Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009-2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TAX LAWS AMENDMENT (2010 MEASURES No. 2) BILL 2010
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 Improving fairness and integrity in the tax system:
distributions to entities connected with a private company 7
Chapter 2 Extending the tax file number withholding arrangements to
closely held trusts, including family trusts 35
Chapter 3 Income tax treatment of the HECS-HELP benefit 59
Chapter 4 Deductible gift recipients 61
Chapter 5 Income tax exemption: Global Carbon Capture and Storage
Institute Limited 63
Chapter 6 Repeal of certain unlimited periods for amending assessments
65
Index 73
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|ATO |Australian Taxation Office |
|BAS |business activity statement |
|Commissioner |Commissioner of Taxation |
|DGR |deductible gift recipient |
|FBTAA 1986 |Fringe Benefits Tax |
| |Assessment Act 1986 |
|HECS-HELP benefit |Higher Education Contribution|
| |Scheme-Higher Education Loan |
| |Programme benefit |
|ITAA 1936 |Income Tax Assessment Act |
| |1936 |
|ITAA 1997 |Income Tax Assessment Act |
| |1997 |
|PAYG |pay as you go |
|TAA 1953 |Taxation Administration Act |
| |1953 |
|TFN |tax file number |
|the Institute |Global Carbon Capture and |
| |Storage Institute Limited |
|the Review |Review of Unlimited Amendment|
| |Periods in the Income Tax |
| |Laws |
General outline and financial impact
Improving fairness and integrity in the tax system: distributions to
entities connected with a private company
Schedule 1 to this Bill amends the non-commercial loan rules in
Division 7A of the Income Tax Assessment Act 1936 to prevent a
shareholder of a private company (or an associate of the
shareholder) accessing tax-free dividends from the provision of
company assets, for less than their market value.
Other technical amendments have also been made to strengthen the
non-commercial loan rules to ensure that they operate in accordance
with their original policy intent and cannot be circumvented by the
use of a closely held corporate limited partnership or interposed
entities.
Date of effect: This measure applies from 1 July 2009.
Proposal announced: This measure was announced jointly in the
Treasurer's and the then Assistant Treasurer and Minister for
Competition Policy and Consumer Affairs' Media Release No. 067 of
12 May 2009.
Financial impact: This measure will have the following revenue
implications:
|2009-10 |2010-11 |2011-12 |2012-13 |
|Nil |$10m |$10m |$10m |
Compliance cost impact: Low. This measure will affect only a
small proportion of individuals and businesses. There is a low
ongoing compliance cost impact and a low transitional impact,
reflecting the need for some taxpayers to be aware of the
amendment.
Extending the tax file number withholding arrangements to closely held
trusts, including family trusts
Schedule 2 to this Bill amends the Income Tax Assessment Act 1936,
the Income Tax Assessment Act 1997 and the Taxation Administration
Act 1953 to extend the existing arrangements for tax file number
(TFN) withholding to cover closely held trusts, including family
trusts. The information collected by the Australian Taxation
Office (ATO) under these amendments will facilitate data-matching
and allow the ATO to check whether the assessable income of
beneficiaries of these trusts correctly includes their share of the
net income of the trust.
Date of effect: This measure applies from 1 July 2010.
Proposal announced: This measure was announced jointly in the
Treasurer's and the then Assistant Treasurer and Minister for
Competition Policy and Consumer Affairs' Media Release No. 067 of
12 May 2009.
Financial impact: This measure will have the following revenue
implications:
|2009-10 |2010-11 |2011-12 |2012-13 |
|- |$50m |$50m |$50m |
Compliance cost impact: Low. Trustees will be required to obtain
the beneficiary's TFN or withhold the required amount under the TFN
withholding arrangements. Additionally, there will be some
associated reporting requirements.
Beneficiaries that do not have a TFN need to apply for one.
Income tax treatment of the HECS-HELP benefit
Schedule 3 to this Bill amends the Income Tax Assessment Act 1997
to exempt from income tax the Higher Education Contribution Scheme-
Higher Education Loan Programme benefit (HECS-HELP benefit).
The HECS-HELP benefit was an initiative first introduced in the
2008-09 Budget. The benefit gives eligible recipients a reduction
in their compulsory HECS debt repayment and/or their HELP debt
repayment or, in some cases where a repayment is not required due
to low income, a direct reduction in their HELP debt.
Date of effect: This measure applies to assessments for the 2008-
09 income year and later income years.
Proposal announced: Not previously announced.
Financial impact: Nil.
Compliance cost impact: Negligible.
Deductible gift recipients
Schedule 4 to this Bill amends the Income Tax Assessment Act 1997
to update the list of deductible gift recipients (DGRs) to include
two new entities, and extend the period for which another DGR may
collect deductible gifts.
Date of effect: The changes generally apply to gifts received
after the day the organisation is notified of its specific listing.
Proposal announced: The listing of the Bali Peace Park Association
Inc. was announced in the Assistant Treasurer's Media Release No.
115 of 17 December 2009. The listing of the other organisation has
not previously been announced.
Financial impact: This measure will have the following revenue
implications:
|2009-10 |2010-11 |2011-12 |2012-13 |
|-$0.098m |-$0.687m |-$0.363m |Nil |
Compliance cost impact: Nil.
Income tax exemption: Global Carbon Capture and Storage Institute Limited
Schedule 5 to this Bill amends the Income Tax Assessment Act 1997
to make the Global Carbon Capture and Storage Institute Limited
(the Institute) income tax exempt for a four-year period.
The central objective of the Institute is to accelerate the
commercial deployment of carbon capture and storage projects to
contribute to reducing carbon dioxide emissions.
The information and expertise developed by the Institute is to be
disseminated broadly and globally to the benefit of both the
Australian and global carbon capture and storage communities.
Date of effect: The exemption applies to income received on or
after 1 July 2009 and before 1 July 2013.
Proposal announced: This measure was announced on 2 November 2009
in the 2009-10 Mid-Year Economic and Fiscal Outlook.
Financial impact: Nil.
Compliance cost impact: Low.
Repeal of certain unlimited periods for amending assessments
Schedule 6 to this Bill amends various taxation laws to repeal over
100 unlimited amendment periods. As result, a number of provisions
which provide the Commissioner of Taxation with an indefinite time
to amend taxpayers' assessments are replaced with the existing
amendment provisions that have certain finite periods. The removal
of these unlimited amendment periods will improve certainty for
taxpayers in their taxation affairs and contribute to reducing the
volume of unnecessary provisions in the taxation laws.
Date of effect: This measure removes the specified unlimited
amendment periods the day after this Bill receives Royal Assent.
Proposal announced: This measure was announced in the then
Assistant Treasurer and Minister for Competition Policy and
Consumer Affairs' Media Release No. 048 of 12 May 2009.
Financial impact: Unquantifiable, but thought to be minimal (less
than $1 million per year).
Compliance cost impact: Nil.
Chapter 1
Improving fairness and integrity in the tax system: distributions to
entities connected with a private company
Outline of chapter
1. Schedule 1 to this Bill amends the non-commercial loan rules in
Division 7A of the Income Tax Assessment Act 1936 (ITAA 1936) to
prevent a shareholder of a private company (or an associate of the
shareholder) accessing tax-free dividends through the use of
company assets, for less than their market value.
2. Other technical amendments are also made to strengthen the non-
commercial loan rules to ensure that they operate in accordance
with their original policy intent and cannot be circumvented by the
use of a corporate limited partnership.
3. All of the legislative references in this chapter relate to the
ITAA 1936 unless otherwise specified.
Context of amendments
4. The non-commercial loan rules in Division 7A are integrity
provisions that treat payments, loans and other credits by private
companies to shareholders (or their associates) as assessable
dividends (unless they come within specified exclusions), to the
extent that there are realised or unrealised profits in the
company. Division 7A also ensures that an amount may be included
in the assessable income of a shareholder (or their associate) if a
private company has an unpaid present entitlement to income of a
trust and the trustee makes a payment or loan to, or forgives a
debt of, the shareholder of the private company (or their
associate).
5. The definition of 'payment' for the purposes of Division 7A is
contained in subsection 109C(3). A payment includes:
. a payment to the extent that it is to the entity, on
behalf of the entity, or for the benefit of the entity;
and
. a credit of an amount to the extent that it is:
- to the entity; or
- on behalf of the entity; or
- for the benefit of the entity; and
. a transfer of property to the entity.
6. For a payment to arise under a 'transfer of property', the
ownership of an asset needs to pass from the private company to the
shareholder (or their associate), or there must be a lease of real
property in existence. As such, Division 7A does not cover the
mere use of an asset, or licence or right to use an asset.
7. As part of the 2009-10 Budget, the Government announced that it
would tighten the non-commercial loan rules to improve fairness and
integrity in the tax law, by ensuring that benefits provided by a
private company to a shareholder (or their associate), through the
use of company assets, such as holiday houses, cars and other
luxury items, at less than market value would be taxable. The
Government also announced that it would make a number of other
technical amendments to Division 7A to ensure that it operates in
accordance with its original policy intent.
8. These amendments treat arrangements where a private company has
provided an asset to a shareholder (or their associate) for their
use (other than a transfer of property, which is already covered by
paragraph 109C(3)(c) of the ITAA 1936) as a payment for the
purposes of Division 7A. These changes ensure that Division 7A
cannot be circumvented by the provision of an asset for use. The
amendments in subsection 109CA(1) do not impact upon the operation
of any of the existing payments in subsection 109C(3).
9. After consulting with small business and farming communities, the
Assistant Treasurer announced changes to the measure via Press
Release No. 051 of 14 September 2009. These changes included the
introduction of an otherwise deductible rule and an exception for
the use of certain residences, in addition to the exception for the
minor use of certain company assets.
10. The Government has also included a provision that excepts the use
of main residences that were purchased prior to 1 July 2009 as part
of these amendments. This exception ensures that taxpayers who
used a company structure to purchase a home, are not impacted by
these amendments (subject to a company continuity of ownership
test). These exceptions only apply to payments that arise because
of the operation of section 109CA. That is, the exception applies
to the use of certain dwellings, but not where there is a transfer
of property within the meaning of paragraph 109C(3)(c).
11. In addition to the changes made to the definition of payment, these
amendments also correct a number of other technical deficiencies
that provide taxpayers with the opportunity to structure their
affairs to circumvent the application of Division 7A.
Summary of new law
12. When a private company provides an asset to a shareholder, or an
associate of the shareholder for use (other than a transfer of
property which is covered by paragraph 109C(3)(c) of the
ITAA 1936), a payment for the purposes of Division 7A will arise.
13. There are three exceptions to this treatment. They are for:
. the minor use of company assets;
. certain payments that would otherwise be allowable as a
once-only deduction to the user of the asset; and
. the use of certain residences.
14. Broadly, Subdivision EA of Division 7A operates where a private
company has an unpaid present entitlement to income of a trust and
the trust makes a payment, loan or forgiveness of debt to a
shareholder of the private company or an associate of the
shareholder in particular circumstances. These amendments to
Subdivision EA ensure that the operation of the Subdivision cannot
be circumvented by interposing an entity between either the trust
making a payment or loan to a shareholder (or their associate) or
between a trust and the private company that holds an unpaid
present entitlement to an amount from the net income of the trust
15. Other technical amendments are also made to strengthen the non-
commercial loan rules to ensure that they operate in accordance
with their original policy intent and cannot be circumvented by the
use of a corporate limited partnership, which is a partnership
taxed like a company.
16. Amendments are also made to put beyond doubt that Division 7A
applies to arrangements that involve a non-resident private company
making a payment, loan or forgiveness of debt to a resident
shareholder (or their associate).
Comparison of key features of new law and current law
|New law |Current law |
|Division 7A applies to |Section 94N excludes |
|closely held corporate |corporate limited |
|limited partnerships in |partnerships from the |
|the same way as it |operation of Division 7A.|
|applies to private | |
|companies. | |
|The meaning of 'payment' |The meaning of 'payment' |
|is extended to include |in subsection 109C(3) |
|the provision of an asset|includes a transfer of |
|for use by an entity |property to an entity, |
|(other than a transfer of|which entails the |
|property within the |ownership of an asset |
|meaning of |passing to a shareholder |
|paragraph 109C(3)(c)). |or their associate, and a|
|Not included in this |lease of real property to|
|extended definition of |an entity. |
|'payment' are the minor | |
|use of company assets, | |
|certain payments that | |
|would otherwise be | |
|allowable as once-only | |
|deductions and the use of| |
|certain residences. | |
|A payment made by an |A payment made by an |
|entity in relation to a |entity in relation to a |
|loan from a private |loan from a private |
|company must not be taken|company must not be taken|
|into account in |into account in |
|determining whether a |determining whether a |
|loan has been repaid in |loan has been repaid in |
|whole or in part in the |whole or in part in the |
|year in which it was |year in which it was |
|made, or in determining |made, or in determining |
|whether a minimum yearly |whether a minimum yearly |
|repayment has been made, |repayment has been made, |
|if a reasonable person |if a reasonable person |
|would conclude that: |would conclude that when |
|when the payment was made|the payment was made the |
|the entity intended to |entity intended to obtain|
|obtain a loan or loans |a loan from the private |
|from the private company |company of an amount |
|of an amount similar to |similar to, or larger |
|or larger than the |than, the payment. |
|payment; or | |
|in order to make the | |
|payment the entity | |
|obtained, before the | |
|payment was made, a loan | |
|or loans from the private| |
|company of a total amount| |
|similar to, or larger | |
|than, the payment. | |
|The requirement under |Subdivision EA allows an |
|paragraph 109XA(1)(b) |amount to be included in |
|does not apply where a |an entity's assessable |
|shareholder of a |income if a trustee makes|
|corporate beneficiary of |a payment, and that |
|a trust (or their |payment is a discharge |
|associate) receives a |of, or a reduction in, a |
|payment due to the |present entitlement of a |
|application of |shareholder (or their |
|subsection 109XA(1) and |associate) that is wholly|
|all or part of the amount|or partly attributable to|
|is subsequently loaned |an unrealised gain and a |
|back to the trust. |company has an unpaid |
|Any loan repayments made |present entitlement to |
|by the trustee to the |the income of the trust. |
|shareholder (or their |Where an arrangement |
|associate) in subsequent |involves an unrealised |
|years may then give rise |gain and the repayment of|
|to a deemed dividend for |a loan from a shareholder|
|the purposes of |(or their associate) to |
|Division 7A, where there |the trust, Subdivision EA|
|is an unpaid present |may be ineffective due to|
|entitlement. |the operation of |
| |paragraph 109XA(1)(b). |
|A company or trust |Only a company |
|withholding an amount |withholding an amount |
|from an employee's salary|from an employee's salary|
|or bonus and offsetting |or bonus and offsetting |
|these amounts against the|these amounts against the|
|loan can be a repayment |loan can be a repayment |
|by an entity, in relation|by an entity, in relation|
|to a loan. |to a loan. |
|Where a loan that has |Where a loan that has |
|previously been included |previously been included |
|in the assessable income |in the assessable income |
|of a shareholder of a |of a shareholder of a |
|private company (or their|private company (or their|
|associate) under |associate) under |
|section 109XB is forgiven|section 109XB is forgiven|
|by the trustee, the |by the trustee, it may |
|forgiven amount does not |give rise to a deemed |
|give rise to a deemed |dividend. |
|dividend. | |
|Where an entity is |An entity interposed |
|interposed between a |between a trust and a |
|trust and the shareholder|target entity (that is, a|
|of a private company (or |shareholder of a private |
|their associate), the |company or their |
|trust will be treated as |associate) may circumvent|
|having directly paid or |the operation of |
|loaned an amount to the |Subdivision EA of |
|shareholder of the |Division 7A. |
|private company (or their| |
|associate) for the | |
|purposes of Subdivision | |
|EA of Division 7A, where | |
|a reasonable person would| |
|conclude that the trustee| |
|made the payment or loan | |
|as part of an arrangement| |
|involving the target | |
|entity. | |
|If a reasonable person |When a private company is|
|would conclude that a |presently entitled to an |
|private company is |amount from the net |
|entitled to an amount |income of a trust estate |
|from a trust estate that |that is interposed |
|is interposed between the|between the company and a|
|private company and a |trust making a payment, |
|trust (target trust) |loan or forgiveness of a |
|making a payment, loan or|debt to a shareholder of |
|forgiveness of debt to a |the private company (or |
|shareholder of the |their associate) |
|private company (or their|Subdivision EA may not |
|associate) as part of an |apply. |
|arrangement involving | |
|that target trust, the | |
|private company is taken | |
|to be entitled to an | |
|amount from the net | |
|income of the target | |
|trust. | |
|Any amounts that result |Payments under section |
|in a payment because of |109C or a forgiveness of |
|section 109C or a |debt under section 109F |
|forgiveness of debt |are not currently |
|because of section 109F |recognised in the |
|are recognised in the |distributable surplus |
|distributable surplus |formula in section 109Y. |
|formula in section 109Y. | |
|Amounts that are included|Amounts included in the |
|in the assessable income |assessable income of a |
|of a shareholder of a |shareholder of a private |
|private company (or their|company (or their |
|associate) under section |associate) under section |
|109XB, in an earlier year|109XB, in an earlier year|
|of income, are reflected |of income, are not |
|in the non-commercial |reflected in the |
|loans component of the |distributable surplus |
|distributable surplus |formula in section 109Y. |
|formula in section 109Y. | |
|If a loan from a trustee |If a loan from a trustee |
|to a shareholder of a |to a shareholder of a |
|private company (or their|private company (or their|
|associate) is included in|associate) is included in|
|their assessable income |their assessable income |
|under section 109XB, and |under section 109XB and a|
|a later dividend is |later dividend is |
|received by the |received by the |
|shareholder (or their |shareholder (or their |
|associate) and offset |associate), that dividend|
|against that loan, the |cannot be offset against |
|offset amount is excluded|the loan from the |
|from their assessable |trustee. |
|income to the extent that| |
|the dividend is | |
|unfranked. | |
|The law will put beyond |No equivalent. |
|doubt that Division 7A | |
|applies to arrangements | |
|that involve a | |
|non-resident private | |
|company making a payment,| |
|loan or forgiveness of | |
|debt to a resident | |
|shareholder (or their | |
|associate). | |
Detailed explanation of new law
Payment that arises from the provision of an asset for use (other than a
transfer of property)
17. The definition of 'payment' in section 109C does not currently
extend to a number of arrangements used by private companies to
provide assets, for use, to their shareholders (or an associate of
a shareholder).
