

the transferor is taken to have transferred to the transferee the property or services concerned.

For the purposes of this Division, where:

(a) the following subparagraphs apply to an entity (in this subsection called the defunct entity):

the defunct entity is a company, a partnership or the trustee of a trust estate;

the defunct entity transferred property or services to a trust estate (including a transfer that was taken to have been made because of another application or other applications of this subsection) at a particular time;

if the defunct entity is a company—any of the following events occurs:

(A) the company passes a resolution for its winding-up;

(B) an order is made for the winding-up of the company;

(C) any similar event;

if the defunct entity is a partnership—the partnership ceases to exist for the purposes of this Act;

if the defunct entity is a trustee of a trust estate—either of the following sub-subparagraphs applies:

(A) the trust estate commences to be wound-up;

(B) the trust estate ceases to exist for the purposes of this Act; and

(b) the Commissioner is satisfied that another entity (in this subsection called the successor entity) has benefited or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting (either directly or indirectly through one or more interposed companies, partnerships or trusts) by, or as a result of:

a transfer of property or services made by the defunct entity; or

a transfer of property or services made as a consequence of the defunct entity being wound-up or ceasing to exist; and

the Commissioner is of the opinion that it is appropriate to apply this subsection to the successor entity;

the assessable income of the successor entity of the year of income in which the event, or the earliest event, mentioned in subparagraph (a)(iii), (iv) or (v) occurred and of each subsequent year of income is to be determined as if the successor entity had transferred to the trust estate mentioned in subparagraph (a)(ii), at the time mentioned in that subparagraph:

the whole of the property or services mentioned in that subparagraph; or

if the Commissioner thinks it appropriate—a part of the property or services referred to in that subparagraph.

A reference in this Division to a transfer of property or services to a trust estate does not include a reference to a transfer made by the trustee of the estate of a deceased person under:

the terms of the deceased person’s will or codicil; or

an order of a court that varied or modified the provisions of the deceased person’s will or codicil;

unless:

the transfer was made in or as the result of the exercise (by the trustee or any other person) of a power of appointment or any other discretion; or

under subsection 102AAK(1), the property or services are taken to have been transferred by an entity other than the trustee, instead of by the trustee; or

under subsection 102AAK(5), the Commissioner treats the property or services as having been (to any extent) transferred by an entity other than the trustee, instead of by the trustee.

For the purposes of this section, if:

(a) an amount is included in the assessable income of a taxpayer of a year of income (which year of income is in this section called the current year of income), being the year of income commencing on 1 July 1990 or a subsequent year of income, under section 99B in relation to a trust estate; and

(b) the whole or a part of the amount so included in the taxpayer’s assessable income (which whole or part is in this section called the distributed amount) is attributable to:

(i) if the trust estate was a listed country trust estate in relation to a particular non-resident year of income of the trust estate (in this section called the non-resident trust’s year of income)—so much of the income and profits of the trust estate of the non-resident trust’s year of income as represents eligible designated concession income in relation to any listed country in relation to the non-resident trust’s year of income; or

(ii) if the trust estate was not a listed country trust estate in relation to a particular non-resident year of income of the trust estate (in this section also called the non-resident trust’s year of income)—so much of the income and profits of the trust estate of the non-resident trust’s year of income as has not been subject to tax in any listed country in a tax accounting period:

(A) ending before the end of the non-resident trust’s year of income; or

(B) commencing during the non-resident trust’s year of income;

then:

the distributed amount is the distributed amount of the non-resident trust’s year of income; and

the taxpayer is the original taxpayer in relation to the distributed amount of the non-resident trust’s year of income.

For the purposes of subsection (1), unless the contrary is established by the taxpayer:

a distributed amount in relation to a listed country trust estate in relation to a non-resident trust’s year of income is taken to be wholly attributable to income and profits of the trust estate of that year of income that represent eligible designated concession income in relation to a listed country; and

a distributed amount in relation to a trust estate that was not a listed country trust estate in relation to a non-resident trust’s year of income is taken to be wholly attributable to income and profits of the trust estate of that year of income that have not been subject to tax in any listed country in a tax accounting period.

This section does not apply to a distributed amount that is attributable to income or profits of the estate of a deceased person if the amount was paid to, or applied for the benefit of, the taxpayer within 3 years after the death of that person.

This section does not apply to a distributed amount that was included in the assessable income of a taxpayer of a year of income under section 99B in relation to a trust estate if, at all times during the year of income, the trust:

was a public unit trust; and

was not a controlled foreign trust.

