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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Tax Laws amendment (2009 Measures no. 2) bill 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Application of the income tax law to financial claims scheme
entitlements 9
Chapter 2 Increase access to the small business capital gains tax
concessions 37
Chapter 3 Tax benefits and capital gains tax 71
Chapter 4 National Urban Water and Desalination Plan - urban water tax
offset 73
Chapter 5 Deductible gift recipients 81
Chapter 6 Australian Business Register 85
Chapter 7 Removing the Greenhouse Challenge Plus Programme condition for
fuel tax credits 99
Chapter 8 Tax exemption for certain grants to businesses affected by the
Victorian bushfires 103
Index 105
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|AAT |Administrative Appeals |
| |Tribunal |
|ABN |Australian Business Number |
|ABN Act |A New Tax System (Australian |
| |Business Number) Act 1999 |
|ABR |Australian Business Register |
|ADI |authorised deposit-taking |
| |institution |
|APRA |Australian Prudential |
| |Regulation Authority |
|APRA Act |Australian Prudential |
| |Regulation Authority Act 1998|
|ATO |Australian Taxation Office |
|Banking Act |Banking Act 1959 |
|CGT |capital gains tax |
|Commissioner |Commissioner of Taxation |
|DGRs |deductible gift recipients |
|FHSA |first home saver account |
|FHSA Act |First Home Saver Accounts Act|
| |2008 |
|FMD |farm management deposit |
|GCPP |Greenhouse Challenge Plus |
| |Programme |
|Insurance Act |Insurance Act 1973 |
|ITAA 1936 |Income Tax Assessment Act |
| |1936 |
|ITAA 1997 |Income Tax Assessment Act |
| |1997 |
|PAYG |pay as you go |
|plan |National Urban Water and |
| |Desalination Plan |
|Registrar |Australian Business Registrar|
|RSA |retirement savings account |
|SBR |Standard Business Reporting |
|scheme |financial claims scheme |
|Small Business Act |Tax Laws Amendment (Small |
| |Business) Act 2007 |
|TAA 1953 |Taxation Administration Act |
| |1953 |
|TFN |tax file number |
|Water Department |Department of the |
| |Environment, Water, Heritage |
| |and the Arts |
|Water Minister |Minister for Climate Change |
| |and Water |
General outline and financial impact
Application of the income tax law to financial claims scheme entitlements
Schedule 1 to this Bill amends various Acts to ensure there are no
adverse taxation implications arising from a payment made by the
Australian Prudential Regulation Authority, or by a liquidator,
under the financial claims scheme (the scheme).
It achieves this in general by amending the law to treat payments
made under the scheme in the same way as if they had been made by
the failed institution to which the scheme applies.
Specific amendments cover capital gains tax, farm management
deposits, retirement savings accounts, first home saver accounts,
reporting obligations and withholding obligations.
Date of effect: These amendments generally apply to all payments
made, and other things done, under the scheme, whether before or
after the amendments commence. Certain obligations and penalties
only apply from the time the amendments commence.
Proposal announced: The scheme was announced in the Treasurer's
Media Release No. 061 of 2 June 2008 and in the Prime Minister's
Media Release of 12 October 2008.
Financial impact: Because it is not possible to determine whether
the scheme will be activated during the forward estimates period,
the revenue impact is unquantifiable but, if it is activated, the
impact will be negligible because the tax outcomes are designed to
be the same as if the payments had been made by the financial or
insurance institution.
Compliance cost impact: Low.
Increase access to the small business capital gains tax concessions
Schedule 2 to this Bill amends the law to increase access to the
small business capital gains tax (CGT) concessions for taxpayers
owning a CGT asset used in a business by an affiliate or entity
connected with the taxpayer and for partners owning a CGT asset
used in the partnership business, with effect from the 2007-08
income year. This Schedule also makes a number of other minor
amendments to clarify and refine elements of the small business CGT
concessions.
Date of effect: The main amendments apply to CGT events happening
in the 2007-08 income year and later income years. The minor
amendments have their own particular application dates.
Proposal announced: This measure was announced in the 2008-09
Budget on 13 May 2008.
Financial impact: This measure will have an unquantifiable (but
minimal to small) cost to revenue over the forward estimates.
Compliance cost impact: Compliance costs are expected to be low.
Tax benefits and capital gains tax
Schedule 3 to this Bill amends the Income Tax Assessment Act 1997
to provide a general exemption from capital gains tax (CGT) for
capital gains arising from a right or entitlement to a tax offset,
deduction or similar benefit.
Date of effect: This measure applies to CGT events happening in
the 2009-10 income year and later income years.
Proposal announced: This measure has not previously been
announced.
Financial impact: Nil.
Compliance cost impact: Nil.
National Urban Water and Desalination Plan - urban water tax offset
Schedule 4 to this Bill amends the Income Tax Assessment Act 1997
to provide a refundable tax offset in relation to certain projects
approved under the National Urban Water and Desalination Plan.
Date of effect: This measure applies to approved projects between
the 2008-09 and 2012-13 income years.
Proposal announced: This measure was announced in the 2008-
09 Budget on 13 May 2008.
Financial impact: This measure will have these financial
implications:
|2008-09 |2009-10 |2010-11 |2011-12 |
|-$14m |-$129m |-$195m |-$315m |
Compliance cost impact: The compliance cost impact of this measure
is estimated to be moderate.
Deductible gift recipients
Schedule 5 to this Bill amends the Income Tax Assessment Act 1997
(ITAA 1997) to update the list of the deductible gift recipients
(DGRs) to include four new entities and to extend the time period
of three organisations currently listed in the ITAA 1997.
Tax deductions are provided to donors who give to organisations
that are endorsed as deductible gift recipients (DGRs), subject to
certain conditions. Organisations which do not fall under the
general DGR categories may seek specific listing in the income tax
law.
Date of effect: The date of effect for each organisation being
specifically listed is included in Tables 5.1 and 5.2 in Chapter 5.
Proposal announced: The listing of these organisations has not
been announced.
Financial impact: This measure will have the following revenue
implications:
|DGRs |2008-0|2009-10 |2010-11 |2011-12|2012-13|Total |
| |9 | | | | | |
|Australasian|Nil |-$300,000|-$307,500|-$315,1|-$323,0|-$1,245,7|
|College for | | | |88 |67 |55 |
|Emergency | | | | | | |
|Medicine | | | | | | |
|Grattan |Nil |-$1,500,0|-$1,500,0|-$300,0|Nil |-$3,300,0|
|Institute | |00 |00 |00 | |00 |
|PWR |Nil |-$600,000|-$600,000|Nil |Nil |-$1,200,0|
|Melbourne | | | | | |00 |
|2009 Limited| | | | | | |
|ACT Region |Nil |-$10,500 |-$21,525 |-$22,06|-$22,61|-$76,703 |
|Crime | | | |3 |5 | |
|Stoppers | | | | | | |
|Limited | | | | | | |
|Yachad |Nil |-$111,000|Nil |Nil |Nil |-$111,000|
|Accelerated | | | | | | |
|Learning | | | | | | |
|Project | | | | | | |
|Limited | | | | | | |
|Bunbury |Nil |-$150,000|-$300,000|-$150,0|Nil |-$600,000|
|Diocese | | | |00 | | |
|Cathedral | | | | | | |
|Rebuilding | | | | | | |
|Fund | | | | | | |
|St George's |Nil |-$124,800|-$166,400|-$166,4|-$41,60|-$499,200|
|Cathedral | | | |00 |0 | |
|Restoration | | | | | | |
|Fund | | | | | | |
|Total |Nil |-$2,796,3|-$2,895,4|-$953,6|-$387,2|-$7,032,6|
| | |00 |25 |51 |82 |58 |
Compliance cost impact: Negligible.
Australian Business Register
Schedule 6 to this Bill amends the A New Tax System (Australian
Business Number) Act 1999 (ABN Act) to allow the Registrar of the
Australian Business Register (ABR) to act as the Multi-agency
Registration Authority, to enable representatives of businesses to
be identified for the purpose of communicating electronically with
multiple government agencies on behalf of businesses. This is a
part of the Government's Standard Business Reporting program.
Other amendments to the ABN Act improve the integrity and
efficiency of the ABR and help position the Registrar to take on
the role of the Multi-agency Registration Authority.
There are also two consequential amendments to other tax Acts that
clarify the existing law.
Date of effect: The amendments to introduce the Multi-agency
Registration Authority commence on a single day to be fixed by
Proclamation but limited to a day not later than 12 months after
Royal Assent.
The other amendments to the ABN Act and the consequential
amendments commence on Royal Assent.
Proposal announced: This measure has not previously been
announced.
Financial impact: Nil.
Compliance cost impact: There will be minimal additional costs
imposed by the introduction of the Multi-agency Registration
Authority and the other amendments to the ABN Act. However, this
is far outweighed by the substantial reduction in costs that
benefit businesses in their reporting to governments through the
Standard Business Reporting program that is facilitated by the
Multi-agency Registration Authority amendments.
Removing the Greenhouse Challenge Plus Programme condition for fuel tax
credits
Schedule 7 to this Bill amends the Fuel Tax Act 2006 to remove the
restriction that businesses may not claim more than $3 million of
fuel tax credits in a financial year unless they are a member of
Greenhouse Challenge Plus Programme.
Date of effect: This measure takes effect on 1 July 2009.
Proposal announced: This measure has not previously been
announced.
Financial impact: Nil. This measure maintains businesses' ability
to claim their full fuel tax credit entitlement.
Compliance cost impact: Nil.
Tax exemption for certain grants to businesses affected by the Victorian
bushfires
Schedule 8 to this Bill amends the Income Tax Assessment Act 1997
to provide an exemption from tax for the Clean-up and Restoration
Grants paid to small businesses and primary producers affected by
the Victorian bushfires.
Date of effect: This measure applies to the Clean-up and
Restoration Grants paid to small businesses and primary producers
in the 2008-09 and 2009-10 income years.
Proposal announced: This measure has not previously been
announced.
Financial impact: This measure will have these revenue
implications:
|2008-09 |2009-10 |2010-11 |2011-12 |2012-13 |
|Nil |-$3.1m |-$3.2m |-$0.3m |-$0.3m |
Compliance cost impact: Nil.
Chapter 1
Application of the income tax law to financial claims scheme entitlements
Outline of chapter
1. Schedule 1 to this Bill amends various Acts to ensure there are no
adverse taxation implications arising from a payment made by the
Australian Prudential Regulation Authority (APRA), or by a
liquidator, under the financial claims scheme (the scheme).
2. It achieves this in general by amending the law to treat payments
made under the scheme in the same way as if they had been made by
the failed institution to which the scheme applies.
3. Specific amendments cover capital gains tax (CGT), farm management
deposits (FMDs), retirement savings accounts (RSAs), first home
saver accounts (FHSAs), reporting obligations and withholding
obligations.
Context of amendments
4. The Financial System Legislation Amendment (Financial Claims Scheme
and Other Measures) Act 2008, amended the Banking Act 1959 (Banking
Act) and the Insurance Act 1973 (Insurance Act) to establish the
financial claims scheme.
5. That scheme allows APRA to pay depositors in failed financial
institutions some part of their deposit, subject to a global limit
determined by the Treasurer when he or she activates the scheme in
a particular case. To the extent that APRA makes a payment, that
part of depositors' rights to recover their deposit is assigned to
APRA. The scheme provides a similar arrangement for APRA to pay
claimants under a general insurance policy the insurance amounts to
which they are entitled when their insurer has failed.
6. The original legislation did not include the consequential
amendments of the tax law that ensure appropriate tax outcomes in
relation to the scheme.
Income tax and capital gains tax
7. General deposit holders in an authorised deposit-taking institution
(ADI) are assessable on any interest or gains paid, payable or
credited on financial deposits. If interest or a gain has been
paid or credited to the deposit holder then the amount is already
derived and assessable to the deposit holder. Payments under the
scheme in respect of these amounts would not alter the tax outcome
compared to payment by the ADI.
8. Where interest has accrued but not been paid or credited by the
failed ADI to the depositor, the existing law may not treat the
payments under the scheme in respect of these amounts in the same
way as interest payment by the ADI.
9. There are two rights arising from the scheme in relation to ADI
deposits to which the CGT rules can apply:
. the right of the depositor to receive a payment from the
scheme administrator; and
. a deposit with an ADI is a CGT asset. The right to a
portion of the funds in the ADI deposit (part of the
original deposit debt) is transferred to the scheme
administrator following payment by the scheme
administrator to the depositor.
10. Where a payment is made under the scheme, the part of the
depositor's right to recover their deposit is transferred to the
scheme administrator. A receipt for a transfer in respect of an
amount of uncredited interest may not have the character of
interest or income in the hands of the depositor.
11. Payments under the scheme to a general insurance policy holder in
settlement of a general insurance claim may be assessable as
ordinary or statutory income or included in the calculation of
ordinary or statutory income. For example, where the insurance
payment is in respect of the loss or destruction of a depreciating
asset, the payment would be taken into account in working out the
capital allowance balancing adjustment under Division 40 of the
Income Tax Assessment Act 1997 (ITAA 1997).
12. The existing law would provide equivalent taxation treatment where
the rights to recover amounts from the general insurer that are
transferred to the scheme administrator are in respect of a policy
for a building, CGT asset or depreciating asset. However, where
the rights transferred to the APRA scheme administrator are in
respect of a policy for personal injury, loss of income, interest
or trading stock, the existing law may not treat the payments under
the scheme by APRA in the same way as the payments they replace.
Farm management deposits
13. Schedule 2G to the Income Tax Assessment Act 1936 (ITAA 1936)
contains the provisions for FMDs. An FMD is a tax-linked,
financial risk management tool for eligible primary producers. It
is designed to allow eligible primary producers to set aside income
in profitable years for subsequent withdrawal in low-income years.
This reduces the risk to eligible primary producers of income
variability owing to factors such as drought.
14. The following requirements exist for the deposits:
. The taxpayer's taxable non-primary production income for
the year of income must be less than $65,000 in the year
of deposit (paragraph 393-10(1)(b) of Schedule 2G to the
ITAA 1936).
. The FMD balance cannot exceed $400,000 at any time
(subsection 393-35(6) of Schedule 2G to the ITAA 1936).
. The minimum deposit must be $1,000 or more (subsection 393-
35(5) of Schedule 2G to the ITAA 1936).
. The owner can only hold FMDs at one financial institution
(subsection 393-35(7) of Schedule 2G to the ITAA 1936).
. The FMD must not be withdrawn or reduced to less than
$1,000 within the first 12 months unless the withdrawal is
made in exceptional circumstances. However, transferring
an FMD to another institution is not treated as a
withdrawal (section 393-37 of Schedule 2G to the ITAA
1936).
. Transfer of an FMD to another institution does not
constitute a 'repayment' of the deposit for the purposes
of working out an amount assessable on repayment of an FMD
(paragraph 393-50(5)(a) of Schedule 2G to the ITAA 1936).
. Transfer of an FMD to another institution does not
constitute 'making' a deposit for the purposes of working
out an amount deductible for making of an FMD
(paragraph 393-50(5)(b) of Schedule 2G to the ITAA 1936).
15. Under the scheme, taxpayers who hold an FMD with an ADI which
becomes a declared ADI are eligible to be paid certain amounts to
maintain their liquidity, before they receive payment in a winding
up of the ADI.
16. Under Division 2AA of Part II of the Banking Act, APRA may
automatically transfer all or part of an FMD from the old ADI to a
new ADI.
17. In the event that APRA transfers only a part of the old FMD, a
liquidator of the old ADI may pay a distribution from the
liquidation of the old ADI, by making a new deposit into a new ADI.
Retirement savings accounts
18. Within the superannuation system, complying superannuation funds
are subject to restrictions which do not apply to other forms of
saving. Accounts are maintained within these entities for the
purpose of providing retirement or death benefits for the member or
account-holder, or their dependants.
19. An RSA is capital guaranteed and can be provided to the general
public by an ADI. For income tax and superannuation purposes, RSAs
are treated in a similar manner to superannuation products offered
by complying superannuation funds.
20. As benefits in an RSA are generally preserved until retirement, it
is not appropriate for payments by APRA or a liquidator under the
scheme to be made directly to individuals. Consequently, payments
are to be made into an RSA established with a new ADI. However,
changes are required to the ITAA 1997 to ensure the payments
receive the appropriate treatment for tax purposes.
First home saver accounts
21. Generally, because there are restrictions on when an individual can
get their money out of an FHSA, it is not appropriate for an
individual who has an FHSA in a failed ADI to receive their
entitlement directly in their hands. As such, APRA or the
liquidator will open a new FHSA and transfer the guaranteed funds
to it on the individual's behalf.
22. As part of the scheme, where an account-holder's entitlement to be
paid an amount includes an entitlement in relation to an FHSA, the
entitlement relating to the FHSA is to be met through the
application of the relevant amount to an FHSA in an ADI that is not
a declared ADI.
23. APRA or the liquidator can open an FHSA in such circumstances
regardless of any other laws. In the case of an FHSA, this is
necessary because there are eligibility requirements in the First
Home Saver Accounts Act 2008 (FHSA Act) which would otherwise
prevent an FHSA from being opened.
24. However, some other changes need to be made to ensure the scheme
works appropriately with FHSAs.
Reporting obligations
25. Under the current law, an investment body (including ADIs) is
required to give the Commissioner of Taxation (Commissioner) a
written report relating to investments with the body (an annual
investment income report).
26. There are no reporting obligations that require APRA to report
amounts that are paid under the scheme (Division 2AA of Part II of
the Banking Act and Part VC of the Insurance Act).
27. These amendments require APRA to report amounts paid under the
scheme, aligning with the current reporting obligations that apply
to ADIs. This reporting requirement will assist those receiving
payments under the scheme in determining their tax related
liabilities and entitlements and also assist the Australian
Taxation Office (ATO) in conducting data-matching and compliance
activities.
Withholding obligations
28. Under the pay as you go (PAYG) withholding provisions (Part 2-5 of
Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)), an
ADI or a general insurer is required to withhold, report and remit
to the Commissioner amounts from certain payments, including:
. payments for work and services;
. payments in respect of investment or payment for a supply
where a tax file number (TFN) or Australian Business
Number (ABN) is not quoted; and
. dividend, interest and royalty payments to an overseas
person or a foreign resident.
29. The purpose of the PAYG withholding provisions in Part 2-5 of
Schedule 1 to the TAA 1953 is to ensure the efficient collection of
income tax during the year in anticipation of the payee's income
tax liability on assessment.
30. It is not clear whether the existing PAYG withholding provisions
will apply to payments made under the scheme where the same
payment, if made by the ADI or general insurer, would attract the
application of the PAYG withholding provisions. These amendments
ensure they do.
Summary of new law
31. Various Acts are amended to provide equivalent taxation treatment
for any payments by the Administrator of the scheme to (or for the
benefit of) an ADI deposit holder or a claimant under a general
insurance policy as if the payments had been made by the ADI or
general insurer.
Capital gains tax
32. Capital gains and capital losses arising from the rights under the
scheme are disregarded. This ensures that the scheme does not
trigger any CGT consequences that would not have arisen if the
scheme was not activated.
Farm management deposits
33. This measure ensures that there are no adverse taxation
implications for holders of FMDs arising from the scheme where FMDs
are held with failed ADIs. This measure covers the actions of both
APRA and the liquidators of failed ADIs.
34. The establishment of a new FMD by APRA will not result in a
withdrawal of the original FMD and the making of a new FMD for tax
purposes. The establishment of a new FMD will instead be treated
as a transfer of the old FMD from a tax perspective.
35. Similarly, the establishment of a new FMD by a liquidator will be
treated as a transfer of the old FMD for tax purposes.
Retirement savings accounts
36. A payment by APRA of a scheme entitlement, or a distribution by a
liquidator of a failed ADI declared under the scheme, in respect of
an individual who held an RSA with a failed ADI, where made to
another RSA, is to be treated for tax purposes as if the payment is
a roll-over superannuation benefit from the failed ADI.
First home saver accounts
37. The payment of a scheme entitlement into a new FHSA is essentially
a transfer of an FHSA from one provider to another. For the
avoidance of doubt, this is being expressly stated. This means
that the payment will fit within paragraph 11(3)(a) of the FHSA
Act, which stops a transfer from one FHSA provider to another FHSA
provider from being eligible for the government contribution.
38. There is the possibility that there could be a delay between the
declaration of an ADI and a new FHSA being opened on behalf of an
individual. Similarly, a person's entitlements could be paid in
instalments which could be paid some time apart.
39. In these situations, there is the possibility that when an FHSA is
opened on their behalf the individual will no longer be eligible to
have an FHSA because they have acquired a qualifying interest in a
dwelling.
40. An amendment is made to ensure that where this is the case, an
individual will have to notify the new FHSA provider of their
ineligibility. The time for doing so will be the same (in most
cases 30 days) but will start to run from when APRA advises the
FHSA holder that their new FHSA has been opened. This will ensure
that the tax and penalty consequences of ineligibility will be as
similar as possible to what they would have been if the old FHSA
provider had not become a declared ADI.
41. Given that the extent of the Government's deposit guarantee may
change in the future, future payments may also be made by the
liquidator of the declared ADI.
42. Accordingly, an amendment is made to allow the liquidator to pay
those amounts into a new FHSA, even if the eligibility requirements
are not met, in the same way as APRA will be allowed to.
43. The FHSA Act limits the ability of account providers to make
payments from an FHSA and enforces those limits with criminal
penalties. APRA has a right to reimbursement from the declared ADI
for amounts it pays into a new FHSA provider under the scheme.
44. Accordingly, an amendment is made to ensure that the liquidator of
an account provider is not prevented from paying APRA any monies it
is entitled to as a result of becoming a substituted creditor under
the financial claims scheme.
Reporting obligations
45. In relation to payments made under the scheme, APRA is required to
give:
. an annual statement to account-holders or recipients about
the amounts paid to, or applied for the benefit of, the
account-holder or recipient in the previous financial
year; and
. an annual report to the Commissioner about all amounts
paid to, or applied for the benefit of, account-holders or
recipients in the previous financial year.
46. APRA may require certain entities to give information relevant to
preparing or giving those statements or reports or to comply with
an obligation under a law relating to taxation.
Withholding obligations
47. The amendments to Part 2-5 of Schedule 1 to the TAA 1953 apply to
payments made under the scheme.
48. The amendments ensure that the PAYG withholding provisions apply to
payments made under the scheme:
. to meet (wholly or partly) an entitlement of an account-
holder of an insolvent ADI; or
. to meet (wholly or partly) an entitlement in connection
with a general insurance policy issued by an insolvent
general insurance company,
in a corresponding way to the way in which the PAYG withholding
provisions would apply to the payments if they were made by the ADI
or general insurance company.
