I ncome Tax Assessment Amendment Act (No. 5) 1979

No. 147 of 1979

An Act to amend the law relating to income tax.

BE IT ENACTED by the Queen, and the Senate and House of Representatives of the Commonwealth of Australia, as follows:

Short title, &c.

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1. (1) This Act may be cited as the Income Tax Assessment Amendment Act (No. 5) 1979.

(2) The Income Tax Assessment Act 1936is in this Act referred to as the Principal Act.

2 Commencement

2. This Act shall come into operation on the day following the day on which the Income Tax Assessment Amendment Act (No. 4) 1979 comes into operation.

3 Losses of previous years

3. Section 80 of the Principal Act is amended—

(a) by omitting from sub-section (2) “So much” and substituting “Subject to sub-section (5), so much”; and

(b) by adding at the end thereof the following sub-section:

“(5) For the purposes of determining whether a deduction is allowable to a taxpayer under sub-section (2) in respect of the year of income that commenced on 1 July 1978 or in respect of a subsequent year of income and for the purposes of ascertaining the amount of any such deduction, there shall be disregarded so much of the amount of any loss deemed to have been incurred by the taxpayer as would not have been deemed, for the purposes of this section, to have been incurred by the taxpayer if—

(a) Income Tax Assessment Amendment Act (No. 4) 1979, were applicable in all cases where the shares referred to in that section as bonus shares were issued before the commencement of the Income Tax Assessment Amendment Act 1978 and in all cases where the shares so referred to in that section were issued after the commencement of that last-mentioned Act;section 6ba of this Act, as in force immediately after the commencement of the

(b) Income Tax Assessment Amendment Act (No. 4) 1979, were amended by omitting from sub-section (9) ‘after 7 April 1978’;section 36 of this Act, as in force immediately after the commencement of the

(c) sub-section (9) of Income Tax Assessment Amendment Act (No. 4) 1979 and as taken to be amended by paragraph (b) of this sub-section, and sub-section (10) of section 36 of this Act as in force at that time, were applicable in relation to property disposed of at any time, whether before or after the commencement of the Income Tax Assessment Amendment Act 1978;section 36 of this Act, as in force immediately after the commencement of the

(d) Income Tax Assessment Amendment Act 1977 were amended by omitting sub-section (2) and substituting the following sub-section:section 6 of the

‘(2) Section 36a of the Principal Act is amended by adding at the end thereof the following sub-section:

“(5) A notice for the purposes of sub-section (2) given on or after 24 May 1977 in respect of a change in the ownership of, or in the interests of persons in, property, being a chose in action, does not have any effect unless the persons giving the notice establish to the satisfaction of the Commissioner that the change in ownership or interests occurred before that date.”.’;

(e) Income Tax Assessment Amendment Act (No. 4) 1979, were amended by omitting sub-sections (6) and (7) and substituting the following sub-section:section 36a of this Act, as in force immediately after the commencement of the

‘(6) Notwithstanding sub-section (2), a notice for the purposes of that sub-section does not have any effect to the extent to which the notice is in respect of a change (whether occurring before or after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979) in the ownership of, or in the interests of persons in, property—

(a) that is not a chose in action;

(b) the value of which for the purposes of the Commissioner under sub-section (9) of that section; andsection 36 is determined by

(c) the value of which determined under sub-section (9) of that section is less than or equal to the value of the property applicable in accordance with sub-section (2) of this section.’;

(f) Income Tax Assessment Amendment Act (No. 4) 1979, were amended by omitting ‘, after 7 April 1978,’ from sub-section (1) and from paragraph (a) of sub-section (2);section 52a of this Act, as in force immediately after the commencement of the

(g) Income Tax Assessment Amendment Act (No. 4) 1979, were amended by omitting ‘after 24 September 1978 and’ from paragraph (a) of sub-section (2a) and from sub-paragraph (i) of paragraph (a) of sub-section (2b);section 52a of this Act, as in force immediately after the commencement of the

