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 (Transfer of Provisions) 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 Background to the rewrites 5
Chapter 2 Collection and recovery of income tax rewrite - Part VI of the
ITAA 1936 11
Chapter 3 Debt forgiveness rewrite - Schedule 2C 35
Chapter 4 Luxury car leases rewrite - Schedule 2E 49
Chapter 5 Farm management deposits rewrite - Schedule 2G 61
Chapter 6 General insurance rewrite - Schedule 2J 69
Chapter 7 Finding tables 79
Index 93
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|ADIs |authorised deposit-taking |
| |institutions |
|ASIC |Australian Securities and |
| |Investments Commission |
|ATO |Australian Taxation Office |
|BAS |business activity statement |
|CGT |capital gains tax |
|Commissioner |Commissioner of Taxation |
|FMD |farm management deposit |
|GST |goods and services tax |
|IT(TP)A 1997 |Income Tax (Transitional |
| |Provisions) Act 1997 |
|ITAA 1936 |Income Tax Assessment Act |
| |1936 |
|ITAA 1997 |Income Tax Assessment Act |
| |1997 |
|PAYE |pay as you earn |
|PAYG |pay as you go |
|R&D |research and development |
|TAA 1953 |Taxation Administration Act |
| |1953 |
|TLIP |Tax Law Improvement Project |
General outline and financial impact
This Bill rewrites provisions from the Income Tax Assessment Act
1936 into the Income Tax Assessment Act 1997 and the Taxation
Administration Act 1953. This is a significant step towards
achieving a single income tax assessment Act for Australia.
The rewritten provisions are:
. Part VI (collection and recovery provisions);
. Schedule 2C (commercial debt forgiveness);
. Schedule 2E (luxury car leases);
. Schedule 2G (farm management deposits); and
. Schedule 2J (general insurance).
The rewritten provisions generally make no policy changes.
However, they include the drafting changes needed to conform to the
legislative approach used in the Income Tax Assessment Act 1997, to
simplify expression, and to remove any ambiguity.
Date of effect: The rewrites generally apply to the 2010-11 and
later income years.
Proposal announced: This measure was announced in the then
Assistant Treasurer's speech to the Taxation Institute of Australia
Annual Conference on 13 March 2009.
Financial impact: Nil to minimal.
Compliance cost impact: Low.
Chapter 1
Background to the rewrites
Outline of chapter
1. This chapter explains the historical background to the Income Tax
Assessment Act 1997 (ITAA 1997) and the steps that have been
taken to complete the rewrite of the Income Tax Assessment Act 1936
(ITAA 1936). It also summarises the changes the Bill makes to the
provisions it rewrites. The later chapters discuss the specific
changes in more detail.
Creating the 1997 Act
2. In November 1993, the Joint Committee of Public Accounts
recommended that the income tax law be rewritten.[1] The Keating
government accepted the recommendation and created the Tax Law
Improvement Project (TLIP) to implement it.
3. In April 1995, the TLIP team published a discussion paper proposing
to rewrite the law progressively. It proposed that approach for
several reasons, including:
. rewriting the law in tranches would be less disruptive for
the Parliament and other users of the law;
. the benefits of the rewrite would be available sooner; and
. waiting to deliver the whole rewrite at once would almost
certainly involve having to rewrite some things twice, as
the law changed in the interim.
4. The team's proposal was adopted. This led to the ITAA 1997
(introduced into Parliament in 1996 and enacted in 1997) and two
further Acts: the Tax Law Improvement Act 1997 and the Tax Law
Improvement Act (No. 1) 1998. Each Act included rewrites of
tranches of the income tax law.
Further stages of rewriting the income tax law
5. In August 1998, the Howard government announced, in its Tax Reform:
Not a New Tax, A New Tax System paper, that the TLIP team would be
subsumed into the taskforce being assembled to implement the
substantive reforms that paper proposed.[2]
6. Since that time, no formal work has been done on a pure rewrite of
the remaining provisions of the previous Act, the ITAA 1936.
However, rewriting has continued as part of substantive reforms.
The reform of the imputation system in 2002, for example, included
a rewrite of the imputation provisions from the ITAA 1936 into the
ITAA 1997.
7. The ITAA 1936 has not been repealed. However, in 2006, the Tax
Laws Amendment (Repeal of Inoperative Provisions) Act 2006 repealed
all the provisions of the ITAA 1936 that had so far been rewritten,
as well as other provisions of the Act that had become inoperative.
What does the Bill do?
8. TLIP had no mandate to make significant policy changes, but it did
have a wide brief to improve the legislation it was rewriting.
TLIP introduced many of the drafting features we now take for
granted in the income tax and goods and services tax (GST) laws
(such as a top-down structure, aids to navigation, asterisking of
defined terms, and non-operative guide material). It also used
plain English drafting for its rewrites.
9. The rewrites in this Bill involve no significant policy changes but
do conform to the drafting approach used in the ITAA 1997 and in
Schedule 1 to the Taxation Administration Act 1953 (TAA 1953).
However, they involve much less rewriting of provisions than did
the TLIP rewrites. In part, that is to minimise the possibility of
substantive changes occurring unintentionally but, more
importantly, it is because the provisions chosen for rewriting
already used a fairly plain-English style.
What sorts of changes have been made to the material?
10. In general, the rewrites aim to reproduce the ITAA 1936 material,
in language as little changed as possible, and in the same order as
the original material.
Structural changes
11. In some cases, material has been consolidated or reordered to
better conform to the structure of the current law. These cases
are itemised in the relevant chapters.
Inoperative and transitional material
12. Material that is clearly inoperative has been removed, and some
material of a transitional nature has been moved from the principal
rules into the Income Tax (Transitional Provisions) Act 1997
(IT(TP)A 1997). These cases too are itemised in the relevant
chapters.
Numbering
13. In some cases, the numbering of provisions has changed to reflect
the location in the ITAA 1997 or the TAA 1953 into which the
provisions have been rewritten. Structural changes and removal of
inoperative provisions have also affected the numbering in some
areas. The specific changes for each of the rewrites are explained
in the relevant chapter.
General wording changes
14. In a few instances, wording has been changed where it produced a
clearly simpler result without changing the meaning. These cases
are itemised in the relevant chapters.
Guide material
15. Guide material has been added where none exists in the current law
and, where it does exist, has often been substantially rewritten.
The added material includes both formal guides to Divisions and
Subdivisions, and notes that point readers to related provisions or
other relevant information.
Definitional changes
16. The most significant changes were to make the material conform to
the definitional approaches used in the ITAA 1997. The most
important of these is the 'one-term, one-meaning' protocol that
requires a defined term to have the same meaning across the ITAA
1997. By contrast, it is quite common in the ITAA 1936 for
definitions to apply only to a Division, or even to a section, and
for the same term to be defined in many different ways throughout
that Act.
17. In some cases, the current law defines a term inconsistently with
its definition or use in the ITAA 1997, and in others a term may be
defined in the ITAA 1997 but take its ordinary meaning in the
current law. The changes made in the rewrites to accommodate the
definitional rules have aimed to preserve the meaning of the
current law. Individual changes are discussed in the relevant
chapters.
Will the rewrite affect interpretation of the law?
18. Whenever the wording of legislation changes, its meaning could
change too. An important aim of the rewrites in this Bill is to
minimise any changes in meaning and there are good reasons for
believing that merely changing the structure, wording or location
of provisions has not changed their meaning.
Statutory influences on interpretation
19. The main reason is that section 1-3 of the ITAA 1997 provides that
an idea expressed in one form of words in the ITAA 1936 is not
taken to be different when the same idea appears to be expressed in
the ITAA 1997 but in a different form of words. Section 15AC of
the Acts Interpretation Act 1901 says the same thing.
20. Because 'this Act' is defined in the ITAA 1997 to include
Schedule 1 to the TAA 1953, section 1-3 produces the same result
for material rewritten into that Schedule.
21. In general, there is no intention in the rewrites in this Bill to
change the ideas expressed in the original material, so section 1-3
should prevent any changes in meaning being inferred because
different words have been used. In those few cases where a
different meaning is intended, the relevant chapters say so
expressly.
Effect on ATO rulings
22. The Australian Taxation Office (ATO) publishes rulings about the
interpretation of taxation laws.[3] Those rulings are more than
just the Commissioner of Taxation's (Commissioner) opinion about
what the law means; they are statements to which the Commissioner
is legally bound, even if they prove to be wrong (see Division 357
in Schedule 1 to the TAA 1953).
23. There might be doubt about the ongoing effect of a ruling about a
provision that has been rewritten. To the extent that a rewritten
provision expresses the same idea as the original provision,
section 357-85 of Schedule 1 to the TAA 1953 provides that the
ruling applies equally to the rewritten provision. That means that
taxpayers can rely on an existing ruling, and will get the same
legal protection, as if the ruling were about the rewritten
provision.
How is this explanatory memorandum arranged?
24. After this general chapter, the explanatory memorandum contains a
separate chapter for each of the rewrites.
Specific chapter for each rewrite
25. Each of those chapters explains what, in broad terms, the rewritten
material does. It also discusses particular issues relevant to
that rewrite. For instance, the chapters explain such things as:
. the material that was not rewritten because it was
inoperative;
. the changes made to conform to definitional requirements;
and
. the reasons for the location and structure of the
rewritten material.
26. The chapters do not discuss the detailed policy reasons for the
original provisions. However, they do list the Act that introduced
the original provisions and each of the Acts that amended them.
That list will help those interested in the policy reasons for the
provisions to track down the original explanatory memorandums and
parliamentary debates that explain them.
27. The chapters do discuss the reasons for any substantive changes to
the original provisions. They also explain the consequential
amendments to other provisions that are needed as a result of
enacting the rewrites.
Finding tables
28. Some finding tables follow the specific chapters. Those tables
cross-reference the original provisions with their equivalents in
the rewrites. The tables help taxpayers map the rewrites onto the
existing provisions and vice versa.
Chapter 2
Collection and recovery of income tax rewrite - Part VI of the ITAA 1936
Outline of chapter
29. Schedule 1 to this Bill rewrites the remaining sections of Part VI
of the Income Tax Assessment Act 1936 (ITAA 1936) into the Income
Tax Assessment Act 1997 (ITAA 1997) and the Taxation Administration
Act 1953 (TAA 1953).
Context of amendments
30. The context of the rewrite is explained in Chapter 1.
31. The remaining sections of Part VI of the ITAA 1936 are contained in
Divisions 1 and 8 to 10. Those Divisions can be broken into three
discrete topics, namely:
. Division 1 - general rules about collections and recovery
of income tax;
. Divisions 8 and 10 - prompt recovery of certain income tax
liabilities through estimates; and
. Divisions 9 and 10 - penalties for directors of non-
complying companies.
Detailed explanation of new law
32. Part VI of the ITAA 1936 is repealed by this Bill [Schedule 1,
item 2]. The contents of Part VI have been rewritten and this Bill
will include the rewritten rules in either the ITAA 1997 or
Schedule 1 to the TAA 1953.
Division 1 of Part VI
33. Division 1 of Part VI of the ITAA 1936 now contains only three
unrelated sections. The remainder of the Division has already been
rewritten or relocated into the TAA 1953. These sections were
original sections from the enactment of the ITAA 1936.
34. Section 204 of the ITAA 1936 sets the time in which income tax for
an income year becomes due and payable. It also imposes the
general interest charge on overdue income tax debts and sets the
time at which any shortfall interest charge must be paid to the
Commissioner of Taxation (Commissioner). The effect of this
section has been reproduced in the core provisions of the ITAA
1997.
35. Section 213 of the ITAA 1936 has been largely untouched since its
enactment in 1936. It allows the Commissioner to seek security
from a taxpayer for a future income tax liability. Refusal to
provide security sought by the Commissioner is a criminal offence.
The effect of this section has been reproduced in the TAA 1953.
Consistent with current tax administration policy about having a
single set of general collection and recovery rules for all taxes,
the effect of the section has been expanded to cover all taxes
administered by the Commissioner. Machinery provisions have also
been incorporated into the security deposits rules to provide
certainty for taxpayers about their rights and obligations.
36. Section 219 of the ITAA 1936 allows the Commissioner to consolidate
the income tax assessments of a number of different agents if they
are in respect of the same foreign resident or an Australia
resident absent from Australia. The provision facilitates the
issuing of assessments and the collection of income tax where there
are several agents in receipt of income from the one foreign
resident. The section has particular application to cases where
there are several selling agents for the same foreign resident
firm. As this provision relates to the making of income tax
assessments by the Commissioner, it is being relocated to Part IV
of the ITAA 1936 (about assessments of income tax). A rewrite of
this provision cannot be undertaken before Part IV has been
rewritten.
Divisions 8 and 10 of Part VI
37. Divisions 8 and 10 of Part VI of the ITAA 1936 introduced a new
regime in 1993 to enable the Commissioner to recover certain tax
debts earlier and more effectively. The regime provides the
Commissioner with the ability to recover amounts based on
reasonable estimates.
38. See the explanatory memorandum to the Insolvency (Tax Priorities)
Legislation Amendment Bill 1993 for a more detailed explanation of
the operation of Division 8 of Part VI.
39. The rewrite reproduces the effect of Divisions 8 and 10 of Part VI
in the TAA 1953.
Divisions 9 and 10 of Part VI
40. Divisions 9 and 10 of Part VI of the ITAA 1936 introduced a new
regime in 1993 to enable the Commissioner to recover certain tax
debts earlier and more effectively. The regime imposes a duty on
directors to cause the company to forward amounts withheld from
payments to employees and some other creditors to the Commissioner.
The duty is enforced by penalties equal to the unpaid amounts.
The penalty is automatically remitted if the company meets its
obligations, or promptly goes into voluntary administration or
liquidation.
41. The penalty regime reflects the public duty on directors to ensure
that amounts withheld from payments to third parties are promptly
forwarded to the Commissioner. The public duty arises because
withheld amounts are similar in nature to amounts held on trust.
That is, the directors are in a position of trust and have a duty
to protect those monies until they have been forwarded to the
Commissioner.
42. In addition, because the pay as you go (PAYG) withholding rules
often give a credit to the entity from which an amount has been
withheld regardless of whether the withholder has paid the amount
to the Commissioner, the Commonwealth is effectively guaranteeing
such amounts. Such a guarantee necessitates the imposition of
penalties on directors to ensure companies comply with their PAYG
withholding obligations and to maintain the integrity of the tax
system.
43. See the explanatory memorandum to the Insolvency (Tax Priorities)
Legislation Amendment Bill 1993 for a more detailed explanation of
the operation of Division 9 of Part VI.
44. The rewrite reproduces the effect of Divisions 9 and 10 of Part VI
in the TAA 1953.
How the rewrite is different
45. References in this chapter are to Schedule 1 to the TAA 1953 unless
otherwise stated.
Division 1 of Part VI
Guide material
46. The rewrite contains newly written guide material in respect of
section 204 of the ITAA 1936. The guide material explains how the
rewrite fits within the core provisions of the ITAA 1997 and when
the provisions would apply to a particular taxpayer. [Schedule 1,
item 3, section 5-1 of the ITAA 1997]
Structural changes
47. The remaining sections in Part VI of the ITAA 1936 are unrelated to
one another and are not co-located in the rewrite. Section 204 has
been rewritten into the core provisions of the ITAA 1997 in a newly
created Division. [Schedule 1, item 3, Division 5 of the ITAA
1997]
48. Section 213 has been rewritten into Schedule 1 to the TAA 1953 with
other rules about collection and recovery of tax-related
liabilities. [Schedule 1, item 9, Subdivision 255-D]
49. Section 219 has not been rewritten as part of this Bill. It has
instead been relocated within the ITAA 1936 and will be rewritten
with the other rules about income tax assessments. [Schedule 1,
item 1, section 169AA of the ITAA 1936]
50. The rewrites of sections 204 and 213, whilst expressed differently,
do not involve a change in structure as the sections are relatively
short and self-contained.
Differences in Division 5 of the ITAA 1997 (former section 204)
51. The rewrite is a simplified expression of section 204 but contains
no substantive policy changes.
Income tax payability dependent on assessment
52. The Commissioner currently interprets the law as making income tax
due and payable only once income tax has been assessed. That is,
an assessment is required before any income tax can be due and
payable. Whilst that conclusion is not clear from the law itself,
the High Court of Australia agreed with this view in considering
the application of the law to full self-assessment cases[4]
(typically, companies, superannuation trustees and first home saver
account providers). The High Court has not considered the
application of this law to non-full self-assessment cases.
53. The rewrite makes that result clear for both full self-assessment
and non-full self-assessment cases. This change to the text of the
tax law is consistent with the way the Commissioner already
administers the tax law and the context in which the Act operates.
[Schedule 1, item 3, subsections 5-5(2) and (3) of the ITAA 1997]
54. Once an assessment has been made by the Commissioner, the income
tax assessment is due and payable in accordance with the general
rules. In order to ensure that the law applies equally to all
taxpayers the due and payable date might be treated as having
occurred before the assessment was made. Setting a fixed due and
payable date (which might be before an assessment) facilitates the
correct calculation of interest charges for taxpayers who fail to
lodge income tax returns within the required timeframes. [Schedule
1, item 3, subsection 5-5(3)]
Commissioner's ability to defer due dates for payment
55. The Commissioner's power to generally defer the date on which
income tax for self-assessment taxpayers becomes due and payable
has been omitted. The Commissioner can instead rely on his general
power to defer the time at which a tax-related liability becomes
due and payable, contained in Division 255 in Schedule 1 to the TAA
1953.
56. The Commissioner's ability to defer payment of income tax is
generally set out in the TAA 1953. It gives the Commissioner a
discretion to extend payment dates for taxes, to enter into payment
arrangements and, in some cases, to write off debts. The
provisions apply widely to all the taxes for which the Commissioner
is responsible.
57. The older administrative provisions in the ITAA 1936 allow the
Commissioner to grant a general extension to full self-assessment
taxpayers by publishing a notice in the Commonwealth of Australia
Gazette.
58. The Commissioner's powers under the TAA 1953 are sufficient to
defer the due and payable date for either single taxpayers or
classes of taxpayers. The Commissioner therefore does not use his
powers under the ITAA 1936 but uses the wider TAA 1953 powers to
achieve that outcome. Accordingly, the rewrite does not reproduce
the ITAA 1936 powers.
59. However, there is a slight doubt about the breadth of the
Commissioner's powers under the TAA 1953 as they apply to 'classes'
of taxpayer. The rewrite therefore changes those powers to remove
any doubt that the Commissioner can grant extensions of due dates
for single taxpayers as well as for classes.
60. Section 255-10 in Schedule 1 to the TAA 1953 has been modified to
clarify its application to classes of taxpayers. Section 255-10
allows the Commissioner to defer the time at which an amount of a
tax-related liability becomes due and payable. The section does
not explain how the Commissioner defers the due date for classes of
taxpayers as it only discusses how such a deferral occurs in
relation to a particular taxpayer.
61. Schedule 1 to this Bill amends section 255-10 to provide a
procedure for the Commissioner to defer a tax-related liability for
a class of taxpayers. The Commissioner will be required to publish
on the Australian Taxation Office (ATO) website a notice advising
taxpayers of his or her decision to defer the due and payable date
of a tax-related liability. [Schedule 1, item 7, subsections 255-
10(2A) to (2C)]
62. Situations in which the Commissioner may exercise this power
include extensions for the lodgment of business activity statements
(BASs) immediately following the Christmas break and extensions for
the lodgment of BASs for taxpayers affected by a natural disaster.
63. The rewrite notes that a notice published on the ATO website is not
a legislative instrument. This statement is included to merely
assist readers. The notice is not a legislation instrument within
the meaning of the Legislative Instrument Act 2003 and therefore
the provision has no substantive effect other than to assist
readers. [Schedule 1, item 7, subsection 255-10(2C)]
Differences in Subdivision 255-D in Schedule 1 to the TAA 1953
(former section 213)
Application of the rules to all taxes
64. Consistent with current tax administration policy about having a
single set of general collection and recovery rules for all taxes,
the effect of section 213 has been expanded to cover all taxes
administered by the Commissioner. [Schedule 1, item 9, section 255-
100]
65. The rewrite applies to all existing and future tax-related
liabilities. Section 213 was limited to existing and future income
tax liabilities.
66. However, a number of provisions in the tax laws extended the
operation of section 213 to cover particular taxes (for example,
franking deficit tax). These extensions are no longer necessary
and are being repealed. [Schedule 1, item 28]
67. The overall structure of the rewrite and the conditions it contains
have not been amended. However, the rewrite is a simplified
expression of section 213. Section 213 is currently a single block
of text. The current conditions have been separated out with the
intention of making clearer each of the conditions and powers it
contains.
68. References to 'carrying on a business' in section 213 have been
changed to 'carrying on an enterprise' to reflect the widened
application of the provisions to other taxes, including the goods
and services tax. [Schedule 1, item 9, paragraph 255-100(1)(a)]
Operation of the security deposit rules
69. The security deposit rules allow the Commissioner to seek security
from a taxpayer for an existing or future tax liability in certain
situations. Refusal to provide security sought by the Commissioner
is a criminal offence. [Schedule 1, item 9, Subdivision 255-D]
70. The Commissioner may ask for security where he or she believes
there is a serious risk of a tax-related liability not being paid.
Examples of such situations include:
. where a taxpayer plans to temporarily carry on an
enterprise in Australia and leave without returning;
. where the taxpayer has a history of non-compliance
(including by defaulting on their tax liabilities);
. where the directors of a corporate taxpayer have a history
of non-compliance;
. where the Commissioner is granting a taxpayer the benefit
of a payment arrangement; and
. to protect the integrity of the tax system against schemes
such as 'fraudulent phoenix activity', which broadly
involves winding up a company (with significant unpaid
debts) but continuing the same business through a newly
'risen' company.
71. The Commissioner must consider all relevant matters and act
reasonably in deciding whether to request security, how much
security to require a taxpayer to provide, what kind of security to
accept and when, and how often to ask for security. [Schedule 1,
item 9, section 255-100]
72. The Commissioner's decisions are administrative in nature and
reviewable by the Federal Court of Australia under the
Administrative Decisions (Judicial Review) Act 1977.
73. The Criminal Code defences apply to the criminal offence of
refusing to provide security sought by the Commissioner. Of
particular relevance is the defence of 'involuntariness'. A
taxpayer who is unable to provide security as requested by the
Commissioner can rely on the defence provided they are incapable of
providing the security as required. However, a taxpayer would be
expected to comply with the request as far as they are capable
and/or refraining from the activity that will generate the tax
liabilities for which the Commissioner has sought security.