49. The amendments clarify the application of the PAYG withholding
provisions to the meeting of an entitlement under the scheme. This
will help to ensure that taxpayers do not have unanticipated tax
liabilities on assessment which they may have difficulty paying.
Comparison of key features of new law and current law
|New law |Current law |
|A payment under the |The existing law may not |
|scheme in respect of an |treat payments under the |
|ADI deposit or general |scheme by APRA, where the|
|insurance policy is |rights assigned to the |
|treated as if the payment|APRA scheme administrator|
|had been made by the ADI |are in respect of a |
|or general insurer. |policy for personal |
| |injury, loss of income, |
| |interest or trading |
| |stock, in the same way as|
| |the payments they |
| |replace. |
|A capital gain or capital|A right in relation to an|
|loss arising from an |ADI deposit or under a |
|entitlement under the |general insurance policy |
|scheme in relation to an |may be a CGT asset and |
|ADI deposit or a general |may give rise to a |
|insurance policy is |capital gain or capital |
|disregarded. |loss on disposal. |
| |The right to an |
| |entitlement under the |
| |scheme is a CGT asset. |
| |The satisfaction of that |
| |right due to a payment |
| |from the scheme will |
| |trigger a CGT event. |
| |The transfer of rights to|
| |APRA under the scheme |
| |will trigger a CGT event.|
|This measure will ensure |No equivalent. |
|there are no adverse | |
|taxation implications for| |
|holders of FMDs arising | |
|from the scheme where | |
|FMDs are held with failed| |
|ADIs. This measure | |
|covers the actions of | |
|both APRA and the | |
|liquidators of failed | |
|ADIs. | |
|This measure will ensure |No equivalent. |
|the appropriate treatment| |
|for tax purposes where | |
|payments in respect of an| |
|RSA held with a failed | |
|ADI are made to a new | |
|ADI. The measure also | |
|requires the paying | |
|entity under the scheme | |
|to be subject to certain | |
|reporting obligations. | |
|This measure covers the | |
|actions of both APRA and | |
|the liquidator of failed | |
|ADIs. | |
|If an ADI fails, APRA or |No equivalent. |
|the liquidator will be | |
|empowered to open an FHSA| |
|in another ADI and | |
|transfer the funds | |
|guaranteed by the scheme | |
|into the new FHSA for the| |
|affected person. | |
|APRA is required to |No equivalent. |
|report all amounts paid | |
|to, or applied to the | |
|benefit of, | |
|account-holders and | |
|recipients under the | |
|scheme in a financial | |
|year in an annual | |
|statement to | |
|account-holders and | |
|recipients and in an | |
|annual report to the | |
|Commissioner. | |
|The PAYG withholding |The current law is |
|provisions apply to |unclear if the PAYG |
|payments under the scheme|withholding provisions |
|in a corresponding way to|apply to payments made by|
|the way in which the PAYG|APRA under the scheme. |
|withholding provisions | |
|would have applied to the| |
|payment had it been made | |
|by an ADI or general | |
|insurance company. | |
Detailed explanation of new law
Capital gains tax
General deposits accounts in ADIs
50. New rules are inserted to specify the taxation treatment of the
operation of the scheme for account-holders with insolvent ADIs.
51. There are two rights arising from the scheme in relation to ADI
deposits to which the CGT rules can apply:
. the right of the depositor to receive a payment from the
scheme administrator; and
. the right to the portion of the funds in the ADI deposit
that is transferred to the scheme administrator following
payment by the scheme administrator to the depositor.
52. A new provision is inserted to provide that the income tax law is
applied to a taxpayer if an amount is paid to the taxpayer under
the scheme in the same way as if the amount was paid by the ADI
under the terms and conditions of the agreement for keeping the
account. [Schedule 1, item 20, section 253-5]
53. Under the current law a capital gain or capital loss will be
realised where there is a disposal of either of the rights arising
from the scheme. The intention is that the scheme will not create
any income tax consequences that would not arise if the scheme was
not activated. A new section is inserted to disregard a capital
gain or a capital loss a taxpayer makes because of the operation of
the scheme. [Schedule 1, item 20, section 253-10]
54. The existing law will apply to determine the CGT treatment of
capital gains and capital losses in respect of the ADI deposit
subsequent to the administration of the scheme and once the
liquidation of the ADI is completed.
55. Where the scheme covers only part of an ADI deposit, a payment made
under the scheme will result in a partial disposal of the ADI
deposit. The CGT provisions in Division 112 of the ITAA 1997
modify the cost base of the remainder of a CGT asset where there is
a partial disposal of the asset. Subsection 112-30(3) modifies the
cost base with reference to the capital proceeds and the market
value of the remainder of the asset. This could result in a
capital gain or capital loss arising from the operation of the
scheme, which is not intended.
56. A new section is inserted to specify that the cost base of the part
of a deposit which is covered by the scheme is equal to the payment
under the scheme. The cost base of the remainder of a deposit
following a payment from the scheme is equal to the cost base of
the deposit reduced by the amount that has been paid under the
scheme. [Schedule 1, item 20, section 253-15]
1.
A deposit holder has a deposit of $100,000 with an ADI. The
scheme is activated for the ADI. Under the existing law if
a payment of $20,000 is made by the scheme administrator,
the cost base of the part of the deposit covered by the
scheme is worked out using the formula in subsection 112-
30(3). If the market value of the remaining $80,000, based
on the market's expectation of the outcome of the
liquidation of the ADI, is only $10,000 then the cost base
of the amount covered by the scheme would be $66,666. That
cost base is calculated as $100,000 � $20,000 / $20,000
+ $10,000). A capital loss of $46,666 would arise from the
operation of the scheme.
Under the existing law the cost base of the remainder of the
deposit would be $33,334. This cost base would be used to
determine whether a capital gain or capital loss arises for
the taxpayer at the conclusion of the administration or
liquidation of the ADI.
Under the new law, the cost base of the part of the deposit
covered by the scheme will be equal to the payment, $20,000,
and the cost base of the remainder of the deposit will be
$80,000.
General insurance policies
57. New rules are inserted to specify the income tax treatment of
scheme payments in respect of general insurance policies. Payments
by the Administrator under the scheme in relation to a general
insurance claim payable by a general insurer to a policy holder are
to be treated for income tax purposes as if they were:
. paid directly by the general insurer to the claimant under
the general insurance policy; and
. made under the terms and conditions of the general
insurance policy to which the claim relates.
[Schedule 1, item 26, section 322-25]
58. Section 62ZZM of the Insurance Act provides that when an amount of
a person's entitlement under the scheme in relation to a general
insurance policy is met, the person is taken to have been paid the
amount by the general insurer.
59. In order to ensure that the taxation laws apply to payments under
the scheme in the same way as if the payments were made by the
general insurer, the payments under the scheme must be described in
such a way that they will have the same character as payments by
the general insurer. Section 62ZZM is amended to treat the payment
as being under the terms and conditions of the policy. [Schedule
1, item 32, section 62ZZM]
60. An entitlement to receive a payment under the scheme is a right
which is a CGT asset. The payment of an entitlement under the
scheme triggers a CGT event as it is a disposal or other ending of
the right to the entitlement. A new rule is inserted to disregard
a capital gain or capital loss a taxpayer makes from the ending of
an entitlement under the scheme in relation to an ADI deposit or a
general insurance policy. This ensures that the operation of the
scheme does not give rise to any capital gain or capital loss that
would not arise if the scheme has not been activated. [Schedule 1,
item 26, section 322-30]
61. Notes are included in a number of provisions of the existing law to
provide cross referencing to the new provisions inserted. Also, a
reference to a new cost base modification provision is added to the
finding table in section 112-97 of the ITAA 1997 for the cost base
modification rules outside the CGT provisions. [Schedule 1, items
17 to 19, subsections 104-10(5) and 104-25(5) and section 112-97]
Farm management deposits
Eligible taxpayers
62. These amendments apply when an entitlement under Division 2AA of
Part II of the Banking Act in connection with an account containing
an FMD is met, wholly or partly, by the making of a new deposit at
a new ADI. They also apply in the case of liquidation, the
liquidator making a new deposit for the taxpayer. [Schedule 1,
item 15, subsection 393-80(1) in Schedule 2G to the ITAA 1936]
63. In cases where amounts paid into a new account at an ADI can be
attributed to multiple FMDs an allocation rule will be needed.
Where the entitlement is met via instalments:
. If the entitlement only relates to one FMD, then 100 per
cent of the instalment should be attributed to that FMD.
. If the entitlement relates to multiple FMDs, then each
instalment should be apportioned based on each FMDs
respective proportions of the total amount held in the
original account(s). That is if an FMD is 10 per cent of
the account(s)' total, then 10 per cent of the instalment
should be attributed to that FMD. If a different FMD is
30 per cent of the account(s)' total, then 30 per cent of
the instalment should be attributed to that FMD.
. The same rules apply when that entitlement is met by a
single payment but relates to multiple FMDs.
[Schedule 1, item 15, subsection 393-80(1) in Schedule 2G to the
ITAA 1936]
1.
A taxpayer has an account containing two FMDs worth a total
of $100,000. The first FMD was deposited three years ago
worth $10,000. The second FMD was deposited six months ago
worth $90,000. As such, the first FMD is worth 10 per cent
of the account and the second FMD is worth 90 per cent.
APRA meets the taxpayer's entitlement via instalments. The
first instalment is $30,000 and the second is $70,000.
When the $30,000 is paid into a new account, the taxpayer
must apportion the $30,000 between the two FMDs. The first
FMD was 10 per cent of the old account and therefore 10 per
cent of the new payment should be attributed to that FMD
(ie, $3,000). Similarly, the second FMD should have 90 per
cent of the instalment attributed to it (ie, $27,000).
When the $70,000 is paid into a new account, the taxpayer
must apportion the $70,000 between the two FMDs. The first
FMD was 10 per cent of the old account and therefore 10 per
cent of the new payment should be attributed to that FMD
(ie, $7,000). Similarly, the second FMD should have 90 per
cent of the instalment attributed to it (ie, $63,000).
Tax treatment of actions taken by APRA or a liquidator
64. When the actions of APRA or a liquidator result in a new deposit,
this is treated as satisfying the requirements for the transfer of
deposits between financial institutions, set out in subsection 393-
40(5) of Schedule 2G to the ITAA 1936. The effects of this are:
. the applicable depositing day for the old FMD is
maintained under paragraph 393-37(7)(c) or (d) of Schedule
2G to the ITAA 1936 for the new deposit (which affects
whether a withdrawal of the new deposit prevents it from
being an FMD);
. the new deposit is not regarded as a repayment of the
old FMD that may give rise to assessable income
(see subsection 393-50(5) of Schedule 2G to the
ITAA 1936); and
. the new deposit is not regarded as the making of a new FMD
that may give rise to a deduction (see subsection 393-
50(5) of Schedule 2G to the ITAA 1936).
[Schedule 1, item 15, subsection 393-80(2) in Schedule 2G to the
ITAA 1936]
1.
A taxpayer made a $10,000 deposit into an FMD on 1 July 2001
and a $10,000 deduction is claimed in the taxpayer's tax
return for the 2001-02 income year.
On 28 June 2009 the ADI which holds the FMD is declared to
be covered by the scheme and the taxpayer is entitled to
receive a new FMD at a new ADI. This entitlement is met by
establishing a new FMD of $10,000 at a new ADI on 1 July
2009.
The creation of the new deposit at the new ADI will be
treated as a transfer of the old deposit rather than a
withdrawal and making of another deposit. As such, the FMD
is not considered to have been withdrawn and no amount is
included in assessable income in 2009-10. Furthermore, the
new deposit will not allow a deduction for the taxpayer in
the 2009-10 income year.
The applicable depositing day will remain 1 July 2001 to
allow the taxpayer to withdraw the FMD without being
considered to have withdrawn the FMD within 12 months of
deposit.
65. The new deposit cannot lose its status as an FMD even if it is less
than $1,000 (despite subsection 393-45(1) of Schedule 2G to the
ITAA 1936 which outlines that an FMD can lose its status if the
deposit is less than $1,000). This ensures that taxpayers are not
disadvantaged if the new deposit can only be $1,000 or less due to
the functioning of the scheme. [Schedule 1, item 15, subsection
393-80(3) in Schedule 2G to the ITAA 1936]
1.
A taxpayer made a $10,000 deposit into an FMD on 1 July 2001
and a $10,000 deduction is claimed in the taxpayer's tax
return for the 2001-02 income year. On 28 June 2009 the ADI
is declared to be covered by the scheme. As such, the
taxpayer has an entitlement under the scheme to receive a
new FMD at a new ADI. This entitlement is met via two
payments: $900 on 29 June 2009 and the residual $9,100 on
1 January 2010.
This amendment ensures that the new deposit created on
29 June 2009 cannot lose its status as an FMD despite the
deposit being less than $1,000.
66. Amendments are also made to ensure that the old FMD and the new
deposit do not lose their status as FMDs because they are held with
more than one financial institution. Furthermore, any new FMDs
made between the time the entitlement arises and the first time a
new deposit is made by APRA to meet that entitlement will not lose
their status as an FMD. [Schedule 1, item 15, subsection 393-80(4)
in Schedule 2G to the ITAA 1936]
Unrecouped FMD deduction for new deposit less than old FMD
67. When an FMD is withdrawn in a year of income, the owner is required
to include as assessable income, any amount that equals the
deductible amount previously allowed. The amount assessable is
limited to the amount previously deductible by the use of the
unrecouped FMD deduction.
68. The unrecouped FMD deduction will generally be that part of the
deposit for which a deduction has been claimed but which has yet to
be included in assessable income on repayment. If the FMD contains
both deductible and non-deductible deposits, withdrawals are
considered to have been made from the non-deductible part first.
69. If the new deposit is less than the old FMD at the time (the
declaration time) the old ADI became a declared ADI under the
Banking Act, the unrecouped FMD deduction in respect of the new
deposit is the amount worked out using the formula:
[pic]
1.
A taxpayer made a $10,000 deposit into an FMD on 1 July 2001
and a $10,000 deduction is claimed in the taxpayer's tax
return for the 2001-02 income year. As such, the unrecouped
FMD deduction for that deposit is $10,000. On 28 June 2009
the ADI is declared to be covered by the scheme and the
taxpayer has an entitlement under the scheme to receive a
new FMD at a new ADI. This entitlement is met via two
payments: $900 on 29 June 2009 and the residual $9,100 on
1 January 2010.
This amendment provides a way of attributing the unrecouped
FMD deduction to each of the new deposits. Using the
formula in relation to the first instalment of $900 yields
an unrecouped FMD deduction of $900.
[pic]
Similarly for the second instalment, the unrecouped FMD
deduction will be $9,100.
[pic]
[Schedule 1, item 15, subsection 393-80(6) in Schedule 2G to the
ITAA 1936]
70. However, the total of the unrecouped FMD deduction attributable to
the new deposits can not be greater than the original unrecouped
FMD deduction. Therefore the taxpayer must work out the total
unrecouped FMD deduction attributed to new deposits in relation to
that old FMD.
71. To work out the unrecouped FMD deduction the following process must
be followed. First the difference between the unrecouped FMD
deduction just before declaration time and the total of the amounts
worked out under all previous applications of the above formula in
relation to that old FMD must be calculated.
72. If the unrecouped FMD deduction as calculated using the above
formula for that instalment is greater than the difference
calculated in paragraph 1.71, then the difference (if any) will be
the unrecouped FMD deduction. [Schedule 1, item 15, subsection 393-
80(7) in Schedule 2G to the ITAA 1936]
1.
A taxpayer has an FMD in an account worth $100,000. The
unrecouped FMD deduction attributable to that FMD is
$100,000. An entitlement arises under the scheme to receive
$100,000 and APRA meets the taxpayer's entitlement via three
instalments: $70,000, $25,000 and $10,000 (while greater
than $100,000, the excess may be interest that has not been
received by the taxpayer prior to the ADI failing). The
apportionment rule should work as follows:
For the first instalment, the calculation yields the
following unrecouped FMD deduction for that new deposit:
[pic]
. The unrecouped FMD deduction just before declaration time
was $100,000. The total of the amounts worked out under all
previous applications of this formula in relation to that
old FMD is zero as its never been used before. Therefore
the difference between the two is $100,000.
. The value of the unrecouped FMD deduction calculation is
$70,000. As this is less than the original $100,000
unrecouped FMD deduction, the $70,000 can be attributed to
the new deposit.
For the second instalment, the calculation yields the
following unrecouped FMD deduction for that new deposit:
[pic]
. The unrecouped FMD deduction just before declaration time
was $100,000. The total of the amounts worked out under all
previous applications of this formula in relation to that
old FMD is $70,000 ($70,000 from the first instalment). The
difference between the two is $30,000.
. As the amount calculated by the formula is less than
$30,000, the whole $25,000 can be attributed to the second
deposit as the unrecouped FMD deduction.
For the third instalment, the calculation yields the
following unrecouped FMD deduction for that new deposit:
[pic]
. The unrecouped FMD deduction just before declaration time
was $100,000. The total of the amounts worked out under all
previous applications of this formula in relation to that
old FMD is $95,000 ($70,000 + $25,000). The difference
between the two is $5,000.
. The amount calculated by the formula above is $25,000. The
difference between the unrecouped FMD deduction just before
declaration time and the total of the amounts worked out
under all previous applications of the above formula in
relation to that old FMD is $5,000. As the $25,000 is
greater than $5,000, the $5,000 is the unrecouped FMD
deduction in relation to that deposit.
Repayment if the owner of an FMD with an insolvent ADI is bankrupt,
dies or ceases to be a primary producer
73. An FMD must be repaid if the owner dies, becomes bankrupt or ceases
to be a primary producer for at least 120 days (subsection 393-
40(3) of Schedule 2G to the ITAA 1936). Furthermore, the FMD is
deemed to be repaid in these circumstances even if the FMD is not
withdrawn (subsection 393-15(4) of Schedule 2G to the ITAA 1936).
This results in taxpayers being assessed on their FMDs even when
they have taken no action to withdraw the money.
74. To ensure that the taxpayer is not assessed on an unpaid FMD under
the scheme, amendments are made to ensure that the taxpayer is not
deemed to have repaid their FMD in the case of death, bankruptcy or
ceasing to be a primary producer for 120 days for that part of the
FMD which has not been paid by APRA or the liquidator. [Schedule
1, item 15, section 393-85 of Schedule 2G to the ITAA 1936]
1.
A taxpayer made a $10,000 deposit into an FMD on 1 July 2001
and a $10,000 deduction is claimed in the taxpayer's tax
return for the 2001-02 income year. On 30 June 2009 the
taxpayer has ceased being a primary producer for 120 days
and therefore the $10,000 should be included in assessable
income for that year (the 2008-09 income year).
However, on 28 June 2009 the ADI is declared to be covered
by the scheme. As such, the taxpayer has an entitlement
under the scheme to receive a new FMD at a new ADI. This
entitlement is met by establishing a new FMD of $10,000 at a
new ADI on 1 July 2009. As such the taxpayer will have an
unmet entitlement of $10,000 at the end of the 2008-09
income year.
This amendment ensures that the taxpayer is not assessed on
the $10,000 in the 2008-09 income year.
75. This amendment only applies to that proportion of the old FMD to
which an unmet entitlement with APRA or unmet claim against the ADI
(in the case where the claim is against the winding up of an ADI)
applies. [Schedule 1, item 15, section 393-85 of Schedule 2G to
the ITAA 1936]
Retirement savings accounts
76. Division 306 of the ITAA 1997 sets out the tax treatment of
payments made from one superannuation plan to another
superannuation plan, and of similar payments. It includes a
definition of 'roll-over superannuation benefit'. Division 307
defines concepts such as 'superannuation benefit', 'superannuation
lump sum', and the 'tax-free component' and 'taxable component' of
such benefits.
77. Amendments to Division 306 provide the treatment, for tax purposes,
of a payment of an entitlement arising under the scheme, or a
distribution by a liquidator of a failed ADI declared under the
scheme, where the payment or distribution is in respect of an
individual who held an RSA with a failed ADI, and is made to
another RSA. [Schedule 1, item 21, subsection 306-25(1)]
78. Part 3-30 of the ITAA 1997 applies to the payer of the entitlement
or the liquidator as if they were the failed ADI. Consequently, a
payment or distribution is treated as if it were a superannuation
member benefit and a superannuation lump sum. The payment or
distribution will be treated as a roll-over superannuation benefit
where it is paid from the original RSA to the new RSA.
79. The paying entity is also subject to the reporting obligations
under Part 3-30 for the purposes of the payment. For example, the
paying entity is required to report details of the amount
effectively rolled-over to both the receiving ADI and the account-
holder under Division 390 in Schedule 1 to the TAA 1953. The
uniform administrative and criminal penalty regime for non-
compliance prescribed in the TAA 1953 applies. [Schedule 1, item
21, subsection 306-25(2)]
80. As part of its reporting obligations, the paying entity is required
to report to the receiving ADI the value of the superannuation
interest and the amount of the tax-free and taxable components of
the interest. For an RSA in the accumulation phase, the value of
the superannuation interest and the amount of each of those
components are determined at the declaration time as defined in the
Banking Act. For an RSA in the pension phase, these amounts are
determined as at the time the income stream commenced with the
failed ADI. [Schedule 1, item 21, subsections 306-25(3) and (4)]
81. The operation of these amendments is not affected by other
amendments dealing with the application of CGT to the failed ADI,
and the treatment of entitlements relating to insolvent ADIs and
general insurers. [Schedule 1, item 21, subsection 306-25(5)]
First home saver accounts
Special provisions applying if financial claims scheme entitlements
arise in relation to FHSAs
82. The amendments provide that the payment of a scheme entitlement
into a new FHSA is treated as a transfer between FHSAs as described
in paragraph 11(3)(a) of the FHSA Act, which stops a transfer from
one FHSA provider to another FHSA provider from being eligible for
the government contribution.
83. The effects of this include the contribution not being considered a
personal FHSA contribution, not counting against the limit on
contributions set by section 27 of the FHSA Act and not counting
for working out the amount of a Government FHSA contribution for
the person under section 38. [Schedule 1, item 9, subsection
128A(2) of the FHSA Act]
84. The amendments provide that the eligibility rules in
paragraphs 15(1)(e) and (f) of the FHSA Act are disregarded to
ensure that the holding and closure of the old FHSA after the
entitlement arises cannot prevent the person from meeting the FHSA
eligibility requirements in relation to the new FHSA being
established by APRA. [Schedule 1, item 9, subsection 128A(3) of
the FHSA Act]
85. The amendments provide an exemption from the criminal offence in
subsection 19(1) of the FHSA Act that an FHSA provider might
otherwise face for opening an FHSA for someone who has not applied
in an approved form, quoted their TFN and stated that they meet the
eligibility requirements for opening an account.
