a class C deficit deferral amount (defined in subsection (2)) arises in relation to the company and the refund.

"(2) The class C deficit deferral amount is the amount of the class C franking deficit, or the amount of the increase in the class C franking deficit, referred to in paragraph (1)(c).

"(3) If a class C deficit deferral amount arises in relation to a

company and a refund, the company is liable to pay class C deficit deferral tax in relation to the refund. The amount of the tax is the gross class C deficit deferral amount (see subsection (4)) reduced by any class C deficit deferral tax already payable by the company in relation to refunds received in the second franking year.

"(4) The gross class C deficit deferral amount is worked out using

the formula:

Class C deficit deferral amount x 36/64

"(5) If an amount is paid under subsection 221AZR(1) in the same year as the instalment mentioned in that subsection, then, for the purposes of this section, the amount is to be treated as being part of the instalment.".

95.   After subparagraph 160AQK(1)(a)(ii)

Insert:

"(iia) class C franking deficit tax for a franking year; or".

96.   After subparagraph 160AQK(1)(a)(iv)

Insert:

"or (v) class C deficit deferral tax in relation to the refund of one or more instalments paid during a franking year;".

97.   Paragraph 160AQK(1)(c)

After "the class B franking deficit tax," insert "the class C franking deficit tax,".

98.   Paragraph 160AQK(1)(c)

Omit "and the class B deficit deferral tax", substitute ", the class B deficit deferral tax and the class C deficit deferral tax".

99.   After subsection 160AQT(1AA)

Insert:

"(1AB) If:

(a) a class C franked dividend is paid in a year of income to a shareholder in a company; and

(b) the shareholder is:

(i) a natural person who is a resident at the time of payment of the dividend; or

(ii) a trustee; or

(iii) a partnership; or

(iv) a registered organisation; and

(c) the dividend is not exempt income of the shareholder; and

(d) the dividend was not paid as part of a dividend stripping operation;

the assessable income of the shareholder of the year of income includes the amount worked out using the formula:

Franked amount x Company tax rate

1-Company tax rate

where:

Franked amount means the class C franked amount of the dividend.

Company tax rate means the applicable general company tax rate.".

100.   After subsection 160AQT(1B)

Insert:

"(1C) If:

(a) a class C franked dividend is paid in a year of income to a shareholder in a company; and

(b) the shareholder is a life assurance company; and

(c) the dividend is not exempt income of the shareholder; and

(d) the dividend was not paid as part of a dividend stripping operation; and

(e) the assets of the shareholder from which the dividend was derived were included in insurance funds of the shareholder at any time during the period:

(i) starting at the beginning of the year of income of the shareholder in which the dividend was paid; and

(ii) ending at the time the dividend was paid;

the assessable income of the shareholder of the year of income includes the amount worked out using the formula:

Franked amount x Company tax rate

1-Company tax rate

where:

Franked amount means the class C franked amount of the dividend.

Company tax rate means the applicable general company tax rate.".

101.   Paragraph 160AQX(c)

Omit "is either or both", substitute "are one or more".

102.   Paragraph 160AQX(c)

Add at the end:

"(iii) a class C flow-on franking amount in relation to the trust amount;".

103.   After paragraph 160AQX(e)

Insert:

"(ea) if only subparagraph (c)(iii) applies-the class C potential rebate amount in relation to the trust amount;".

104.   Paragraph 160AQX(f)

Omit "both".

105.   Section 160AQX

Add at the end:

"; (g) if subparagraphs (c)(i) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the trust amount; and

(ii) the class C potential rebate amount in relation to the trust amount;

(h) if subparagraphs (c)(ii) and (iii) apply-the sum of:

(i) the class B potential rebate amount in relation to the trust amount; and

(ii) the class C potential rebate amount in relation to the trust amount;

(i) if subparagraphs (c)(i), (ii) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the trust amount; and

(ii) the class B potential rebate amount in relation to the trust amount; and

(iii) the class C potential rebate amount in relation to the trust amount.".

106.   Paragraph 160AQY(b)

Omit "is either or both", substitute "are one or more".

107.   Paragraph 160AQY(b)

Add at the end:

"(iii) a class C flow-on franking amount in relation to the trust amount;".

108.   After paragraph 160AQY(d)

Insert:

"(da) if only subparagraph (b)(iii) applies-the class C potential rebate amount in relation to the trust amount;".

109.   Paragraph 160AQY(e)

Omit "both".

110.   Section 160AQY

Add at the end:

"; (f) if subparagraphs (b)(i) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the trust amount; and

(ii) the class C potential rebate amount in relation to the trust amount;

(g) if subparagraphs (b)(ii) and (iii) apply-the sum of:

(i) the class B potential rebate amount in relation to the trust amount; and

(ii) the class C potential rebate amount in relation to the trust amount;

(h) if subparagraphs (b)(i), (ii) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the trust amount; and

(ii) the class B potential rebate amount in relation to the trust amount; and

(iii) the class C potential rebate amount in relation to the trust amount.".

111.   Paragraph 160AQYA(1)(c)

Omit "is either or both", substitute "are one or more".

112.   Paragraph 160AQYA(1)(c)

Add at the end:

"(iii) a class C flow-on franking amount in relation to the trust amount;".

113.   After paragraph 160AQYA(1)(e)

Insert:

"(ea) if only subparagraph (c)(iii) applies-the class C potential

rebate amount in relation to the trust amount;".

114.   Paragraph 160AQYA(1)(f)

Omit "both".

115.   Subsection 160AQYA(1)

Add at the end:

"; (g) if subparagraphs (c)(i) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the trust amount; and

(ii) the class C potential rebate amount in relation to the trust amount;

(h) if subparagraphs (c)(ii) and (iii) apply-the sum of:

(i) the class B potential rebate amount in relation to the trust amount; and

(ii) the class C potential rebate amount in relation to the trust amount;

(i) if subparagraphs (c)(i), (ii) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the trust amount; and

(ii) the class B potential rebate amount in relation to the trust amount; and

(iii) the class C potential rebate amount in relation to the trust amount.".

116.   Paragraph 160AQYA(2)(c)

Omit "is either or both", substitute "are one or more".

117.   Paragraph 160AQYA(2)(c)

Add at the end:

"(iii) a class C flow-on franking amount in relation to the partnership amount;".

118.   After paragraph 160AQYA(2)(e)

Insert:

"(ea) if only subparagraph (c)(iii) applies-the class C potential rebate amount in relation to the partnership amount;".

119.   Paragraph 160AQYA(2)(f)

Omit "both".

120.   Subsection 160AQYA(2)

Add at the end:

"; (g) if subparagraphs (c)(i) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the partnership amount; and

(ii) the class C potential rebate amount in relation to the partnership amount;

(h) if subparagraphs (c)(ii) and (iii) apply-the sum of:

(i) the class B potential rebate amount in relation to the partnership amount; and

(ii) the class C potential rebate amount in relation to the partnership amount;

(i) if subparagraphs (c)(i), (ii) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the partnership amount; and

(ii) the class B potential rebateamount in relation to the partnership amount; and

(iii) the class C potential rebate amount in relation to the partnership amount.".

121.   Paragraph 160AQZ(c)

Omit "is either or both", substitute "are one or more".

122.   Paragraph 160AQZ(c)

Add at the end:

"(iii) a class C flow-on franking amount in relation to the partnership amount;".

123.   After paragraph 160AQZ(e)

Insert:

"(ea) if only subparagraph (c)(iii) applies-the class C potential rebate amount in relation to the partnership amount;".

124.   Paragraph 160AQZ(f)

Omit "both".

125.   Section 160AQZ

Add at the end:

"; (g) if subparagraphs (c)(i) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the partnership amount; and

(ii) the class C potential rebate amount in relation to the partnership amount;

(h) if subparagraphs (c)(ii) and (iii) apply-the sum of:

(i) the class B potential rebate amount in relation to the partnership amount; and

(ii) the class C potential rebate amount in relation to the partnership amount;

(i) if subparagraphs (c)(i), (ii) and (iii) apply-the sum of:

(i) the class A potential rebate amount in relation to the partnership amount; and

(ii) the class B potential rebate amount in relation to the partnership amount; and

(iii) the class C potential rebate amount in relation to the partnership amount.".

126.   Section 160AQZA

Repeal the section, substitute:

"160AQZA. Franking rebate for certain life assurance companies

(1) If:

(a) a class A franking credit of a taxpayer arises or, but for section 160APKA would arise, under subsection 160APQ(1) in respect of:

(i) a trust amount or partnership amount that is included in; or

(ii) a partnership amount that is allowed as a deduction from;

the assessable income of the taxpayer of a year of income; and

(b) subsection 160APQ(3) applies or, but for section 160APKA, it would apply;

the taxpayer is entitled to a rebate of tax in the taxpayer's assessment in respect of income of the year of income of an amount equal to the class A potential rebate amount in relation to the trust amount or partnership amount.

"(2) If:

(a) a class B franking credit of a taxpayer arises or, but for section 160APKA would arise, under subsection 160APQ(1A) in respect of:

(i) a trust amount or partnership amount that is included in; or

(ii) a partnership amount that is allowed as a deduction from;

the assessable income of the taxpayer of a year of income; and

(b) subsection 160APQ(3) applies or, but for section 160APKA, it would apply;

the taxpayer is entitled to a rebate of tax in the taxpayer's assessment in respect of income of the year of income of an amount equal to the class B potential rebate amount in relation to the trust amount or partnership amount.

"(3) If:

(a) a class C franking credit of a taxpayer arises or, but for section 160APKA would arise, under subsection 160APQ(2) in respect of:

(i) a trust amount or partnership amount that is included in; or

(ii) a partnership amount that is allowed as a deduction from; the assessable income of the taxpayer of a year of income; and

(b) subsection 160APQ(3) applies or, but for section 160APKA, it would apply;

the taxpayer is entitled to a rebate of tax in the taxpayer's assessment in respect of income of the year of income of an amount equal to the class C potential rebate amount in relation to the trust amount or partnership amount.".

127.   After paragraph 160AR(1)(b)

Insert:

"and (c) subsection 160APQ(3) does not apply;".

128.   After paragraph 160AR(1A)(b)

Insert:

"and (c) subsection 160APQ(3) does not apply;".

129.   After subsection 160AR(1A)

Insert:

"(1B) If:

(a) a trust amount is included in the assessable income of a company of a year of income; and

(b) a class C franking credit arises under section 160APQ in relation to the trust amount; and

(c) subsection 160APQ(3) does not apply;

an amount equal to so much of the class C potential rebate amount in relation to the trust amount as does not exceed the trust amount is allowable as a deduction from the assessable income of the company of the year of income.".

130.   After paragraph 160AR(2)(b)

Insert:

"and (c) subsection 160APQ(3) does not apply;".

131.   After paragraph 160AR(3)(b)

Insert:

"and (c) subsection 160APQ(3) does not apply;".

132.   Section 160AR

Add at theend:

"(4) If:

(a) a partnership amount is included in, or allowable as a deduction from, the assessable income of a company of a year of income; and

(b) a class C franking credit arises under section 160APQ in relation to the partnership amount; and

(c) subsection 160APQ(3) does not apply; the class C potential rebate amount in relation to the partnership amount is allowable as a deduction from the assessable income of the company of the year of income.".

133.   Paragraph 160ARA(e)

Omit the paragraph, substitute:

"(e) the amount that would be the potential rebate amount in relation to the trust amount if section 128D did not apply.".

134.   Section 160ARB

Omit "sum of the class A potential rebate amount and the class B potential amount", substitute "potential rebate amount".

135.   Section 160ARC

Add at the end:

"(3) If:

(a) a trustee is liable to be assessed under subsection 98(3) on a trust amount; and

(b) there is a class C flow-on franking amount in relation to the trust amount;

the trust amount is to be reduced by so much of the class C potential rebate amount in relation to the trust amount as does not exceed the trust amount.".

136.   Section 160ARD

Omit "sum of the class A potential rebate amount and the class B potential amount", substitute "potential rebate amount".

137.   Section 160AREA

Omit "or a class B deficit deferral amount (see subsection 160AQJB(2))", substitute ", a class B deficit deferral amount (see subsection 160AQJB(2)) or a class C deficit deferral amount (see subsection 160AQJC(2))".

138.   Section 160ARH

Add at the end:

"(3) If:

(a) at a particular time (the return time), a return (the first return) under this Part in relation to a company in relation to a franking year is lodged; and

(b) before the return time, no return has been lodged, and no class C franking account assessment has been made, in relation to the company in relation to the franking year;

the following provisions have effect:

(c) the Commissioner is taken at the return time to have made an assessment (the deemed assessment) of:

(i) the class C franking account balance of the company for the franking year; and

(ii) any class C franking deficit tax payable by the company for the franking year;

being those respective amounts as specified in the first return;

(d) the first return is taken to be a notice of the deemed assessment and to be signed by the Commissioner;

(e) the notice referred to in paragraph (d) is taken to have been served on the company at the return time.".

139.   After subsection 160ARJ(1A)

Insert:

"(1B) The Commissioner may at any time make an assessment of the class C franking account balance of a company at a particular time during a franking year and, if the company has a class C franking deficit at that time, of the class C franking deficit tax payable by the company.".

140.   Subsection 160ARJ(2)

Omit "subsection (1) or (1A)", substitute "subsection (1), (1A) or (1B)".