74. A security deposit requirement is enforced by criminal sanctions
for non-compliance. Security need not be provided by way of a cash
deposit (for example, security can be provided by granting a
mortgage over property). Such requirements are neither taxes nor
withholding obligations. Therefore, collection of security
deposits is not subject to the general collection and recovery
rules that apply to tax-related liabilities. Requests for security
deposits cannot be allocated to a running balance account and the
general interest charge is not applied to taxpayers who fail to
provide security within timeframes required.
75. Security can be provided by way of bond or deposit or by any other
means the Commissioner believes appropriate. Such other means
include a mortgage over property (real or personal), floating
charges, liens and guarantees. The Commissioner may be required to
register his or her security interests where required by law.
[Schedule 1, item 9, subsection 255-100(2)]
76. The Commissioner's ability to exercise his or her rights in
relation to a security arrangement (to settle a tax-related
liability) is governed by the general law applying to security
arrangements and will often be situation specific and dependent
upon the reason for the request for security and the nature of the
liabilities to which the security relates. In general, the
Commissioner would be able to exercise his or her rights under the
security arrangement where the taxpayer has failed to meet his or
her tax debt as and when it fell due, or where the taxpayer has
breached the conditions of a payment arrangement. Further, a
taxpayer may request the Commissioner use a security deposit to
extinguish their tax-related liability.
77. Whether the Commissioner must relinquish his or her rights under a
particular security arrangement is also governed by the general law
applying to security arrangements. In general, the Commissioner
would be required to relinquish his or her rights under a security
arrangement (for example, by refunding a bond) when the underlying
tax-related liability is discharged. However, a further
requirement to give security could sometimes be met by the
Commissioner simply retaining the rights under an existing security
arrangement.
Machinery provisions
78. Machinery provisions have been incorporated into the security
deposits rules [Schedule 1, item 9, section 255-105].
Incorporating these machinery provisions provides certainty for
taxpayers about their rights and obligations. The machinery
provisions incorporate the following features.
. The Commissioner is required to give written notice to a
taxpayer required to give security.
. The notice must explain why the Commissioner has asked for
security, describe the means by which security can be
provided; set out by when security must be provided and
advise of the procedures available to have the
Commissioner's decision reviewed.
. In order to avoid taxpayers challenging or defeating the
application of the provision on purely technical grounds,
a failure to comply with specific technicalities of the
notice requirements does not affect the validity of a
request by the Commissioner for a security deposit.
. The Commissioner may accept a security deposit by
instalments.
Penalty
79. Section 213 has been largely untouched since its enactment in 1936
including the amount of the penalty for breaching the security
requirement. Although the penalty has not been updated since that
time to reflect inflation or the current capital available to
taxpayers, it was recently amended to change the penalty from a
fixed monetary amount to an equivalent penalty unit amount.
80. The penalty therefore no longer provides an appropriate deterrent
for those taxpayers who do not comply with a requirement to provide
security. The penalty is therefore adjusted to reflect changed
circumstances since 1936.
81. The penalty is increased to 100 penalty units (or $11,000) for
individuals. This increase is broadly consistent with changes in
the Consumer Price Index and average weekly earnings since 1936.
As a result of the operation of section 4B of the Crime Act 1914,
the penalty applied to bodies corporate is therefore automatically
raised to five times the new standard penalty for individuals (500
penalty units, or $55,000). [Schedule 1, item 9, section 255-110]
Divisions 8 and 10 of Part VI
Guide material
82. The rewrite contains newly written guide material for the whole
Division. [Schedule 1, item 10, section 268-1]
83. The guide material gives a simple explanation of the intent and
mechanics of the Division.
Structural changes
84. The rewrite follows the basic structure of Division 8 of Part VI.
However, some related provisions have been merged so as to avoid
unnecessary duplication. A few of the provisions have also been
reordered to simplify and bring together a number of related
matters.
85. The rewrite is split into six Subdivisions, namely rules about:
. the object of the Division;
. making estimates;
. liability to pay estimates;
. reducing and revoking estimates;
. late payment of estimates; and
. a number of miscellaneous matters about estimates.
Differences
Who can make declarations and affidavits
86. The Commissioner can make estimates of unreported PAYG withholding
liabilities and can sue based on those estimates. The rules
providing the Commissioner with the power to make estimates allow
taxpayers to make a statutory declaration or an affidavit if they
believe the Commissioner has wrongly estimated the liability.
87. The law sets out who is eligible to make such a declaration or
affidavit. The current list does not cover all types of taxpayer.
That deficiency is the result of the passage of time and the number
of ad hoc changes that have been made to the law over the years.
The rewrite updates the list to cover every type of taxpayer.
[Schedule 1, item 10, section 268-90]
Removing special payment arrangement rules
88. The rules providing the Commissioner with the power to make
estimates also allow the Commissioner to enter into payment
arrangements for collecting those estimated debts. These rules are
narrower than the Commissioner's general TAA 1953 powers to enter
into payment arrangements, which also apply to these debts.
89. The provisions in the estimates rules allowing for payment
arrangements are superfluous because of the TAA 1953 powers and are
seldom used. The rewrite therefore seeks to simplify and shorten
the rules by not reproducing the estimates payment arrangement
provisions.
90. The Commissioner's general power to enter into payment arrangements
in the TAA 1953 will now be the only rules that apply to estimates.
Changes to reflect the introduction of the running balance account
system
91. Division 8 was not amended to reflect the introduction of the
running balance account system in 1999. That system provides a
bank account style credit/debit arrangement for a taxpayer's
interaction with the Commissioner.
92. Under the system, a number of credits and debits are offset at
various stages (for example, the BAS would offset a fuel tax credit
against a PAYG withholding liability and only the net balance of
the BAS is payable or refundable). With regard to payments made,
the Commissioner has an unfettered discretion to allocate payments
as he or she sees fit. That is, a taxpayer might intend to make a
payment against a particular tax liability, but the Commissioner
can ignore such wishes and apply the payment (credit) against any
debt he or she so chooses.
93. The same rules apply in respect of other credits of the taxpayer.
So, even on a BAS, the Commissioner can choose how he or she will
apply any offsetting (or even whether to apply offsetting within
the statement - for example, the statement credits might be applied
to other outstanding liabilities which would leave the statement
debts still owing). A more common example will be where the
taxpayer makes a part payment towards an undisclosed statement
liability. The Commissioner may exercise the discretion so that
the payment reduces non-PAYG liabilities thereby opening up the
possibility of the Commissioner making an estimate.
94. The introduction of the running balance account means that the
estimate rules requiring the taxpayer to supply information on
'amounts paid or applied' do not practically work because they ask
taxpayers to supply information to the Commissioner that they
cannot possibly know without asking the Commissioner.
95. It is therefore inappropriate to ask taxpayers to supply this
information in a statutory declaration or affidavit. The content
of a statutory declaration or affidavit should be limited to
taxpayers providing information on amounts of debts (underlying
liabilities). Therefore, the requirement to supply amounts paid or
applied has been removed. [Schedule 1, item 10, section 268-90]
Rules about service
96. The rules about service have been clarified taking account of a
number of court decisions, particularly with regard to the
application of similar rules in Division 9. Where appropriate, the
outcomes of those decisions are reflected in the rewrite. See
paragraphs 2.78 to 2.82. [Schedule 1, item 10, section 268-15]
Divisions 9 and 10 of Part VI
Guide material
97. The rewrite contains newly written guide material for the whole
Division. [Schedule 1, item 10, section 269-1]
98. The guide material gives a simple explanation of the intent and
mechanics of the Division.
Structural changes
99. The rewrite basically follows the structure of Division 9 of
Part VI.
100. However, a few provisions have been merged or moved to different
Subdivisions. For example, the existing separately specified
directors' obligations have been combined into one section.
101. The rewrite is broken up into four Subdivisions, namely rules
about:
. the object and application of penalties for directors of
non-complying companies;
. obligations of directors and penalties for breaching those
obligations;
. discharging liabilities for penalties; and
. miscellaneous rules about directors' penalties.
102. The rewrite has sought to standardise the various directors'
obligations. A small number of minor differences that existed
between the various obligations have been removed.
Differences
103. Some of the material previously included in the object and outline
has been included as guide material. The wording of the objects
clause has also been adjusted to reflect current drafting practice.
104. The Division has been rationalised and standardised. There have
been a number of changes made to the Division over the years as
additional obligations have been placed on directors to ensure
compliance with the income tax laws. However, there have been
subtle changes to the wording of new obligations which have
resulted in unnecessary complexity being imposed on directors. The
rewrite has sought to simplify the expression of the directors'
obligations and to list each obligation in a standardised way.
105. The rewrite provides directors with a clear set of rights and
obligations in respect to duties to ensure a company complies with
its taxation obligations.
Directors' penalty notices
106. The rewrite has been drafted taking account of a number of court
decisions on the application of Division 9. Where appropriate, the
outcome of those decisions has been reflected in the rewrite.
107. For example, the Meredith case[5] concerned when the Commissioner
has given a director penalty notice. The court decided that
section 29 of the Acts Interpretation Act 1901 did not apply, so
that a notice was given when it is posted (rather than when it is
received).
108. That result was the intended result under the current law but, to
remove any possibility of a future misunderstanding, the rewrite
clearly excludes the operation of section 29 of the Acts
Interpretation Act 1901. This has not resulted in a policy change
as it simply reflected the current state of the law as set out in
the Meredith decision. [Schedule 1, item 10, section 269-25]
109. However, an implication of the Meredith decision is that directors
could have less than 14 days to comply with a notice, because of
the time taken to deliver the post (especially to remote areas).
To address this issue, the rewrite extends the 14-day period to 21
days, so that all directors will at least have as much time as they
would under the Commissioner's administrative practice (which
counts the 14-day period, not from when it posted the notice, but
from when the notice would normally have been delivered).
[Schedule 1, item 10, section 269-25]
110. The general rules about the service of documents will continue to
be governed by section 28 of the Acts Interpretation Act 1901 and
the Taxation Administration Regulation 1976. Amongst other
methods, those rules permit the Commissioner to give a notice by
posting it either to the place of residence or business of the
taxpayer last known to the Commissioner, or to the taxpayer's
'preferred address for service'.
Addresses from Australian Securities and Investments Commission
documents
111. When issuing director penalty notices, the ATO is entitled to also
rely on certain Australian Securities and Investments Commission
(ASIC) records to ascertain directors' addresses. In practice, the
ATO relies on the ASIC database to obtain the addresses rather than
the original forms because it is not practical for the ATO to get
the addresses from the source documents.
112. The rewrite makes clear that the ATO does not have to use ASIC
source documents but can search appropriate ASIC computing records
to find directors' addresses (that is, the ATO can rely on
information held by ASIC). [Schedule 1, item 10, section 269-50]
113. The law permits the use of ASIC records because directors have a
legal duty under the Corporations Act 2001 to keep their address
with ASIC current. Therefore, it is appropriate to allow the
Commissioner to use that address for the purposes of service.
114. Information held by ASIC includes information ASIC has obtained
from source documents and audit activity and transferred onto their
computing systems. The information held by ASIC operates
effectively as conclusive evidence of a director's address and can
be relied upon by the Commissioner.
Defences for directors' penalties
115. The director penalty regime imposes a duty on directors to cause
their company to forward to the Commissioner all amounts it
withholds from payments it makes to its employees and some other
creditors. The duty is enforced by a penalty equal to any unpaid
amount. The penalty is automatically remitted if the company meets
its obligations, or promptly goes into liquidation or voluntary
administration.
116. The automatic remission of the penalty when the company promptly
goes into liquidation or voluntary administration reflects the
additional obligation on directors, in the event that they cannot
cause their company to forward all amounts it withholds to the
Commissioner, to take all reasonable steps necessary to promptly
place the company into liquidation or administration. [Schedule 1,
item 10, subsection 269-15(2)]
117. The regime excuses directors if, because of illness or some other
good reason, they did not take part in the management of the
company.
118. Following some recent court judgments, there was a concern that the
present wording of the defence provision can excuse directors on
the basis of relatively minor ailments, including those suffered by
others. The rewrite restores the original policy intent of the
provision by qualifying the condition that the director 'did not
take part' in the management of the company with the additional
condition that it would have also been unreasonable to expect the
director to take part. [Schedule 1, item 10, subsection 269-35(2)]
119. The defence provisions now expressly state that section 1318 of the
Corporations Act 2001 does not apply as a possible defence to a
directors' penalty. This follows a decision of the New South Wales
Court of Appeal[6] which came to this conclusion after considering
the contexts of both provisions and the interaction between the
Corporations Act 2001 and the ITAA 1936. [Schedule 1, item 10,
subsection 269-35(5)]
Application and transitional provisions
Division 1 of Part VI
Application and commencement
120. The rewrite of Division 1 of Part VI commences on 1 July 2010.
[Clause 2]
121. The rewrite of section 204 applies from the 2010-11 financial year
and later financial years. [Schedule 1, item 54, section 5-5 of
the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997)]
Transitional rules
122. Despite its repeal, section 204 continues to apply to income tax
and shortfall interest charge a taxpayer must pay in relation to
the 2009-10 financial year and earlier financial years. [Schedule
1, item 56]
123. Any general interest charge that is accruing under section 204 at
the time the rewrite commences is transitioned into the rewritten
provision. That is, any unpaid general interest charge under
section 204 is taken to have been imposed under the rewritten
provision. This will allow the interest to continue to accrue
until it is paid. Effectively, this will mean that the rewrite
will have no effect on outstanding liabilities and accruing
interest. [Schedule 1, item 54, section 5-10 of the IT(TP)A 1997]
124. If the Commissioner has required a taxpayer under section 213 to
give security for a potential tax debt, or a taxpayer has given the
Commissioner the required security, the security obligation is
taken to have been made under the rewrite as opposed to section
213. This will allow for a smooth transition into the new
arrangements. The rewrite will therefore not affect any past
arrangements. The new notice requirements do not apply to existing
security obligations transitioned into the new arrangements.
[Schedule 1, item 57]
125. Tax sharing agreements entered into by members of consolidated
groups often contain references to sections that are rewritten or
amended by this Bill. Where those agreements refer to those
provisions, they are deemed to instead refer to the rewritten and
amended provisions. [Schedule 1, items 54 and 55, sections 5-1 and
721-25 of the IT(TP)A 1997]
Divisions 8 and 10 of Part VI
Application and commencement
126. The rewrite of Divisions 8 and 10 of Part VI commences on 1 July
2010. [Clause 2]
127. From 1 July 2010, the Commissioner must make estimates under the
new provisions regardless of when the underlying liability arose.
That is, from 1 July 2010, the Commissioner may make estimates
under the new law in relation to liabilities that arose before 1
July 2010 or that arise after 1 July 2010. The Commissioner cannot
issue estimates under the current law once the new law commences.
[Schedule 1, item 58]
Transitional rules
128. The new law applies to estimates still in force made under the
current law as if those estimates were made under the new law.
[Schedule 1, items 58 to 60]
129. Regulations made under the ITAA 1936 to support the current law
continue in force to support the new law as if they had been made
under the TAA 1953. These regulations will be formally remade
under the TAA 1953 as soon as practicable after the commencement of
the new law. [Schedule 1, item 63]
130. The general interest charge continues to accrue on estimates made
under the current law. [Schedule 1, item 61]
131. Payment arrangements made before the commencement of the new law
continue in effect. [Schedule 1, item 62]
Divisions 9 and 10 of Part VI
Application and commencement
132. The rewrite of Divisions 9 and 10 of Part VI commences on 1 July
2010. [Clause 2]
133. The rewrite applies to obligations arising both before and after
1 July 2010 subject to a number of transitional rules. For
example, the Commissioner can issue a notice of a penalty that
arose in relation to an unfulfilled obligation under the current
law as if the new law had always applied. This approach will
ensure a smooth transition between the old law and new law.
[Schedule 1, item 64]
Transitional rules
134. No penalties are imposed under the new law if a penalty was payable
under the old law at anytime before 1 July 2010. This will prevent
a taxpayer being subject to multiple penalties in relation to a
breach of a single obligation. [Schedule 1, item 65]
135. Penalties that remain unpaid as at 1 July 2010 under the old law
are taken to have been payable under the new law for the purposes
of the machinery provisions. This will ensure a smooth transition
between the old and new law. [Schedule 1, item 65]
136. Payment arrangements made before the commencement of the new law
continue in effect afterwards. If a taxpayer defaults on a payment
arrangement that resulted in a remission of a director penalty, the
penalty will be treated as having not been remitted and will be
taken to be payable under the new law. [Schedule 1, item 65]
Consequential amendments
137. As a result of the rewrite, a number of consequential amendments
are required to ensure cross references to the old law are updated
to refer to the new law. [Schedule 1, items 11 to 27, 29 to 32 and
34 to 52]
Legislative history of Part VI
Division 1 of Part VI
138. Sections 204, 213 and 219 (Division 1) of the ITAA 1936 are
original sections of that Act.
139. These Acts have amended those sections:
|Act title |Act No. |Effect of amendments |
|Income Tax |17 of 1940|The amendments provided a |
|Assessment Act 1940 | |different due and payable |
| | |date in respect of income tax|
| | |that is 'further tax on |
| | |undistributed company |
| | |income'. This date was 30 |
| | |days after a notice of |
| | |assessment was served instead|
| | |of the standard 60 days. |
| | |This tax no longer exists. |
|Income Tax |63 of 1940|These amendments repealed and|
|Assessment Act (No. | |replaced the general and |
|2) 1940 | |specific due and payable |
| | |dates that existed at that |
| | |time with a single due and |
| | |payable date that was the |
| | |date specified by the |
| | |Commissioner in the notice of|
| | |assessment. However, the |
| | |Commissioner could not |
| | |specify a day earlier than 30|
| | |days after service of the |
| | |notice. |
|Income Tax and |43 of 1954|The amendments were |
|Social Services | |consequential upon the |
|Contribution | |introduction of provisional |
|Assessment Act 1954 | |tax and tax instalments. |
| | |Prior to introduction of |
| | |progressive payments of |
| | |income tax, the Commissioner |
| | |was required to specify the |
| | |date on which an assessment |
| | |of income tax was due and |
| | |payable (subject to some |
| | |limitations). With the |
| | |introduction of progressive |
| | |payments of income tax, many |
| | |taxpayers were due a refund |
| | |upon assessment. In those |
| | |cases, it was no longer |
| | |appropriate for the |
| | |Commissioner to specify a |
| | |date on which income tax was |
| | |due and payable. To provide |
| | |for the working of the |
| | |provisions, limiting when an |
| | |amended assessment can be |
| | |made (which was linked to the|
| | |date income tax became due |
| | |and payable) the provision |
| | |was amended to specify a |
| | |deemed date when income tax |
| | |became due and payable where |
| | |a date was not specified by |
| | |the Commissioner in an |
| | |assessment. |
|Income Tax |143 of |These amendments were merely |
|Assessment Act (No. |1965 |consequential upon the |
|2) 1965 | |conversion to decimal |
| | |currency. |
|Income Tax Laws |108 of |Amendments made were of a |
|Amendment Act 1981 |1981 |technical nature. They |
| | |converted numbers expressed |
| | |in words in the statute to |
| | |numerals. |
|Taxation Laws |123 of |The amendments were |
|Amendment Act 1984 |1984 |consequential upon the |
| | |introduction of Part VII |
| | |penalties for income tax |
| | |shortfalls. The amendments |
| | |widened the application of |
| | |section 204 to specify a date|
| | |on which a penalty under |
| | |Part VII became due and |
| | |payable. |
| | |The amendments also made a |
| | |few technical amendments to |
| | |section 213 to modernise the |
| | |language. |
|Income Tax |52 of 1986|Amendments were consequential|
|Assessment Amendment| |upon the introduction of |
|(Capital Gains) Act | |capital gains tax. The |
|1986 | |changes allow the |
| | |Commissioner to consolidate |
| | |assessments in relation to |
| | |both agents in receipt of |
| | |income and agents in receipt |
| | |of gains or profits of a |
| | |capital nature. |
|Taxation Laws |11 of 1999|The amendments were |
|Amendment Act (No. | |consequential upon the |
|3) 1999 | |introduction of the general |
| | |interest charge that applied |
| | |to overdue tax-related |
| | |liabilities. The amendments |
| | |applied general interest |
| | |charge to all income tax |
| | |liabilities that remain |
| | |unpaid after the day on which|
| | |it became due and payable. |
|A New Tax System |179 of |These amendments introduced a|
|(Tax Administration)|1999 |fixed due and payable date |
|Act 1999 | |for the income tax |
| | |liabilities of full |
| | |self-assessment taxpayers. |
| | |As those taxpayers have a |
| | |deemed assessment once they |
| | |lodge their return, rules |
| | |that require the service of a|
| | |notice of assessment were |
| | |inappropriate in order to set|
| | |the due and payable date. |
|A New Tax System |91 of 2000|Section 204 was amended to |
|(Tax Administration)| |introduce a statutory due |
|Act (No. 2) 2000 | |date for payment by taxpayers|
| | |who are not full |
| | |self-assessment taxpayers, |
| | |for example, individuals. A |
| | |statutory due date was |
| | |necessary for the calculation|
| | |of penalties under the new |
| | |administrative penalty |
| | |regime, for example, general |
| | |interest charge. |
|Taxation Laws |101 of |The amendments were technical|
|Amendment Act (No. |2004 |in nature and ensured that |
|1) 2004 | |the general rules about when |
| | |an original assessment of |
| | |income tax is due and payable|
| | |do not apply to amended |
| | |assessments which are subject|
| | |to other rules. |
|Tax Laws Amendment |75 of 2005|These amendments were part of|
|(Improvements to | |a package that introduced the|
|Self Assessment) Act| |shortfall interest charge. |
|(No. 1) 2005 | |The amendments determined the|
| | |date the shortfall interest |
| | |charge becomes due and |
| | |payable and the application |
| | |of general interest charge to|
| | |unpaid shortfall interest |
| | |charge liabilities. |
|Tax Laws Amendment |143 of |The amendments converted the |
|(2007 Measures No. |2007 |existing penalty expressed as|
|4) Act 2007 | |a maximum dollar amount to a |
| | |penalty expressed as a number|
| | |of penalty units. The |
| | |amendments merely brought the|
| | |provision into line with |
| | |current Commonwealth criminal|
| | |penalty policy. |
Divisions 8 and 10 of Part VI
140. Divisions 8 and 10 of Part VI of the ITAA 1936 were added by the
Insolvency (Tax Priorities) Legislation Amendment Act 1993
[Act No. 32 of 1993].
