INCOME TAX ASSESSMENT ACT 1997 [ARCHIVE]

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-1 - ASSESSABLE INCOME  

Division 17 - Effect of GST etc. on assessable income  

SECTION 17-25 [ARCHIVE]   17-25   GST attributable because of the GST Transition Act  
If:


(a) section 10 of the A New Tax System (Goods and Services Tax Transition) Act 1999 applies in an income year that ends after 30 November 1999 and before 1 July 2000 in relation to a *taxable supply that you will make on or after 1 July 2000; and


(b) because of the application of that section, an amount of *GST is attributable to your first *tax period after 1 July 2000;

an amount equal to the amount of GST is not assessable income.

SECTION 17-30 [ARCHIVE]   Special credits because of indirect tax transition  

17-30(1)  
A special credit under section 16, 16A, 16B, 16C, 19A or 19B, of the A New Tax System (Goods and Services Tax Transition) Act 1999 is assessable income :


(a) at the time it is attributed to a *tax period (for a credit under section 16, 16A, 16B, 19A or 19B; or


(b) at the time it is paid (for a credit under section 16C).

17-30(2)  
A special credit under section 3 of the A New Tax System (Wine Equalisation Tax and Luxury Car Tax Transition) Act 1999 is assessable income at the time it is attributed to a *tax period.

PART 2-5 - RULES ABOUT DEDUCTIBILITY OF PARTICULAR KINDS OF AMOUNTS  

Division 25 - Some amounts you can deduct  

SECTION 25-80 [ARCHIVE]   Upgrading plant to meet GST obligations etc.  

25-80(1)  
You can deduct expenditure you incur in upgrading *plant for the income year in which you incur the expenditure or enter into a contract to carry out the upgrade if:


(a) you incur the expenditure or enter into the contract between 1 July 1999 and 30 June 2000; and


(b) you do so for the purpose of, or for purposes that include the purpose of, meeting your existing or future obligations, or exercising your existing or future rights, under the *GST law; and


(c) you are the owner or *quasi-owner of the plant when you incur the expenditure or enter into the contract; and


(d) you use the upgraded plant before 1 July 2001, or have it *installed ready for use before 1 July 2001; and


(e) your *pre-GST annual turnover for the income year in which you incur the expenditure or enter into the contract does not exceed $10,000,000; and


(f) immediately before 1 July 2000, you are registered under Part 2-5 of the *GST Act.

If you have already deducted the expenditure but you fail to comply with paragraph (d) of this subsection, your assessment may be amended to disallow the deduction.

Substituted accounting periods

25-80(2)  
If the income year in which you incur the expenditure or enter into the contract ends before 30 June 2000, you are taken to have complied with paragraph (1)(f) if:


(a) when you lodge your *income tax return for the income year, you are registered under Part 2-5 of the *GST Act; or


(b) before you lodge your income tax return for the income year, you applied for registration under Part 2-5 of the GST Act and, when you lodge the return, the application has not been refused.

25-80(3)  
However, if subsection (2) has applied to you but, immediately before 1 July 2000, you are not registered under Part 2-5 of the *GST Act, you cannot deduct the expenditure. If you have already deducted it, your assessment may be amended to disallow the deduction. Reducing the deduction

25-80(4)  
Reduce your deduction by an amount that reasonably reflects the extent (if any) you neither used the upgraded *plant, nor had it *installed ready for use, for the *purpose of producing assessable income during the period in the income year you were its owner or *quasi-owner.

25-80(5)  
Also, if you do not become the owner or *quasi-owner of the upgraded *plant by the end of 30 June 2000, reduce your deduction by an amount that reflects the extent (if any) that, as at that time, you reasonably expect neither to use the upgraded plant, nor to have it *installed ready for use, for the *purpose of producing assessable income during that part of the *financial year beginning on 1 July 2000 for which you expect to be its owner or quasi-owner.

Division 26 - Some amounts you cannot deduct, or cannot deduct in full  

SECTION 26-55 [ARCHIVE]   Limit on deductions  

26-55(1)  

(b) section 78B (Promoters recoupment tax) of the Income Tax Assessment Act 1936;


(c) Subdivision B (Development allowance) of Division 3 of Part III of the Income Tax Assessment Act 1936, so far as it provides for deductions by a *leasing company;


(e) Division 3 of Part XII (Drought investment allowance) of the Income Tax Assessment Act 1936, so far as it provides for deductions by a *leasing company.