86. The FHSA provider has the onus of proving that the new exemption
applies. This is appropriate because the information about the
matter is peculiarly within the knowledge of the provider. The ATO
would bear significant costs if it were required to obtain the
information needed to negate the exemption, and the provisions are
likely to be used only infrequently and where used the information
is easily available to the provider. In addition, drafting the
provisions in this way promotes simpler, clearer legislation.
87. The amendments ensure that APRA or the liquidator will not be
prevented from meeting their obligations under the financial claims
scheme to open a new account for the FHSA holder. [Schedule 1,
item 9, subsection 128A(4) of the FHSA Act]
88. The amendments cover the instances when an FHSA holder would have
to give a notice that they do not satisfy the FHSA eligibility
requirements, except that the old FHSA is in liquidation. Given it
is uncertain when APRA or the liquidator will complete a transfer
into a new FHSA, provision is made so that any tax or penalty
consequences are merely deferred until a new account has been
established in a new FHSA provider. [Schedule 1, item 8,
subsection 128A(4) of the FHSA Act]
89. The amendments provide that the person must give notice within 30
days after he or she is advised that a new FHSA has been opened in
his or her name with a new FHSA provider. [Schedule 1, item 9,
subsection 128A(5) of the FHSA Act]
90. The amendments provide that APRA's right to be reimbursed out of
money held in the declared ADI is not affected by the limits on
payments out of FHSA accounts outlined in section 31 of the FHSA
Act. [Schedule 1, item 9, subsection 128A(6) of the FHSA Act]
Reporting obligations
91. In relation to payments made under the scheme (under Division 2AA
of Part II of the Banking Act or Part VC of the Insurance Act),
APRA is required to give both:
. an annual statement to an account-holder or recipient
about the amounts paid to, or applied for the benefit of,
the account-holder or recipient in the previous financial
year; and
. a separate annual report to the Commissioner about all
amounts paid to, or applied for the benefit of account-
holders and all amounts paid to, or applied for the
benefit of recipients in the previous financial year.
[Schedule 1, items 1 and 30, sections 16AHA of the Banking Act and
62ZZKA of the Insurance Act]
92. The term 'recipient' is used in the amendments to the Insurance Act
rather than the term 'policyholder', because a third person can
receive a payment under Division 3 of Part VC of the Insurance Act.
93. APRA is only required to provide the annual statement and report to
the Commissioner in the situation where one or more amounts are
paid to, or applied for the benefit of, one or more account-holders
or one or more recipients in a financial year to meet (in whole or
in part) the entitlements under the scheme. Therefore, if no
payments are made under the scheme, APRA will not be required to
give the statement or report. [Schedule 1, items 1 and 30,
subsections 16AHA(1) of the Banking Act and 62ZZKA(1) of the
Insurance Act]
94. Current provisions in the Banking Act and the Insurance Act give
APRA the power to delegate the functions and powers it has in
regard to administering the scheme. In the situation where a
delegate of APRA makes a payment under the scheme, APRA will need
to provide the statement and report.
APRA to give information to account-holders and recipients
95. If a payment is made to an account-holder or recipient under the
scheme, then APRA will be required to provide that account-holder
or recipient with a statement that:
. is in the approved form;
. names the account-holder or recipient;
. states the account-holder's or recipient's TFN (if known
to APRA);
. states the total of the amounts, and the total of the
amounts withheld from the amounts, paid to the account-
holder or recipient; and
. specifies the financial year to which the statement
relates.
[Schedule 1, items 1 and 30, subsections 16AHA(2) of the
Banking Act and 62ZZKA(2) of the Insurance Act]
96. The information provided in the statement given to an account-
holder or recipient includes that account-holder's or recipient's
TFN, if APRA knows it. As the TFN information is only quoted in
the statement going to that TFN holder, it is not divulged or
communicated to a third person within the meaning of section 8WB of
Part III of the TAA 1953 (relating to penalties for divulging or
communicating TFN information). Therefore, no offence is
committed.
97. The annual statement must be provided to the account-holder or
recipient within 14 days after the end of the financial year in
which the amounts are paid. [Schedule 1, items 1 and 30,
subsections 16AHA(2) of the Banking Act and 62ZZKA(2) of the
Insurance Act]
98. The requirement for APRA to provide the statement within 14 days
after the end of the financial year is so that account-holders and
recipients can use the information provided in the statement to
help calculate their end of year tax position, which will therefore
assist them in complying with their taxation obligations.
99. The approved form rules in Division 388 in Schedule 1 to the TAA
1953 apply to the requirements to provide those statements as if
the requirements were taxation laws. This ensures that the
approved form rules apply to the statements APRA must provide
without having to reproduce those rules in full. [Schedule 1,
items 1 and 30, subsections 16AHA(4) and (5) of the Banking Act and
62ZZKA(4) and (5) of the Insurance Act]
100. An 'approved form' is a form approved by the Commissioner that
contains the information the Commissioner requires and is provided
in the manner the Commissioner requires.
APRA to give information to the Commissioner
101. If a payment is made to an account-holder or to a recipient under
the scheme, then as well as making a statement to the account-
holder or recipient, APRA will also be required to give the
Commissioner a report in the approved form about all amounts paid
to the account-holders or recipients. [Schedule 1, items 1 and 30,
subsection 16AHA(3) of the Banking Act and 62ZZKA(3) of the
Insurance Act]
102. APRA is required to provide the report to the Commissioner within
four months after the end of the financial year, in which the
payments are made. [Schedule 1, items 1 and 30, subsection
16AHA(3) of the Banking Act and 62ZZKA(3) of the Insurance Act]
103. As the law currently stands, investment bodies, such as ADIs, are
required by Regulation 56 of the Income Tax Regulations 1936 to
give the Commissioner a written report (an annual investment income
report) regarding all payments (and the details of those payments)
made to investors in a financial year. The report that is required
to be given to the Commissioner includes TFN information of the
investor where the investor has quoted that information to the
investment body. As APRA, being the administrator of the scheme,
will be making payments in regard to certain failed ADIs, it is
appropriate that APRA provide information, such as TFN information
to the Commissioner that would have otherwise been provided by the
ADI.
104. Providing TFN information to the Commissioner assists the ATO with
compliance and data matching activities.
Purposes for which information can be obtained
105. The Banking Act is amended to allow APRA, by written notice, to
require a certain entity to give a specified person specified
information about an account-holder relevant to preparing or giving
a statement or report required by section 16AHA and relevant to
complying with an obligation under a law relating to taxation.
[Schedule 1, item 3, paragraphs 16AK(4)(ea) and (eb) of the Banking
Act]
106. A 'certain entity' that APRA may require to give information
includes:
. an ADI (whether or not it is a declared ADI);
. an administrator appointed to take control of an ADI's
business; or
. a liquidator (including a provisional liquidator)
appointed in connection with the winding up, or proposed
winding up, of an ADI.
107. Offence and civil penalty provisions in the Banking Act apply to an
entity mentioned in paragraph 1.106, if the entity fails to give
the specified information to the specified person in the written
request provided by APRA.
108. The Insurance Act is amended to allow APRA, by written notice, to
require a certain entity to give a specified person specified
information relevant to preparing or giving a statement or report
required by section 62ZZKA and relevant to complying with an
obligation under a law relating to taxation. [Schedule 1, item 33,
paragraphs 62ZZP(4)(da) and (db) of the Insurance Act]
109. A 'certain entity' that APRA may require to give information
includes:
. a general insurer (whether or not it is a declared general
insurer); or
. a liquidator (including a provisional liquidator)
appointed in connection with the winding up, or proposed
winding up, of a general insurer.
110. Offence and civil penalty provisions in the Insurance Act apply to
an entity mentioned in paragraph 1.109, if the entity fails to give
the specified information to the specified person in the written
request provided by APRA.
Withholding obligations
111. The TAA 1953 is amended to ensure that the PAYG withholding
provisions apply to payments made to meet an entitlement under the
scheme in a way corresponding to the way that the PAYG withholding
provisions would have applied if the payment was made by an ADI or
general insurance company. [Schedule 1, item 34, section 21-1 of
Schedule 1 to the TAA 1953]
112. Therefore, APRA, as the administrator of the scheme, will be
required to withhold amounts from payments made under the scheme
and then report and remit these amounts to the Commissioner.
113. The terms 'general insurance policy' and 'general insurance
company' are defined terms for the purposes of the TAA 1953 and are
used in the amendments instead of the terms 'protected policy' and
'general insurer', that are used in the provisions relating to the
scheme in the Insurance Act ('protected policy' and 'general
insurer' are not defined terms for the purposes of the TAA 1953).
114. The use of the terms 'general insurance policy' and 'general
insurance company' cover, for the purposes of the amendments, the
same scope as the terms 'protected policy' and 'general insurer',
because the amendments apply to specific payments made by a general
insurance company under the scheme.
115. The amendments apply if an entity's entitlement under:
. Division 2AA of Part II of the Banking Act to be paid an
amount by APRA in connection with the entity's account
with an ADI; or
. Part VC of the Insurance Act, to be paid an amount in
connection with a general insurance policy issued by a
general insurance company,
is met wholly or partly. [Schedule 1, item 34, subsection 21-5(1)
of Schedule 1 to the TAA 1953]
116. Therefore, the entitlements do not necessarily have to be met by
APRA for the amendments to apply.
117. Division 2AA of Part II of the Banking Act entitles account-holders
that have certain accounts with certain ADIs to be paid amounts by
APRA worked out by reference to the balance of those accounts.
118. Part VC of the Insurance Act entitles policyholders and other
persons to be paid amounts by APRA in relation to certain policies
with an insolvent general insurer.
119. Part 2-5 in Schedule 1 to the TAA 1953 (the PAYG withholding
provisions) applies in relation to APRA and the meeting of the
entitlement in a corresponding way to the way in which it would
have applied in relation to the ADI or general insurance company
doing, in connection with the account or policy, whatever was done
in meeting the entitlement. [Schedule 1, item 34, subsection 21-
5(2) of Schedule 1 to the TAA 1953]
120. This means that APRA needs to take steps corresponding to those an
ADI or general insurance company would have taken, when an
entitlement is met under the scheme.
121. The reason payments are treated in a 'corresponding way' to the way
those payments would be treated if paid by an ADI or general
insurance company, is because payments made under the scheme will
not be made by an ADI or general insurance company and therefore
will not strictly be of an identical nature.
122. The phrase 'whatever was done in meeting the entitlement' simply
refers to how the entitlement was met and usually this would be a
payment. Therefore, in relation to the PAYG withholding
provisions, the same outcome should result in relation to APRA and
the meeting of the entitlement under the scheme as would have
resulted if the ADI had made the payments to the account-holder.
123. Current provisions in the Banking Act and the Insurance Act give
APRA the power to delegate the functions and powers it has in
regard to administering the scheme.
124. In the case where a delegate makes a payment to meet an entitlement
under the scheme, the PAYG withholding provisions will apply in
relation to APRA and the meeting of the entitlement by the delegate
in a corresponding way to the way in which the PAYG withholding
provisions would apply to an ADI if they made that payment.
1.
The PAYG withhold provisions require ADIs to withhold
amounts on certain payments, such as when interest is paid
to an account-holder and the account-holder has failed to
quote their TFN.
In the situation where APRA, as the administrator of the
scheme, makes a payment to meet the entitlement of an
eligible account-holder of a failed ADI, then that payment
will be treated, for PAYG withholding purposes, in a
corresponding way to the way the payment would have been
treated if it were made by the ADI.
Once APRA withholds an amount from the payment made to the
eligible account-holder, APRA will need to remit and report
the withheld amount to the Commissioner in line with the
PAYG withholding provisions.
Application and transitional provisions
125. The amendments to disregard capital gains or capital losses in
respect of ADI deposits or general insurance policies apply to CGT
events after 17 October 2008, after the commencement of the scheme.
This ensures that the CGT rules can apply immediately if the
scheme is activated. [Schedule 1, items 27 and 29]
126. The amendments to the FMD provisions apply to assessments for the
year of income including 18 October 2008 and later income years.
This aligns the application date for the tax treatment of the
payments with the commencement of the scheme. The retrospective
commencement will ensure no taxpayer is adversely affected should
an ADI be declared before Royal Assent. [Schedule 1, item 16]
127. The amendments relating to RSAs apply in relation to entitlements
arising under the scheme after 17 October 2008. This aligns the
application date for the tax treatment of the payments with the
commencement of the scheme. [Schedule 1, subitem 22(1)]
128. The amendments to impose the RSA reporting obligations under
Division 390 of Schedule 1 to the TAA 1953 on APRA (or other paying
entities) apply from the date of commencement of this measure.
[Schedule 1, subitem 22(2)]
129. The amendments relating to FHSAs apply in relation to entitlements
arising under the scheme after 17 October 2008. This aligns the
application date for the tax treatment of the payments with the
commencement of the scheme. The retrospective commencement will
ensure no taxpayer is adversely affected should an ADI be declared
before Royal Assent. [Schedule 1, item 10]
130. The amendments to the Banking Act and the Insurance Act that impose
annual reporting obligations on APRA apply in relation to amounts
paid or applied before, on or after the commencement of those
amendments. [Schedule 1, items 2 and 31]
131. As the amendments will require APRA to give an annual statement to
an account-holder or recipient, or a report to the Commissioner
after the end of a financial year about payments made during the
financial year, the amendments need to apply to payments that may
be made prior to the commencement of the amendments. Therefore, as
long as the reporting obligations commence before the end of the
2008-09 financial year, then the reporting obligations will apply
with respect to any payments made under the scheme during the 2008-
09 financial year. (Note that the main scheme legislation received
Royal Assent on 17 October 2008.)
132. The amendments to Part 2-5 of Schedule 1 to the TAA 1953 apply in
relation to things done before, on or after the commencement of the
amendments to meet entitlements arising after 17 October 2008 under
the scheme. [Schedule 1, subitem 35(1)]
133. The amendments ensure that (as required under Part 2-5 of Schedule
1 to the TAA 1953), APRA will include in its annual statements to
account-holders, recipients and the Commissioner, withholding
payments made under the scheme after 17 October 2008.
134. However, APRA is not required to comply with the PAYG withholding
provisions before the commencement of amendments and therefore the
amendments do not make APRA liable to a criminal or administrative
penalty for an omission occurring before the commencement of the
application provision. [Schedule 1, subitem 35(2)]
Consequential amendments
Farm management deposits
135. Notes are inserted at the end of subsections 393-15(3) and (4) of
Schedule 2G to the ITAA 1936 to indicate the amendments in this
Bill interact with the core FMD provisions in section 393-15 of
Schedule 2G to the ITAA 1936. [Schedule 1, items 11 and 12,
subsections 393-15(3) and (4) of Schedule 2G to the ITAA 1936]
136. Amendments are made to the definition of 'ADI' in section 393-25 of
Schedule 2G to the ITAA 1936 to accommodate the required amendments
needed for the scheme. [Schedule 1, items 12 and 13, section 393-
25 of Schedule 2G to the ITAA 1936]
Chapter 2
Increase access to the small business capital gains tax concessions
Outline of chapter
137. Schedule 2 to this Bill amends the law to increase access to the
small business capital gains tax (CGT) concessions for taxpayers
owning a CGT asset used in a business by an affiliate or entity
connected with the taxpayer and for partners owning a CGT asset
used in the partnership business. This Schedule also makes a
number of other minor amendments to clarify and refine elements of
the small business CGT concessions.
Context of amendments
138. The small business CGT concessions were introduced to provide small
business operators with access to additional funds for retirement
or to grow their businesses. The concessions are the:
. 15-year exemption;
. retirement exemption;
. active assets 50 per cent reduction; and
. small business roll-over.
139. Tax Laws Amendment (Small Business) Act 2007 (Small Business Act)
introduced a single definition of a small business entity, which
replaced various threshold eligibility tests for accessing the
range of small business concessions, including the CGT concessions.
The single definition was introduced to simplify and standardise
the various small business concessions.
140. In broad terms, a small business entity has to carry on a business
and its yearly aggregated turnover has to be less than $2 million.
The Small Business Act retained the existing alternative
eligibility criteria for accessing the small business CGT
concessions for entities that do not meet the new small business
entity test but increased the maximum net asset value threshold
from $5 million to $6 million.
Entities holding passive assets
141. The introduction of the $2 million small business turnover test and
the retention of the $6 million net asset value test resulted in a
difference between how the two tests treat businesses with passive
asset structures (ie, where one entity owns a CGT asset and an
affiliate or an entity connected with the asset-owning entity uses
the asset in its business).
142. Owners of passively held CGT assets used in the business of an
affiliate or an entity connected with the asset-owning entity can
access the small business CGT concessions via the $6 million
maximum net asset value test in some circumstances. However, they
do not have access to the small business entity test ($2 million
turnover test) because they typically do not meet the requirement
of carrying on a business.
Partners in a partnership
143. A partner can access the small business CGT concessions via the
aggregated turnover test only if the partnership is a small
business entity and the relevant CGT asset is an 'asset of the
partnership'. An asset of the partnership is an asset that is
owned by the partners in accordance with their fractional interest
in the partnership or in accordance with their respective interests
as specified in the partnership agreement.
144. In some circumstances, an individual partner (or partners) owns an
asset directly and makes the asset available for general use in the
partnership. Under the current rules, this asset is not an asset
of the partnership, as the partner (or partners) owns the asset.
The partner is not able to access the small business CGT
concessions for that asset via the aggregated turnover test but may
be able to access the concessions via the maximum net asset value
test.
Summary of new law
145. The amendments allow a taxpayer owning a CGT asset that is used in
a business by the taxpayer's affiliate, or an entity connected with
the taxpayer, to access the small business CGT concessions via the
$2 million aggregated turnover test (small business entity test).
146. The amendments also allow partners who own a CGT asset that is used
in a partnership business to access the small business CGT
concessions via the $2 million aggregated turnover test where the
CGT asset is not an 'asset of the partnership'.
147. Schedule 2 also makes a number of other amendments to refine and
clarify aspects of the existing small business CGT concessions
provisions. These are summarised in the comparison of new and
current law in the table below.
Comparison of key features of new law and current law
|New law |Current law |
|Taxpayers that do not |Taxpayers that do not |
|carry on a business but |carry on a business but |
|own a CGT asset that is |own a CGT asset that is |
|used in a business by the|used in a business by the|
|taxpayer's affiliate or |taxpayer's affiliate or |
|an entity connected with |an entity connected with |
|the taxpayer are able to |the taxpayer are not able|
|access the small business|to access the small |
|CGT concessions via the |business CGT concessions |
|small business entity |via the small business |
|test. |entity test. |
|The spouse or child |The spouse or child |
|(under 18 years of age) |(under 18 years of age) |
|of an individual is taken|of an individual is taken|
|to be an affiliate of the|to be an affiliate of the|
|individual in a wider |individual in a narrow |
|range of circumstances |range of circumstances |
|and for a wider range of |and for a particular |
|purposes. |purpose. |
|An individual partner (or|An individual partner (or|
|partners) in a |partners) in a |
|partnership is able to |partnership can access |
|access the small business|the small business CGT |
|CGT concessions via the |concessions via the small|
|small business entity |business entity test only|
|test where the asset is |if the relevant CGT asset|
|owned by the partner, but|is an 'asset of the |
|used in the partnership. |partnership'. |
|The small business CGT |The small business CGT |
|concessions are |concessions are |
|technically workable for |technically unworkable |
|partners in a partnership|for partners in a |
|that are seeking relief |partnership that are |
|via the small business |seeking relief via the |
|entity test, as the |small business entity |
|relevant CGT asset is a |test, as a partner's |
|partner's interest in an |interest in a CGT asset |
|'asset of the |of the partnership is not|
|partnership'. |an 'asset of the |
| |partnership'. |
|Small business owners are|Liabilities are |
|allowed to include |disregarded from the |
|liabilities in the net |calculation of net asset |
|asset value test where |value where the |
|those liabilities relate |liabilities are related |
|to disregarded interests |to interests in an entity|
|in an entity connected |connected with the |
|with the taxpayer that |taxpayer that have |
|are disregarded to avoid |already been disregarded |
|double counting. |from the calculation to |
| |avoid double counting. |
|Where an asset is used in|An asset that has a |
|an entity that is neither|predominant rental use |
|an affiliate of, nor |and a minor business use |
|connected with, the |may qualify as an active |
|taxpayer owning the |asset if the minor |
|asset, all the uses of |business use is |
|the asset (except for |undertaken by an |
|certain personal use and |affiliate or an entity |
|certain uses from which |connected with the |
|interest, annuity, rent, |taxpayer, but the rental |
|royalty or foreign |use is by an entity that |
|exchange gains are |is neither an affiliate |
|derived) are considered |of, nor connected with, |
|in determining what its |the taxpayer owning the |
|main use is and, |asset. |
|therefore, whether it is | |
|an active asset. | |
|Capital gains made on |Capital gains made on |
|assets acquired on the |assets acquired on the |
|death of a joint tenant |death of a joint tenant |
|(or that devolve to the |(or that devolve to the |
|trustee of a trust that |trustee of a trust that |
|is established by the |is established by the |
|will of an individual), |will of an individual), |
|where the deceased would |where the deceased would |
|have been able to access |have been able to access |
|the small business CGT |the small business CGT |
|concessions and the |concessions and the |
|surviving joint tenant |surviving joint tenant |
|(or trustee) does not |(or trustee) does not |
|continue carrying on the |continue carrying on the |
|business, are eligible |business, are not |
|for the small business |eligible for the small |
|CGT concessions. |business CGT concessions.|
|The small business CGT |There is no provision in |
|retirement exemption |the small business CGT |
|applies appropriately to |retirement exemption to |
|capital proceeds received|cater for an individual |
|by individuals in |receiving capital |
|instalments. |proceeds in instalments. |
|Small business operators |The small business CGT |
|do not need to satisfy |retirement exemption is |
|the basic conditions for |not available for CGT |
|the small business CGT |events J5 and J6 as |
|retirement exemption if |taxpayers cannot satisfy |
|the capital gain arises |the basic conditions for |
|from CGT event J5 or J6. |accessing the small |
| |business CGT concessions.|
|The small business CGT |The small business CGT |
|retirement exemption |retirement exemption does|
|caters for CGT exempt |not cater for CGT exempt |
|payments flowing through |payments flowing through |
|small business structures|small business structures|
|involving interposed |involving interposed |
|entities ultimately to a |entities ultimately to a |
|CGT concession |CGT concession |
|stakeholder without |stakeholder. |
|adverse tax consequences.| |
|Division 7A and section |Division 7A and section |
|109 of the Income Tax |109 of the ITAA 1936 |
|Assessment Act 1936 (ITAA|could apply to retirement|
|1936) will not apply to |exemption payments made |
|payments made to CGT |by private companies or |
|concession stakeholders |trusts to CGT concession |
|to satisfy the retirement|stakeholders to treat |
|exemption conditions. |such payments as |
| |dividends. |
|A partner in a |The CGT provisions treat |
|partnership is not a |a partner in a |
|small business entity in |partnership as carrying |
|their capacity as a |on a business. This |
|partner. This rule |creates uncertainty |
|applies to the small |because a partner could |
|business concessions |argue that the business, |
|generally and not just to|for CGT purposes, is a |
|the CGT concessions. |small business entity |
| |where their aggregated |
| |turnover is less than |
| |$2 million. |
Detailed explanation of new law
Partners and partnership assets - subsection 152-10(1) of the ITAA 1997
148. Individual partners make capital gains when a CGT event happens in
relation to a partnership asset. Therefore individual partners
must satisfy the basic conditions in subsection 152-10(1) of the
Income Tax Assessment Act 1997 (ITAA 1997) if seeking access to the
small business CGT concessions. Although the small business CGT
concessions apply to a partner's interest in a CGT asset of the
partnership, the provision refers to the asset as 'an asset of the
partnership'.