141. These Acts have amended Division 8 of Part VI:
|Act title |Act No. |Effect of amendments |
|Taxation Laws |138 of |Consequential amendments on |
|Amendment Act (No. |1994 |the introduction of the |
|3) 1994 | |reportable payments system. |
| | |The amendments widened the |
| | |scope of Division 8 to allow |
| | |estimates to be made of |
| | |unremitted reportable |
| | |payments system amounts. The|
| | |reportable payments system |
| | |was repealed when the PAYG |
| | |withholding system was |
| | |introduced. |
|Taxation Laws |170 of |Minor consequential |
|Amendment Act (No. |1995 |amendments relating to the |
|3) 1995 | |removal of the ability to |
| | |acquire 'tax stamps' and |
| | |adjustment to the pay as you |
| | |earn (PAYE) provisions |
| | |dealing with group |
| | |certificates. The PAYE |
| | |system was repealed when the |
| | |PAYG withholding system was |
| | |introduced. |
|Taxation Laws |41 of 1998|Very minor technical |
|(Technical | |correction to adjust an |
|Amendments) Act 1998| |incorrect internal reference.|
|Taxation Laws |47 of 1998|Consequential amendments |
|Amendment Act (No. | |resulting from the |
|3) 1998 | |introduction of new generic |
| | |collection rules for the PAYE|
| | |system, prescribed payments |
| | |system and reportable |
| | |payments system. |
|Taxation Laws |11 of 1999|Amendments were made to |
|Amendment Act (No. | |remove the existing late |
|3) 1999 | |payment penalty and to |
| | |replace it with the |
| | |standardised general interest|
| | |charge. |
|A New Tax System |179 of |Changes were made to Division|
|(Tax Administration)|1999 |8 as a result of the |
|Act 1999 | |introduction of the PAYG |
| | |withholding system which |
| | |replaced a number of other |
| | |withholding regimes to which |
| | |Division 8 applied. The |
| | |estimates made by the |
| | |Commissioner are now also |
| | |covered by the generic |
| | |collection and recovery rules|
| | |which were introduced by the |
| | |Act. |
|A New Tax System |44 of 2000|Minor amendments to correct |
|(Tax Administration)| |incorrect internal |
|Act (No. 1) 2000 | |references. |
|New Business Tax |86 of 2000|The scope of Division 8 |
|System (Alienation | |widened to cover the new |
|of Personal Services| |alienated personal services |
|Income) Act 2000 | |payment withholding |
| | |arrangements also introduced |
| | |with this Act. |
|A New Tax System |91 of 2000|Merely a minor technical |
|(Tax Administration)| |correction. |
|Act (No. 2) 2000 | | |
|Corporations |55 of 2001|Minor consequential changes |
|(Repeals, | |from introduction of the |
|Consequentials and | |Corporations Act 2001. |
|Transitionals) Act | | |
|2001 | | |
|Taxation Laws |119 of |The amendments widened the |
|Amendment Act (No. |2002 |scope of Division 8 to ensure|
|5) 2002 | |that the Commissioner could |
| | |make estimates of any amounts|
| | |covered by the PAYG |
| | |withholding system and not |
| | |just amounts covered by the |
| | |repealed system that were |
| | |rolled into the PAYG |
| | |withholding system. |
| | |The amendments also provided |
| | |rules that allowed estimates |
| | |made to be amended or revoked|
| | |if a statutory declaration |
| | |has been made by the entity |
| | |issued with the estimate. |
|Tax Laws Amendment |101 of |Removal of inoperative |
|(Repeal of |2006 |provisions and consequential |
|Inoperative | |amendments. |
|Provisions) Act 2006| | |
Divisions 9 and 10 of Part VI
142. Divisions 9 and 10 of Part VI of the ITAA 1936 were added by the
Insolvency (Tax Priorities) Legislation Amendment Act 1993
[Act No. 32 of 1993].
143. These Acts have amended Division 9 of Part VI:
|Act title |Act No. |Effect of amendments |
|Taxation Laws |138 of |Consequential amendments on |
|Amendment Act (No. |1994 |the introduction of |
|3) 1994 | |reportable payments systems. |
| | |The amendments widened the |
| | |scope of Division 9 to allow |
| | |directors' penalties to be |
| | |made in relation to |
| | |unremitted reportable |
| | |payments system amounts. The|
| | |reportable payments system |
| | |was repealed when the PAYG |
| | |withholding system was |
| | |introduced. |
|Taxation Laws |47 of 1998|Consequential amendments |
|Amendment Act (No. | |resulting from the |
|3) 1998 | |introduction of new generic |
| | |collection rules for the PAYE|
| | |system, prescribed payments |
| | |system and reportable |
| | |payments system. |
|A New Tax System |179 of |Changes were made to Division|
|(Tax Administration)|1999 |9 as a result of the |
|Act 1999 | |introduction of the PAYG |
| | |withholding system which |
| | |replaced a number of other |
| | |withholding regimes to which |
| | |Division 9 applied. The |
| | |penalties made by the |
| | |Commissioner are now also |
| | |covered by the generic |
| | |collection and recovery rules|
| | |which were introduced by the |
| | |Act. |
|A New Tax System |44 of 2000|Minor amendments to correct |
|(Tax Administration)| |incorrect internal |
|Act (No. 1) 2000 | |references. |
|New Business Tax |86 of 2000|The scope of Division 9 |
|System (Alienation | |widened to cover the new |
|of Personal Services| |alienated personal services |
|Income) Act 2000 | |payment withholding |
| | |arrangements also introduced |
| | |with this Act. |
|Corporations |55 of 2001|Minor consequential changes |
|(Repeals, | |from introduction of the |
|Consequentials and | |Corporations Act 2001. |
|Transitionals) Act | | |
|2001 | | |
|Taxation Laws |169 of |A number of consequential |
|Amendment Act (No. |2001 |changes resulting from |
|6) 2001 | |refinements made to the |
| | |personal services income |
| | |rules. |
|Taxation Laws |57 of 2002|Minor technical correction |
|Amendment Act (No. | |(renumbering of subsections).|
|2) 2002 | | |
|Taxation Laws |119 of |The amendments widened the |
|Amendment Act (No. |2002 |scope of Division 9 to ensure|
|5) 2002 | |that the Commissioner could |
| | |impose penalties for any |
| | |amounts covered by the PAYG |
| | |withholding system and not |
| | |just amounts covered by the |
| | |repealed system that was |
| | |rolled into the PAYG |
| | |withholding system. |
|Tax Laws Amendment |101 of |Removal of inoperative |
|(Repeal of |2006 |provisions and consequential |
|Inoperative | |amendments. |
|Provisions) Act 2006| | |
|Corporations |101 of |Minor consequential |
|Legislation |2007 |amendment. |
|Amendment (Simpler | | |
|Regulatory System) | | |
|Act 2007 | | |
Chapter 3
Debt forgiveness rewrite - Schedule 2C
Outline of chapter
144. Schedule 2 to this Bill rewrites Schedule 2C to the Income Tax
Assessment Act 1936 (ITAA 1936) into the Income Tax Assessment
Act 1997 (ITAA 1997).
Context of amendments
145. Schedule 2C to the ITAA 1936 provides a taxation treatment for the
gain made when a taxpayer's debt is forgiven. The gain is not
treated as assessable income. Instead, Schedule 2C works out an
amount (the 'net forgiven amount'), which reduces the taxpayer's
tax losses, net capital losses, capital allowances and the cost
bases of capital gains tax (CGT) assets. These are things that
would otherwise reduce the taxpayer's future income tax liability.
Detailed explanation of new law
146. The rewrite repeals Schedule 2C and reproduces its effect in the
ITAA 1997. [Schedule 2, items 1 and 2, Schedule 2C to the ITAA
1936, Division 245 of the ITAA 1997]
How the rewrite is different
Guide material
147. The rewrite contains newly written guide material for the whole
Division and for most of its Subdivisions. [Schedule 2, item 2,
sections 245-1, 245-5, 245-30, 245-48, 245-80, 245-95 and 245-200]
148. The existing diagrams that map Schedule 2C and each of its
Subdivisions have not been reproduced because they add little to
the reader's understanding of the provisions.
Structural changes
149. The rewrite follows the structure of Schedule 2C: it has the same
Subdivisions and they appear in the same order.
150. The main exception is that Subdivision G is not rewritten.
Subdivision G provides special rules for forgiveness of a debt
between companies in the same group. As a consequence of enacting
provisions for consolidated groups in 2002 (see Part 3-90 of the
ITAA 1997), Subdivision G is no longer necessary and is omitted
from the rewrite.
151. A few provisions have been moved to different Subdivisions or to
other places in the ITAA 1997. For example, the definition of
'moneylending debt' that was in Subdivision H has been moved into
the Dictionary to the ITAA 1997. These differences are discussed
in more detail later.
Differences in Subdivision A - Which debts are covered
152. Subdivision A of Schedule 2C explains which debts are subject to
the debt forgiveness rules. The rewrite achieves the same outcome
but with a slightly different approach.
153. Schedule 2C applies to 'commercial debts', a defined term based on
another defined term, 'debt'. The ITAA 1997 avoids using terms
inconsistently. Since it already uses 'debt' in its ordinary
sense, it could not adopt the Schedule 2C definition of 'debt'.
Therefore, the rewrite incorporates the content of that definition
directly into operative application rules. It was convenient to do
the same with the definition of 'commercial debt'. [Schedule 2,
item 2, sections 245-10, 245-15 and 245-20]
154. One aspect of the definition of 'debt' in Schedule 2C that is not
reproduced is the requirement (in subsection 245-15(1) of Schedule
2C) that there be an obligation to pay an amount to another person.
The ordinary meaning of 'debt' requires an obligation to do
something, so that need not be expressly stated. To the extent
that a debt might involve an obligation to do something other than
pay an amount, the context (for example, references to 'paying' the
debt, rather than to satisfying it) makes it clear that the rewrite
is concerned with monetary debts. Therefore, the rewrite does not
reproduce the reference to an amount.
155. A second aspect of the definition that is not reproduced is the
requirement that the obligation be enforceable. There might be
some unenforceable obligations that could be described as debts
(for example, debts of honour). However, it is unlikely they could
satisfy the further requirement that interest on the debt could be
deducted. Therefore, the rewrite also does not include that
requirement.
156. Another aspect of the definition of 'debt' in Schedule 2C that is
not included in the rewrite is the rule that treats accrued but
unpaid interest on the debt as being part of the principal debt
rather than a separate debt (section 245-20 of Schedule 2C). This
rule was originally included to reduce compliance costs but in
practice has not achieved that result. Further, conflating the
time at which the interest accrued and the time at which the
original debt was incurred can actually distort the value of the
forgiven debt (because, in valuing the debt, the provisions assume
the debtor's capacity to pay is the same when it is forgiven as
when it was incurred). For those reasons, the rule is not
replicated. As a result, each amount of interest that accrues is a
separate debt and, if it is forgiven, is subject to the debt
forgiveness rules separately from any forgiveness of the principal
amount.
157. Section 245-26 in Schedule 2C provides for the Schedule to apply to
trustees when a trust estate's debt is forgiven. The ITAA 1997
already provides for a trust to be treated as an entity (see
section 960-100), so this provision did not need to be rewritten.
158. The provisions that stop the rewrite applying to forgivenesses that
were in train when Schedule 2C was enacted in 1996 have been moved
into the Income Tax (Transitional Provisions) Act 1997
(IT(TP)A 1997) on the basis that they have only a limited future
role. [Schedule 2, item 9, subsection 245-10(1) of the IT(TP)A
1997)]
Differences in Subdivision B - What is debt forgiveness
159. Subdivision B of Schedule 2C explains what 'forgiveness' of a debt
is. The rewrite does the same thing in much the same way, although
it presents the material in separate shorter sections rather than
in a single longer section. [Schedule 2, item 2, sections 245-35
to 245-37]
160. Some exceptions included in the definitions of 'debt' and
'commercial debt' in Subdivision A of Schedule 2C have been moved
into the section that lists the forgivenesses to which the
provisions do not apply. This was necessary because the rewrite
moves the content of those definitions directly into the operative
provisions. Including them in the list of forgivenesses not
covered is also more consistent with their true nature as
exceptions. [Schedule 2, item 2, paragraphs 245-40(a), (b) and
(f)]
Differences in Subdivision C - What is the value of the forgiven
debt
161. Subdivision C of Schedule 2C works out the gross benefit to the
debtor of the debt being forgiven. In general, this is the value
of the debt forgiven less what the debtor pays for the forgiveness.
The rewrite reproduces the Subdivision in substantially similar
terms.
162. One exception is the appearance of the provision about how much the
value of the debt forgiven is reduced when the debtor provides
consideration for the forgiveness. In Schedule 2C, section 245-65
is unusually difficult to understand. The rewrite simplifies the
drafting of the provision by presenting the rules in a table. The
result it achieves is unchanged. [Schedule 2, item 2, section 245-
65]
163. The rewrite omits section 245-70. For the purposes of working out
the gross forgiven amount of a debt, section 245-70 treats money or
property the debtor applies for the benefit of the creditor, or at
the creditor's direction, as if it had been paid or given to the
creditor. The section is redundant because the calculation of a
gross forgiven amount does not depend on the debtor giving money or
property to the creditor; it merely asks if the money or property
was paid or given in respect of the forgiveness. Therefore,
although the rewrite omits the section, it does not change the
Subdivision's operation.
164. Another exception is that the rewrite splits section 245-75 of
Schedule 2C into two sections, reflecting the fact that it deals
with two separate ideas. [Schedule 2, item 2, sections 245-75 and
245-77]
165. A minor change in outcome occurs because the rewrite adopts the
ITAA 1997 definition of 'end user' of property (see section 250-
50), while Schedule 2C defines the expression to have the meaning
given by section 51AD of the ITAA 1936 (see subsection 245-60(3) of
Schedule 2C). The two definitions are substantially the same (they
both describe an entity who can use the property or control its
use). However, unlike the definition in section 51AD, the ITAA
1997 definition explicitly disregards temporary control of the
property for the purpose of ensuring public health or safety,
protecting the environment or continuing the supply of an essential
service. The rewrite adopts the ITAA 1997 definition because the
ITAA 1997 'end user' approach is consistent with the policy behind
the section 51AD definition and the minor difference is likely to
be relevant so infrequently that adopting the ITAA 1997 definition
is not a significant change. [Schedule 2, item 2, paragraph 245-
60(1)(c)]
Differences in Subdivision D - Adjustments to the debt's value
166. Subdivision D of Schedule 2C reduces the value of a forgiven debt
to produce a 'net forgiven amount'. That net forgiven amount is
then applied by Subdivision E to reduce the taxpayer's tax losses,
CGT cost bases, and so on. Subdivision D reduces the debt's value
in two ways. The value of a forgiven debt is reduced first by any
part of the value that is otherwise taken into account in working
out the taxpayer's taxable income (see section 245-85 of Schedule
2C). That stops double counting. Second, the taxpayer is allowed
to transfer some of the tax effect of the forgiveness to the
creditor if both are companies with a common ownership (see
section 245-90 of Schedule 2C). The rewrite reproduces those
provisions. [Schedule 2, item 2, sections 245-85 and 245-90]
167. If the companies in that second case do wish to transfer some of
the tax effect, Subdivision D requires them to agree in writing and
to lodge the agreement with the Commissioner of Taxation
(Commissioner) before the first of them lodges its tax return for
the year. However, the Commissioner can determine a later day for
lodging the agreement. The rewrite clarifies that such a
determination must be in writing [Schedule 2, item 2, subparagraph
245-90(4)(b)(ii)]. It also makes explicit the existing position
that it is not a legislative instrument (because it does not meet
the conditions for being such an instrument - see section 5 of the
Legislative Instruments Act 2003) [Schedule 2, item 2, subsection
245-90(5)].
Differences in Subdivision E - Tax consequences of a forgiven debt
168. Subdivision E of Schedule 2C contains the provisions that apply the
value of a forgiven debt to reduce the taxpayer's tax losses, net
capital losses, capital allowances and the cost bases of CGT
assets. The rewrite reproduces those provisions. [Schedule 2,
item 2, Subdivision 245-E]
169. The rewrite removes an ambiguity in the way section 245-155 of
Schedule 2C works. That section reduces expenditure for the
purposes of working out future deductions that are based on the
expenditure and limits the total of those deductions to the amount
of the expenditure after that reduction. The rewrite clarifies
that the reduction cannot exceed the unused amount of the
expenditure. [Schedule 2, item 2, subsection 245-155(2)]
170. This Subdivision of Schedule 2C contains some repetition.
For example, subsection 245-105(5) says much the same thing as
section 245-115. The rewrite makes sure material only appears
once. [Schedule 2, item 2, sections 245-115, 245-130 and 245-175
and subsection 245-145(1)]
171. Subsection 245-105(2) of Schedule 2C is presented as an operative
rule but is in fact only for guidance. In the rewrite it becomes a
non-operative note. [Schedule 2, item 2, note to subsection 245-
105(1)]
172. The rules in Subdivision E of Schedule 2C that allocate the
forgiven amount of a debt use a drafting approach that locates much
of the operative material in defined terms. For example, section
245-130 allocates the amount to reducing 'deductible net capital
losses', which is defined in section 245-125. Where those
definitions do not already appear in the ITAA 1997, the rewrite
instead moves their content directly into the allocation
provisions. That prevents the unnecessary use of definitions.
[Schedule 2, item 2, sections 245-115, 245-130, 245-145, 245-175,
245-180, 245-185 and 245-190]
173. Some of the material in the definition of 'excluded expenditure' in
section 245-140 of Schedule 2C relates to things occurring before
the Schedule commenced (see subsections 245-140(3) and (4)).
Because of its limited future operation, the rewrite moves that
material into the IT(TP)A 1997. [Schedule 2, item 9, subsection
245-10(2) of the IT(TP)A 1997]
174. Section 245-140 of Schedule 2C lists the capital allowance
deductions that are subject to being reduced when a debt is
forgiven. The rewrite reproduces that list but corrects a defect.
Item 22 of the list refers to expenditure on Australian films under
section 124ZAF of the ITAA 1936. That section covered expenditure
under contracts entered into before 13 January 1983 and had been
inoperative for many years before it was repealed in 2006. The
equivalent provision for expenditure made under contracts entered
into after that date is section 124ZAFA but that section is not
listed in section 245-140. The rewrite replaces the reference to
section 124ZAF with one to section 124ZAFA. [Schedule 2, item 2,
item 22 in the table in subsection 245-145(1)]
Differences in Subdivision F - Partnerships
175. Subdivision F of Schedule 2C provides for any part of the net
forgiven amount that a partnership cannot use to be divided amongst
the partners. It would then reduce the partners' personal tax
losses, net capital losses, and so on.
176. The rewrite reproduces that result. However, section 245-205 of
Schedule 2C is not reproduced. That section provides that the
Subdivision's rules about partnerships do not apply to corporate
limited partnerships. Since the corporate limited partnership
rules in Division 5A of Part III of the ITAA 1936 already provide
for that result, section 245-205 is redundant. To reinforce that
message, notes are added to the definitions of 'partnership' and
'company' alerting readers that the income tax law treats a
corporate limited partnership as a company and not as a
partnership. [Schedule 2, items 42 to 45, definitions of 'company'
and 'partnership' in subsection 995-1(1)]
177. Section 245-210 of Schedule 2C is also not reproduced. That
section provides for Subdivisions A to E to apply to partnerships.
In the ITAA 1997, section 960-100 ensures that a partnership is an
entity so that provisions that apply generally to entities also
apply to partnerships. Coupled with the partnership provisions in
Division 5 of Part III of the ITAA 1936, that makes section 245-210
unnecessary.
Differences in Subdivision G - Company groups
178. Subdivision G of Schedule 2C provides for the value of a company's
forgiven debt to reduce the tax losses or net capital losses of
other companies in the same group.
179. The rewrite does not reproduce Subdivision G. Since Part 3-90 of
the ITAA 1997 was enacted in 2002, a consolidated corporate group
has been treated as a single entity for tax purposes, so the
separate entities within the group do not have their own income tax
affairs.
180. It is still possible for a group of wholly-owned companies to
decide not to consolidate. The policy for the treatment of
grouping provisions for a group that chooses not to consolidate was
set out by the Review of Business Taxation in its 1999 paper A
Platform for Consultation:[7]
The availability of a consolidation taxation regime removes the
need to retain the current grouping provisions. In particular,
the current tax treatment is unsound whereby, on the one hand,
each group entity is treated as a separate taxpayer and, on the
other, grouping provisions operate to break down that
separation in a partial fashion.
181. This position led to the recommendation of the Review to
repeal grouping provisions.[8] That recommendation was implemented
when Part 3-90 was enacted. The explanatory memorandum to the
New Business Tax System (Consolidation) Bill (No. 1) 2002 restated
the policy expressed by the Review of Business Taxation:[9]
The intention of the measures contained in this Bill is to
allow wholly-owned groups to elect to be taxed in one of two
ways - as a single consolidated taxpaying entity or on an
individual entity basis for each member of the group. The
existing hybrid and less than comprehensive arrangements as
represented by the grouping provisions will be replaced by the
consolidation regime.
182. It follows that removing Subdivision G is broadly consistent with
the policy behind the consolidation provisions. The general anti-
avoidance rule in Part IVA of the ITAA 1936 is available to
counter any schemes that removing the Subdivision might otherwise
enable for unconsolidated company groups. Because Subdivision G
only applies to companies, Part IVA is already relied on to counter
such arrangements entered into by other entities, such as trusts.
Differences in Subdivision H - Definitions, record-keeping and
timing
183. Subdivision H of Schedule 2C contains a rule about the timing of
debts that result from drawing on a line of credit, some rules
about keeping records of commercial debts and definitions of some
terms used in the Schedule.
184. The rule about the time of incurring debts that arise from drawings
on a line of credit (section 245-260 in Schedule 2C) is omitted.
The current rule provides that the whole debt is taken to have been
incurred when the first drawing was made after the most recent time
that no amount was owed on the line of credit.
185. That rule was originally included to reduce compliance costs but in
practice has not achieved that result. Further, merging the times
of the drawings, can actually distort the value of the forgiven
debt in ways that disadvantage taxpayers. For those reasons, the
rule is not replicated.
186. Some of the definitions are not rewritten because:
. they are already defined in the ITAA 1997 (for example,
the definition of 'associate' is the same in the ITAA 1997
as in Schedule 2C);
. the definition simply repeats the term's ordinary meaning
(for example, 'pay' is defined to include 'repay' but, as
repay simply means to pay back, the ordinary meaning of
'pay' already covers it); or
. the rewrite builds the content of the definition directly
into an operative provision (for example, the definition
of 'debt' as including a part of a debt appears in the
rewrite as a rule that applies the provisions to parts of
debts in the same way as they apply to a whole debt).
