Taxation Laws Amendment Act (No. 3) 1992 (98 of 1992)
Part 2 AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936
Division 6 Amendments relating to infrastructure borrowings
34 After Division 16K of Part III of the Principal Act, the following Division is inserted
"Division 16L - Tax-exempt infrastructure borrowings
"Subdivision A - Interpretation
General
"159GZZZU. In this Division:
'associate' has the same meaning as in subsection 26AAB(14);
'borrowing' means any form of borrowing, whether secured or unsecured, and includes the raising of funds by the issue of a bond, debenture, discounted security or other document evidencing indebtedness;
'Crown lease' means a lease granted by the Crown under a statutory law of the Commonwealth, a State or a Territory;
'direct infrastructure borrowing' has the meaning given by section 159GZZZW;
'exemption period', in relation to an infrastructure borrowing, means:
(a) in the case of a direct infrastructure borrowing or an indirect infrastructure borrowing - the period of 10 years beginning at the time of the borrowing; or
(b) in the case of a refinancing infrastructure borrowing - so much of the period that under paragraph (a) is the exemption period in respect of the direct infrastructure borrowing, or the indirect infrastructure borrowing, to which the refinancing infrastructure borrowing relates as remains at the time of the refinancing infrastructure borrowing;
'government body' means the Commonwealth, a State, a Territory or a body to which paragraph 23(d) applies;
'indirect infrastructure borrowing' has the meaning given by section 159GZZZX;
'listed company' means a company any of the shares of which are listed for quotation in the official list of a stock exchange in Australia or elsewhere;
'Loan Council' means the Australian Loan Council constituted under the Financial Agreement referred to in the Financial Agreement Validation Act 1929;
'refinancing infrastructure borrowing' has the meaning given by section 159GZZZY;
'used for assessable income purposes' means used for gaining or producing assessable income or installed ready for use for that purpose and held in reserve;
'25 year assessable use period', in relation to a direct infrastructure borrowing, means the period of 25 years mentioned in paragraph 159GZZZZB(1)(b).
Kinds of infrastructure borrowing
"159GZZZV. There are 3 kinds of infrastructure borrowing:
(a) a direct infrastructure borrowing (see section 159GZZZW); and
(b) an indirect infrastructure borrowing (see section 159GZZZX); and
(c) a refinancing infrastructure borrowing (see section 159GZZZY).
Direct infrastructure borrowing
"159ZZZW. A direct infrastructure borrowing is a borrowing of money where:
(a) the borrower requirements set out in section 159GZZZZ are met; and
(b) the requirement relating to the spending of the borrowed money, set out in section 159GZZZZA, is met; and
(c) the requirement relating to the use of facilities on which the borrowed money is spent, set out in section 159GZZZZB, is met.
Indirect infrastructure borrowing
"159GZZZX. An indirect infrastructure borrowing is a borrowing of money by an incorporated body where:
(a) the borrower requirements set out in section 159GZZZZ are met; and
(b) the body intends, at the time of the borrowing:
(i) to lend all the borrowed money to another person; and
(ii) that the loan will constitute the whole or part of a direct infrastructure borrowing by that other person.
Refinancing infrastructure borrowing
(Meaning of "refinancing infrastructure borrowing")
"159GZZZY.(1) A refinancing infrastructure borrowing is a borrowing of money where:
(a) the borrower requirements set out in section 159GZZZZ are met; and
(b) the borrower intends, at the time of the borrowing, to use the money borrowed only to repay the whole or part of any of the following borrowings of the borrower:
(i) a direct infrastructure borrowing; or
(ii) an indirect infrastructure borrowing; or
(iii) a borrowing that is a refinancing infrastructure borrowing because of another application of this subsection.
(Interpretive provision)
"(2) For the purposes of references in this Division, a refinancing infrastructure borrowing relates to a direct infrastructure borrowing or to an indirect infrastructure borrowing if the repayment mentioned in paragraph (1)(b) is of:
(a) the direct infrastructure borrowing or the indirect infrastructure borrowing, as the case may be; or
(b) another refinancing infrastructure borrowing that, under a previous application of this subsection, relates to the direct infrastructure borrowing or the indirect infrastructure borrowing, as the case may be.