149. Therefore, on a strict reading, the current provisions are
unworkable for partners in a partnership who are seeking relief via
the small business entity test.
150. Schedule 2 amends subparagraph 152-10(1)(c)(iii) of the ITAA 1997
to refer to the partner's 'interest in an asset of the
partnership', consistent with the references earlier in the
subsection. The amendment will clarify this aspect of the law and
align it with the intended operation of the provision. [Schedule
2, item 1, subparagraph 152-10(1)(c)(iii)]
Treatment of passively held CGT assets
Use of CGT assets by affiliates or entities connected with the
asset owner and the small business entity test
151. The basic eligibility conditions for the small business CGT
concessions are specified in Division 152 of the ITAA 1997.
Ignoring partnerships, a taxpayer with an active asset has to be
either a small business entity or satisfy the maximum net asset
value test to be eligible for the small business CGT concessions
(subparagraphs 152-10(1)(c)(i) and (ii) of the ITAA 1997).
Section 328-110 of the ITAA 1997 specifies the meaning of small
business entity.
152. One of the existing conditions for accessing the small business CGT
concessions via the small business entity test is that the entity
that owns a CGT asset must also be a small business entity, which
requires that entity to carry on a business (paragraph 152-
10(1)(a), subparagraph 152-10(1)(c)(i) and paragraphs 328-110(1)(a)
and (4)(a) of the ITAA 1997).
153. This condition means that a taxpayer who owns a CGT asset and who
does not carry on a business cannot gain access to the small
business CGT concessions via the small business entity test even if
the asset is used in the business of an affiliate or an entity
connected with the taxpayer that is a small business entity.
154. The amendments insert provisions to cover these arrangements so
that a taxpayer who owns a CGT asset (and does not carry on a
business other than as a partner in partnership) that is used in a
business by the taxpayer's affiliate or an entity connected with
the taxpayer is able to access the small business CGT concessions
via the $2 million aggregated turnover test (small business entity
test). [Schedule 2, item 2, subparagraph 152-10(1)(c)(iv); and
item 4, subsection 152-10(1A)]
155. This access to the small business CGT concessions via the small
business entity test for a taxpayer who owns a CGT asset that is
used in the business of an affiliate or an entity connected with
the taxpayer occurs when the following conditions are satisfied:
. The taxpayer's affiliate, or an entity that is connected
with the taxpayer, is a small business entity for the
income year (ie, the income year in which the CGT event
happens to the taxpayer's CGT asset).
. The taxpayer does not carry on a business in the income
year other than in partnership.
. If the taxpayer carries on a business in partnership, the
CGT asset is not an interest in an asset of the
partnership.
. The small business entity that is the taxpayer's
affiliate, or is connected with the taxpayer, is the
entity that carries on the business referred to in
subparagraph 152-40(1)(a)(ii) in its proposed new form, or
new subparagraph 152-40(1)(a)(iii), or paragraph 152-
40(1)(b) in its proposed new form in relation to the CGT
asset.
[Schedule 2, item 4, subsection 152-10(1A)]
156. This access to the small business CGT concessions requires a
taxpayer's affiliate or entity connected with the taxpayer to be a
small business entity in the income year. The access also requires
the small business entity to be the entity that carries on the
business at a time in the income year referred to in subparagraph
152-40(1)(a)(ii) in its proposed new form, or new subparagraph 152-
40(1)(a)(iii), or paragraph 152-40(1)(b) in its proposed new form
in relation to the CGT asset. This link is necessary to prevent
access to the concessions in a situation where a taxpayer's
affiliate or entity connected with the taxpayer is a small business
entity but the asset is used by an affiliate or entity connected
with the taxpayer that is not a small business entity. [Schedule
2, item 4, paragraphs 152-10(1A)(a) and (d)]
157. Where an asset-owning entity is seeking access to the small
business CGT concessions via these amendments, the rules contained
in section 328-115 of the ITAA 1997 for determining the aggregated
turnover of the relevant business are modified by the new special
rules for calculating aggregated turnover for passively held
assets. [Schedule 2, item 14, section 152-48]
158. This access to the small business CGT concessions is only available
where the taxpayer that owns the CGT asset, which is used in the
business of its affiliate or an entity connected with the taxpayer,
is not carrying on a business except as a partner in partnership.
Taxpayers owning such CGT assets that also carry on a business
other than in partnership would continue to determine their
eligibility for the small business CGT concessions via the small
business entity test under subparagraph 152-10(1)(c)(i) of the ITAA
1997. [Schedule 2, item 4, paragraph 152-10(1A)(b)]
1.
Peter owns land that he leases to a company he wholly owns,
Foxxy Farm Pty Ltd, which uses the land in its farming
business. Peter does not carry on a business.
[pic]
Under the current law, Peter is not able to access the small
business CGT concessions via the small business entity test
because he does not carry on a business.
Under the amendments, Peter would be able to access the
small business CGT concessions via the small business entity
test depending on the aggregated turnover of Foxxy Farm Pty
Ltd. This follows because Foxxy Farm Pty Ltd, which is
connected with Peter, uses Peter's land in carrying on its
business.
Use of CGT assets by partnerships
159. The CGT regime operates on the basis that a partner in a
partnership carries on a business. The partner is considered to
carry on the business of the partnership but collectively with the
other partners. The changes to paragraphs 152-40(1)(a) and (b) of
the ITAA 1997 make those paragraphs more explicitly consistent with
this understanding of partners carrying on a business. However, a
partner cannot be a small business entity (see paragraphs 2.109 to
2.114). [Schedule 2, item 8, paragraphs 152-40(1)(a) and (b)]
160. The amendments insert a new provision specifying rules to access
the small business CGT concessions via the small business entity
test for CGT assets owned by partners that are used in the business
of the partnership but are not interests in assets of the
partnership (ie, the partners do not own the CGT assets in
accordance with their fractional interest in the partnership or in
accordance with their respective interests as specified in the
partnership agreement). [Schedule 2, item 4, subsection 152-
10(1B)]
161. Under the amendments, an individual partner (or partners) who owns
a CGT asset that is not an interest in an asset of the partnership
is able to access the small business CGT concessions via the small
business entity test provided the asset is made available for use
in the partnership. The access is available when the following
conditions are satisfied:
. The taxpayer must be a partner in a partnership in the
income year (ie, the income year in which the CGT event
happens to the taxpayer's CGT asset).
. The partnership is a small business entity for the income
year.
. The taxpayer must not carry on a business in an income
year other than in partnership.
. The CGT asset is not an interest in an asset of the
partnership.
. The business that the taxpayer carries on as a partner in
the partnership referred to in new paragraph 152-10(1B)(e)
is the business the taxpayer carries on referred to in
subparagraph 152-40(1)(a)(i) or paragraph 152-40(1)(b) (in
their proposed new form) in relation to the CGT asset.
[Schedule 2, item 4, subsection 152-10(1B)]
162. This access to the small business CGT concessions requires the
taxpayer who owns the CGT asset to be a partner in a partnership in
the income year that the CGT event happens and the partnership to
be a small business entity in that year. [Schedule 2, item 4,
paragraphs 152-10(1B)(a) and (b)]
163. This access also requires the taxpayer not to carry on a business
in the income year other than in partnership. If the taxpayer
carried on a non-partnership business, they would continue to
determine their eligibility for the small business CGT concessions
via the small business entity test under subparagraph 152-
10(1)(c)(i) of the ITAA 1997. [Schedule 2, item 4, paragraph 152-
10(1B)(c)]
164. This access also requires that the taxpayer's asset is not an
interest in an asset of the partnership. If the taxpayer's asset
were an interest in an asset of the partnership, the taxpayer would
continue to determine their eligibility for the small business CGT
concessions via the small business entity test under subparagraph
152-10(1)(c)(iii) of the ITAA 1997. [Schedule 2, item 4, paragraph
152-10(1B)(d)]
165. The business the taxpayer carries on in the partnership referred to
in new paragraph 152-10(1B)(a) is required to be the business that
the taxpayer at a time, in the income year, carries on in
subparagraph 152-40(1)(a)(i) or paragraph 152-40(1)(b) (in their
proposed new form) in relation to the CGT asset. This link is
necessary to prevent access to the concessions in a situation where
a taxpayer is a partner in a partnership that is a small business
entity but the asset is used by another partnership in which the
taxpayer is a partner that is not a small business entity.
[Schedule 2, item 4, paragraph 152-10(1B)(e)]
166. The partnership works out its aggregated turnover under the normal
rules contained in section 328-115 of the ITAA 1997, but as those
rules are modified by the new special rules for calculating
aggregated turnover for passively held assets. [Schedule 2, item
14, section 152-48]
1.
Beau and Irene each own 50 per cent of a supermarket
building, which is used in the business of a partnership
carried on by Beau, Jack, Casey and Irene. The partnership
trades under the name 'Auzzie Supermarket'.
[pic]
Operation of current law
Under the current law, Beau and Irene would not be able to
access the small business CGT concessions via the small
business entity test for any capital gain made on the sale
of the building as their respective CGT asset is not an
interest in an asset of the partnership. For the CGT assets
to be interests in an asset of the partnership, Beau, Jack,
Casey and Irene would either have to each own 25 per cent of
the supermarket building or the partnership agreement would
have to specify what interest each partner owned in the
building.
Operation of new law
Under the amendments, Beau and Irene may be able to access
the small business CGT concessions in relation to their
respective shares of the building via the small business
entity test depending on the aggregated turnover of the
partnership calculated respectively for Beau and Irene. The
aggregated turnover of Auzzie Supermarket must be calculated
separately for Beau and Irene taking into account any
entities that are affiliates of, or connected with, each of
them respectively.
Spouses or children taken to be affiliates
167. Subsection 152-40(1A) of the ITAA 1997 currently provides a special
active asset rule to treat a CGT asset as active where an
individual taxpayer owns the asset and it is used in a business
directly carried on by their spouse or child (under 18 years of
age). However, this special rule does not treat a CGT asset as
active where the taxpayer's spouse owns an entity that uses the CGT
asset in its business.
168. Where a taxpayer owns a CGT asset and their spouse uses the CGT
asset in a business operated by an entity wholly owned by the
spouse, the CGT asset may still be an active asset if the entity
that carries on the business is an affiliate of the taxpayer.
However, it may be difficult in practice to establish that the
entity that carries on the business is an affiliate of the taxpayer
if there is no visible or direct business relationship between
them.
169. The amendments repeal subsection 152-40(1A) and insert a rule that
treats an individual's spouse or child (under 18 years of age) as
an affiliate of the individual for the purposes of determining
whether the individual or an entity in which the individual has an
interest, or is a beneficiary of, is eligible for the small
business CGT concessions where one entity owns a CGT asset and:
. that asset is used, or held ready for use, in the course
of carrying on a business by another entity; or
. is inherently connected with a business carried on by
another entity.
[Schedule 2, items 11 and 14, subsections 152-47(1) and (2)]
170. The rule applies only if the 'business' entity is not otherwise an
affiliate of, or connected with, the asset-owning entity. This
means that if the business entity is an affiliate of the asset-
owning entity as a result of applying section 328-130 of the ITAA
1997, an individual's spouse or child (under 18 years of age) would
not be treated as an affiliate of the individual. Similarly, if
the business entity is already connected with the asset-owning
entity via section 328-125 of the ITAA 1997, an individual's spouse
or child (under 18 years of age) would not be treated as an
affiliate of the individual. [Schedule 2, item 14, paragraph 152-
47(1)(c)]
171. The rule is applied in two stages. The first stage treats an
individual's spouse or child (under 18 years of age) as their
affiliate, for the purposes of Subdivision 152-A of the ITAA 1997,
when determining whether the entity that uses the CGT asset, or
holds it ready for use, in its business is an affiliate of, or is
connected with, the entity that owns the CGT asset. [Schedule 2,
item 14, subsection 152-47(2)]
172. If the conditions of the first stage are met, the second stage will
apply to treat the spouse or child (as the case may be) as an
affiliate of the individual for the purposes of Subdivision 152-A
of the ITAA 1997 and for the purposes of sections 328-110 to 328-
125 of the ITAA 1997 to the extent that these sections relate to
Subdivision 152-A. For example, if by the application of the first
stage of the rule, the entity is taken to be an affiliate of, or an
entity connected with, the entity that owns the asset, the asset is
an active asset (subparagraph 152-40(1)(a)(ii) in its proposed new
form, or new subparagraph 152-40(1)(a)(iii), or paragraph 152-
40(1)(b) in its proposed new form). [Schedule 2, item 14,
subsection 152-47(3)]
173. The new affiliate rule affects access to the small business CGT
concessions via the maximum net asset value test in addition to the
small business entity test. Compared to the old rule (subsection
152-40(1A) of the ITAA 1997), the new rule increases access to the
concessions by treating an individual's spouse or child (under 18
years of age) as their affiliate in a wider range of situations.
174. However, for the purposes of the maximum net asset value test, the
new rule also reduces access to the concessions by potentially
bringing in more affiliates and more entities that are connected
with the asset-owning entity than the old rule.
1.
Philip owns 100 per cent of Horse Farm Pty Ltd. Horse Farm
Pty Ltd owns land. Philip's spouse, Crystal, owns Pig Farm
Pty Ltd. Pig Farm Pty Ltd uses the land to carry on a
business. Philip owns 30 per cent and Crystal 70 per cent
of Carrot Pty Ltd. Horse Farm Pty Ltd does not carry on a
business.
[pic]
Operation of current law
Prior to the amendments, Horse Farm Pty Ltd is not able to
access the small business CGT concessions via the $2 million
turnover test because Horse Farm Pty Ltd is not carrying on
a business. The asset is instead being used in Pig Farm Pty
Ltd's business.
Horse Farm Pty Ltd may be able to access the small business
CGT concessions via the $6 million maximum net asset value
test. However, this will depend on the fulfilment of two
necessary conditions:
. whether Pig Farm Pty Ltd is an affiliate of Horse Farm Pty
Ltd (which would make the land an active asset); and
. whether Horse Farm Pty Ltd can satisfy the maximum net asset
value test.
If Horse Farm Pty Ltd has a maximum net asset value greater
than $6 million, it would not be able to access the small
business CGT concessions.
In these circumstances, Pig Farm Pty Ltd would be an
affiliate of Horse Farm Pty Ltd if Pig Farm Pty Ltd acts in
concert with Horse Farm Pty Ltd in respect of Pig Farm Pty
Ltd's business activities. This requirement may be
difficult to demonstrate.
Operation of new law
If Pig Farm Pty Ltd is already an affiliate of Horse Farm
Pty Ltd under section 328-130 of the ITAA 1997, the new
affiliate rule would not apply.
Proceeding on the basis that Pig Farm Pty Ltd is not already
an affiliate of, nor is connected with, Horse Farm Pty Ltd,
the amendments treat Crystal as Philip's affiliate in
determining whether Pig Farm Pty Ltd (the entity that uses
the land in its business) is connected with Horse Farm Pty
Ltd (the entity that owns the land). The new affiliate
rule applies because one entity (Horse Farm Pty Ltd) owns a
CGT asset that is used in the business of another entity
(Pig Farm Pty Ltd).
Pig Farm Pty Ltd is connected with Horse Farm Pty Ltd
because Philip controls Horse Farm Pty Ltd and Philip and
his affiliate, Crystal, controls Pig Farm Pty Ltd.
This makes the land that Horse Farm Pty Ltd owns an active
asset (new subparagraph 152-40(1)(a)(iii)). The land would
also have to meet the requirements of the active asset test
in section 152-35 of the ITAA 1997.
Therefore, Horse Farm Pty Ltd could access the small
business CGT concessions if its maximum net asset value is
not more than $6 million. Horse Farm Pty Ltd could also
access the concessions if Pig Farm Pty Ltd's aggregated
turnover is less than $2 million.
Because Crystal is treated as Philip's affiliate in
determining whether Pig Farm Pty Ltd is an affiliate of, or
connected with, Horse Farm Pty Ltd, Crystal is also treated
as Philip's affiliate for testing whether Carrot Pty Ltd is
connected with Horse Farm Pty Ltd. Carrot Pty Ltd is,
therefore, connected with Horse Farm Pty Ltd because Philip
controls Horse Farm Pty Ltd and Philip and his affiliate,
Crystal, control Carrot Pty Ltd.
In seeking access to the small business CGT concessions via
the maximum net asset value test, Horse Farm Pty Ltd would
need to include the net assets of its affiliates and
entities connected with it.
In seeking access to the small business CGT concessions via
the small business entity test, Pig Farm Pty Ltd's
aggregated turnover would include the annual turnovers of
its affiliates and entities connected with it.
175. The application of the new affiliate rule is not limited to
situations where an entity that owns a CGT asset and does not
operate a business provides that asset to another entity for use in
its business (the standard passively held asset). It also applies
to situations where an entity that operates a business owns a CGT
asset that it provides to another entity for use in that other
entity's business.
176. Under the current law, an entity that operates a business and owns
a CGT asset that is used in the business of another entity will not
be able to access the small business CGT concessions via the small
business entity test unless the other entity is an affiliate of, or
connected with, the asset-owning entity.
177. This could occur where the asset-owning entity is wholly owned by
an individual, the entity using the asset in its business is wholly
owned by the individual's spouse and the asset-owning entity and
business entity are not affiliated and are not connected with each
other.
178. The new rule applies to these circumstances by treating the
individual's spouse as their affiliate. As such, the two entities
would be connected and the CGT asset would be an active asset
(subsection 152-40(1) of the ITAA 1997). [Schedule 2, item 14,
subsections 152-47(1) to (3)]
179. The asset-owning entity may now be able to access the small
business CGT concessions via the small business entity test if its
aggregated turnover is less than $2 million. The asset-owning
entity would calculate its aggregated turnover under the relevant
provisions in Subdivision 328-C of the ITAA 1997 without any regard
to the new special rule for calculating aggregated turnover
inserted by these amendments. This is because the asset-owning
entity carries on a business other than as a partner in a
partnership and may be able to qualify as a small business entity
under the normal rules depending on its aggregated turnover.
1.
Assume the same facts as in Example 2.3, except that Horse
Farm Pty Ltd carries on a business other than as a partner
in partnership.
Operation of current law
Horse Farm Pty Ltd may be able to access the small business
CGT concessions via the small business entity test if Pig
Farm Pty Ltd is an affiliate of Horse Farm Pty Ltd. In
these circumstances, Horse Farm Pty Ltd's access would
depend on its aggregated turnover.
Operation of new law
If Pig Farm Pty Ltd is already an affiliate of Horse Farm
Pty Ltd under section 328-130 of the ITAA 1997, the new
affiliate rule would not apply.
Proceeding on the basis that Pig Farm Pty Ltd is not already
an affiliate of, nor is connected with, Horse Farm Pty Ltd,
the new affiliate rule will apply to make Crystal an
affiliate of Phillip. This is because one entity owns a CGT
asset that is used in the business of another entity.
Therefore, Horse Farm Pty Ltd is connected with Pig Farm Pty
Ltd and the land is an active asset. Again, the land would
also have to meet the requirements of the active asset test
in section 152-35 of the ITAA 1997. Following the same
reasoning as in Example 2.3, Carrot Pty Ltd is also
connected with Horse Farm Pty Ltd.
Depending on Horse Farm Pty Ltd's aggregated turnover, it
may be able to access the small business CGT concessions via
the small business entity test. However, Horse Farm Pty Ltd
will use the relevant provisions only in Subdivision 328-C
of the ITAA 1997 to test whether it is a small business
entity.
In particular, Horse Farm Pty Ltd will use section 328-115
of that Subdivision to calculate its aggregated turnover and
will not need to apply the new special rule (new section 152-
48) for calculating aggregated turnover that applies where
the asset-owning entity is not carrying on a business (other
than as a partner in partnership).
The application of the net assets test is as outlined in
Example 2.3.
CGT assets to which the new affiliate rule applies
180. The rule treating an individual's spouse or child (under 18 years
of age) as an affiliate of the individual applies in relation to
any capital gain from any CGT asset owned by the individual, an
affiliate of the individual or an entity connected with the
individual. This means in Examples 2.3 and 2.4 that, if Crystal
sells a CGT asset, the rule will treat Philip as Crystal's
affiliate. [Schedule 2, item 14, paragraph 152-47(4)(a)]
181. This means that the individual or entity faces the same set of
aggregation rules for the purposes of the maximum net asset value
test or the aggregated turnover test regardless of which CGT asset
the individual is seeking to claim the small business CGT
concessions for. However, the rule does not apply for the purposes
of determining eligibility for the other small business concessions
such as the concessional rules for fringe benefits tax and pay as
you go instalments. [Schedule 2, item 14, paragraph 152-47(4)(a)]
1.
Assume the same facts as in Example 2.4 and Horse Farm Pty
Ltd owns another parcel of land that it uses in its
business. It sells this asset during the year and is
testing its eligibility for the small business CGT
concessions via the small business entity test. As it owns
an asset that is being used in the business of an entity
that is connected with it as a result of applying the new
affiliate rule, Horse Farm Pty Ltd will bring in the
turnovers of Pig Farm Pty Ltd and Carrot Pty Ltd in
calculating its aggregated turnover using the relevant
provisions in Subdivision 328-C of the ITAA 1997.
182. A spouse is only an affiliate of the taxpayer while they are still
a spouse. Likewise, a child will only be an affiliate while the
child is under 18 years. This caters for situations where an
individual's circumstances change during the income year such as
the ending of a spousal relationship. [Schedule 2, item 14,
paragraph 152-47(4)(b)]
Working out the taxpayer's aggregated turnover for the purposes of
applying the small business CGT concessions to passively held CGT
assets
183. The small business entity test includes rules for determining what
turnovers to include in calculating the $2 million turnover test.
