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House of Representatives

Taxation Laws Amendment Bill (No. 4) 1990

Taxation Laws Amendment Act (No. 4) 1990

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)

GENERAL OUTLINE

The Bill will amend the Income Tax Assessment Act 1936 -

·
to amend the thin capitalisation rules:

· .
to exempt certain nostro and vostro account balances (short-term clearance accounts) from the thin capitalisation calculations;
· .
to exempt from the thin capitalisation foreign equity calculation certain securities that qualify for the section 128F withholding tax exemption;
· .
to exempt short-term (not more than 30 days) trade credit from the thin capitalisation controls;
· .
to allow the equity of certain foreign-owned resident holding companies in resident banks to be treated as foreign equity;
· .
to provide an alternative method of measuring excess foreign debt.

·
to modify the transitional arrangements accorded to gold miners in respect of the removal of their income tax exemption to:

· .
provide by way of an option an alternative method to calculate residual eligible gold mining expenditure;
· .
extend the transitional capital gains tax (CGT) treatment to all assets, whose disposal on or after 1 January 1991 falls within the CGT provisions, to ensure that any such gains or losses are only calculated prospectively from 1 January 1991;
· .
enable gold miners to bring trading stock on hand at 1 January 1991 into account for the purposes of determining taxable income;

·
to amend the dividend imputation rules to:

· .
to provide for franking debits to arise when:

· ..
a company's liability to pay franking deficit tax is waived or reduced because the company has made an initial payment of tax under the new company tax collection system on the basis of its estimated tax liability;
· ..
any part of an initial or subsequent payment of tax is refunded because it exceeds the company's tax liabilities;
· ..
to change the way a franking debit arises when a subsequent payment of tax (other than a final payment) is credited or refunded by the Commissioner of Taxation;

· .
to provide that the franking credit for an initial payment of company tax made during the year of income to which the payment relates arises in the following franking year;

·
to ensure that any unrecouped excess exploration and prospecting expenditure incurred in relation to quarrying operations can be carried forward once the mining right to which the expenditure relates is sold.
·
to introduce changes to the zone rebate arrangements by:

· .
including Lord Howe Island and Nhulunbuy in the special area in Zone A and King Island and the Furneaux Group of islands in Zone B; and
· .
increasing the dependants' component of the rebate for the special area in Zone B to the same level as that applying for the special area in Zone A (proposal announced in the Budget on 21 August 1990).

·
to make a minor technical amendment to the provisions dealing with the disposal of contaminated live stock;
·
to reflect changes in the names of organisations (the Australian College of General Practitioners and the Australian Sports Aid Foundation) currently listed in the income tax gift provisions;

The Bill will also make a minor technical amendment to Taxation Laws Amendment Act (No. 2) 1990.


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