Infrastructure borrowings - borrower requirements
(Borrower requirements)
"159GZZZZ.(1) For a borrowing to be an infrastructure borrowing, the requirements of this section must be met.
(Basic borrower requirement)
"(2) The borrower must:
(a) be:
(i) in any case - an incorporated body at the time of the borrowing; or
(ii) in the case of a direct infrastructure borrowing or a refinancing infrastructure borrowing that relates to a direct infrastructure borrowing - a corporate unit trust (within the meaning of section 102J), or a public trading trust (within the meaning of section 102R), in relation to the year of income in which the borrowing takes place; and
(b) where the borrower is an incorporated body and the borrowing is a direct infrastructure borrowing or a refinancing infrastructure borrowing that relates to a direct infrastructure borrowing - at the time of the borrowing, intend to be an incorporated body throughout the 25 year assessable use period in relation to the direct infrastructure borrowing; and
(c) where the borrower is a trust to which subparagraph (a)(ii) applies - at the time of the borrowing, intend to be such a trust in relation to each year of income the whole or part of which occurs during the 25 year assessable use period in relation to the direct infrastructure borrowing mentioned in that subparagraph; and
(d) in any case - not be making the borrowing in partnership (disregarding the definition of that expression in section 6) with anyone else; and
(e) in any case - subject to subsection (4), not be a government body or government owned (see subsection (3)) at the time of the borrowing.
(Meaning of "government owned")
"(3) For the purposes of paragraph (2)(e):
(a) an incorporated body is government owned if:
(i) it is limited by shares; and
(ii) a government body is the beneficial owner of at least 50% of the total rights:
(A) to dividends paid by the body; or
(B) to distributions of capital of the body on winding-up or otherwise; or
(C) to vote at meetings of shareholders of the body; and
(b) a trust is government owned if a government body is the beneficial owner of more than 50% of the interests in income or corpus of the trust.
(Paragraph (2)(e) not to apply to certain bodies)
"(4) Paragraph (2)(e) does not apply to a borrower if the Loan Council has declared the borrower to be exempt from the coverage of the global borrowing limits for the financial year in which the infrastructure borrowing takes place.
(Treasurer to publish notice)
"(5) The Treasurer must, as soon as practicable after the Loan Council has made a declaration in relation to a borrower, arrange for notice of the making of the declaration in relation to the borrower to be published in the Gazette.
(Direct infrastructure borrowings by listed companies)
"(6) Where:
(a) the infrastructure borrowing is:
(i) a direct infrastructure borrowing; or
(ii) a refinancing infrastructure borrowing that relates to a direct infrastructure borrowing;
by an incorporated body limited by shares; and
(b) the incorporated body is a listed company; and
(c) at the time of the borrowing, a person is the beneficial owner of shares carrying more than half the voting rights in the incorporated body;
that person must not, at the time of the borrowing, intend to dispose of sufficient of those shares to cause the number of voting rights to fall to or below half during the 25 year assessable use period in relation to the
borrowing.
(Direct infrastructure borrowings by unlisted companies)
"(7) Where:
(a) the infrastructure borrowing is:
(i) a direct infrastructure borrowing; or
(ii) a refinancing infrastructure borrowing that relates to a direct infrastructure borrowing; by an incorporated body limited by shares; and
(b) the incorporated body is not a listed company; and
(c) at the time of the borrowing, a person either alone or together with an associate or associates is the beneficial owner of shares carrying more than half the voting rights in the incorporated body;
that person, or that person and the associates, must not intend, at the time of the borrowing, to dispose of sufficient of those shares to cause the number of voting rights to fall to or below half during the 25 year assessable use period in relation to the borrowing.