(h) Income Tax Assessment Amendment Act (No. 4) 1979, and as taken to be amended by paragraphs (f) and (g) of this sub-section, were applicable in relation to property purchased or acquired at any time, whether before or after the commencement of the Income Tax Assessment Amendment Act 1978;section 52a of this Act, as in force immediately after the commencement of the

(j) Income Tax Assessment Amendment Act (No. 5) 1979, were amended by omitting paragraph (a) of sub-section (1f) and substituting the following paragraph:section 82kh of this Act, as in force immediately after the commencement of the

‘(a) that amount of relevant expenditure was incurred by reason of, as a result of or as part of a tax avoidance agreement; and’;

(k) Income Tax Assessment Amendment Act (No. 5) 1979, were amended by omitting from paragraph (a) ‘after 19 April 1978’; andsection 82kj of this Act, as in force immediately after the commencement of the

(m) Subdivision D (other than Income Tax Assessment Amendment Act (No. 5) 1979, and as taken to be amended by paragraphs (j) and (k) of this sub-section, were applicable in relation to losses, outgoings or expenditure incurred at any time, whether before or after the commencement of the Income Tax Assessment Amendment Act 1979.”.section 82kk) of Division 3 of Part III of this Act, as in force immediately after the commencement of the

4 Losses of previous years incurred in engaging in primary production

4. Section 80aa of the Principal Act is amended—

(a) by omitting from sub-section (4) “So much” and substituting “Subject to sub-section (9), so much”; and

(b) by adding at the end thereof the following sub-section:

“(9) For the purposes of determining whether a deduction is allowable to a taxpayer under sub-section (4) in respect of the year of income that commenced on 1 July 1978 or in respect of a subsequent year of income and for the purposes of ascertaining the amount of any such deduction, there shall be disregarded so much of the amount of any loss deemed to have been incurred by the taxpayer in engaging in primary production as would not have been deemed, for the purposes of this section, to have been incurred by the taxpayer in engaging in primary production if the conditions specified in the paragraphs of sub-section (5) of section 80 were applicable for the purpose of determining whether the taxpayer is deemed, in any year of income, to have incurred a loss in engaging in primary production and in determining the amount of any such loss.”.

Arrangements to avoid the operation of sections 3 and 4

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5. (1) Where—

(a) an amount (in this sub-section referred to as the “relevant amount”) is included in the assessable income of a taxpayer (in this sub-section referred to as the “recipient taxpayer”) of the year of income that commenced on 1 July 1978 (in this sub-section referred to as the “relevant year of income”);

(b) the relevant amount is a loss, outgoing or expenditure (which loss, outgoing or expenditure is in this sub-section referred to as the “relevant expenditure”) incurred (whether before or after the commencement of this section) to the recipient taxpayer by another taxpayer (in this sub-section referred to as the “associated taxpayer”);

(c) but for this sub-section, a deduction would be allowable to the associated taxpayer in relation to a year of income in respect of the whole or a part of the relevant expenditure;

(d) if the relevant amount were not included in the assessable income of the recipient taxpayer of the relevant year of income, the recipient taxpayer would be deemed to have incurred a loss in the relevant year of income;

(e) if, in determining whether the recipient taxpayer is deemed to have incurred a loss in the relevant year of income and in determining the amount of any such loss—

(i) the relevant amount were not included in the assessable income of the recipient taxpayer of the relevant year of income; and

(ii) the conditions specified in the paragraphs of sub-Income Tax Assessment Act 1936 were taken to be applicable,section 80(5) of the

the recipient taxpayer would not be deemed to have incurred a loss in the relevant year of income or would be deemed to have incurred a loss in the relevant year of income of an amount less than the amount of the loss referred to in paragraph (d); and