Subject to this section, if the original taxpayer in relation to the distributed amount of the non-resident trust’s year of income is:

a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

the trustee of a public trading trust in relation to the current year of income; or

the trustee of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust in relation to the current year of income;

the taxpayer is liable to pay interest to the Commissioner in respect of the distributed amount of the non-resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Distributed amount means the distributed amount of the non-resident trust’s year of income.

Applicable rate of tax has the meaning given by subsection (10).

FITO (Foreign income tax offset) means so much of any tax offset under Division 770 of the Income Tax Assessment Act 1997 to which the taxpayer is entitled as is attributable to the distributed amount of the non-resident trust’s year of income.

Subject to this section, if:

the original taxpayer in relation to the distributed amount of the non-resident trust’s year of income is the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99A in respect of a part of, or a share in, the net income of the trust estate; and

(b) the whole or a part (which whole or part is in this subsection called the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income) of the part or share of the net income is attributable to the distributed amount of the non-resident trust’s year of income;

the taxpayer is liable to pay interest to the Commissioner in respect of the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Taxpayer’s portion of the distributed amount means the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income.

Applicable rate of tax has the meaning given by subsection (10).

FITO (Foreign income tax offset) means so much of any tax offset under Division 770 of the Income Tax Assessment Act 1997 to which the taxpayer is entitled as is attributable to the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income.

Subject to this section, if:

the original taxpayer in relation to the distributed amount of the non-resident trust’s year of income is the trustee of a trust estate or a partnership; and

(b) the following conditions are satisfied in relation to another taxpayer (in this subsection called the actual taxpayer):

an amount is included in the assessable income of the actual taxpayer of a year of income under subsection 92(1) or section 97, 98A or 100;

the actual taxpayer is:

(A) a company or a natural person (other than a company or a natural person in the capacity of a trustee); or

(B) the trustee of a complying superannuation fund, a non-complying superannuation fund, a complying approved deposit fund, a non-complying approved deposit fund or a pooled superannuation trust in relation to the year of income; or

(D) the trustee of a public trading trust in relation to the year of income; or

(E) the trustee of a trust estate who is liable to be assessed and pay tax under section 98, 99 or 99A in respect of a part of, or a share in, the net income of a trust estate;

(iii) if sub-subparagraph (ii)(A), (B), (C) or (D) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the distributed amount of the non-resident trust’s year of income;

(iv) if sub-subparagraph (ii)(E) applies—the whole or a part (which whole or part is in this subsection also called the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income) of the part or share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the distributed amount of the non-resident trust’s year of income;

the actual taxpayer is liable to pay interest to the Commissioner in respect of the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

Taxpayer’s portion of the distributed amount means the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income.

Applicable rate of tax has the meaning given by subsection (10).

FITO (Foreign income tax offset) means so much of any tax offset under Division 770 of the Income Tax Assessment Act 1997 to which the taxpayer is entitled as is attributable to the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income.

If:

(a) paragraph 102UK(2)(b) or 102UM(2)(b) has the effect that the whole or a part of a share of the net income of a trust estate (the first trust estate) is not included in the assessable income of the trustee of another trust estate (the second trust estate); and

(b) the whole or the part of the share (which whole or part is in this subsection called the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the distributed amount of the non-resident trust’s year of income; and

if paragraph 102UK(2)(b) or 102UM(2)(b) were ignored, the second trust estate would be an interposed trust mentioned in applying subparagraph (4)(b)(iii) or (iv) of this section; and

this subsection does not also apply to the trustee of a trust interposed between the first trust estate and the non-resident trust;

the trustee of the first trust estate is liable to pay interest to the Commissioner in respect of the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income, calculated under subsection (5), on the amount calculated using the formula:

where:

applicable rate of tax has the meaning given by subsection (10).

FITO (Foreign income tax offset) means so much of any tax offset under Division 770 of the Income Tax Assessment Act 1997 to which the trustee of the first trust would be entitled, in respect of the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income, if the taxpayer’s portion of the distributed amount of the non-resident trust’s income were an amount in respect of which the trustee were liable to be assessed and to pay tax under section 99A.

taxpayer’s portion of the distributed amount means the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income.

Interest payable by a taxpayer under this section is to be calculated:

in respect of the period commencing at whichever of the following times is the latest:

the beginning of the first year of income of the taxpayer that begins after the end of the non-resident trust’s year of income;

the beginning of the year of income of the taxpayer commencing on 1 July 1990;

(iii) if the taxpayer is a natural person (other than a natural person in the capacity of a trustee) who first commenced to be a resident of Australia at a time (in this subparagraph called the first residence time) on or after 1 July 1990—the beginning of the year of income of the taxpayer next following the year of income of the taxpayer in which the first residence time occurred;

and ending at the end of the assessment year of income; and

at the base interest rate.