141.   After subsection 160ARK(2)

Insert:

"(2A) If a company has not lodged a return in respect of a franking year, the Commissioner may make an assessment of:

(a) the class C franking account balance of the company at the end of the franking year; and

(b) any class C franking deficit tax payable by the company for the franking year.".

142.   Subparagraphs 160ARN(10)(a)(i) and (ii)

Omit the subparagraphs, substitute:

"(i) increasing a class A franking surplus, a class B franking surplus or a class C franking surplus (including an increase from a nil class A franking account balance, a nil class B franking account balance or a nil class C franking account balance);

(ii) reducing a class A franking deficit, a class B franking deficit or a class C franking deficit (including a reduction resulting in a nil class A franking account balance, a nil class B franking account balance or a nil class C franking account balance) and the franking deficit tax payable in respect of the franking deficit;".

143.   Subparagraphs 160ARN(10)(b)(i) and (ii)

Omit the subparagraphs, substitute:

"(i) reducing a class A franking surplus, a class B franking surplus or a class C franking surplus (including a reduction resulting in a nil class A franking account balance, a nil class B franking account balance or a nil class C franking account balance);

(ii) increasing a class A franking deficit, a class B franking deficit or a class C franking deficit (including an increase from a nil class A franking account balance, a nil class B franking account balance or a nil class C franking account balance) and the franking deficit tax payable in respect of the franking deficit; and".

144.   Subsection 160ARXA(1) (definition of deficit deferral tax shortfall)

Omit "or class B deficit deferral tax shortfall;", substitute ", class B deficit deferral tax shortfall or class C deficit deferral tax shortfall.".

145.   Subsection 160ARXA(1) (subparagraph (a)(ii) of the definition of franking tax shortfall)

Omit "; and", substitute "; or".

146.   Subsection 160ARXA(1) (paragraph (a) of the definition of franking tax shortfall)

Add at the end:

"(iii) the class C franking tax shortfall in relation to the company and the franking year; and".

147.   Subsection 160ARXA(1) (paragraph (b) of the definition of franking tax shortfall)

Add at the end:

"or (iii) the class C deficit deferral tax shortfall in relation to the company and the refund.".

148.   Subsection 160ARXA(1) (definition of statement deficit deferral tax)

Omit "or class B statement deficit deferral tax;", substitute ", class B statement deficit deferral tax or class C statement deficit deferral tax.".

149.   Subsection 160ARXA(1) (definition of statement franking tax)

Add at the end:

"or (c) the class C statement franking tax in relation to the company, the franking year and the time.".

150.   Subsection 160ARXA(1)

Insert the following definitions:

"class C deficit deferral tax shortfall, in relation to a company and a refund, means any amount by which the company's class C statement deficit deferral tax for that refund at the time at which it was lowest is less than the company's class C proper deficit deferral tax for that refund.

class C franking tax shortfall, in relation to a company and a franking year, means the amount (if any) by which the company's class C statement franking tax for that year at the time at which it was lowest is less than the company's class C proper franking tax for that year.

class C proper deficit deferral tax, in relation to a company and a

refund, means the class C deficit deferral tax properly payable by the company in relation to the refund.

class C proper franking tax, in relation to a company and a franking year, means the class C franking deficit tax properly payable by the company in respect of that year.

class C statement deficit deferral tax, in relation to a company, a refund and a time, means the class C deficit deferral tax that would have been payable by the company in relation to the refund if the tax were assessed at that time taking into account taxation statements by the company.

class C statement franking tax, in relation to a company, a franking year and a time, means the class C franking deficit tax that would have been payable by the company in respect of that year if the tax were assessed at that time taking into account taxation statements by the company.".

151.   Section 160ARX

Add at the end:

"(3) If:

(a) the class C franking deficit of a company at the end of a franking year is more than 10% of the total of the class C franking credits arising during the franking year; and

(b) the class C franked amount of a dividend paid during the franking year to a shareholder in the company exceeded the class C required franking amount for that dividend;

the company is liable to pay, by way of penalty, additional tax equal to 30% of the class C franking deficit tax that is payable by the company for the franking year.".

152.   After section 160ARYB

Insert:

"160ARYC. Class C deficit deferral tax-penalty

A company is liable to pay, by way of penalty, additional tax equal to 30% of the class C deficit deferral tax that is payable by the company in relation to a refund if the class C deficit deferral amount that arises under subsection 160AQJC(2) in relation to the refund is greater than the amount worked out using the formula:

0.1 x Total of class C franking - The adjusted amount in

credits that arose in relation to refunds referred

the first franking year to in paragraph

160AQJC(1)(c)".

153.   Subsection 160ARZ(1)

Add at the end:

"; and (c) the class C franking deficit tax (if any) payable by the company for the franking year.".

154.   After sub-subparagraph 160ARZD(1)(c)(ii)(B)

Insert:

"(BA) if the shortfall is a class C franking tax shortfall-the class C franking deficit tax that would have been payable by the company for that year if the tax were assessed on the basis of the company's return under subsection 160ARE(1) or 160ARF(1) in relation to that year;".

155.   Sub-subparagraph 160ARZD(1)(c)(ii)(D)

Omit "and".

156.   Subparagraph 160ARZD(1)(c)(ii)

Add at the end:

"(E) if the shortfall is a class C deficit deferral tax shortfall- the class C deficit deferral tax that would have been payable by the company in relation to that refund if the tax were assessed on the basis of the company's return under section 160AREA in relation to that refund; and".

157.   Paragraph 160ASC(b)

Omit "or the class B franking account balance", substitute ", the class B franking account balance or the class C franking account balance".

158.   After Division 12 of Part IIIAA

Insert:

"Division 13-Transitional provisions arising from the introduction of class C franking credits and class C franking debits

160ASF. Class C conversion time of a company

(1) The class C conversion time of a company is the earliest of the following times:

(a) the time when the first class C franking credit of the company rises;

(b) the time immediately before the end of the 1995-96 franking year of the company;

(c) the nominated class C conversion time (see subsection (2)).

"(2) A company may, at any time before the earlier of the times mentioned in paragraphs (1)(a) and (b), make an irrevocable written election that that time, or a time that is after that time, is that company's nominated class C conversion time.

Conversion of class A franking account balance to class C franking account balance

"160ASG. Conversion of class A franking surplus

(1) If, at a company's class C conversion time:

(a) the company is not a life assurance company; and

(b) the company has a class A franking surplus; then, immediately after the company's class C conversion time:

(c) a class A franking debit of the company arises equal to that class A franking surplus; and

(d) a class C franking credit of the company also arises that is worked out using the formula:

Amount of class A franking surplus x 39/61 x 64/36

Conversion of class A franking deficit

"(2) If, at a company's class C conversion time:

(a) the company is not a life assurance company; and

(b) the company has a class A franking deficit; then, immediately after the company's class C conversion time:

(c) a class A franking credit of the company arises equal to that class A franking deficit; and

(d) a class C franking debit of the company also arises that is worked out using the formula:

Amount of class A franking deficit x 39/61 x 64/36

Conversion of class B franking account balance to class C franking account balance

"160ASH. Conversion of class B franking surplus

(1) If a company has a class B franking surplus at the class C conversion time then, immediately after that time:

(a) a class B franking debit of the company arises equal to that class B franking surplus; and

(b) a class C franking credit of the company also arises that is worked out using the formula:

Amount of class B franking surplus x 33/67 x 64/36

Conversion of class B franking deficit

"(2) If a company has a class B franking deficit at the class C conversion time then, immediately after that time:

(a) a class B franking credit of the company arises equal to that class B franking deficit; and

(b) a class C franking debit of the company also arises that is worked out using the formula:

Amount of class B franking deficit x 33/67 x 64/36

Changes to franking account balances after a company's class C conversion time

"160ASI. Class A franking credit arising after class C conversion time

(1) If, at a particular time after a company's class C conversion time:

(a) the company is not a life assurance company; and

(b) a class A franking credit of the company arises under this Part (apart from under this section, subsection 160ASG(2), subsection 160ASJ(2) or subsection 160ASK(1)); then, at that time:

(c) a class A franking debit arises equal to the amount of the class A franking credit; and

(d) a class C franking credit also arises equal to the amount worked out using the formula:

Amount of class A franking credit x 39/61 x 64/36

Class A franking debit arising after class C conversion time

"(2) If, at a particular time after a company's class C conversion time:

(a) the company is not a life assurance company; and

(b) a class A franking debit of the company arises under this Part (apart from under this section, subsection 160AQB(1), subsection 160ASG(1), subsection 160ASJ(1) or subsection 160ASK(1)); then, at that time:

(c) a class A franking credit arises equal to the amount of the class A franking debit; and

(d) a class C franking debit also arises equal to the amount worked out using the formula:

Amount of class A franking debit x 39/61 x 64/36

Class B franking credit arising after class C conversion time

"(3) If, at a particular time after a company's class C conversion time, a class B franking credit of a company arises under this Part (apart from under this section, subsection 160ASH(2) or subsection 160ASK(2)):

(a) a class B franking debit arises at that time equal to the amount of the class B franking credit; and

(b) a class C franking credit also arises at that time equal to the amount worked out using the formula:

Amount of class B franking credit x 33/67 x 64/36

Class B franking debit arising after class C conversion time under

provisions other than subsection 160AQB(2)

"(4) If, at a particular time after a company's class C conversion time, a class B franking debit of a company arises under this Part (apart from under this section, subsection 160AQB(2), subsection 160ASH(1) or subsection 160ASK(2)):

(a) a class B franking credit arises at that time equal to the amount of the class B franking debit; and

(b) a class C franking debit also arises at that time equal to the amount worked out using the formula:

Amount of class B franking debiit x 33/67 x 64/36

Note: Subsection (5) deals with class B debits arising from the payment of class B franked dividends.

Class B franking debit arising under subsection 160AQB(2) after class C conversion time

"(5) If, at a particular time after the company's class C conversion time, a class B franking debit of a company arises under subsection 160AQB(2) (and subsection 160ASK(2) does not apply), a class B franking credit and a class C franking debit of the company each equal to the amount of the class B frankingdebit arise at that time. Provisions relating to companies that cease to be life assurance companies

"160ASJ. Conversion of class A franking surplus

(1) If:

(a) a company is a life assurance company at the company's class C conversion time; and

(b) at a particular time (the transition time) after the company's class C conversion time, the company ceases to be a life assurance company (other than by ceasing to be a company); and

(c) at the transition time the company has a class A franking surplus;

then, immediately after the transition time:

(d) a class A franking debit of the company equal to that class A franking surplus arises; and

(e) a class C franking credit of the company also arises that is worked out using the formula:

Amount of class A franking surplus x 39/61 x 64/36

Conversion of class A franking deficit

"(2) If:

(a) a company is a life assurance company at the company's class C conversion time; and

(b) at a particular time (the transition time) after the company's class C conversion time, the company ceases to be a life assurance company (other than by ceasing to be a company); and

(c) at the transition time the company has a class A franking deficit;

then, immediately after the transition time:

(d) a class A franking credit of the company arises equal to that class A franking deficit; and

(e) a class C franking debit of the company also arises that is worked out using the formula:

Amount of class A franking deficit x 39/61 x 64/36

Provisions relating to companies with class A or class B required franking amounts

"160ASK. Class A required franking amounts

(1) If:

(a) a company, other than a life assurance company, pays a dividend at a particular time after the class C conversion time of the company; and

(b) the beginning of the reckoning day for the dividend is before the class C conversion time for the company; and

(c) a class A franking debit arises from the payment of the dividend;

then, at that time:

(d) a class A franking credit arises equal to the amount of the class A franking debit; and

(e) a class C franking debit also arises that is worked out using the formula:

Amount of class A franking debit x 39/61 x 64/36

Class B required franking amounts

"(2) If:

(a) a company pays a dividend at a particular time after the class C conversion time of the company; and

(b) the beginning of the reckoning day for the dividend is before the class C conversion time for the company; and

(c) a class B franking debit arises from the payment of the dividend;

then, at that time:

(d) a class B franking credit arises equal to the amount of the class B franking debit; and

(e) a class C franking debit also arises that is worked out using the formula:

Amount of class B franking debit x 33/67 x 64/36

Required franking amounts in certain cases covered by subsection 160AQE(2)

"160ASL. When section applies

(1) This section applies in relation to a dividend paid by a company to a shareholder if:

(a) the beginning of the reckoning day for the dividend is after the company's class C conversion time; and

(b) the dividend is the current dividend under subsection 160AQE(2); and

(c) the beginning of the reckoning day for the earlier dividend mentioned in that subsection is before the company's class C conversion time.