18. These amendments extend the meaning of 'payment' to include the
provision of an asset (other than a transfer of property) for use
by an entity. This extension ensures that arrangements aimed at
circumventing the operation of Division 7A, through the provision
of an asset under a licence or other right to use, are now within
the scope of Division 7A.
[Schedule 1, item 13, subsection 109CA(1)]
19. For the purposes of subsection 109CA(1), the payment occurs as the
use occurs. [Schedule 1, item 13, paragraph 109CA(2)(a)]
20. A payment may also occur when the asset is available for use to the
exclusion of the company. As such, it does not matter when the
right to use the asset is granted.
[Schedule 1, item 13, paragraph 109CA(2)(b)]
1.
On 7 October 2006, Ngo Pty Ltd leases a car for five years
and then provides the car to a shareholder (Barry) to use
for the duration of that period. Barry pays Ngo Pty Ltd
$5,000 per year for the use of the car. After 1 July 2009,
the provision of this car, for use, will be a payment under
Division 7A. The payment will occur on 1 July 2009 when the
car is first available for Barry's use in the 2009-10 income
year. It does not matter that the agreement was entered
into in 2006 because the provision of the car continues in
the 2009-10 income year. Because Barry has the right to use
the car for the whole of the 2009-10 income year the value
of the payment for the 2009-10 income year is based on 12
months of use. It does not matter that the car is not
driven ('used') by Barry every day during the income year.
21. An asset may be available for the shareholder's use without a
formal agreement. In addition, an asset may be available for use
even though there is no actual use.
1.
Brian is a shareholder of a private company that owns a
luxury yacht. He does not have a formal agreement with the
company in relation to the yacht, however, he takes the
yacht out every second weekend. Brian keeps the yacht at
the company's business premises, but takes the key home.
Brian stores several personal items on the yacht.
Brian's fortnightly use of the yacht is a payment under
Division 7A. The availability of the yacht for Brian's use
is also subject to Division 7A because the yacht is not
readily available for use by the company. The company would
need to arrange with Brian to get the key and for the
removal of Brian's personal items before using the yacht.
That is, the asset is available for Brian's use to the
exclusion of the company.
2.
Marina is a shareholder of a private company that owns a
city apartment. The apartment is generally available for
rent. However, Marina asks the company not to rent the
apartment out for a week so that she and her family can use
the apartment over a long weekend. Marina's use of the
apartment is a payment for the purposes of section 109CA.
22. If there is merely a general entitlement to use the company's
assets, an asset is not available for a shareholder's use to the
exclusion of the company.
1.
Peter is a shareholder of a private company that owns five
cars for company use. Shareholders and their associates
have general permission to use the cars on weekends if they
are not being used for company business. Peter regularly
takes one of the cars home.
Peter's use of the car that he takes home will be subject to
Division 7A. This will include driving the car (actual use)
and the availability of the car for his use to the exclusion
of the company, such as when it is parked at home, or at a
restaurant that Peter is visiting.
Although Peter may have general permission to use all five
of the cars, he does not use all of them for the purposes of
Division 7A. The four cars that Peter leaves at the company
premises are available for the company to loan to another
shareholder, employee, customer, or other party. That is,
these cars are not available to Peter to the exclusion of
the company.
23. Where an asset is used by more than one entity simultaneously, it
is necessary to consider whether the use of that asset should be
attributed to a particular entity or apportioned.
1.
Clare and her husband Martin are shareholders of a private
company that owns a holiday house. Clare, Martin and their
infant son Phoenix have a one-month holiday at the house
over summer. They do not pay for the use of the holiday
home.
Although Phoenix is an associate of Clare and Martin, the
provision of the use of the asset is attributable to Clare
and Martin. This is the case particularly because Phoenix
has no power to enter into a contract with the company and
because of his dependence on Clare and Martin. The company
is not providing the holiday house to Phoenix for his use,
and his incidental use of the house is secondary to that of
Clare and Martin.
The use of the holiday house (at market value rates) can
therefore be attributed to Martin and Clare in equal shares
on the basis that they use the holiday house equally.
2.
Hayden is a shareholder of a private company. Hayden leases
a car from the private company for 12 months for a nominal
amount of $10,000. Hayden uses the car to drive his
children to school in the morning. Hayden's wife (who is
also a shareholder) sometimes drives the car on weekends.
The use of the car is attributable to Hayden's relationship
with the company. The use of the car by Hayden's spouse and
his children is secondary to his right to use the asset and
is not provided by the company for their use, but Hayden's.
Hayden is assessed on the market value of the use of the car
for the full 12 months, less actual consideration paid.
Valuation of a payment that arises from the provision of an asset for use
(other than a transfer of property)
24. The amount of a payment is the amount that would have been paid for
the provision of the asset by parties dealing at arm's length less
any consideration actually paid. The amount of the payment is nil
if the consideration paid equals or exceeds the amount that would
have been paid by parties dealing at arm's length. [Schedule 1,
item 13, subsections 109CA(10) and (11)]
1.
Matt is a shareholder of a private company that owns a
holiday home. In the 2009-10 income year, Matt uses the
holiday home for one week for which he pays the company 50
per cent less than the market value rent for the property.
The market value rent for the property is $1,000 a week.
The company has therefore made a payment to Matt of an
amount of $500, which will be assessable to Matt under
Division 7A, subject to the company having a distributable
surplus.
25. Exceptions to a payment that arises from the provision of an asset
for use (other than a transfer of property)
26. The use of an asset will not be a payment under section 109CA if it
is covered by one of the exceptions. The exceptions are for the
minor use of certain company assets, certain payments that would
otherwise be allowable as a once-only deduction and the use of
certain residences. The exceptions only apply to the operation of
section 109CA and do not apply more broadly to the operation of
Division 7A. For example, a transfer of a property to shareholder
involving a main residence would still be a payment under
paragraph 109C(3)(c) of Division 7A, while the mere use of a main
residence may not be a payment.
Minor benefits
27. Subsection 109CA(4) provides that an amount will not constitute a
payment if the provision of the asset would, if done in respect of
the employment of an employee, be a minor benefit under section 58P
of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986).
28. Section 58P of the FBTAA 1986 sets out when a minor benefit
provided in, or in respect of a year of tax, is an exempt benefit
and hence not subject to fringe benefits tax. Paragraph 58P(1)(e)
of the FBTAA 1986 provides that the notional taxable value of a
minor benefit in relation to the current year of tax must be less
than $300. In addition paragraph 58P(1)(f) of the FBTAA 1986 sets
out a number of other matters such as the infrequency and
irregularity of the benefit which may lead to a conclusion that it
would be unreasonable to treat the minor benefit as a fringe
benefit for the current year of tax.
29. This exception will reduce compliance costs for taxpayers as they
will not have to treat minor payments to shareholders of a private
company (or their associates) that arise under new
subsection 109CA(1), as payments that may give rise to a deemed
dividend. [Schedule 1, item 13, subsection 109CA(4)]
1.
John is a shareholder of a private company that hires out
trailers for $250 per day. The company owns a number of
trailers, one of which the company made available to John
during the 2009-10 income year to move furniture and other
household items.
John is not an employee of the company. However, because
the value of his one-off use of the trailer in the income
year is less than $300 and his use of the trailer would be
treated as a minor benefit under section 58P of the
FBTAA 1986 if he was an employee, the use of the trailer
does not constitute a payment under Division 7A.
Otherwise deductible payments
30. Subsection 109CA(5) provides that if the shareholder of a private
company (or their associate) had incurred and paid expenditure in
respect of the provision of the asset and a once-only deduction
would have been allowable to the shareholder (or their associate),
subsection 109CA(1) does not apply.
31. In determining whether an amount is otherwise deductible, the
appropriate test is whether the payment for the use of the asset
would otherwise be deductible to the user of the asset, not whether
the user would be able to deduct the amount had they purchased the
asset themselves. [Schedule 1, item 13, subsection 109CA(5)]
1.
Shop Pty Ltd owns a shopping centre. Audrey is a
shareholder of Shop Pty Ltd and at various times during the
2009-10 income year she is provided with part of the
property to run a gift wrapping service. Under her
arrangement with Shop Pty Ltd, Audrey is not required to
make payments to Shop Pty Ltd for her use of that part of
the property.
Had Audrey made payments for the use of that part of the
property she would be able to deduct those payments, as they
would have been part of the expenses she incurred in running
her business. Therefore, while Audrey's use of the property
is within the scope of subsection 109CA(1), it is
disregarded, as Audrey would have otherwise been able to
deduct any payments made for the use of the property.
The exception would not operate if it was established that
Audrey had in fact a lease of real property (that is, a
transfer of property to an entity within the meaning of
paragraph 109C(3)(c)). The exception in subsection 109CA(5)
only applies to the extended meaning of payment in
subsection 109CA(1).
A dwelling owned by a private company
32. The amendments contain two separate exceptions for the provision of
certain kinds of dwellings.
33. The first exception is contained in subsection 109CA(6) and
provides an exception for the provision of a dwelling for use by a
shareholder or their associate (the entity) where that provision
would not meet the otherwise deductible rule (that is, because the
use is for private purposes). In order to qualify for the
exception certain conditions must be met. These are that:
. the entity or their associate is carrying on a business;
. the entity or their associate uses or is granted or has a
lease, licence or other right to use land, water or a
building for the purpose of carrying on the business; and
. the provision of the dwelling to the entity is connected
with that use or with that lease, licence or other right
to use the land, water or building to carry on the
business.
34. It is also necessary for there to be a connection between the
provision of the dwelling and that use, lease, licence or other
right to use land, water or building in carrying on a business,
even if the business is being carried on by an entity other than
the entity living in the dwelling. [Schedule
1, item 13, subsection 109CA(6)]
1.
Aaron and Liz Jones are shareholders in a private company
called Farm Pty Ltd and beneficiaries of the Jones Family
Trust. Farm Pty Ltd owns a property called Greenacre on
which the Jones Family Trust runs a farming business.
For the 2009-10 income year Aaron and Liz live in a dwelling
on Greenacre. Aaron and Liz do not make payments to Farm
Pty Ltd for the use of this dwelling.
As this use is for private purposes, it does not come within
the otherwise deductible exception in subsection 109CA(5).
However, as their use of the dwelling is in connection with
the Jones Family Trust using Greenacre to carry on a
business, the provision of the dwelling by Farm Pty Ltd is
disregarded for the purposes of subsection 109CA(1).
Liz's brother Tom who is also a shareholder of Farm Pty Ltd
does the accounts for the Jones Family Trust from his
harbour side dwelling in Sydney. Farm Pty Ltd also owns
this dwelling. Tom's use of the harbour side dwelling is
not connected to the use of the land, water or building on
Greenacre and therefore is not eligible for this exception.
2.
Rebecca is a shareholder of a private company called Health
Pty Ltd. She is also a doctor who runs a surgery. Rebecca
runs her surgery in a house owned by Health Pty Ltd under a
licence agreement. The surgery takes up approximately 40
per cent of the area of the house. Health Pty Ltd has also
granted Rebecca a right to use the remaining 60 per cent of
the house to live in. She does not pay Health Pty Ltd under
either arrangement.
Rebecca's licence to use the part of the house to run her
surgery is not a payment for the purposes of
subsection 109CA(1). This is because she would have been
allowed a once-only deduction if she had made a payment for
that use.
Rebecca's use of the remainder of the house is also exempt
due to the operation of subsection 109CA(6) as she is
carrying on a business, using a building that she has been
granted a licence to use and there is a connection between
her carrying on the business and her using the remainder of
the house as her dwelling.
3.
Ernie is a shareholder of a private company called Electric
Co Pty Ltd. Electric Co Pty Ltd owns the dwelling that
Ernie lives in. Ernie stores his tools at the dwelling, but
does not otherwise use the land or building in carrying on
his business. Ernie's use of the dwelling is not exempt
under subsection 109CA(6) because he does not use land,
water or buildings in carrying on his business. However,
the dwelling may be an exempt main residence under
subsection 109CA(7).
35. The second residence exception is for the provision of a main
residence and is contained in subsection 109CA(7). This exception
relates to dwellings that are the main residence of the shareholder
(or their associate) of a private company, where the dwelling has
been acquired by the private company before 1 July 2009. The
exception is subject to a continuity of ownership test so that the
exception is not carried over if the ownership of the private
company changes.
1.
Jessica is the sole shareholder of a private company called
House Pty Ltd. The sole asset owned by House Pty Ltd is a
dwelling that the private company acquired in 2005. Jessica
currently uses this dwelling as her main residence. As long
as there is no substantial change in ownership of House Pty
Ltd the provision of the dwelling by House Pty Ltd, for
Jessica's use, is disregarded for the purposes of
subsection 109CA(1).
However, in 2012, Jessica sells her ownership interest in
House Pty Ltd to Gaurav. The sale of her interest in House
Pty Ltd represents a change in the ownership of the company
under section 165-12 of the Income Tax Assessment Act 1997.
Hence, if Gaurav seeks to use the dwelling owned by House
Pty Ltd as his main residence, without paying market value
rates, his use of the house will be treated as a payment for
the purposes of subsection 109CA(1).
Gaurav will then be liable to pay tax if the payment for the
use of the house is not converted to a loan and either
repaid before the lodgment day of the private company, or a
loan agreement complying with Division 7A requirements is
made (and subject to the private company having a
distributable surplus).
Closely held corporate limited partnerships
36. Division 7A does not currently apply to corporate limited
partnerships due to the operation of section 94N, which states that
a reference to a private company in relation to the year of income
does not include a reference to a corporate limited partnership.
37. Under these amendments, corporate limited partnerships that satisfy
the requirements outlined in section 109BB are subject to the
operation of Division 7A. Section 109BB sets out that a corporate
limited partnership will be considered to be closely held for the
purposes of Division 7A where it has fewer than 50 members or an
entity has, directly or indirectly, and for the entity's own
benefit, an entitlement to a 75 per cent or greater share of the
income or capital of the partnership.
[Schedule 1, item 11, section 109BB]
1.
Kariba L.P is a limited partnership that has one general
partner and three limited partners. Kariba L.P is a
corporate limited partnership under section 94D. As Kariba
L.P has less than 50 members, it is subject to the
application of Division 7A from the 2009-10 income year.