(6) Where the assessable income of a taxpayer of a year of income includes one or more of the following amounts in relation to one or more non-resident years of income of a particular trust estate (which amounts are in this subsection called the principal amounts):

the distributed amount of the non-resident trust’s year of income;

the taxpayer’s portion of the distributed amount of the non-resident trust’s year of income;

the aggregate of the interest payable by the taxpayer in respect of the principal amounts is not to exceed the difference between:

the aggregate of the principal amounts; and

(d) so much of the tax payable in respect of the year of income as is attributable to the aggregate of the principal amounts (ignoring any tax offset under Income Tax Assessment Act 1997).Part 3-6 of the

(7) For the purposes of this section, the extent to which an amount (in this subsection called the section 99B amount) included in the assessable income of a taxpayer of a year of income under section 99B in relation to a trust estate is attributable to an amount (in this subsection called the trust amount) covered by subparagraph (1)(b)(i) or (ii) is to be determined in accordance with the following paragraphs:

in all cases—distributions of income and profits of the trust estate are to be taken to have been made in the following order:

first, from income and profits of the earliest non-resident year of income;

then, successively from income and profits of successive subsequent years of income;

(b) if subparagraph (1)(b)(i) applies—the extent to which the amount (in this paragraph called the adjusted section 99B amount), being so much of the section 99B amount as is attributable to the income and profits of the trust estate of the non-resident trust’s year of income, represents eligible designated concession income in relation to any listed country in relation to the non-resident trust’s year of income is calculated using the formula:

where:

Adjusted section 99B amount means the adjusted section 99B amount.

Eligible designated concession income means the number of dollars in the amount, being so much of the income and profits of the trust estate of the non-resident trust’s year of income as represents eligible designated concession income in relation to any listed country in relation to the non-resident trust’s year of income.

Total income means the number of dollars in the income and profits of the trust estate of the non-resident trust’s year of income.

(c) if subparagraph (1)(b)(ii) applies—the extent to which the amount (in this paragraph called the adjusted section 99B amount), being so much of the section 99B amount as is attributable to the income and profits of the trust estate of the non-resident trust’s year of income, represents income and profits that have not been subject to tax in a listed country in a tax accounting period mentioned in that subparagraph is calculated using the formula:

where:

Adjusted section 99B amount means the adjusted section 99B amount.

Untaxed income means the number of dollars in the amount, being so much of the income and profits of the trust estate of the non-resident trust’s year of income as is not subject to tax in any listed country in a tax accounting period mentioned in that subparagraph.

Total income means the number of dollars in the income and profits of the trust estate of the non-resident trust’s year of income.

For the purposes of subsection (7), an amount of income or profits of a trust estate is to be taken to be distributed if the amount is paid to, or applied for the benefit of (within the meaning of section 99B), a beneficiary of the trust estate.

Where, apart from this subsection, the amount of interest that would be payable under this section by a taxpayer in respect of the distributed amount of a non-resident trust’s year of income, or in respect of the taxpayer’s portion of the distributed amount of a non-resident trust’s year of income, is less than 50 cents, interest is not payable by the taxpayer under this section.

For the purposes of this section, the applicable rate of tax in relation to a taxpayer is:

if the taxpayer is a company (other than a company in the capacity of a trustee)—the corporate tax rate for the year of tax to which the assessment year of income relates; or

(b) in any other case—the maximum rate specified in the table in Income Tax Rates Act 1986 that applies for the assessment year of income.Part I of Schedule 7 of the

(10A) Paragraph (10)(b) has effect as if the maximum rate specified as mentioned in that paragraph was increased by 2 percentage points for assessment years of income that correspond to the temporary budget repair levy years (Income Tax (Transitional Provisions) Act 1997).within the meaning of section 4-11 of the

For the purposes of the application of this section to a taxpayer, the assessment year of income is:

if subsection (2) or (3) applies—the current year of income; or

if subsection (4) applies—the year of income referred to in subparagraph (4)(b)(i).

For a taxpayer who is not a full self-assessment taxpayer for the assessment year of income, the Commissioner must make an assessment of the interest payable by the taxpayer under this section.

If:

a taxpayer is a full self-assessment taxpayer for the assessment year of income; and

the taxpayer lodges a return for that year;

then:

the Commissioner is taken to have made an assessment of the interest payable by the taxpayer under this section for the year, equal to the amount specified in the return as the interest so payable; and

Note: If any interest is so payable, the return must specify the amount: see section 161AA.

the assessment is taken to have been made on the day on which the return is lodged; and

the return is taken to be a notice of that assessment given to the taxpayer by the Commissioner on that day.