Effect on required franking amount-companies other than life assurance companies

"(2) If the company is not a life assurance company at the beginning of the reckoning day for the current dividend then, for the purposes of the definition of RFS in subsection 160AQE(2):

(a) the amount that will be the franked amount in relation to the earlier dividend is taken to be the amount worked out using the formula:

Amount (if any) that will be the class A

franked amount of the earlier dividend x 39/61 x 64/36

+ Amount (if any) that will be the

class B franked amount of the

earlier dividend

x 33/67 x 64/36

(b) the required franking amount in relation to the earlier dividend is taken to be the amount worked out using the formula: Class A required franking amount

(if any) of the earlier dividend x 39/61 x 64/36

+ Class B required franking amount

(if any) of the earlier dividend

x 33/67 x 64/36

Effect on required franking amount-life assurance companies

"(3) If the company is a life assurance company at the beginning of the reckoning day for the current dividend then, for the purposes of the definition of RFS in subsection 160AQE(2):

(a) the amount that will be the franked amount in relation to the earlier dividend is taken to be the amount worked out using the formula:

Amount (if any) that will be the class A

franked amount of the earlier dividend

+ Amount (if any) that will

be the class B franked

amount of the earlier

dividend x 33/67 x 64/36

(b) the required franking amount in relation to the earlier dividend is taken to be the amount worked out using the formula:

Class A required franking

amount (if any) of the

earlier dividend + Class B required franking

amount (if any) of the

earlier dividend

x 33/67 x 64/36

Required franking amounts in certain casescovered by subsection 160AQE(3)

"160ASM. When section applies

(1) This section applies in relation to a dividend paid by a company to a shareholder if:

(a) the beginning of the reckoning day for the dividend is after the company's class C conversion time; and

(b) the dividend is the current dividend under subsection 160AQE(3); and

(c) the beginning of the earlier reckoning day mentioned in that subsection is before the company's class C conversion time.

Effect on required franking amount-companies other than life assurance companies

"(2) If the company is not a life assurance company at the beginning of the reckoning day for the current dividend then, for the purposes of the definition of EFA in subsection 160AQE(3), the amount that is the franked amount in relation to the earlier franked dividend is taken to be the amount worked out using the formula:

Amount (if any) that is

the class A franked amount

of the earlier franked x 39/61 x 64/36

dividend + Amount (if any) that

is the class B franked amount

of the earlier franked

dividend

x 33/67 x 64/36

Effect on required franking amount-life assurance companies

"(3) If the company is a life assurance company at the beginning of the reckoning day for the current dividend then, for the purposes of the definition of EFA in subsection 160AQE(3), the amount that is the franked amount in relation to the earlier dividend is taken to be the amount worked out using the formula:

Amount (if any) that is the

class A franked amount of the

earlier franked dividend + Amount (if any) that

is the class B franked

amount of the earlier

franked dividend

x 33/67 x 64/36

"160ASN. Variation of certain declarations under section 160AQF

(1) A declaration that is made before a company's class C conversion time in relation to a dividend, or dividends, paid by the company where the beginning of the reckoning day for at least one of the dividends is after that time may, despite subsection 160AQF(2), be varied, before the reckoning day, to take account of the introduction of class C franking credits and debits.

"(2) If:

(a) a company pays more than one dividend under a resolution; and

(b) the beginning of the reckoning day for at least one of the dividends is before the class C conversion time for the company; and

(c) the beginning of the reckoning day for at least one of the dividends is after the class C conversion time for the company; and

(d) the franked amount of each of the dividends covered by paragraph (b) is substantially similar (taking into account the different classes of franking credits) to the franked amount of each of the dividends covered by paragraph (c);

the company is taken, for the purposes of subparagraphs 160AQF(1)(c)(ii), (1AA)(c)(ii) and (1AAA)(c)(ii) to have specified the same percentage for each of the dividends to which the resolution relates.".

159.   Transitional

Liability to franking deficit tax

(1) A company is taken to be liable to pay tax under subsection 160AQJ(1) of the Income Tax Assessment Act 1936 in respect of its 1995-96 franking year if:

(a) at the company's class C conversion time the company is not a life assurance company; and

(b) at the company's class C conversion time the company has a class A franking deficit; and

(c) the company would, on the assumption that the amendments made by this Schedule did not apply in respect of the company for its 1995-96 franking year, have been liable to pay tax under subsection 160AQJ(1) of the Income Tax Assessment Act 1936.

(2) If a company is taken to be liable to pay tax as a result of the application of subsection (1), a class C franking credit of the company arises at the end of the company's 1995-96 franking year worked out using the formula:

Amount of the tax x 64/36

Liability to penalty for over-franking

(3) A company is taken to be liable to pay tax under subsection 160ARX(1) of the Income Tax Assessment Act 1936 in respect of its 1995-96 franking year if:

(a) at the company's class C conversion time the company is not a life assurance company; and

(b) at the company's class C conversion time the company has a class A franking deficit; and

(c) the company would, on the assumption that the amendments made by this Schedule did not apply in respect of the company for its 1995-96 franking year, have been liable to pay tax under subsection 160ARX(1) of the Income Tax Assessment Act 1936.

160.   Application

(1) The amendments made by item 15 apply to basic amounts that are attributable to payments of tax that become payable as a result of assessments issued after 7.30 p.m. by legal time in the Australian Capital Territory on 9 May 1995.

(2) The amendment made by item 126 applies in relation to:

(a) dividends paid to a shareholder in a company during the company's 1993-94 franking year or an earlier franking year as if subsections 160AQZA(2) and (3) of the Income Tax Assessment Act 1936 were omitted and all references to class A (wherever occurring) were omitted from subsection (1) of that section; and

(b) dividends paid to a shareholder in a company during the company's 1994-95 franking year as if subsection 160AQZA(3) of the Income Tax Assessment Act 1936 were omitted; and

(c) dividends paid to a shareholder in a company during the company's 1995-96 franking year or a later franking year.

(3) Subject to subitem (5), the amendments made by items 127 and 130 apply in relation to a trust amount or partnership amount received during the first franking year of the company that commences after 6 December 1990 and each later franking year.

(4) Subject to subitem (5), the amendments made by items 128 and 131 apply in relation to a trust amount or partnership amount received during the company's 1994-95 franking year and each later franking year.

(5) If in relation to a year of income which commenced after 6 December 1990:

(a) a company furnished a return of income, or applied to have an assessment amended, before 28 September 1995; and

(b) the return or application (as the case may be) includes a claim for a deduction under section 160AR in relation to a trust amount or partnership amount to which subsection 160APQ(3) applies;

then the amendments made by items 127, 128, 130 and 131 do not apply in relation to any trust amount or partnership amount received by the company before 28 September 1995 and to which subsection 160APQ(3) applies.

SCHEDULE 3   AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936 RELATING TO DEMUTUALISATION OF INSURANCE COMPANIES AND AFFILIATES

1.   After Division 9 of Part III

Insert the following Division:

"Division 9AA-Demutualisation of insurance companies and affiliates

"Subdivision A-What this Division is about

"121AA. What this Division is about

Basically, if an insurance company demutualises and its policyholders or members dispose of their listed shares in the company, for tax purposes the acquisition cost of the shares is based on the lesser of:

(a) the embedded value or net tangible asset value of the company; and

(b) the value of the company based on the total first trading day price of all shares in the company.

Other tax consequences result from disposals of other interests and from other events in connection with the demutualisation.

"Subdivision B-Key concepts and related definitions

"121AB. Insurance company definitions

(1) A mutual insurance company is an insurance company:

(a) whose profits are divisible only among its policyholders; or

(b) that satisfies all of the following conditions:

(i) it is limited by guarantee;

(ii) it did not divide its profits among its members during the 10 years ending on 9 May 1995;

(iii) on a winding-up, its profits are not divisible among its members.

"(2) An insurance company is a life insurance company or a general insurance company.

"(3) A life insurance company is a company registered under the Life Insurance Act 1995.

"(4) A general insurance company is a company whose sole or principal business is insurance business within the meaning of subsection 3(1) of the Insurance Act 1973, but does not include a life insurance company.

"121AC. Mutual affiliate company

A mutual affiliate company is a company that satisfies the following conditions:

(a) it is limited by guarantee;

(b) it is not an insurance company;

(c) at least 75% of the policyholders of a mutual insurance company are members of it;

(d) it did not divide its profits among its members during the 10 years ending on 9 May 1995;

(e) on a winding-up, its profits are not divisible among its members in their capacity as such.

"121AD. Demutualisation and demutualisation resolution day

(1) A mutual insurance company demutualises if it ceases to be a mutual insurance company:

(a) in any case-other than by ceasing to be an insurance company; or

(b) if it is a life insurance company-because the whole of its life insurance business is transferred to another company under a scheme confirmed by the Federal Court of Australia.

"(2) A mutual affiliate company demutualises if it ceases to be a mutual affiliate company other than by ceasing to be a company.

"(3) The demutualisation resolution day, in relation to the demutualisation of a company, is:

(a) if paragraph (b) does not apply-the day on which the resolution to proceed with the demutualisation is passed; or

(b) if paragraph (1)(b) applies to the demutualisation-the day on which the transfer of the whole of the company's life insurance business takes place.

Demutualisation methods, the policyholder/member group and the listing period

"121AE. Demutualisation methods 1 to 6

(1) There are 6 methods by which the demutualisation of a mutual insurance company, where a mutual affiliate company is not also demutualised, may be implemented that are relevant for the purposes of this Division. They are described in sections 121AF to 121AK as demutualisation methods 1 to 6.

Demutualisation method 7

"(2) There is one method by which the demutualisation of both a mutual insurance company and a mutual affiliate company may be implemented that is relevant for the purposes of this Division. It is described in section 121AL as demutualisation method 7. Demutualisation methods

"(3) Each of the methods described in sections 121AF to 121AL is a demutualisation method.

Policyholder/member group

"(4) The policyholder/member group, in relation to the demutualisation of a mutual insurance company under any of demutualisation methods 1 to 6, consists of the following persons:

(a) in the case of a mutual insurance company covered by paragraph 121AB(1)(a)-policyholders (other than trustees covered by paragraph (d) or (e)) in the company immediately before the demutualisation;

(b) in the case of any other mutual insurance company-members (other than trustees covered by paragraph (d) or (e)) of the company immediately before the demutualisation;

(c) in any case-any of the following who, in connection with the demutualisation, are entitled to the same rights to shares or the proceeds of the sale of shares as the policyholders (in a paragraph (a) case) or the members (in a paragraph (b) case):

(i) employees of the company or a wholly-owned subsidiary of the company;

(ii) persons who ceased to be such policyholders or members before the demutualisation;

(iii) charities;

(iv) persons who are entitled to the rights because of the death of the policyholders or members;

(d) in any case-each person who satisfies the following requirements:

(i) the person is a member of a regulated superannuation fund (as defined by section 19 of the Superannuation Industry (Supervision) Act 1993), other than a standard employer-sponsored member (as defined by subsection 16(5) of that Act);

(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;

(iii) the trustee of the fund is a company that is a wholly-owned subsidiary of the mutual insurance company;

(iv) the person's benefits in the fund consist solely of the proceeds of the policy or policies;

(v) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee;

(e) in any case-each person who satisfies the following requirements:

(i) the person is the member of a single-member superannuation fund;

(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;

(iii) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee.

"(5) The policyholder/member group, in relation to the demutualisation of a mutual insurance company and a mutual affiliate company under demutualisation method 7, consists of the following persons:

(a) if the mutual insurance company is covered by paragraph 121AB(1)(a)-policyholders (other than trustees covered by paragraph (e) or (f)) in the mutual insurance company immediately before the demutualisation;

(b) in the case of any other mutual insurance company-members (other than trustees covered by paragraph (e) or (f)) of the company immediately before the demutualisation;

(c) members (other than trustees covered by paragraph (e) or (f)) of the mutual affiliate company immediately before the demutualisation;

(d) any of the following who, in connection with the demutualisation, are entitled to the same rights to shares or the proceeds of the sale of shares as the members:

(i) employees of the mutual insurance company, the mutual affiliate company or a wholly-owned subsidiary of either company;

(ii) persons who ceased to be such members before the demutualisation;

(iii) charities;

(iv) persons who are entitled to the rights because of the death of members;

(e) in any case-each person who satisfies the following requirements:

(i) the person is a member of a regulated superannuation fund (as defined by section 19 of the Superannuation Industry (Supervision) Act 1993), other than a standard employer-sponsored member (as defined by subsection 16(5) of that Act);

(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;

(iii) the trustee of the fund is a company that is a wholly-owned subsidiary of the mutual insurance company;

(iv) the person's benefits in the fund consist of the proceeds of the policy or policies;

(v) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee;

(f) in any case-each person who satisfies the following requirements:

(i) the person is the member of a single-member superannuation fund;

(ii) the trustee of the fund holds a policy or policies in the mutual insurance company;

(iii) in connection with the demutualisation, the person, rather than the trustee, has the right to shares or the proceeds of the sale of shares in respect of the policy or policies held by the trustee.

"(6) The listing period is the period ending 2 years after the demutualisation resolution day, or at such later time as the Commissioner, before the end of the 2 years, allows.

"121AEA. Replacement of policyholders by persons exercising certain rights

If, as a result of the exercise of any power under the articles of association of an insurance company, persons are entitled to exercise rights in place of policyholders, then, to the extent that the Commissioner considers it appropriate, the persons are treated for the purposes of this Division as replacing the policyholders.

"121AF. Demutualisation method 1

(1) Under demutualisation method 1, in connection with the implementation of the demutualisation:

(a) all membership rights in the mutual insurance company are extinguished; and

(b) shares (the ordinary shares) of only one class in the mutual insurance company are issued to each person in the policyholder/member group; and

(c) the ordinary shares are listed within the listing period.

Note: Other things may also happen in connection with the implementation of the demutualisation.

"(2) The following diagram shows, where this demutualisation method is used, the issue of the shares to the policyholder/member group.