The purpose of this test is to include the turnover of entities
that are connected with, or affiliates of, the taxpayer who owns
the CGT asset as these entities are, in effect, part of the same
business operation.
184. The amendments insert special rules for calculating aggregated
turnover for passively held assets, which are assets covered by new
subsection 152-10(1A) or (1B), that apply in addition to the
standard aggregated turnover rules in Subdivision 328-C of the ITAA
1997. [Schedule 2, item 14, section 152-48]
185. A special rule treats an entity (the deemed entity) that is an
affiliate of, or is connected with, the owner of a passively held
CGT asset as an affiliate of, or connected with, the entity that
uses the passively held asset in its business (the test entity) if
the deemed entity is not already an affiliate of, or connected
with, the test entity. [Schedule 2, item 14, subsection 152-48(2)]
186. This special rule for owners of passively held CGT assets that are
used in the business of the asset owner's affiliate or entity
connected with the asset owner ensures that the amendments have
sufficient integrity and minimises tax planning opportunities by
including the turnover of all entities that are, in effect, part of
the same business operation.
1.
Peter owns Pony Farm Pty Ltd. Pony Farm Pty Ltd owns land.
Peter's spouse, Diana, owns Worm Farm Pty Ltd. Worm Farm
Pty Ltd uses the land in its business. Neither Peter nor
Diana carries on a business. Bush Pty Ltd is an affiliate
of Pony Farm Pty Ltd. Pony Farm Pty Ltd wholly owns Flowers
Pty Ltd so the two entities are connected. Cherry Pty Ltd
is an affiliate of Worm Farm Pty Ltd. Worm Farm Pty Ltd
wholly owns Earth Pty Ltd so the two entities are connected.
Worm Farm Pty Ltd is not an affiliate of Pony Farm Pty Ltd
under section 328-130 of the ITAA 1997.
[pic]
For the purposes of the small business CGT provisions, Diana
and Peter are affiliates because of the new affiliate rule
(new section 152-47). Therefore, Diana and Peter are
connected with Worm Farm Pty Ltd, Pony Farm Pty Ltd, Flowers
Pty Ltd, and Earth Pty Ltd. This makes each of these
companies connected with each other. Of particular
significance is that Pony Farm Pty Ltd and Flowers Pty Ltd
are connected with Worm Farm Pty Ltd.
Pony Farm Pty Ltd sells its land and seeks to qualify for
the small business CGT concessions via the small business
entity test by satisfying the conditions in new subsection
152-10(1A).
In these circumstances, the 'test entity' in the special
rule is Worm Farm Pty Ltd because it needs to be a small
business entity for the purposes of new subsection 152-
10(1A).
The special rule takes Bush Pty Ltd to be an affiliate of
Worm Farm Pty Ltd because Bush Pty Ltd, the deemed entity,
is not otherwise an affiliate of, or connected with, Worm
Farm Pty Ltd and Bush Pty Ltd is an affiliate of Pony Farm
Pty Ltd (the asset owner). Therefore, Worm Farm Pty Ltd
would treat Bush Pty Ltd as its affiliate during an income
year while it is an affiliate of Pony Farm Pty Ltd during
the income year. Worm Farm Pty Ltd would calculate its
aggregated turnover in Subdivision 328-C on this basis but
this calculation of aggregated turnover only applies for
accessing the small business CGT provisions.
Working out aggregated turnover where a taxpayer's asset is used in
more than one partnership of which they are a partner
187. The amendments insert another special rule to deal with situations
where a taxpayer makes their CGT asset available for use in the
business of more than one partnership of which they are a partner.
The purpose of this rule is to limit tax planning opportunities
that may otherwise be available to such taxpayers in these
circumstances. These opportunities arise because the partnerships
do not have to be connected with the taxpayer to obtain access to
the concessions via new subsection 152-10(1B). If the partnerships
are not connected with each other and they are not connected with
the taxpayer, each partnership would calculate its aggregated
turnover without having to include the annual turnover of any of
the other partnerships. [Schedule 2, item 14, subsection 152-
48(3)]
188. The new rule for taxpayers in these circumstances treats each
partnership that is not already connected with the test entity as
being connected with the test entity. [Schedule 2, item 14,
subsection 152-48(3)]
1.
Steven owns a CGT asset that he makes equally available for
use in the businesses of two partnerships, Partnership One
and Partnership Two, that he is a partner in. The
partnerships are not connected with each other or Steven.
Steven sells the asset. The conditions in new subsection
152-10(1B) are satisfied (apart from the condition that each
partnership is a small business entity in the income year
the CGT event happens) for the asset (being each of Steven's
interests in the asset) that is used separately in the
businesses Steven carries on in the two partnerships.
Because the partnerships are not otherwise connected with
each other, they are taken to be connected with each other
under the new subsection 152-48(3). This means that the
aggregated turnover of Partnership One will include the
annual turnover of Partnership Two; and the aggregated
turnover of Partnership Two will include the annual turnover
of Partnership One.
Applying the rules where an entity is an affiliate of the test
entity and connected with the test entity at different times
189. There may occasionally be situations where an entity is, for
example, an affiliate of the test entity at one time during an
income year, while it neither is an affiliate of, nor connected
with, the asset-owning entity; and at another time in the income
year the entity is connected with the asset-owning entity, while it
neither is an affiliate of, nor connected with, the test entity.
190. Applying the special rule in new subsection 152-48(2) to the
situation described in the preceding paragraph leads to the entity
that is connected with the asset-owning entity being taken to be
connected with the test entity for that part of the income year
that it is neither an affiliate of, nor connected with, the test
entity. This means that the same entity is an affiliate of the
test entity and is connected with the test entity at different
times during the income year. [Schedule 2, item 14, subsection 152-
48(2)]
191. In calculating the aggregated turnover of the test entity in
Subdivision 328-C, the annual turnover of an entity that is both
connected with and an affiliate of the test entity at different
times in an income year is included only once. This ensures that
the entity's annual turnover is not counted twice in calculating
the aggregated turnover of the entity being tested.
Businesses that are winding up and passively held assets
192. The amendments in new subsections 152-10(1A) and (1B) to increase
access to the small business CGT concessions for passively held
assets via the small business entity test rely on the CGT event
happening in an income year in which the asset is being used in,
held ready for use in, or inherently connected with a business
carried on by:
. the taxpayer's affiliate;
. an entity connected with the taxpayer; or
. the taxpayer in partnership.
193. The existing law provides, for non-passively held assets, a rule in
subsection 328-110(5) to permit access to the concessions where the
CGT event happens in a later year than that in which the asset
owner ceased to carry on a business. This rule provides access to
the small business CGT concessions via the small business entity
test for the asset owner where the CGT event occurs in a year that
the business is being wound up.
194. To provide comparable access to the small business CGT concessions
for owners of passively held assets, the amendments insert a new
rule that permits the CGT event to occur in an income year after
the business has ceased operating but while it is being wound up.
[Schedule 2, item 14, section 152-49]
195. The new rule applies to an entity that previously carried on a
business which is being wound up in the CGT event year but only if
the asset had been used, held ready for use, or was inherently
connected with the business in the income year it ceased to
operate. [Schedule 2, item 14, subsection 152-49(1)]
196. If the conditions in the preceding paragraph apply, the new rule
treats the:
. entity (including a partner) as carrying on the business
at a moment in time in the CGT event year; and
. CGT asset as being used in, held ready for use in, or
inherently connected with the business at that same time
in the CGT event year.
[Schedule 2, item 14, subsection 152-49(2)]
197. If the entity that is taken to be carrying on the business in the
new paragraph 152-49(2)(a) is the taxpayer (as a partner in a
partnership), an affiliate of the taxpayer, or an entity connected
with the taxpayer, the CGT asset now:
. satisfies paragraph 152-40(1)(a) or (b) (in their proposed
new form) and the asset is an active asset at the time the
business is taken to be carried on in the CGT event year;
and
. can potentially satisfy new paragraph 152-10(1A)(d) or
(1B)(e) in the CGT event year depending on whether the
business entity is a small business entity (although the
partner is taken to carry on the business in partnership,
the partnership has to qualify as a small business
entity).
[Schedule 2, item 14, subsection 152-49(2)]
198. The relevant business entity will need to satisfy subsection 328-
110(5) to be a small business entity in the CGT event year.
Subsection 328-110(5) takes an entity to carry on a business in an
income year if:
. the entity is winding up a business it formerly carried
on; and
. it was a small business entity in the income year that it
stopped carrying on the business.
199. If the relevant business entity was a small business entity in the
year it stopped carrying on a business, that entity would be deemed
to carry on a business in the CGT event year. The relevant
business entity would need to meet the aggregated turnover test in
the CGT event year for it to be a small business entity in that
year.
1.
Assume the same facts as in Example 2.1 but Foxxy Farm Pty
Ltd ceases operations in an income year (and was a small
business entity in that year) and Peter sold his land in a
later income year when Foxxy Farm Pty Ltd is still winding
up its business.
The new rule applies because:
. Peter sold his land in an income year that Foxxy Farm Pty
Ltd was still winding up; and
. Foxxy Farm Pty Ltd used the land in its business in the
income year it stopped carrying on its business.
As the new rule applies, it will take Foxxy Farm Pty Ltd to:
. carry on the business in the income year that the land is
sold; and
. take the land as being used in, or held ready for use in,
the business Foxxy Farm Ptd Ltd is taken to carry on in that
income year.
This means that Peter's land is an active asset at a time in
the CGT event year because it is used in the business of an
entity (Foxxy Farm Pty Ltd) that is connected with the asset
owner (Peter) - that is, it satisfies the new proposed form
of paragraph 152-40(1)(a).
Subsection 328-110(5) will also take Foxxy Farm Pty Ltd to
be carrying on a business in the year the land is sold
because it is a wind up year and Foxxy Farm Pty Ltd was a
small business entity in the year it ceased to carry on a
business. If Foxxy Farm Pty Ltd's aggregated turnover is
less than $2 million in the CGT event year (worked out using
Subdivision 328-C as modified by the new aggregated turnover
rules for passively held assets in new section 152-48), it
will be a small business entity in the year the land is
sold.
Peter's land can now satisfy new paragraph 152-10(1A)(d)
because Foxxy Farm Pty Ltd is a small business entity in the
year the land is sold (as required by new paragraph 152-
10(1A)(a)); and Foxxy Farm Pty Ltd carries on the business
referred to in new subparagraph 152-40(1)(a)(iii) at a time
in the year the land is sold.
As Peter does not carry on any business, he will be able to
get access to the small business CGT concessions for any
capital gain made on the sale of his land depending on
whether:
. his land satisfies the active asset test over the period
that he has owned the land; and
. Foxxy Farm Pty Ltd's aggregated turnover in the income year
the land is sold is less than $2 million.
2.
Amy is a partner of a partnership named Tasty Eats. Amy has
made some land she owns available for use in the partnership
and the land is not 'an asset of the partnership' (ie, the
partners do not own the CGT asset in accordance with their
fractional interest in the partnership or in accordance with
their respective interests as specified in the partnership
agreement). Amy does not carry on any other business.
In the 2010-11 income year when Amy's land is still made
available for the partnership, Amy (and the partnership)
stops carrying on a business. Tasty Eats is a small
business entity in the year it stops carrying on a business.
In a later income year, the business Amy carried on in
partnership (Tasty Eats) is winding up and Amy sells her
land in that year.
The new rule applies because:
. Amy sold her land in an income year that the business she
carried on in partnership (Tasty Eats) is winding up; and
. Amy used the land in carrying on the business in partnership
in the income year she stopped carrying on a business.
As the new rule applies, it will take Amy to:
. carry on a business in partnership in the income year that
the land is sold; and
. take the land as being used in, or held ready for use in,
the business Amy is taken to carry on in partnership in that
income year.
This means that Amy's land is an active asset at a time in
the CGT event year because it is used in the business she
caries on in partnership - that is, it satisfies paragraph
152-40(1)(a).
Subsection 328-110(5) will also take Tasty Eats to be
carrying on a business in the year the land is sold because
it is a wind up year and Tasty Eats was a small business
entity in the year it ceased to carry on a business. If
Tasty Eat's aggregated turnover is less than $2 million in
the CGT event year (worked out using Subdivision 328-C as
modified by the new aggregated turnover rules for passively
held assets in new section 152-48), it will be a small
business entity in the year the land is sold.
Amy's land can now satisfy new paragraph 152-10(1B)(e)
because the business Amy carries on as a partner in
partnership in the year the land is sold (as referred to in
paragraph 152-10(1B)(a)) is the business Amy carries on in
partnership referred to in the new proposed form of
subparagraph 152-40(1)(a)(i) at a time in the year the land
is sold.
As Amy does not carry on any other business, she will be
able to get access to the small business CGT concessions for
any capital gain made on the sale of her land depending on
whether:
. her land satisfies the active asset test over the period
that she has owned the land; and
. Tasty Eat's aggregated turnover in the income year the land
is sold is less than $2 million.
Other amendments
200. Schedule 2 also makes a number of minor changes to the small
business CGT concession provisions to refine the provisions and to
overcome a number of existing problems with those provisions.
Net asset test - liabilities related to interests in affiliates or entities
connected with the taxpayer
201. In applying the maximum net asset value test, the net value of CGT
assets of an entity is determined broadly by subtracting from the
market value of the assets the liabilities related to the assets
(and certain provisions).
202. This calculation of net asset value disregards certain assets, such
as personal use assets and main residences, under subsection 152-
20(2) of the ITAA 1997. Where an asset is disregarded, any related
liability is also disregarded as such liabilities are not related
to any asset included in the net asset value calculation.
203. Paragraph 152-20(2)(a) of the ITAA 1997 disregards the value of
interests in entities connected with the taxpayer or the taxpayer's
affiliates to avoid double counting in the net assets calculation,
as the assets underlying these interests are already counted.
204. However, this excludes the liabilities relating to such disregarded
interests so that such liabilities are never taken into account in
the net asset value calculation. This disadvantages taxpayers as
it excludes liabilities that are indirectly related to assets whose
gross value has been included in the net asset calculation.
205. The amendment provides that liabilities relating to disregarded
interests in entities connected with the taxpayer or the taxpayer's
affiliates are taken into account in calculating the net asset
value. [Schedule 2, item 25, paragraph 152-20(2)(a)]
1.
Suppose Danny owns all the shares in ATommi Pty Ltd. The
net asset value of ATommi Pty Ltd is $1 million. Danny has
net assets of $5.2 million (not counting the value of his
shareholding in ATommi Pty Ltd).
Under the current law, Danny works out his maximum net asset
value to be $6.2 million, which includes ATommi Pty Ltd's
net asset value of $1 million but excludes the value of
Danny's shares in ATommi Pty Ltd.
Danny still owes $500,000 that he borrowed to acquire the
shares in ATommi Pty Ltd.
The current law would exclude from the calculation Danny's
$500,000 liability incurred to acquire the shares in ATommi
Pty Ltd, resulting in a net asset value of $6.2 million.
However, this has excluded a liability that is related
(indirectly) to assets whose market value has been included
elsewhere in the net asset calculation.
The amendment allows Danny to include the $500,000 liability
in the calculation, resulting in a maximum net asset value
of $5.7 million.
206. The amendment applies to CGT events that happen on or after the day
on which the amending legislation receives Royal Assent. [Schedule
2, item 42]
Active asset - main use to derive rent
207. Schedule 2 amends the active asset test in section 152-40 of the
ITAA 1997 to ensure that all the uses of an asset (apart from
personal use of an asset by the taxpayer or an individual who is
the taxpayer's affiliate) are considered in determining whether it
is an active asset for the purpose of the small business CGT
concessions. [Schedule 2, item 26, paragraph 152-40(4)(e); and
item 27, subsection 152-40(4A)]
208. Paragraph 152-40(4)(e) of the ITAA 1997 excludes assets whose main
use is to derive rent or certain other forms of passive income from
being active assets. However, under the current law it is possible
for an asset which has a predominant rental and a minor business
use to qualify as an active asset if the minor business use is
undertaken by an affiliate or an entity connected with the
taxpayer, but the rental use is by an entity that is neither an
affiliate of, nor connected with, the taxpayer owning the asset.
Example 2.11 illustrates this possibility.
1.
Kiki owns a property and rents out 90 per cent of the floor
area to Lost Dog Pty Ltd that is neither her affiliate nor
connected with her. Kiki earns 90 per cent of the revenue
derived from owning the property from renting it to Lost Dog
Pty Ltd.
Beaglehole Pty Ltd, which carries on a dog grooming
business, uses the remaining 10 per cent of the floor area
of the property as its business premises and pays Kiki rent
for using it (this rent forms 10 per cent of the revenue
Kiki earns from owning the property). As Kiki owns 60 per
cent of Beaglehole Pty Ltd, Beaglehole Pty Ltd is connected
with Kiki.
Under the current law, the main use of the property in
Beaglehole Pty Ltd's business (being the business mentioned
in subsection 152-40(1) of the ITAA 1997) is not to derive
interest, an annuity or rent. As such, the property is an
active asset despite its main use overall (the 90 per cent
that is rented to Lost Dog Pty Ltd) being to derive rent.
209. The amendments remove the focus on the main use of an asset in the
course of carrying on the business mentioned in subsection 152-
40(1) of the ITAA 1997 and focus instead on the main use of the
asset by the taxpayer. [Schedule 2, item 26, paragraph 152-
40(4)(e)]
210. The amendments adopt an attribution approach in relation to the use
of an asset by a taxpayer's affiliate or an entity connected with
the taxpayer. This approach treats the use of the asset by the
affiliate or the entity connected with the taxpayer as though it
were the use of the taxpayer. [Schedule 2, item 27, paragraph 152-
40(4A)(b)]
211. This attribution approach, therefore, treats any business use by
the taxpayer's affiliate or an entity connected with the taxpayer
as business use by the taxpayer irrespective of whether the
taxpayer receives rental income from the affiliate or entity
connected with the taxpayer. If the affiliate or entity connected
with the taxpayer uses the asset to derive interest, rent, royalty,
or foreign exchange gains from an entity that is neither an
affiliate of nor connected with the taxpayer, that use is treated
as the taxpayer's use. [Schedule 2, item 27, paragraph 152-
40(4A)(b)]
212. The amendments exclude any personal use of an asset by the taxpayer
who owns the asset and any personal use by an individual who is the
taxpayer's affiliate from the determination of the main use of the
asset. In the affiliate case, this is achieved by treating the
affiliate's personal use of the asset as the taxpayer's use.
[Schedule 2, item 27, paragraphs 152-40(4A)(a) and (b)]
1.
Further to Example 2.8:
The amendments ensure that the determination of the main use
of Kiki's property takes into account the 90 per cent rental
use to Lost Dog Pty Ltd, which neither is Kiki's affiliate
nor is connected with her.
The amendments treat Beaglehole Pty Ltd's use of that part
of the property rented to it as Kiki's use because
Beaglehole Pty Ltd is connected with Kiki. Because
Beaglehole Pty Ltd uses that part of the property as its
business premises, Kiki is treated as using that part as
business premises. This means that the rent Beaglehole Pty
Ltd pays to Kiki is not treated as rent for the purposes of
determining Kiki's main use of the property.
Kiki's main use of the property is to derive rent, because
90 per cent of the revenue she derives from the property is
rent received from Lost Dog Pty Ltd.
Therefore, Kiki's property is not an active asset in these
circumstances for the purpose of section 152-40 in its
proposed new form.
2.
John owns a property that he rents 80 per cent of the floor
area of to an affiliate, Peter, and the remaining 20 per
cent John uses in his business. John earns 80 per cent of
the revenue derived from owning the property from renting it
to Peter.
Peter uses 60 per cent of the floor area of that part of the
property rented to him in his business and rents the
remaining 40 per cent to an entity that neither is John's
affiliate nor is connected with John.
Peter earns 40 per cent of the revenue he derives from the
property from his on renting to the third party.
The amendments treat Peter's use of that part of the
property rented to him as John's use. Therefore, John is
treated as renting 40 per cent of that part of the property
to an entity that is neither his affiliate nor is connected
with him and 60 per cent as being used in a business by
John.
The main use of the property by John is not to derive
interest, an annuity, rent, royalties or foreign exchange
gains. This is because 32 per cent (80% � 40%) of John's
property is treated as being used to derive rent and the
remaining 68 per cent is either actually used in John's
business (20 per cent) or is treated as being used in a
business by John (48 per cent).
Therefore, John's property is an active asset in these
circumstances for the purpose of section 152-40 in its
proposed new form. John's asset would still have to satisfy
the active asset test in section 152-35 of the ITAA 1997
over the period that he has owned the asset.
3.
Neil owns a property that he rents 60 per cent of the floor
area to an affiliate, Andrea. Neil uses 15 per cent of the
floor area in his business and the remaining 25 per cent is
for his own personal use.
Because personal use of an asset by the owner or an
affiliate of the owner is ignored in determining its main
use, the proportions of 60 per cent and 15 per cent have to
be adjusted so that they add up to 100 per cent of the use
of the asset. This adjustment is made by multiplying the 60
per cent and 15 per cent each by 100/75 as this factor
adjusts the two percentages so that they add up to 100 per
cent but maintain their current proportionality to each
other, which is 4:1.
Following the adjustments, Neil rents 80 per cent (60% �
100/75) of the non-personal use floor area of the property
to Andrea and uses 20 per cent (15% � 100/75) of the non-
personal use floor area in his business.
Neal earns 80 per cent of the revenue derived from owning
the property from renting it to Andrea.
Andrea uses 50 per cent of that part of the property rented
to her in her business and rents the remaining 50 per cent
to an entity that neither is Neil's affiliate nor is
connected with Neil. Andrea earns 50 per cent of the
revenue she derives from the property from her on renting to
the third party.
The amendments treat Andrea's use of that part of the
property rented to her as Neil's use. Therefore, Neil is
treated as renting 50 per cent of that part of the property
to an entity that is neither his affiliate nor is connected
with him and 50 per cent as being used in a business by
Neil.
The main use of the property is not to derive interest, an
annuity, rent, royalties or foreign exchange gains. This is
because 40 per cent (80% � 50%) of Neil's property is
treated as being used to derive rent; and the remaining 60
per cent either is actually used in Neil's business (20 per
cent) or is treated as being used in a business by Neil
(40 per cent).
Therefore, Neil's property is an active asset in these
circumstances for the purpose of section 152-40 in its
proposed new form. Neil's asset would still have to satisfy
the active asset test in section 152-35 of the ITAA 1997
over the period that he has owned the asset.
213. The amendments apply to CGT events that happen on or after the day
on which the amending legislation receives Royal Assent. [Schedule
2, item 42]
Joint tenants and testamentary trusts - section 152-80 of the ITAA 1997
214. Schedule 2 also amends the law to extend access to the small
business CGT concessions to capital gains relating to assets
acquired on the death of a joint tenant and assets that devolve to
the trustee of a trust that is established by the will of an
individual where the deceased would have been able to access the
concessions. [Schedule 2, items 30 to 32, section 152-80]
215. Section 152-80 of the ITAA 1997 applies if a CGT asset forms part
of the estate of a deceased individual and devolves to their legal
personal representative or passes to a beneficiary.