Sections 170, 172, 174, 254 and 255 of this Act, and Division 5 of the Income Tax Assessment Act 1997 (How to work out when to pay your income tax), apply to interest payable under section 102AAM in the same way as they apply to income tax.

The object of this Subdivision is to set out rules relating to the following:

the determination of attributable taxpayer status (section 102AAT);

the calculation of the attributable income of a trust estate (sections 102AAU to 102AAZC (inclusive));

the inclusion of amounts in assessable income (sections 102AAZD, 102AAZE and 102AAZF);

the keeping of associated records (section 102AAZG).

(1) Subject to this Division, for the purposes of this Division, an entity is an attributable taxpayer in relation to a year of income of the entity (which year of income is in this section called the entity’s current year of income) and in relation to a particular trust estate if, and only if:

either of the following subparagraphs applies:

all of the following conditions are satisfied:

(A) the trust estate was a discretionary trust estate at any time during the entity’s current year of income;

(B) the trust estate was not a public unit trust at all times during the entity’s current year of income;

(C) the entity has transferred property or services to the trust estate at a time (in this subparagraph called the transfer time) before or during the entity’s current year of income;

(D) if the underlying transfer was made in the course of carrying on a business—it is not the case that, at or about the time of the underlying transfer, identical or similar property or services were transferred by the underlying transferor in the ordinary course of business to ordinary clients or customers under arm’s length transactions and in similar circumstances and subject to identical or similar terms and conditions as those that applied in relation to the underlying transfer of the property or services concerned;

(E) if the underlying transfer was made under an arm’s length transaction otherwise than in the course of carrying on a business—the entity was in a position, at any time after the transfer time and before the end of the entity’s current year of income, to control the trust estate;

(F) if the transfer was made before the IP time and the trust estate was in existence, and was a discretionary trust estate, at the IP time—the entity was in a position, at any time after the IP time and before the end of the entity’s current year of income, to control the trust estate;

all of the following conditions are satisfied:

(A) the trust estate was a non-discretionary trust estate, or a public unit trust, at all times during the entity’s current year of income when the trust estate was in existence;

(B) the entity has transferred property or services to the trust estate after the IP time and before or during the entity’s current year of income;

(C) the underlying transfer was made for no consideration or for a consideration less than the arm’s length amount in relation to the underlying transfer;

(D) it is not the case that the sole purpose of the underlying transfer was the acquisition of units in the trust estate where the parties to the underlying transfer were at arm’s length with each other in relation to the underlying transfer and the trust estate was a public unit trust at all times during the entity’s current year of income when the trust estate was in existence; and

if the entity is a natural person (other than a natural person in the capacity of a trustee):

if:

(A) the natural person first commenced to be a resident of Australia at a time (in this subparagraph called the first residence time) after the IP time and before the end of the entity’s current year of income; and

(B) the transfer, or each of the transfers, covered by paragraph (a) was made before the first residence time;

the trust estate was not a non-resident family trust in relation to the natural person at all times:

(C) after the beginning of the first year of income of the natural person after the first residence time; and

(D) before the end of the entity’s current year of income;

when the trust estate was in existence; or

in any other case—the trust estate was not a non-resident family trust in relation to the natural person at all times after the beginning of the year of income of the taxpayer commencing on 1 July 1990 and before the end of the entity’s current year of income when the trust estate was in existence; and

it is not the case that:

(i) the entity is a natural person (other than a natural person in the capacity of a trustee) who first commenced to be a resident of Australia at a time (in this paragraph called the first residence time) after the IP time and before the end of the entity’s current year of income; and

the transfer was made before the first residence time; and

the entity was not in a position to control the trust estate at any time during the period:

(A) commencing at the beginning of the first year of income of the entity after the first residence time; and

(B) ending at the end of the entity’s current year of income.

For the purposes of this section, if:

(a) an entity (in this subsection called the transferor) being a partnership is an attributable taxpayer in relation to the entity’s current year of income and in relation to a particular trust estate (in this subsection called the transferee trust estate) because of one or more transfers (being actual transfers or transfers taken to have been made because of subsection 102AAK(1), (2) or (5)) of property or services made by the transferor to the transferee trust estate; or

(b) an entity (in this subsection also called the transferor) being a trust estate is an attributable taxpayer in relation to the entity’s current year of income and in relation to another trust estate (in this subsection also called the transferee trust estate) because of one or more transfers (being actual transfers or transfers taken to have been made because of subsection 102AAK(1), (2) or (5)) of property or services made by the transferor to the transferee trust estate;

the question whether any other entity is an attributable taxpayer in relation to the same year of income and in relation to the transferee trust estate is to be determined as if:

if paragraph (a) applies—subsection 102AAK(6) did not apply in relation to any of the transfers mentioned in that paragraph; or

if paragraph (b) applies—subsection 102AAK(8) did not apply in relation to any of the transfers mentioned in that paragraph.