187. Other definitions are moved into the Dictionary to the ITAA 1997.
[Schedule 2, items 3 to 8, definitions of 'forgiveness',
'forgiveness income year', 'moneylending debt', 'net forgiven
amount' and 'total net forgiven amount' in subsection 995-1(1)]
188. That leaves the Subdivision only with the rules about record-
keeping. Accordingly, the Subdivision's heading is changed from
'General' to 'Record-keeping'. [Schedule 2, item 2, heading to
Subdivision 245-G and section 245-265]
189. The rewrite reproduces the current record-keeping rules except that
it makes failing to keep the required records an offence of strict
liability. That means that the offence does not require any fault
element (see section 6.1 of the Criminal Code). Under the current
law, establishing an offence would require proof of an intention
not to keep the records (see subsection 5.6(1) of the Criminal
Code). The change recognises the difficulty of proving an
intention not to keep records that might not have been kept because
of carelessness or oversight. It is also consistent with other
record-keeping provisions in tax laws (for example, subsection
262A(5A) of the ITAA 1936 and subsection 382-5(10) of Schedule 1 to
the TAA 1953). [Schedule 2, item 2, subsection 245-265(9)]
190. The rewrite also removes the defence of reasonable excuse provided
for in Schedule 2C's record-keeping rule (see subsection 245-
265(8A)). That defence is open-ended, leaving it unclear what
needs to be established to make it out, or to rebut it when raised.
It also brings the provision into line with other record-keeping
provisions in tax laws, which do not provide any such defence. The
Criminal Code does provide defences that are relevant to this
provision, such as involuntariness (see section 4.2), mental
impairment (see section 7.3) and mistake of fact (see section 9.2).
Application and transitional provisions
Application
191. The rewrite applies to debts forgiven in the 2010-11 income year
and later income years. For most taxpayers, the 2010-11 income
year starts on 1 July 2010. For taxpayers with a substituted
accounting period, their 2010-11 income year will start on a
different day. [Schedule 2, item 9, subsection 245-5(1) of the
IT(TP)A 1997]
Transitional
192. Debts forgiven before the rewrite applies (that is, debts forgiven
in the 2009-10 income year or in an earlier income year) are still
subject to the operation of Schedule 2C, even though it is repealed
[Schedule 2, item 9, subsection 245-5(2) of the IT(TP)A 1997].
That does not affect the operation of section 8 of the Acts
Interpretation Act 1901 (which provides for the continuation of
rights, obligations and penalties created under repealed
provisions, and of legal proceedings relating to those rights,
obligations and penalties) [Schedule 2, item 9, subsection 245-5(3)
of the IT(TP)A 1997].
193. A number of rules in Schedule 2C provide treatments for things that
occurred, or were in train, before 27 June 1996, when Schedule 2C
commenced (see subsections 245-10(2) and 245-140(3) and (4)).
Those provisions are of little ongoing relevance now but the
rewrite preserves any residual operation they may have by moving
them into the IT(TP)A 1997. [Schedule 2, item 9, section 245-10 of
the IT(TP)A 1997]
Consequential amendments
194. References to Schedule 2C are replaced by references to the
equivalent provisions in the rewrite. Some of those consequential
amendments also change wording, or add asterisks, to reflect the
transfer of Schedule 2C defined terms into the ITAA 1997
Dictionary. [Schedule 2, items 10 to 22 and 24 to 41, paragraphs
82KZMA(6)(b) and 82KZMF(2)(b), subsections 73A(1A), 82KZM(2) and
109F(3) and sections 124KAA and 124ZAFAA to the ITAA 1936 and
paragraphs 165-115ZA(2)(b), 204-30(2)(c) and 243-75(2)(a) and (b),
subsections 25-25(1) (note), 25-35(5) (item 3 in the table), 36-
15(7), 36-17(9) (note), 40-90(1), 40-645(3) (note 1), 43-50(7), 104-
25(5) (note 2), 243-75(1), 707-140(3), and 707-415(2) (item 1 in
the table) and (4), and sections 12-5, 112-97 (item 19 in the
table), and 230-470 of the ITAA 1997]
195. Note 1 to subsection 40-645(3) is amended to remove the words 'of
this Act', which exist to provide a contrast between references to
provisions of the ITAA 1997 and references to provisions of
Schedule 2C. The contrast is no longer necessary because all
references in the note are now to provisions of the ITAA 1997.
[Schedule 2, item 23, subsection 40-645(3) (note 1)]
Legislative history of Schedule 2C
196. Schedule 2C to the ITAA 1936 was added by the Taxation Laws
Amendment Act (No. 2) 1996 [Act No. 76 of 1996].
197. These Acts have amended Schedule 2C:
|Act title |Act No. |Effect of amendments |
|Taxation Laws |95 of 1997|Minor amendments |
|Amendment Act (No. | |consequential on amendments |
|2) 1997 | |to CGT provisions. |
|Tax Law Improvement |121 of |Minor amendments |
|Act 1997 |1997 |consequential on the Tax Law |
| | |Improvement Project (TLIP) |
| | |rewrites of other provisions.|
|Taxation Laws |122 of |Added subsection 245-25(4A) |
|Amendment Act (No. |1997 |to prevent Schedule 2C |
|1) 1997 | |applying to Commonwealth tax |
| | |debts. |
| | |Amended subsection 245-55(4),|
| | |and added subsection |
| | |245-65(2A), to stop market |
| | |value rules applying in |
| | |relation to foreign debts. |
| | |Added subsection 245-75(3) to|
| | |divide effect of forgiveness |
| | |among joint debtors instead |
| | |of applying it fully to each |
| | |of them. |
| | |Table of deductible |
| | |expenditures in |
| | |section 245-140 expanded to |
| | |include expenditure on |
| | |research and development |
| | |(R&D) activities and |
| | |horticultural plants. |
| | |Technical amendment to |
| | |subsection 245-190(3) to make|
| | |it possible to work out |
| | |balancing adjustments for |
| | |notional disposal of assets. |
| | |Technical amendment to |
| | |subsection 245-225(3) to |
| | |ensure group company |
| | |provisions apply in all |
| | |intended cases. |
| | |Technical amendment to |
| | |section 245-230 to correct an|
| | |interaction anomaly with |
| | |company loss rules. |
|Taxation Laws |16 of 1998|Minor amendment consequential|
|Amendment Act (No. | |on TLIP rewrite of other |
|1) 1998 | |provisions. |
|Tax Law Improvement |46 of 1998|Minor amendments |
|Act (No. 1) 1998 | |consequential on TLIP |
| | |rewrites of other provisions.|
|Taxation Laws |39 of 1999|Minor amendment to section |
|Amendment (Software | |245-140 consequential on |
|Depreciation) | |introduction of capital |
|Act 1999 | |allowance for software. |
|Taxation Laws |54 of 1999|Minor amendment to section |
|Amendment Act (No. | |245-140 consequential on |
|6) 1999 | |introduction of capital |
| | |allowance for spectrum |
| | |licences. |
|Taxation Laws |93 of 1999|Technical correction to |
|Amendment Act (No. | |section 245-105 to allow |
|2) 1999 | |total net forgiven amounts to|
| | |reduce net capital losses of |
| | |all earlier income years, not|
| | |just the preceding year. |
|Taxation Laws |94 of 1999|Minor amendment to section |
|Amendment Act (No. | |245-250 consequential on |
|4) 1999 | |rewrite of value shifting |
| | |provisions. |
|New Business Tax |169 of |Amendments to section 245-85 |
|System (Integrity |1999 |consequential on new regime |
|and Other Measures) | |for preventing value shifting|
|Act 1999 | |via debt forgiveness and to |
| | |section 245-140 because of |
| | |changes to prepayments rules.|
|A New Tax System |91 of 2000|Minor amendment consequential|
|(Tax Administration)| |on introduction of uniform |
|Act (No. 2) 2000 | |administrative penalties |
| | |regime. |
|New Business Tax |77 of 2001|Minor amendments to sections |
|System (Capital | |245-140 and 245-155 |
|Allowances | |consequential on introduction|
|-Transitional and | |of uniform capital allowance |
|Consequential) Act | |regime. |
|2001 | | |
|Treasury Legislation|146 of |Amendments to section 245-265|
|Amendment |2001 |consequential on reform of |
|(Application of | |the criminal code. |
|Criminal Code) | | |
|Act (No. 2) 2001 | | |
|New Business Tax |163 of |Amendment to section 245-25 |
|System (Debt and |2001 |replacing extension of |
|Equity) Act 2001 | |Schedule 2C to debt dividends|
| | |with an extension to |
| | |non-equity shares, |
| | |consequential on introduction|
| | |of debt and equity regime. |
|Taxation Laws |170 of |Minor amendment to section |
|Amendment (Research |2001 |245-140 consequential on |
|and Development) Act| |changes to the R&D tax |
|2001 | |concession. |
|Taxation Laws |57 of 2002|Technical amendment to |
|Amendment Act (No. | |section 245-170 correcting a |
|2) 2002 | |numbering error. |
|New Business Tax |90 of 2002|Amendments to sections 245-85|
|System | |and 245-250 consequential on |
|(Consolidation, | |introduction of the general |
|Value Shifting, | |value shifting regime. |
|Demergers and Other | | |
|Measures) Act 2002 | | |
|Taxation Laws |142 of |Minor amendment to section |
|Amendment Act (No. |2003 |245-110 consequential on new |
|5) 2003 | |rules for tax losses of |
| | |corporate tax entities. |
|Tax Laws Amendment |161 of |Minor amendments to section |
|(Improvements to |2005 |245-265 consequential on |
|Self Assessment) Act| |Review of Self-Assessment |
|(No. 2) 2005 | |amendments. |
|Tax Laws Amendment |101 of |Removal of inoperative |
|(Repeal of |2006 |provisions and consequential |
|Inoperative | |amendments. |
|Provisions) Act 2006| | |
|Tax Laws Amendment |168 of |Minor amendments to sections |
|(2006 Measures No. |2006 |245-55 and 245-65 |
|4) Act 2006 | |consequential on CGT changes |
| | |for foreign residents. |
|Tax Laws Amendment |143 of |Minor amendment to section |
|(2007 Measures No. |2007 |245-110 consequential on |
|4) Act 2007 | |introduction of foreign tax |
| | |offset regime. |
|Tax Laws Amendment |164 of |Minor amendment to section |
|(2007 Measures No. |2007 |245-140 consequential on |
|5) Act 2007 | |changes to the R&D |
| | |concession. |
Chapter 4
Luxury car leases rewrite - Schedule 2E
Outline of chapter
198. Schedule 3 to this Bill rewrites Schedule 2E to the Income Tax
Assessment Act 1936 (ITAA 1936) into the Income Tax Assessment
Act 1997 (ITAA 1997).
Context of amendments
199. Schedule 2E to the ITAA 1936 ensures that a lease of a luxury car
cannot be used to provide greater tax benefits than those that
would be available if the lessee had bought the car. Schedule 2E
does that by putting the lessee and the lessor in the same
positions they would have been in had the lessee bought the car
from the lessor.
Detailed explanation of new law
200. The rewrite repeals Schedule 2E and reproduces its effect in the
ITAA 1997. [Schedule 3, items 1 and 2, Schedule 2E to the ITAA
1936, Division 242 of the ITAA 1997]
How the rewrite is different
Guide material
201. The rewrite contains newly written guide material for the Division
and for each of its Subdivisions. [Schedule 3, item 2, sections
242-1, 242-5, 242-30, 242-45, 242-60 and 242-75]
Structural changes
202. The rewrite follows the structure of Schedule 2E: it has the same
Subdivisions and they appear in the same order.
203. The main exceptions are that Subdivisions 42A-E (what happens when
a lease expires) and F (what happens when a lease is terminated)
have been merged and Subdivision 42A-G (definitions) has been
deleted.
204. A few provisions have been moved to different Subdivisions or to
other places in the ITAA 1997. For example, many of the
definitions in Subdivision 42A-G have been moved into the
Dictionary to the ITAA 1997. These differences are discussed in
more detail later.
Differences in Subdivision A - Notional sale and loan
205. Subdivision 42A-A of Schedule 2E provides the rules that treat a
lease of a luxury car as a notional sale of the car by the lessor
to the lessee and a notional loan by the lessor of the purchase
price. It also details what the consideration is for the notional
sale.
206. Subsection 42A-20(1) defines the consideration for the notional
sale of the car by the lessor (and the cost of the car to the
lessee) as the amount the parties stated in an arm's-length
agreement, or the amount that would reasonably have been expected
to have been paid had the agreement been an arm's-length agreement
for the sale of the car. The rewrite simplifies those rules by
making the consideration the car's market value. Because there is
little or no difference between the arm's-length sale price used by
the existing provision and a market value sale price, there should
be little or no difference in the substantive effect of the
provisions. [Schedule 3, item 2, subsection 242-20(1)]
207. An exception to the rule about consideration applies to subleases
between associates. In that case, Schedule 2E makes the
consideration the sum of the car's depreciated value and any
balancing charge arising from the notional sale. The rewrite
changes 'depreciated value' to 'adjustable value', the equivalent
expression used in the ITAA 1997. [Schedule 3, item 2, subsection
242-20(2)]
208. The references to the 'cost' of the car (in Subdivision 42A-A and
elsewhere) are changed to 'the first element of the cost' to
reflect a change in terminology made with the introduction of the
uniform capital allowance provisions in 2001. This change ensures
that lessees can deduct the decline in the value of any
improvements they make to the car. [Schedule 3, item 2, paragraph
242-25(1)(b) and subsections 242-20(1) and (2) and 242-90(3) and
(4)]
209. The rewrite also changes the reference to the balancing charge
provision so that it refers to the current balancing charge
provision in the ITAA 1997 [Schedule 3, item 2, paragraph 242-
20(2)(d)]. The existing reference to just the ITAA 1936 provision
appears to have been an oversight made when the ITAA 1936
depreciation provisions were rewritten in 1997. The reference was
also not adjusted when the 1997 rewrite was itself rewritten in
2001 as part of the uniform capital allowance regime. The rewrite
adds references to the ITAA 1936 provision and to the original 1997
rewrite provision. Those references are included in the Income Tax
(Transitional Provisions) Act 1997 (IT(TP)A 1997) because of their
limited future relevance [Schedule 3, item 74, section 242-20 of
the IT(TP)A 1997].
210. Some elements of the definitions of 'associate', 'lease', 'luxury
car' and 'motor car' in Schedule 2E have been moved out of those
definitions into operative provisions. That allows 'lease' to take
its ordinary meaning without definition, simplifies the definition
of 'luxury car', and allows the existing ITAA 1997 definitions of
'associate' and 'car' to apply without amendment. [Schedule 3,
item 2, paragraph 242-15(2)(b) and subsections 242-10(1) and (3)
and 242-20(2)]
211. The provisions that stop the rewrite applying to leases granted
before 7:30 pm on 20 August 1996 are moved into the IT(TP)A 1997 on
the basis that they have only a limited future role. [Schedule 3,
item 74, subsection 242-10(2) of the IT(TP)A 1997]
Differences in Subdivision B - Lessor's assessable income
212. Subdivision B of Schedule 2E explains the taxation treatment for
the lessor of both the actual lease payments and the notional
payments arising from the notional sale and loan.
213. To avoid having to define the expressions, 'accrual amount',
'implicit interest rate' and 'outstanding notional loan principal',
the rewrite incorporates those concepts directly into the operative
provision that works out how much is included in the lessor's
assessable income. There are some slight differences in wording,
which are discussed later. [Schedule 3, item 2, subsection 242-
35(2)]
214. Subsections 42A-35(2) and (3) provide balancing charges for the
notional sale of the car to the lessee and for any actual sale the
lessor makes after reacquiring it from the lessee when the lease
ends. Since a car is a depreciating asset (see section 40-30 of
the ITAA 1997), the same work is done by the balancing adjustment
rules in Subdivision 40-D (which apply when a taxpayer stops
holding a depreciating asset). This is the case even when there is
only a notional sale from the lessor to the lessee because
subsection 42A-15(1) treats the lessor as having sold the car for
all income tax purposes, not just for the purposes of Schedule 2E.
215. Accordingly, since 1999 (when the depreciation provisions were
amended to assess profits made on the disposal of assets for which
no depreciation had been deducted), subsections 42A-35(2) and (3)
have been redundant. For that reason, subsections 42A-35(2) and
(3) are not rewritten.
216. That change could make a difference in the case where the lessor
has some private use of the car either before the notional sale to
the lessee or before any later real sale. Subsections 42A-35(2)
and (3) make no allowance for any private use; they assess the full
profit. The balancing adjustment rules in Subdivision 40-D of the
ITAA 1997 only assess the non-private portion of the profit. In
the unusual case where a luxury car is leased out by someone who
has used it privately, this change produces a small benefit for the
taxpayer.
217. Subsection 42A-40(2) explains that, although the actual lease
payments are neither assessable income nor exempt income of the
lessor, they are taken into account in working out the notional
payments that are included in the lessor's assessable income.
Since the calculation of the notional payments is done by a
different provision, the subsection is inoperative. Reflecting
that, the rewrite converts it into an inoperative note. [Schedule
3, item 2, subsection 242-40(1) (note)]
218. As Schedule 2E stops the actual lease payments from being
assessable income (because it assesses the interest on the notional
loan instead), the lease payments become exempt income.
Subsection 42A-40(3) is necessary to ensure that the amounts the
lessor incurs to earn those lease payments are still deductible
(because deductions are not usually available for earning exempt
income). Since subsection 42A-40(3) was enacted, the income tax
law has recognised a new category of exempt income, called 'non-
assessable, non-exempt income', which covers the lease payments.
The rewrite updates the subsection so that it also ensures that
deductions are not denied because the lessor incurred the amounts
in earning non-assessable, non-exempt income. [Schedule 3, item 2,
subsection 242-40(2)]
Differences in Subdivision C - Lessee's deductions
219. Subdivision 42A-C of Schedule 2E explains what deductions are
available to the lessee of a luxury car.
220. Section 42A-55 provides that the lessee cannot deduct the lease
payments but points out that they are taken into account in working
out the amounts that are deductible in relation to the notional
loan. That second part of the section is non-operative (because
section 42A-140 calculates the deductible amount), so the rewrite
converts it into a note. [Schedule 3, item 2, section 242-55
(note)]
Differences in Subdivision D - Adjustments if the lessor's income
differs from the amount of interest
221. Subdivision 42A-D of Schedule 2E provides for balancing adjustments
for the lessor and lessee if the amount of the notional payments
differs from the actual payments made under the lease.
222. Paragraph 42A-65(1)(a) applies the balancing adjustment rules to
the lessor when a lease term expires and paragraph 42A-65(1)(b)
applies them when a lease is terminated beforehand. The rewrite
merges those two cases into a single paragraph that applies the
balancing adjustment rules whenever the lease ends. [Schedule 3,
item 2, paragraph 242-65(1)(a)]
223. The adjustments for the lessor are worked out by comparing the
total of the amounts payable to the lessor under the lease with the
notional payments under the notional loan. If the former exceeds
the latter, the difference is the lessor's assessable income; if
the reverse is the case, the lessor can deduct the difference. The
current provisions make that hard to follow by expressing the two
cases in different terms. The rewrite expresses them in the same
terms, so the comparison and the results are easier to follow.
[Schedule 3, item 2, subsections 242-65(2) and (3)]
Differences in Subdivisions E and F - What happens when the lease
ends
224. Subdivisions 42A-E and 42A-F of Schedule 2E respectively explain
what happens if a luxury car lease expires and if it is terminated
before the end of the term. In broad terms, those Subdivisions do
the same thing in both cases, so the rewrite merges them into a
single Subdivision that explains what happens whenever the lease
ends. [Schedule 3, item 2, Subdivision 242-E]
225. Schedule 2E frequently mentions the 'end of the lease'. By this,
Schedule 2E generally means the end of the whole transaction (that
is, after all extensions or renewals of the lease have ended).
There are some cases, however, where it means the end of the
current lease period (whether the original lease period or a period
for which the lease was extended or renewed). The rewrite makes
clearer which is meant in those cases. [Schedule 3, item 2,
paragraph 242-90(5)(a) and subsections 242-80(1), (4), (7) and (8)]
226. Paragraph 42A-80(3)(a) refers to an arrangement 'of a kind
mentioned in paragraph (b) of the definition of lease'. Those
arrangements are subleases. Because the ordinary meaning of
'lease' is already used extensively in the ITAA 1997, the rewrite
is not able to replicate the current definition. Therefore, the
rewrite replaces the reference to paragraph (b) of the definition
with the term 'sublease'. [Schedule 3, item 2, subsection 242-
80(3)]
227. Subsection 42A-80(4) provides that the notional loan is taken to
have been repaid when a lease is extended or renewed. It also
provides that Subdivision 42A-D (about balancing adjustments)
applies at that time. As Subdivision 42A-D is self-applying, the
second part of the subsection is purely advisory. Therefore, the
rewrite converts it into an inoperative note. [Schedule 3, item 2,
subsection 242-80(4) (note)]
228. Subsection 42A-80(5) refers to an amount worked out under
subsection 42A-80(7). That subsection makes the cost or value of
the car for purposes of the extension or renewal, the value stated
in an arm's-length lease, or the amount that would reasonably have
been expected to have been paid had the agreement been an arm's-
length agreement for the sale of the car. The rewrite simplifies
those rules by making the consideration the car's market value.
Because there is no difference between the arm's-length sale price
used by the existing provision and a market value sale price, there
should be no difference in the substantive effect of the
provisions. [Schedule 3, item 2, subsection 242-80(5)]
229. Subsections 42A-90(1) and 42A-105(1) specify the conditions for
sections 42A-90 and 42A-105 to apply. The rewrite combines those
conditions into a single provision. [Schedule 3, item 2,
subsection 242-90(1)]
230. Subsections 42A-90(3) and (6) and 42A-105(3) and (5) provide
formulas for working out the consideration for the sale of the car
by the lessee back to the lessor that is taken to have occurred
when the lease comes to an end. The formulas are complex and take
into account variables that might not always be known, so
paragraphs 42A-90(3)(b) and 42A-105(3)(b) allow market value to be
used if it is not practicable to apply the full formula. The
rewrite simplifies the provisions by using the market value as the
consideration in all cases. [Schedule 3, item 2, subsection 242-
90(3)]
231. There should be little difference from that change because the
existing formulas aim to achieve the same broad outcome by adopting
particular figures specified in the lease agreement. Division 240
applies a similar 'sale and loan' approach to hire purchase
arrangements and always treats the consideration as being the
market value, so, for that reason too, it is reasonable to conclude
that the results are similar.
