INCOME TAX ASSESSMENT ACT 1936

PART III - LIABILITY TO TAXATION  

Division 2 - Income  

Subdivision A - Assessable income generally  

SECTION 26AJ   INVESTMENT-RELATED LOTTERY WINNINGS TO BE INCLUDED IN ASSESSABLE INCOME  

26AJ(1)  
If:


(a) either:


(i) a loan benefit is provided to a taxpayer, or to another person, in respect of a year of income (in this subsection called the current year of income ); or

(ii) an amount (other than loan principal) is paid or credited to a taxpayer, or to another person, during a year of income (in this subsection also called the current year of income ); or

(iii) other property or services are provided to a taxpayer, or to another person, during a year of income (in this subsection also called the current year of income ); and


(b) the making of a loan, the payment or crediting of the amount, or the provision of the property or services, as the case may be, is by way of winnings from:


(i) betting (including pool betting); or

(ii) a lottery or other form of gambling; or

(iii) a game with prizes; and


(c) the chance to participate in the betting, lottery, gambling or game (in this subsection called the betting chance ) was provided:


(i) wholly or partly in respect of an investment held by the taxpayer in or with a third person (who may be an associate of the taxpayer) (in this subsection called the investment body ); or

(ii) wholly or partly in relation directly or indirectly to such an investment; and


(d) the betting, lottery, gambling or game was organised by, or on behalf of:


(i) the investment body (either acting alone or together with one or more other persons); or

(ii) an associate of the investment body (either acting alone or together with one or more other persons); and


(e) if the recipient of the loan benefit, amount or property or services, as the case may be, is a person other than the taxpayer - either:


(i) the other person is an associate of the taxpayer; or

(ii) the loan benefit, amount or property or services, as the case may be, is provided under an arrangement to which the taxpayer, or an associate of the taxpayer, is a party; and


(f) no part of the value of the betting chance is included in the assessable income of the taxpayer of any year of income; and


(g) the provision of the betting chance is neither:


(i) a fringe benefit; nor

(ii) a benefit that, apart from paragraph (g) of the definition of fringe benefit in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 , would be a fringe benefit;

then:


(h) if subparagraph (a)(i) applies - the taxpayer's assessable income of the current year of income includes the amount (if any) by which the benchmark amount of interest in relation to the loan in respect of the current year of income exceeds the amount of interest that has accrued on the loan in respect of the current year of income; or


(i) if subparagraph (a)(ii) applies - the taxpayer's assessable income of the current year of income includes the amount paid or credited; or


(j) if subparagraph (a)(iii) applies - the taxpayer's assessable income of the current year of income includes the arm's length value of the property or services, reduced by the recipient's contribution (if any).

26AJ(2)  
If:


(a) apart from this subsection, an amount (in this subsection called the gross assessable amount ) is included in a taxpayer's assessable income of a year of income under paragraph (1)(h) in respect of a loan benefit; and


(b) assuming that:


(i) the recipient of the loan benefit had, on the last day of the period (in this subsection called the loan period ) during the year of income when the recipient was under an obligation to repay the whole or any part of the loan, incurred and paid unreimbursed interest (in this subsection called the gross interest ), in respect of the loan, in respect of the loan period; and

(ii) the amount of the gross interest was equal to the benchmark amount of interest in relation to the loan in respect of the year of income;
a once-only deduction (in this subsection called the gross deduction ) would, or would apart from section 82A , and Subdivisions F and GA of Division 3 of this Part, of this Act, and Divisions 28 and 900 of the Income Tax Assessment Act 1997 , have been allowable to the recipient in respect of the gross interest;

the gross assessable amount is reduced by:


(c) if no interest accrued on the loan in respect of the loan period - the amount of the gross deduction; or


(d) in any other case - the amount worked out using the formula:


Gross deduction   -   Reducing amount


where:
  • Gross deduction means the amount of the gross deduction;
  • Reducing amount means the amount (if any) that would, or that would apart from section 82A , and Subdivisions F and GA of Division 3 of this Part, of this Act, and Divisions 28 and 900 of the Income Tax Assessment Act 1997 , have been allowable as a once-only deduction to the recipient in respect of the interest that accrued on the loan in respect of the loan period if that interest had been incurred and paid by the recipient on the last day of the loan period.
  • 26AJ(3)  
    If:


    (a) apart from this subsection, an amount (in this subsection called the gross assessable amount ) is included in a taxpayer's assessable income of a year of income under paragraph (1)(j) in respect of the provision of property or services; and


    (b) assuming that:


    (i) the recipient of the property or services had, at the time the property or services were provided, incurred and paid unreimbursed expenditure in respect of the provision of the property or services; and

    (ii) the expenditure was equal to the amount of the arm's length value of the property or services;
    a once-only deduction would, or would apart from section 82A , and Subdivisions F and GA of Division 3 of this Part, of this Act, and Divisions 28 and 900 of the Income Tax Assessment Act 1997 , have been allowable to the recipient in respect of a percentage (in this subsection called the deductible percentage ) of the expenditure;

    the gross assessable amount is reduced by the deductible percentage.

    26AJ(4)  
    For the purposes of the application of this section to a taxpayer, if a person (in this subsection called the provider ) makes a loan to another person (who may be the taxpayer) (in this subsection called the recipient ):


    (a) the making of the loan is taken to constitute a loan benefit provided by the provider to the recipient; and


    (b) that loan benefit is taken to be provided in respect of each year of income of the taxpayer during the whole or part of which the recipient is under an obligation to repay the whole or any part of the loan.