216. This section allows the legal personal representative or the
beneficiary to access the small business CGT concessions if the
deceased could have accessed the concessions.
217. However, if the parties are joint tenants and one dies, the
surviving joint tenant(s) is taken to have acquired the deceased's
interest in the asset under subsection 128-50(2) of the ITAA 1997.
The deceased's interest in the asset does not devolve to the legal
personal representative or pass to a beneficiary.
218. This denies access to the small business CGT concessions for any
capital gains made on this interest acquired by a surviving joint
tenant(s) who does not continue with the business they owned as
joint tenants with the deceased.
219. The amendments will ensure that the concessions are not denied
simply because of the death of a joint tenant and the automatic
transfer of the asset to the other tenant (rather than going
through an estate) where the surviving tenant does not continue
with the business. [Schedule 2, items 30 to 32, subparagraphs 152-
80(1)(a)(ii) and (b)(iii); and paragraph 152-80(2A)(c)]
220. Similarly, the amendments will ensure that the concessions are not
denied simply because, following the death of an individual, an
asset devolves to the trustee of a testamentary trust established
by the will of the deceased individual. [Schedule 2, items 30 to
32, subparagraph 152-80(1)(b)(i) and paragraph 152-80(2A)(d)]
221. The amendments apply to CGT events that happen in the 2006-07
income year and later income years. [Schedule 2, item 43]
Retirement exemption and proceeds received in instalments
222. Schedule 2 inserts a rule to apply the retirement exemption to
capital proceeds received in instalments by individuals. [Schedule
2, item 34, subsection 152-305(1A)]
223. Schedule 2 removes the duplicate provision for receipt of capital
proceeds in instalments by companies and trusts in subsection 152-
310(3) of the ITAA 1997. [Schedule 2, item 36, subsection 152-
310(3)]
224. These changes correct an unintended effect on the operation of the
retirement exemption made by Schedule 2 to the Superannuation
Legislation Amendment (Simplification) Act 2007. Those amendments
inadvertently removed the rule relating to the receipt of capital
proceeds in instalments for individuals and introduced a second
rule for capital proceeds received in instalments by companies and
trusts.
225. The amendment to reinsert the rule for capital proceeds received by
individuals in instalments, which favours taxpayers, applies for
capital proceeds received in instalments in the 2007-08 and later
income years, which ensures that the amendments have the same date
of effect as the amendments mentioned in the preceding paragraph.
[Schedule 2, item 44]
226. The amendment that repeals the duplicate provision for capital
proceeds received in instalments by companies and trusts applies to
payments made on or after the day on which the amending Bill
receives Royal Assent. [Schedule 2, item 46]
Retirement exemption - CGT events J5 and J6
227. Tax Laws Amendment (2006 Measures No. 7) Act 2007 altered the
operation of the small business CGT roll-over to allow a taxpayer
to choose the roll-over before acquiring a replacement asset or
making an improvement to an existing asset. It is evident from
that legislation and its explanatory memorandum that the retirement
exemption was intended to be available for capital gains made from
CGT events J5 and J6:
. CGT event J5 happens if the taxpayer does not acquire a
replacement asset or incur relevant improvement
expenditure by the end of the two-year replacement asset
period.
. CGT event J6 happens if the cost of the replacement asset
or the amount of the improvement expenditure (or both) is
less than the amount of the capital gain originally
deferred.
228. The retirement exemption is currently not available for CGT events
J5 or J6 as those capital gains cannot satisfy the basic conditions
as required by paragraphs 152-305(1)(a) and (2)(a) of the ITAA
1997.
229. The basic conditions include:
. a CGT event happens in relation to a CGT asset of the
taxpayer in an income year (paragraph 152-10(1)(a) of the
ITAA 1997); and
. the CGT asset satisfies the active asset test
(paragraph 152-10(1)(d) of the ITAA 1997).
230. If no replacement asset has been acquired or no improvement
expenditure has been spent, within the two-year period, there is no
CGT asset that CGT event J5 happens to for satisfying either
paragraph 152-10(1)(a) or (1)(d) of the ITAA 1997.
231. CGT event J6 happens because the taxpayer did not acquire a
replacement asset of sufficient cost base or incur sufficient
improvement expenditure. Thus, the event happens in relation to
the non-acquisition of a replacement asset of sufficient cost base
rather than in relation to the replacement asset. Therefore, a
capital gain from CGT event J6 also cannot satisfy either paragraph
152-10(1)(a) or (1)(d) of the ITAA 1997.
232. Schedule 2 inserts a new provision to modify the operation of
paragraphs 152-305(1)(a) and (2)(a) of the ITAA 1997 to make
satisfying the basic conditions for the small business retirement
exemption unnecessary if the gain arises from CGT events J5 or J6.
[Schedule 2, item 35, subsection 152-305(4)]
233. The amendment reduces compliance costs for taxpayers because they
do not have to calculate their maximum net asset value or
aggregated turnover at the time of the J5 or J6 event.
1.
Bart sells his entire business with the intention of
purchasing a new business. He claims the small business
roll-over. At that time he is also eligible to claim the
retirement exemption.
Bart is unable to find a suitable replacement asset within
two years and decides instead to retire from business.
Under the current law, CGT event J5 is triggered. As Bart
has not acquired a replacement asset or incurred the
relevant improvement expenditure, he cannot satisfy the
basic conditions for accessing the retirement exemption so
the capital gain from CGT event J5 cannot be disregarded.
The amendment will permit Bart to access the retirement
exemption in these circumstances as he is no longer required
to meet the basic conditions for accessing the retirement
exemption in relation to his capital gain from the J5 event.
234. This amendment favours taxpayers and applies to CGT events that
happen in the 2006-07 income year and later income years, which
ensures that the amendments have the same date of effect as the
2007 amendments mentioned in paragraph 2.91. [Schedule 2, item 45]
Retirement exemption payments to CGT concession stakeholders through
interposed entities
235. The 2007 amendments mentioned in paragraph 2.91 enabled indirect
ownership to be used to qualify an individual as a CGT concession
stakeholder, but the payment requirement for the small business
retirement exemption in subsection 152-325(1) of the ITAA 1997 was
not updated to allow indirect payments.
236. Schedule 2 amends the law to allow a company or trust to make a
retirement exemption payment indirectly through one or more
interposed entities to a CGT concession stakeholder. [Schedule 2,
item 37, subsection 152-325(1)]
237. The amendments overcome practical difficulties, such as breaching
non-tax laws, of complying with the requirement to make a payment
directly to a CGT concession stakeholder under the retirement
exemption where that CGT concession stakeholder is traced
indirectly.
238. To ensure that there is no tax impact on the interposed entity, the
amendments also provide that the indirect payments are:
. non-assessable non-exempt income of an interposed entity;
. not deductible from an interposed entity's assessable
income; and
. neither a dividend nor a frankable distribution.
[Schedule 2, item 36, subsection 152-310(3); and item 38,
subsections 152-325(9) and (10)]
239. The amendments also exclude small business retirement exemption
payments made under section 152-325 of the ITAA 1997 from the
operation of section 109 and Division 7A of the ITAA 1936 (the
'deemed dividend provisions'). [Schedule 2, item 38, subsection
152-325(11)]
240. The amendments repeal subsection 152-325(9) of the ITAA 1997. This
subsection treated payments made by a company or trust to an
employee of an amount exempted under the retirement exemption as
being payments made in respect of the termination of employment of
the relevant CGT concessions stakeholder. [Schedule 2, item 38]
241. The deemed dividend provisions aim to restrict a company from
unreasonably reducing its taxable income. Section 109 deems
excessive payments to shareholders, directors and associates as a
dividend paid by the company and Division 7A prevents private
companies from making tax-free distributions of profits to
shareholders or their associates in the form of payments, loans or
forgiven debts.
242. The application of the deemed dividend provisions to the small
business retirement exemption is counter to the policy objective of
the exemption, which is to allow small business operators to sell
their small business assets and provide for their retirement as
their business and its assets may be their sole retirement asset
(to a $500,000 lifetime limit).
243. Excluding the application of section 109 and Division 7A will
reduce uncertainty and complexity for taxpayers utilising the small
business retirement exemption. It will also remove any potential
conflict between the amendments that treat indirect retirement
exemption payments between interposed entities as if they were
neither a dividend nor a frankable distribution and section 109 or
Division 7A. [Schedule 2, item 38, subsection 152-325(10)]
244. The amendments apply to payments that are made on or after the day
on which the amending Bill receives Royal Assent. [Schedule 2,
item 46]
Partners and small business entities
245. When the small business entity regime was introduced the clear
intention was that a partner in a partnership could not in their
capacity as a partner be a small business entity. It is only the
partnership that could be a small business entity.
246. This creates uncertainty because a partner could argue that, as
they are considered to carry on a business for CGT purposes
(consistent with the general law position), they could be a small
business entity where their aggregated turnover is less than $2
million.
247. Section 328-110 of the ITAA 1997 specifies the meaning of small
business entity for applying the small business concession rules.
248. Schedule 2 amends section 328-110 of the ITAA 1997 (meaning of
small business entity) to provide that a partner in a partnership
cannot be a small business entity in their capacity as a partner.
This applies for the small business concessions generally and not
just for the small business CGT concessions. [Schedule 2, item 39,
subsection 328-110(6)]
249. The amendment removes current uncertainty about whether a partner
in a partnership can be a small business entity.
250. The small business entity regime had effect from the 2007-08 income
year so the amendment applies to assessments for the 2007-08 income
year and later income years. The amendment applies retrospectively
as it aligns the legislation with administrative practice.
[Schedule 2, item 47]
Application and transitional provisions
Application of the main amendments
251. The main amendments apply to CGT events happening in the 2007-08
income year and later income years to align with the date of effect
of the small business entity regime amendments. [Schedule 2,
subitem 41(1)]
252. In this regard, the amendments will generally be beneficial to
taxpayers. The amendments have been actively sought by industry
and will increase access to the small business CGT concessions.
253. However, some taxpayers may be disadvantaged under these amendments
by the repeal of subsection 152-40(1A) and the introduction of the
new affiliate rule that treats an individual's spouse or child
(under 18 years of age) as an affiliate of the individual in
particular circumstances.
254. In particular, some taxpayers may have been able to qualify for the
small business CGT concessions under subsection 152-40(1A) of the
ITAA 1997 repealed by these amendments and may not qualify under
the new rule for treating an individual's spouse or child (under 18
years of age) as their affiliate.
255. Taxpayers in these circumstances can still qualify for the small
business CGT concessions for CGT events happening up to but not
including the day on which the amending Bill is introduced into the
Parliament. [Schedule 2, subitems 41(2) and (3)]
Transitional extension of time limit for making choices
256. Taxpayers that become eligible to make a choice under Division 152
of the ITAA 1997 due to Schedule 2 to this Bill will have an
extended time period, under a transitional rule, to make such a
choice in relation to CGT events happening before the day on which
this Bill receives Royal Assent. [Schedule 2, item 48]
257. The small business CGT concessions require taxpayers to make
choices. For example, the small business retirement exemption and
small business roll-over are available only if the taxpayer chooses
to obtain them.
258. Subsection 103-25(1) of the ITAA 1997 limits the date for making a
choice to the day the entity lodges its income tax return for the
income year in which the relevant CGT event happened or a later
date allowed by the Commissioner.
259. The transitional rule extends the time limit for a choice an entity
becomes eligible to make as a result of this Schedule to the latest
of:
. the day the entity lodges its income tax return for the
income year in which the relevant CGT event happened;
. 12 months after the day on which this Bill receives Royal
Assent; and
. a later day allowed by the Commissioner.
[Schedule 2, subitem 48(2)]
260. The way in which the taxpayer prepares their income tax return is
sufficient evidence of the making of this choice.
Chapter 3
Tax benefits and capital gains tax
Outline of chapter
261. Schedule 3 to this Bill amends the Income Tax Assessment Act 1997
(ITAA 1997) to provide a general exemption from capital gains tax
(CGT) for capital gains or capital losses arising from a right or
entitlement to a tax offset, deduction or similar benefit.
Context of amendments
262. Subsection 118-37(1) of the ITAA 1997 disregards the capital gain
or capital loss you make from a CGT event as a result of a number
of specified events or programs.
263. This measure covers capital gains or capital losses you make from a
CGT event as a result of receiving a tax offset, deduction or other
similar benefit.
Summary of new law
264. Subsection 118-37(1) of the ITAA 1997 disregards the capital gain
or capital loss you make from a CGT event as a result of a number
of specified events or programs.
265. The amendment disregards capital gains or capital losses you make
from a CGT event as a result of receiving a tax offset, deduction
or other similar benefit.
Detailed explanation of new law
266. A highly technical interpretation of the income tax law may result
in a capital gain or capital loss arising to taxpayers who have a
right to receive an urban water tax offset on the satisfaction of
the right.
267. This measure puts beyond doubt that a capital gain or capital loss
would not arise for taxpayers in such circumstances, or in other
circumstances where a tax offset, deduction or other taxation
benefit arises under a scheme.
268. The opportunity is taken to extend this treatment to taxpayers who
have the right to receive other types of tax offsets, deductions or
other taxation benefits. For example, this treatment would be
extended to the right to receive a reduction in land tax available
under an Australian law, or under the law of a foreign country or
part of a foreign country. [Schedule 3, item 1, paragraph 118-
37(1)(h)]
Application and transitional provisions
269. This measure applies to relevant CGT events happening in the 2009-
10 income year and later income years. [Schedule 3, item 2]
Chapter 4
National Urban Water and Desalination Plan - urban water tax offset
Outline of chapter
270. Schedule 4 to this Bill amends the Income Tax Assessment Act 1997
(ITAA 1997) to provide a refundable tax offset in relation to
certain projects approved under the National Urban Water and
Desalination Plan (plan).
Context of amendments
271. The Government is committed to working cooperatively with the
States and Territories to improve the security of water supplies to
Australia's major cities. The Government's Water for the Future
plan builds on the National Water Initiative by bringing rural and
urban water reforms together.
272. The plan is an important component of Water for the Future and will
support initiatives that drive investment in diverse water supply
options and encourage industry and the community to save and use
water more efficiently.
273. The aim of the plan is to increase the security of water supplies
to Australia's cities. This will be achieved by supporting major
desalination, water recycling and stormwater harvesting projects
that contribute significantly to improving the security of water
supplies to Australia's cities.
274. The Minister for Climate Change and Water (Water Minister) is
responsible for approving financial assistance under the plan. The
plan will be administered by the Department of the Environment,
Water, Heritage and the Arts (Water Department).
275. Financial assistance under the plan will be determined through a
competitive process and is capped at 10 per cent of eligible up-
front capital costs up to a maximum of $100 million per project.
To ensure the plan focuses on major projects, projects must have
eligible capital costs of at least $30 million. Special rules
apply to stormwater harvesting projects (see paragraph 4.14).
276. Financial assistance will be provided as refundable tax offsets,
unless the applicant receiving the assistance is outside the tax
system, in which case they will receive a grant.
277. Financial assistance for approved projects will be available from
the 2009-10 income year. Financial assistance will be provided
upon completion of agreed milestones, and projects must be
completed by 30 June 2013 in order to receive the agreed assistance
in full. Financial assistance will be of a fixed value once it has
been approved regardless of any subsequent changes to the capital
cost of the project.
278. The Water Department issued implementation guidelines on 7 December
2008, which explain the application and approval processes for
funding under the plan. The following diagram illustrates the
process.
1. : Funding process
[pic]
Detailed explanation of new law
Entitlement to the tax offset
279. A company is entitled to a refundable tax offset under the plan for
an eligible project if the Water Minister has issued a valid
certificate for the project. [Schedule 4, item 10, section 402-
755]
280. Private sector entities, water utilities and governments are
eligible to apply for assistance under the plan. As only the
private sector falls within the income tax system (and may
therefore receive a tax offset), there is no need to include
entities other than companies in these provisions. The other
entities will be able to apply for grants under the plan.
281. The amount of the offset is 10 per cent of eligible up-front
capital costs up to a maximum of $100 million. [Schedule 4, item
10, subsection 402-765(4)]
282. This amount may be paid over several certificates, recognising the
attainment of project milestones, and therefore relate to different
income years.
1.
Pinderburge Pty Ltd is building a desalination plant in
south-eastern Australia. The project is approved for
funding of $50 million under the plan.
In 2009-10, Pinderburge did not meet any milestones, so no
assistance was paid to the company. In 2010-11, the company
achieved two milestones and claimed eligible capital
expenditure of $370 million, for which the Water Department
issued certificates for tax offsets totalling $37 million.
In 2011-12, the final milestone was achieved, and $200
million of eligible capital expenditure was claimed. As
only $50 million of funding was approved, the final
certificate for a tax offset was limited to the balance of
$13 million.
283. For stormwater harvesting projects, the amount of the offset is up
to 50 per cent of eligible capital costs to a maximum of $20
million. [Schedule 4, item 10, subsection 402-765(3)]
Certificates
284. A certificate may be issued by the Water Minister if a project has
satisfied the requirements set out in the guidelines. [Schedule 4,
item 10, subsection 402-760(1)]
285. The guidelines will provide details of the steps in the
certification process.
286. A certificate may be revoked under certain circumstances outlined
in the guidelines. [Schedule 4, item 10, section 402-770]
287. Where a certificate is revoked, it is taken as if the certificate
was never issued. This means that, for the income year which the
certificate relates to, the tax return of the company would need to
be amended.
288. A certificate which has been issued cannot be varied. To vary a
certificate, the Water Minister must revoke the existing
certificate and issue a new one. [Schedule 4, item 10, subsection
402-770(7)]
Administrative Appeals Tribunal Review
289. A company may apply to the Administrative Appeals Tribunal (AAT)
for review of the Water Minister's decision in relation to:
. their refusal to issue a certificate to a company;
. the amount specified in such a certificate; or
. the revocation of such a certificate.
[Schedule 4, item 10, section 402-775]
290. Where a review by the AAT is an option available to a company in
relation to the matters specified above, any correspondence from
the Water Minister or the Water Department must include information
on the company's rights to appeal to the AAT. [Schedule 4, item
10, subsections 402-760(6), 402-765(4) and 402-770(4)]
291. The review rights apply only to the process surrounding the
issuance and revoking of certificates, and not the application for
assistance under the plan.
Guidelines
292. The Water Minister must make guidelines in relation to the issuing
and revoking of certificates. These guidelines will be registered
as a legislative instrument. [Schedule 4, item 10, subsection 402-
780(1)]
293. Subsection 14(2) of the Legislative Instruments Act 2003 prevents
legislative instruments from referring to material not contained in
the enabling legislation unless the contrary intention is specified
in the legislation. This contrary intention, at subsection 402-
780(2), is necessary as the guidelines will rely to an extent on
material produced by the Water Department in relation to the plan.
[Schedule 4, item 10, subsection 402-780(2)]
294. The guidelines do not have effect until the period in which they
can be disallowed by Parliament has elapsed. This prevents a
disallowed guideline from having effect between the date of tabling
in Parliament and the date of disallowance. [Schedule 4, item 10,
subsection 402-780(3)]
Water Minister and Water Department
295. For consistency, the defined terms Water Minister and Water
Department will be added to the income tax law. [Schedule 4, items
11 and 12]
296. Currently, as noted in paragraph 4.5, the Water Minister is the
Minister for Climate Change and Water, and the Water Department is
the Department of Environment, Water, Heritage and the Arts.
Application and transitional provisions
297. This measure applies for the 2009-10, 2010-11, 2011-12 and 2012-13
income years. [Schedule 4, item 10, subsection 402-760(2)]
298. A certificate can only be issued for one income year, but a company
can receive multiple certificates within and across different
income years.
299. The legislation for this measure will become inoperative once the
plan finishes in 2013-14. As a result, the provisions are repealed
with effect from 1 July 2014. [Schedule 4, items 16 to 18]
300. To allow the revocation of certificates after the provisions are
repealed, the legislation will specifically preserve the operation
of the revocation provisions, as well as the appeal rights of the
taxpayer, for 10 years after repeal. [Schedule 4, item 19]
Consequential amendments
301. A reference to the urban water tax offset is added to the list of
tax offsets in section 13-1 of the ITAA 1997. [Schedule 4, item 2,
section 13-1]
302. Section 67-25 of the ITAA 1997 currently lists all refundable tax
offsets in various subsections. For clarity, the existing
subsections are repealed and rewritten into a table. A reference
to the urban water tax offset is added to this table. [Schedule 4,
items 3 and 6]
303. Due to the shift of the table into section 67-23, a number of
references to refundable tax offsets in various Acts are amended to
reflect this. [Schedule 4, items 1, 7 to 9 and 13 to 15]
304. The heading of section 67-25 is amended to reflect the content of
what remains in that section. [Schedule 4, items 4 and 5]
305. This Schedule amends the ITAA 1997 to provide a general exemption
from capital gains tax for capital gains arising from a right or
entitlement to a tax offset, deduction or similar benefit. That
measure would also apply to the tax offsets detailed in this
Schedule.
Chapter 5
Deductible gift recipients
Outline of chapter
306. Schedule 5 to this Bill amends the Income Tax Assessment Act 1997
(ITAA 1997) to update the list of the deductible gift recipients
(DGRs) to include four new entities and to extend the time period
of three organisations currently listed in the ITAA 1997.
Context of amendments
307. The income tax law allows taxpayers who make gifts of $2 or more to
DGRs to claim income tax deductions. To be a DGR, an organisation
must fall within one of the general categories set out in Division
30 of the ITAA 1997, or be listed by name under that Division.
308. DGR status assists eligible funds and organisations to attract
public support for their activities.
Summary of new law
309. The amendments add four organisations to the list of specifically
listed DGRs and extend the time period for which deductions are
allowed for gifts made to three organisations. Gifts of $2 or more
that are made to organisations during their period of specific
listing, are tax deductible.
Detailed explanation of new law
310. Schedule 5 allows deductions for gifts to the organisations listed
in Table 5.1. [Schedule 5, items 1, 3, 4 and 7]
1.
|Name of Fund |Date of Effect |Special |
| | |Conditions |
|The Australasian|3 February 2009.|The gift must be|
|College for | |made after 2 |
|Emergency | |February 2009. |
|Medicine | | |
|Grattan |5 March 2009. |The gift must be|
|Institute | |made after 4 |
| | |March 2009 and |
| | |before 5 March |
| | |2011. |
|ACT Region Crime|13 February |The gift must be|
|Stoppers Limited|2009. |made after 12 |
| | |February 2009. |
|PWR Melbourne |3 February 2009.|The gift must be|
|2009 Limited | |made after 2 |
| | |February 2009 |
| | |and before |
| | |1 January 2010. |
311. The Grattan Institute is a policy research institute that will be
established at the University of Melbourne. The Institute is being
established as a research body providing an independent voice in
Australian public policy debate and will not be aligned with any
political movement. The Institute will focus on the major
challenges and opportunities facing Australia as a liberal
democracy in a globalised economy.