232. Subsections 42A-90(4) and 42A-105(4) determine the cost of the car
for capital allowance purposes for an associate of the lessee who
later acquires the car. In describing the capital allowance
purposes, the subsection refers to the current capital allowance
provision and to the provisions under the two previous capital
allowance regimes. The rewrite moves the references to the two
previous regimes into the IT(TP)A 1997 because of their limited
future relevance. [Schedule 3, items 2 and 74, subsection 242-
90(4) and section 242-20 of the IT(TP)A 1997]
Differences in Subdivision G - Interpretation
233. Subdivision 42A-G defines many of the terms used in Schedule 2E.
Consistent with the approach used in the ITAA 1997 to not define
terms for only a part of the Act, the Subdivision is not rewritten.
The definitions in the Subdivision are instead dealt with in other
ways.
Incorporating the content directly into operative provisions
234. For some definitions, the content is incorporated directly into the
operative provisions [Schedule 3, item 2, paragraphs 242-10(1)(a),
(b) and (d), 242-15(2)(b), 242-20(2)(a) and (b), subsections 242-
10(3), 242-35(2) and (3), 242-80(3) and 242-90(4)]. For example,
the definition of 'associate' starts with the same meaning as in
the ITAA 1997 but is expanded to include employees and employers,
so the rewrite replaces all references to associates with
references to associates, employees and employers.
Relying on existing definitions in the ITAA 1997
235. For some definitions, existing definitions in the ITAA 1997 cover
the same ground. These include the definitions of 'hire purchase
agreement', 'motor car or car', 'right to use' and 'short-term hire
agreement'.
236. The existing ITAA 1997 definition of 'hire purchase agreement' is
slightly different from that in Schedule 2E. Schedule 2E requires
that amounts paid under an agreement for hiring property are taken
into account in working out how much the lessee has to pay to
exercise the option to acquire the property. The existing ITAA
1997 definition instead requires that the hire charge plus the
amount payable to exercise the option total more than the price of
the property. This difference is largely one of form, not
substance, so the ITAA 1997 definition can be used without
affecting the result.
237. The Schedule 2E definition of 'motor car or car' is based on the
ITAA 1997 definition of 'car' but excludes certain cars modified to
carry the disabled. The rewrite incorporates that exclusion
directly into the operative provisions. [Schedule 3, item 2,
paragraph 242-10(1)(d)]
238. The Schedule 2E definition of 'short-term hire agreement' relies,
in part, on the rule in section 42A-125 about treating consecutive
short-term hiring agreements as leases. The existing definition of
'short-term hire agreement' in the ITAA 1997 already broadly
captures that idea, so section 42A-125 is omitted. A small
difference is that section 42A-125 applies to consecutive periods
totalling over six months, while the ITAA 1997 definition refers to
agreements that add up to 'longer than a short-term basis'. The
explanatory memorandum that added that definition referred to that
period as being 'longer than a few months' (see paragraph 5.26 of
the explanatory memorandum to the New Business Tax System
(Simplified Tax System) Bill 2000), so the two ideas are
substantially the same.
Relying on the ordinary meaning of the term
239. Some definitions (for example, the definition of 'lessee' of a
leased car) simply restate the term's ordinary meaning and are
omitted for that reason. The definitions omitted for this reason
are: 'extension', 'finance charge', most of the definition of
'lease', 'leased car', 'lease term', 'lessee', 'lessor', and part
of the definition of 'implicit interest rate'.
240. The definition of 'lease' describes the ordinary meaning of lease
but then adds that hire-purchase agreements and short-term hire
agreements are not leases. The rewrite omits the definition of
'lease', thus relying on its ordinary meaning, but incorporates the
restriction on hire-purchase agreements and short-term hire
agreements directly into the operative rules. [Schedule 3, item 2,
paragraph 242-10(1)(a)]
241. 'Implicit interest rate' is defined to mean the rate of compound
interest for the accrual period at which the present values of
actual payments equal the notional loan principal. In the rewrite,
this content is incorporated (in slightly different words) in the
formula for working out the lessor's accrual amounts [Schedule 3,
item 2, subsection 242-35(2)]. The current definition then
provides rules that require a reasonable estimate to be made when
the present values of the actual payments are not known at the
start of the lease. The rewrite omits those rules on the basis
that this is the course that would be taken anyway when applying
the definition in such circumstances.
Not using the term in a defined way
242. For some defined terms, the provisions are rewritten to avoid
having to use the terms in a defined way at all (for example, the
rewrite continues the current use of 'notional loan' as a label for
the loan the lessor is taken to have made to the lessee but no
longer makes it into a definition). The definitions omitted for
this reason are: 'accrual period', 'notional loan' and 'notional
loan principal'.
Adding definitions to the ITAA 1997 Dictionary
243. The remaining definitions are moved into the ITAA 1997 Dictionary
to apply across the Act. The definitions moved in this way are:
'lease payment', part of the definition of 'lease payment period',
part of the definition of 'luxury car', and 'termination amount'.
In some cases, the labels are altered. [Schedule 3, items 51 to 53
and 59, 'luxury car lease payment', 'luxury car lease payment
period', 'luxury car' and 'termination amount' in subsection 995-
1(1)]
244. The core definition of 'lease payment period' is moved into the
Dictionary (as the term 'luxury car lease payment period') but the
special rules that ensure payment periods can be no longer than six
months are incorporated directly into the operative rules.
[Schedule 3, items 2 and 52, subsection 242-35(3) and 'luxury car
lease payment period' in subsection 995-1(1)]
245. The core definition of 'luxury car' (which looks to whether the
capital allowance provisions would reduce depreciation deductions)
is moved into the Dictionary. It is written by reference to the
time at which it is necessary to know whether the car is a luxury
car, while the Schedule 2E definition asks whether the car was a
luxury car when the current owner first leased it. That allows the
definition to be used for purposes other than the leasing
provisions. The timing rule in the Schedule 2E definition is
instead located in the operative rules. [Schedule 3, items 2 and
53, paragraph 242-10(1)(b) and 'luxury car' in subsection 995-1(1)]
246. The Schedule 2E definition of 'luxury car' asks whether the capital
allowance deductions for the car would be reduced by Division 40
but also asks whether it would have been reduced by the
predecessors of Division 40. The rewrite moves the references to
those earlier provisions into the IT(TP)A 1997 because of their
limited future relevance. [Schedule 3, item 60, subsection 242-
10(3) of the IT(TP)A 1997]
247. The Schedule 2E definition of 'termination amount' is substantially
the same as the existing definition in the ITAA 1997 (in section
240-78). The difference is that the ITAA 1997 definition expressly
covers insurance payments on loss or destruction of property while
the Schedule 2E definition uses the 'value of the car' as the
default amount in all non-acquisition cases. Given the way
insurance payments for loss or destruction are usually calculated,
there is little or no difference in result. Therefore, the rewrite
retains the ITAA 1997 definition but relocates it from section 240-
78 to the Dictionary. [Schedule 3, items 30 and 59, section 240-78
and 'termination amount' in subsection 995-1(1)]
Application and transitional provisions
Application
248. The rewrite applies to assessments for the 2010-11 income year and
later income years. For most taxpayers, the 2010-11 income year
starts on 1 July 2010. For taxpayers with a substituted accounting
period, their 2010-11 income year will start on a different day.
[Schedule 3, item 60, subsection 242-10(1) of the IT(TP)A 1997]
Consequential amendments
249. The amendments update references in the law to Schedule 2E
provisions that are rewritten into the ITAA 1997. [Schedule 3,
items 3 to 5, 7, 11 to 13, 15, 16, 19, 20, 38, 46 and 56,
subparagraphs 118-12(2)(a)(vii), 118-12(2)(b)(viii), 118-
12(2)(b)(ix) and 974-130(4)(a)(iii), paragraph 240-115(2)(b),
subsections 25-35(4A), 28-12(1) (note 2), 28-45(1) (note 1), 28-
90(6) (note 1), 40-185(1) (note), 40-305(1) (note) and 'special
accrual amount' in subsection 995-1(1), and 'leases of luxury cars'
in section 10-5, 'notional sale and loan' in section 11-55 and
'leases of luxury cars' in section 12-5]
250. References to a 'finance charge' in Schedule 2E and in Division 240
of the ITAA 1997 (which uses a similar 'sale and loan' approach for
hire purchase) are replaced with references to 'interest'. This
adopts a more intuitive label; it does not change the substance of
the provisions. Other provisions that refer to the Schedule 2E or
Division 240 finance charge have been changed accordingly.
[Schedule 3, items 8, 24 to 26, 35, 36 and 48, heading to
Subdivision 240-G, paragraph 240-30(a), subsections 25-35(4B), 240-
25(4), 240-25(6) and 'finance charge' in subsection 995-1(1), and
section 240-100]
251. Asterisks are used in the ITAA 1997 to help readers by marking
defined terms. The amendments add some asterisks, and remove
others, mostly because undefined terms are converted into defined
terms and vice versa. [Schedule 3, items 6, 9, 17, 18, 23, 25, 27,
29, 31 to 34, 37, 39 to 42, 45, 47, 49 and 50, paragraphs 40-
755(4)(b), 43-175(2)(a) and 240-90(4)(a), subsections 25-35(4A) and
(4B), 240-25(6), 240-60(1) (steps 1 and 4 in the method statement),
240-80(4), 240-80(5), 240-105(4) (formula), 243-15(5), 243-20(4),
243-25(2), 243-30(2), 855-55(4) and 'depreciating asset', 'in-house
software' and 'IRU' in subsection 995-1(1), and section 240-10]
252. A number of amendments are made as a consequence of assimilating
terms used in Schedule 2E into the definitional structure used in
the ITAA 1997. [Schedule 3, items 10, 14, 30, 39 to 42, 54, 55 and
59, subsections 25-35(4C), 243-15(5), 243-20(4), 243-25(2), 243-
30(2) and 'notional loan', 'notional loan principal' and
'termination amount' in subsection 995-1(1), and sections 40-40
(item 1 in the table) and 240-78]
253. The expression 'subject to tax' is defined in the ITAA 1997 to mean
subject to tax in certain foreign countries, but is used frequently
within its (undefined) ordinary meaning. This is inconsistent with
the ITAA 1997 approach to definitions, which requires that a
defined expression not also be used in an undefined way. The
amendments change the label for the definition to 'subject to
foreign tax' and update the references in each case where it is
intended to be used in the defined way. [Schedule 3, items 43 to
45, 57 and 58, heading to section 830-75, subsections 855-55(4) and
'subject to tax' and 'subject to foreign tax' in subsection 995-
1(1), and section 83-75]
Legislative history of Schedule 2E
254. Schedule 2E to the ITAA 1936 was added by the Taxation Laws
Amendment Act (No. 2) 1997 [Act No. 95 of 1997].
255. These Acts have amended Schedule 2E:
|Act title |Act No. |Effect of amendments |
|Taxation Laws |174 of |Minor amendments |
|Amendment Act (No. |1997 |consequential on the rewrite |
|4) 1997 | |of the depreciation |
| | |provisions into the |
| | |ITAA 1997. |
| | |Amended section 42A-40 to |
| | |ensure that the lease |
| | |payments were not treated as |
| | |the lessor's exempt income. |
| | |Amended section 42A-130 to |
| | |ensure that the finance |
| | |charge was worked out |
| | |disregarding certain refunded|
| | |lessee payments. |
|New Business Tax |77 of 2001|Minor amendments |
|System (Capital | |consequential on the |
|Allowances - | |introduction of the uniform |
|Transitional and | |capital allowances |
|Consequential) Act | |provisions. |
|2001 | | |
|Tax Laws Amendment |101 of |Minor amendments |
|(Repeal of |2006 |consequential on the repeal |
|Inoperative | |of other provisions. |
|Provisions) Act 2006| | |
Chapter 5
Farm management deposits rewrite - Schedule 2G
Outline of chapter
256. Schedule 4 to this Bill rewrites Schedule 2G to the Income Tax
Assessment Act 1936 (ITAA 1936) to the Income Tax Assessment
Act 1997 (ITAA 1997).
Context of amendments
257. The farm management deposit (FMD) scheme in Schedule 2G to the ITAA
1936 allows eligible primary producers to set aside pre-tax income
in profitable years for subsequent withdrawal in low-income years.
FMDs allow primary producers to claim a deduction when they make an
FMD. When an FMD is withdrawn, the amount of the withdrawal is
included in their assessable income in the tax year of withdrawal.
This reduces the risk to eligible primary producers of income
variability owing to factors such as drought.
258. The rewrite reproduces the effect of Schedule 2G to the ITAA 1936.
[Schedule 4, item 2, Division 393]
Detailed explanation of new law
259. The rewrite repeals Schedule 2G and reproduces its effect in the
ITAA 1997. [Schedule 4, items 1 and 2, Division 393]
How the rewrite is different
Guide material
260. The rewrite contains newly written guide material for the Division.
[Schedule 4, Part 1, item 2, section 393-1]
Structural changes
261. The rewrite of Schedule 2G has the same basic structure as Schedule
2G with some changes.
262. Subdivisions 393-A (tax consequences of FMDs) and 393-B (FMDs and
related terms) in Schedule 2G have the same general effect in the
rewrite.
263. Subdivision 393-C in Schedule 2G has not been rewritten.
Subdivision 392-C (calculation of averaging adjustment for primary
producers) of the ITAA 1997 already contains provisions that
determine taxable primary production income and taxable non-primary
production income. These provisions are the same as those in
Schedule 2G except for one difference which is explained below.
264. Subdivision 393-D in Schedule 2G has been rewritten as Subdivision
393-C (special rules relating to financial claims scheme for
account-holders with insolvent authorised deposit-taking
institutions (ADIs)). The reporting obligations of FMD providers
that were located in section 264AA of the ITAA 1936 have been
relocated to the Taxation Administration Act 1953 (TAA 1953). This
centralises administration matters in the TAA 1953.
265. Some provisions have not been rewritten because they are no longer
required or have been moved to more appropriate locations; for
example, to the Dictionary in subsection 995-1(1) of the ITAA 1997
or the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A
1997).
Differences in Subdivision 393-A - Tax consequences of farm
management deposits
266. Subdivision 393-A in Schedule 2G explains the tax consequences of
FMDs. The rewritten Subdivision 393-A achieves the same outcome
with some minor changes.
267. The deduction for making FMDs is only available to individuals who
carry on a primary production business in Australia. This key
requirement is not located centrally in Schedule 2G; however, it
has been made explicit in the rewrite in the rules that determine
the entitlement to the deduction and specify the requirements for
FMD agreements. [Schedule 4, Part 1, item 2, paragraph 393-5(1)(b)
and item 1 in the table in section 393-35]
268. The calculation of the amount to be included in assessable income
on repayment of an FMD has been simplified in the rewrite. The
rewritten provision contains a single formula for the calculation
regardless of whether the FMD is repaid in part or in full. A
comprehensive example has also been included to illustrate the
calculation. [Schedule 4, Part 1, item 2, subsection 393-10(1) and
example]
269. References to income equalisation deposits have been removed from
the definition of 'unrecouped FMD deduction' in the rewrite because
they are no longer relevant in the majority of cases (the Loan
(Income Equalization Deposits) Act 1976 was repealed on 22 February
2005) [Schedule 4, Part 1, item 2, subsection 393-10(2)]. However,
a provision has been inserted in the IT(TP)A 1997 to maintain the
application where needed [Schedule 4, Part 3, item 50, section 393-
10 of the IT(TP)A 1997].
270. Schedule 2G changes the ordinary meaning of some words, such as
'make' and 'repay', by defining or extending the terms for the
purposes of the Schedule. Many of these terms have their ordinary
meaning in the ITAA 1997 and cannot be used inconsistently.
Therefore, the rewrite achieves the same effect by using operative
application rules.
271. Schedule 2G modifies the meaning of 'repay' to include a transfer,
reinvestment or other dealing on behalf of the depositor of the
FMD. This is relevant for determining the assessable amount on
repayment of an FMD. The rewrite provides an operative application
rule to this effect. [Schedule 4, Part 1, item 2, subsection 393-
10(3)]
272. Schedule 2G also modifies the meaning of 'make' and 'repay' to
exclude immediate reinvestment as an FMD, extension of the term of
an FMD and transfer to another provider as an FMD. This
modification affects the deduction and assessment provisions. This
is achieved in the rewrite by an operative provision that modifies
the deduction, assessment and 12-month rules. [Schedule 4, Part 1,
item 2, section 393-15]
Differences in Subdivision 393-B - Meaning of a farm management
deposit and an owner
273. Subdivision 393-B in Schedule 2G explains what an FMD is and
defines other related terms.
274. The definition of FMD in Schedule 2G takes its meaning from six
operative provisions. The meaning of 'farm management deposit' has
been clarified in the rewrite by restructuring the various elements
of the definition [Schedule 4, Part 1, item 2, section 393-20].
The rewrite is explicit in identifying what are the requirements of
an FMD agreement and the effects of contravening those requirements
[Schedule 4, Part 1, item 2, sections 393-30 and 393-35].
275. Not all of the definitions in Schedule 2G have been rewritten
because some of the terms are already defined in the ITAA 1997; for
example, 'entity' and 'tax file number'. Other terms have not been
rewritten because they have their ordinary meaning; such as,
'depositor', 'make' and 'repay'.
276. 'Primary producer' is defined in Schedule 2G but has not been
rewritten. Instead, references to 'primary producer' have been
replaced with the defined term 'primary production business' and
the concept of 'carrying on a primary production business' which
are both used in the ITAA 1997.
277. The definition of 'owner' has been rewritten and replaced with
'owner of a *farm management deposit'. [Schedule 4, Part 1, item
2, subsection 393-25(1)]
278. Schedule 2G refers to FMDs being made by a depositor with a
'financial institution'. Because 'financial institution' is
defined more widely in the ITAA 1997 than in Schedule 2G, a new
term - 'FMD provider' - has been inserted in the rewrite in its
place. [Schedule 4, Part 1, item 2, subsection 393-20(3)]
279. Schedule 2G provides for the treatment of deposits that are
withdrawn within the first 12 months after the deposit was made
(the 12-month rule). The concept of 'withdrawing' a deposit is
only used in relation to the 12-month rule; elsewhere Schedule 2G
refers to 'repayments'. For consistency throughout the provisions,
the rewrite replaces the references to 'withdrawal' with
'repayment'. [Schedule 4, Part 1, item 2, section 393-40]
280. The 12-month rule in Schedule 2G is determined by reference to the
'applicable depositing day'. This term has not been used in the
rewrite. Instead the rewrite deals with the concept by an
operative application rule and removes outdated references to
income equalisation deposits [Schedule 4, Part 1, item 2,
subsection 393-40(6)]. However, a provision has been inserted in
the IT(TP)A 1997 to maintain the application to income equalisation
deposits where necessary [Schedule 4, Part 3, item 50, section 393-
40 of the IT(TP)A 1997].
281. Schedule 2G contains inoperative provisions relating to certain
deposits and transfers made prior to 1 July 2003. These provisions
are not rewritten.
Taxable primary production income and taxable non-primary
production income
282. Subdivision 393-C of Schedule 2G has not been rewritten because
similar rules appear in Subdivision 392-C of the ITAA 1997 for
calculating the averaging adjustment of long-term averaging of
primary producers' tax liability. However, the provisions are not
identical. The difference arises in the definition of 'primary
production deductions', which is relevant for determining 'taxable
primary production income'. One of the eligibility criteria for
the FMD scheme is that taxable non-primary production income must
not be more than $65,000.
283. In Schedule 2G, apportionable deductions are excluded from primary
production deductions and are allocated entirely to non-primary
production deductions. In Division 392 of the ITAA 1997,
apportionable deductions are spread across both primary production
deductions and non-primary production deductions. The Schedule 2G
approach is generally more concessional than Division 392. By
aligning the definitions, a greater proportion of basic taxable
income will be subject to averaging. The impact on the income
averaging calculations will depend on the individual circumstances
of the taxpayer. Therefore, to maintain the treatment provided by
Schedule 2G, subsection 392-80(3) of the ITAA 1997 is rewritten to
exclude apportionable deductions from the definition of primary
production deductions. [Schedule 4, Part 2, item 46,
subsection 392-80(3)]
Special rules relating to the financial claims scheme for account-
holders with insolvent ADIs
284. Subdivision 393-D of Schedule 2G - the financial claims scheme
rules - has been rewritten as Subdivision 393-C. [Schedule 4,
Part 1, item 2, Subdivision 393-C]
Reporting obligations
285. The reporting obligations contained in section 264AA of the ITAA
1936 have been relocated and the terminology has been updated.
[Schedule 4, Part 1, item 7, Division 398, Schedule 1 to the TAA
1953]
Application and transitional provisions
Application
286. The rewrite applies to assessments for the 2010-11 income year and
later years. [Schedule 4, Part 3, item 50, section 393-1 of the
IT(TP)A 1997]
Transitional
287. The effect of the deductions provided under Schedule 2G continues
under the rewrite. References in the rewrite to deductions for
FMDs include references in Schedule 2G to deductions for FMDs that
relate to deposits made before the 2010-11 income year. This is
important particularly for the application of 'unrecouped FMD
deduction' which is used to calculate the amount of assessable
income on repayment of a deposit. [Schedule 4, Part 3, item 50,
section 393-5 of the IT(TP)A 1997]
Consequential amendments
288. References to Schedule 2G are replaced by references to the
equivalent provisions in the rewrite. Some of those consequential
amendments also change wording, or add asterisks, to reflect the
transfer of Schedule 2G defined terms into the ITAA 1997
Dictionary. [Schedule 4, Part 2, items 8 to 49, subsection 3(2)
(paragraph (aa) of the definition of 'exempt livestock proceeds')
of the Farm Household Support Act 1992, subsections 6(1), 95(1),
101A(4), 170(1) (item 9 in the table), 177B(1) and (2), 202DM(1)
and 202DM(3) of the ITAA 1936, sections 97A, 202DK, 202DL, 202DL
(note), 264AA of the ITAA 1936, paragraphs 202DL(a) and (b),
202DM(1)(a) and 202DM(3)(a) of the ITAA 1936, paragraph 268-
35(5)(j) in Schedule 2F of the ITAA 1936, paragraph 268-35(5)(j) in
Schedule 2F (note) of the ITAA 1936, sections 10-5 (item in the
table headed 'farm management deposits') and 12-5 (item in the
table headed 'primary production') of the ITAA 1997, paragraphs 26-
55(2)(c), 165-55(5)(j) of the ITAA 1997, subparagraph 61-
570(1)(a)(iii) of the ITAA 1997, paragraph 165-55(5)(j) (note)
of the ITAA 1997, subsection 230-460(15) and 392-80(3) of the ITAA
1997, subsection 253-5(1) (paragraph (b) of the note) of the ITAA
1997, subsections 8J(18) and (19) of the TAA 1953, subsections 45-
120(4) and (5) in Schedule 1 to the TAA 1953]
Legislative history of Schedule 2G
289. Schedule 2G to the ITAA 1936 was added by the Taxation Laws
Amendment (Farm Management Deposits) Act 1998 [Act No. 85 of 1998].