(f) the associated taxpayer incurred the whole or a part of the relevant expenditure (which whole or part is in this sub-section referred to as the “prescribed relevant expenditure”) to the recipient taxpayer for the purpose, or for purposes that included the purpose, of wholly or partly preventing the operation of section 3 or 4 of this Act in relation to the recipient taxpayer or, if the recipient taxpayer is a partnership, in relation to a partner or partners in the partnership, by securing that the recipient taxpayer would not be deemed to have incurred a loss in the relevant year of income or would be deemed to have incurred a loss in the relevant year of income of an amount less than the amount of the loss that the recipient taxpayer would be deemed to have incurred in the relevant year of income if an amount equal to the prescribed relevant expenditure were not included in the assessable income of the recipient taxpayer of the relevant year of income,

then, notwithstanding anything contained in the Income Tax Assessment Act 1936, a deduction is not allowable to the associated taxpayer in respect of any part of the prescribed relevant expenditure.

Where—

(a) the value of the trading stock of a taxpayer that, but for this sub-section, would be taken into account at the end of the year of income that commenced on 1 July 1978 (in this sub-section referred to as the “relevant year of income”) for the purposes of the Income Tax Assessment Act 1936 is greater than the value of that trading stock that would be taken into account at that time if the taxpayer had valued that trading stock in such a way that the value of that trading stock to be taken into account at that time would have been the lowest possible amount at which the value of that trading stock could be taken into account at that time in accordance with Subdivision B of Division 2 of Part III of the Income Tax Assessment Act 1936;

(b) if the taxpayer had valued the trading stock of the taxpayer in such a way that the value of that trading stock to be taken into account at the end of the relevant year of income would have been the lowest possible amount at which the value of that trading stock could have been taken into account at that time in accordance with Subdivision B of Income Tax Assessment Act 1936, the taxpayer would have been deemed to have incurred a loss in the relevant year of income;Division 2 of Part III of the

(c) if, in determining whether the taxpayer is deemed to have incurred a loss in the relevant year of income and in determining the amount of any such loss—

(i) the value of the trading stock of the taxpayer to be taken into account at the end of the relevant year of income were the value referred to in paragraph (b); and

(ii) the conditions specified in the paragraphs of sub-Income Tax Assessment Act 1936 were taken to be applicable,section 80 (5) of the

the taxpayer would not be deemed to have incurred a loss in the relevant year of income or would be deemed to have incurred a loss in the relevant year of income of an amount less than the amount of the loss referred to in paragraph (b); and

(d) some or all of the trading stock was valued by the taxpayer in the way in which it was valued by the taxpayer for the purpose, or for purposes that included the purpose, of wholly or partly preventing the operation of section 3 or 4 of this Act in relation to the taxpayer or, if the taxpayer is a partnership, in relation to a partner or partners in the partnership, by securing that the taxpayer would not be deemed to have incurred a loss in the relevant year of income or would be deemed to have incurred a loss in the relevant year of income of an amount less than the amount of the loss that the taxpayer would be deemed to have incurred in the relevant year of income if the trading stock of the taxpayer had been valued by the taxpayer at a lesser value,

then, notwithstanding anything contained in the Income Tax-Assessment Act 1936, the value of the trading stock of the taxpayer to be taken into account at the end of the relevant year of income and at the commencement of the next succeeding year of income is—

(e) in a case to which paragraph (f) does not apply—the value referred to in paragraph (b); or

(f) if the taxpayer satisfies the Commissioner that, if the taxpayer had not valued the trading stock first referred to in paragraph (d) for the purpose, or for purposes that included the purpose, mentioned in that paragraph, the taxpayer might reasonably be expected to have valued the trading stock of the taxpayer in such a way that the value of the trading stock of the taxpayer to be taken into account at the end of the relevant year of income would be greater than the value of the trading stock referred to in paragraph (b)—that greater value.