Interposed entities
Payments and loans made by a trustee through interposed entities
38. Under Subdivision E of Division 7A, where an entity is interposed
between a private company and a shareholder or their associate
(target entity), a payment or loan from the private company is
treated as being made directly to a target entity if certain
conditions are met. There are currently no corresponding rules
that apply for the purposes of Subdivision EA, where a company has
an unpaid present entitlement to an amount from the net income of a
trust and an entity is interposed between the trust and the
shareholder or their associate (the target entity).
39. The existing Subdivision EA treats a payment or loan from a trust
to a shareholder (or associate) as a payment or loan from the
private company, if the company has an unpaid present entitlement
from the trust.
40. Under these amendments, where a corporate beneficiary has a present
entitlement to an amount from the net income of a trust estate and
the whole of that amount has not been paid, and an entity is
interposed between that trust and a target entity (the shareholder
of the private company or their associate), the trust is treated as
having directly paid or loaned an amount to the target entity for
the purposes of Division 7A. Subdivision EA then operates as if
the trustee makes a payment or loan to the target entity.
[Schedule 1, item 25, sections 109XF and 109XG]
41. Sections 109XF and 109XG set out three conditions that must be met
before a trustee is taken to have made a payment or a loan to a
target entity:
. there must be a payment or loan from the trustee to an
interposed entity;
. in circumstances where a reasonable person would conclude
that the payment or loan was made as part of an
arrangement to make a payment (paragraph 109XF(1)(b)) or
loan (paragraph 109XG(1)(b)); and
. the interposed entity, or another interposed entity, makes
a payment (paragraph 109XF(1)(c)) or loan
(paragraph 109XG(1)(c)) to the target entity.
[Schedule 1, item 25, subsections 109XF(1) and 109XG(1)]
42. Paragraphs 109XF(1)(a) and (b) and 109XG(1)(a) and (b) make
reference to both a payment and a loan to ensure that the
provisions operate in situations where a payment or loan is made to
an interposed entity and the interposed entity then makes a loan or
a payment to the target entity. The characterisation of the amount
(as a payment or loan) will depend on the nature of the transaction
between the last interposed entity and the target entity.
1.
Berry Pty Ltd has an unpaid present entitlement from
Raspberry Trust. Raspberry Trust makes a payment to
Strawberry Trust, who then makes a loan to Jane, who is a
shareholder of Berry Pty Ltd, as set out in the diagram.
The notional transaction between Raspberry Trust and Jane is
treated as a loan, because the transaction between Jane and
Strawberry Trust is a loan.
43. These amendments operate whether a single entity (the first
interposed entity) is, or multiple entities are, interposed between
the trust making the payment or loan and the target entity.
[Schedule 1, item 25, paragraphs 109XF(1)(c) and 109XG(1)(c)]
44. It does not matter whether the interposed entity makes the payment
or loan to the target entity at the same time as the first
interposed entity receives a payment or loan from the trustee. The
trustee is considered to have made the payment or loan at the time
the interposed entity makes the payment or loan to the target
entity. [Schedule 1, item 25, subsections 109XF(2) and 109XG(2)]
45. Where the interposed entity makes a payment to the target entity
the amount is treated as a payment for the purposes of
subsection 109XA(1). This means that the payment must be a
discharge, or partial discharge, of a present entitlement
attributable to an unrealised gain as required by
paragraph 109XA(1)(b). [Schedule 1, item 25, subsection 109XF(3)]
1.
On 1 March 2010, Green Pty Ltd enters into an arrangement
involving, Green Trust, Low Trust and Vicki, who is a
shareholder of Green Pty Ltd.
As part of this arrangement, the Green Trust declares a
present entitlement of $100,000 to Green Pty Ltd. The
present entitlement remains unpaid. Green Trust then loans
$100,000 to Low Trust who makes a $100,000 payment to Vicki.
The $100,000 payment to Vicki is a discharge of a present
entitlement attributable to an unrealised gain in Low Trust
(as set out in the diagram).
The effect of section 109XF is that, for the purposes of
paragraph 109XA(1)(a), Green Trust has made a payment to
Vicki.
Since the payment from Low Trust to Vicki is the discharge
of a present entitlement attributable to an unrealised gain,
paragraph 109XA(1)(b) is also satisfied.
Paragraph 109XA(1)(c) is also satisfied because Green Pty
Ltd has an unpaid present entitlement from Green Trust.
Accordingly, section 109XB will apply to bring the payment
within the scope of Division 7A.
Amount and timing of the payment or loan through interposed
entities
46. The Commissioner of Taxation (Commissioner) will determine the
value of the payment or loan made through an interposed entity
under this type of arrangement. [Schedule 1, item 25,
subsection 109XH(1)]
47. In determining this amount, the Commissioner is required to take
into account the amount that the interposed entity paid or lent to
the target entity, and how much of that amount represented
consideration payable to the target entity by the trustee or any of
the interposed entities. [Schedule
1, item 25, subsection 109XH(2)]
48. Any repayments made by the target entity to the interposed entity
will be taken into account in working out the value of the loan
under Division 7A. [Schedule 1, item 25, subsection 109XG(3)]
49. The amount determined by the Commissioner cannot exceed the amount
of the unpaid present entitlement that the private company has from
the trust. [Schedule 1, item 25, subsection 109XH(3)]
50. The time of the loan or payment is when the loan or payment is made
to the target entity by the interposed entity. [Schedule 1, item
25, subsection 109XH(4)]
Entitlements to trust income through interposed trusts
51. One of the requirements to satisfy subsections 109XA(1) and (3) is
that a private company, is or becomes, presently entitled to an
amount from the net income of a trust estate that makes the
payment, loan or debt forgiveness to the shareholder (or their
associate), and that amount has not been paid.
52. Interposing one or more trusts between the private company and the
trust that makes the payment or loan to the shareholder (or their
associate) circumvents the existing operation of Subdivision EA.
53. Under subsection 109XI(1), the private company will be treated as
having a present entitlement to an amount from the net income of
the target trust for the purposes of Division 7A, where:
. one or more trusts is interposed between a private company
and the target trust (the trust making the payment to the
shareholder of the private company or their associate);
and
. a reasonable person would conclude that the private
company is, or becomes, entitled to an amount from the net
income of the interposed trust, solely or mainly as part
of an arrangement involving an entitlement to an amount
from the target trust.
[Schedule 1, item 25, subsection 109XI(1)]
54. It does not matter whether the private company became, or becomes,
entitled to the amount from the net income of an interposed trust
at the same time the interposed trust became, or becomes, presently
entitled to an amount from the net income of the target trust.
[Schedule 1, item 25, subsection 109XI(2)]
55. The private company is taken to be, or to become, presently
entitled to an amount from the net income of the target trust at
the time the private company is, or becomes, presently entitled to
an amount from the interposed trust. [Schedule
1, item 25, subsection 109XI(7)]
56. The amount that the private company is taken to be, or to become,
entitled to from the net income of the target trust is the amount
determined by the Commissioner. It may be different to the amount
to which the interposed trust became presently entitled. [Schedule
1, item 25, subsection 109XI(4)]
57. In determining this amount, the Commissioner must have regard to
the amount the private company is entitled to from the net income
of the first interposed trust and how much of that amount the
Commissioner considers represents consideration payable to the
private company. [Schedule 1, item 25, subsection 109XI(6)]
58. For the purposes of section 109XI the amount of the present
entitlement that the private company is taken to be, or to become,
entitled to from the net income of the target trust, is limited by
the amount of the present entitlement that the interposed trust is,
or becomes, presently entitled to from the net income of the target
trust. [Schedule 1, item 25, subsection 109XI(5)]
59. A private company will not be treated as being presently entitled
to an amount if that amount is included in the assessable income of
a shareholder or their associate under another provision in
Subdivision EA. [Schedule 1, item 25, subsection 109XI(3)]
1.
Michael is a shareholder of Bennetts Pty Ltd and Bennetts
Pty Ltd is a beneficiary of Harvey Trust. In the 2009-10
income year, Michael receives a payment from the trustee of
the Wilson Trust, which is attributable to an unrealised
gain. He receives this payment because of his shareholding
in Bennetts Pty Ltd. Michael also receives a $2,000 non-
compliant Division 7A loan from the Harvey Trust.
Bennetts Pty Ltd is not presently entitled to an amount from
the net income of the Wilson Trust. However, Bennetts Pty
Ltd is entitled to $10,000 from the net income of the Harvey
Trust (the first interposed trust) and Harvey Trust is
presently entitled to $10,000 from the net income of the
Wilson Trust. These amounts remain unpaid.
The loan made by the Harvey Trust to Michael will be
included in Michael's assessable income under ordinary
operation of subsection 109XA(2).
Bennetts Pty Ltd is taken to be presently entitled to $8,000
from the Wilson Trust, which is the unpaid present
entitlement of $10,000 from the Harvey Trust, reduced by the
$2,000 loan amount that is included in Michael's assessable
income under another provision of Subdivision EA.
Loan-back agreements related to the distribution of an unrealised gain
60. Under the current law, payments under Subdivision EA must be
attributable to an unrealised gain. The amount of the payment that
can be taken to be paid is limited to the present entitlement owed
to the company that remains unpaid.
61. Taxpayers have been entering into arrangements whereby the amount
of the payment received by a shareholder (or their associate) from
the trustee of a trust, is significantly more than the unpaid
present entitlement held by the private company to circumvent the
operation of Division 7A.
62. The shareholder (or their associate) then loans back to the trust
the amount of the payment that exceeds the unpaid present
entitlement, held by the private company.
63. In a subsequent income year, the trustee declares a present
entitlement to the private company that remains unpaid. The
trustee makes a loan repayment to the shareholder (or their
associate). The repayment of the loan to the shareholder (or their
associate) is not caught by the operation of Division 7A as the
payment is no longer a discharge of, or a reduction in, a present
entitlement of the shareholder (or their associate) that is wholly
or partly attributable to an amount that is an unrealised gain
within the scope of subsection 109XA(1).
64. These amendments ensure that the requirement for the amount to be a
discharge of a present entitlement attributable to an unrealised
gain is disregarded where the conditions contained in
subsection 109XA(1A) are satisfied.
65. Subsection 109XA(1A) sets out that paragraph 109XA(1)(b) is
disregarded when:
. subsection 109XA(1) has previously applied because the
trustee made a payment to the shareholder (or their
associate) in an earlier income year;
. the shareholder (or their associate) makes a loan or loans
back to the trustee on or after 1 July 2009 and a
reasonable person would conclude that the shareholder (or
their associate) made or intended to make the loan or
loans to the trustee at the time of, or before, the
original transaction took place; and
. the trustee makes a repayment of all or part of the loan.
[Schedule 1, item 18, subsection 109XA(1A)]
66. Section 109J (which provides that a private company is not taken to
pay a dividend because of a payment, to the extent that the payment
discharges an obligation of the private company to pay money to the
entity on an arm's length basis) does not apply where
subsection 109XA(1A) applies. This is to ensure that the loan
agreement between the trust and the shareholder of the private
company cannot be used to avoid the application of
subsection 109XA(1A). [Schedule 1, item 18, subsection 109XA(1B)]
1.
In the 2010-11 income year Trust A re-values an asset and
makes a distribution of $5 million to Lucas who is a
shareholder of Willis Pty Ltd. Willis Pty Ltd has a
$500,000 unpaid present entitlement to an amount from the
net income of Trust A. Lucas will be required to include
$500,000 of the payment he receives in his assessable income
for the 2010-11 income year (subject to the distributable
surplus of Willis Pty Ltd).
When Lucas receives the payment from Trust A, he immediately
loans the amount back to the trust for $4.5 million. The
trust is obliged to repay the loan over successive income
years.
In the 2012-13 income year, Willis Pty Ltd holds an unpaid
present entitlement of $500,000 from the net income of Trust
A. The trustee of Trust A again makes a payment of $500,000
to Lucas. However, this payment represents a repayment of
the outstanding loan to Lucas, rather than a payment in
relation to an unrealised gain.
Before the 2009-10 income year, Lucas would not have been
required to include this payment in his assessable income
under section 109XB. However, from the 2009-10 income year
the subsequent payment made by the trustee (the repayment of
the loan) is treated as the discharge of a present
entitlement of the shareholder (or their associate) that is
wholly or partly attributable to an amount that is an
unrealised gain.
Definition of non-commercial loans
67. The definition of non-commercial loans in section 109Y currently
includes the amounts that are shown as assets in the company's
accounting records at the end of the year of income that have been
taken under section 109D, section 109E and former section 108 to
have been paid as dividends in earlier years of income.
68. These amendments allow amounts that have been included in the
assessable income of a shareholder (or their associate), under
section 109XB (about payments taken to be made through interposed
entities), to be taken into account when determining the amount of
non-commercial loans under section 109Y. [Schedule 1, item 28,
subsection 109Y(2)]
69. Where an amount is included in the non-commercial loan calculation
because of section 109XB, it will be reduced by the total of the
unfranked parts of any later dividends received by a shareholder
(or their associate) which have been set off under section 109ZCA.
Subsection 109Y(2A) ensures that the amount of any non-commercial
loans, for the purpose of section 109Y, does not result in an
underestimate of an entity's distributable surplus. [Schedule
1, item 30, subsection 109Y(2A)]
Loans which have been treated as a deemed dividend that are forgiven by a
trustee
70. Section 109G sets out that a private company is not taken to pay a
dividend at the end of a year of income because of the forgiveness
of an amount of a debt resulting from a loan, where the loan has
already given rise to a deemed dividend. Currently, there is no
equivalent provision in the law to allow a forgiven amount to be
disregarded if the loan is made by a trustee rather than a private
company.
71. These amendments introduce section 109XD, which allows an amount of
a debt, resulting from a loan, to be forgiven and not be included
in the assessable income of a shareholder (or their associate) of a
private company where the loan has previously resulted in an amount
being included in the assessable income of the shareholder (or
their associate) under section 109XB or former section 109UB.
[Schedule 1, item 24, section 109XD]
1.
Anna is a shareholder of Elliot Pty Ltd. In a previous
income year, Anna received a non-Division 7A compliant loan
from the Dawson Trust that was included in her assessable
income under section 109XB.
In the 2009-10 income year, the Dawson Trust forgives the
amount of the loan made to Anna. As the loan has already
been included in Anna's assessable income under
section 109XB, she is not required to include it again in
her assessable income.
The offset of later dividends against loans made by trustees
72. The current law sets out special rules which allow a later
dividend, distributed by a private company to a shareholder (or
their associate), to be set off against some or all of an amount
that has already been taken to be a deemed dividend, previously
paid by a company.
73. However, where an amount is instead included in the assessable
income of a shareholder (or their associate) under section 109XB,
there is no corresponding provision in the law to allow a later
dividend from a private company to be set off against this amount.
74. These amendments allow for later dividends, distributed by a
private company to a shareholder (or their associate), to be set
off against some or all of an amount received from a trustee, where
that amount has already been included in the assessable income of
the shareholder (or their associate) under section 109XB.
[Schedule 1, item 31, subsection 109ZCA(1)]
75. As a later dividend could be part of a general dividend paid by the
private company, and the dividend could be either fully or partly
franked, an exception is provided so that a later dividend is still
considered to be assessable income to the extent that it is
franked. [Schedule 1, item 31, subsections 109ZCA(2) and (3)]
76. This exception means that the franking credit attached to a later
dividend is still available to shareholders, to be applied against
income tax liabilities, where that franked dividend is used to
offset an earlier amount treated as a dividend. [Schedule
1, item 31, subsection 109ZCA(4)]
Repayment of a loan by withholding amounts from an employee's salary or
bonus
77. Under section 109R some repayments made to a private company, in
relation to a loan the private company made to an entity, are not
taken into account for the purpose of working out how much of the
loan has been repaid for the purposes of sections 109D and 109E or
the minimum yearly repayment amount in subsection 109E(5).
78. Subsection 109R(2) determines which payments will not be taken into
account, subject to the exceptions contained in subsection 109R(3).
79. Paragraph 109R(3)(b) provides an exception for a payment made by
setting off a loan amount against work and income support related
withholding payments and benefits payable by the private company.