312. The Australasian College for Emergency Medicine is the
administrative institution in Australia and New Zealand for the
practice of emergency medicine. The College is distinguished as an
educational institution for the teaching and accreditation of
physicians in the speciality of emergency medicine. The College's
specialist education program in emergency medicine aims to improve
standards and training in emergency departments in hospital systems
across Australia and New Zealand.
313. PWR Melbourne 2009 Limited (The Parliament of the World's
Religions) is an international forum which aims to promote
interfaith interaction and to encourage peace and understanding
between different faiths and people with no faith. The Parliament
is held every five years in different locations around the world.
The Parliament's conference in Melbourne in 2009 will be
specifically listed as a DGR in the tax law until 31 December 2009.
314. Crime Stoppers is a crime information operation, which enables
anyone with information about any crime and who wishes to remain
anonymous to pass that information to Police. Crime Stoppers
operates in all states and territories of Australia. ACT Region
Crime Stoppers Limited is a partnership between the community,
media and police. Like all Crime Stoppers programs, ACT Region
Crime Stoppers Limited is a program designed to assist in the
detection, and hence the reduction of crime.
Extended listings
315. Schedule 5 extends the period for which deductions are allowed for
gifts to the organisation listed in Table 5.2. [Schedule 5, items
2, 5 and 6]
1.
|Name of Fund |Date of Effect |Special |
| | |Conditions |
|Yachad |1 July 2008. |The gift must be|
|Accelerated | |made after 30 |
|Learning Project| |June 2008 and |
|Limited | |before 1 July |
| | |2009. |
|St George's |31 December |The gift must be|
|Cathedral |2007. |made after 30 |
|Restoration Fund| |December 2007 |
| | |and before |
| | |1 January 2011. |
|Bunbury Diocese |19 December |The gift must be|
|Cathedral |2008. |made after 18 |
|Rebuilding Fund | |December 2008 |
| | |and before |
| | |19 December 2010|
| | |. |
316. Yachad Accelerated Learning Project Limited is a program of
educational intervention aimed at raising the scholastic
achievements of students in remote and rural locations in
Australia. Under Yachad, Israeli educators work with Indigenous
communities and their local leaders, as well as school principals
and their staff, to combat patterns of educational disadvantage.
317. The Bunbury Diocese Cathedral Rebuilding Fund was established to
rebuild the St. Patrick's Cathedral in Bunbury, Western Australia
which was destroyed by a tornado in 2005. Extending the period of
DGR status of the Fund recognises the heritage significance of the
St. Patrick's Cathedral.
318. St. George's Cathedral Restoration Fund is undertaking the
restoration of the St. George's Cathedral precinct which involves
urgent repairs and conservation work to the Cathedral, the Burt
Memorial Hall and the Deanery. The St. George's Cathedral precinct
has significant historical and heritage significance and has been
permanently listed on the Western Australia Register of Heritage
since 1995.
Application and transitional provisions
319. The amendments to list the organisations listed in Table 5.1 and
Table 5.2 apply from the dates of effect shown in those tables.
Consequential amendments
320. A number of changes have been made to update the index to include
the new entities. [Schedule 5, items 8, 9, 11 and 12]
Chapter 6
Australian Business Register
Outline of chapter
Australian Business Register amendments
321. Part 1 of Schedule 6 to this Bill amends the A New Tax System
(Australian Business Number) Act 1999 (ABN Act) to improve the
integrity and efficiency of the Australian Business Register (ABR).
These amendments help position the Registrar of the ABR
(Registrar) to take on the role of Multi-agency Registration
Authority (see Part 2).
Multi-agency Registration Authority amendments
322. Part 2 of Schedule 6 to this Bill amends the ABN Act to allow the
Registrar of the ABR to act as the Multi-agency Registration
Authority to enable representatives of businesses to be identified
for the purpose of communicating electronically with multiple
government agencies on behalf of the business.
Context of amendments
Australian Business Register amendments
323. The Registrar already registers businesses in order for businesses
to identify themselves reliably in all their dealings with the
Australian Government, including for the purposes of the taxation
laws. The existing legislation provides that applications for an
ABN must be in a form approved by the Registrar. While the
application can require name and address and other information
about associates of the business the Registrar cannot always
enforce the identification of associates of the business.
324. An entity that is dissatisfied with a decision of the Registrar
does not have any formal objection rights but must apply to the
Administrative Appeals Tribunal (AAT) as the only initial dispute
mechanism. Section 14 of the ABN Act requires entities to update
certain details that are outlined in section 25, such as an address
for service of notices. Section 15 of the ABN Act permits the
Registrar to require the entity to provide certain information to
him. However, there is no provision to enable the Registrar to
update those details either from information obtained that is
publicly available or from his own resources. As a result of this,
the Registrar has had difficulty in utilising opportunities to
achieve and maintain an accurate register.
Multi-agency Registration Authority amendments
325. Many businesses have reporting obligations with multiple government
agencies. Currently, if they wish to interact with multiple
agencies online, they need to undergo multiple identity
establishment processes, and then need to manage multiple
credentials. This is one of the barriers for business to take up
online communication with government.
326. The ABR is in a unique position to establish the identity of a
business person based on their tax file number (TFN), as well as to
establish a link between the person and the business they represent
in order to facilitate business to government online interaction.
327. Registration Authorities, such as the Registrar, provide a
verification of identity and relationship service when applicants
register for electronic credentials to allow online transactions.
Registration Authorities also play a role in maintaining
registrant's information and to administering requests for
credential renewals and revocations.
328. This new role of the ABR was envisaged when the ABR was
established. One of the benefits of establishing the ABR was to
reduce administrative costs for small business by limiting the
number of times a business would be asked for similar information
by different agencies. This would result in a reduction in the
number of forms and other procedural obligations that are a burden
for businesses.
Summary of new law
Australian Business Register amendments
329. The ABN Act is being amended to permit the Registrar to use the
approved form provisions outlined in section 388-50 in Schedule 1
to the Taxation Administration Act 1953 (TAA 1953) for a range of
purposes. The amendments improve the integrity of the ABR.
330. The purposes of the approved forms include the application for an
ABN which requires the identification of the entity and its
associates; notification of changes to various details recorded on
the ABR in respect of the entity; an obligation for the entity or
an associate to provide certain information in respect of the
entity or an associate respectively; and for the entity to request
the cancellation of the entity's ABN.
331. The Registrar would also be given the power to update details on
the ABR, where he is satisfied that the details entered in relation
to an entity are incorrect, and replace them with information that
he believes to be correct.
332. The introduction of objection rights for a range of decisions of
the Registrar assists entities to receive a low cost review of
decisions rather that having to apply for review of the decision to
the AAT. If the entity is not satisfied with the decision of an
objection the entity is able to take the matter to the AAT or the
Courts.
333. Section 10 of the ABN Act outlines the conditions that must be met
before the Registrar must register an entity in the ABR. The
amendments include an additional condition to be satisfied before
the Registrar must register an entity. The additional condition
allows the Registrar to be satisfied that the identity of an
associate of the entity has been established. The approved form
for registration requests details about associates of the entity.
Multi-agency Registration Authority amendments
334. The amendments allow for the Registrar to register and maintain
details about representatives of businesses to enable electronic
communication with one or more government agencies. The amendments
allow the Registrar to identify representatives of businesses as
part of the registration process. The amendments also require the
entity or the representative to update the details on the Register.
The Registrar is able to use public information and information
provided by third parties on a voluntary basis to update and
correct the Register in respect of details of representatives.
335. Part 1 of the Schedule introduces objection rights for entities.
Part 2 extends the objection rights of entities to cover decisions
in respect of representatives, where the entity is dissatisfied
with a decision of the Registrar.
336. The amendments further extend the use of the approved form
provisions in the TAA 1953 for a range of purposes related to
representatives of the entity including applications for
registration of a representative. Such applications may request,
but not compel, the provision of the TFN of a nominating individual
and that of the representative. A request for cancellation of a
representative's registration by the entity uses the approved form
provisions. In addition, an obligation to provide the Registrar
with information relevant to confirm the representative's identity,
or the details in relation to the representative entered in the
ABR, requires the use of an approved form.
337. Two new offence provisions are included in Part 2, one for
impersonating a registered representative of the enterprise, and
the other for non-compliance with a request for information
concerning either the identity of a representative or details
entered on the ABR in respect of that representative.
Comparison of key features of new law and current law
Australian Business Register amendments
|New law |Current law |
|The approved form |Applications for |
|provisions contained in |registration to obtain an|
|the TAA 1953 are used for|ABN must be in a form |
|a wide range of purposes.|approved by the |
| |Registrar. |
|Where details about an |The Registrar must |
|associate of the entity |register an entity in the|
|were requested in the |ABR if satisfied that a |
|approved form for |number of conditions |
|registration, the |apply to the |
|Registrar may require |registration. These are:|
|that the identity of the |the entity has applied |
|associate is established,|under section 9 of the |
|in addition to the |ABN Act; the entity is or|
|existing conditions, |will be entitled to an |
|before the Registrar must|ABN; the identity of the |
|register the entity in |entity has been |
|the ABR. |established; and the |
| |entity is not already |
| |registered in the |
| |Register. |
|In addition to the |The Registrar must enter |
|existing details entered |in the ABR the following |
|in the ABR, details about|details: the entity's |
|an entity's associate |name; the entity's ABN, |
|must be entered in the |the date of effect of the|
|ABR where details about |registration; an address |
|the associate of the |for services of notices |
|entity were requested in |under the Act; and the |
|the approved form for |details prescribed in the|
|registration. |regulations. |
|Objection rights are to |Applications for review |
|be included in respect of|of certain decisions can |
|certain decisions of the |only be made to the AAT |
|Registrar. Use of the |in the first instance. |
|provisions in Part IVC of| |
|the TAA 1953 means that | |
|appeal rights to the AAT | |
|and the Courts are | |
|retained. | |
|Where the Registrar is |The Registrar cannot, |
|satisfied that the |without advice from the |
|details entered in the |entity, update the |
|ABR for an entity are |details entered in the |
|incorrect, the Registrar |Register where he is |
|may adjust those details |satisfied that they are |
|if he has access to |incorrect, despite having|
|details that the |access to information |
|Registrar believes are |which he believes to be |
|correct. |correct. He can only |
| |adjust details as advised|
| |by the entity. |
Detailed explanation of new law
Australian Business Register amendments
338. The new law introduces the approved form provisions that are
contained in section 388-50 in Schedule 1 to the TAA 1953 and those
provisions will be used for a variety of purposes. The definition
to be inserted into section 41 of the ABN Act of 'approved form'
states that it has the same meaning as in the Income Tax Assessment
Act 1997 (ITAA 1997). Section 995-1 of the ITAA 1997 states that
'approved form' has the meaning given by section 388-50 in Schedule
1 to the TAA 1953. [Schedule 6, item 28, section 41]
339. The approved form definition in the TAA 1953 is quite comprehensive
as to the possible content of the form, whereas the existing
provision in the ABN Act is vague and only states that the
application for an ABN must be in a form approved by the Registrar.
The new law improves clarity as to the content of the approved
form. The approved form provisions are used in the application for
registration of an enterprise in the ABR. Upon registration, an
ABN is issued to the entity. [Schedule 6, item 2, subsection 9(2)]
340. The approved form provisions do not contain any mention of the use
of TFNs in the form. The approved form for registration of an
entity for an ABN permits the use of TFNs for both the entity and
of an associate, but respect for an individual's privacy is
maintained by providing that the quotation of TFNs is voluntary.
[Schedule 6, item 2, subsection 9(3)]
341. The approved form provisions would apply to the notification of
changes to matters set out in the ABR. Previously, there was no
particular form to lodge any amendments to those details.
[Schedule 6, item 9, paragraph 14(2)(b)]
342. The approved form provisions also apply to requests by the
Registrar to entities that are registered in the ABR to confirm
various aspects of the registration in the ABR. Previously, there
was no particular form for such requests. [Schedule 6, item 11,
paragraph 15(3)(b)]
343. An associate who had not been identified upon registration of an
entity may also be affected by the approved form provisions as the
Registrar may require an associate of an entity to give the
Registrar information that is relevant to confirming the
associate's identity. This also applies to new associates of the
entity after registration. This form is subject to the offence
provision under section 8C of the TAA 1953, if the associate fails
to comply with the request. [Schedule 6, item 11, item 2 in the
table in subsection 15(1)]
344. Similarly, there is an approved form for an entity to apply for
cancellation of its registration in the ABR. The previous form for
this purpose is a form approved by the Registrar. [Schedule 6,
item 17, subsection 18(4)]
345. To improve the integrity of the ABR, the Registrar may require that
the identity of an associate is established before an entity is
registered on the ABR. This applies where details about an
associate were requested in the approved form for registration of
the entity. [Schedule 6, item 3, paragraph 10(1)(ca)]
346. To assist the Registrar to identify associates, he is able to
request the entity to provide specified information or a specified
document in respect of an associate. [Schedule 6, item 4,
paragraph 10(2)(b)]
347. Previously, an entity could make an application to the AAT for a
review of certain decisions, where they were dissatisfied with the
decision of the Registrar. This was a reasonable arrangement given
that the initial focus of the Registrar was to encourage all
eligible entities to apply for an ABN. Objection rights were
available to entities in respect of both the goods and services tax
and income tax matters.
348. However, to improve the integrity of the ABR, in recent times the
Registrar has introduced an online eligibility tool which
automatically rejects applications that do not appear to be
carrying on an enterprise. The Registrar has also been more active
in identifying and cancelling registrations of entities that are
not or are no longer eligible. It is therefore appropriate that
persons who are dissatisfied with that decision are able to access
a low cost review process. Accordingly, the entity has objection
rights using the provisions set out in Part IVC of the TAA 1953.
Those provisions use the approved form provisions contained in
section 388-50 of Schedule 1 to the TAA 1953. The objection rights
extend to all of the previous types of decisions for which an
entity could seek review of the decision of the Registrar by
applying to the AAT. [Schedule 6, item 22, section 21]
349. Should an objection decision be unfavourable to the entity, the
entity is able to seek a review of the decision from the AAT or
appeal to the Federal Court against the decision. These choices
result from the use of the provisions in Part IVC of the TAA 1953.
The term 'reviewable ABN decision' is inserted into the definition
section of the ABN Act to refer to certain decisions made by the
Registrar that are subject to objection rights. [Schedule 6, item
31, section 41]
350. Although the Registrar may enter in the ABR any details that he has
obtained, there are certain details outlined in section 25 of the
ABN Act that the Registrar must enter in the ABR. The amendments
include a provision to require the Registrar to enter in the ABR
details about the entity's associates that were requested in the
approved form for registration in the ABR. Due to section 14, an
entity has to advise of any change to its associates that are
entered on the ABR. [Schedule 6, item 23, paragraph 25(2)(aa)]
351. Previously, where the entity did not advise of a change in details
in accordance with the requirement under section 14 of the ABN Act
and where the Registrar has been unable to obtain correct details
from the entity, the Registrar had limited ability to update the
ABR. The Schedule contains a new provision to permit the Registrar
to amend the details entered in relation to the entity in the ABR
based upon his own information. This occurs where he considers
that the details entered in the ABR are incorrect and he has access
to other details that he considers to be correct. Such information
could be obtained from publicly available sources or other
accessible information. If the information obtained was subject to
the secrecy provisions that apply to a government entity, the
information would usually remain subject to those secrecy
provisions. This amendment maintains the integrity of the ABR.
[Schedule 6, item 27, section 29A]
Multi-agency Registration Authority amendments
352. As the Multi-agency Registration Authority, the Registrar
establishes the identity of a representative of an entity and the
relationship between a business and its representative. Following
registration of the representative, the representative is able to
communicate electronically on behalf of the business with multiple
government agencies depending upon the extent of their authority
from the entity.
353. The role of the Multi-agency Registration Authority forms an
integral part of the Standard Business Reporting (SBR) program.
SBR is a multi-agency program that aims to reduce reporting burdens
for business through eliminating unnecessary or duplicated
reporting and improve the interface between businesses and
government agencies.
354. The Registrar is well placed to act as the Multi-agency
Registration Authority as the Registrar already identifies
businesses that apply for an ABN (section 10 of the ABN Act).
. The Registrar also confirms the identity of associates of
the entity based on their TFN and other information
disclosed by the Australian Taxation Office under
paragraph 16(4)(a) of the Income Tax Assessment Act 1936.
. Paragraph 8WB(1A)(a) of the TAA 1953 deems the disclosure
of TFN information to the Registrar not to be an offence
as it is required or permitted for the purposes of a
taxation law.
355. However, as the legislation previously read, the Registrar was not
able to use TFNs and other information from the Commissioner of
Taxation (Commissioner) for the purposes of other government
agencies. The objects clause is broadened to allow the Registrar
to create and maintain a register of representatives of businesses
for the purpose of facilitating electronic dealings by those
businesses with government entities. The amendment allows the
Registrar to use such information to register representatives of
businesses. [Schedule 6, item 37, subsection 3(4)]
356. This amendment satisfies Principle 1 of the Information Privacy
Principles listed in section 14 of the Privacy Act 1988.
Principle 1 of the Information Privacy Principles precludes an
agency from collecting personal information for inclusion in a
record unless it is collected for a lawful purpose directly related
to a function or activity of that agency.
357. Enterprises are able to nominate individuals to be registered as
representatives of the enterprise for the purpose of facilitating
the entity's electronic dealings with government entities. The
application must be in the approved form and that form may request
the TFN of the representative and of the individual who nominates
the representative of that enterprise. It is not compulsory for
either party to quote their TFN. However, quotation of the TFN
would mean that a representative could be registered in real time
in the one electronic session. [Schedule 6, item 39, section 9A]
358. A note has been included in the legislation to make the reader
aware that the offence provisions contained in subsection 8WB(1) of
Schedule 1 to the TAA 1953 do not apply to the recording or
disclosing of another person's TFN on the approved form. This is
because an exception applies under paragraph 8WB(1A)(a) of the TAA
1953. That paragraph permits the recording or disclosure of
another person's TFN to the extent required or permitted by a
taxation law.
359. The amendments outline the criteria to be satisfied before the
Registrar must register a representative of an entity in the ABR.
An application must have been made in accordance with the
provisions in section 9A. The Registrar has to be satisfied that
the identity of the nominating individual who has signed the
declaration on the authorised form has been established. Where a
representative is to nominate other representatives, the Registrar
needs to be satisfied that the identity of the representative has
been established. The last criterion provides that the Registrar
is not forced to register multiple registrations of a
representative for the same entity. [Schedule 6, item 40,
subsection 10A(1)]
360. Where the Registrar needs to establish the identity of a
representative, the Registrar is able to request the entity, or the
proposed representative, to provide the Registrar with specified
information or a specified document to satisfy the Registrar of the
identity of the proposed representative. It should be noted that
where the representative provides the Registrar with their TFN
there would usually be no need for the Registrar to use this
provision. [Schedule 6, item 40, subsection 10A(2)]
361. The Registrar registers a representative by entering certain
details in the ABR in relation to the entity. The details are the
name of the representative, the representative's email address and
the date of effect of the registration. [Schedule 6, item 42,
section 11A]
362. The Registrar is able to enter any details into the ABR but section
25 specifies certain details that must be entered in the ABR. In
respect of a representative of an entity, the Registrar must enter
the name of the representative, the representative's email address
and the date of effect of the registration of the representative.
[Schedule 6, item 55, subsection 25(3)]
363. To allow specification of additional details that must be recorded
in the ABR in the future, a provision is included to permit such
details to be prescribed in the regulations rather than having to
amend the law. [Schedule 6, item 55, subsection 25(4)]
364. Where the Registrar refuses to register an individual as a
representative of an entity, the Registrar must give the entity
written notice of the refusal and the reasons for the refusal.
[Schedule 6, item 43, subsection 13(1)]
365. If the Registrar has not decided an entity's application for an
individual to be a representative of the entity within 28 days
after the application was made, the entity may give the Registrar
written notice that it wishes to treat the application as having
been refused. Subsection 13(4) outlines the method of measuring
the 28 day period, which is the same as for an application for an
ABN. As the application has been effectively refused, the entity
is entitled to lodge an objection under section 21 of the ABN Act.
[Schedule 6, item 45, subsection 13(2)]
366. To preserve the integrity of the ABR, the Registrar has the power
to request the entity, or a representative of the entity, to
provide the Registrar with information that is relevant to
confirming the identity of the representative, or information
relevant to the details entered in the ABR in relation to the
representative of the entity. Failure to provide such information
is subject to the offence provisions contained in section 8C of the
TAA 1953. [Schedule 6, item 47, item 3 in the table in
subsection 15(1)]
367. The Registrar is able to cancel the registration of a
representative of the entity where he is satisfied that one of a
number of situations is satisfied. The situations covered include
where the registration of the entity is cancelled; or the
representative no longer represents the entity; the representative
is registered under an identity that is not the representative's
true identity; or the representative's identity is no longer
satisfactorily established. Examples of situations where the
representative no longer represents the entity are where the
representative advises that they no longer wish to represent the
entity or where the representative is no longer capable of
representing the entity. [Schedule 6, item 48, subsection 18(1A)]
368. An entity can request the Registrar to cancel the registration of a
representative of an entity by completing an application in the
approved form and forwarding it to the Registrar. [Schedule 6,
item 49, paragraph 18(4)(b)]
369. A number of additional reviewable ABN decisions are included in the
table in subsection 21(2) of the ABN Act. These are for refusing
to register the entity's representative; cancelling the
registration of the entity's representative; refusing to cancel the
registration of the entity's representative; and setting the date
of effect of a cancellation. [Schedule 6, item 51, subsection
21(2)]
370. The Registrar must reinstate the registration of a representative
in the ABR if the Registrar is satisfied that the registration
should not have been cancelled. This could occur where the
Registrar realised that a mistake had been made; or as a result of
an objection; a request for review; or an appeal; determined that
the registration of the representative should not have been
cancelled, or the application refused. The Registrar must give
written notice of such reinstatement to the entity. [Schedule 6,
item 50, subsection 19(1)]
371. An offence provision is included in the amendments to discourage a
person from impersonating a person who is registered under the ABN
Act as a representative of an entity. The penalty for such an
offence is two years imprisonment. [Schedule 6, item 54,
subsection 23(3)]
372. Where the Registrar is satisfied that the details of
representatives of entities entered in the ABR are incorrect, and
the Registrar has access to details that he believes to be correct,
the Registrar is able to correct the details on the ABR. If the
information obtained was subject to the secrecy provisions that
apply to a government entity, the information would usually remain
subject to those secrecy provisions. The Registrar is able to
update his records to maintain the integrity of the register.