Direct infrastructure borrowing - requirement relating to spending of borrowed money
(Spending requirement)
"159GZZZZA.(1) For a borrowing to be a direct infrastructure borrowing, the borrower must, at the time of the borrowing, intend to spend the money borrowed only on:
(a) the construction of one or more infrastructure facilities; or
(b) subject to subsection (2), the construction or acquisition of one or more related facilities.
(Spending on related facilities)
"(2) Spending money on the construction or acquisition of a related facility only qualifies under subsection (1) if:
(a) the borrower also intends to spend some of the borrowed money as mentioned in paragraph (1)(a) on one or more of the infrastructure facilities to which the related facility is related; or
(b) the following conditions are satisfied:
(i) the borrower already owns the infrastructure facility or facilities to which the related facility is related; and
(ii) the requirements of section 159GZZZZB are satisfiedin relation to that infrastructure facility or those infrastructure facilities (assuming the money were also to be spent on them) as well as the related facility at the time of the borrowing; and
(iii) the borrower intends to begin the construction or make the acquisition of the related facility not later than 10 years after:
(A) if the borrower constructed the infrastructure facility or facilities to which it is related - the beginning of construction of the infrastructure facility, or the first of the infrastructure facilities, to which it is related; or
(B) if the borrower acquired the infrastructure facility or facilities to which it is related - the time of acquisition of the infrastructure facility, or the first of the infrastructure facilities, to which it is related.
(Exclusions)
"(3) A borrowing does not qualify for the purposes of subsection (1) if the body intends to spend the money borrowed:
(a) on entering into or acquiring a lease; or
(b) on acquiring land on which there is a building or structure that is to form part of the infrastructure facility or the related facility concerned; or
(c) on refinancing a loan.
(Facility can be part of or related to other facilities)
"(4) It does not matter for the purposes of subsection (1) if the infrastructure facility is to be part of or related to any other infrastructure facility of any person.
("acquisition" includes dismantling etc.)
"(5) In paragraph (1)(b), 'acquisition' includes dismantling, transportation or installation in connection with the acquisition.
Direct infrastructure borrowing - requirement relating to use of facilities on which borrowed money is to be spent (Facility use requirements)
"159GZZZZB.(1) For the borrowing to be a direct infrastructure borrowing, it is also necessary that, at the time of the borrowing, the borrower intends:
(a) that it will own, use and effectively control the use of, the facilities on which the money will be spent (other than by leasing them) principally for assessable income purposes; and
(b) that the use for assessable income purposes will continue for at least 25 years after the first such use by the body of any of the facilities concerned; and
(c) that it will not do anything that will cause section 51AD or Division 16D to apply to any of the facilities concerned.
(Crown leases)
"(2) For the purposes of paragraph (1)(a), if:
(a) the borrower intends that any of the facilities concerned will be a fixture on land that is the subject of a Crown lease; and
(b) it can reasonably be expected, when the borrowing takes place, that the Crown lease will run, or (because of law, custom or otherwise) be extended or renewed to run, for at least the 25 year assessable use period;
then the borrower is taken to intend to own the facility concerned.
Infrastructure facilities
(3 kinds of facilities)
"159GZZZZC.(1) There are 3 kinds of infrastructure facility.
(Land transport facility)
"(2) One kind of infrastructure facility is a land transport facility, that is to say, a road, tunnel, bridge, or railway line, or a combination of these, in Australia that is to be used for the transport of the public or their goods at a charge (whether the transport is by the member of the public concerned or by another person).
(Seaport facility)
"(3) Another kind of infrastructure facility is a seaport facility, that is to say, a wharf, or dock, in Australia for the public to embark or disembark, or for loading or unloading their cargo, onto or from seagoing vessels, where there is a charge for the transport of the public or their cargo on the vessels.
(Electricity generating facility)
"(4) The other kind of infrastructure facility is an electricity generating facility in Australia, where the electricity generated is primarily or principally for sale to the public through the public electricity grid.
Related facilities
(Basic test)
"159GZZZZD.(1) Related facilities are facilities in Australia that are reasonably necessary for an infrastructure facility to be able to operate for the purpose for which it was constructed.