If:

apart from this subsection, an entity, being a natural person (other than a natural person in the capacity of a trustee), is not an attributable taxpayer in relation to the entity’s current year of income and in relation to a trust estate; and

apart from paragraph (1)(b), the entity would have been such an attributable taxpayer; and

apart from subparagraph 102AAH(2)(b)(i) or (3)(a)(ii), the trust estate was not a non-resident family trust in relation to the natural person at some time after the entity’s current year of income when the natural person was alive and the trust estate was in existence;

the following provisions have effect:

subsection (1) has effect as if paragraph (1)(b) had applied;

section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

If:

apart from this subsection, an entity is not an attributable taxpayer in relation to the entity’s current year of income and in relation to a trust estate; and

apart from sub-subparagraph (1)(a)(i)(E) or (F) or paragraph (1)(c), the entity would have been such an attributable taxpayer; and

the entity was in a position to control the trust estate at some time after the entity’s current year of income when the trust estate was in existence;

the following provisions have effect:

subsection (1) has effect as if sub-subparagraph (1)(a)(i)(E) or (F) or paragraph (1)(c), as the case may be, had applied;

section 170 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this subsection.

Subject to this Subdivision, the attributable income of a non-resident trust estate of a year of income is:

if the non-resident trust estate is not a listed country trust estate in relation to the year of income—the net income of the non-resident trust estate of the year of income; or

if the non-resident trust estate is a listed country trust estate in relation to the year of income—the amount that would have been the net income of the non-resident trust estate of the year of income if the exempt income of the trust estate included all income and profits of the trust estate, other than eligible designated concession income in relation to any listed country in relation to the year of income;

reduced by:

so much (if any) of the amount covered by paragraph (a) or (b) as represents:

an amount:

(A) that is or has been included in the assessable income of a beneficiary under section 97; or

(B) in respect of which the trustee of the non-resident trust estate is or has been assessed and liable to pay tax under section 98, 99 or 99A; or

(C) on which trustee beneficiary non-disclosure tax is payable under Division 6D; or

an amount:

(A) that is paid to a beneficiary, being a resident of a listed country, during the period of 13 months commencing at the beginning of the year of income; and

(B) subject to tax in a listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; or

an amount that consists of, or is attributable to, the franked part of a distribution, or the part of a distribution that has been franked with an exempting credit; or

(v) if an amount is or has been included in the assessable income of any taxpayer under taxpayer’s year of income) and in relation to a trust estate other than the non-resident trust estate—so much of an amount paid to the trustee of the non-resident trust estate as represents the attributable income of that other trust estate of the taxpayer’s year of income; orsection 102AAZD because the taxpayer is an attributable taxpayer in relation to any year of income (in this subparagraph called the

if:

(A) an attribution account payment is made to the trustee of the trust estate during the year of income; and

(B) the making of the attribution account payment gives rise to an attribution debit, in relation to any taxpayer, for the entity making the payment;

the amount of the attribution debit; or

an amount of income or profits of the trust estate:

(A) that is subject to tax in any listed country in a tax accounting period ending before the end of the year of income or commencing during the year of income; and

(B) that is not eligible designated concession income in relation to any listed country in relation to the year of income; and

so much of any foreign tax or Australian tax paid by the trustee or a beneficiary as is attributable to so much of the amount covered by paragraph (a) or (b), as the case requires, as remains after the reduction or reductions covered by paragraph (c).

The attributable income of a resident trust estate of a year of income is 0.

For the purposes of sub-subparagraph (1)(c)(ii)(A), a beneficiary is to be taken to be a resident of a listed country if, and only if, the beneficiary is treated as a resident of the listed country for the purposes of the tax law of the listed country.

If the tax law of a listed country adopts some criterion other than treatment as a resident as the criterion for applying a worldwide source tax base to a beneficiary, then, subsection (3) has effect, in relation to that tax law, as if that criterion were the same as treatment as a resident of the listed country for the purposes of that tax law.

For the purposes of this section, where, because of section 101, a beneficiary is presently entitled to a particular amount, the amount is taken to have been paid to the beneficiary.