Paragraph 109R(3)(ba) provides an exception for payments covered by
section 12-55 of Schedule 1 to the Taxation Administration
Act 1953. Currently, the exceptions in paragraphs 109R(3)(b)
and 109R(3)(ba) cannot be accessed if the repayment being made is
for a loan from a trustee, due to the operation of
subsection 109XC(8).
80. These amendments allow a loan made by a trustee to be repaid by
setting off the payments outlined in paragraphs 109R(3)(b)
and 109R(3)(ba) against the outstanding amount of the loan.
[Schedule 1, item 23, subsection 109XC(8)]
1.
In the 2009-10 income year, Aaron is an employee of the Bell
Trust but also a shareholder of Evans Pty Ltd. Evans Pty
Ltd has an unpaid present entitlement to an amount from the
net income of the Bell Trust.
During the 2009-10 income year, the Bell Trust makes a loan
of $100,000 to Aaron. Aaron arranges for the Bell Trust to
set off Aaron's yearly bonus against the outstanding loan as
a repayment.
The amount that has been set off is treated as a repayment
for the purposes of sections 109D, 109E and
subsection 109E(5).
Repayment of a loan to a private company using a re-borrowing
81. Subsection 109R(2) currently states that a payment to repay a loan
to a private company must not be taken into account if a reasonable
person would conclude that, after having regard to all the
circumstances, the entity making the repayment intended to obtain a
loan from the private company of an amount similar to, or larger
than, the repayment when the payment was made to the private
company.
82. These amendments extend the operation of subsection 109R(2) to
ensure that where a reasonable person would conclude that an entity
obtained a loan from the private company, of an amount similar to,
or larger than the payment, before the payment was actually made,
the payment will not be taken into account for the purpose of
working out how much of the loan is repaid under sections 109D and
109E, or the minimum yearly repayment amount under
subsection 109E(5).
83. In certain circumstances, it may already be possible to disregard
these payments. However, these amendments will put this matter
beyond doubt and remove any ambiguity. [Schedule
1, item 15, subsection 109R(2)]
1.
Alicia obtains a loan of $10,000 from Cleary Pty Ltd.
Alicia has until the lodgment day to repay the loan. Two
weeks before the lodgment day Alicia obtains a further
$10,000 from Cleary Pty Ltd. She then repays the original
$10,000 loan a week before the lodgment day.
The repayment of the original $10,000 loan is not a
repayment for the purposes of section 109D, because Alicia
has borrowed a similar amount from Cleary Pty Ltd and in
this case a reasonable person would conclude that the loan
was obtained in order to make the repayment of the original
$10,000.
The original $10,000 loan is treated as a deemed dividend
subject to the distributable surplus of the private company.
Inclusion of Division 7A amounts in distributable surplus calculation
84. The current law does not include amounts that have been paid out by
a private company in the form of a payment or a forgiveness of debt
during an income year in the distributable surplus calculation made
under subsection 109Y(2).
85. By excluding these amounts, the current formula in
subsection 109Y(2) understates the distributable surplus of a
private company. This may lead to an artificial reduction in the
amount of deemed dividends that a private company is considered to
have paid during the relevant income year.
86. These amendments correct this anomaly by including a reference to
Division 7A amounts in the distributable surplus formula in
subsection 109Y(2). This reference ensures that amounts that have
been taken to be payments, under section 109C or the forgiveness of
a debt under section 109F, are included in the distributable
surplus of a private company under subsection 109Y(2). [Schedule
1, item 27, subsection 109Y(2)]
1.
On 29 June 2005, a private company has real property valued
at its historical cost in the company's accounting records
of $500,000, which it acquired before 1985. The real
property has a market value of $1,500,000 and the private
company has liabilities of $400,000 and paid-up capital of
$100,000. For section 44 purposes, the private company has
'profits' of $1,000,000 which reflects the unrealised gain
in the real property.
If, on 29 June 2005, the private company makes an in specie
distribution of the real property to a shareholder, an
amount of $1,000,000 would be included in the shareholder's
assessable income as a dividend under section 44.
However, if instead of making the in specie distribution,
the private company sells the real property to the
shareholder for $500,000, the sale of the real property is a
payment within the meaning of paragraph 109C(3)(c) of an
amount determined under subsection 109C(4) - being
$1,000,000.
The private company's distributable surplus under section
109Y is determined according to the private company's
accounting records as at 30 June 2005. As at that date, the
private company has assets of $500,000 (being the proceeds
on disposal of the real property), liabilities of $400,000
and paid-up capital of $100,000. The net assets of the
private company for section 109Y purposes is $100,000 and
the private company's distributable surplus after deducting
paid up share capital of $100,000 is nil before these
amendments. The end result is no amount is treated as a
dividend under Division 7A.
By selling the real property to the shareholder at its
historical cost, the private company has achieved a
disguised distribution of $1,000,000 to the shareholder tax
free.
If this same transaction occurs from the 2009-10 income year
after these amendments, the amount of the payment for the
purpose of paragraph 109C(3)(c) will be included in the
distributable surplus of the private company as a
Division 7A amount. Hence, the company's distributable
surplus will be $1,000,000 and the shareholder of the
company will be required to include a deemed dividend of
$1,000,000 in their assessable income.
Application of Division 7A to a resident shareholder or their associate
87. There has been some conjecture as to whether Division 7A applies
to circumstances where a shareholder of a private company (or
their associate) is an Australian resident and the private company
involved in the arrangement is a foreign resident.
88. Section 109BC will put beyond doubt that Division 7A applies in
relation to these arrangements and that the Australian resident
will be liable to pay tax on any deemed dividends that arise under
the operation of Division 7A.
89. Subsection 109BC(1) ensures that the relevant tax accounting
period for a foreign company applies for the purposes of
Division 7A. Subsection 109BC(2) ensures that where a company is
resident in more than one foreign country the tax accounting
period that ends first will be the relevant tax accounting period
for the purpose of Division 7A. [Schedule 1, item
11, section 109BC]
Application and transitional provisions
90. These amendments apply from 1 July 2009. [Schedule 1, item 35]
Chapter 2
Extending the tax file number withholding arrangements to closely held
trusts, including family trusts
Outline of chapter
91. Schedule 2 to this Bill amends the Income Tax Assessment Act 1936
(ITAA 1936), the Income Tax Assessment Act 1997 (ITAA 1997) and the
Taxation Administration Act 1953 (TAA 1953) to extend the existing
arrangements for tax file number (TFN) withholding to cover closely
held trusts, including family trusts. The information collected by
the Australian Taxation Office (ATO) under these amendments will
facilitate data-matching and allow the ATO to check whether the
assessable income of beneficiaries of these trusts correctly
includes their share of the net income of the trust.
92. All references to legislative provisions in this chapter are
references to the TAA 1953 unless otherwise stated.
Context of amendments
93. In the late 1990s it became apparent that complex chains of trusts
were being used to avoid or indefinitely defer tax. In order to
address this issue, legislation was passed to require a trustee of
a closely held trust to advise the Commissioner of Taxation
(Commissioner) of certain details about a trust's ultimate
beneficiaries and tax-preferred distributions to beneficiaries.
Failure to do this, or there being no ultimate beneficiary,
rendered the trustee liable to pay an ultimate beneficiary non-
disclosure tax at the top marginal tax rate plus the Medicare levy.
94. The purpose of that measure was to allow the Commissioner to check
that the assessable income of ultimate beneficiaries correctly
included their share of trust income and that the net assets of
ultimate beneficiaries reflected their receipt of tax-preferred
amounts.
95. This measure proved to be very difficult to comply with for some
trustees of closely held trusts. Consequently, from the 2008-09
income year, the ultimate beneficiary reporting rules were replaced
by the trustee beneficiary reporting rules which now require
trustees of closely held trusts to report information to the
Commissioner in respect of each beneficiary that is itself a
trustee entitled to a share of the trust's net income or to receive
tax-preferred amounts.
96. However, these new reporting requirements are limited to trustee
beneficiaries and do not apply in respect of beneficiaries who are
individuals or companies. Additionally, family trusts that have
made a family trust election under the trust loss provisions in
Schedule 2F to the ITAA 1936 are not subject to the trustee
beneficiary reporting rules.
97. The current TFN withholding arrangements apply to various entities
that pay or distribute income. However, the TFN withholding
arrangements do not apply to trusts unless they are unit trusts.
98. Consequently, as part of the 2009-10 Budget, the Government
announced that, with effect from 1 July 2010, it would extend the
current TFN withholding arrangements to cover closely held trusts,
including family trusts.
Summary of new law
99. This Schedule extends the TFN withholding regime under Subdivision
12-E of Schedule 1 to the TAA 1953 to closely held trusts
(including family and related trusts) in respect of eligible
beneficiaries to which these amendments apply. Where an eligible
beneficiary receives a distribution, or at the end of the income
year is presently entitled to income of the trust and the
beneficiary has failed to quote their TFN to the trustee of the
trust prior to that time, they will be subject to TFN withholding
arrangements under these amendments.
100. There are four stages to the operation of these amendments where a
relevant beneficiary has failed to provide their TFN to the
trustee.
. The first stage imposes a withholding obligation on the
trustee where a withholding event under these amendments
occurs.
- A withholding event occurs when the trustee of a trust
makes a distribution to an eligible beneficiary, or when
an eligible beneficiary becomes presently entitled to a
share of income of the trust and the beneficiary has
failed to quote their TFN to the trustee prior to either
the distribution time or the end of the income year.
- When a withholding event occurs the trustee is required
to withhold prior to making the distribution or for a
present entitlement case, at the end of the income year.
. The second stage requires the trustee of a relevant trust
to report and remit those amounts withheld to the
Commissioner.
- The trustee is required to register for pay as you go
(PAYG) withholding with the ATO as well as report and
remit amounts on an annual basis.
- The trustee is also required, through the trust income
tax return, to report amounts distributed to eligible
beneficiaries that would have been subject to
withholding had the relevant beneficiary failed to quote
their TFN to the trustee.
. The third stage involves the crediting of the amounts
withheld by the trustee in respect of a beneficiary on
assessment of their income tax liability.
. The fourth stage involves the imposition of penalties on
the trustee for failing to withhold and/or failing to
remit the amount withheld to the Commissioner.
- These penalties are the same as those that apply under
the current TFN withholding arrangements.
101. TFN withholding does not apply where a beneficiary has provided
their TFN to the trustee prior to either the time the trustee makes
a distribution or at the end of the income year in the case of
present entitlement amounts.
102. The trustee is required to report the TFNs quoted by beneficiaries
to the Commissioner in the approved form. The trustee is only
required to report a quoted TFN once (upon validation of it being
the correct TFN) and will report the TFNs collected during a
quarter in a quarterly report. Where the trustee has no new TFNs
to report for a quarter, they are not required to lodge a report
for that relevant quarter.
Comparison of key features of new law and current law
|New law |Current law |
|From the 2010-11 income |No equivalent. |
|year, trustees of closely| |
|held trusts (and family | |
|and related trusts) must | |
|withhold amounts in | |
|respect of either | |
|distributions made to | |
|eligible beneficiaries, | |
|or at the end of the | |
|income year where the | |
|beneficiary is presently | |
|entitled to a share of | |
|the income of the trust. | |
|This obligation arises | |
|where the beneficiary | |
|fails to quote their TFN | |
|to the trustee prior to | |
|receiving the | |
|distribution or becoming | |
|presently entitled to the| |
|amount. | |
|Trustees of trusts |The current TFN |
|subject to these |withholding arrangements |
|amendments are required |do not apply to closely |
|to report and remit |held trusts. |
|amounts withheld under | |
|TFN withholding on an | |
|annual basis. | |
|Trustees are also | |
|required to report in | |
|their trust income tax | |
|return on amounts that | |
|would have been subject | |
|to withholding had the | |
|relevant beneficiary | |
|failed to quote their TFN| |
|to the trustee. | |
|Eligible beneficiaries |The current TFN |
|who have had amounts |withholding arrangements |
|withheld under these |do not apply to closely |
|amendments are entitled |held trusts. |
|to a credit for those | |
|amounts assessed in their| |
|income tax return. | |
|Trustees of trusts |The current TFN |
|subject to these |withholding arrangements |
|amendments are required |do not apply to closely |
|to withhold and remit |held trusts. |
|amounts withheld to the | |
|Commissioner or face | |
|administrative penalties | |
|for failure to withhold | |
|and/or remit an amount | |
|withheld. | |
|Trustees of trusts |The current TFN |
|subject to these |withholding arrangements |
|amendments are required |do not apply to closely |
|to report to the |held trusts. |
|Commissioner any TFNs | |
|quoted by their | |
|beneficiaries on a | |
|quarterly basis. Failure| |
|to do so exposes the | |
|trustee to an | |
|administrative penalty. | |
Detailed explanation of new law
Scope of these amendments
103. The current arrangements for TFN withholding apply to various
relationships including employer/employee, investment body/investor
and superannuation provider/superannuant. In the context of
trusts, TFN withholding in respect of investments applies to trusts
(including closely held trusts) that are 'unit trusts' as defined
in section 202A of the
ITAA 1936.
104. This Schedule extends the TFN withholding arrangements to most
closely held trusts, including family trusts. The scope of these
amendments is broadly intended to cover all beneficiaries of those
trusts. However, there are certain trusts and certain classes of
beneficiaries that are excluded from the operation of this measure.
Trustees and trusts subject to this measure
105. These amendments apply to trustees of closely held trusts,
including family trusts. The concept of a 'closely held trust' is
defined in subsection 102UC(1) of the ITAA 1936 to mean a trust
that is not an 'excluded trust' that:
. has up to 20 beneficiaries who have fixed entitlements to
a 75 per cent or greater share of the income, or a 75 per
cent or greater share of the capital, of the trust; or
. is a 'discretionary trust'.
[Schedule 2, item 5, subparagraph 12-175(1)(c)(ii)]
106. An 'excluded trust', for the purpose of the definition of 'closely
held trust', is defined in subsection 102UC(4) of the ITAA 1936 and
includes complying superannuation funds, complying approved deposit
funds, pooled development funds, deceased estates and fixed trusts
that are unit trusts where exempt entities have fixed entitlements
to all the income and capital of the trust (see paragraph (a) of
the definition). [Schedule 2, item 5, subparagraph 12-
175(1)(c)(ii)]
107. The definition of closely held trusts in section 102UC also
explicitly excludes family trusts. 'Family trusts' in that context
include those trusts that have made a family trust election and
those trusts covered by an interposed entity election that the
trust is to be included in the family group of the individual
specified in the family trust election. It also includes those
owned by the family group of that individual (see paragraphs (c) to
(e) of that definition).
108. However, for the purposes of these amendments, the use of the term
'closely held trusts' also includes family trusts and the related
trusts covered under paragraphs (c) to (e) of the definition in
section 102UC of the ITAA 1936. [Schedule
2, item 5, subparagraph 12-175(1)(c)(ii)]
109. For the purposes of this chapter, the use of the term 'closely held
trusts' is intended to also cover family trusts as included within
the scope of these amendments.
Trustees and trusts excluded from this measure
110. These amendments do not apply to trustees of trusts that do not
meet the concept of closely held trust as defined under this
measure. Additionally, closely held trusts that are not 'resident
trust estates' as defined under subsection 95(2) of the ITAA 1936
are excluded from this measure. [Schedule
2, item 5, subparagraph 12-175(1)(c)(i)]
111. In the situation where a closely held trust is also a unit trust
within the meaning of section 202A of the ITAA 1936, the trust will
be subject to the TFN withholding rules both in respect of
investments and under these amendments. In that situation the TFN
withholding rules in respect of investments will apply in priority
to the rules under these amendments. [Schedule
2, item 4, subsection 12-5(2) (item 5 in the table, column headed
'in priority to:')]
1.
The Newman Trust is a closely held unit trust that is a unit
trust within the meaning of section 202A of the ITAA 1936
and has 10 beneficiaries (five of which are individuals and
five are companies). Of all the beneficiaries, only Ray,
Helen and Lindy Lou Pty Ltd have failed to provide their TFN
prior to becoming presently entitled to a share of income of
the Newman Trust.
Consequently, the Newman Trust is required to withhold an
amount from each share (as if it was a payment) by reason of
section 12-145 of the ITAA 1936. As the Newman Trust is
subject to the TFN withholding rules applying to investment
bodies, it is not also required to withhold under these
amendments.
