INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART VI - COLLECTION AND RECOVERY OF TAX  

Division 3 - Provisional tax  

Subdivision B - Provisional tax avoidance schemes  

SECTION 221YHAAC   PROVISIONAL TAX AVOIDANCE SCHEMES RELATING TO TAXPAYERS OTHER THAN TAXPAYERS IN THE CAPACITY OF TRUSTEES  

221YHAAC(1)   [Estimated taxable income increased by provisional tax benefit]  

Subject to subsection (3), where:

(a) a taxpayer other than a taxpayer in the capacity of a trustee furnishes a statement under subsection 221YDA(1) setting out the estimated taxable income of the taxpayer for a year of income (in this subsection referred to as the ``current year of income'' );

(b) the Commissioner is satisfied that there is, or might reasonably be expected to be, a family partnership or family trust of the taxpayer in relation to the current year of income; and

(c) the Commissioner serves on the taxpayer a notice in writing stating that the Commissioner is of the opinion that:

(i) the taxpayer has obtained or, but for this subsection, would obtain, a provisional tax benefit, of an amount specified in the notice, in connection with an arrangement in respect of the partnership or trust estate in relation to the current year of income, being an arrangement entered into or carried out before or after the commencement of this section; and

(ii) having regard to:

(A) the manner in which the arrangement was entered into or carried out;

(B) the form and substance of the arrangement;

(C) the time at which the arrangement was entered into and the length of the period during which the arrangement was carried out;

(D) the result in relation to the operation of this Division that, but for this subsection, would be achieved by the arrangement;

(E) any change in the financial position of the taxpayer that has resulted, will result, or may reasonably be expected to result, from the arrangement;

(F) any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the taxpayer, being a change that has resulted, will result, or might reasonably be expected to result, from the arrangement;

(G) any other consequence for the taxpayer, or for any person referred to in sub-subparagraph (F), of the arrangement having been entered into or carried out; and

(H) the nature of any connection (whether of a business, family or other nature) between the taxpayer and any person referred to in sub-subparagraph (F),

it would be concluded that the person, or one of the persons, who entered into or carried out the arrangement or any part of the arrangement did so for the purpose of enabling the taxpayer to obtain a provisional tax benefit in connection with the arrangement or of enabling the taxpayer and another taxpayer or other taxpayers each to obtain a provisional tax benefit in connection with the arrangement (whether or not that person who entered into or carried out the arrangement or any part of the arrangement is the taxpayer or is the other taxpayer or one of the other taxpayers),

the estimated taxable income of the taxpayer of the current year of income shall be deemed to have been increased by the amount of the provisional tax benefit specified in the notice.

221YHAAC(2)   [Amount of provisional tax benefit obtained]  

A reference in subsection (1) to the obtaining by a taxpayer of a provisional tax benefit in connection with an arrangement in respect of a partnership or trust estate (in this subsection referred to as the ``scheme partnership'' or the ``scheme trust estate'' , as the case requires) in relation to a year of income (in this subsection referred to as the ``current year of income'' ) is a reference to all of the following paragraphs being satisfied:

(a) either of the following subparagraphs applying:

(i) an amount not being included under subsection 92(1) or under section 97 , 98A or 100, as the case requires, in the assessable income of the taxpayer of the current year of income in respect of the net income of the scheme partnership or of the net income of the scheme trust estate, as the case may be, where that amount would have been so included or might reasonably be expected to have been so included, in the assessable income of the taxpayer of the current year of income if the arrangement had not been entered into or carried out;

(ii) a deduction being allowable under subsection 92(2) to the taxpayer in relation to the current year of income in respect of the partnership loss of the scheme partnership where an amount, being the whole or a part of the deduction, would not have been allowable, or might reasonably be expected not to have been allowable, to the taxpayer in relation to the current year of income if the arrangement had not been entered into or carried out;

(b) any one or more of the following subparagraphs applying:

(i) another amount, or other amounts, being included, or being reasonably likely to be included, under subsection 92(1) or section 97 , 98A or 100 , in the assessable income of the taxpayer of any other year or years of income (including a year of income ending before the commencement of this section) in respect of the net income of a partnership or trust estate that is a family partnership or a family trust, as the case may be, of the taxpayer in relation to that other year or other years of income where that amount or those amounts would not have been so included, or might reasonably be expected not to have been so included, in the assessable income of the taxpayer of that other year of income or those other years of income if the arrangement had not been entered into or carried out;

(ii) another amount, or other amounts, being, or being reasonably likely to be, assessable under section 98 in any other year or years of income in respect of a share of the taxpayer of the net income of a trust estate that is a family trust of the taxpayer in relation to that other year or other years of income (including a year of income ending before the commencement of this section) where that amount or those amounts would not have been so assessable, or might reasonably be expected not to have been so assessable, in that other year of income or those other years of income if the arrangement had not been entered into or carried out;