In sub-section (2)—

(a) a reference to trading stock shall be read as not including a reference to live stock; and

(b) a reference to the valuation of trading stock by a taxpayer shall be read as a reference to the exercise by the taxpayer of an option or options under Income Tax Assessment Act 1936 in relation to the trading stock of the taxpayer.section 31 of the

A reference in sub-section (1) or (2), in relation to a taxpayer, to a loss shall be read as a reference to—

(a) in a case where the taxpayer is a partnership that is being treated as a taxpayer for the purposes of Income Tax Assessment Act 1936—a partnership loss for the purposes of section 92 of the Income Tax Assessment Act 1936; andsection 90 of the

(b) in any other case—a loss for the purposes of Income Tax Assessment Act 1936.section 80 or 80aa of the

(5) Notwithstanding anything contained in the Income Tax Assessment Act 1936, the Commissioner may amend an assessment for the purpose of giving effect to this section if the amendment is made within 3 years after the date on which the tax became due and payable under the assessment, but nothing in this sub-section limits the power of the Commissioner to amend an assessment in accordance with the provisions of that Act.

6 Deduction in respect of new plant installed on or after 1 January 1976

6. Section 82ab of the Principal Act is amended—

(a) by inserting in sub-section (4) “, in a case to which sub-section (6a) does not apply” after “Where”; and

(b) by inserting after sub-section (6) the following sub-sections:

“(6a) Where, in a case to which sub-section (2) does not apply—

(a) the eligible expenditure was incurred—

(i) in respect of a unit of property acquired by a taxpayer under a contract entered into before 1 July 1978; or

(ii) in respect of a unit of property that was constructed by the taxpayer and the construction of which commenced before 1 July 1978;

(b) the unit of property or a part of the unit of property was positioned for use as at 3 June 1979;

(d) the whole or a part of the eligible expenditure that was incurred on or before 3 June 1979 (which whole or part, as the case may be, is in this sub-section referred to as the ‘qualifying eligible expenditure’)—

(i) is attributable to the property that was positioned for use as mentioned in paragraph (b); and

(ii) is not attributable to any part of the installation of that property that occurred after 3 June 1979,

the relevant amount is the amount calculated in accordance with the formula , where—

A is the amount that, for the purposes of sub-section (1), would be the relevant amount in relation to the eligible expenditure if that relevant amount were calculated in accordance with sub-sections (2) and (3);

B is the amount of the qualifying eligible expenditure;

C is the amount of the eligible expenditure; and

D is the amount that, for the purposes of sub-section (1), would be the relevant amount in relation to the eligible expenditure if that relevant amount were calculated in accordance with sub-sections (4) and (5).

“(6b) For the purposes of sub-section (6a), a unit of property or a part of a unit of property shall be taken to have been positioned for use as at 3 June 1979 if, and only if—

(a) in a case where the unit of property, when it was first used or installed ready for use as mentioned in sub-section (1), was permanently located in a fixed position—the unit of property or the part of the unit of property, as the case may be, was, as at 3 June 1979, permanently located in that position; and

(b) in any other case—the unit of property or the part of the unit of property, as the case may be, was, as at 3 June 1979, located at the place, on the premises or in the position at which the unit of property was first used or installed ready for use as mentioned in sub-section (1).”.

7 Interpretation

7. Section 82kh of the Principal Act is amended by inserting after sub-section (1b) the following sub-section:

“(1ba) In the application of sub-section (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 deduction or deductions 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 be deemed, for the purposes of section 80 or 80aa, to have incurred a loss or a part of a loss in a year of income that the person would not be deemed to have incurred in that year of income if a deduction were not allowable in respect of any part of” that eligible relevant expenditure, sections 80 and 80aa shall be applied on the basis that the amount of eligible relevant expenditure is an amount of relevant expenditure but is not an amount of eligible relevant expenditure.”.

Deductions in respect of Income Equalization Deposits

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8. (1) Section 159gc of the Principal Act is amended—

(a) by omitting from sub-section (4) “40 per centum” (wherever occurring) and substituting “60%”; and

(b) by omitting from sub-section (5) “$100,000” (wherever occurring) and substituting “$250,000”.

The amendments made by sub-section (1) apply to assessments in respect of income of the year of income that commenced on 1 July 1978 and in respect of income of all subsequent years of income.