112. These amendments also facilitate the exemption of trusts as
prescribed under the regulations. This provision will provide
flexibility to exclude classes of trusts that may be inadvertently
within the scope of this measure. [Schedule
2, item 5, subparagraph 12-175(1)(c)(iii)]
Beneficiaries that are subject to this measure
113. Generally, these amendments apply to all beneficiaries of closely
held trusts, irrespective of whether they are individuals,
companies or trusts. The amendments however, do not apply to
excluded beneficiaries (see paragraph 2.25). [Schedule
2, item 5, paragraph 12-175(1)(d)]
114. Additionally, there are special rules that apply under these
amendments to beneficiaries (including trustee beneficiaries) who
are not liable to pay tax under section 98 of the ITAA 1936. There
are also special rules that apply to beneficiaries (including
trustee beneficiaries) that are impacted by either the family trust
distribution tax or the trustee beneficiary reporting rules (refer
respectively to Division 271 of Schedule 2F to the ITAA 1936 and
Division 6D of Part III of the ITAA 1936). These rules are
discussed in further detail from paragraphs 2.26 to 2.37.
Beneficiaries that are excluded from this measure
115. Certain beneficiaries are not within the scope of this measure.
These classes of beneficiaries are:
. non-residents (as under Division 6 of the ITAA 1936, the
trustee pays tax on their behalf) [Schedule 2, item 5,
subparagraph 12-175(1)(d)(i)];
. an exempt entity, as defined in section 995-1 of the
ITAA 1997 to mean an entity all of whose ordinary or
statutory income is exempt from income tax [Schedule
2, item 5, subparagraph 12-175(1)(d)(ii)]; or
. those under a legal disability (for example, minors and
bankrupts) pursuant to section 98 of ITAA 1936 (as the
trustee is liable to pay tax on their behalf) [Schedule 2,
item 5, subparagraph 12-175(1)(d)(iii)].
The treatment of entities not liable to pay tax in respect of
distribution or share under section 98 of the ITAA 1936
116. A special rule applies where a trustee is liable to pay tax on
behalf of a beneficiary (under section 98 of the ITAA 1936) in
respect of a particular share or distribution, where the
beneficiary is not under a legal disability.
117. As discussed in paragraph 2.25, beneficiaries under a legal
disability (pursuant to section 98 of the ITAA 1936) are exempt
from this measure. However, under the current law, there are
situations where a trustee is liable on the behalf of a beneficiary
where they are not under a legal disability but only in respect of
a particular share or distribution.
118. One such situation arises where a beneficiary receives a vested and
indefeasible interest in any of the trust and is deemed to be
presently entitled by the operation of subsection 95A(2) of the
ITAA 1936. In that situation subsection 98(2) of the ITAA 1936
operates so that the trustee is liable to pay tax in respect of
that deemed present entitlement.
119. Under these amendments, where the trustee is liable to pay tax in
respect of a share or distribution under section 98 of the ITAA
1936, they will not be required to withhold on that particular
amount. [Schedule 2, item 5, paragraphs 12-175(2)(b) and 12-
180(2)(b)]
120. The intention of this exclusion is to cover those beneficiaries who
are not under a legal disability, but some portion of their share
or distribution is caught under section 98 of the ITAA 1936 and the
trustee is liable for tax, but only in respect of that specific
amount. Those beneficiaries who are under a legal disability
pursuant to section 98 of the ITAA 1936, will continue to be
excluded from this measure entirely.
The treatment of entities subject to family trust distribution tax
121. Special rules apply under these amendments to trusts where the
trustee is liable to pay the family trust distribution tax.
122. Where the trust is a family trust and the beneficiary (and/or
trustee beneficiary) is within that trust's 'family group', the
beneficiary is subject to these amendments in the same way as all
other beneficiaries. [Schedule 2, item 5, paragraphs 12-175(2)(d)
and 12-180(2)(d)]
123. However, where that trust confers present entitlement or makes a
distribution of trust income to a beneficiary outside of that
'family group', the trust will be subject to the family trust
distribution tax, which is a final tax liability (equivalent to
46.5 per cent). Consequently, where the trustee is liable to pay
the family trust distribution tax they will not also be required to
withhold an amount in respect of these amendments. [Schedule
2, item 5, paragraphs 12-175(2)(d) and 12-180(2)(d)]
124. This rule extends to all beneficiaries (including trustee
beneficiaries) who receive distributions from the parent trust but
are outside of the family group of the parent trust. [Schedule 2,
item 5, paragraphs 12-175(2)(d) and 12-180(2)(d)]
1.
Stephen, as the trustee of the Gordon Family Trust, has made
a family trust election identifying Mr. Gemmell as the
nominated individual. The beneficiaries of the trust
include Les, Scott, Tom and the trustee of the Schneider
Trust. While Scott, Tom and the Schneider Trust are all
members of the family group of Mr. Gemmell, Les is not. At
the end of the income year, each of the beneficiaries is
made presently entitled to income of the Gordon Family
Trust. However, Les, Scott and the Schneider Trust have
failed to quote their TFN to Stephen prior to the end of the
income year.
When Les becomes presently entitled to a share of the income
of the trust, Stephen as trustee of the Gordon Family Trust
becomes liable to pay the family trust distribution tax. As
the imposition of that tax takes precedence over the TFN
withholding under these amendments, Stephen is not required
to withhold in respect of Les.
However, as Scott and the Schneider Trust are within the
family group of Mr. Gemmell, no obligation to pay the family
trust distribution tax arises and Stephen will be required
to withhold an amount under this measure in respect of Scott
and the trustee of the Schneider Trust.
As Tom has quoted his TFN prior to the end of the income
year, Stephen will not be required to withhold from Tom.
Treatment of entities subject to the trustee beneficiary reporting
rules
125. Special rules also apply under these amendments to trustees that
are subject to the trustee beneficiary reporting rules under
Division 6D of Part III of the ITAA 1936. Division 6D imposes
obligations on the trustee of a closely held trust as defined in
section 102UC of the ITAA 1936 in respect of a beneficiary that is
itself the trustee of a trust (a trustee beneficiary).
126. Where a trust is subject to these trustee beneficiary reporting
rules, they will not be required to withhold amounts under this
measure in respect of the trustee beneficiary. [Schedule
2, item 5, paragraphs 12-175(2)(c) and 12-180(2)(c)]
127. Trusts subject to the trustee beneficiary rules in respect of
distributions made to trustee beneficiaries are excluded from this
measure for two reasons. Firstly, trusts subject to the trustee
beneficiary reporting rules will be required to provide a correct
trustee beneficiary statement to the Commissioner to which the
trustee beneficiary's TFN would be included. Secondly, a failure
to provide a correct trustee beneficiary statement (including the
trustee beneficiary's TFN) exposes the trustee to the trustee
beneficiary non-disclosure tax which is a final tax liability
(equivalent to 46.5 per cent). [Schedule 2, item 5, paragraphs 12-
175(2)(c) and 12-180(2)(c)]
1.
The Spiller Trust is a closely held trust for the purposes
of Division 6D of the ITAA 1936. Its beneficiaries include
an Australian resident company, Lolly Pty Ltd, and the
trustees of the Simon Trust and the McCarthy Trust (which
are also both closely held trusts). None of the three
beneficiaries have provided their TFNs to the trustee of the
Spiller Trust. At the end of the income year, the Spiller
Trust determines that each beneficiary's share of present
entitlement to the net income of the trust is $100.
As Lolly Pty Ltd is a company and a beneficiary of the
Spiller Trust, it remains subject to TFN withholding under
these amendments. Consequently, the Spiller Trust is
required to withhold from Lolly Pty Ltd's entitlement to the
share of net income of the trust.
However, as Spiller Trust is subject to the trustee
beneficiary reporting rules and is required to provide a
correct trustee beneficiary statement for both the Simon
Trust and the McCarthy Trust, the Spiller Trust is not
required to withhold under this measure in respect of either
trustee beneficiary.
Withholding obligations
128. For trustees and beneficiaries subject to this measure, a TFN
withholding obligation will arise where either the trustee makes a
distribution of an amount that includes ordinary or statutory
income to the beneficiary, or at the end of the income year where
the beneficiary is presently entitled to a share of the income of
the trust and in either case, the beneficiary has failed to quote
their TFN to the trustee.
Withholding obligation where the trustee distributes trust income
129. A withholding obligation will arise in respect of distributions
made where:
. a trustee makes a distribution to an eligible beneficiary
[Schedule 2, item 5, paragraph 12-175(1)(a)];
. some or all of the distribution is ordinary or statutory
income of the trust [Schedule 2, item 5, paragraph 12-
175(1)(b)];
. some or all of the distribution is not in respect of a
share of net income to which the beneficiary was presently
entitled to and otherwise subject to TFN withholding under
this measure [Schedule 2, item 5, subsection 12-175(4)];
and
. the beneficiary has failed to quote their TFN at the time
the distribution is made (the distribution time) [Schedule
2, item 5, subsection 12-175(1)].
130. However, this withholding obligation will only arise where the
distribution described above is not subject to any of the special
rules discussed in paragraphs 2.26 to 2.37. [Schedule 2, item 5,
paragraphs 12-175(2)(b) to (d)]
1.
The trustee of the Kretschmann Trust (which is a closely
held trust under this measure) makes regular distributions
throughout the year to its two beneficiaries (Pierce and
Regina). Pierce has provided his TFN to the trustee of the
Kretschmann Trust prior to the making of these distributions
but Regina has not.
As Regina has failed to quote her TFN prior to the trustee
making the distribution, a withholding obligation is
triggered for the Kretschmann Trust in respect of the
distributions made to Regina.
131. Where the distribution made is not a payment, the PAYG withholding
regime (Part 2-5 of Schedule 1 to the TAA 1953) will apply as if
the trustee had paid the amount of the distribution to the
beneficiary at the distribution time. [Schedule
2, item 5, subsection 12-175(3)]
132. This withholding obligation imposed on the trustee operates
independently of the reporting obligations imposed under these
amendments (including the requirement to report amounts withheld
and to pay the amounts withheld to the Commissioner). The
withholding obligation under this measure may arise at any point
during the income year (where a distribution is made), whereas
these amendments provide for reporting and remittance on an annual
basis (discussed further in paragraphs 2.56 and 2.76). [Schedule
2, item 5, subsections 12-175(1) and (2)]
Withholding obligation where the beneficiary becomes presently
entitled to trust income
133. Where, at the end of the income year, the beneficiary is presently
entitled to a share of trust income, a withholding obligation
arises on that share of the net income of the trust, where the
beneficiary has failed to quote their TFN, but only to the extent
that withholding has not occurred on a distribution of all or part
of the amount during the income year. [Schedule
2, item 5, subsections 12-180(1), (2) and (4)]
134. However, this withholding obligation will only arise where the
share of net income described above is not subject to any of the
special rules discussed in paragraphs 2.26 to 2.37. [Schedule 2,
item 5, paragraphs 12-180(2)(b) to (d)]
1.
The ABC Trust (which is a closely held trust under this
measure) has three beneficiaries (Jo, Rhonda and Sydney Pty
Ltd). The ABC Trust has not made any distributions to the
beneficiaries during the income year.
At the end of the income year, the trustee of the ABC Trust
resolves to make each of the three beneficiaries presently
entitled to a share of the income of the trust. Jo and
Rhonda quoted their TFNs to the trustee of the ABC Trust
prior to the end of the income year; however, Sydney Ptd Ltd
had failed to do so.
Consequently, the ABC Trust has a withholding obligation in
respect of Sydney Pty Ltd's share of net income of the
trust.
135. Where a trust ends during the income year, the withholding
obligation in respect of present entitlement will apply as if the
time occurring just before the trust ends, was the end of the
income year. [Schedule 2, item 5, subsection 12-180(5)]
136. For the purposes of consistency with the TFN withholding framework,
the PAYG withholding regime (Part 2-5 of Schedule 1 to the TAA
1953) will continue to apply as if the trustee had paid the share
of income to the beneficiary at the end of the income year even
though the beneficiary may be merely entitled to that share of the
net income. [Schedule 2, item 5, subsection 12-180(3)]
137. Consequently, where a withholding obligation arises the trustee
will be required to withhold an amount from this deemed payment and
must do so at the end of the income year. [Schedule 2, item 9,
section 16-5]
Withholding obligations operating together
138. Under these amendments, where a beneficiary has an amount withheld
on a distribution during the year, the obligation arises at that
point of distribution. Consequently, at the end of the income
year, where a beneficiary is presently entitled to a share of
income that includes distributions made during the income year, the
withholding obligation that arises in respect of the present
entitlement amount will be to the extent that the amount is in
addition to the distributions made during the income year that were
subject to a withholding obligation. [Schedule 2, item 5,
subsection 12-180(4)]
139. This means that amounts withheld from distributions made during the
income year will be offset against a withholding obligation that
arises at the end of the income year in respect of present
entitlement.
1.
The trustee of the Mahoney Trust (which is a closely held
trust under this measure) makes a distribution of ordinary
income of $200 to each of its beneficiaries (Kate and
Tamzin) during the income year. At the end of the income
year, the trustee of the Mahoney Trust determines the income
of the trust for the year was $1,000 (and the net income was
also $1,000 ) and further determines that each beneficiary
is presently entitled to the remaining $600 (apportioned to
each beneficiary as an end of year share of net income of
$300).
Both Kate and Tamzin have failed to quote their TFNs to the
trustee before the end of the income year.
As both Kate and Tamzin failed to provide their TFN by the
distribution time, a withholding obligation arose in respect
of each $200 distribution. In discharging this obligation,
the trustee withheld from these distributions at the
distribution time.
The operation of these amendments means that for each
beneficiary the $200 distribution can be subtracted from the
beneficiary's total share of the net income of the trust
(which is $500). This means that for each beneficiary, the
withholding obligation in respect of present entitlement
will only extend to the remaining portion of the share.
Consequently, as both Kate and Tamzin have failed to quote
their TFN by the end of the income year, the trustee has an
additional withholding obligation for each beneficiary on
their further entitlements of $300 (calculated as: $500
(total share) - $200 (the amount already withheld upon)).
140. In summary, and subject to the exceptions explained above, an
obligation on a trustee of a closely held trust to withhold under
these amendments arises where:
. the beneficiary receives a distribution from the trustee
(which is wholly or partly ordinary or statutory income of
the trust); or
. at the end of the income year, the beneficiary is
presently entitled to a share of income of the trust;
and in either case:
. the beneficiary has not quoted their TFN to the trustee
prior to either the making of the distribution or being
presently entitled to a share of the income of the trust
at the end of the year; and
. the distribution or share is not subject to any of the
special rules under these amendments (not a distribution
or share in respect of section 98 of the ITAA 1936 or
subject to trustee beneficiary reporting rules or family
trust distribution tax).
Amount to withhold
141. In accordance with existing subsection 15-10(2) of Schedule 1 the
amount required to be withheld under this measure will be worked
out under the regulations. Accordingly, the following paragraphs
are only indicative of the amounts intended to be withheld for each
obligation.
142. The withholding rate intended to be applied for both obligations
will be established under the regulations but is intended to match
the 'top rate'. The top rate is defined under Subregulation 34(4)
of the Taxation Administration Regulations 1976 as the sum of the
highest rate specified in Part I of Schedule 7 to the Income Tax
Rates Act 1986 and the rate of the levy specified in subsection
6(1) of the Medicare Levy Act 1986. This rate is currently applied
for TFN withholding in respect of investments and is 46.5 per cent.
The amount to withhold in respect of a distribution of trust income
143. Under this measure, where a withholding obligation arises from a
distribution made during the income year, the amount to withhold
will be quantified based on the distribution as a whole. [Schedule
2, item 5, subsection 12-175(1)]
Amount to be withheld = D � R
Where:
D = the distribution made to the beneficiary; and
R = the rate worked out under the regulations.
1.
As in Example 2.4 the trustee of the Kretschmann Trust has a
withholding obligation in regards to distributions made
during the year to the beneficiary Regina.
On 23 September 2011, the trustee distributes $1,000 of
trust income to Regina. As a withholding obligation exists,
the trustee of the Kretschmann Trust must withhold an amount
calculated as 46.5 per cent of the value of the
distribution. This amount equates to a withholding of $465
from the distribution.
144. The withholding quantum is intended to apply to the full amount of
the distribution made during the year in respect of the income for
that income year, regardless of whether the distribution forms part
of the share of the net income to which the beneficiary becomes
presently entitled at the end of that income year.