(Examples)
"(2) The following are examples of facilities that are related facilities in respect of an infrastructure facility, provided that they pass the test in subsection (1):
(a) plant and other equipment (for example, rolling stock in the case of a railway) for use in operating the infrastructure facility;
(b) buildings or other structures from which staff are to operate the infrastructure facility;
(c) buildings or other structures for storing freight, cargo, plant, fuel, stores or equipment;
(d) stations or passenger terminals;
(e) maintenance facilities.
(Access roads etc. excluded)
"(3) In the case of any infrastructure facility, a road, bridge, tunnel or railway to provide access to the infrastructure facility is not a related facility (or part of the infrastructure facility itself).
(Dry-docks etc. excluded)
"(4) In the case of a seaport facility, a dry-dock or other facility for repair or maintenance of vessels is not a related facility (or part of the infrastructure facility itself).
(Dams etc. excluded)
"(5) In the case of an electricity generating facility, the following are not related facilities (or part of the infrastructure facility itself):
(a) a dam or coal mine;
(b) facilities for transporting fuel to the site at which the electricity generating takes place;
(c) transmission lines or other plant or equipment for use in sending the electricity generated to the public electricity grid.
"Subdivision B - Tax effects of infrastructure borrowings Infrastructure borrowings to be non-assessable and non-deductible
(Basic non-assessability/non-deductibility provision)
"159GZZZZE.(1) No amount is included in, or allowable as a deduction from, the assessable income of a taxpayer of a year of income in respect of:
(a) payments of principal or interest, or in the nature of interest, made or liable to be made by or to the taxpayer under an infrastructure borrowing during the exemption period in relation to the borrowing; or
(b) amounts received or receivable, or paid or payable, by the taxpayer by way of consideration for the acquisition or disposal, during the exemption period in relation to an infrastructure borrowing, of:
(i) rights or liabilities in respect of the borrowing; or
(ii) any bond, debenture, discounted security, or other document evidencing indebtedness, in respect of the borrowing; or
(c) any profit or loss of the taxpayer in respect of a disposal mentioned in paragraph (b), or in respect of the repayment of an infrastructure borrowing by or to the taxpayer during the exemption period in relation to the borrowing; or
(d) the writing off or extinguishing of the whole or part of any debt that consists of a payment or amount to which this subsection applies that is liable to be made to, or is receivable by, the taxpayer.
(Special provision relating to Division 16E)
"(2) No amount is included in, or allowable as a deduction from, the assessable income of a taxpayer of a year of income:
(a) under section 159GQ in relation to the exemption period in respect of an infrastructure borrowing; or
(b) under subsection 159GR(2) in relation to any payment made or liable to be made to the taxpayer during the exemption period in respect of an infrastructure borrowing; or
(c) under section 159GS in relation to any transfer, during the exemption period in respect of an infrastructure borrowing, of:
(i) rights or liabilities in respect of the borrowing; or
(ii) any bond, debenture, discounted security, or other document evidencing indebtedness, in respect of the borrowing; or
(d) under section 159GT in respect of the exemption period in relation to an infrastructure borrowing.
(Deemed re-acquisition after exemption period)
"(3) For the purposes of this Act:
(a) if a taxpayer holds a bond, debenture, discounted security, or other document evidencing indebtedness, in respect of an infrastructure borrowing - that bond, debenture, discounted security or other document; or
(b) in any other case - all rights of a taxpayer under any infrastructure borrowing;
is or are taken to have been disposed of by the taxpayer immediately before the end of the exemption period and to have been re-acquired by the taxpayer immediately after the end of the period for their market value at that time.
Tax exemption to be disregarded for certain purposes
"159GZZZZF. The exclusion under section 159GZZZZE of amounts from assessable income is to be disregarded for the purpose of applying any provision of this Act to determine allowable deductions in respect of infrastructure borrowings (other than deductions to which section 159GZZZZE applies).".