Demutualisation method 1

(FLOW CHART OMITTED)

"121AG. Demutualisation method 2

(1) Under demutualisation method 2, in connection with the implementation of the demutualisation:

(a) all membership rights in the mutual insurance company are extinguished; and

(b) not more than 10 shares (the special shares) in the mutual insurance company are issued to a trustee to hold for the benefit of the policyholder/member group, where:

(i) the issue takes place before the issue of the ordinary shares mentioned in paragraph (c); and

(ii) on the issue of all the ordinary shares, the rights attaching to the special shares become the same as those attaching to the ordinary shares; and

(c) a greater number of shares (the ordinary shares) of only one class in the mutual insurance company are either:

(i) issued, at the election of each person in the policyholder/member group, to the person or to a trustee to sell on behalf of the person; or

(ii) issued to a trustee, at the election of each person in the policyholder/member group, to distribute to the person or to sell on behalf of the person; and

(d) the trustee sells the ordinary shares and distributes the proceeds to the person, or distributes the ordinary shares to the person; and

(e) the ordinary shares are listed within the listing period.

Note: Other things may also happen in connection with the implementation of the demutualisation.

"(2) The following diagram shows the main events, where this demutualisation method is used involving an election covered by subparagraph (1)(c)(ii).

Demutualisation method 2

(FLOW CHART OMITTED)

"121AH. Demutualisation method 3

(1) Under demutualisation method 3, in connection with the implementation of the demutualisation:

(a) all membership rights in the mutual insurance company are extinguished; and

(b) shares in the mutual insurance company are issued to another company (the holding company); and

(c) shares (the ordinary shares) of only one class in:

(i) the holding company; or

(ii) another company (the ultimate holding company) of which the holding company is a wholly-owned subsidiary, either directly or through one or more other wholly-owned subsidiaries (each of which is an interposed holding company);

are issued to each person in the policyholder/member group; and

(d) the ordinary shares are listed within the listing period.

Note: Other things may also happen in connection with the implementation of the demutualisation.

"(2) The following diagram shows the main events, where this demutualisation method is used.

Demutualisation method 3

(FLOW CHART OMITTED)

"121AI. Demutualisation method 4

(1) Under demutualisation method 4, in connection with the implementation of the demutualisation:

(a) all membership rights in the mutual insurance company are extinguished; and

(b) shares in the mutual insurance company are issued to another company (the holding company); and

(c) not more than 10 shares (the special shares) in:

(i) the holding company; or

(ii) another company (the ultimate holding company) of which the holding company is a wholly-owned subsidiary, either directly or through one or more other wholly-owned subsidiaries (each of which is an interposed holding company);

are issued to a trustee to hold for the benefit of the policyholder/ member group; and

(d) the issue of the special shares takes place before the issue of the ordinary shares mentioned in paragraph (e), and on the issue of all the ordinary shares, the rights attaching to the special shares become the same as those attaching to the ordinary shares; and

(e) a greater number of shares (the ordinary shares) of only one class in the holding company or ultimate holding company are either:

(i) issued, at the election of each person in the policyholder/ member group, to the person or to a trustee to sell on behalf of the person; or

(ii) issued to a trustee, at the election of each person in the policyholder/member group, to distribute to the person or to sell on behalf of the person; and

(f) the trustee sells the ordinary shares and distributes the proceeds of sale to the person, or distributes the ordinary shares to the person; and

(g) the ordinary shares are listed within the listing period.

Note: Other things may also happen in connection with the implementation of the demutualisation.

"(2) The following diagram shows the main events, where this demutualisation method is used involving 2 trustees and an election covered by subparagraph (1)(e)(ii).

Demutualisation method 4

(FLOW CHART OMITTED)

"121AJ. Demutualisation method 5

(1) Under demutualisation method 5, in connection with the implementation of the demutualisation:

(a) all membership rights in the mutual insurance company are extinguished; and

(b) shares in the mutual insurance company are issued to another company (the holding company); and

(c) shares (the ordinary shares) of only one class in:

(i) the holding company; or

(ii) another company (the ultimate holding company) of which the holding company is a wholly-owned subsidiary, either directly or through one or more other wholly-owned subsidiaries (each of which is an interposed holding company);

are either:

(iii) issued, at the election of each person in the policyholder/ member group, to the person or to a trustee to sell on behalf of the person; or

(iv) issued to a trustee, at the election of each person in the policyholder/member group, to distribute to the person or to sell on behalf of the person; and

(d) the trustee sells the ordinary shares and distributes the proceeds of sale to the person, or distributes the ordinary shares to the person; and

(e) the ordinary shares are listed within the listing period.

Note: Other things may also happen in connection with the implementation of the demutualisation.

"(2) The following diagram shows the main events, where this demutualisation method is used involving an election covered by subparagraph (1)(c)(iv).

Demutualisation method 5

(FLOW CHART OMITTED)

"121AK. Demutualisation method 6

(1) Under demutualisation method 6, in connection with the implementation of the demutualisation of a life insurance company:

(a) all membership rights in the company are extinguished; and

(b) the whole of the life insurance business of the company is, under a scheme confirmed by the Federal Court of Australia, transferred to another company formed for the purpose; and

(c) shares (the ordinary shares) of only one class in the other company are:

(i) issued, at the election of each person in the policyholder/ member group, to the person or to a trustee to sell on behalf of the person; or

(ii) issued to a trustee, at the election of each person in the policyholder/member group, to distribute to the person or to sell on behalf of the person; and

(d) the trustee sells the ordinary shares and distributes the proceeds of sale to the person or distributes the ordinary shares to the person; and

(e) the ordinary shares are listed within the listing period.

Note: Other things may also happen in connection with the implementation of the demutualisation.

"(2) The following diagram shows the main events, where this demutualisation method is used.

Demutualisation method 6

(FLOW CHART OMITTED)

"121AL. Demutualisation method 7

(1) Under demutualisation method 7, in connection with the implementation of the demutualisation of both a mutual insurance company and a mutual affiliate company:

(a) all membership rights in both companies are extinguished; and

(b) shares in the mutual insurance company and the mutual affiliate company are issued to another company (the holding company); and

(c) shares (the ordinary shares) of only one class in:

(i) the holding company; or

(ii) another company (the ultimate holding company) of which the holding company is a wholly-owned subsidiary, either directly or through one or more other wholly-owned subsidiaries (each of which is an interposed holding company);

are either:

(iii) issued, at the election of each person in the policyholder/ member group to the person or to a trustee to sell on behalf of the person; or

(iv) issued to a trustee, at the election of each person in the policyholder/member group, to distribute to the person or to sell on behalf of the person; and

(d) the trustee sells the ordinary shares and distributes the proceeds of the sale to the person, or distributes the ordinary shares to the person; and

(e) the ordinary shares are listed within the listing period.

Note: Other things may also happen in connection with the implementation of the demutualisation.

"(2) The following diagram shows the main events, where this demutualisation method is used involving an election covered by subparagraph (1)(c)(iv).

Demutualisation method 7

(FLOW CHART OMITTED)

"121AM. Embedded value of a mutual life insurance company

(1) The embedded value of a mutual life insurance company that demutualises using a demutualisation method is, in accordance with this section, the sum of its existing business value and its adjusted net worth on the applicable accounting day (see subsection (3)).

Eligible actuary and Australian actuarial practice

"(2) The sum is to be worked out by an eligible actuary (see subsection 121AO(3)) according to Australian actuarial practice.

Applicable accounting day

"(3) The applicable accounting day is:

(a) if an accounting period of the company ends on the demutualisation resolution day-that day; or

(b) in any other case-the last day of the most recent accounting period of the company ending before the demutualisation resolution day.

Adjustment for changes after applicable accounting day

"(4) In a case covered by paragraph (3)(b), if any significant change in the amount of the existing business value or adjusted net worth occurs between the applicable accounting day and the demutualisation resolution day, the amount is to be adjusted to take account of the change.

Continued business assumption

"(5) In working out the existing business value or the adjusted net worth, it is to be assumed:

(a) that after the applicable accounting day the company will continue to conduct its life insurance business and any other activity in the same way as it did before that day, and that it will not conduct any different business or other activity; and

(b) that the demutualisation will not occur.

Discount rate assumption

"(6) In working out the existing business value or adjusted net worth, the annual discount rate to be used in respect of each future accounting period is worked out using the formula:

10 year Treasury bond rate + 4.5% + Capital reserve adequacy

shortfall percentage

where:

10 year Treasury bond rate means the Treasury bond rate (see subsection 121AO(1)) for the applicable accounting day in respect of bonds with a 10 year term.

Capital reserve adequacy shortfall percentage means:

(a) if, for any future accounting period, the capital reserves of the company are projected to fall below the capital reserve adequacy level (see subsection 121AO(2)) by 1% or more at both the beginning and end of the accounting period-the percentage worked out by averaging the percentages worked out under each of the following subparagraphs:

(i) 0.2% for each 1% by which the capital reserves are projected to fall below the level at the beginning of the period;

(ii) 0.2% for each 1% by which the capital reserves are projected to fall below the level at the end of the period; or

(b) in any other case-nil.

Annual inflation rate assumption

"(7) In working out the existing business value, the annual inflation rate to be applied is worked out using the formula:

10 year Treasury bond rate - 4% (see subsection (6))

Expenditure assumption

"(8) In working out the existing business value, it is to be assumed that expenditure that the company will incur, in conducting its life insurance business, on recurring items after the demutualisation resolution day will be of the same kinds and amounts (increased to take account of any inflation, using the annual inflation rate in subsection (7)) as the company incurred in the accounting period, or part of an accounting period, ending on the demutualisation resolution day.

Investment return assumption

"(9) In working out the existing business value or the adjusted net worth, it is to be assumed that the annual rate of return on each investment of the company is:

(a) if the investment is a security with a term less than 2 years or is cash-the Treasury bond rate (see subsection 121AO(1)) for the applicable accounting day in respect of bonds with a 26 week term; or

(b) if the investment is any other kind of security-the Treasury bond rate for the applicable accounting day in respect of bonds with a 10 year term; or

(c) in any other case-the rate mentioned in paragraph (b), plus 3%.

Future distributable profits assumption

"(10) In working out the existing business value or the adjusted net worth, the future distributable profits are to be determined on the assumption that the company:

(a) will not distribute its profits so as to cause its capital reserves to fall below the capital reserve adequacy level (see subsection 121AO(2)) applicable to the company; and

(b) will distribute all of its profits except to the extent necessary for its capital reserves not to fall below the capital reserve adequacy level.

"121AN. Net tangible asset value of a general insurance company or mutual affiliate company

(1) The net tangible asset value of a general insurance company, or a mutual affiliate company, that demutualises using a demutualisation method is, in accordance with this section:

(a) the amount of its assets on the applicable accounting day (see subsection (4));

reduced by:

(b) the amount of its liabilities (including future liabilities) arising from its business conducted before that day. Australian accounting practice

"(2) The amount of the company's assets and liabilities (other than future liabilities) is to be worked out according to Australian accounting practice.

Eligible actuary and Australian actuarial practice

"(3) The amount of the company's future liabilities is to be worked out by an eligible actuary (see subsection 121AO(3)) according to Australian actuarial practice.

Applicable accounting day

"(4) The applicable accounting day is:

(a) if an accounting period of the company ends on the demutualisation resolution day-that day; or

(b) in any other case-the last day of the most recent accounting period of the company ending before the demutualisation resolution day.

Adjustment for changes after applicable accounting day

"(5) In a case covered by paragraph (4)(b), if any significant change in the amount of the company's assets or liabilities occurs between the applicable accounting day and the demutualisation resolution day, that amount is to be adjusted to take account of the change.

Continued business assumption

"(6) In working out the net tangible asset value, it is to be assumed:

(a) that after the applicable accounting day the company will continue to conduct its business and any other activity in the same way as it did before that day, and that it will not conduct any different business or other activity; and

(b) that the demutualisation will not occur.

Treasury bond rate, capital reserve adequacy level, eligible actuary and security

"121AO. Treasury bond rate

(1) The Treasury bond rate for the applicable accounting day in respect of bonds with a particular term is:

(a) if any Treasury bonds with that term were issued on the applicable accounting day-the annual yield on those bonds; or

(b) in any other case-the annual yield on Treasury bonds with that term, as published by the Reserve Bank of Australia and applicable to the accounting day.

Capital reserve adequacy level

"(2) The capital reserve adequacy level for a life insurance company that demutualises is:

(a) if, after 1 July 1995 and before the applicable accounting day mentioned in subsection 121AM(3) or 121AN(4), the Life Insurance Actuarial Standards Board established under the Life Insurance Act 1995 issued a capital reserve adequacy standard applicable to the company-the level of capital reserves required by that standard; or

(b) in any other case-the level of capital reserves required to provide adequate capital for the conduct of the life insurance business and other activities of the company.

Eligible actuary

"(3) An eligible actuary is a Fellow or Accredited Member of the Institute of Actuaries of Australia who is not an employee of:

(a) the mutual insurance company or, where demutualisation method 7 applies, the mutual insurance company or the mutual affiliate company; or

(b) a subsidiary of that company or, where demutualisation method 7 applies, of either company.

Security

"(4) A security is:

(a) a bond, debenture, certificate of entitlement, bill of exchange or promissory note; or

(b) a deposit with a bank, building society or other financial institution; or

(c) a secured or unsecured loan.