The amount to withhold in respect of present entitlement to trust
income
145. Under this measure, where a withholding obligation arises in
respect of present entitlement, the amount to withhold will be
quantified on the beneficiary's share of the net income of the
trust. [Schedule 2, item 5, subsection 12-180(1)]
Amount to be withheld = S � R
Where:
S = the beneficiary's share of the net income of the trust;
and
R = the rate worked out under the regulations.
1.
The Evans Trust (which is a closely held trust under this
measure) has three beneficiaries. These beneficiaries are
Courtney, Michael and Bennett Pty Ltd. The trustee of the
Evans Trust has made no distributions to the beneficiaries
during the income year. At the end of the year, the trustee
of the Evans Trust makes a determination that each
beneficiary is presently entitled to trust income of $1,000.
However, both Michael and Bennett Pty Ltd have failed to
quote their TFNs to the trustee prior to the determination.
Consequently, upon making Michael and Bennett Pty Ltd
presently entitled to a share of the income of the Evans
Trust, a withholding obligation arises. The trustee is then
required to withhold from Michael and Bennett Pty Ltd, an
amount calculated as 46.5 per cent of the corresponding
share of the net income of the trust, where the net income
is calculated under section 95 of the ITAA 1936.
As Courtney has provided her TFN to the trustee prior to the
end of the income year, no withholding obligation has arisen
in respect of her share of present entitlement.
Payment of amounts withheld
146. Where a withholding obligation arises, the trustee is required to
remit the amount withheld to the Commissioner. Under existing law,
entities that withhold from payments must remit those amounts
withheld to the Commissioner in accordance with the framework in
Subdivision 16-B of Schedule 1 to the TAA 1953. This framework
stipulates different remittance cycles for different sized
withholders.
147. These remittance cycles apply weekly, monthly or quarterly for
large, medium or small withholders respectively. For each
withholder, the date of remittance is tied to the date of the
withholding event.
148. Under these amendments, trustees that are required to withhold are
not required to remit under the weekly/monthly/quarterly cycle.
Rather, they are required to remit withheld amounts to the
Commissioner in an approved form through the business activity
statement (BAS) system on an annual cycle. [Schedule
2, item 11, subsection 16-75(5)]
149. This will require the trustee to register for PAYG withholding with
the ATO and to pay the amount to the Commissioner by the 28th day
of the next month following the day the trustee is required to
lodge their annual report for withholding amounts (discussed in
paragraph 2.76). [Schedule 2, item 11, paragraph 16-75(5)(a)]
150. The requirement to remit the amount withheld by the end of the 28th
day of the month following required lodgment of the annual report
is intended to administratively align with the quarterly BAS cycle
and to accommodate those entities who are deferred BAS payers. The
due date for payment can be longer if the Commissioner allows.
[Schedule 2, item 11, paragraph 16-75(5)(b)]
1.
As in Example 2.8, a withholding obligation has arisen for
the Evans Trust in respect to present entitlement of a share
of the trust income made to both Michael and Bennett Pty
Ltd.
In discharging this obligation the trustee of the Evans
Trust withholds the equivalent rate (46.5 per cent) from
each entitlement totalling $465 each (calculated as $1,000
� 0.465).
The Evans Trust annual report is due on 30 September 2011,
however the trustee lodges the annual report earlier on 28
July 2011. Despite the early lodgment, the Evans Trust is
still required to remit the $930 withheld through the
relevant BAS by 28 October 2011.
Reporting requirements
151. Associated with the withholding obligations introduced under these
amendments, the trustee is required to comply with three main
reporting obligations to the Commissioner and to their
beneficiaries.
First requirement: Reporting of TFNs quoted
152. Once a TFN has been quoted to the trustee, the trustee is required
to report the beneficiary's TFN to the Commissioner in the approved
form if the trustee has not previously reported the TFN.
153. Under the current TFN withholding arrangements, TFNs quoted to the
withholder are reported to the Commissioner through different
mechanisms. In the employer/employee scenario, TFNs are reported
using TFN declarations. However, under Regulation 55 of the Income
Tax Regulations 1936, TFNs quoted in respect of the investment
body/investor scenario are reported through quarterly reports.
154. Under these amendments, as the withholding obligation can occur
upon the making of a distribution (which can occur at any point in
time during the income year), or the determination of present
entitlement to a share of income (which generally occurs annually),
TFNs quoted in respect of these amendments are to be reported on a
quarterly basis. The reporting of these TFNs will be in a form
approved by the Commissioner and the report must be provided to the
Commissioner within one month after the end of the quarter to which
it relates (or within such further time as the Commissioner
allows). [Schedule 2, item 1, subsections 202DP(1) and (2) of the
ITAA 1936]
1.
Tara has recently become a beneficiary of the existing
Jackson Trust (which is a closely held trust under this
measure). In accordance with these amendments, Tara quotes
her TFN to the trustee of the Jackson Trust on 4 July 2011.
Upon quotation of Tara's TFN, the trustee becomes obligated
to report the TFN in the approved form within one month
after 30 September 2011.
Quotation of the TFN
155. Under the current TFN withholding arrangements, provisions exist to
facilitate the correct quotation of the TFN to the payer, in
addition to providing administrative mechanisms to deal with the
incorrect quotation of a TFN.
156. These amendments will replicate features of the current
administrative requirements and facilitate the administrative
mechanism to deal with the incorrect quotation of the TFN.
[Schedule 2, item 1, sections 202DN, 202DO, 202DP and 202DR of the
ITAA 1936]
157. Where an incorrect TFN has been quoted and reported to the
Commissioner, these amendments facilitate two mechanisms for the
Commissioner to resolve this issue. The first mechanism under
these amendments provides the Commissioner with the power to
correct the incorrectly quoted TFN using the information available
and may give the trustee a notice in writing indicating that the
TFN quoted is incorrect or otherwise wrong and that the
Commissioner has been able to ascertain the correct TFN. [Schedule
2, item 1, subsection 202DR(1) of the ITAA 1936]
158. Where the Commissioner is able to successfully correct an
incorrectly quoted TFN, the beneficiary will be treated as having
quoted their TFN from the day in which they originally quoted their
TFN to the trustee. [Schedule 2, item 1, subsections 202DR(2) and
(3) of the ITAA 1936]
159. The second mechanism under these amendments operates where the
Commissioner cannot correct an incorrectly quoted TFN. In this
case, the Commissioner must give the trustee written notice and
also give a copy of the notice to the beneficiary along with a
written statement of reasons indicating this decision. [Schedule
2, item 1, subsections 202DR(4) and (5) of the ITAA 1936]
160. The Commissioner would be unable to successfully correct an
incorrectly quoted TFN where:
. the Commissioner is satisfied that the beneficiary's TFN
has been cancelled or withdrawn [Schedule 2, item 1,
subparagraph 202DR(4)(a)(i) of the ITAA 1936];
. the Commissioner is satisfied for any reason that the
number quoted is not the beneficiary's TFN [Schedule 2,
item 1, subparagraph 202DR(4)(a)(ii) of the ITAA 1936]; or
. the Commissioner is not satisfied that the beneficiary has
a TFN [Schedule 2, item 1, paragraph 202DR(4)(b) of the
ITAA 1936].
161. On and from the day the notice takes effect, the beneficiary is
taken not to have quoted their TFN to the trustee. This has the
effect that TFN withholding is not required for any withholding
obligations that occurred prior to the date of the notice.
However, distributions and present entitlement already made will
not give rise to a retrospective withholding obligation. [Schedule
2, item 1, subsections 202DR(6) and (7) of the ITAA 1936]
1.
The Buchanan Trust (which is a closely held trust under this
measure) has two beneficiaries, Olga and Andrew. Upon
receiving a distribution during the year both Olga and
Andrew had quoted their TFNs to the trustee of the Buchanan
Trust by the distribution time. However, after reporting
those TFNs to the Commissioner in the TFN quarterly report,
it turns out that both TFNs quoted were incorrect.
Olga's TFN was incorrect because two of the numbers were
accidentally transposed when the number was quoted.
Consequently, the Commissioner is able to identify the
correct number using other information available and advises
the trustee that the TFN has been corrected. In Olga's
case, she is treated as if her TFN quoted was correct and no
withholding obligation will arise in respect of these
amendments.
In respect to Andrew's TFN, upon receiving the TFN report
the Commissioner notices that the TFN reported is incorrect
and is not satisfied that Andrew actually has a TFN.
Consequently, the Commissioner notifies both the trustee and
Andrew of this and provides Andrew with a statement of
reasons for this decision.
From the date of the Commissioner's notice to Andrew, he is
deemed not to have quoted a TFN. This means that any
amounts to which Andrew becomes entitled from that date
gives rise to a withholding obligation under these
amendments until a new (correct) TFN is quoted. However,
the distribution already made will not give rise to a
retrospective withholding obligation.
Reporting period
162. These amendments also provide a mechanism for the Commissioner to
notify the trustee of a different reporting period for the purposes
of TFN quotation. This gives the Commissioner the administrative
flexibility to set a period longer than three months for the
trustee to report the quoted TFNs in the appropriate circumstances.
The Commissioner may use this power in order to facilitate a
smooth administrative process for the reporting of quoted TFNs.
[Schedule 2, item 1, subsection 202DP(3) of the ITAA 1936]
Penalties
163. Failure to report a quoted TFN to the Commissioner constitutes an
offence under section 8C of the TAA 1953 wherein the trustee has
failed to comply with a requirement under the taxation law. An
offence under section 8C of the TAA 1953 is an offence of absolute
liability. [Schedule 2, item 1, note under section 202DP of the
ITAA 1936]
164. An offence of absolute liability in this context means that where a
trustee fails to report a quoted TFN, they will have committed an
offence and the defence of mistake is unavailable. There is no
requirement to prove fault, and the trustee is punishable on
conviction of a fine not exceeding 20 penalty units for their first
offence. Subsequent offences will render the trustee punishable on
conviction of a greater penalty.
Changes to the definition of 'quoted'
165. These amendments also change the definition of 'quote' and 'quoted'
under section 995-1 of the ITAA 1997 to facilitate the requirement
to quote a TFN under this measure. [Schedule 2, items 26 and 27,
definitions of 'quote' and 'quoted' in subsection 995-1(1) of the
ITAA 1997]
Second requirement: Reporting to the Commissioner of amounts
withheld and amounts distributed
166. These amendments also require the trustee of a closely held trust
to lodge two different annual reports with the Commissioner. The
first report (annual report for withholding amounts) is an annual
report which is designed to detail the amounts withheld by the
trustee under this measure. The second report (annual report for
amounts distributed) is also an annual report and is designed to
detail the amounts distributed to beneficiaries, even though the
trustee was not required to withhold from those distributions.
167. Under the current law, entities that withhold from payments are
required to notify the Commissioner of those amounts withheld on or
before the day the payment is due (refer to section 16-150). This
is normally achieved through the BAS system as part of the
remittance obligation.
168. In addition to this requirement, the current PAYG withholding
framework requires the withholder to provide the Commissioner with
an annual report detailing amounts withheld (refer to section 16-
153). In the specific case of TFN withholding in respect of
investments, investment bodies subject to those obligations are
required to lodge an annual investment report, which provides
extensive information about the investment, and the amounts
withheld (refer to Regulation 56 of the Income Tax Regulations
1936).
Annual report for withholding amounts
169. Under these amendments, a trustee is required to lodge an annual
report with the Commissioner in the approved form, which reports
amounts withheld under this measure. [Schedule 2, item 12,
subsection 16-152(1)]
170. This report is due not later than three months after the end of the
income year or within such longer period as the Commissioner
allows. [Schedule 2, item 12, subsection 16-152(2)]
171. This report is intended to provide the Commissioner with
information regarding amounts that the trustee has withheld from
eligible beneficiaries in respect of a withholding obligation from
making a distribution or where the beneficiary is presently
entitled to a share of income of the trust at the end of the income
year.
Annual report for trust distributions
172. Under these amendments, a trustee is also required to lodge a
report to the Commissioner on the amounts distributed to
beneficiaries and amounts payable to all eligible beneficiaries
(that is, their share of the net income of the trust). This means
that trustees will be required to report amounts distributed or
payable to beneficiaries, even though the beneficiary has quoted
their TFN and a withholding obligation is not triggered under these
amendments. [Schedule 2, item 12, subsection 16-152(3)]
173. This report is due on the end of the day on which the trustee
lodges the trust's income tax return for the income year, or within
such longer period as the Commissioner allows. [Schedule 2, item
12, subsection 16-152(4)]
174. The due date for this report will have the effect that where all
the beneficiaries of a particular trustee have quoted their TFNs,
the trustee will only be required to lodge the report annually with
their trust tax return.
Administration provisions for annual reports
175. For both of these annual reports, the Commissioner retains the
existing discretion under subsection 16-153(6) of Schedule 1 to
vary the requirements of the reports and must follow the existing
notice requirements under subsection 16-153(7) of Schedule 1 in
order to do so. [Schedule 2, item 12, subsection 16-152(5)]
176. In addition, for the annual reports, the existing requirements
under subsection 16-153(5) of Schedule 1 will apply so that even
where the withholding amount is nil, an annual report is required.
However, for the annual report of withholding amounts, this will
only occur where a withholding obligation arises. [Schedule
2, item 12, subsection 16-152(5)]
1.
The McGovern Trust (which is a closely held trust under this
measure) has only one beneficiary (iClaire Pty Ltd).
iClaire Pty Ltd has quoted its TFN to the trustee prior to
the distribution time.
As iClaire Pty Ltd has quoted its TFN, no withholding
obligation arises in regards to distributions made by the
trustee during the income year. As no amounts have been
withheld, the trustee of the McGovern Trust is not required
to lodge an 'annual report for withholding payments'.
However, as the trustee has made distributions to iClaire
Pty Ltd throughout the year, the trustee is required to
lodge an annual report with their trust tax return.
Third requirement: Reporting amounts withheld and distributed to
beneficiaries
177. The third reporting obligation imposed by these amendments is the
obligation to notify beneficiaries of amounts withheld by issuing
payment summaries on an annual basis.
178. Currently, under the PAYG withholding arrangements, withholders are
generally required to issue payment summaries within 14 days of the
end of the financial year notifying the payee, employee or investor
of amounts withheld (refer to section 16-155). A failure to comply
with these requirements constitutes an offence of strict liability,
which is punishable by a fine not exceeding 20 penalty units (refer
to section 8C).
179. Under these amendments, trustees are required to issue an annual
payment summary to each beneficiary who has had amounts withheld
under these amendments. [Schedule 2, items 15 and 17, section 16-
156 and subsection 16-170(1AAA)]
180. A payment summary is to be provided to the relevant beneficiary in
the approved form not later than 14 days after the due date for the
lodgment of the annual report for withholding amounts (discussed in
paragraph 2.76) or such longer period as allowed by the
Commissioner. [Schedule 2, items 15 and 17, subsections 16-156(2)
and 16-170(1AAA)]
181. Under these amendments, the existing penalty for a failure to
provide a payment summary will continue to constitute a strict
liability offence [Schedule 2, items 20 and 21, subsections 16-
175(1)]. A strict liability offence in this context means that
there is no requirement to prove fault, however the defence of
mistake is available.
Credit for amounts withheld
182. Under the existing TFN withholding arrangements a payee/investor is
entitled to a credit equal to the amount that was withheld from
their payment/distribution by the withholder (refer to section 18-
15). This entitlement arises where the payee/investor lodges a
return and receives an assessment for the relevant income year
(including an assessment that no income tax is payable for the
year). Currently, where the claimant of the credit is a trust,
then the current TFN withholding arrangements provide for the
credit to flow through to the beneficiary of the trust (refer to
section 18-25).
183. Under these amendments, when a beneficiary lodges their end of year
income tax return, they are entitled to a credit equal to the
amounts that have been withheld and remitted by the trustee to the
Commissioner in accordance with the existing crediting
arrangements.
Penalties
184. Under the existing PAYG withholding arrangements, there are
specific penalty provisions that relate to TFN withholding. These
include the failure to withhold penalty under sections 16-25 and 16-
30 of Schedule 1 to the TAA 1953 as well as the penalty for failure
to pay within time under section 16-80 of Schedule 1 to the TAA
1953. These penalties apply to entities that are required to both
withhold from certain payments and pay the amounts withheld to the
Commissioner but fail to do so.