(6) For the purposes of this section, the extent to which an amount referred to in subparagraph (1)(c)(i) or (ii) (in this subsection called the taxed amount) represents the amount covered by paragraph (1)(b) (in this subsection called the listed country trust amount) is calculated using the formula:

where:

Listed country trust amount means the number of dollars in the listed country trust amount.

Taxed amount means the taxed amount.

Net income means the number of dollars in the net income of the non-resident trust estate concerned of the year of income concerned.

In calculating the attributable income of a trust estate, the International Tax Agreements Act 1953 is to be disregarded, except for the purpose of references in this Act to that Act.

(1) For the purpose of applying this Act in calculating the attributable income of a trust estate, sections 23AI, 128D, 456, 457, and 459A of this Act and Income Tax Assessment Act 1997 are to be disregarded.section 802-15 of the

For the purpose of applying this Act in calculating the attributable income of a trust estate:

(aa) Income Tax Assessment Act 1997; andDivision 230 of the

(a) Income Tax Assessment Act 1997; andDivision 974 of the

the operation of any provision of this Act to the extent to which that operation depends on an expression whose meaning is given by a Division mentioned in paragraph (aa) or (a);

are to be disregarded.

When applying this Act and the Income Tax Assessment Act 1997 in calculating the attributable income of the trust estate, Division 70 of the Income Tax Assessment Act 1997 has effect as if the cost of the item of trading stock were the value to be taken into account at the start of the year of income.

(1) For the purpose of determining the attributable income of a trust estate of a year of income (in this section called the attributable year of income), where property has been held by the trustee of the trust estate in a non-attributable year of income before the attributable year of income, then, in relation to the application of a depreciation provision to the property, subsection (2) applies.

Such amount as the Commissioner considers appropriate to take account of the holding of the property as mentioned in subsection (1) is, under the depreciation provision:

an allowable deduction to the trustee of the trust estate; or

included in the assessable income of the trust estate;

as the case requires, for the attributable year of income in substitution for any amount that would otherwise be so included or allowable.

(4) For the purpose of exercising the Commissioner’s power under subsection (2) in relation to deductions allowable under Income Tax Assessment Act 1997, the Commissioner must assume that the property was used by the trustee of the trust estate during any non-attributable year of income wholly and exclusively for a taxable purpose (within the meaning of that Division).Division 40 of the

For the purposes of applying this Act in calculating the attributable income of a trust estate, Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (about CGT) apply as if:

sections 118-12 (about assets used to produce non-assessable income) and 855-50 (about a trust becoming a resident trust) were disregarded; and

the trust estate were a resident trust for CGT purposes.

For the purposes of applying this Act in calculating the attributable income of a trust estate of a year of income (in this section called the attributable income year), where:

(a) disregarding the assumption in paragraph 102AAZB(b), at any time (in this section called the residence-change time) during the attributable income year or an earlier year of income, the trust estate ceased to be a resident trust for CGT purposes and became a non-resident trust estate; and

the trust estate owned a CGT asset at the residence-change time; and

a CGT event happens in relation to the asset during the attributable income year; and

(d) Income Tax Assessment Act 1997 (CGT event I2) applies to the asset in respect of the change of residence for the purposes of the application of this Act apart from this Subdivision;section 104-170 of the

then sections 411 to 414 (inclusive) apply to the asset as if:

those sections had effect for the purposes of calculating attributable income under this Subdivision instead of Part X; and

any reference in those sections to an eligible CFC were a reference to the trust estate; and

any reference in those sections to a commencing day asset were a reference to the asset; and

any reference in those sections relating to the eligible CFC’s commencing day or the day following the eligible CFC’s commencing day were a reference relating respectively to the residence-change time or a time immediately after the residence-change time; and

subsections 412(2) and (3), and paragraphs 414(3)(b) and (4)(b), referred only to the market value of the asset concerned.

In calculating the attributable income of a trust estate of a year of income, no deductions are allowable under Income Tax Assessment Act 1997 in respect of tax losses of a year of income earlier than the year of income commencing on 1 July 1990.Division 36 of the

Subject to section 102AAZE and to this section, if:

an entity is an attributable taxpayer:

(i) in relation to the year of income of the taxpayer commencing on 1 July 1990 (which year of income is in this section called the taxpayer’s current year of income) or in relation to a subsequent year of income of the taxpayer (which year of income is in this section also called the taxpayer’s current year of income); and

in relation to a trust estate; and

any part of a non-resident year of income of the trust estate occurs during the taxpayer’s current year of income; and

the taxpayer is a resident at any time during the taxpayer’s current year of income;

the assessable income of the taxpayer of the taxpayer’s current year of income includes:

if the taxpayer is a resident at all times during the taxpayer’s current year of income—the whole of the notional attributable income of the trust estate of the taxpayer’s current year of income; or

if the taxpayer is a resident for only part of the taxpayer’s current year of income—the amount calculated using the formula:

where:

Notional attributable income means the notional attributable income of the trust estate of the taxpayer’s current year of income.