290. These Acts have amended Schedule 2G:
|Act title |Act No. |Effect of amendments |
|Treasury Legislation |146 of |Minor amendments |
|Amendment (Application |2001 |consequential on the |
|of Criminal Code) | |reform of the Criminal |
|Act (No. 2) 2001 | |Code Act 1995. |
|Taxation Laws Amendment |138 of |Originally, FMDs had to |
|(Earlier Access to Farm |2002 |be made as 12-month fixed|
|Management Deposits) Act| |term deposits rather than|
|2002 | |as at-call accounts. |
| | |Amendments removed this |
| | |requirement and |
| | |section 393-37 was |
| | |inserted to ensure that |
| | |only FMDs held for at |
| | |least 12 months qualify |
| | |for the tax consequences.|
| | | |
| | |The requirements for FMDs|
| | |in section 393-30 were |
| | |amended to remove the |
| | |restriction on repaying |
| | |deposits within the first|
| | |12 months. |
| | |Section 393-37 was |
| | |substituted to allow |
| | |early access to FMDs for |
| | |individuals in |
| | |exceptional |
| | |circumstances-declared |
| | |areas and to allow |
| | |partial withdrawals |
| | |within the first 12 |
| | |months not to deny FMD |
| | |status for the balance, |
| | |as long as the balance is|
| | |not reduced to less than |
| | |$1,000. |
|Taxation Laws Amendment |107 of |Definition of 'financial |
|Act (No. 8) 2003 |2003 |institution' in section |
| | |393-25 was substituted to|
| | |make it easier for |
| | |primary producers to |
| | |determine whether the |
| | |entity they are dealing |
| | |with is eligible to |
| | |accept FMDs. |
| | |Section 393-52 inserted |
| | |to treat certain entities|
| | |(non-complying entities) |
| | |as financial |
| | |institutions, in relation|
| | |to certain pre-1 July |
| | |2003 deposits and |
| | |transfers (eligible |
| | |deposits). |
| | |Definition of 'entity' |
| | |inserted in section |
| | |393-25. |
|Tax Laws Amendment |101 of |Removal of inoperative |
|(Repeal of Inoperative |2006 |provisions and |
|Provisions) Act 2006 | |consequential amendments.|
|Superannuation |15 of |Consequential amendments |
|Legislation Amendment |2007 |resulting from simplified|
|(Simplification) Act | |superannuation reforms. |
|2007 | | |
|Tax Laws Amendment (2006|55 of |Non-primary production |
|Measures No. 7) Act 2007|2007 |income threshold in |
| | |section 393-10 increased |
| | |from $50,000 to $65,000. |
| | |The total amount that a |
| | |primary producer can hold|
| | |in an FMD increased from |
| | |$300,000 to $400,000 |
| | |(section 393-35). |
|Tax Laws Amendment (2008|38 of |Paragraphs 393-37(3)(b) |
|Measures No. 2) Act 2008|2008 |and (c) substituted to |
| | |allow withdrawals from |
| | |FMDs within 12 months |
| | |without losing the tax |
| | |benefit if, at the time |
| | |of the withdrawal, the |
| | |primary producer is |
| | |eligible to be issued an |
| | |exceptional circumstances|
| | |certificate and had made |
| | |the FMD before the |
| | |exceptional circumstances|
| | |declaration applied to |
| | |them. |
|Tax Laws Amendment (2009|42 of |Subdivision 393-D |
|Measures No. 2) Act 2009|2009 |inserted to provide |
| | |special rules for |
| | |financial claims scheme |
| | |account-holders with |
| | |insolvent ADIs. |
| | |The rules ensure that |
| | |there are no adverse |
| | |taxation consequences for|
| | |holders of FMDs arising |
| | |from a payment made by |
| | |the Australian Prudential|
| | |Regulation Authority, or |
| | |by a liquidator, under |
| | |the financial claims |
| | |scheme. This is achieved|
| | |by amending the law to |
| | |treat payments made under|
| | |the financial claims |
| | |scheme in the same way as|
| | |if they had been made by |
| | |the failed institution to|
| | |which the scheme applies.|
Chapter 6
General insurance rewrite - Schedule 2J
Outline of chapter
291. Schedule 5 to this Bill rewrites the provisions in Schedule 2J to
the Income Tax Assessment Act 1936 (ITAA 1936) to the Income Tax
Assessment Act 1997 (ITAA 1997).
Context of amendments
292. Schedule 2J to the ITAA 1936 specifies the taxation treatment of
general insurance companies in respect of:
. liabilities in respect of the provision for, and payment
of, outstanding claims - that is, outstanding claims
liabilities; and
. premium income.
293. This Schedule also specifies the taxation treatment of the
outstanding claims liabilities of companies that self-insure in
respect of workers' compensation liabilities.
294. The effect of this Schedule is to effectively spread the income and
deductions of a general insurance company, and the deductions of a
company that self-insures in respect of workers' compensation
liabilities, over the period to which the income and deductions
relate.
Detailed explanation of new law
295. The rewrite repeals Schedule 2J and reproduces its effect in the
ITAA 1997. [Schedule 5, items 1 and 2, Division 321]
How the rewrite is different
296. The provisions in the rewrite follow the same order as the
provisions in Schedule 2J. The main changes are that:
. the provisions have been slightly restructured;
- Division 321 of Schedule 2J (which applies to general
insurance companies) is in Subdivisions 321-A and 321-B
of the rewrite; and
- Division 323 of Schedule 2J (which applies to companies
that self-insure in respect of workers' compensation
liabilities) is in Subdivision 321-C of the rewrite;
. the basis for working out the value of the outstanding
claims liabilities of a general insurance company has been
modified to clarify that the value of the liabilities is
not reduced by recoveries under certain reinsurance
policies;
. some provisions have been replaced by method statements;
and
. guide material, application provisions and transitional
provisions have been omitted.
297. The purpose of these changes is to clarify and simplify the
presentation of the ideas already expressed in Schedule 2J.
Differences in Subdivisions 321-A and 321-B - General insurance companies
298. Subdivisions 321-A and 321-B specify the taxation treatment of
general insurance companies in respect of:
. the provision for, and payment of, outstanding claims
liabilities; and
. premium income.
Subdivision 321-A - Provision for, and payment of, claims by
general insurance companies
Provision for outstanding claims liabilities
299. Subdivision 321-A specifies the taxation treatment of general
insurance companies in respect of the provision for outstanding
claims liabilities.
300. The provisions compare the value of a general insurance company's
outstanding claims liabilities at the end of an income year with
the value of those liabilities at the end of the previous income
year.
. If the value of the outstanding claims liabilities at the
end of an income year is less than the value at the end of
the previous income year, the difference is included in
assessable income.
. If the value of the outstanding claims liabilities at the
end of an income year exceeds the value at the end of the
previous income year, the excess is allowed as a
deduction.
[Schedule 5, item 2, sections 321-10 and 321-15]
301. The rewrite uses a method statement to specify the basis for
working out the value of a general insurance company's outstanding
claims liabilities under general insurance policies at the end of
an income year. [Schedule 5, item 2, section 321-20]
302. The first step in the method statement is to add up the amounts
that, at the end of an income year, the general insurance company
determines, based on proper and reasonable estimates, to be
appropriate to set aside and invest in order to meet:
. outstanding claims liabilities under those general
insurance policies; and
. direct settlement costs associated with those outstanding
claims liabilities.
[Schedule 5, item 2, step 1 in the method statement in section 321-
20]
303. The second step in the method statement is to reduce the step 1
amount by the amount that the company expects to recover:
. under a contract of reinsurance; or
. in any other way.
[Schedule 5, item 2, step 2 in the method statement in section 321-
20]
304. However, the step 1 amount is not reduced by the amount that the
company expects to recover under a contract of reinsurance to which
subsection 148(1) of the ITAA 1936 applies. [Schedule 5, item 2,
step 2 in the method statement in section 321-20]
305. The amount worked out under step 1 in the method statement reflects
the present value of the estimated outstanding claims liabilities
of a general insurance company. Step 2 reduces this amount by the
amount that the company expects to recover because, for example,
the company has reinsured some or all of the liabilities.
Therefore, the step 2 amount is the present value of the estimated
recoveries.
306. The rewrite clarifies that the value of a general insurance
company's outstanding claims liabilities is not reduced by the
amount that the company expects to recover under a contract of
reinsurance to which subsection 148(1) of the ITAA 1936 applies.
307. Subsection 148(1) applies, so far as is relevant, to a reinsurance
policy taken out by a general insurance company carrying on
business in Australia with a non-resident company. If the
subsection applies, broadly:
. the Australian general insurance company cannot deduct
premiums paid in respect of the policy and is not
assessable on any reinsurance recoveries; and
. the non-resident reinsurance company is not assessed in
Australia on the premiums received or receivable.
308. If subsection 148(1) applies to a contract of reinsurance which is
taken out by a general insurance company, the premiums and
recoveries under the reinsurance contract are effectively ignored
in working out the reinsured company's taxable income.
309. Under step 2 in the method statement, the value of the reinsured
company's outstanding claims liabilities is not reduced by the
amount the company expects to recover under the reinsurance
contract. If step 2 was reduced by this amount, the reinsured
company's taxable income would effectively be increased by the
amount of the expected reinsurance recoveries. This would be
inconsistent with the objective of subsection 148(1).
Payment of outstanding claims liabilities
310. Subdivision 321-A also specifies the taxation treatment of general
insurance companies in respect of the payment of outstanding claims
liabilities.
311. A general insurance company can deduct the amounts paid during an
income year in respect of claims under general insurance policies.
[Schedule 5, item 2, section 321-25]
312. In this context, a claim is taken to be paid by a general insurance
company in an income year even though the funds have not actually
been disbursed at the end of the income year provided that:
. the amount of the claim is settled in that income year;
. the relevant liability is no longer reflected in the
company's outstanding claims liabilities at the end of
that income year; and
. the claim is payable by the company at the end of that
income year.
Subdivision 321-B - Premium income of general insurance companies
313. Subdivision 321-B specifies the taxation treatment of general
insurance companies in respect of premium income.
314. Gross premium income received or receivable in respect of general
insurance policies in an income year is included in a general
insurance company's assessable income. [Schedule 5, item 2,
section 321-45]
315. The value of a general insurance company's unearned premium reserve
under general insurance policies issued in the course of carrying
on insurance business which relate to risks covered by those
policies in respect of later income years must be worked out at the
end of each income year.
316. The value of the unearned premium reserve at the end of an income
year is then compared with the value of that reserve at the end of
the previous income year:
. If the value of the unearned premium reserve at the end of
an income year is less than the value at the end of the
previous income year, the difference is included in
assessable income.
. If the value of the unearned premium reserve at the end of
an income year exceeds the value at the end of the
previous income year, the excess is allowed as a
deduction.
[Schedule 5, item 2, sections 321-50 and 321-55]
317. The rewrite uses a method statement to specify the basis for
working out the value of a general insurance company's unearned
premium reserve at the end of an income year. [Schedule 5, item 2,
section 321-60]
318. The first step in the method statement is to add up gross premiums
received or receivable in the income year, or in an earlier income
year, in relation to general insurance policies issued by the
company in the course of carrying on insurance business.
[Schedule 5, item 2, step 1 in the method statement in section 321-
60]
319. The premiums received or receivable by a general insurance company
in an income year include premiums paid in respect of a general
insurance policy where:
. the policy was originally issued in the course of another
company's insurance business; and
. the policy has been transferred to the general insurance
company under a portfolio transfer.
320. The second step in the method statement is to reduce the step 1
amount by so much of the costs incurred by the company in
connection with the issue of those policies that relate to the
gross premiums, including:
. commission and brokerage fees;
. administration costs of processing insurance proposals and
renewals;
. administration costs of collecting premiums;
. selling and underwriting costs;
. fire brigade charges;
. stamp duty; and
. other charges, levies and contributions imposed by
governments or governmental authorities that directly
relate to general insurance policies.
[Schedule 5, item 2, step 2 in the method statement in section 321-
60]
321. The third step in the method statement is to reduce the step 2
amount by the amount of any relevant reinsurance premiums paid or
payable by the company in the income year or in an earlier income
year. The relevant reinsurance premiums are premiums paid or
payable for the reinsurance of risks covered by the general
insurance policies issued by the company except:
. reinsurance premiums that the company cannot deduct
because of subsection 148(1) of the ITAA 1936; and
. reinsurance premiums that were paid or payable in respect
of a particular class of insurance business where, under
the contract of reinsurance, the reinsurer agreed to pay,
in respect of the loss incurred by the company that is
covered by the relevant policy, some or all of the excess
over an agreed amount.
[Schedule 5, item 2, step 3 in the method statement in section 321-
60]
322. The fourth step in the method statement is to increase the step 3
amount by the amount of any reinsurance commissions received or
receivable by the company that relate to relevant reinsurance
premiums. [Schedule 5, item 2, step 4 in the method statement in
section 321-60]
323. Under step 5 in the method statement, the value at the end of an
income year of the unearned premium reserve of a general insurance
company is so much of the step 4 amount that the company
determines, based on proper and reasonable estimates, to relate to
risks covered by the policies in respect of later income years.
[Schedule 5, item 2, step 5 in the method statement in section 321-
60]
324. The unearned premium reserve relates to risks in respect of later
years. Therefore, steps 1 to 4 in the method statement only take
into account, broadly:
. premiums in relation to which there is an unexpired risk
at the end of an income year; and
. the relevant costs, reinsurance premiums and commissions
relating to those premiums.
Guide material omitted
325. Guide material in existing sections 321-1, 321-5 and 321-40 of
Schedule 2J has been omitted from the rewrite. This is because the
provisions are quite short and are self explanatory. As a result,
the guide material is unnecessary.
Application and transitional provisions omitted
326. The application and transitional provisions in sections 321-30, 321-
35 and 321-65 of Schedule 2J have been omitted from the rewrite.
These provisions:
. ensured that Subdivision 321-A in Schedule 2J (which
relates to the provision for, and payment of, claims)
applied to the insurance business, other than reinsurance
business, of a general insurance company for the 1991-92
income year and subsequent income years;
. specified the basis for applying Subdivision 321-A to the
insurance business, other than reinsurance business, of a
general insurance company in the 1991-92 income year;
. ensured that Subdivision 321-A in Schedule 2J (which
relates to the provision for and payment of claims)
applied to the reinsurance business of a general insurance
company for the 1995-96 income year and subsequent income
years;
. specified the basis for applying Subdivision 321-A to the
reinsurance business of a general insurance company in the
1995-96 income year; and
. ensured that Subdivision 321-B in Schedule 2J (which
relates to premium income) applied to a general insurance
company for the 1999-2000 income year and subsequent
income years.
327. These application and transitional provisions have been omitted
from the rewrite because they are redundant.
Differences in Subdivision 321-C - Companies that self-insure in respect of
workers' compensation liabilities
328. Subdivision 321-C specifies the taxation treatment of the
outstanding claims liabilities of companies that self-insure in
respect of workers' compensation liabilities.
329. The provisions apply to a company that is not required by law to
insure, and does not insure, against liability for workers'
compensation claims that:
. arose from events that occurred in the current year or in
an earlier income year; and
. were not paid in full before the end of the current year.
[Schedule 5, item 2, paragraphs 321-80(a) and (b), 321-85(a) and
(b)]
330. The provisions compare the value of the company's outstanding
liabilities for workers' compensation claims at the end of an
income year with the value of those liabilities at the end of the
previous income year.
. If the value of the outstanding claims liabilities at the
end of an income year is less than the value at the end of
the previous income year, the difference is included in
assessable income.
. If the value of the outstanding claims liabilities at the
end of an income year exceeds the value at the end of the
previous income year, the excess is allowed as a
deduction.
[Schedule 5, item 2, paragraphs 321-80(b) and 321-85(b)]
331. The value, at the end of an income year, of a company's outstanding
liabilities for workers' compensation claims is worked out by
adding up the amounts that, at the end of that income year, the
company determines, based on proper and reasonable estimates, to be
appropriate to set aside and invest in order to meet:
. liabilities for those claims; and
. direct settlement costs associated with those liabilities.
[Schedule 5, item 2, section 321-90]
332. The company can deduct the amounts paid during an income year in
respect of workers' compensation claims. [Schedule 5, item 2,
section 321-95]
333. In this context, a workers' compensation claim is taken to be paid
in an income year if:
. the amount of the claim is settled in that income year;
. the relevant liability is no longer included in the
company's outstanding claims liabilities at the end of
that income year; and
. the claim is payable by the company at the end of that
income year.
Guide material omitted
334. Guide material in existing section 323-1 of Schedule 2J has been
omitted from the rewrite. This is because the provisions are self
explanatory. As a result, the guide material is unnecessary.
Application provisions omitted
335. The application provision in section 323-25 of Schedule 2J has been
omitted from the rewrite. This provision ensured that Division 323
in Schedule 2J applied to a company that self-insures in respect of
its workers' compensation liabilities for the 1996-97 income year
and subsequent income years. The provision has been omitted from
the rewrite because it is redundant.
Application and transitional provisions
336. The rewrite applies to the first income year starting on or after
the day that the Act receives Royal Assent and later income years.
[Schedule 5, item 13]
Consequential amendments
337. The amendments update references in the law to Schedule 2J
provisions that are rewritten into the ITAA 1997. [Schedule 5,
items 6 to 12, sections 10-5, 12-5 and 713-710]
338. The amendments also repeal redundant definitions in the ITAA 1936
and clarify that the definition of 'contract of reinsurance' in
subsection 995-1(1) only applies to relevant policies issued by
life insurance companies. [Schedule 5, items 3 to 5 and 16,
definition of 'contract of reinsurance' in subsection 995-1(1)]
Legislative history of Schedule 2J
339. Schedule 2J to the ITAA 1936 was added by the Taxation Laws
Amendment Act (No. 3) 2002 [Act No. 97 of 2002].
340. No amendments have been made to Schedule 2J.
Chapter 7
Finding tables
Outline of chapter
341. This chapter has finding tables to help you locate which provision
in the Bill corresponds to a provision in the current law that has
been rewritten, and vice versa.
342. References to old law in the finding tables are to these
provisions in the Income Tax Assessment Act 1936 (ITAA 1936):
. Part VI (sections 204 to 222ARA);
. Schedule 2C (sections 245-1 to 245-265);
. Schedule 2E (sections 42A-1 to 42A-150);
. Schedule 2G (sections 393-1 to 393-85); and
. Schedule 2J (sections 321-1 to 321-65 and 323-1 to 323-
25).
343. References to the new law are to provisions of the Income Tax
Assessment Act 1997 (ITAA 1997), unless otherwise indicated.
Also, in the finding tables:
. No equivalent means that this is a new provision that has
no equivalent in the current law. Typically, these would
be Guide material.
. Omitted means that the provision of the current law has
not been rewritten in the new law.
. # indicates that the provision is already present in the
ITAA 1997 or in the indicated Act.