(iii) another amount, or other amounts, not being allowable under subsection 92(2) to the taxpayer as a deduction or deductions in relation to any other year or years of income (including a year of income ending before the commencement of this section) in respect of the partnership loss of a partnership that is a family partnership of the taxpayer in relation to that other year or other years of income where that amount or those amounts would have been so allowable or might reasonably be expected to have been so allowable, to the taxpayer in that other year of income or those other years of income if the arrangement had not been entered into or carried out;

(c) either of the following subparagraphs applying:

(i) provisional tax not being payable by the taxpayer in respect of the current year of income where that provisional tax would have been, or might reasonably be expected to have been, payable by the taxpayer if the arrangement had not been entered into or carried out;

(ii) the amount of provisional tax payable by the taxpayer in respect of the current year of income being less than the amount that would have been, or might reasonably be expected to have been, payable by the taxpayer if the arrangement had not been entered into or carried out,

and, for the purposes of subsection (1), the amount of the provisional tax benefit shall be taken to be:

(d) in a case to which paragraph (e) does not apply - the amount referred to in whichever of subparagraphs (a)(i) and (ii) is applicable; or

(e) where the scheme partnership or scheme trust estate was a family partnership, or a family trust, as the case may be, of the taxpayer in relation to the last preceding year of income:

(i) where subparagraph (a)(i) applies in relation to the scheme partnership or scheme trust estate, the taxable income of the taxpayer of the last preceding year of income consisted of, or included, family partnership income in relation to the scheme partnership or family trust income in relation to the scheme trust estate and, in the case of a scheme partnership, the taxpayer furnished an estimate of the family partnership income of the taxpayer in relation to the scheme partnership for the current year of income:

(A) the amount calculated in accordance with the formula

UA   −   B,

where:

U is the provisional tax uplift multiplier for the current year of income; and

A is the amount of the family partnership income of the taxpayer in relation to the scheme partnership, or the amount of the family trust income of the taxpayer in relation to the scheme trust estate, as the case may be, in relation to the last preceding year of income; and

B is the amount of the estimate furnished by the taxpayer of the family partnership income of the taxpayer in relation to the scheme partnership, or of the family trust income of the taxpayer in relation to the scheme trust estate, as the case may be, for the current year of income; or

(B) the amount referred to in subparagraph (a)(i),

whichever is the greater;

(ii) where subparagraph (a)(ii) applies in relation to the scheme partnership, there was a family partnership loss of the taxpayer in relation to the scheme partnership for the last preceding year of income and the taxpayer furnished an estimate of the family partnership loss of the taxpayer in relation to the scheme partnership for the current year of income:

(A) an amount calculated in accordance with the formula

A   −   UB,

where:

A is the amount of the estimate furnished by the taxpayer of the family partnership loss of the taxpayer in relation to the scheme partnership for the current year of income; and

U is the provisional tax uplift multiplier for the current year of income; and

B is the amount of the family partnership loss of the taxpayer in relation to the scheme partnership in relation to the last preceding year of income; or

(B) the amount referred to in subparagraph (a)(ii),

whichever is the greater; or

(iii) where subparagraph (a)(ii) applies in relation to the scheme partnership, the taxable income of the taxpayer of the last preceding year of income consisted of, or included, family partnership income in relation to the scheme partnership and the taxpayer furnished an estimate of the family partnership loss of the taxpayer in relation to the scheme partnership for the current year of income:

(A) the amount calculated in accordance with the formula

UA   +   B,

where:

U is the provisional tax uplift multiplier for the current year of income; and

A is the amount of the family partnership income of the taxpayer in relation to the scheme partnership in relation to the last preceding year of income; and

B is the amount of the estimate furnished by the taxpayer of the family partnership loss of the taxpayer in relation to the scheme partnership for the current year of income; or

(B) the amount referred to in subparagraph (a)(ii),

whichever is the greater.

221YHAAC(2A)   [Provisional tax instalments]  

A reference in paragraph (2)(c) to provisional tax includes a reference to instalments of provisional tax.

221YHAAC(3)   [Limits on increase in estimated taxable income]  

The amount of the estimated taxable income of a taxpayer of a year of income shall not be increased, by virtue of an application, or applications, of subsection (1), to an amount that would, by virtue of subsection 221YDA(2) or (4) , result in the amount of provisional tax payable by the taxpayer in respect of the year of income exceeding the amount that would, but for section 221YDA , be the amount of provisional tax payable by the taxpayer in respect of the year of income.

221YHAAC(3A)   [Reference to provisional tax payable]  

A reference in subsection (3) to an amount of provisional tax payable by a taxpayer in respect of a year of income includes a reference to an amount that, but for subsection 221YBA(5) , would be the provisional tax payable by the taxpayer in respect of the year of income.

221YHAAC(4)   [Increase attributable to income of particular kind]  

For the purposes of this Division, the Commissioner may treat an amount by which the estimated taxable income of a taxpayer is increased by virtue of an application, or applications, of subsection (1) as being attributable to income of a particular kind to such extent as the Commissioner considers reasonable.