Days in residency period means the number of whole days during the taxpayer’s current year of income when the taxpayer was a resident.

Days in year of income means the number of whole days in the taxpayer’s current year of income.

A reference in subsection (1) to the notional attributable income of the trust estate of the taxpayer’s current year of income is a reference to:

if there is a year of income of the trust estate that begins at the same time as the beginning of the taxpayer’s current year of income—the attributable income of the trust estate of that year of income; or

in any other case—the amount obtained:

(i) by calculating, for each year of income of the trust estate (in this paragraph called the trust’s year of income) any part of which occurs during the taxpayer’s current year of income, the amount calculated using the formula:

where:

Attributable income means the attributable income of the trust estate of the trust’s year of income.

Days in overlapping period means the number of whole days in the trust’s year of income that occurred during the taxpayer’s current year of income.

Days in trust’s year of income means the number of whole days in the trust’s year of income; and

by adding together the amounts calculated under subparagraph (i).

If:

an amount is included in the assessable income of an attributable taxpayer of the taxpayer’s current year of income under subsection (1); and

before or during the taxpayer’s current year of income, one or more entities other than the taxpayer have transferred property or services to the trust estate concerned; and

the taxpayer gives to the Commissioner, in accordance with the approved form, such information in connection with the operation of this Division as is required by the form to be set out;

the Commissioner may reduce the amount included in the taxpayer’s assessable income of the taxpayer’s current year of income under subsection (1) having regard to:

the extent to which the attributable income of the trust estate is, in the opinion of the Commissioner, attributable to property or services transferred by the taxpayer; and

such other matters as the Commissioner considers relevant.

If:

apart from this subsection, an amount would be included in the assessable income of an attributable taxpayer of the taxpayer’s current year of income under subsection (1) in relation to a particular trust estate; and

the taxpayer could not reasonably be expected to obtain the information required to determine the attributable income of the trust estate;

the following provisions have effect:

no amount is to be included in the assessable income of the taxpayer of the taxpayer’s current year of income under subsection (1) in relation to the trust estate;

the assessable income of the taxpayer of the taxpayer’s current year of income includes the amount obtained:

if any of the transfers that were taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s current year of income and in relation to the trust estate were made by the taxpayer to the trust estate after the IP time—by calculating, for each such transfer, the amount calculated using the formula:

where:

Adjusted value of the transfer has the meaning given by subsection (5).

Weighted statutory interest rate means the weighted statutory interest rate in relation to the taxpayer’s current year of income; and

if any of the transfers that were taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s current year of income and in relation to the trust estate were made by the taxpayer to the trust estate before the IP time—the amount calculated using the formula:

where:

Adjusted net worth of trust estate has the meaning given by subsection (6).

Weighted statutory interest rate means the weighted statutory interest rate in relation to the taxpayer’s current year of income; and

by adding together the amounts calculated under subparagraphs (i) and (ii).

For the purposes of subsection (4), the adjusted value of a transfer of property or services made by an attributable taxpayer to a trust estate is:

if the transfer occurred during the taxpayer’s current year of income—the amount calculated using the formula:

where:

Market value of transferred property or services means the market value, immediately before the transfer, of the property or services.

Days after transfer means the number of whole days in the taxpayer’s current year of income after the day on which the transfer took place.

Days in year of income means the number of whole days in the taxpayer’s current year of income; or

if the transfer of the property or services occurred before the taxpayer’s current year of income—the sum of:

the market value, immediately before the transfer, of the property or services; and

the amount obtained:

(A) by calculating, in respect of the transfer, for each year of income preceding the taxpayer’s current year of income, the amount ascertained using the formula in subparagraph (4)(d)(i); and

(B) by adding together the amounts calculated under sub-subparagraph (A).

For the purposes of the application of subsection (4) in relation to a transfer of property or services made by an attributable taxpayer to a trust estate, the adjusted net worth of the trust estate is:

if the taxpayer’s current year of income is the year of income commencing on 1 July 1990—the 1 July 1990 net worth of the trust estate; or

in any other case—the sum of:

the 1 July 1990 net worth of the trust estate; and

the amount obtained:

(A) by calculating, in respect of the transfer, for each year of income preceding the taxpayer’s current year of income, the amount ascertained using the formula in subparagraph (4)(d)(ii); and

(B) by adding together the amounts calculated under sub-subparagraph (A).

