House of Representatives

Taxation Laws Amendment Bill (No. 5) 1992

Taxation Laws Amendment Act (No. 5) 1992

Income Tax (Dividends and Interest Withholding Tax) Bill 1992

Income Tax (Dividends and Interest Withholding Tax) Amendment Act 1992

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon John Dawkins, M.P.)

Glossary of Terms

Term Definition
Base amount the lesser of either the original cost price of the horse, or its depreciated value.
Controlled foreign company ( CFC) a non-resident company in which resident individuals, partnerships, companies or trusts hold specified interests. The meaning of the term is set out in section 340 of the Act.
Current year of income The current year of income for provisional tax purposes, is the year of income in respect of which provisional tax is being calculated. This calculation is based on the preceeding year's taxable income and various rebate and credit entitlements contained in the taxpayer's preceeding years notice of assessment.
Dependant in relation to a person is a spouse or de facto spouse and any child, including an adopted child, a step child or an ex-nuptial child of the person.
Eligible employee in relation to a taxpayer is basically an employee of the taxpayer - whether that person is employed directly or indirectly by the taxpayer. An employee is indirectly employed by the taxpayer if that employee works for a company which is associated with the taxpayer.
Environment all aspects of the surroundings of humans, both the physical and social environment.
Environment protection activity activity undertaken to prevent, combat or rectify pollution or treat, clean up or remove waste.
Finance scheme guidelines guidelines made under section 39EA of the Industry Research and Development Act 1986 .
Financing cost this term is defined in subsection 67AAA(3) to include expenditure incurred in obtaining finance to pay personal superannuation contributions or life insurance premiums such as interest or a payment in the nature of interest and borrowing expenses.
Government bodies authorities of the Commonwealth, a State or Territory and will include universities, other educational institutions and research institutions owned by the public sector.
Holding days the number of days the horse is actually held for breeding purposes unless the horse was not held for breeding purposes continuously. If this is the case, the holding days for the purposes of the formulae is the number of days from the last occasion the horse began to be held for breeding purposes.
Horse breeding stock a horse acquired by taxpayer under a contract entered into on or after 19 August 1992, that is three years old at the end of the year of income, and is held for breeding purposes.
Income-producing activity any business or investment activity which produces income.
Ineligible finance scheme a finance scheme that the Industry Research and Development Act 1986 Board determines to be ineligible.
Listed country is a country that is treated afor the purposes of the CFC and transferor trust measures as having a tax system that is generally comparable to that of Australia. A list of these comparable taxing countries is contained in Part 8A of the Income Tax Regulations.
Live stock animals that are not used as beasts of burden or working beasts in a business other than primary production
Margin for error In relation to a variation of provisional tax, the percentage of error allowed in estimating taxable income or PAYE tax instalment deductions before additional tax is imposed.
Nominated percentage (male horses only), is the percentage of the cost of a horse which the taxpayer nominates to write down for a particular year of income. It cannot be greater than 25%.
Opening value the value at the end of the previous year of income or,if the horse became breeding stock during the year of income, the lessor of the original cost of the horse; or its depreciated value.
Pilot plant plant which is used for experimental purposes and not in commercial production.
Pollution emissions which damage the environment or may be potentially dangerous; includes noise pollution.
Preceding year of income The preceeding year of income for provisional tax purposes, is the year of income prior to the current year of income. For example, the actual taxable income and the rebate and credit entitlements contained in the taxpayer's 1991-92 (preceeding year) notice of assessment are used to estimate provisional tax payable for the 1992-93 (current year) year of income.
Provisional Tax Uplift Factor The percentage that is applied to the preceding years taxable income and to certain rebate and credits in determining the provisional tax payable for the current year.
Reducing factor (female horses only) is the greater of three or 12 less the age of the horse (in whole years) on the day it began to be held for breeding purposes.
Risk component The whole premium will consist of a risk component where it is received in respect of a:

term insurance policy; or
a rider or supplementary benefit attached to another policy where the sum insured is payable on death within a specified term.

Special closing value is the " opening value" less "reduction amount", or $1 where a female horse is 12 years of age or older or a horse (male or female) has been written down to the point where the "reduction amount" exceeds the "opening value".
Split dollar arrangement an arrangement whereby one party, usually the employee, pays the part of the premium of a life insurance policy which is an investment component. The other party, usually the employer, pays the part of the premium which is the risk component.
TFN tax The amount of tax that has been deducted from investment income by virtue of the taxpayer's failure to quote his or her Tax File Number (TFN) to an investment body.
Unlisted country is a foreign country which is not a listed country.

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