"121AP. Subsidiary and wholly-owned subsidiary

Subsidiary

(1) A company (the test company) is a subsidiary of another company (the holding company) if at least half of the shares in the test company are beneficially owned by:

(a) the holding company; or

(b) a company that is, or 2 or more companies each of which is, a subsidiary of the holding company; or

(c) the holding company and a company that is, or 2 or more companies each of which is, a subsidiary of the holding company.

"(2) If a company is a subsidiary of another company (including because of this subsection), every company that is a subsidiary of the first-mentioned company is a subsidiary of the other company.

Wholly-owned subsidiary

"(3) A company is a wholly-owned subsidiary of another company if it would, under subsection (1) or (2), be a subsidiary of the other company assuming that the reference in subsection (1) to at least half of the shares were instead a reference to all of the shares.

"121AQ. Other definitions

In this Division:

annuity has the same meaning as in section 27A.

ETP means an eligible termination payment within the meaning of section 27A.

first trading day price, in relation to a listed share, means the price on the Australian stock exchange, as published by that exchange, at which the share was last traded on the trading day on which it was listed.

general insurance business means insurance business (within the meaning of the Insurance Act 1973) other than life insurance business.

life insurance business has the same meaning as in the Life Insurance Act 1995.

listed means listed for quotation in the official list of the Australian stock exchange.

superannuation pension means a pension payable from a superannuation fund within the meaning of section 27A.

undeducted contributions has the same meaning as in section 27A.

undeducted purchase price has the same meaning as in section 27A.

"121AR. List of definitions

The following table lists the expressions defined in this

Division and shows the provisions in which they are defined:

Definition Provision

annuity 121AQ

applicable accounting day 121AM(3) and 121AN(4)

capital reserve adequacy level 121AO(2)

eligible actuary 121AO(3)

embedded value 121AM(1)

ETP 121AQ

demutualise 121AD(1) and (2)

demutualisation method 121AE(3)

demutualisation method 1 to 121AF to

demutualisation method 7 121AL

demutualisation resolution day 121AD(3)

first trading day price 121AQ

general insurance business 121AQ

general insurance company 121AB(4)

insurance company 121AB(2)

life insurance business 121AQ

life insurance company 121AB(3)

listed 121AQ

listing period 121AE(6)

mutual affiliate company 121AC

mutual insurance company 121AB(1)

net tangible asset value 121AN(1)

policyholder/member group 121AE(4) and (5)

security 121AO(4)

subsidiary 121AP(1) and (2)

superannuation pension 121AQ

Treasury bond rate 121AO(1)

undeducted contributions 121AQ

undeducted purchase price 121AQ

wholly-owned subsidiary 121AP(3)

"Subdivision C-Tax consequences of demutualisation

"121AS. Part IIIA consequences of demutualisation

The table below sets out modifications of the application of Part IIIA in respect of events that are described in, or relate to events that are described in, particular demutualisation methods.

TABLE 1-MODIFICATIONS OF PART IIIA

Item Event Modifications

1 Any demutualisation method:

Extinguishment of membership rights as mentioned in paragraph (1)(a) of sections 121AF to 121AL.

Part IIIA does not apply to any disposal constituted by the extinguishment.

2 Demutualisation method 6:

The whole of the life insurance business of the life insurance company is transferred to the other company as mentioned in paragraph 121AK(1)(b).

For the purposes of applying section 160ZZO, the other company is taken to be related to the life insurance company.

3 Any demutualisation method:

A person (the disposer) in the policyholder/member group disposes of a right to have ordinary shares issued or distributed to the person, or the proceeds of sale of ordinary shares distributed to the person, as mentioned in paragraph 121AF(1)(b), 121AG(1)(c) or (d), 121AH(1)(c), 121AI(1)(e) or (f), 121AJ(1)(c) or (d), 121AK(1)(c) or (d) or 121AL(1)(c) or (d).

1. The disposer does not incur a capital loss in respect of the disposal if the disposal takes place before the demutualisation listing day (see note 4 to this table).

2. For the purpose of working out whether a capital gain accrued to the disposer, or a capital loss was incurred by the disposer (where modification 1 does not apply), in respect of the disposal, he or she is taken:

(a) to have paid, as consideration for the acquisition of the right disposed of, an amount worked out using the following formula:

Right disposed of Applicable company

Total of all rights x valuation amount

of the same kind (see note 1 to this table)

(b) to have paid the amount in paragraph (a), and to have acquired the right disposed of, on the demutualisation resolution day.

4 Demutualisation method 2, 4, 5, 6 or 7:

A person (the disposer) in the policyholder/member group disposes of an asset consisting of all or part of the person's interest in the trust property of the trustee mentioned in paragraph 121AG(1)(b) or (c), 121AI(1)(c) or (e), 121AJ(1)(c), 121AK(1)(c) or 121AL(1)(c).

1. The disposer does not incur a capital loss in respect of the disposal if the disposal takes place before the demutualisation listing day (see note 4 to this table).

2. For the purpose of working out whether a capital gain accrued to the disposer, or a capital loss was incurred by the disposer (where modification 1 does not apply), in respect of the disposal, he or she is taken:

(a) to have paid, as consideration for the acquisition of the interest disposed of, an amount worked out using the following formula:

Amount of interest Applicable company

disposed of valuation amount

Total amount of all interests x (see note 1 to this

in the trust property table)

; and

(b) to have paid the amount in paragraph (a), and to have acquired the interest disposed of, on the demutualisation resolution day.

5 Demutualisation method 3, 4 or 5

After the issue of the shares (each of which is a demutualisation share) in the mutual insurance company as mentioned in paragraph 121AH(1)(b), 121AI(1)(b) or 121AJ(1)(b), the holding company (the disposer) disposes of an asset consisting of:

(a) a demutualisation share, or an interest in such a share; or

(b) another share (a non-demutualisation bonus share) in the mutual insurance company, or an interest in such a share, where the share is a bonus share mentioned in Division 8 of Part IIIA and any of the demutualisation shares are the original shares mentioned in that Division.

(For the purposes of the modifications relating to this item, if any of the original shares mentioned in Division 8 of Part IIIA is a demutualisation share, it is called a demutualisation original share.)

1. The disposer does not incur a capital loss in respect of the disposal of the demutualisation share or interest in such a share, if the disposal takes place before the demutualisation listing day (see note 4 to this table).

2. If the disposal is of a demutualisation share (other than a demutualisation original share) or an interest in such a share then, for the purpose of working out whether a capital gain accrued to the disposer, or a capital loss was incurred by the disposer (where modification 1 does not apply), in respect of the disposal, the disposer is taken:

(a) to have paid as consideration for the acquisition of the share or interest both:

(i) the amount worked out using the

formula:

Share or amount of Applicable company valuation

interest disposed of amount

Total demutualisation shares x (see note 1 to this table)

or amount of interests in

such shares

(ii) any consideration actually paid or given for the acquisition; and

(b) to have paid the amount in subparagraph (a)(i) on the demutualisation resolution day and the amount in subparagraph (a)(ii) when it was actually paid; and

(c) to have acquired the share or interest on the demutualisation resolution day.

3. If the disposal is of either:

(a) a demutualisation original share, or an interest in such a share; or

(b) a non-demutualisation bonus share, or an interest in such a share; then, for the purpose of working out whether a capital gain accrued to the disposer, or a capital loss was incurred by the disposer (where modification 1 does not apply), in respect of the disposal:

(c) for the purposes of applying Division 8 of Part IIIA, the consideration for the acquisition of all of the demutualisation original shares to be taken into account under that Division is taken to consist of both:

(i) if the disposal and all previous disposals of the demutualisation original shares and the non-demutualisation bonus shares, or interests in them, take place after the demutualisation listing day--the amount worked out using the formula:

Number of demutualisation Listing day company

original shares x valuation amount

Number of (see note 3 to this table)

demutualisation shares

; and

(ii) if subparagraph (i) does not

apply-the amount worked out using the formula:

Number of demutualisation Pre-listing day company

original shares x valuation amount

Number of (see note 2 to this table)

demutualisation shares

; and

(iii) any consideration actually paid or given for the acquisition of the share or interest disposed of; and

(d) if the disposal is of a demutualisation original share or an interest in such a share, the disposer is taken:

(i) to have paid the amount in subparagraph (c)(i) or (ii) on the demutualisation resolution day and the amount in subparagraph (c)(iii) when it was actually paid; and

(ii) to have acquired the share or interest on the demutualisation resolution day.

6 Demutualisation method 7:

After the issue of the shares (each of which is a demutualisation share ) in the mutual insurance company and the mutual affiliate company as mentioned in paragraph 121AL(1)(b), the holding company (the disposer) disposes of an asset consisting of:

(a) a demutualisation share, or an interest in such a share; or

(b) another share (a non-demutualisation bonus share) in the mutual insurance company or the mutual affiliate company, or an interest in such a share, where the share is a bonus share mentioned in Division 8 of Part IIIA and any of the demutualisation shares are the original shares mentioned in that Division.

(For the purposes of the modifications relating to this item, if any of the original shares mentioned in Division 8 of Part IIIA is a demutualisation share, it is called a demutualisation original share.)

1. The disposer does not incur a capital loss in respect of the disposal of the demutualisation share or interest in such a share, if the disposal takes place before the demutualisation listing day (see note 4 to this table).

2. If the disposal is of a demutualisation share (other than a demutualisation original share) or an interest in such a share then, for the purpose of working out whether a capital gain accrued to the disposer, or a capital loss was incurred by the disposer (where modification 1 does not apply), in respect of the disposal, the disposer is taken:

(a) to have paid as consideration for the acquisition of the share or interest both:

(i) the amount worked out using the formula:

Share or amount of interest

disposed of Net tangible asset value of

Total demutualisation x the company concerned

shares or amount of

interests in such shares

in the company concerned

; and

(ii) any consideration actually paid or given for the acquisition; and

(b) to have paid the amount in subparagraph (a)(i) on the demutualisation resolution day and the amount in subparagraph (a)(ii) when it was actually paid; and

(c) to have acquired the share or interest on the demutualisation resolution day.

3. If the disposal is of either:

(a) a demutualisation original share, or an interest in such a share; or

(b) a non-demutualisation bonus share, or an interest in such a share; then, for the purpose of working out whether a capital gain accrued to the disposer, or a capital loss was incurred by the disposer (wheremodification 1 does not apply), in respect of the disposal:

(c) for the purposes of applying Division 8 of Part IIIA, the consideration for the acquisition of all of the demutualisation original shares to be taken into account under that Division is taken to consist of both:

(i) the amount worked out using the formula:

Number of demutualisation Pre-listing day company

original shares x valuation amount

Number of

demutualisation shares

(ii) any consideration actually paid or given for the acquisition of the share or interest disposed of; and

(d) if the disposal is of a share connected with the demutualisation or interest in such a share, the disposer is taken:

(i) to have paid the amount in subparagraph (c)(i) on the demutualisation resolution day and the amount in subparagraph (c)(ii) when it was actually paid; and

(ii) to have acquired the share or interest on the demutualisation resolution day.

7 Demutualisation method 3, 4, 5 or 7:

After the issue of the shares in the mutual insurance company to the holding company as mentioned in paragraph 121AH(1)(b), 121AI(1)(b), 121AJ(1)(b), or in the mutual insurance company and the mutual affiliate company as mentioned in paragraph 121AL(1)(b):

(a) the ultimate holding company (the disposer) disposes of an asset consisting of either of the following shares in the holding company or an interposed holding company:

(i) a share (a demutualisation share) acquired before the issue of the shares in the mutual insurance company, or an interest in such a share; or

(ii) another share (a non-demutualisation bonus share), or an interest in such a share, where the share is a bonus share mentioned in Division 8 of Part IIIA and any of the demutualisation shares (whether or not disposed of at the time) are the original shares mentioned in that Division; or

(b) the interposed holding company, or any of the interposed holding companies, (the disposer) disposes of an asset consisting of either of the following shares in the holding company or an interposed holding company:

(i) a share (a demutualisation share) acquired before the issue of the shares in the mutual insurance company, or an interest in such a share; or

(ii) another share (a non-demutualisation bonus share), or an interest in such a share, where the share is a bonus share mentioned in Division 8 of Part IIIA and any of the demutualisation shares (whether or not disposed of at the time) are the original shares mentioned in that Division.

(For the purposes of the modifications relating to this item, if any of the original shares mentioned in Division 8 of Part IIIA is a demutualisation share, it is called a demutualisation original share.) (The ultimate holding company and interposed holding company are those mentioned in paragraph 121AH(1)(c), 121AI(1)(c), 121AJ(1)(c) or 121AL(1)(c)).

The same modifications apply as for item

5.

8 Demutualisation method 2 or 4:

The rights attaching to the special shares held by the trustee become the same as those attaching to the ordinary shares as mentioned in subparagraph 121AG(1)(b)(ii) or paragraph 121AI(1)(d).

Part IIIA does not apply to any disposal constituted by the change in the rights.

9 Demutualisation method 2, 4, 5, 6 or 7:

The trustee (the disposer):

(a) sells an ordinary share (a demutualisation share) in the company as mentioned in paragraph 121AG(1)(d), 121AI(1)(f), 121AJ(1)(d), 121AK(1)(d) or 121AL(1)(d); or

(b) sells another share (a non-demutualisation bonus share), where the share is a bonus share mentioned in Division 8 of Part IIIA and any of the demutualisation shares (whether or not sold at the time) are the original shares mentioned in that Division.