Finding table 1 - Old law to new law
|Old law |New law |
|204 |5-5, 5-10, |
| |5-15 |
|213 |255-100, |
| |255-105, |
| |255-110 |
| |Schedule 1 to|
| |the Taxation |
| |Administratio|
| |n Act 1953 |
| |(TAA 1953) |
|219 |169AA ITAA |
| |1936 |
|222AFA |268-1, 268-5 |
| |Schedule 1 |
| |TAA 1953 |
|222AFB |Omitted |
|222AFC |Omitted |
|222AGA |268-10 |
| |Schedule 1 |
| |TAA 1953 |
|222AGB |268-15 |
| |Schedule 1 |
| |TAA 1953 |
|222AGC |268-35, |
| |268-40 |
| |Schedule 1 |
| |TAA 1953 |
|222AGD |268-35, |
| |268-40 |
| |Schedule 1 |
| |TAA 1953 |
|222AGE |268-35 |
| |Schedule 1 |
| |TAA 1953 |
|222AGF |268-90 |
| |Schedule 1 |
| |TAA 1953 |
|222AGG |268-10 |
| |Schedule 1 |
| |TAA 1953 |
|222AHA |268-20 |
| |Schedule 1 |
| |TAA 1953 |
|222AHB |268-50, |
| |268-60 |
| |Schedule 1 |
| |TAA 1953 |
|222AHC |268-40 |
| |Schedule 1 |
| |TAA 1953 |
|222AHD |268-40 |
| |Schedule 1 |
| |TAA 1953 |
|222AHE |268-90 |
| |Schedule 1 |
| |TAA 1953 |
|222AIA |268-65 |
| |Schedule 1 |
| |TAA 1953 |
|222AIB |268-40, |
| |268-65 |
| |Schedule 1 |
| |TAA 1953 |
|222AIC |268-40 |
| |Schedule 1 |
| |TAA 1953 |
|222AID |268-90 |
| |Schedule 1 |
| |TAA 1953 |
|222AIE |268-25 |
| |Schedule 1 |
| |TAA 1953 |
|222AIF |268-30 |
| |Schedule 1 |
| |TAA 1953 |
|222AIG |268-45 |
| |Schedule 1 |
| |TAA 1953 |
|222AIH |268-90 |
| |Schedule 1 |
| |TAA 1953 |
|222AII |268-100 |
| |Schedule 1 |
| |TAA 1953 |
|222AJA |268-75 |
| |Schedule 1 |
| |TAA 1953 |
|222AJB |268-80 |
| |Schedule 1 |
| |TAA 1953 |
|222AKA |268-55 |
| |Schedule 1 |
| |TAA 1953 |
|222AKB |268-70 |
| |Schedule 1 |
| |TAA 1953 |
|222ALA |Omitted |
|222ALB |Omitted |
|222AMA |268-85 |
| |Schedule 1 |
| |TAA 1953 |
|222AMB |268-95 |
| |Schedule 1 |
| |TAA 1953 |
|222ANA |269-1, 269-5 |
| |Schedule 1 |
| |TAA 1953 |
|222ANB |Partly |
| |omitted, |
| |269-10 |
| |Schedule 1 |
| |TAA 1953 |
|222AOA |269-10 |
| |Schedule 1 |
| |TAA 1953 |
|222AOB |269-10, |
| |269-15 |
| |Schedule 1 |
| |TAA 1953 |
|222AOBAA |269-10, |
| |269-15 |
| |Schedule 1 |
| |TAA 1953 |
|222AOBA |269-10, |
| |269-15 |
| |Schedule 1 |
| |TAA 1953 |
|222AOC |269-20 |
| |Schedule 1 |
| |TAA 1953 |
|222AOD |269-20 |
| |Schedule 1 |
| |TAA 1953 |
|222AOE |269-25 |
| |Schedule 1 |
| |TAA 1953 |
|222AOF |269-50 |
| |Schedule 1 |
| |TAA 1953 |
|222AOG |269-30 |
| |Schedule 1 |
| |TAA 1953 |
|222AOH |269-40 |
| |Schedule 1 |
| |TAA 1953 |
|222AOI |269-45 |
| |Schedule 1 |
| |TAA 1953 |
|222AOJ |269-35 |
| |Schedule 1 |
| |TAA 1953 |
|222APA |269-10, |
| |269-15 |
| |Schedule 1 |
| |TAA 1953 |
|222APB |269-10, |
| |269-15 |
| |Schedule 1 |
| |TAA 1953 |
|222APC |269-20 |
| |Schedule 1 |
| |TAA 1953 |
|222APD |269-20 |
| |Schedule 1 |
| |TAA 1953 |
|222APE |269-25 |
| |Schedule 1 |
| |TAA 1953 |
|222APF |269-25 |
| |Schedule 1 |
| |TAA 1953 |
|222APG |269-40 |
| |Schedule 1 |
| |TAA 1953 |
|222APH |269-45 |
| |Schedule 1 |
| |TAA 1953 |
|222API |269-35 |
| |Schedule 1 |
| |TAA 1953 |
|222AQA |Omitted |
|222AQB |Omitted |
|222AQC |Omitted |
|222AQD |Omitted |
|222ARA |268-100, |
| |269-55 |
| |Schedule 1 |
| |TAA 1953 |
|245-1 |245-1 |
|245-2 |245-2 |
|245-3 |Omitted |
|245-5 |245-5 |
|245-6 |Omitted |
|245-10(1) |245-10 |
|245-10(2) |245-10(1) |
| |Income Tax |
| |(Transitional|
| |Provisions) |
| |Act 1997 |
| |(IT(TP)A 1997|
| |) |
|245-15(1) |Omitted |
|245-15(2) |245-40(a) |
|245-15(3) |245-40(b) |
|245-20 |Omitted |
|245-25(1) |Omitted |
|245-25(2) |245-10(a), |
| |(c) |
|245-25(3) |245-10(b), |
| |(c) |
|245-25(4) |245-15 |
|245-25(4A) |245-40(f) |
|245-25(5) |245-10(c) |
|245-26 |#960-100 |
|245-30 |245-30 |
|245-31 |Omitted |
|245-35(1) |245-35(a) |
|245-35(2) |245-35(b) |
|245-35(3) |245-45 |
|245-35(4) |245-36 |
|245-35(5) |245-37 |
|245-35(6) |245-36(1)(b) |
|245-40 |245-40 |
|245-45 |245-53 |
|245-46 |Omitted |
|245-47 |Omitted |
|245-50 |245-50 |
|245-55 |245-55 |
|245-60 |245-60 |
|245-61 |245-61 |
|245-65 |245-65 |
|245-70 |Omitted |
|245-75(1) |245-75(1)(a) |
|245-75(2)(a) |245-75(1)(b) |
|245-75(2)(b) |245-75(2) |
|245-75(3) |245-77 |
|245-80 |245-80 |
|245-81 |Omitted |
|245-85 |245-85 |
|245-90 |245-90 |
|245-95 |245-95 |
|245-96 |Omitted |
|245-100 |245-100 |
|245-105(1), |245-105(1) |
|(2) | |
|245-105(3), |Omitted |
|(4) | |
|245-105(5) |245-115 |
|245-105(6) |245-130 |
|245-105(7) |245-145(1) |
|245-105(8) |245-175(1) |
|245-110 |245-115 |
|245-115 |245-115 |
|245-120 |245-120 |
|245-125 |245-130 |
|245-130 |245-130 |
|245-135 |245-135 |
|245-140(1), |245-145 |
|(2) | |
|245-140(3), |245-10(2) |
|(4) |IT(TP)A 1997 |
|245-145 |245-145 |
|245-150 |245-150 |
|245-155(1) |245-155 |
|245-155(2) |245-157 |
|245-160 |245-160 |
|245-165 |245-175(1), |
| |245-180, |
| |245-185, |
| |245-190 |
|245-170 |245-175(2) |
|245-175 |245-175(1) |
|245-180 |245-180 |
|245-185 |245-185 |
|245-190 |245-190 |
|245-195 |245-195 |
|245-200 |245-200 |
|245-201 |Omitted |
|245-205(1) |#94K ITAA |
| |1936 |
|245-205(2) |#94J ITAA |
| |1936 |
|245-205(3) |#94D ITAA |
| |1936 |
|245-210 |#960-100, |
| |Division 5 of|
| |Part III |
| |ITAA 1936 |
|245-215 |245-215 |
|245-220 |Omitted |
|245-221 |Omitted |
|245-225 |Omitted |
|245-230 |Omitted |
|245-235 |Omitted |
|245-240 |Omitted |
|245-245(1) |#995-1(1) |
|(associate) |(associate) |
|245-245(1) |Omitted |
|(commencement| |
|day) | |
|245-245(1) |245-20 |
|(debt) | |
|245-245(1) |Omitted |
|(debtor | |
|company) | |
|245-245(1) |Omitted |
|(deductible | |
|net capital | |
|loss) | |
|245-245(1) |Omitted |
|(deductible | |
|revenue loss)| |
|245-245(1) |245-35(a) |
|(extinguished| |
|) | |
|245-245(1) |995-1(1) |
|(forgive) |(forgiveness)|
|245-245(1) |Omitted |
|(forgiveness | |
|year of | |
|income) | |
|245-245(1) |995-1(1) |
|(moneylending|(moneylending|
|debt) |debt) |
|245-245(1) |995-1(1) (net|
|(net forgiven|forgiven |
|amount) |amount) |
|245-245(1) |Omitted |
|(non-debtor | |
|company) | |
|245-245(1) |Omitted |
|(pay) | |
|245-245(1) |Omitted |
|(related | |
|group of | |
|companies) | |
|245-245(1) |995-1(1) |
|(total net |(total net |
|forgiven |forgiven |
|amount) |amount) |
|245-245(2) |Omitted |
|245-250 |#995-1(1) |
| |(under common|
| |ownership) |
|245-255 |#995-1(1) |
| |(controller |
| |(for capital |
| |gains tax |
| |purposes)) |
|245-260 |Omitted |
|245-265 |245-265 |
|42A-1 |242-1 |
|42A-5 |242-5 |
|42A-10(1)(a) |242-10(1)(a) |
|to (c) |to (c) |
|42A-10(1)(d) |242-10(2) |
| |IT(TP)A 1997 |
|42A-10(2) |242-10(2) |
| |IT(TP)A 1997 |
|42A-10(3) |242-10(2) |
|42A-15(1) |242-15(1) |
|42A-15(2) |242-15(2) |
|42A-15(3) |242-15(2) |
|42A-20 |242-20, |
| |242-20 |
| |IT(TP)A 1997 |
|42A-25 |242-25 |
|42A-30 |242-30 |
|42A-35(1) |242-35(1) |
|42A-35(2) and|Omitted |
|(3) | |
|42A-40(1) |242-40(1) |
|42A-40(2) |242-40(1) |
| |(note) |
|42A-40(3) |242-40(2) |
|42A-45 |242-45 |
|42A-50 |242-50 |
|42A-55 |242-55 |
|42A-60 |242-60 |
|42A-65 |242-65 |
|42A-70 |242-70 |
|42A-75 |242-75 |
|42A-80(1) |242-80(1) |
|42A-80(2) |242-80(2) |
|42A-80(3) |242-80(3) |
|42A-80(4) |242-80(4) |
|42A-80(5) |242-80(5) |
|42A-80(6) |242-80(6) |
|42A-80(7) |242-80(5) |
|42A-80(8) |242-80(7) |
|42A-80(9) |242-80(8) |
|42A-85 |242-85 |
|42A-90(1) |242-90(1) |
|42A-90(2) |242-90(2) |
|42A-90(3) |242-90(3) |
|42A-90(4) |242-90(4) |
| |242-20 |
| |IT(TP)A 1997 |
|42A-90(5) |242-90(5) |
|42A-90(6) |Omitted |
|42A-95 |242-75 |
|42A-100 |242-85 |
|42A-105(1) |242-90(1) |
|42A-105(2) |242-90(2) |
|42A-105(3) |242-90(3) |
|42A-105(4) |242-90(4) |
| |242-20 |
| |IT(TP)A 1997 |
|42A-105(5) |Omitted |
|42A-110 |Omitted |
|42A-115 |242-35(2) |
|(accrual | |
|amount) | |
|42A-115 |Omitted |
|(accrual | |
|period) | |
|42A-115 |242-10(3) |
|(associate) |242-20(2)(b) |
| |242-90(4) |
|42A-115 |Omitted |
|(extension) | |
|42A-115 |Omitted |
|(finance | |
|charge) | |
|42A-115 (hire|#995-1(1) |
|purchase |(hire |
|agreement) |purchase |
| |agreement) |
|42A-115 |242-35(2) |
|(implicit | |
|interest | |
|rate) | |
|42A-115 |242-10(1)(a) |
|(lease) |242-15(2)(b) |
| |242-20(2)(a) |
| |242-80(3) |
|42A-115 |Omitted |
|(leased car) | |
|42A-115 |995-1(1) |
|(lease |(luxury car |
|payment) |lease |
| |payment) |
|42A-115 |242-35(3) |
|(lease |995-1(1) |
|payment |(luxury car |
|period) |lease payment|
| |period) |
|42A-115 |Omitted |
|(lease term) | |
|42A-115 |Omitted |
|(lessee) | |
|42A-115 |Omitted |
|(lessor) | |
|42A-115 |242-10(1)(b) |
|(luxury car) |995-1(1) |
| |(luxury car) |
|42A-115 |242-10(1)(d) |
|(motor car or|#995-1(1) |
|car) |(car) |
|42A-115 |Omitted |
|(notional | |
|loan) | |
|42A-115 |Omitted |
|(notional | |
|loan | |
|principal) | |
|42A-115 |242-35(2) |
|(outstanding | |
|notional loan| |
|principal) | |
|42A-115 |#995-1(1) |
|(right to |(right to |
|use) |use) |
|42A-115 |#995-1(1) |
|(short-term |(short-term |
|hire |hire |
|agreement) |agreement) |
|42A-115 |995-1(1) |
|(termination |(termination |
|amount) |amount) |
|42A-120 |242-10(1)(b) |
| |995-1(1) |
| |(luxury car) |
| |242-10(3) |
| |IT(TP)A 1997 |
|42A-125 |Omitted |
|42A-130 |Omitted |
|42A-135(1) |995-1(1) |
| |(luxury car |
| |lease payment|
| |period) |
|42A-135(2) |242-35(3) |
|42A-140(1) |Omitted |
|42A-140(2) |242-35(2) |
|42A-145 |242-35(2) |
|42A-150(1) |242-35(2) |
|42A-150(2) |Omitted |
|393-1 |393-1 |
|393-5 |Omitted |
|393-7 |Omitted |
|393-10(1) |393-5(1) |
|393-10(2) |393-5(2) |
|393-10(3) |393-5(3) |
|393-15(1) |393-10(1) |
|393-15(2) |393-10(1) |
|393-15(3) |393-10(2) |
| |995-1(1) |
| |(unrecouped |
| |FMD |
| |deduction) |
| |393-5 and |
| |393-10 |
| |IT(TP)A 1997 |
|393-15(4) |393-10(4) |
|393-20 |Omitted |
|393-25 |393-25(4) |
|(depositor) | |
|393-25 |#995-1(1) |
|(entity) |(entity) |
|393-25 (farm |393-20(1) |
|management |995-1(1) |
|deposit) |(farm |
| |management |
| |deposit) |
|393-25 |393-20(3) |
|(financial | |
|institution) | |
|393-25 (make)|Omitted |
|393-25 |393-25(1) |
|(owner) |995-1(1) |
| |(owner) |
|393-25 |Omitted |
|(primary | |
|producer) | |
|393-25 |393-25(2) |
|(primary |393-25(3) |
|production | |
|business) | |
|393-25 |393-10(3) |
|(repay) | |
|393-25 (tax |Omitted |
|file number) | |
|393-30(1) |393-20(1) |
|393-30(2) |393-20(1)(b) |
|393-30(3) |393-20(2) |
|393-35(1) |393-35 |
| |393-30(1) |
|393-35(2) |393-35 (item |
| |1 in the |
| |table) |
|393-35(3) |393-35 (item |
| |2 in the |
| |table) |
|393-35(4) |393-35 (item |
| |3 in the |
| |table) |
|393-35(5) |393-35 (item |
| |4 in the |
| |table) |
|393-35(6) |393-35 (item |
| |10 in the |
| |table) |
|393-35(7) |393-35 (item |
| |5 in the |
| |table) |
|393-35(8) |393-35 (item |
| |6 in the |
| |table) |
|393-35(9) |393-35 (item |
| |7 in the |
| |table) |
|393-35(10) |393-35 (item |
| |8 in the |
| |table) |
|393-35(11) |393-35 (item |
| |9 in the |
| |table) |
|393-37(1) |393-40(1) |
| |393-40(1) |
| |(note) |
|393-37(2) |393-40(2) |
|393-37(3) |393-40(3) |
|393-37(4) |393-40(4) |
|393-37(5) |393-40(5) |
|393-37(6) |393-15(1)(c) |
|393-37(7) |393-40(6), |
| |393-40 |
| |IT(TP)A 1997 |
|393-40(1) |393-35 |
|393-40(3) |393-35 (item |
| |11 in the |
| |table) |
|393-40(4) |393-35 ( item|
| |12 in the |
| |table) |
|393-40(5) |393-35 (item |
| |13 in the |
| |table) |
|393-40(6) |393-35 (item |
| |14 in the |
| |table) |
|393-45(1) |393-30(1) |
|393-45(2) |393-30(3) |
|393-45(3) |393-30(2) |
|393-50(1) |393-15(1)(a) |
| |393-15(2) |
|393-50(2) |393-15(1)(b) |
| |393-15(2) |
|393-50(3) |393-15(1)(b) |
| | |
| |393-15(2) |
|393-50(4) |393-45 |
|393-50(5) |393-15(1)(c) |
| | |
| |393-15(2) |
| |393-15(3) |
|393-52 |Omitted |
|393-55 |Omitted |
|393-60 |Omitted |
|393-65 |995-1(1) |
| |(taxable |
| |non-primary |
| |production |
| |income) |
|393-75 |393-50 |
|393-80 |393-55 |
|393-85 |393-60 |
|264AA |398-5 |
| |IT(TP)A 1997 |
|321-1 |Omitted |
|321-5 |Omitted |
|321-10 |321-10 |
|321-15 |321-15 |
|321-20 |321-20 |
|321-25 |321-25 |
|321-30 |Omitted |
|321-35 |Omitted |
|321-40 |Omitted |
|321-45 |321-45 |
|321-50 |321-50 |
|321-55 |321-55 |
|321-60 |321-60 |
|321-65 |Omitted |
|323-1 |Omitted |
|323-5 |321-80 |
|323-10 |321-85 |
|323-15 |321-90 |
|323-20 |321-95 |
|323-25 |Omitted |
Finding table 2 - New law to old law
|New Law |Old law |
|169AA |219 |
|ITAA 1936 | |
|5-1 |No equivalent |
|5-5 |204 |
|5-10 |204 |
|5-15 |204 |
|242-1 |42A-1 |
|242-5 |42A-5 |
|242-10(1)(a|42A-10(1)(a) to|
|) to (c) |(c) |
| |42A-115 (lease |
| |and luxury car)|
| | |
| |42A-120 |
|242-10(d) |42A-115 (motor |
| |car or car) |
|242-10(2) |42A-10(3) |
|242-10(3) |42A-115 |
| |(associate) |
|242-15(1) |42A-15(1) |
|242-15(2) |42A-15(2) and |
| |(3) |
| |42A-115 (lease)|
|242-20 |42A-20 |
| |42A-115 |
| |(associate and |
| |lease) |
|242-25 |42A-25 |
|242-30 |42A-30 |
|242-35(1) |42A-35(1) |
|242-35(2) |42A-115 |
| |(accrual |
| |amount, |
| |implicit |
| |interest rate |
| |and outstanding|
| |notional loan |
| |principal) |
| |42A-140(2) |
| |42A-145 |
| |42A-150(1) |
|242-35(3) |42A-115 (lease |
| |payment period)|
| | |
| |42A-135(2) |
|242-40(1) |42A-40(1) and |
| |(2) |
|242-40(2) |42A-40(3) |
|242-45 |42A-45 |
|242-50 |42A-50 |
|242-55 |42A-55 |
|242-60 |42A-60 |
|242-65 |42A-65 |
|242-70 |42A-70 |
|242-75 |42A-75 |
| |42A-95 |
|242-80(1) |42A-80(1) |
|242-80(2) |42A-80(2) |
|242-80(3) |42A-80(3) |
| |42A-115 (lease)|
|242-80(4) |42A-80(4) |
|242-80(5) |42A-80(5) and |
| |(7) |
|242-80(6) |42A-80(6) |
|242-80(7) |42A-80(8) |
|242-80(8) |42A-80(9) |
|242-85 |42A-85 |
| |42A-100 |
|242-90(1) |42A-90(1) |
| |42A-105(1) |
|242-90(2) |42A-90(2) |
| |42A-105(2) |
|242-90(3) |42A-90(3) |
| |42A-105(3) |
|242-90(4) |42A-90(4) |
| |42A-105(4) |
| |42A-115 |
| |(associate) |
|242-90(5) |42A-90(5) |
|245-1 |245-1 |
|245-2 |245-2 |
|245-5 |245-5 |
|245-10 |245-10(1) |
| |245-25(2), (3) |
| |and (5) |
|245-15 |245-25(4) |
|245-20 |245-245(1) |
| |(debt) |
|245-30 |245-30 |
|245-35 |245-35(1) and |
| |(2) |
| |245-245(1) |
| |(extinguished) |
|245-36 |245-35(4) and |
| |(6) |
|245-37 |245-35(5) |
|245-40 |245-15(2) and |
| |(3) |
| |245-25(4A) |
| |245-40 |
|245-45 |245-35(3) |
|245-50 |245-50 |
|245-53 |245-45 |
|245-55 |245-55 |
|245-60 |245-60 |
|245-61 |245-61 |
|245-65 |245-65 |
|245-75(1)(a|245-75(1) |
|) | |
|245-75(1)(b|245-75(2)(a) |
|) | |
|245-75(2) |245-75(2)(b) |
|245-77 |245-75(3) |
|245-80 |245-80 |
|245-85 |245-85 |
|245-90 |245-90 |
|245-95 |245-95 |
|245-100 |245-100 |
|245-105 |245-105(1) and |
| |(2) |
|245-115 |245-105(5) |
| |245-110 |
| |245-115 |
|245-120 |245-120 |
|245-130 |245-105(6) |
| |245-125 |
| |245-130 |
|245-135 |245-135 |
|245-145 |245-105(7) |
| |245-140(1) and |
| |(2) |
| |245-145 |
|245-150 |245-150 |
|245-155 |245-155(1) |
|245-157 |245-155(2) |
|245-160 |245-160 |
|245-175(1) |245-105(8) |
| |245-165 |
| |245-175 |
|245-175(2) |245-170 |
|245-180 |245-165 |
| |245-180 |
|245-185 |245-165 |
| |245-185 |
|245-190 |245-165 |
| |245-190 |
|245-195 |245-195 |
|245-200 |245-200 |
|245-215 |245-215 |
|245-265 |245-265 |
|321-10 |321-10 |
|321-15 |321-15 |
|321-20 |321-20 |
|321-25 |321-25 |
|321-45 |321-45 |
|321-50 |321-50 |
|321-55 |321-55 |
|321-60 |321-60 |
|321-80 |323-5 |
|321-85 |323-10 |
|321-90 |323-15 |
|321-95 |323-20 |
|393-1 |393-1 |
|393-5(1) |393-10(1) |
|393-5(2) |393-10(2) |
|393-5(3) |393-10(3) |
|393-10(1) |393-15(1) |
| |393-15(2) |
|393-10(2) |393-15(3) |
|393-10(3) |393-25 (repay) |
|393-10(4) |393-15(4) |
|393-15(1)(a|393-50(1) |
|) | |
|393-15(1)(b|393-50(2) |
|) | |
|393-15(1)(c|393-37(6) |
|) | |
|393-15(2) |393-50(1) |
| |393-50(2) |
|393-15(3) |393-50(5) |
|393-20(1) |393-25 (FMD) |
| |393-30(1) |
| |393-30(2) |
|393-20(2) |393-30(3) |
|393-20(3) |393-25 |
| |(financial |
| |institution) |
|393-25(1) |393-25 (owner) |
|393-25(2) |393-25 (primary|
| |production |
| |business) |
|393-25(3) |393-25 (primary|
| |production |
| |business) |
|393-25(4) |393-25 |
| |(depositor) |
|393-30(1) |393-45(1) |
|393-30(2) |393-45(3) |
|393-30(3) |393-45(2) |
|393-35 |393-40(1) |
|393-35 |393-35(2) |
|(item 1 in | |
|the table) | |
|393-35 |393-35(3) |
|(item 2 in | |
|the table) | |
|393-35 |393-35(4) |
|(item 3 in | |
|the table) | |
|393-35 |393-35(5) |
|(item 4 in | |
|the table) | |
|393-35 |393-35(7) |
|(item 5 in | |
|the table) | |
|393-35 |393-35(8) |
|(item 6 in | |
|the table) | |
|393-35 |393-35(9) |
|(item 7 in | |
|the table) | |
|393-35 |393-35(10) |
|(item 8 in | |
|the table) | |
