House of Representatives

Taxation Laws Amendment Bill (No. 2) 1996

Explanatory Memorandum

(Circulated by the authority of the Treasurer,the Hon Peter Costello, MP)

Chapter 10 - Capital gains tax - technical correction


10.1 The amendments contained in Schedule 6 of the Bill will correct minor technical deficiencies in the Taxation Laws Amendment Act (No. 4) 1995 .

Summary of the amendments

Purpose of the amendments

10.2 The purpose of the amendments is to restore certain application dates and section references to those originally intended by Parliament.

Date of effect

10.3 These amendments will apply from 16 December 1995, that is immediately after the commencement of Schedules 1 and 2 of Taxation Laws Amendments Act (No.4) 1995 . [Subclauses 2(5) and 2(6)]

Background to the legislation

10.4 Taxation Laws Amendment Act (No.3) 1995 and Taxation Laws Amendment Act (No.4) 1995 contained measures relating to capital gains tax (CGT) and dividend imputation arrangements. During passage of the Acts through Parliament a number of amendments were made to the measures. Those changes resulted in the renumbering of sections and items in the Acts.

10.5 Consequently, amendments in Taxation Laws Amendment Act (No.4) 1995 that were based upon Taxation Laws Amendment Act (No.3) 1995 are now incorrect. Further, additional legislative changes made in the Senate to the Taxation Laws Amendment Act (No.4) 1995 were based on the incorrect item numbers, as the Act had been amended in the House of Representatives.

Explanation of the amendments

Capital gains tax

10.6 The Taxation Laws Amendment Act (No.4) 1995 contains a measure designed to ensure that assets which are taxable Australian assets for the purposes of the CGT provisions and which are used to produce franked dividends or income subject to withholding tax, will be subject to CGT on disposal. The amendment was originally proposed to apply to disposals of taxable Australian assets taking place on or after 20 September 1985, which is the date from which the CGT provisions generally apply.

10.7 An amendment was passed by the Senate so that the provision would apply to disposals taking place after 7:30pm 9 May 1995, which is the time of the announcement of the changes.

10.8 The Senate amendment as drafted related to an incorrect item number of the Act. The number was taken from the Bill as presented and read the first time in the House of Representatives (schedule 1, item 34) rather than the item number from the Bill as read a third time in the House of Representatives (schedule 1, item 35). There were a number of amendments to the Bill as read the first time which resulted in the renumbering of the items in the Bill.

10.9 As a result, the Senate amendment relates to a different item in the Bill. Items 1, 2 and 3 correct these deficiencies.

Dividend imputation

10.10 Items 1 and 2 of schedule 2 of Taxation Laws Amendment Act (No.4) 1995 purport to amend section 46L of the Income Tax Assessment Act 1936 . That section was introduced by Taxation Laws Amendment Act (No.3) 1995 . Following amendments to that Act during its passage through Parliament, a renumbering of the provisions occurred so that the original section 46L became 46M.

10.11 Therefore the references to section 46L in Taxation Laws Amendment Act (No.4) 1995 need to be amended to refer to section 46M. These references are corrected by items 4 and 5 .

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