(For the purposes of the modifications relating to this item, if any of the original shares mentioned in Division 8 of Part IIIA is a demutualisation share, it is called a demutualisation original share.)

1. The person in the policyholder/member group, instead of the trustee, is taken:

(a) to have sold the demutualisation share or non-demutualisation bonus share; and

(b) to have paid, given and received any consideration that was paid, given or received by the trustee in respect of either share; and

(c) to have done any other act in relation to either share that was done by the trustee.

2. The modifications in item 5 apply to the sale of the demutualisation share or non-demutualisation bonus share in the same way as they do to the disposal of such shares covered by that item.

10 Demutualisation method 2, 4, 5, 6 or 7:

The trustee distributes an ordinary share as mentioned in paragraph 121AG(1)(d), 121AI(1)(f), 121AJ(1)(d), 121AK(1)(d) or 121AL(1)(d).

Part IIIA does not apply to any disposal constituted by the distribution.

11 Any demutualisation method:

A person (the disposer) in the policyholder/member group disposes of an asset consisting of:

(a) a share (a demutualisation share), or an interest in such a share, issued or distributed to the person as mentioned in paragraph 121AF(1)(b), 121AG(1)(c) or (d), 121AH(1)(c), 121AI(1)(e) or (f), 121AJ(1)(c) or (d), 121AK(1)(c) or (d) or 121AL(1)(c) or (d); or

(b) another share (a non-demutualisation bonus share) in the same company, or an interest in such a share, where the share is a bonus share mentioned in Division 8 of Part IIIA and any of the demutualisation shares (whether or not disposed of at the time) are the original shares mentioned in that Division.

(For the purposes of the modifications relating to this item, if any of the original shares mentioned in Division 8 of Part IIIA is a demutualisation share, it is called a demutualisation original share.)

The same modifications apply as for item 5.

12 Various demutualisation methods

A disposal of an asset takes place before the demutualisation listing day, where:

(a) modification 1 of item 3, 4, 5, 6, 7 or 11 of this table applies to the disposal; and

(b) a roll-over provision (see note 5 to this table) applies to the disposal.

1. If the person who is taken to acquire the asset under the roll-over provision disposes of it before the demutualisation listing day, the person does not incur a capital loss in respect of that disposal.

2. If the person disposes of the asset on or after the demutualisation listing day, then for the purposes of applying the roll-over provision to that disposal, the modifications in the item in this table apply as if modification 1 were not made.

Notes:

1. For the purposes of the table, the applicable company valuation amount, in relation to the disposal of an asset or the allocation of an amount to a member in the records of a superannuation fund, is:

(a) if the asset is disposed of, or the amount is allocated, before the demutualisation listing day-the pre-listing day company valuation amount; or

(b) in any other case-the listing day company valuation amount.

2. The pre-listing day company valuation amount is:

(a) in relation to demutualisation methods 1 to 6, where the mutual insurance company is a life insurance company-the embedded value of the company; or

(b) in relation to demutualisation methods 1 to 6, where the mutual insurance company is a general insurance company-the net tangible asset value of the company; or

(c) in relation to demutualisation method 7-the sum of the net tangible asset values of the general insurance company and the mutual affiliate company.

3. The listing day company valuation amount is the lesser of:

(a) the pre-listing day company valuation amount; and

(b) the amount worked out using the formula:

First trading day price of a listed

ordinary share mentioned in the

demutualisation method concerned x Total number of ordinary shares

issued or distributed to, or to

be sold on behalf of, persons

in the policyholder/member group

4. The demutualisation listing day is the day on which the ordinary shares mentioned in the demutualisation method concerned are listed.

5. A roll-over provision is section 160X or any provision of Division 17 of Part IIIA.

"121AT. Other tax consequences of demutualisation

The table below sets out modifications of the application of this Act (other than Part IIIA) in respect of events that are described in, or relate to events that are described in, particular demutualisation methods.

TABLE 2-MODIFICATIONS OF THE ACT (OTHER THAN PART IIIA)

Item Event Modifications

1 Event described in item 1 of Table 1.

No amount is included in, or allowable as a deduction from, assessable income in respect of the extinguishment.

2 Event described in item 3 or 4 of Table 1.

1. If the disposal takes place before the demutualisation listing day (see note 4 to Table 1):

(a) no loss is allowable as a deduction from the disposer's assessable income in respect of the disposal; and

(b) any deduction allowable from the disposer's assessable income in respect of the acquisition of the right or interest does not exceed the amount included in the disposer's assessable income in respect of the disposal.

2. Paragraphs 2(a) and (b) of the modifications column for item 3 or 4 in Table 1 apply for the purposes of working out:

(a) the amount of any profit included in the disposer's assessable income in respect of the disposal; or

(b) the amount of any deduction allowable from the disposer's assessable income in respect of the acquisition of the right or interest.

3 Event that would be described in item 5 of Table 1 if the references in that item to bonus shares and original shares mentioned in Division 8 of Part IIIA were instead references to bonus shares and original shares mentioned in section 6BA.

1. If the disposal is of a demutualisation share, or interest in such a share, and the disposal takes place before the demutualisation listing day:

(a) no loss is allowable as a deduction from the disposer's assessable income in respect of the disposal; and

(b) any deduction allowable from the disposer's assessable income in respect of the acquisition of the share or interest does not exceed the amount included in the disposer's assessable income in respect of the disposal.

2. If the disposal is of a demutualisation share (other than a demutualisation original share), or an interest in such a share, then paragraphs 2(a) to (c) of the modifications column for item 5 in Table 1 apply for the purposes of working out:

(a) the amount of any profit included in, or loss (where modification 1 does not apply) allowable as a deduction from, the disposer's assessable income in respect of the disposal; or

(b) the amount of any deduction allowable (where modification 1 does not apply) from the disposer's assessable income in respect of the acquisition of the share or interest.

3. If the disposal is of either:

(a) a demutualisation original share, or an interest in such a share; or

(b) a non-demutualisation bonus share, or an interest in such a share;

then paragraphs 3(c) and (d) of the modifications column for item 5 in Table 1 apply for the purpose of working out:

(c) the amount of any profit included in, or loss (where modification 1 does not apply) allowable as a deduction from, the disposer's assessable income in respect of the disposal; or

(d) the amount of any deduction allowable (where modification 1 does not apply) from the disposer's assessable income in respect of the acquisition of the share or interest.

In applying paragraph 3(c) of the modifications column for item 5 in Table 1, the reference to Division 8 of Part IIIA is taken instead to be a reference to section 6BA.

4 Event that would be described in item 6 of Table 1 if the references in that item to bonus shares and original shares mentioned in Division 8 of Part IIIA were instead references to bonus shares and original shares mentioned in section 6BA.

1. If the disposal is of a demutualisation share, or interestin such a share, and the disposal takes place before the demutualisation listing day:

(a) no loss is allowable as a deduction from the disposer's assessable income in respect of the disposal; and

(b) any deduction allowable from the disposer's assessable income in respect of the acquisition of the share or interest does not exceed the amount included in the disposer's assessable income in respect of the disposal.

2. If the disposal is of a demutualisation share (other than a demutualisation original share), or an interest in such a share, then paragraphs 2(a) to (c) of the modifications column for item 6 in Table 1 apply for the purposes of working out:

(a) the amount of any profit included in, or loss (where modification 1 does not apply) allowable as a deduction from, the disposer's assessable income in respect of the disposal; or

(b) the amount of any deduction allowable (where modification 1 does not apply) from the disposer's assessable income in respect of the acquisition of the share or interest.

3. If the disposal is of either:

(a) a demutualisation original share, or interest in such a share; or

(b) a non-demutualisation bonus share, or an interest in such a share;

then paragraphs 3(c) and (d) of the modifications column for item 6 in Table 1 apply for the purpose of working out:

(c) the amount of any profit included in, or loss (where modification 1 does not apply) allowable as a deduction from, the disposer's assessable income in respect of the disposal; or

(d) the amount of any deduction allowable (where modification 1 does not apply) from the disposer's assessable income in respect of the acquisition of the share or interest.

In applying paragraph 3(c) of the modifications column for item 6 in Table 1, the reference to Division 8 of Part IIIA is taken instead to be a reference to section 6BA.

5 Event that would be described in item 7 of Table 1 if the references in that item to bonus shares and original shares mentioned in Division 8 of Part IIIA were instead references to bonus shares and original shares mentioned in section 6BA.

The same modifications as for item 3 of this table apply.

6 Event described in item 8 of Table 1.

No amount is included in, or allowable as a deduction from, assessable income in respect of the change in the rights.

7 Event that would be described in item 9 of Table 1 if the references in that item to bonus shares and original shares mentioned in Division 8 of Part IIIA were instead references to bonus shares and original shares mentioned in section 6BA.

1. The person in the policyholder/member group, instead of the trustee is taken:

(a) to have sold the demutualisation share or non-demutualisation bonus share; and

(b) to have paid, given and received any consideration that was paid, given or received by the trustee in respect of either share; and

(c) to have done any other act in relation to either share that was done by the trustee.

2. The modifications in item 3 of this table apply to the sale of the demutualisation share or non-demutualisation bonus share in the same way as they do to the disposal of such shares covered by that item.

8 Event that would be described in item 11 of Table 1 if the references in that item to bonus shares and original shares mentioned in Division 8 of Part IIIA were instead references to bonus shares and original shares mentioned in section 6BA.

The same modifications as for item 3 of this table apply.

9 Under demutualisation method 6, the whole of the life insurance business of a life insurance company is transferred to another company as mentioned in paragraph 121AK(1)(b).

The other company is taken to continue to carry on the transferred life insurance business of the mutual life insurance company.

10 An ordinary share is issued or distributed to a person in the policyholder/member group as mentioned in paragraph 121AF(1)(b), 121AG(1)(c) or (d), 121AH(1)(c), 121AI(1)(e) or (f), 121AJ(1)(c) or (d), 121AK(1)(c) or (d) or 121AL(1)(c) or (d).

No amount is included in, or allowable as a deduction from, assessable income of the person in respect of the issue or distribution of the share, except where the share is issued in consideration for services provided, or to be provided, by the person.

11 Ordinary shares in the company are issued or distributed as mentioned in paragraph 121AF(1)(b), 121AG(1)(c) or (d), 121AH(1)(c), 121AI(1)(e) or (f), 121AJ(1)(c) or (d), 121AK(1)(c) or (d) or 121AL(1)(c) or (d) to a person in the policyholder/member group who is the trustee of a superannuation fund to hold on behalf of a member of the fund. The trustee within 30 days allocates to the member, in the records of the fund, an amount representing the member's contributions in respect of the shares (the allocation shares).

If the trustee pays an ETP, a superannuation pension or an annuity to the member, the undeducted contributions in relation to the ETP, or undeducted purchase price of the pension or annuity, is increased by the amount worked out using the formula:

Number of allocation shares Applicable company

Total number of ordinary shares valuation amount

issued or distributed to, or to be x (see note 1 to Table 1)

sold on behalf of, the

policyholder/member group

12 A resolution is passed to proceed, in accordance with one of the demutualisation methods, with the demutualisation of:

(a) a mutual insurance company that is a general insurance company; or

(b) both such a mutual insurance company and a mutual affiliate company.

Immediately before the demutualisation resolution day:

(a) in the case of any demutualisation method-the general insurance company or any wholly-owned subsidiary of the general insurance company; or

(b) in the case of demutualisation method 7-the mutual affiliate company, a wholly-owned subsidiary of the mutual affiliate company, or a company all of whose shares are beneficially owned by the general insurance company and the mutual affiliate company; has a class A franking surplus, a class B franking surplus or a class C franking surplus (all within the meaning of art IIIAA).

The class A franking account balance, class B franking account balance or class C franking account balance (all within the meaning of Part IIIAA) is reduced to nil at the beginning of the demutualisation resolution day.

13 A resolution is passed to proceed with the demutualisation of a mutual insurance company or both a mutual insurance company and a mutual affiliate company. A dividend that was declared before the demutualisation resolution day is paid on or after the demutualisation resolution day to:

(a) in the case of any demutualisation method-the mutual insurance company or any wholly-owned subsidiary of the mutual insurance company; or

(b) in the case of demutualisation method 7-the mutual affiliate company, a wholly-owned subsidiary of the mutual affiliate company, or a company all of whose shares are beneficially owned by the general insurance company and the mutual affiliate company.

No franking credit (within the meaning of Part IIIAA) arises for the company or the subsidiary in relation to the payment of the dividend on or after the demutualisation resolution day.".

2. Subsection 170(10):

Omit "or 105AB", substitute ", 105AB or 121AT".

3. Application

The amendments made by this Schedule apply to mutual insurance companies and mutual affiliate companies that existed at 7.30 p.m., by legal time in the Australian Capital Territory, on 9 May 1995.