    26AJ(5)  
    For the purposes of this section, if a person (in this subsection called the provider ) makes a deferred interest loan (in this subsection called the principal loan ) to another person (in this subsection called the recipient ):


    (a) the provider is taken, at the end of:


    (i) the period of 6 months commencing on the day on which the principal loan was made; and

    (ii) each subsequent period of 6 months;
    (being in either case a period during the whole of which the recipient is under an obligation to repay the whole or any part of the principal loan) to have made a loan (in this subsection called the deemed loan ) to the recipient; and


    (b) the amount of the deemed loan is equal to the amount by which the interest (in this subsection called the accrued interest ) that has accrued on the principal loan in respect of that period exceeds the amount (if any) paid in respect of the accrued interest before the end of that period; and


    (c) if any part of the accrued interest becomes payable or is paid after the time when the deemed loan is taken to have been made, the deemed loan is to be reduced accordingly; and


    (d) the deemed loan is taken to have been made at a nil rate of interest.

    26AJ(6)  
    For the purposes of this section, if no interest is payable in respect of a loan, a nil rate of interest is taken to be payable in respect of the loan.

    26AJ(7)  
    For the purposes of this section, a person is taken to be under an obligation to pay or repay an amount even though the amount is not due for payment or repayment.

    26AJ(8)  
    For the purposes of this section, if a person does anything that results in the creation of property in another person, the first-mentioned person is taken to have provided that property to the other person at the time when the property comes into existence.

    26AJ(9)  
    For the purposes of this section, if:


    (a) a particular mode of application of money by a taxpayer in relation to another person (in this subsection called the investment body ) would not, apart from this subsection, be an investment; and


    (b) a chance to participate in:


    (i) betting (including pool betting); or

    (ii) a lottery or other form of gambling; or

    (iii) a game with prizes;
    is provided to the taxpayer or a third person:

    (iv) wholly or partly in respect of the mode of application of money by the taxpayer; or

    (v) wholly or partly in relation directly or indirectly to the mode of application of money by the taxpayer; and


    (c) if a cash payment had been provided by the investment body to the taxpayer instead of that chance, the payment would constitute, to any extent, a return on an investment held by the taxpayer in or with the investment body;

    the mode of application of money is taken to be an investment held by the taxpayer with the investment body.

    26AJ(10)  
    If a ballot is held to determine the order in which loans are to be made by a Starr-Bowkett building society to its members, then the making of a loan in accordance with the ballot is not covered by paragraph (1)(b).

    26AJ(11)  


    In this section:

    arm's length value
    , in relation to property or services, means:


    (a) the amount that the recipient could reasonably have been expected to have been required to pay to obtain the property or services from the provider under a transaction where the parties to the transaction are dealing with each other at arm's length in relation to the transaction; or


    (b) if such an amount cannot be practically determined - such amount as represents a reasonable valuation of the property or services;

    arrangement
    means:


    (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and


    (b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise;

    associate
    has the same meaning in relation to a person as that expression has in relation to a person in section 318 ;

    benchmark amount of interest
    , in relation to a loan, in relation to a year of income, means the amount of interest that would have accrued on the loan in respect of the year of income if the interest was calculated on the daily balance of the loan at the benchmark interest rate in relation to the year of income;

    benchmark interest rate
    , in relation to a year of income, means the predominant per cent per annum interest rate on new, variable interest rate housing loans to individuals for owner-occupation that is specified, for the June immediately preceding the financial year to which the year of income relates, in the " Interest Rates and Yields: Banks " table in the Statistical Directory of the Reserve Bank of Australia Bulletin dated July in that financial year;

    deferred interest loan
    means a loan in respect of which interest is payable at a rate exceeding nil, other than:


    (a) a loan where the whole of the interest is due for payment within 6 months after the loan is made; or


    (b) a loan where:


    (i) the interest is payable by instalments; and

    (ii) the intervals between instalments do not exceed 6 months; and

    (iii) the first instalment is due for payment within 6 months after the loan is made;

    investment
    means any mode of application of money for the purpose of gaining a return;

    loan
    includes:


    (a) an advance of money; and


    (b) the provision of credit or any other form of financial accommodation; and


    (c) the payment of an amount for, on account of, on behalf of or at the request of a person where there is an obligation (whether express or implied) to repay the amount; and


    (d) a transaction (whatever its terms or form) which in substance effects a loan of money;

    loan benefit
    has the meaning given by subsection (4);

    once-only deduction
    (Repealed by No 75 of 2010 )

    person
    means any of the following:


    (a) a company;


    (b) a partnership;


    (c) a person in the capacity of trustee;


    (d) any other person;

    provide
    :


    (a) in relation to property - includes dispose of (whether by assignment, declaration of trust or otherwise); and


    (b) in relation to services - includes allow, confer, give, grant or perform;

    recipient's contribution
    , in relation to property or services, means the amount of any consideration paid to the provider by the recipient in respect of the provision of the property or services, reduced by the amount of any reimbursement paid to the recipient in respect of that consideration;

    return
    , in relation to an investment, includes interest, income or profit;

    services
    includes any benefit, right (including a right in relation to, and an interest in, real or personal property), privilege or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:


    (a) an arrangement for or in relation to:


    (i) the performance of work (including work of a professional nature), whether with or without the provision of property; or

    (ii) the provision of, or the use of facilities for, entertainment, recreation or instruction; or

    (iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or


    (b) a contract of insurance; or


    (c) an arrangement for or in relation to the lending of money;

    unreimbursed expenditure
    means expenditure no part of which has been reimbursed;

    unreimbursed interest
    means interest no part of which has been reimbursed.


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