[Schedule 6, item 56, paragraph 29A(1)(b)]
373. The disclosure provisions contained in section 30 are amended to
permit the Registrar to disclose information concerning a
representative, who is registered, or has been registered in the
Register, provided it is for the purpose of facilitating an
entity's dealings with government entities, or for the purpose of
maintaining details registered under the ABN Act. [Schedule 6,
item 57, paragraph 30(3)(e)]
Commencement date
Australian Business Register amendments
374. These amendments commence on the day on which this Bill receives
Royal Assent.
Multi-agency Registration Authority amendments
375. These amendments commence on a single day to be fixed by
Proclamation, but limited to a day not later than 12 months after
Royal Assent. The reasons for such a commencement date are
outlined in the following paragraphs.
376. The Government announced that the SBR program would be available to
businesses from 1 July 2010. The SBR Authentication solution that
allows for the registration of individuals, as representatives of
businesses, for the purpose of enabling electronic dealings with
government agencies, is just one component of the wider SBR
program. The registration aspect facilitates the issue of an
electronic identity that enables business representatives to
authenticate their transactions when reporting to government
agencies for the purposes for which they are authorised.
377. The Government agencies in the SBR program need to be able to
receive communications authenticated by the electronic identity
issued to business representatives. The SBR program will need to
ensure that all components of the system are working properly,
including (but not limited to):
. the commercial software which is being developed to pre-
fill government forms directly from the client's
accounts/records;
. SBR Core Services, which will validate the information on
the forms and the version of the forms being transmitted,
confirm the identity used to transmit the information,
provide confirmation of receipt back to the client and
direct the forms to the right agencies; and
. systems of participating agencies being able to receive
the electronic forms and be accepted by their processing
systems.
378. Although the authentication solution will need to be delivered
ahead of the broader SBR implementation deadline, a specific date
is not yet known. The delivery of the authentication solution is
dependant on its end-to-end testing and its integration with the
other key components of the SBR program. It is therefore dependant
on the successful delivery of these other components.
379. Other key dependencies which may impact on the Registrar's ability
to meet a fixed date of effect for the legislative amendments
include the significant IT development work required to support the
outcomes of this Bill. This work includes the development of the
registration process, as well as developments required in taxation
systems to deliver the functionality introduced in this Bill, such
as the use of TFN information to streamline identity verification
processes. Access to this information will be dependant on, and
become part of, the major systems refresh currently being
undertaken by the Commissioner. Slippage in the delivery of this
refresh could impact on the successful delivery of the registration
process.
380. The success of the SBR program is dependant upon all aspects of the
program being available at the same time. Businesses must be able
to experience a smooth registration process for its representatives
and receive their associated electronic identity and be able to
interact with the various agencies involved in the SBR program. In
turn, the agencies need to be able to receive and process the
information supplied by businesses.
381. For these reasons, the legislation provides for a commencement date
to be a single day to be fixed by Proclamation but limited to a day
not later than 12 months after Royal Assent. The actual date will
be dependent upon all aspects of the SBR program being successfully
integrated and tested.
Application and transitional provisions
Australian Business Register amendments
382. Where the approved form provisions contained in section 388-50 of
the TAA 1953 replace the existing form approved by the Registrar or
the approved form replaces a document that does not have any
special requirements, the new form applies after the commencement
of the relevant provisions, that is, Royal Assent.
383. Items 1 to 4, 23 and 28 are relevant to the approved form for
applications for an ABN. Those items apply to applications using
the new approved form from their commencement, that is, Royal
Assent.
384. Item 17 refers to the new approved form to apply to cancel the
registration of the ABN. As above, the provision apply to
applications for cancellation of an ABN from the commencement of
the item, that is, Royal Assent.
385. An approved form is introduced to enable entities and associates to
update information contained in the ABR concerning the entity or an
associate. At present, such information can be provided in any
format. The new provision regarding the approved form applies from
commencement of items 9 and 10, that is, Royal Assent.
386. Item 11 introduces an approved form for the Registrar to request
entities and associates to update items in the ABR, or to confirm
the identity of either associates or entities, or the entitlement
of entities to be registered in the ABR. The approved form for
these purposes applies to requests by the Registrar after the
commencement of that item, that is, Royal Assent. [Schedule 6,
item 32]
Consequential amendments
Australian Business Register amendments
387. Two consequential amendments are included to more appropriately
identify the authority for the use of the phrase 'address shown in
the Register'. The first instance of this occurs in
paragraph 57(1)(a) of the Product Grants and Benefits
Administration Act 2000. The words 'under subsection 25(2) of the
A New Tax System (Australian Business Number) Act 1999' are to be
added to the phrase 'address shown in the Register'. [Schedule 6,
item 33, paragraph 57(1)(a) in the Product Grants and Benefits
Administration Act 2000]
388. The second instance occurs in paragraph 105-140(1)(a) in Schedule 1
to the TAA 1953 where the same words included in the above
amendment are also included in this provision. [Schedule 6, item
34, paragraph 105-140(1)(a) in Schedule 1 to the TAA 1953]
Chapter 7
Removing the Greenhouse Challenge Plus Programme condition for fuel tax
credits
Outline of chapter
389. Schedule 7 to this Bill amends the Fuel Tax Act 2006 to remove the
restriction that businesses may not claim more than $3 million of
fuel tax credits in a financial year unless they are a member of
the Greenhouse Challenge Plus Programme (GCPP).
Context of amendments
390. Under Division 45 of the Fuel Tax Act 2006, businesses may not
claim more than $3 million of fuel tax credits in a financial year
unless they are a member of the GCPP, or another program determined
by the Minister for the Environment, Heritage and the Arts.
391. The GCPP provision in the Fuel Tax Act 2006 was originally included
so that large fuel users would monitor and take measures to reduce
their carbon emissions. This outcome will be better achieved
through the Government's Carbon Pollution Reduction Scheme. The
GCPP will cease after 30 June 2009 and a suitable replacement
program can not be identified for the purpose of the Fuel Tax Act
2006.
392. Without an amendment removing the GCPP condition from the Fuel Tax
Act 2006, businesses will be unable to claim fuel tax credits in
excess of $3 million in a financial year. These businesses will
then not be given relief from fuel tax on their inputs, which would
be inconsistent with the policy intent of the fuel tax credit
system.
Summary of new law
393. This measure removes the provision in the Fuel Tax Act 2006 that
businesses may not claim more than $3 million of fuel tax credits
in a financial year unless they are a member of the GCPP, or
another program determined by the Minister for the Environment,
Heritage and the Arts.
Comparison of key features of new law and current law
|New law |Current law |
|Businesses will be able |After the termination of |
|to claim their fuel tax |the GCPP on 30 June 2009,|
|credit entitlement |businesses' fuel tax |
|including for amounts |credits will be capped at|
|more than $3 million in a|$3 million in a financial|
|financial year. |year regardless of their |
| |fuel tax credit |
| |entitlement. |
Detailed explanation of new law
394. This measure removes the provision in Division 45 of the Fuel Tax
Act 2006 that specifies that businesses may not claim more
than $3 million of fuel tax credits in a financial year unless they
are a member of the GCPP, or another program determined by the
Minister for the Environment, Heritage and the Arts.
395. Currently under the Act, businesses which are not a member of the
GCPP (and consequently not able to claim their fuel tax credit
entitlements that are in excess of $3 million), can join the GCPP
within four years and make a decreasing adjustment to account for
these credits. From 1 July 2009 these businesses will be unable to
join the GCPP and therefore, to enable them to make a decreasing
adjustment for credits prior to 1 July 2009, Part 3 of Schedule 7
deems businesses not a member of the GCPP to be a member of the
GCPP immediately prior to its termination.
396. Under section 105-55 in Schedule 1 to the Taxation Administration
Act 1953 (TAA 1953), businesses will then have four years to make
this adjustment - which will remain an adjustment for the June 2009
tax period. It will not matter whether or not the taxpayer has
already claimed the original fuel tax credits, as subsections 45-
5(1) and 65-5(5) of the Fuel Tax Act 2006 will continue to apply to
those credits.
1.
Bill's Mining Company has monthly tax periods and has fuel
tax credit entitlements. Bill's Mining Company's fuel tax
credits for the financial year ending 30 June 2009 totals
$2,960,000. Bill's Mining Company is not a member of the
GCPP.
In September 2009 Bill's Mining Company becomes aware it is
entitled to half a fuel tax credit entitlement for taxable
fuel it acquires for use in its light vehicles used on its
mining site. These entitlements arise in the financial year
ending June 2009 and totals $100,000. Bill's Mining
Company's fuel tax credit entitlements for the financial
year exceed $3 million by $60,000.
Division 45 of the Fuel Tax Act 2006 continues to apply to
the $60,000 in fuel tax credit entitlements that are in
excess of the $3 million. Bill's Mining Company must become
a member of the GCPP to claim the fuel tax credits as a
decreasing fuel tax adjustment.
Under the amendments Bill's Mining Company is deemed to be a
member of the GCPP as at 30 June 2009.
Bill's Mining Company will therefore have a decreasing fuel
tax adjustment for the $60,000 in fuel tax credit
entitlements. The adjustment is attributable to the tax
period ending 30 June 2009.
Under section 105-55 in Schedule 1 to the TAA 1953 Bill's
Mining Company will have four years from the end of the tax
period ending 30 June 2009 to claim the fuel tax credit
entitlements to the tax period.
Application and transitional provisions
397. Application provisions are outlined in paragraphs 7.7 and 7.8.
Consequential amendments
398. As well as the amendments to remove Division 45 and references to
Division 45 of the Fuel Tax Act 2006, minor amendments are required
to Schedule 3 to the Fuel Tax (Consequential and transitional
Provisions) Act 2006. [Schedule 7, Part 2]
Do not remove section break.
Outline of chapter
399. Schedule 8 to this Bill amends the Income Tax Assessment Act 1997
(ITAA 1997) to provide an exemption from tax for the Clean-up and
Restoration Grants paid to small businesses and primary producers
affected by the Victorian bushfires.
Context of amendments
400. On 18 February 2009, the Australian Government, in conjunction with
the Victorian Government, announced a $51 million package to assist
small businesses and primary producers affected by the Victorian
bushfires.
401. This package includes a $5,000 Clean-up and Restoration Grant,
which can be increased up to $25,000 in cases where the applicant
has suffered significant damage.
402. Generally, such grants are treated as assessable income under the
income tax law. Expenses related to the carrying on of a business
(ie, those funded by using the grant) would generally be
deductible.
Detailed explanation of new law
403. This measure defines the Clean-up and Restoration Grants as non-
assessable non-exempt income. This approach ensures that the grant
is exempt from tax, while avoiding interactions with other areas of
tax law. [Schedule 8, item 2]
404. While the Australian and Victorian Governments have announced a
number of measures to assist both individuals and businesses to
recover from the Victorian bushfires, this measure only applies to
the Clean-up and Restoration Grants.
Consequential amendments
405. The table in section 11-55 of the ITAA 1997 is amended to add the
Clean-up and Restoration Grants to the list of payments that are
non-assessable non-exempt income. [Schedule 8, item 1]
406. Given the short period for which the grants would be paid, a
sunsetting clause is included to repeal this measure with effect
from 1 July 2011. [Schedule 8, items 3 and 4]
Application and transitional provisions
407. This measure applies to grants paid in the 2008-09 and 2009-10
income years. [Schedule 8, item 5]
Index
Schedule 1: Tax treatment of payments under financial claims scheme
|Bill reference |Paragraph |
| |number |
|Items 1 and 30, sections 16AHA of the |1.91 |
|Banking Act and 62ZZKA of the Insurance Act | |
|Items 1 and 30, subsections 16AHA(1) of the |1.93 |
|Banking Act and 62ZZKA(1) of the Insurance | |
|Act | |
|Items 1 and 30, subsections 16AHA(2) of the |1.95, 1.97 |
|Banking Act and 62ZZKA(2) of the | |
|Insurance Act | |
|Items 1 and 30, subsections 16AHA(3) of the |1.101, 1.102 |
|Banking Act and 62ZZKA(3) of the | |
|Insurance Act | |
|Items 1 and 30, subsections 16AHA(4) and (5)|1.99 |
|of the Banking Act and 62ZZKA(4) and (5) of | |
|the Insurance Act | |
|Items 2 and 31 |1.130 |
|Item 3, paragraphs 16AK(4)(ea) and (eb) of |1.105 |
|the Banking Act | |
|Item 8, subsection 128A(4) of the FHSA Act |1.88 |
|Item 9, subsection 128A(2) of the FHSA Act |1.83 |
|Item 9, subsection 128A(3) of the FHSA Act |1.84 |
|Item 9, subsection 128A(4) of the FHSA Act |1.87 |
|Item 9, subsection 128A(5) of the FHSA Act |1.89 |
|Item 9, subsection 128A(6) of the FHSA Act |1.90 |
|Item 10 |1.129 |
|Items 11 and 12, subsections 393-15(3) and |1.135 |
|(4) of Schedule 2G to the ITAA 1936 | |
|Items 12 and 13, section 393-25 of Schedule |1.136 |
|2G to the ITAA 1936 | |
|Item 15, subsection 393-80(1) in Schedule 2G|1.62, 1.63 |
|to the ITAA 1936 | |
|Item 15, subsection 393-80(2) in Schedule 2G|1.64 |
|to the ITAA 1936 | |
|Item 15, subsection 393-80(3) in Schedule 2G|1.65 |
|to the ITAA 1936 | |
|Item 15, subsection 393-80(4) in Schedule 2G|1.66 |
|to the ITAA 1936 | |
|Item 15, subsection 393-80(6) in Schedule 2G|Example 1.5 |
|to the ITAA 1936 | |
|Item 15, subsection 393-80(7) in Schedule 2G|1.72 |
|to the ITAA 1936 | |
|Item 15, section 393-85 of Schedule 2G to |1.74, 1.75 |
|the ITAA 1936 | |
|Item 16 |1.126 |
|Items 17 to 19, subsections 104-10(5) and |1.61 |
|104-25(5) and section 112-97 | |
|Item 20, section 253-5 |1.52 |
|Item 20, section 253-10 |1.53 |
|Item 20, section 253-15 |1.56 |
|Item 21, subsection 306-25(1) |1.77 |
|Item 21, subsection 306-25(2) |1.79 |
|Item 21, subsections 306-25(3) and (4) |1.80 |
|Item 21, subsection 306-25(5) |1.81 |
|Subitem 22(1) |1.127 |
|Subitem 22(2) |1.128 |
|Item 26, section 322-25 |1.57 |
|Item 26, section 322-30 |1.60 |
|Items 27 and 29 |1.125 |
|Item 32, section 62ZZM |1.59 |
|Item 33, paragraphs 62ZZP(4)(da) and (db) of|1.108 |
|the Insurance Act | |
|Item 34, section 21-1 of Schedule 1 to the |1.111 |
|TAA 1953 | |
|Item 34, subsection 21-5(1) of Schedule 1 to|1.115 |
|the TAA 1953 | |
|Item 34, subsection 21-5(2) of Schedule 1 to|1.119 |
|the TAA 1953 | |
|Subitem 35(1) |1.132 |
|Subitem 35(2) |1.134 |
Schedule 2: CGT concessions for small business
|Bill reference |Paragraph |
| |number |
|Item 1, subparagraph 152-10(1)(c)(iii) |2.14 |
|Item 2, subparagraph 152-10(1)(c)(iv); and |2.18 |
|item 4, subsection 152-10(1A) | |
|Item 4, subsection 152-10(1A) |2.19 |
|Item 4, paragraphs 152-10(1A)(a) and (d) |2.20 |
|Item 4, paragraph 152-10(1A)(b) |2.22 |
|Item 4, subsection 152-10(1B) |2.24, 2.25 |
|Item 4, paragraphs 152-10(1B)(a) and (b) |2.26 |
|Item 4, paragraph 152-10(1B)(c) |2.27 |
|Item 4, paragraph 152-10(1B)(d) |2.28 |
|Item 4, paragraph 152-10(1B)(e) |2.29 |
|Item 8, paragraphs 152-40(1)(a) and (b) |2.23 |
|Items 11 and 14, subsections 152-47(1) and |2.33 |
|(2) | |
|Item 14, subsections 152-47(1) to (3) |2.42 |
|Item 14, paragraph 152-47(1)(c) |2.34 |
|Item 14, subsection 152-47(2) |2.35 |
|Item 14, subsection 152-47(3) |2.36 |
|Item 14, paragraph 152-47(4)(a) |2.44, 2.45 |
|Item 14, paragraph 152-47(4)(b) |2.46 |
|Item 14, section 152-48 |2.21, 2.30, |
| |2.48 |
|Item 14, subsection 152-48(2) |2.49, 2.54 |
|Item 14, subsection 152-48(3) |2.51, 2.52 |
|Item 14, section 152-49 |2.58 |
|Item 14, subsection 152-49(1) |2.59 |
|Item 14, subsection 152-49(2) |2.60, 2.61 |
|Item 25, paragraph 152-20(2)(a) |2.69 |
|Item 26, paragraph 152-40(4)(e) |2.73 |
|Item 26, paragraph 152-40(4)(e); and item |2.71 |
|27, subsection 152-40(4A) | |
|Item 27, paragraphs 152-40(4A)(a) and (b) |2.76 |
|Item 27, paragraph 152-40(4A)(b) |2.74, 2.75 |
|Items 30 to 32, section 152-80 |2.78 |
|Items 30 to 32, subparagraphs |2.83 |
|152-80(1)(a)(ii) and (b)(iii); and | |
|paragraph 152-80(2A)(c) | |
|Items 30 to 32, subparagraph 152-80(1)(b)(i)|2.84 |
|and paragraph 152-80(2A)(d) | |
|Item 34, subsection 152-305(1A) |2.86 |
|Item 35, subsection 152-305(4) |2.96 |
|Item 36, subsection 152-310(3) |2.87 |
|Item 36, subsection 152-310(3); and item 38,|2.102 |
|subsections 152-325(9) and (10) | |
|Item 37, subsection 152-325(1) |2.100 |
|Item 38 |2.104 |
|Item 38, subsection 152-325(10) |2.107 |
|Item 38, subsection 152-325(11) |2.103 |
|Item 39, subsection 328-110(6) |2.112 |
|Subitem 41(1) |2.115 |
|Subitems 41(2) and (3) |2.119 |
|Item 42 |2.70, 2.77 |
|Item 43 |2.85 |
|Item 44 |2.89 |
|Item 45 |2.98 |
|Item 46 |2.90, 2.108 |
|Item 47 |2.114 |
|Item 48 |2.120 |
|Subitem 48(2) |2.123 |
Schedule 3: Tax benefits and capital gains tax
|Bill reference |Paragraph |
| |number |
|Item 1, paragraph 118-37(1)(h) |3.8 |
|Item 2 |3.9 |
Schedule 4: National Urban Water and Desalination Plan
|Bill reference |Paragraph |
| |number |
|Items 1, 7 to 9 and 13 to 15 |4.34 |
|Item 2, section 13-1 |4.32 |
|Items 3 and 6 |4.33 |
|Items 4 and 5 |4.35 |
|Item 10, section 402-755 |4.10 |
|Item 10, subsection 402-760(1) |4.15 |
|Item 10, subsection 402-760(2) |4.28 |
|Item 10, subsections 402-760(6), 402-765(4) |4.21 |
|and 402-770(4) | |
|Item 10, subsection 402-765(3) |4.14 |
|Item 10, subsection 402-765(4) |4.12 |
|Item 10, section 402-770 |4.17 |
|Item 10, subsection 402-770(7) |4.19 |
|Item 10, section 402-775 |4.20 |
|Item 10, subsection 402-780(1) |4.23 |
|Item 10, subsection 402-780(2) |4.24 |
|Item 10, subsection 402-780(3) |4.25 |
|Items 11 and 12 |4.26 |
|Items 16 to 18 |4.30 |
|Item 19 |4.31 |
Schedule 5: Deductible gift recipients
|Bill reference |Paragraph |
| |number |
|Items 1, 3, 4 and 7 |5.5 |
|Items 2, 5 and 6 |5.10 |
|Items 8, 9, 11 and 12 |5.15 |
Schedule 6: ABN changes
|Bill reference |Paragraph |
| |number |
|Item 2, subsection 9(2) |6.19 |
|Item 2, subsection 9(3) |6.20 |
|Item 3, paragraph 10(1)(ca) |6.25 |
|Item 4, paragraph 10(2)(b) |6.26 |
|Item 9, paragraph 14(2)(b) |6.21 |
|Item 11, paragraph 15(3)(b) |6.22 |
|Item 11, item 2 in the table in subsection |6.23 |
|15(1) | |
|Item 17, subsection 18(4) |6.24 |
|Item 22, section 21 |6.28 |
|Item 23, paragraph 25(2)(aa) |6.30 |
|Item 27, section 29A |6.31 |
|Item 28, section 41 |6.18 |
|Item 31, section 41 |6.29 |
|Item 32 |6.66 |
|Item 33, paragraph 57(1)(a) in the Product |6.67 |
|Grants and Benefits Administration Act 2000 | |
|Item 34, paragraph 105-140(1)(a) in Schedule|6.68 |
|1 to the TAA 1953 | |
|Item 37, subsection 3(4) |6.35 |
|Item 39, section 9A |6.37 |
|Item 40, subsection 10A(1) |6.39 |
|Item 40, subsection 10A(2) |6.40 |
|Item 42, section 11A |6.41 |
|Item 43, subsection 13(1) |6.44 |
|Item 45, subsection 13(2) |6.45 |
|Item 47, item 3 in the table in |6.46 |
|subsection 15(1) | |
|Item 48, subsection 18(1A) |6.47 |
|Item 49, paragraph 18(4)(b) |6.48 |
|Item 50, subsection 19(1) |6.50 |
|Item 51, subsection 21(2) |6.49 |
|Item 54, subsection 23(3) |6.51 |
|Item 55, subsection 25(3) |6.42 |
|Item 55, subsection 25(4) |6.43 |
|Item 56, paragraph 29A(1)(b) |6.52 |
|Item 57, paragraph 30(3)(e) |6.53 |
Schedule 7: Fuel Tax
|Bill reference |Paragraph |
| |number |
|Part 2 |7.10 |
Schedule 8: Government grants for businesses in relation to the 2009
Victorian bushfires
|Bill reference |Paragraph |
| |number |
|Item 1 |8.7 |
|Item 2 |8.5 |
|Items 3 and 4 |8.8 |
|Item 5 |8.9 |