SCHEDULE 4   VARIOUS AMENDMENTS OF THE INCOME TAX ASSESSMENT ACT 1936

PART 1   ESTABLISHMENT COSTS OF HORTICULTURAL PLANTS

1.   After section 124ZZD

Insert:

"Division 10F-Deduction for capital expenditure incurred in establishing horticultural plants

Subdivision A-Simplified outline

"124ZZE. Simplified outline

The following is a simplified outline of this Division:

- A taxpayer can get a deduction for capital expenditure (establishment expenditure) incurred in establishing a horticultural plant, so long as:

(a) the taxpayer owns the plant; and

(b) the taxpayer uses the plant for the purpose of producing assessable income; and

(c) the taxpayer uses the plant in a business of horticulture; and

(d) the expenditure is not otherwise deductible; and

(e) the expenditure is incurred on or after 10 May 1995.

- A taxpayer can get a deduction for the establishment expenditure even if it was incurred by a previous owner of the plant.

- If the effective life of a plant is less than 3 years, a taxpayer can get a deduction for 100% of the establishment expenditure in the year when the plant is first used:

(a) for the purpose of producing assessable income; and

(b) in a business of horticulture.

- If the effective life of a plant is 3 or more years, a taxpayer can get an annual deduction for the establishment expenditure, worked out on a prime cost basis. The deduction is available only during the plant's maximum write-off period.

- A taxpayer can get a special deduction if a plant with an effective life of 3 or more years is destroyed before the end of the plant's maximum write-off period.

- A taxpayer cannot get a deduction for recouped expenditure.

- If the ownership of a plant is transferred, the transferor may be required to give the transferee information that will help the transferee calculate his or her deduction.

124ZZF. When can a taxpayer get a 100% deduction for

establishment expenditure?

124ZZG. When can a taxpayer get an annual deduction for

establishment expenditure?

124ZZH. How much can be deducted each year?

124ZZI. What is the annual write-off rate and the maximum

write-off period?

124ZZJ. What counts as establishment expenditure for a plant?

124ZZK. What is the effective life of a plant?

124ZZL. Commissioner may make determination specifying effective

lives of plants

124ZZM. Special deduction for destruction of plants

124ZZN. No deduction if expenditure recouped

124ZZO. Transfer of ownership of plants-transferor to give tax

information to transferee

124ZZP. Section 124ZZO obligations-treatment of partnerships

124ZZQ. Owner includes lessee or licensee

124ZZR. Definitions

"Subdivision B-100% deduction where the effective life of a plant is less than 3 years

"124ZZF. When can a taxpayer get a 100% deduction for establishment expenditure?

If:

(a) there is an amount of establishment expenditure for a horticultural plant; and

(b) the number of years in the effective life of the plant is less than 3; and

(c) at a particular time during a year of income, a taxpayer became the first entity to use the plant, or to hold the plant ready for use:

(i) for the purpose of producing assessable income; and

(ii) in a business of horticulture; and

(d) the taxpayer owned the plant at that time;

100% of the establishment expenditure is allowable as a deduction to the taxpayer for the year of income.

Note 1: Establishment expenditure is defined by section 124ZZJ.

Note 2: Effective life is defined by section 124ZZK.

Note 3: Ownership is given an extended meaning in relation to leases and licences by section 124ZZQ.

Note 4: Entity is defined by section 124ZZR.

"Subdivision C-Annual deduction where the effective life of a plant is 3 or more years

"124ZZG. When can a taxpayer get an annual deduction for establishment expenditure?

If:

(a) there is an amount of establishment expenditure for a horticultural plant; and

(b) the number of years in the effective life of the plant is 3 or more; and

(c) at a particular time during a year of income, a taxpayer used the plant, or held the plant ready for use:

(i) for the purpose of producing assessable income; and

(ii) in a business of horticulture; and

(d) the taxpayer owned the plant at that time; and

(e) that time is within the maximum write-off period for the plant; the amount worked out under section 124ZZH is allowable as a deduction to the taxpayer for the year of income.

Note 1: Establishment expenditure is defined by section 124ZZJ.

Note 2: Effective life is defined by section 124ZZK.

Note 3: Ownership is given an extended meaning in relation to leases and licences by section 124ZZQ.

Note 4: Maximum write-off period is defined by section 124ZZI.

"124ZZH. How much can be deducted each year?

The amount of the section 124ZZG deduction is worked out using the following formula:

Annual write-off rate x Write-off days in year x Establishment

Days in year expenditure

where:

Annual write-off rate is worked out under section 124ZZI.

Write-off days in year means the number of whole days in the year of income, where all of the following conditions are satisfied:

(a) throughout that day, the taxpayer used the plant, or held the plant ready for use:

(i) for the purpose of producing assessable income; and

(ii) in a business of horticulture;

(b) the taxpayer owned the plant throughout that day;

(c) that day is within the maximum write-off period for the plant (worked out under section 124ZZI).

Days in year means the number of days in the year of income.

Establishment expenditure means the amount of establishment

expenditure for the plant (worked out under section 124ZZJ).

"124ZZI. What is the annual write-off rate and the maximum write-off period?

Use the following table to work out the annual write-off rate and the maximum write-off period for a plant. The maximum write-off period for a plant begins at the time when the plant first became capable of being used:

(a) for the purpose of producing assessable income; and

(b) in a business of horticulture.

Years in effective Annual write-off rate Maximum write-off period life of plant

3 to fewer than 5 0.40 2 years and 183 days

5 to fewer than 6-2/3 0.27 3 years and 257 days

6-2/3 to fewer than 10 0.20 5 years

10 to fewer than 13 0.17 5 years and 323 days

13 to fewer than 30 0.13 7 years and 253 days

30 or more 0.07 14 years and 105 days

Note: Effective life is defined by section 124ZZK.

"Subdivision D-Establishment expenditure for a plant

What counts as establishment expenditure for a plant?

"124ZZJ. Basic definition

(1) For the purposes of this Division, if:

(a) an entity has incurred expenditure of a capital nature wholly or partly in respect of the establishment of a horticultural plant in Australia for use in a business of horticulture; and

(b) the expenditure was incurred on or after 10 May 1995; so much of the amount of the expenditure as is attributable to the establishment of the plant is taken to be an amount of establishment expenditure for the plant.

Note: Entity is defined by section 124ZZR.

Exclusion of drainage and land-clearance costs

"(2) A reference in this section to capital expenditure in respect of the establishment of a horticultural plant does not include a reference to expenditure incurred in:

(a) draining swamp or low-lying land; or

(b) clearing land.

Exclusion of otherwise deductible costs

"(3) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which a deduction is allowable in respect of that expenditure under a provision of this Act other than section 124ZZF or 124ZZG.

Exclusion of depreciable costs

"(4) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which the expenditure is taken into account in calculating an amount of depreciation that is allowable as a deduction.

Exclusion of qualifying expenditure with the meaning of Division 10D

"(5) Expenditure is taken not to be establishment expenditure in respect of the establishment of a horticultural plant to the extent to which the expenditure is qualifying expenditure within the meaning of Division 10D (which deals with buildings and structural improvements).

"Subdivision E-Effective lives of plants

"124ZZK. What is the effective life of a plant?

(1) For the purposes of this Division, the effective life of a plant depends on whether the original taxpayer elects to adopt the period specified in the Commissioner's determination under section 124ZZL. For this purpose, an entity is the original taxpayer in relation to a plant if the entity owned the plant at the time when the plant first became capable of being used:

(a) for the purpose of producing assessable income; and

(b) in a business of horticulture.

Note: Under section 124ZZL, the Commissioner may make a determination specifying periods that taxpayers may elect to adopt as the effective lives of horticultural plants owned by them.

Original taxpayer may elect to adopt the period specified in the Commissioner's determination

"(2) If:

(a) there is in force a determination by the Commissioner under section 124ZZL which specifies a period that a taxpayer may elect to adopt as the effective life of the plant; and

(b) the original taxpayer makes a written election to adopt that period;

the effective life of the plant is that period.

Effective life if original taxpayer does not elect to adopt the period specified in the Commissioner's determination

"(3) If the original taxpayer does not elect to adopt the period specified in the Commissioner's determination, the effective life of the plant is the period, worked out as at the time when the plant first became capable of being used:

(a) for the purpose of producing assessable income; and

(b) in a business of horticulture;

during which it would be reasonable to expect that the plant would be capable of being used:

(c) for the purpose of producing assessable income; and

(d) in a business of horticulture.

Election is irrevocable

"(4) An election under this section is irrevocable.

Commissioner may make determination specifying effective lives of plants

"124ZZL. Commissioner's determination

(1) The Commissioner may, by writing:

(a) make a determination specifying periods that taxpayers may elect to adopt as the effective lives of horticultural plants owned by them; and

(b) revoke or vary such a determination.

Period may be specified unconditionally

"(2) A period may be specified unconditionally.

Specification of period may be conditional

"(3) A period, or 2 or more different periods, may be specified in relation to particular kinds of plants subject to one or more specified conditions being satisfied as at the time when the plant first became capable of being used:

(a) for the purpose of producing assessable income; and

(b) in a business of horticulture.

Determination to be available for sale to the public

"(4) A determination, or a variation or a revocation of a determination, must be made available for sale to the public.

When determination may be retrospective

"(5) A determination, or a variation or a revocation of a determination, may be expressed to apply in relation to a plant that first became capable of being used:

(a) for the purpose of producing assessable income; and

(b) in a business of horticulture;

before the determination, variation or revocation, as the case may be, was made if, and only if:

(c) in the case of a determination or a variation of a determination-the specified period is the first period applicable to plants of that kind; or

(d) in any case-the retrospectivity works to the advantage of taxpayers in calculating the effective lives of plants of that kind.

"Subdivision F-Special deduction for destruction of plants

"124ZZM. Special deduction for destruction of plants

(1) This section applies if:

(a) there is an amount of establishment expenditure for a horticultural plant; and

(b) during a year of income, the plant is destroyed; and

(c) immediately before the destruction, a taxpayer owned the plant and used it in a business of horticulture for the purpose of producing assessable income; and

(d) the number of years in the effective life of the plant is 3 or more.

Note: Effective life is defined by section 124ZZK.

Deduction if taxpayer receives an amount in respect of the destruction

"(2) If:

(a) an amount (the recoverable amount) was or is received or receivable by the taxpayer (under a policy of insurance or otherwise) in respect of the destruction; and

(b) the amount worked out using the formula set out in subsection (4) exceeds the recoverable amount;

the excess is allowable as a deduction to the taxpayer for the year of income.

Deduction if taxpayer does not receive an amount in respect of the destruction

"(3) If no amount was or is received or receivable by the taxpayer (under a policy of insurance or otherwise) in respect of the destruction, the amount worked out using the formula set out in subsection (4) is allowable as a deduction to the taxpayer for the year of income.

Formula

"(4) The formula mentioned in subsections (2) and (3) is:

Establishment expenditure - Notional deductions

where:

Establishment expenditure means the amount of the establishment expenditure for the plant.

Notional deductions means the deduction, or the total of the deductions, that would have been allowable to the taxpayer under section 124ZZG for the establishment expenditure if it were assumed that, at all times during the period:

(a) beginning when the plant first became capable of being used:

(i) for the purpose of producing assessable income; and

(ii) in a business of horticulture; and

(b) ending when the plant was destroyed;

the taxpayer had owned the plant and had used it:

(c) for the purpose of producing assessable income; and

(d) in a business of horticulture.

"Subdivision G-No deduction if expenditure recouped

"124ZZN. No deduction if expenditure recouped

(1) This Division does not apply, and is taken never to have applied, to expenditure incurred by an entity if:

(a) the entity, whether before or after the commencement of this section, receives, or becomes entitled to receive, a recoupment of, or grant in respect of, the expenditure; and

(b) the amount of the recoupment or the grant is not, and will not be, included in the entity's assessable income of any year of income.

Dissection of amounts

"(2) For the purposes of subsection (1), if a person receives, or becomes entitled to receive, an amount that constitutes to an unspecified extent a recoupment of, or a grant in respect of, expenditure, then so much of that amount as is reasonable is taken to be a recoupment of, or grant in respect of, that expenditure, as the case requires.

Amendment of assessments

"(3) Section 170 does not prevent the amendment of an assessment at any time for the purpose of giving effect to this section.

"Subdivision H-Transfer of ownership of plants-transferor to give tax information to transferee

"124ZZO. Transfer of ownership of plants-transferor to give tax information to transferee

(1) This section applies if:

(a) the ownership of one or more horticultural plants is or was transferred from an entity (the transferor) to another entity (the transferee); and

(b) there is an amount of establishment expenditure for each of the plants.

Transferee may ask transferor for tax information

"(2) The transferee may, by written notice given to the transferor, require the transferor to give to the transferee, within the period specified in the notice, any or all of the following information:

(a) the amount of the establishment expenditure for each of the plants;

(b) the effective lives of each of the plants;

(c) whether the transferor made an election under section 124ZZK in relation to any of the plants;

(d) the beginning of the maximum write-off periods for each of the plants.

The period specified in the notice must be at least 60 days. The notice must be given within 60 days after the transfer, or within 60 days after the commencement of this section, whichever comes last.

Transferee may only give one notice

"(3) The transferee must not give more than one notice under subsection (2) in relation to a particular transfer.

Offence

"(4) An entity must not, without reasonable excuse, intentionally or recklessly refuse or fail to comply with a notice under subsection (2).

Penalty: 10 penalty units.

Notice to set out the effect of subsection (4)

"(5) A notice under subsection (2) must set out the effect of subsection (4).

Application

"(6) This section applies to a transfer that occurs on or after 10 May 1995.