185. In addition to the specific PAYG withholding penalties described
above, general administrative penalties also exist under Part III
of the TAA 1953. These penalties apply for failure to comply with
taxation requirements, making intentional errors in reports and the
making of false and misleading statements.
186. Under these amendments, the existing penalty regime will apply to
the withholding obligations and reporting requirements as required.
There are no new penalties specific to the operation of these
amendments.
Refunding of amounts withheld in error
187. Under the current TFN withholding arrangements, those amounts that
are withheld by a payer and/or paid to the Commissioner in error
can be refunded to the payee, where the payer becomes aware of the
error or the payee applies for the refund.
188. The application process for the payee requires the payee to provide
certain information to the payer in order to have the payer refund
the amount to the payee. Similarly, the payer is then required to
provide certain information to the Commissioner, in order to
recover the amounts refunded to the payee, where the amounts had
originally been remitted to the Commissioner.
189. Under these amendments, where a beneficiary has amounts withheld
and/or paid to the Commissioner in error, they will be able to seek
a refund using the current refund arrangements. [Schedule
2, item 23, subparagraph 18-65(3)(d)(v)]
Application and transitional provisions
190. These amendments will apply to income of a trust for an income year
starting on or after 1 July 2010. For trusts with a substituted
accounting period, this means that this measure will apply to them
in the first income year starting after 1 July 2010. [Schedule
2, items 24 and 25]
Consequential amendments
191. There are also various other amendments, which clear up assorted
headings, notes, and other things that need to be removed or
changed due to the creation of the new provisions for the extension
of the TFN withholding rules to closely held trusts, including
family trusts. [Schedule 2, items 2, 3, 6 to 8, 10, 13, 14, 16,
18, 19 and 22 ]
Chapter 3
Income tax treatment of the HECS-HELP benefit
Outline of chapter
192. Schedule 3 to this Bill amends the Income Tax Assessment Act 1997
(ITAA 1997) to exempt from income tax the value of the benefit
received by eligible recipients of the Higher Education
Contribution Scheme-Higher Education Loan Programme benefit (HECS-
HELP benefit).
Context of amendments
193. The HECS-HELP benefit was an initiative first introduced in the
2008-09 Budget. This benefit gives eligible recipients a reduction
in their compulsory HECS debt repayment and/or their HELP debt
repayment or, in some cases where a repayment is not required due
to low income, a direct reduction in their HELP debt.
194. Mathematics and science graduates and early childhood education
teachers were initially eligible for the benefit. In the 2009-10
Budget it was announced that the HECS-HELP benefit had been
extended to nurses and teachers generally.
195. These amendments ensure that no income tax is payable on the value
of the HECS-HELP benefit received by eligible recipients.
Summary of new law
196. From the 2008-09 income year, the HECS-HELP benefit will be exempt
from income tax.
Detailed explanation of new law
197. Section 157-1 of the Higher Education Support Act 2003 allows an
individual to apply to the Commissioner of Taxation (Commissioner)
for the benefit if they satisfy the eligibility requirements set
out in the HECS-HELP benefit guidelines.
198. These guidelines set out the eligibility criteria and the amount of
the HECS-HELP benefit. One criterion for eligibility is that the
person has completed at least one employed week in a specified
occupation for their particular degree.
199. Once the Commissioner has determined the value of the HECS-HELP
benefit in accordance with the guidelines, section 154-85 of the
Higher Education Support Act 2003 provides that a person's
compulsory repayment amount is reduced by the amount of the HECS-
HELP benefit received.
200. Section 15-2 of the ITAA 1997 deems any benefits which are provided
to a person in relation to their employment to be assessable
income.
201. These amendments ensure that the value of a benefit received by an
eligible recipient of the HECS-HELP benefit is exempt from income
tax.
202. The list of classes of exempt income in section 11-15 of the ITAA
1997 is amended to include a reference to the receipt of a HECS-
HELP benefit. [Schedule 3, item 1]
203. A definition of a 'HECS-HELP benefit' is inserted into the
Dictionary in subsection 995-1(1) of the ITAA 1997. [Schedule 3,
item 3]
204. The table of exempt education and training amounts in section 51-10
is amended to include a reference to the receipt of a HECS-HELP
benefit. [Schedule 3, item 2]
Application and transitional provisions
205. These amendments apply to assessments for the 2008-09 income year
and later income years. [Schedule 3, item 4]
Chapter 4
Deductible gift recipients
Outline of chapter
206. Schedule 4 to this Bill amends the Income Tax Assessment Act 1997
(ITAA 1997) to update the list of deductible gift recipients (DGRs)
to include two new entities, and extend the period for which
another DGR may collect deductible gifts.
Context of amendments
207. 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.
208. DGR status assists eligible funds and organisations to attract
public support for their activities.
Summary of new law
209. These amendments add two organisations to the list of specifically
listed DGRs. The amendments also extend the period for which
another organisation may collect deductible gifts for another three
years.
Detailed explanation of new law
210. This Schedule allows deductions for gifts to the organisations
listed in Table 4.1 from the dates of effect and subject to the
special conditions in the Table. [Schedule 4, items 1 and 2, items
9.2.22 and 9.2.23 in the table in subsection 30-80(2) of the ITAA
1997]
1.
|Name of Fund |Date of effect |Special |
| | |conditions |
|Sichuan |12 May 2008 |The gift must be|
|Earthquake | |made after 11 |
|Surviving | |May 2008 and |
|Children's Fund | |before 13 May |
| | |2010. |
|Bali Peace Park |16 December 2009|The gift must be|
|Association Inc.| |made after |
| | |15 December 2009|
| | |and before |
| | |17 December |
| | |2011. |
| | |Used for the |
| | |purpose of |
| | |establishing the|
| | |Bali Peace Park.|
211. The Sichuan Earthquake Surviving Children's Fund aims to raise
money by donations from the public in Australia to be used to
provide assistance in the reconstruction of schools in the Sichuan
Province in China and provide assistance for children in the
Sichuan Province, following an earthquake on 12 May 2008.
212. The Bali Peace Park Association Inc. aims to raise funds to acquire
the Sari Club site, Bali, Indonesia, and create a 'peace park' on
the land where the terrorist bomb was detonated on 12 October 2002
and to create an annual national awareness day on 12 October to
allow for reflection and acknowledgement of the terrorist attack
while promoting tolerance and understanding across cultures and
religions.
213. This Schedule also extends the date until which the Yachad
Accelerated Learning Project Limited may collect deductible gifts
from 1 July 2009 to 1 July 2012. [Schedule 4, item 5, item 9.2.34
in the table in subsection 30-25(2) of the ITAA 1997]
Application and transitional provisions
214. The amendments to list the organisations in Table 4.1 apply from
the dates of effect shown in that table. [Schedule 4, items 6 and
7]
Consequential amendments
215. A number of changes have been made to update the index of DGRs to
include the new entities. [Schedule 4, items 3 and 4, section 30-
315]
Chapter 5
Income tax exemption: Global Carbon Capture and Storage Institute Limited
Outline of chapter
216. Schedule 5 to this Bill amends the Income Tax Assessment Act 1997
(ITAA 1997) to make the Global Carbon Capture and Storage Institute
Limited (the Institute) income tax exempt for a four-year period.
Context of amendments
217. The Institute was formally launched by the Prime Minister on
16 April 2009, and was established as a not-for-profit company
limited by guarantee on 12 June 2009.
218. The central objective of the Institute is to accelerate the
commercial deployment of carbon capture and storage projects to
contribute to reducing carbon dioxide emissions.
219. The Institute does not meet the general requirements for income tax
exempt entities set out in the tax law.
220. The information and expertise developed by the Institute is to be
disseminated broadly and globally to the benefit of both the
Australian and global carbon capture and storage communities.
Summary of new law
221. The Institute will be made exempt from income tax over the period
1 July 2009 to 30 June 2013.
Detailed explanation of new law
222. Section 50-5 of the ITAA 1997 contains a table of entities
(relating to charity, education, science and religion) for which
all of their ordinary and statutory income is exempt from income
tax. The Institute will be added to the table, making the
Institute exempt from income tax. [Schedule 5, item 1, item 1.8 in
the table in section 50-5 of the ITAA 1997]
223. Section 11-5 of the ITAA 1997 lists entities that are exempt from
income tax. This list will be amended to include the Institute.
[Schedule 5, item 8, section 11-5 of the ITAA 1997]
Application and transitional provisions
224. The exemption applies to amounts included in assessable income on
or after 1 July 2009, and before 1 July 2013. [Schedule 5, item 1,
item 1.8 in the table in section 50-5 of the ITAA 1997]
225. These amendments will be repealed on 1 January 2018, by which time
they will have become inoperative. [Schedule 5, items 10 and 11]
Consequential amendments
226. The definitions of 'eligible policy', 'exempt entity', 'exempt life
assurance fund', and 'trustee' in section 102M of the Income Tax
Assessment Act 1936 (ITAA 1936) will be repealed and replaced with
provisions that preserve the effect of the current law, but are
clearer and more consistent with tax law drafting principles.
[Schedule 5, items 2 to 6]
227. References in the ITAA 1997 will be updated to reflect these
amendments. [Schedule 5, item 9, paragraph 295-173(b) of the ITAA
1997]
228. These consequential amendments are desirable because the current
definition of 'exempt entity' in section 102M of the ITAA 1936 is
inconsistent with the definition in the Dictionary to the ITAA
1936.
229. Further, the words in a heading in section 11-5 of the ITAA 1997
will be reordered, to be consistent with the ordering of the same
words in section 50-5 of the ITAA 1997. [Schedule 5, item 7]
230. The consequential amendments do not involve any substantive changes
to the law.
Chapter 6
Repeal of certain unlimited periods for amending assessments
Outline of chapter
231. Schedule 6 to this Bill amends various taxation laws to repeal over
100 unlimited amendment periods. As result, a number of provisions
which provide the Commissioner of Taxation (Commissioner) with an
indefinite time to amend taxpayers' assessments are replaced with
the existing amendment provisions that have certain finite periods.
The removal of these unlimited amendment periods will improve
certainty for taxpayers in their taxation affairs and contribute to
reducing the volume of unnecessary provisions in the taxation laws.
Context of amendments
232. In 2004, unlimited amendment periods were considered as part of the
Review of Aspects of Income Tax Self Assessment. In consideration
of these provisions this report concluded that, whether or not a
taxpayer had paid the correct amount of tax in a particular year,
their assessment should eventually become final, unless they had
deliberately sought to evade their responsibilities.
233. In 2005, as a consequence of this report, amendments were made to
the tax law to reduce the period during which the Commissioner
could amend income tax assessments to two or four years depending
upon the degree of complexity of the income tax returns. However,
these amendments did not address the existing unlimited amendment
periods throughout the tax laws.
234. Subsequently, Treasury released the Review of Unlimited Amendment
Periods in the Income Tax Laws (the Review) discussion paper in
which it proposed to remove the existing unlimited amendment
periods. The Review identified over 100 provisions in the tax law
that provided an indefinite time for the Commissioner to amend
taxpayers' assessments. Consequently, the Review proposed to
replace most of them with either the standard two or four-year
amendment period, a specific fixed amendment period, or an
amendment period that would commence only following a future
contingent event.
235. Open public consultation was undertaken in relation to the Review
and received support to eliminate the unlimited amendment periods
from all the submissions. However, some submissions recommended
changes to the proposed replacement amendment periods.
Summary of new law
236. This Schedule amends the income tax laws to repeal certain
redundant unlimited amendment periods. These repeals cover
situations where the general amendment provisions (under section
170 of the Income Tax Assessment Act 1936 (ITAA 1936) provide the
Commissioner with sufficient time to examine an item in an income
tax return and, if necessary, amend the relevant assessment. In
these circumstances, there is no reason to maintain an unlimited
amendment provision for a particular item. The provisions repealed
can be divided into three categories of unlimited amendment
periods:
. exceptions to the operation of the general amendment
provisions in subsections 170(10) and (10AA) of the
ITAA 1936;
. unlimited amendment periods contained in certain specific
provisions that outline the taxation treatment of a
particular item that forms part of the income tax
assessment; and
. those amending Acts drafted between 1985 and 2005 that
contain an unlimited amendment provision due to the
uncertainty surrounding the timing of the passage of the
amending Act.
237. The vast majority of the amendments are contained in the last
category. The common drafting practice that created these
unlimited amendment periods ceased in 2005 as a consequence of the
Review of Aspects of Income Tax Self Assessment.
238. By repealing these unlimited amendment periods, the general
amendment provisions apply in those particular circumstances. The
amendment periods for effected assessments will be either two or
four years depending upon the complexity of the taxpayer's income
tax assessment. However, under the general rules if there has been
fraud or evasion, an unlimited amendment period continues to apply.