|393-35 |393-35(11) |
|(item 9 in | |
|the table) | |
|393-35 |393-35(6) |
|(item 10 in| |
|the table) | |
|393-35 |393-40(3) |
|(item 11 in| |
|the table) | |
|393-35 |393-40(4) |
|(item 12 in| |
|the table) | |
|393-35 |393-40(5) |
|(item 13 in| |
|the table) | |
|393-35 |393-40(6) |
|(item 14 in| |
|the table) | |
|393-40(1) |393-37(1) |
|393-40(2) |393-37(2) |
|393-40(3) |393-37(3) |
|393-40(4) |393-37(4) |
|393-40(5) |393-37(5) |
|393-40(6) |393-37(7) |
|393-45 |393-50(4) |
|393-50 |393-75 |
|393-50 |393-80 |
|393-60 |393-85 |
|995-1(1) |393-25 (entity)|
|(entity) | |
|995-1(1) |393-25 (farm |
|(farm |management |
|management |deposit) |
|deposit) | |
|995-1(1) |245-245(1) |
|(forgivenes|(forgive) |
|s) | |
|995-1(1) |42A-115 (luxury|
|(luxury |car) |
|car) |42A-120 |
|995-1(1) |42A-115 (lease |
|(luxury car|payment) |
|lease | |
|payment) | |
|995-1(1) |42A-115 (lease |
|(luxury car|payment period)|
|lease | |
|payment |42A-135(1) |
|period) | |
|995-1(1) |245-245(1) |
|(moneylendi|(moneylending |
|ng debt) |debt) |
|995-1(1) |245-245(1) (net|
|(net |forgiven |
|forgiven |amount) |
|amount) | |
|995-1(1) |393-25 (owner) |
|(owner) | |
|995-1(1) |995-1(1) |
|(special |(special |
|accrual |accrual amount)|
|amount) |ITAA 1997 |
|995-1(1) |995-1(1) |
|(subject to|(subject to |
|foreign |tax) ITAA 1997 |
|tax) | |
|995-1(1) |393-65 |
|(taxable | |
|non-primary| |
|production | |
|income) | |
|995-1(1) |42A-115 |
|(terminatio|(termination |
|n amount) |amount) |
| |240-78 |
| |ITAA 1997 |
|995-1(1) |245-245(1) |
|(total net |(total net |
|forgiven |forgiven |
|amount) |amount) |
|995-1(1) |393-15(3) |
|(unrecouped| |
|FMD | |
|deduction) | |
|242-10(1) |No equivalent |
|IT(TP)A | |
|1997 | |
|242-10(2) |42A-10(1)(d) |
|IT(TP)A |and (2) |
|1997 | |
|242-10(3) |42A-120 |
|IT(TP)A | |
|1997 | |
|242-20 |42A-20 |
|IT(TP)A 199|42A-90(4) |
|7 |42A-105(4) |
|245-10(1) |245-10(2) |
|IT(TP)A 199| |
|7 | |
|245-10(2) |245-140(3) and |
|IT(TP)A 199|(4) |
|7 | |
|393-10 |393-15(3) |
|IT(TP)A 199| |
|7 | |
|393-40 |393-37(7) |
|IT(TP)A 199| |
|7 | |
|398-5 |264AA |
|IT(TP)A 199| |
|7 | |
|255-105 |213 |
|Schedule 1 | |
|TAA 1953 | |
|255-110 |213 |
|Schedule 1 | |
|TAA 1953 | |
|268-1 |222AFA |
|Schedule 1 | |
|TAA 1953 | |
|268-5 |222AFA |
|Schedule 1 | |
|TAA 1953 | |
|268-10 |222AGA, 222AGG |
|Schedule 1 | |
|TAA 1953 | |
|268-15 |222AGB |
|Schedule 1 | |
|TAA 1953 | |
|268-20 |222AHA |
|Schedule 1 | |
|TAA 1953 | |
|268-25 |222AIE |
|Schedule 1 | |
|TAA 1953 | |
|268-30 |222AIF |
|Schedule 1 | |
|TAA 1953 | |
|268-35 |222AGC, 222AGD,|
|Schedule 1 |222AGE |
|TAA 1953 | |
|268-40 |222AGC, 222AGD,|
|Schedule 1 |222AHC, 222AHD,|
|TAA 1953 |222AIB, 222AIC |
|268-45 |222AIG |
|Schedule 1 | |
|TAA 1953 | |
|268-50 |222AHB |
|Schedule 1 | |
|TAA 1953 | |
|268-55 |222AKA |
|Schedule 1 | |
|TAA 1953 | |
|268-60 |222AHB |
|Schedule 1 | |
|TAA 1953 | |
|268-65 |222AIA, 222AIB |
|Schedule 1 | |
|TAA 1953 | |
|268-70 |222AKB |
|Schedule 1 | |
|TAA 1953 | |
|268-75 |222AJA |
|Schedule 1 | |
|TAA 1953 | |
|268-80 |222AJB |
|Schedule 1 | |
|TAA 1953 | |
|268-85 |222AMA |
|Schedule 1 | |
|TAA 1953 | |
|268-90 |222AGF, 222AHE,|
|Schedule 1 |222AID, 222AIH |
|TAA 1953 | |
|268-95 |222AMB |
|Schedule 1 | |
|TAA 1953 | |
|268-100 |222AII, 222ARA |
|Schedule 1 | |
|TAA 1953 | |
|269-1 |222ANA |
|Schedule 1 | |
|TAA 1953 | |
|269-5 |222ANA |
|Schedule 1 | |
|TAA 1953 | |
|269-10 |222ANB, 222AOA,|
|Schedule 1 |222AOB, |
|TAA 1953 |222AOBAA, |
| |222AOBA, |
| |222APA, 222APB |
|269-15 |222AOB, |
|Schedule 1 |222AOBAA, |
|TAA 1953 |222AOBA, |
| |222APA, 222APB |
|269-20 |222AOC, 222AOD,|
|Schedule 1 |222APC, 222APD |
|TAA 1953 | |
|269-25 |222AOE, 222APE |
|Schedule 1 | |
|TAA 1953 | |
|269-30 |222AOG, 222APF |
|Schedule 1 | |
|TAA 1953 | |
|269-35 |222AOJ, 222API |
|Schedule 1 | |
|TAA 1953 | |
|269-40 |222AOH, 222APG |
|Schedule 1 | |
|TAA 1953 | |
|269-45 |222AOI, 222APH |
|Schedule 1 | |
|TAA 1953 | |
|269-50 |222AOF |
|Schedule 1 | |
|TAA 1953 | |
|269-55 |222ARA |
|Schedule 1 | |
|TAA 1953 | |
Index
Schedule 1: Collection and recovery of tax
|Bill reference |Paragraph |
| |number |
|Item 1, section 169AA of the ITAA 1936 |2.21 |
|Item 2 |2.4 |
|Item 3, Division 5 of the ITAA 1997 |2.19 |
|Item 3, section 5-1 of the ITAA 1997 |2.18 |
|Item 3, subsections 5-5(2) and (3) of the |2.25 |
|ITAA 1997 | |
|Item 3, subsection 5-5(3) |2.26 |
|Item 7, subsections 255-10(2A) to (2C) |2.33 |
|Item 7, subsection 255-10(2C) |2.35 |
|Item 9, Subdivision 255-D |2.20, 2.41 |
|Item 9, section 255-100 |2.36, 2.43 |
|Item 9, paragraph 255-100(1)(a) |2.40 |
|Item 9, subsection 255-100(2) |2.47 |
|Item 9, section 255-105 |2.50 |
|Item 9, section 255-110 |2.53 |
|Item 10, section 268-1 |2.54 |
|Item 10, section 268-15 |2.68 |
|Item 10, section 268-90 |2.59, 2.67 |
|Item 10, section 269-1 |2.69 |
|Item 10, subsection 269-15(2) |2.88 |
|Item 10, section 269-25 |2.80, 2.81 |
|Item 10, subsection 269-35(2) |2.90 |
|Item 10, subsection 269-35(5) |2.91 |
|Item 10, section 269-50 |2.84 |
|Items 11 to 27, 29 to 32 and 34 to 52 |2.109 |
|Item 28 |2.38 |
|Item 54, section 5-10 of the IT(TP)A 1997 |2.95 |
|Items 54 and 55, sections 5-1 and 721-25 of |2.97 |
|the IT(TP)A 1997 | |
|Item 54, section 5-5 of the Income Tax |2.93 |
|(Transitional Provisions) Act 1997 | |
|(IT(TP)A 1997) | |
|Item 56 |2.94 |
|Item 57 |2.96 |
|Item 58 |2.99 |
|Items 58 to 60 |2.100 |
|Item 61 |2.102 |
|Item 62 |2.103 |
|Item 63 |2.101 |
|Item 64 |2.105 |
|Item 65 |2.106, 2.107, |
| |2.108 |
Schedule 2: Forgiveness of commercial debts
|Bill reference |Paragraph |
| |number |
|Items 1 and 2, Schedule 2C to the ITAA 1936,|3.3 |
|Division 245 of the ITAA 1997 | |
|Item 2, Subdivision 245-E |3.25 |
|Item 2, sections 245-1, 245-5, 245-30, |3.4 |
|245-48, 245-80, 245-95 and 245-200 | |
|Item 2, sections 245-10, 245-15 and 245-20 |3.10 |
|Item 2, sections 245-35 to 245-37 |3.16 |
|Item 2, paragraphs 245-40(a), (b) and (f) |3.17 |
|Item 2, paragraph 245-60(1)(c) |3.22 |
|Item 2, section 245-65 |3.19 |
|Item 2, sections 245-75 and 245-77 |3.21 |
|Item 2, sections 245-85 and 245-90 |3.23 |
|Item 2, subparagraph 245-90(4)(b)(ii) |3.24 |
|Item 2, subsection 245-90(5) |3.24 |
|Item 2, note to subsection 245-105(1) |3.28 |
|Item 2, sections 245-115, 245-130 and |3.27 |
|245-175 and subsection 245-145(1) | |
|Item 2, sections 245-115, 245-130, 245-145, |3.29 |
|245-175, 245-180, 245-185 and 245-190 | |
|Item 2, item 22 in the table in subsection |3.31 |
|245-145(1) | |
|Item 2, heading to Subdivision 245-G and |3.45 |
|section 245-265 | |
|Item 2, subsection 245-155(2) |3.26 |
|Item 2, subsection 245-265(9) |3.46 |
|Items 3 to 8, definitions of 'forgiveness', |3.44 |
|'forgiveness income year', 'moneylending | |
|debt', 'net forgiven amount' and 'total net | |
|forgiven amount' in subsection 995-1(1) | |
|Item 9, subsection 245-5(1) of the |3.48 |
|IT(TP)A 1997 | |
|Item 9, subsection 245-5(2) of the |3.49 |
|IT(TP)A 1997 | |
|Item 9, subsection 245-5(3) of the |3.49 |
|IT(TP)A 1997 | |
|Item 9, section 245-10 of the IT(TP)A 1997 |3.50 |
|Item 9, subsection 245-10(1) of the IT(TP)A |3.15 |
|1997) | |
|Item 9, subsection 245-10(2) of the IT(TP)A |3.30 |
|1997 | |
|Items 10 to 22 and 24 to 41, paragraphs |3.51 |
|82KZMA(6)(b) and 82KZMF(2)(b), | |
|subsections 73A(1A), 82KZM(2) and 109F(3) | |
|and sections 124KAA and 124ZAFAA to the ITAA| |
|1936 and paragraphs 165-115ZA(2)(b), | |
|204-30(2)(c) and 243-75(2)(a) and (b), | |
|subsections 25-25(1) (note), 25-35(5) (item | |
|3 in the table), 36-15(7), 36-17(9) (note), | |
|40-90(1), 40-645(3) (note 1), 43-50(7), | |
|104-25(5) (note 2), 243-75(1), 707-140(3), | |
|and 707-415(2) (item 1 in the table) and | |
|(4), and sections 12-5, 112-97 (item 19 in | |
|the table), and 230-470 of the ITAA 1997 | |
|Item 23, subsection 40-645(3) (note 1) |3.52 |
|Items 42 to 45, definitions of 'company' and|3.33 |
|'partnership' in subsection 995-1(1) | |
Schedule 3: Leases of luxury cars
|Bill reference |Paragraph |
| |number |
|Items 1 and 2, Schedule 2E to the ITAA 1936,|4.3 |
|Division 242 of the ITAA 1997 | |
|Item 2, Subdivision 242-E |4.27 |
|Item 2, sections 242-1, 242-5, 242-30, |4.4 |
|242-45, 242-60 and 242-75 | |
|Item 2, paragraph 242-10(1)(a) |4.43 |
|Item 2, paragraphs 242-10(1)(a), (b) and |4.37 |
|(d), 242-15(2)(b), 242-20(2)(a) and (b), | |
|subsections 242-10(3), 242-35(2) and (3), | |
|242-80(3) and 242-90(4) | |
|Item 2, paragraph 242-10(1)(d) |4.40 |
|Item 2, paragraph 242-15(2)(b) and |4.13 |
|subsections 242-10(1) and (3) and 242-20(2) | |
|Item 2, subsection 242-20(1) |4.9 |
|Item 2, subsection 242-20(2) |4.10 |
|Item 2, paragraph 242-20(2)(d) |4.12 |
|Item 2, paragraph 242-25(1)(b) and |4.11 |
|subsections 242-20(1) and (2) and 242-90(3) | |
|and (4) | |
|Item 2, subsection 242-35(2) |4.16, 4.44 |
|Item 2, subsection 242-40(1) (note) |4.20 |
|Item 2, subsection 242-40(2) |4.21 |
|Item 2, section 242-55 (note) |4.23 |
|Item 2, paragraph 242-65(1)(a) |4.25 |
|Item 2, subsections 242-65(2) and (3) |4.26 |
|Item 2, subsection 242-80(3) |4.29 |
|Item 2, subsection 242-80(4) (note) |4.30 |
|Item 2, subsection 242-80(5) |4.31 |
|Item 2, subsection 242-90(1) |4.32 |
|Item 2, subsection 242-90(3) |4.33 |
|Item 2, paragraph 242-90(5)(a) and |4.28 |
|subsections 242-80(1), (4), (7) and (8) | |
|Items 2 and 52, subsection 242-35(3) and |4.47 |
|'luxury car lease payment period' in | |
|subsection 995-1(1) | |
|Items 2 and 53, paragraph 242-10(1)(b) and |4.48 |
|'luxury car' in subsection 995-1(1) | |
|Items 2 and 74, subsection 242-90(4) and |4.35 |
|section 242-20 of the IT(TP)A 1997 | |
|Items 3 to 5, 7, 11 to 13, 15, 16, 19, 20, |4.52 |
|38, 46 and 56, subparagraphs | |
|118-12(2)(a)(vii), 118-12(2)(b)(viii), | |
|118-12(2)(b)(ix) and 974-130(4)(a)(iii), | |
|paragraph 240-115(2)(b), subsections | |
|25-35(4A), 28-12(1) (note 2), 28-45(1) (note| |
|1), 28-90(6) (note 1), 40-185(1) (note), | |
|40-305(1) (note) and 'special accrual | |
|amount' in subsection 995-1(1), and 'leases | |
|of luxury cars' in section 10-5, 'notional | |
|sale and loan' in section 11-55 and | |
|'leases of luxury cars' in section 12-5 | |
|Items 6, 9, 17, 18, 23, 25, 27, 29, 31 to |4.54 |
|34, 37, 39 to 42, 45, 47, 49 and 50, | |
|paragraphs 40-755(4)(b), 43-175(2)(a) and | |
|240-90(4)(a), subsections 25-35(4A) and | |
|(4B), 240-25(6), 240-60(1) (steps 1 and 4 of| |
|the method statement), 240-80(4), 240-80(5),| |
|240-105(4) (formula), 243-15(5), 243-20(4), | |
|243-25(2), 243-30(2), 855-55(4) and | |
|'depreciating asset' 'in-house software' and| |
|'IRU' in subsection 995-1(1), and section | |
|240-10 | |
|Items 8, 24 to 26, 35, 36 and 48, heading to|4.53 |
|Subdivision 240-G, paragraph 240-30(a), | |
|subsections 25-35(4B), 240-25(4), 240-25(6) | |
|and 'finance charge' in subsection 995-1(1),| |
|and section 240-100 | |
|Items 10, 14, 30, 39 to 42, 54, 55 and 59, |4.55 |
|subsections 25-35(4C), 243-15(5), 243-20(4),| |
|243-25(2), 243-30(2) and 'notional loan', | |
|'notional loan principal' and 'termination | |
|amount' in subsection 995-1(1), and | |
|sections 40-40 (item 1 in the table) and | |
|240-78 | |
|Items 30 and 59, section 240-78 and |4.50 |
|'termination amount' in subsection 995-1(1) | |
|Items 43 to 45, 57 and 58, heading to |4.56 |
|section 830-75, subsections 855-55(4) and | |
|'subject to tax' and 'subject to foreign | |
|tax' in subsection 995-1(1), and section | |
|83-75 | |
|Items 51 to 53 and 59, 'luxury car lease |4.46 |
|payment', 'luxury car lease payment period',| |
|'luxury car' and 'termination amount' in | |
|subsection 995-1(1) | |
|Item 60, subsection 242-10(1) of the |4.51 |
|IT(TP)A 1997 | |
|Item 60, subsection 242-10(3) of the IT(TP)A|4.49 |
|1997 | |
|Item 74, subsection 242-10(2) of the IT(TP)A|4.14 |
|1997 | |
|Item 74, section 242-20 of the IT(TP)A 1997 |4.12 |
Schedule 4: Farm management deposits
|Bill reference |Paragraph |
| |number |
|Items 1 and 2, Division 393 |5.4 |
|Item 2, Division 393 |5.3 |
|Part 1, item 2, Subdivision 393-C |5.29 |
|Part 1, item 2, section 393-1 |5.5 |
|Part 1, item 2, paragraph 393-5(1)(b) and |5.12 |
|item 1 in the table in section 393-35 | |
|Part 1, item 2, subsection 393-10(1) and |5.13 |
|example | |
|Part 1, item 2, subsection 393-10(2) |5.14 |
|Part 1, item 2, subsection 393-10(3) |5.16 |
|Part 1, item 2, section 393-15 |5.17 |
|Part 1, item 2, section 393-20 |5.19 |
|Part 1, item 2, subsection 393-20(3) |5.23 |
|Part 1, item 2, subsection 393-25(1) |5.22 |
|Part 1, item 2, sections 393-30 and 393-35 |5.19 |
|Part 1, item 2, section 393-40 |5.24 |
|Part 1, item 2, subsection 393-40(6) |5.25 |
|Part 1, item 7, Division 398, Schedule 1 to |5.30 |
|the TAA 1953 | |
|Part 2, items 8 to 49, subsection 3(2) |5.33 |
|(paragraph (aa) of the definition of 'exempt| |
|livestock proceeds') of the Farm Household | |
|Support Act 1992, subsections 6(1), 95(1), | |
|101A(4), 170(1) (item 9 in the table), | |
|177B(1) and (2), 202DM(1) and 202DM(3) of | |
|the ITAA 1936, sections 97A, 202DK, 202DL, | |
|202DL (note), 264AA of the ITAA 1936, | |
|paragraphs 202DL(a) and (b), 202DM(1)(a) and| |
|202DM(3)(a) of the ITAA 1936, paragraph | |
|268-35(5)(j) in Schedule 2F of the ITAA | |
|1936, paragraph 268-35(5)(j) in Schedule 2F | |
|(note) of the ITAA 1936, sections 10-5 (item| |
|in the table headed 'farm management | |
|deposits') and 12-5 (item in the table | |
|headed 'primary production') of the ITAA | |
|1997, paragraphs 26-55(2)(c), 165-55(5)(j) | |
|of the ITAA 1997, | |
|subparagraph 61-570(1)(a)(iii) of the ITAA | |
|1997, paragraph 165-55(5)(j) (note) | |
|of the ITAA 1997, subsection 230-460(15) and| |
|392-80(3) of the ITAA 1997, | |
|subsection 253-5(1) (paragraph (b) of the | |
|note) of the ITAA 1997, subsections 8J(18) | |
|and (19) of the TAA 1953, subsections | |
|45-120(4) and (5) in Schedule 1 to the TAA | |
|1953 | |
|Part 2, item 46, subsection 392-80(3) |5.28 |
|Part 3, item 50, section 393-1 of the |5.31 |
|IT(TP)A 1997 | |
|Part 3, item 50, section 393-5 of the |5.32 |
|IT(TP)A 1997 | |
|Part 3, item 50, section 393-10 of the |5.14 |
|IT(TP)A 1997 | |
|Part 3, item 50, section 393-40 of the |5.25 |
|IT(TP)A 1997 | |
Schedule 5: General insurance
|Bill reference |Paragraph |
| |number |
|Items 1 and 2, Division 321 |6.5 |
|Item 2, sections 321-10 and 321-15 |6.10 |
|Item 2, section 321-20 |6.11 |
|Item 2, step 1 in the method statement in |6.12 |
|section 321-20 | |
|Item 2, step 2 in the method statement in |6.13, 6.14 |
|section 321-20 | |
|Item 2, section 321-25 |6.21 |
|Item 2, section 321-45 |6.24 |
|Item 2, sections 321-50 and 321-55 |6.26 |
|Item 2, section 321-60 |6.27 |
|Item 2, step 1 in the method statement in |6.28 |
|section 321-60 | |
|Item 2, step 2 in the method statement in |6.30 |
|section 321-60 | |
|Item 2, step 3 in the method statement in |6.31 |
|section 321-60 | |
|Item 2, step 4 in the method statement in |6.32 |
|section 321-60 | |
|Item 2, step 5 in the method statement in |6.33 |
|section 321-60 | |
|Item 2, paragraphs 321-80(a) and (b), |6.39 |
|321-85(a) and (b) | |
|Item 2, paragraphs 321-80(b) and 321-85(b) |6.40 |
|Item 2, section 321-90 |6.41 |
|Item 2, section 321-95 |6.42 |
|Items 3 to 5 and 16, definition of 'contract|6.48 |
|of reinsurance' in subsection 995-1(1) | |
|Items 6 to 12, sections 10-5, 12-5 and |6.47 |
|713-710 | |
|Item 13 |6.46 |
-----------------------
[1] Joint Committee of Public Accounts, Report No. 326, An Assessment of
Tax, p. 84.
[2] Tax Reform: Not a New Tax, A New Tax System, August 1998, p. 149.
[3] These can be found on the ATO's website: www.ato.gov.au
[4] Federal Commissioner of Taxation v Futuris Corp Ltd [2008] HCA 32 and
Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd & Ors
[2008] HCA 41.
[5] Deputy Commissioner of Taxation v Meredith [2007] NSWCA 354.
[6] Deputy Commissioner of Taxation v Dick [2007] NSWCA 190.
[7] Review of Business Taxation, A Platform for Consultation, Vol II,
February 1999, p. 557.
[8] Review of Business Taxation, A Tax System Redesigned, July 1999,
Recommendation 15.1(iii), p. 517.
[9] Explanatory memorandum to the New Business Tax System (Consolidation)
Bill (No. 1) 2002, paragraph 13.2.