Section 124ZZO obligations-treatment of partnerships

"124ZZP. Obligations

(1) Section 124ZZO applies to a partnership as if the partnership were a person, but it applies with the following changes:

(a) obligations that would be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners;

(b) any offence against that section that would otherwise be committed by the partnership is taken to have been committed by each partner who:

(i) aided, abetted, counselled or procured the relevant act or omission; or

(ii) was in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the partner).

Giving of notices

"(2) For the purposes of section 124ZZO, if a document is given to a partner of a partnership, the document is taken to have been given to the partnership.

"Subdivision I-Interpretation

"124ZZQ. Owner includes lessee or licensee

Crown lease

(1) For the purposes of this Division, if:

(a) a taxpayer is the lessee of land under a Crown lease (within the meaning of section 54AA); and

(b) a plant is affixed to the land; and

(c) the taxpayer or another entity planted the plant; and

(d) apart from this section, the taxpayer is not the owner of the plant; and

(e) the Crown lease enables the taxpayer to carry on a business of horticulture on the land; and

(f) if there is a holder of a lesser interest or licence in relation to the land-the holder does not carry on a business of horticulture on the land;

the taxpayer is taken to be the owner of the plant instead of any other entity.

Ordinary lease

"(2) For the purposes of this Division, if:

(a) a taxpayer is the lessee of land under a lease other than a Crown lease (within the meaning of section 54AA); and

(b) a plant is affixed to the land; and

(c) the taxpayer or another entity planted the plant; and

(d) apart from this section, the taxpayer is not the owner of the plant; and

(e) the lease enables the taxpayer to carry on a business of horticulture on the land; and

(f) if there is a holder of a lesser interest or licence in relation to the land-the holder does not carry on a business of horticulture on the land;

the taxpayer is taken to be the owner of the plant instead of any other entity.

Licence

"(3) For the purposes of this Division, if:

(a) a taxpayer holds a licence in relation to land; and

(b) a plant is affixed to the land; and

(c) the taxpayer or another entity planted the plant; and

(d) apart from this section, the taxpayer is not the owner of the plant; and

(e) the licence enables the taxpayer to carry on a business of horticulture on the land;

the taxpayer is taken to be the owner of the plant instead of any other entity.

Definition

"(4) In this section:

lease includes sublease.

"124ZZR. Definitions

In this Division:

annual write-off rate has the meaning given by section 124ZZI.

effective life has the meaning given by section 124ZZK.

entity means any of the following:

(a) a company;

(b) a partnership;

(c) a person in a capacity of trustee;

(d) any other person.

establishment expenditure has the meaning given by section 124ZZJ.

maximum write-off period has the meaning given by section 124ZZI.

owner has a meaning affected by section 124ZZQ.

plant means any live member of the plant kingdom, and includes fungi.

producing assessable income includes gaining assessable income.".

PART 2   FORESTRY

2.   After subsection 36(7)

Insert:

"(7A) If:

(a) a taxpayer has acquired land carrying trees; and

(b) part of the price paid for the land was attributable to the trees; and

(c) the taxpayer tended the trees for the purposes of sale; and

(d) the trees were held by the taxpayer in connection with timber operations (within the meaning of Division 10A) for the purpose of gaining or producing assessable income; and

(e) after 9 May 1995, the taxpayer disposed of the trees (by sale, gift or otherwise); and

(f) the trees were assets of a business which is or was carried on by the taxpayer; and

(g) the disposal was not in the ordinary course of carrying on that business;

the sum of the following amounts is allowable as a deduction to the taxpayer for the year of income in which the disposal occurred:

(h) so much of the price paid by the taxpayer for the land as is attributable to the trees;

(i) so much of any other expenditure of a capital nature incurred by the taxpayer as is attributable to the acquisition of the trees.

"(7B) Paragraph (7A)(i) does not apply to an amount that has been allowed, or is allowable, as a deduction to the taxpayer for any year of income under a provision of this Act other than subsection (7A).

"(7C) For the purposes of subsection (7A), if:

(a) the taxpayer acquired the land in a transaction where the parties did not deal with each other at arm's length in relation to the transaction; and

(b) the price paid by the taxpayer for the land was greater than was reasonable;

the price paid by the taxpayer for the land is taken to be the amount that would have been reasonable if the parties had dealt with each other at arm's length.

"(7D) For the purposes of subsection (7A), if:

(a) the taxpayer has incurred expenditure covered by paragraph (7A)(i) in connection with a transaction where the parties did not deal with each other at arm's length in relation to the transaction; and

(b) the amount of the expenditure was greater than was reasonable;

the amount of the expenditure is taken to be the amount that would have been reasonable if the parties had dealt with each other at arm's length.".

3.   Section 124J

Add at the end:

"(2) For the purposes of subsection (1), if:

(a) the taxpayer acquired the land or the right, as the case may be, in a transaction where the parties did not deal with each other at arm's length in relation to the transaction; and

(b) the price paid by the taxpayer for the land or the right, as the case may be, was greater than was reasonable;

the price paid by the taxpayer for the land or the right, as the case may be, is taken to be the amount that would have been reasonable if the parties had dealt with each other at arm's length.".

4.   Application-section 124J

The amendment of section 124J of the Income Tax Assessment Act 1936 made by this Part applies in relation to timber felled after 28 September 1995.

PART 3   REGISTER OF APPROVED OCCUPATIONAL CLOTHING

5.   Subsections 51AL(5) to (22) (inclusive)

Omit "TCFDA" (wherever occurring), substitute "Industry Secretary".

Note 1: The heading to subsection 51AL(13) of the Income Tax

Assessment Act 1936 is altered by omitting "TCFDA's" and substituting "Industry Secretary's".

Note 2: The heading to subsection 51AL(14) of the Income Tax

Assessment Act 1936 is altered by omitting "TCFDA" and substituting "Industry Secretary".

6.   Subsection 51AL(23)

Omit the subsection, substitute:

Delegation by Industry Secretary

"(23) The Industry Secretary may, by writing, delegate any or all of his or her functions and powers under this section to a person who holds or performs the duties of:

(a) a Senior Executive Service office in the Industry Department; or

(b) a Senior Officer Grade A, B or C office in the Industry

Department.".

7.   Subsection 51AL(24)

Omit "TCFDA", substitute "Industry Secretary".

Note: The heading to subsection 51AL(24) of the Income Tax Assessment

Act 1936 is altered by omitting "TCFDA" and substituting "Industry Secretary".

8.   Subsection 51AL(26) (definition of TCFDA)

Omit the definition.

9.   Subsection 51AL(26)

Insert:

"Industry Department means the Department of Industry, Science and Technology.

Industry Secretary means the Secretary to the Industry Department.

Senior Executive Service office has the same meaning as in the Public Service Act 1922.".

10.   Transitional-acts of the Textiles, Clothing and Footwear

Development Authority etc.

(1) This item applies to any thing done by or in relation to the Textiles, Clothing and Footwear Development Authority before the commencement of this item under or in connection with section 51AL of the Income Tax Assessment Act 1936.

(2) The following Acts have effect as if the thing had been done by or in relation to the Industry Secretary under or in connection with that section:

(a) the Income Tax Assessment Act 1936;

(b) the Administrative Decisions (Judicial Review) Act 1977;

(c) the Administrative Appeals Tribunal Act 1975.

11.   Transitional-pending proceedings

(1) This item applies to proceedings to which the Textiles, Clothing and Footwear Development Authority was a party and that:

(a) arose out of section 51AL of the Income Tax Assessment Act 1936; and

(b) were pending in any court or tribunal immediately before the commencement of this item.

(2) The Industry Secretary is, by force of this item, substituted for the Authority as a party to the proceedings.

12.   Transitional-records of the Textiles, Clothing and Footwear Development Authority

(1) This item applies to any records or documents that:

(a) were in the possession of the Textiles, Clothing and Footwear Development Authority immediately before the commencement of this item; and

(b) relate to section 51AL of the Income Tax Assessment Act 1936.

(2) The records and documents are to be transferred to the Industry Secretary.

PART 4   RESEARCH AND DEVELOPMENT

13.   Section 73CB

Repeal the section, substitute:

"73CB. Expenditure incurred to tax-exempt bodies

(1) In this section:

agreement means any agreement, arrangement, understanding or scheme, whether formal or informal, whether express or implied, and whether or not intended to be enforceable by legal proceedings.

Australian government means the Commonwealth, a State or a Territory.

Australian governmental authority means an authority of the Commonwealth, of a State or of a Territory.

tax-exempt entity means a person, a body or association of persons (whether incorporated or unincorporated), or a fund, that is not liable to income tax and, without limiting the generality of the above, includes an Australian government and an Australian governmental authority that is not liable to income tax.

"(2) For the purposes of this section:

(a) a body is taken to be an authority of the Commonwealth if:

(i) the Commonwealth has a controlling interest in the body; or

(ii) the Commonwealth has an interest in the body and the only other persons having an interest in the body are Australian governments or Australian governmental authorities; and

(b) a body is taken to be an authority of a State if:

(i) the State has a controlling interest in the body; or

(ii) the State has an interest in the body and the only other persons having an interest in the body are Australian governments or Australian governmental authorities; and

(c) a body is taken to be an authority of a Territory if:

(i) the Territory has a controlling interest in the body; or

(ii) the Territory has an interest in the body and the only other persons having an interest in the body are Australian governments or Australian governmental authorities.

"(3) For the purposes of this section, but without limiting the meaning of the expression associate:

(a) the Commonwealth is taken to be an associate of each authority of the Commonwealth; and

(b) an authority of the Commonwealth is taken to be an associate of each other authority of the Commonwealth; and

(c) a State is taken to be an associate of each authority of the State; and

(d) an authority of a State is taken to be an associate of each other authority of the State; and

(e) a Territory is taken to be an associate of each authority of the Territory; and

(f) an authority of a Territory is taken to be an associate of each other authority of the Territory.

"(4) For the purposes of interpretation, this section is to be construed as if it were part of section 73B.

"(5) If:

(a) an eligible company incurs expenditure to a tax-exempt entity, or an associate of a tax-exempt entity, in connection with research and development activities carried out on behalf of the company; and

(b) when the expenditure was incurred, the company was not at risk in respect of the whole of the expenditure or was not at risk in respect of a part of the expenditure; and

(c) at the time when the expenditure was incurred, the tax-exempt entity or associate, as the case requires, was not entered on the Register of Commercial Government Bodies kept under section 39HA of the Industry Research and Development Act 1986;

a deduction is not allowable to the company under section 73B for any part of the expenditure.

"(6) For the purposes of the application of this section in relation to any expenditure incurred by a company, the company is taken to have not been at risk in respect of the expenditure at the time when the expenditure was incurred if, in the Commissioner's opinion, the company or any associate of the company could reasonably have expected at that time to receive, as the direct or indirect result of the incurring of the expenditure or any part of the expenditure, any consideration because of:

(a) any act that occurred, transaction or agreement that was entered into, or circumstance that existed, before or at that time; or

(b) any act that was likely to occur, any transaction or agreement that was likely to be entered into, or any circumstance that was likely to exist, after that time.".

14.   Application

(1) Subject to subitem (2), the section inserted by item 13 applies to expenditure incurred at or after 7.30 p.m. by legal time in the Australian Capital Territory on 9 May 1995.

(2) The section inserted by item 13 does not apply, and the section repealed by that item continues to apply despite its repeal, to expenditure incurred before 7.30 p.m. by legal time in the Australian Capital Territory on 9 May 1995.

(3) The section inserted by item 13 does not apply, and the section repealed by that item applies despite its repeal, to expenditure incurred at or after 7.30 p.m. (the start time) by legal time in the Australian Capital Territory on 9 May 1995:

(a) that was or is incurred in accordance with the terms of a finance scheme, where:

(i) the scheme was approved by the Industry Research and Development Board before the start time; or

(ii) the scheme was considered by the Board before the start time, and its decisionon the scheme was deferred until after that time; or

(iii) the Board decided before the start time not to approve the scheme and either:

(A) the time for applying to the Administrative Appeals Tribunal for a review of that decision had not expired before the start time; or

(B) an application for review of the decision by the Tribunal had been made before the start time, but the Tribunal had not made its decision on the application before that time; and

(b) that was or is incurred under a contract evidenced in writing that was entered into on or before 30 June 1996; and

(c) in respect of which the eligible company that incurred the expenditure had been jointly registered with one or more eligible companies by the Industry Research and Development Board on or before 30 June 1996.

SCHEDULE 5   AMENDMENTS OF THE SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT 1992

1.   Object

The object of the amendments made by this Schedule is to provide a sales tax exemption for certain beverages consisting principally of rice milk.

2.   Schedule 1, Table of Contents, Item 71

Add at the end "and rice milk".

3.   Item 71 of Schedule 1

Omit the Item, substitute:

"Item 71: (Soy milk and rice milk) Beverages consisting principally of:

(a) soy milk; or

(b) rice milk;

but not including goods covered by Item 12 in Schedule 2.".

4.   Subitem 12(2) of Schedule 2

Add at the end "or rice milk".

5.   Application of amendments

The amendments made by this Schedule apply to dealings with goods that occur on or after 28 September 1995.

SCHEDULE 6   AMENDMENT OF THE TAXATION LAWS AMENDMENT ACT 1993

1.   Section 47

Omit "created after 25 June 1992", substitute "by a taxpayer in the taxpayer's 1990-91 income year or a later year of income.".