Comparison of key features of new law and current law
|New law |Current law |
|Over 100 provisions are |Over 100 provisions in |
|repealed and replaced |various tax laws provide |
|with the existing general|an unlimited period for |
|amendment provisions. |the Commissioner to amend|
|These general amendment |a taxpayer's assessment. |
|provisions provide a | |
|finite amendment period | |
|of two or four years | |
|depending on the | |
|taxpayer's circumstances.| |
Detailed explanation of new law
239. The following provisions are repealed under these amendments.
1. : Provisions that have unlimited amendment periods by the
operation of subsections 170(10) and (10AA) that are repealed
|Provision in |Description |
|ITAA 1936 | |
|section 82KJ |Deductions not allowable in respect |
| |of certain pre-paid outgoings |
|section 82KK |Schemes designed to postpone tax |
| |liability |
|Provision in |Description |
|ITAA 1997 | |
|Subdivision |Disposal of a car for which lease |
|20-B |payments have been deducted |
|The former |Later year relief |
|section 42-29| |
|0 | |
|The former |Meaning of 'entitlement to an |
|section 330-1|eligible cash bidding amount' |
|75 | |
|The former |Limit on the amount that can be |
|section 330-2|included in the agreement |
|45 | |
[Schedule 6, items 3 and 4]
2. : Other provisions that create unlimited amendment periods that
are repealed
|Provision in |Description |
|ITAA 1936 | |
|subsection |Exemption of income earned in |
|23AG(6G) |overseas employment |
|subsection |Assessment on assumption - |
|454(2) |retention of accounts etc. and |
| |compliance with information |
| |notices |
|Provision in |Description |
|ITAA 1997 | |
|subsection |Reducing deductions for amounts |
|26-35(5) |paid to related entities |
|section 214-130 |Other later amendments (franking |
| |assessments) |
|subsection |Deducting in anticipation of |
|900-240(2) |receiving an award transport |
| |payment |
[Schedule 6, items 2 and 5 to 10]
3. : A list of Acts with the generic unlimited amendment periods that
are repealed
|Act |Provision |
|A New Tax System (Pay As You Go) Act 1999 |section 4 |
|New Business Tax System (Capital Gains Tax) |section 4 |
|Act 1999 | |
|New Business Tax System (Consolidation and |section 4 |
|Other Measures) Act (No. 1) 2002 | |
|New Business Tax System (Consolidation and |section 4 |
|Other Measures) Act 2003 | |
|New Business Tax System (Consolidation) Act |section 4 |
|(No. 1) 2002 | |
|New Business Tax System (Consolidation, |section 4 |
|Value Shifting, Demergers and Other | |
|Measures) Act 2002 | |
|New Business Tax System (Income Tax Rates) |section 4 |
|Act (No. 2) 1999 | |
|New Business Tax System (Miscellaneous) Act |section 4 |
|(No. 1) 2000 | |
|New Business Tax System (Miscellaneous) Act |section 4 |
|(No. 2) 2000 | |
|New Business Tax System (Taxation of |section 4 |
|Financial Arrangements) Act (No. 1) 2003 | |
|Petroleum (Timor Sea Treaty)(Consequential |section 4 |
|Amendments) Act 2003 | |
|Tax Laws Amendment (2004 Measures No. 1) Act|section 4 |
|2004 | |
|Tax Laws Amendment (2004 Measures No. 2) Act|section 4 |
|2004 | |
|Tax Laws Amendment (2004 Measures No. 3) Act|section 4 |
|2004 | |
|Tax Laws Amendment (2004 Measures No. 6) Act|section 4 |
|2005 | |
|Tax Laws Amendment (2004 Measures No. 7) Act|section 4 |
|2005 | |
|Tax Laws Amendment (Medicare Levy and |section 5 |
|Medicare Levy Surcharge) Act 2004 | |
|Tax Laws Amendment (Medicare Levy and |section 4 |
|Medicare Levy Surcharge) Act 2005 | |
|Taxation Laws (Technical Amendments) Act |section 4 |
|1998 | |
|Taxation Laws Amendment (Company |section 19 |
|Distributions) Act 1987 | |
|Taxation Laws Amendment (Earlier Access to |section 4 |
|Farm Management Deposits) Act 2002 | |
|Taxation Laws Amendment (Foreign Income |section 4, |
|Measures) Act 1997 |Schedule 1, |
| |subitems 128(4) |
| |and 129(8) |
|Taxation Laws Amendment (Foreign Income) Act|section 61 |
|1990 | |
|Taxation Laws Amendment (Fringe Benefits and|section 75 |
|Substantiation) Act 1987 | |
|Taxation Laws Amendment (Medicare Levy and |section 4 |
|Medicare Levy Surcharge) Act 2002 | |
|Taxation Laws Amendment (Software |section 4 |
|Depreciation) Act 1999 | |
|Taxation Laws Amendment (Structured |section 4 |
|Settlements and Structured Orders) Act 2002 | |
|Taxation Laws Amendment (Superannuation) |section 4 (but |
|Act (No. 2) 2002 |retain the |
| |unlimited |
| |amendment period|
| |for section 37 |
| |of the |
| |Superannuation |
| |Guarantee |
| |(Administration)|
| |Act 1992 |
|Taxation Laws Amendment (Superannuation) Act|section 66 |
|1989 | |
|Taxation Laws Amendment (Superannuation) Act|section 62 |
|1992 | |
|Taxation Laws Amendment (Superannuation) Act|section 34 |
|1993 | |
|Taxation Laws Amendment (Trust Loss and |section 4 |
|Other Deductions) Act 1998 | |
|Taxation Laws Amendment Act (No. 1) 1995 |section 3 |
| |(Schedule 1, |
| |item 90) |
|Taxation Laws Amendment Act (No. 1) 1996 |section 4 |
|Taxation Laws Amendment Act (No. 1) 1997 |section 4 |
|Taxation Laws Amendment Act (No. 1) 1998 |section 4 |
|Taxation Laws Amendment Act (No. 1) 1999 |section 4 |
|Taxation Laws Amendment Act (No. 1) 2004 |section 4 |
|Taxation Laws Amendment Act (No. 2) 1985 |section 36 |
|Taxation Laws Amendment Act (No. 2) 1986 |section 28 |
|Taxation Laws Amendment Act (No. 2) 1987 |section 48 |
|Taxation Laws Amendment Act (No. 2) 1988 |section 57 |
|Taxation Laws Amendment Act (No. 2) 1989 |section 15 |
|Taxation Laws Amendment Act (No. 2) 1990 |section 65 |
|Taxation Laws Amendment Act (No. 2) 1991 |subsection 84(1)|
|Taxation Laws Amendment Act (No. 2) 1992 |section 75 |
|Taxation Laws Amendment Act (No. 2) 1993 |section 59 |
|Taxation Laws Amendment Act (No. 2) 1994 |section 122 |
|Taxation Laws Amendment Act (No. 2) 1995 |Section 3 |
| |(Schedule 3, |
| |item 44) |
|Taxation Laws Amendment Act (No. 2) 1996 |section 4 |
|Taxation Laws Amendment Act (No. 2) 1997 |section 4 |
|Taxation Laws Amendment Act (No. 2) 1999 |section 4 |
|Taxation Laws Amendment Act (No. 2) 2000 |section 4 |
|Taxation Laws Amendment Act (No. 2) 2003 |section 4 |
|Taxation Laws Amendment Act (No. 2) 2004 |section 4 |
|Taxation Laws Amendment Act (No. 3) 1985 |section 43 |
|Taxation Laws Amendment Act (No. 3) 1987 |section 40 |
|Taxation Laws Amendment Act (No. 3) 1989 |section 23 |
|Taxation Laws Amendment Act (No. 3) 1990 |section 35 |
|Taxation Laws Amendment Act (No. 3) 1991 |section 103 |
|Taxation Laws Amendment Act (No. 3) 1992 |section 81 |
|Taxation Laws Amendment Act (No. 3) 1993 |section 116 |
|Taxation Laws Amendment Act (No. 3) 1994 |section 116 |
|Taxation Laws Amendment Act (No. 3) 1995 |section 3 |
| |(Schedule 1, |
| |item 50) |
|Taxation Laws Amendment Act (No. 3) 1997 |section 4 |
|Taxation Laws Amendment Act (No. 3) 1998 |section 4 |
|Taxation Laws Amendment Act (No. 3) 2002 |section 4 |
|Taxation Laws Amendment Act (No. 3) 2003 |section 4 |
|Taxation Laws Amendment Act (No. 4) 1985 |section 24 |
|Taxation Laws Amendment Act (No. 4) 1986 |section 50 |
|Taxation Laws Amendment Act (No. 4) 1987 |section 52 and |
| |62 |
|Taxation Laws Amendment Act (No. 4) 1988 |section 58 |
|Taxation Laws Amendment Act (No. 4) 1989 |section 32 |
|Taxation Laws Amendment Act (No. 4) 1990 |section 37 |
|Taxation Laws Amendment Act (No. 4) 1992 |section 32 |
|Taxation Laws Amendment Act (No. 4) 1994 |section 3 |
| |(Schedule 1, |
| |item 91) |
|Taxation Laws Amendment Act (No. 4) 1995 |section 4 |
|Taxation Laws Amendment Act (No. 4) 1997 |section 4 |
|Taxation Laws Amendment Act (No. 4) 1999 |section 4 |
|Taxation Laws Amendment Act (No. 4) 2000 |section 4 |
|Taxation Laws Amendment Act (No. 4) 2002 |section 4 |
|Taxation Laws Amendment Act (No. 4) 2003 |section 4 |
|Taxation Laws Amendment Act (No. 5) 1988 |section 44 |
|Taxation Laws Amendment Act (No. 5) 1989 |section 50 |
|Taxation Laws Amendment Act (No. 5) 1990 |section 33 |
|Taxation Laws Amendment Act (No. 5) 1992 |section 87 |
|Taxation Laws Amendment Act (No. 5) 2000 |section 4 |
|Taxation Laws Amendment Act (No. 5) 2001 |section 4 |
|Taxation Laws Amendment Act (No. 5) 2002 |section 4 |
|Taxation Laws Amendment Act (No. 5) 2003 |section 4 |
|Taxation Laws Amendment Act (No. 6) 1992 |section 33 |
|Taxation Laws Amendment Act (No. 6) 2000 |section 4 |
|Taxation Laws Amendment Act (No. 6) 2001 |section 4 |
|Taxation Laws Amendment Act (No. 6) 2003 |section 4 |
|Taxation Laws Amendment Act (No. 7) 2000 |section 4 |
|Taxation Laws Amendment Act (No. 8) 2003 |section 4 |
|Taxation Laws Amendment Act 1985 |section 39 |
|Taxation Laws Amendment Act 1986 |section 26 |
|Taxation Laws Amendment Act 1987 |section 33 |
|Taxation Laws Amendment Act 1988 |section 40 |
|Taxation Laws Amendment Act 1989 |section 53 |
|Taxation Laws Amendment Act 1990 |section 41 |
|Taxation Laws Amendment Act 1991 |sections 90 and |
| |99 |
|Taxation Laws Amendment Act 1992 |section 75 |
|Taxation Laws Amendment Act 1993 |section 59 |
|Taxation Laws Amendment Act 1994 |section 87 |
[Schedule 6, items 1 and 11 to 117]
Application and transitional provisions
240. Schedule 6 commences the day after this Bill receives Royal Assent.
Index
Schedule 1: Distributions to entities connected with a private company
|Bill reference |Paragraph |
| |number |
|Item 11, section 109BB |1.37 |
|Item 11, section 109BC |1.89 |
|Item 13, subsection 109CA(1) |1.18 |
|Item 13, paragraph 109CA(2)(a) |1.19 |
|Item 13, paragraph 109CA(2)(b) |1.20 |
|Item 13, subsection 109CA(4) |1.29 |
|Item 13, subsection 109CA(5) |1.31 |
|Item 13, subsection 109CA(6) |1.34 |
|Item 13, subsections 109CA(10) and (11) |1.24 |
|Item 15, subsection 109R(2) |1.83 |
|Item 18, subsection 109XA(1A) |1.65 |
|Item 18, subsection 109XA(1B) |1.66 |
|Item 23, subsection 109XC(8) |1.80 |
|Item 24, section 109XD |1.71 |
|Item 25, sections 109XF and 109XG |1.40 |
|Item 25, subsections 109XF(1) and 109XG(1) |1.41 |
|Item 25, paragraphs 109XF(1)(c) and |1.43 |
|109XG(1)(c) | |
|Item 25, subsections 109XF(2) and 109XG(2) |1.44 |
|Item 25, subsection 109XF(3) |1.45 |
|Item 25, subsection 109XG(3) |1.48 |
|Item 25, subsection 109XH(1) |1.46 |
|Item 25, subsection 109XH(2) |1.47 |
|Item 25, subsection 109XH(3) |1.49 |
|Item 25, subsection 109XH(4) |1.50 |
|Item 25, subsection 109XI(1) |1.53 |
|Item 25, subsection 109XI(2) |1.54 |
|Item 25, subsection 109XI(3) |1.59 |
|Item 25, subsection 109XI(4) |1.56 |
|Item 25, subsection 109XI(5) |1.58 |
|Item 25, subsection 109XI(6) |1.57 |
|Item 25, subsection 109XI(7) |1.55 |
|Item 27, subsection 109Y(2) |1.86 |
|Item 28, subsection 109Y(2) |1.68 |
|Item 30, subsection 109Y(2A) |1.69 |
|Item 31, subsections 109ZCA(2) and (3) |1.75 |
|Item 31, subsection 109ZCA(4) |1.76 |
|Item 31, subsection 109ZCA(1) |1.74 |
|Item 35 |1.90 |
Schedule 2: Extending the TFN withholding arrangements to closely held
trusts, including family trusts
|Bill reference |Paragraph |
| |number |
|Item 1, sections 202DN, 202DO, 202DP and |2.66 |
|202DR of the ITAA 1936 | |
|Item 1, note under section 202DP of the ITAA|2.73 |
|1936 | |
|Item 1, subsections 202DP(1) and (2) of the |2.64 |
|ITAA 1936 | |
|Item 1, subsection 202DP(3) of the ITAA 1936|2.72 |
|Item 1, subsection 202DR(1) of the ITAA 1936|2.67 |
|Item 1, subsections 202DR(2) and (3) of the |2.68 |
|ITAA 1936 | |
|Item 1, subsections 202DR(4) and (5) of the |2.69 |
|ITAA 1936 | |
|Item 1, subparagraph 202DR(4)(a)(i) of the |2.70 |
|ITAA 1936 | |
|Item 1, subparagraph 202DR(4)(a)(ii) of the |2.70 |
|ITAA 1936 | |
|Item 1, paragraph 202DR(4)(b) of the ITAA |2.70 |
|1936 | |
|Item 1, subsections 202DR(6) and (7) of the |2.71 |
|ITAA 1936 | |
|Items 2, 3, 6 to 8, 10, 13, 14, 16, 18, 19 |2.101 |
|and 22 | |
|Item 4, subsection 12-5(2) (item 5 in the |2.21 |
|table, column headed 'in priority to:') | |
|Item 5, subsection 12-175(1) |2.39, 2.53 |
|Item 5, subsections 12-175(1) and (2) |2.42 |
|Item 5, paragraph 12-175(1)(a) |2.39 |
|Item 5, paragraph 12-175(1)(b) |2.39 |
|Item 5, subparagraph 12-175(1)(c)(i) |2.20 |
|Item 5, subparagraph 12-175(1)(c)(ii) |2.15, 2.16, |
| |2.18 |
|Item 5, subparagraph 12-175(1)(c)(iii) |2.22 |
|Item 5, paragraph 12-175(1)(d) |2.23 |
|Item 5, subparagraph 12-175(1)(d)(i) |2.25 |
|Item 5, subparagraph 12-175(1)(d)(ii) |2.25 |
|Item 5, subparagraph 12-175(1)(d)(iii) |2.25 |
|Item 5, paragraphs 12-175(2)(b) to (d) |2.40 |
|Item 5, paragraphs 12-175(2)(b) and |2.29 |
|12-180(2)(b) | |
|Item 5, paragraphs 12-175(2)(c) and |2.36, 2.37 |
|12-180(2)(c) | |
|Item 5, paragraphs 12-175(2)(d) and |2.32, 2.33, |
|12-180(2)(d) |2.34 |
|Item 5, subsection 12-175(3) |2.41 |
|Item 5, subsection 12-175(4) |2.39 |
|Item 5, subsection 12-180(1) |2.55 |
|Item 5, subsections 12-180(1), (2) and (4) |2.43 |
|Item 5, paragraphs 12-180(2)(b) to (d) |2.44 |
|Item 5, subsection 12-180(3) |2.46 |
|Item 5, subsection 12-180(4) |2.48 |
|Item 5, subsection 12-180(5) |2.45 |
|Item 9, section 16-5 |2.47 |
|Item 11, subsection 16-75(5) |2.58 |
|Item 11, paragraph 16-75(5)(a) |2.59 |
|Item 11, paragraph 16-75(5)(b) |2.60 |
|Item 12, subsection 16-152(1) |2.79 |
|Item 12, subsection 16-152(2) |2.80 |
|Item 12, subsection 16-152(3) |2.82 |
|Item 12, subsection 16-152(4) |2.83 |
|Item 12, subsection 16-152(5) |2.85, 2.86 |
|Items 15 and 17, section 16-156 and |2.89 |
|subsection 16-170(1AAA) | |
|Items 15 and 17, subsections 16-156(2) and |2.90 |
|16-170(1AAA) | |
|Items 20 and 21, subsection 16-175(1) |2.91 |
|Item 23, subparagraph 18-65(3)(d)(v) |2.99 |
|Items 24 and 25 |2.100 |
|Items 26 and 27, definitions of 'quote' and |2.75 |
|'quoted' in subsection 995-1(1) of the ITAA | |
|1997 | |
Schedule 3: Exemption of HECS-HELP benefit
|Bill reference |Paragraph |
| |number |
|Item 1 |3.11 |
|Item 2 |3.13 |
|Item 3 |3.12 |
|Item 4 |3.14 |
Schedule 4: Deductible gift recipients
|Bill reference |Paragraph |
| |number |
|Items 1 and 2, items 9.2.22 and 9.2.23 in |4.5 |
|the table in subsection 30-80(2) of the ITAA| |
|1997 | |
|Items 3 and 4, section 30-315 |4.10 |
|Item 5, item 9.2.34 in the table in |4.8 |
|subsection 30-25(2) of the ITAA 1997 | |
|Items 6 and 7 |4.9 |
Schedule 5: Global Carbon Capture and Storage Institute Ltd
|Bill reference |Paragraph |
| |number |
|Item 1, item 1.8 in the table in section |5.7, 5.9 |
|50-5 of the ITAA 1997 | |
|Items 2 to 6 |5.11 |
|Item 7 |5.14 |
|Item 8, section 11-5 of the ITAA 1997 |5.8 |
|Item 9, paragraph 295-173(b) of the ITAA |5.12 |
|1997 | |
|Items 10 and 11 |5.10 |
Schedule 6: Repeal of certain unlimited periods for amending assessments
|Bill reference |Paragraph |
| |number |
|Items 2 and 5 to 10 |Table 6.2 |
|Items 3 and 4 |Table 6.1 |
-----------------------
Payment
Strawberry Trust
Raspberry Trust
Notional loan
Loan
Unpaid present entitlement
Jane (Shareholder)
Berry Pty Ltd
Loan
Low Trust
Green Trust
Notional payment
Payment
Unpaid present entitlement
Vicki (Shareholder)
Green Pty Ltd
Unpaid present entitlement
Harvey Trust
Wilson Trust
Payment
Unpaid present entitlement
Loan
Bennetts Pty Ltd
Michael (Shareholder)