If:

subsection (4) applies to an attributable taxpayer in relation to the taxpayer’s current year of income; and

any of the transfers taken into account in determining whether the taxpayer was an attributable taxpayer in relation to the taxpayer’s year of income and in relation to the trust estate concerned were made before the IP time; and

the taxpayer gives to the Commissioner, in accordance with the approved form, such information in connection with the operation of this Division as is required by the form to be set out;

the Commissioner may reduce the amount included in the taxpayer’s assessable income of the taxpayer’s current year of income under subsection (4) having regard to:

the extent to which the market value, as at the beginning of the taxpayer’s current year of income, of the assets of the trust estate is, in the opinion of the Commissioner, attributable to property or services transferred by the taxpayer before the IP time; and

such other matters as the Commissioner considers relevant.

An amount is not to be included in the assessable income of the taxpayer of a year of income under section 102AAZD in relation to a trust estate that is a listed country trust estate in relation to the year of income if the amount obtained by:

identifying each trust estate in relation to which the taxpayer is an attributable taxpayer in relation to the year of income; and

calculating the attributable income of the year of income of each such trust estate; and

adding the amounts calculated under paragraph (b);

does not exceed the lesser of the following amounts:

$20,000;

10% of the total of the net incomes of each of those trust estates of the year of income.

Section 460 applies to an amount included in the assessable income of a taxpayer under section 102AAZD in a corresponding way to the way in which section 460 applies to an amount included in the assessable income of a taxpayer under section 456 or 457 and, for the purposes of that corresponding application, references in sections 336, 338 and 460 to a Part X Australian resident are to be read as references to a resident within the meaning of section 6.

Subject to this section, a person who is an attributable taxpayer:

in relation to the year of income of the person commencing on 1 July 1990 or in relation to a subsequent year of income of the person; and

in relation to a particular trust estate;

must keep records (in or elsewhere) containing particulars of:

the acts, transactions and other circumstances that resulted in the person being an attributable taxpayer in relation to that year of income and in relation to that trust estate; and

except where subsection 102AAZD(4) applies in relation to the trust estate and in relation to the year of income of the person—the basis of the calculation of the attributable income of the trust estate for each year of income of the trust estate any part of which occurred during the year of income of the person; and

the basis of the calculation of the amounts (including nil amounts) included in the assessable income of the person of the year of income of the person under section 102AAZD.

Note: There is an administrative penalty if you do not keep or retain records as required by this section: see Taxation Administration Act 1953.section 288-25 in Schedule 1 to the

A person who contravenes subsection(1) commits an offence punishable on conviction by a fine not exceeding 30 penalty units.

Note: See Crimes Act 1914 for the current value of a penalty unit.section 4AA of the

An offence under subsection (2) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

A person who is required by this section to keep records must:

keep the records in writing in the English language or so as to enable the records to be readily accessible and convertible into writing in the English language; and

keep the records so as to enable the person’s liability under this Act to be readily ascertained.

This section does not require a person to keep a record of information if:

the person did not know, and had no reasonable grounds to suspect, that the person was an attributable taxpayer of the kind mentioned in subsection (1); or

the person did not know that, and made all reasonable efforts to ascertain whether, the person was an attributable taxpayer as mentioned in subsection (1); or

the person did not know, and made all reasonable efforts to obtain, the information.

Note: A defendant bears an evidential burden in relation to the matters in subsection (4), see subsection 13.3(3) of the Criminal Code.

Subject to subsections (6) and (7), the following provisions apply to a partnership as if the partnership were a person:

subsections (1) to (4) (inclusive) of this section;

subsections 262A(4) and (5), in so far as those subsections apply to records kept under or for the purposes of this section;

(c) Taxation Administration Act 1953, in so far as that Part of that Act relates to the provisions covered by paragraph (a) or (b) of this subsection.Part III of the

Where, by virtue of subsection (5), an offence is taken to have been committed by a partnership, that offence is taken to have been committed by each of the partners.

In a prosecution of a person for an offence by virtue of subsection (6), it is a defence if the person proves that the person:

did not aid, abet, counsel or procure the act or omission by virtue of which the offence was taken to have been committed; and

was not in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, an act or omission by virtue of which the offence is taken to have been committed.

Note 1: The defence under subsection (7) does not apply in relation to offences under Criminal Code.Part 2.4 of the

Note 2: A defendant bears a legal burden in relation to the matters in subsection (7), see Criminal Code.section 13.4 of the