Division 27 - Effect of input tax credits etc. on deductions  

SECTION 27-30 [ARCHIVE]   27-30   Input tax credits attributable because of the GST Transition Act  
If:


(a) section 10 of the A New Tax System (Goods and Services Tax Transition) Act 1999 applies in an income year that ends after 30 November 1999 and before 1 July 2000 in relation to a *creditable acquisition that you will make on or after 1 July 2000; and


(b) because of the application of that section, an *input tax credit is attributable to your first *tax period after 1 July 2000;

you cannot deduct under this Act an amount equal to the input tax credit.

Division 30 - Gifts or contributions  

SECTION 30-25 [ARCHIVE]   EDUCATION  

30-25(2)  


Education - Specific
Item Fund, authority or institution Special conditions
2.2.5 Monash Mt Eliza Graduate School of Business and Government Limited the gift must be made before 6 April 2000
.
2.2.12 H.R.H. The Duke of Edinburgh's Commonwealth Study Conferences (Australia) Incorporated the gift must be made before 21 February 2001
.

SECTION 30-45 [ARCHIVE]   Welfare and rights  

30-45(2)  


Welfare and rights - Specific
Item Fund, authority or institution Special conditions
4.2.8 the Royal Queensland Society for the Prevention of Cruelty the gift must be made before 24 December 1999
.
4.2.16 Katherine District Business Re-establishment Fund the gift must be made before 18 November 2000
.
4.2.17 the Community Disaster Relief (Sydney Hail Storm Assistance) Fund the gift must be made after 14 April 1999 and before 15 April 2001
.
4.2.18 The Linton Trust the gift must be made after 2 December 1998 and before 3 December 2000

SECTION 30-50 [ARCHIVE]   DEFENCE  

30-50(2)  


Defence - Specific
Item Fund, authority or institution Special conditions
5.2.2 The Sandakan Memorials Trust Fund the gift must be made before 30 July 1997
.
5.2.3 the Cobram and District War Memorial Incorporated Fund the gift must be made before 19 October 1997
.
5.2.4 The Central Synagogue Restoration Fund the gift must be made before 23 December 1997
.
5.2.5 The Borneo Memorials Trust Fund the gift must be made before 23 December 1997
.
5.2.6 Australian National Korean War Memorial Trust Fund the gift must be made before 2 September 2000
.
5.2.7 The National Nurses' Memorial Trust the gift must be made after 3 September 1997 and before 4 January 2000
.
5.2.8 Mount Macedon Memorial Cross Restoration, Development and Maintenance Trust Fund the gift must be made after 8 February 1998 and before 9 February 1999 or after 30 June 2000 and before 1 July 2001
.
5.2.9 the Australian Ex-Prisoners of War Memorial Fund the gift must be made after 19 October 1999 and before 20 October 2005
.
5.2.10 the RSL and 6th Division Australian-Hellenic Educational Memorial Fund the gift must be made after 13 June 2000 and before 14 June 2002
.
5.2.12 Australian Chinese Ex-Services National Reunion War Memorial Fund the gift must be made after 14 December 2000 and before 16 December 2002
.
5.2.13 Royal Australian Air Force (RAAF) Memorial Trust Fund the gift must be made after 16 November 2000 and before 18 November 2002
.
5.2.14 Sir Hughie Edwards VC Foundation Incorporated the gift must be made after 21 August 2001 and before 23 August 2003
.
5.2.15 Warringah, Australia Remembers Trust the gift must be made after 8 November 2001 and before 9 November 2003
.
5.2.17 The Albert Coates Memorial Trust the gift must be made after 30 January 2002 and before 31 January 2006
.
5.2.18 Tea Gardens/Hawks Nest War Memorial Committee the gift must be made after 30 January 2002 and before 31 January 2004
.
5.2.19 Mount Macedon Memorial Cross Trust the gift must be made after 14 August 2002 and before 15 August 2005
.
5.2.20 The Manly Warringah War Memorial Regional Park Remembrance Trust the gift must be made after 7 April 2002 and before 8 April 2004
.
5.2.23 the Tamworth Waler Memorial Fund the gift must be made after 19 April 2004 and before 20 April 2006

SECTION 30-70 [ARCHIVE]   The family  

30-70(2)  


The family - Specific
Item Fund, authority or institution Special conditions
8.2.1 the Nursing Mothers' Association of Australia the gift must be made before 1 August 2001
.
8.2.2 the Stolen Children's Support Fund the gift must be made after 28 February 1999 and before 4 February 2003

SECTION 30-80 [ARCHIVE]   INTERNATIONAL AFFAIRS  

30-80(2)  


International affairs - Specific
Item Fund, authority or institution Special conditions
9.2.9 the United Hellenic Earthquake Appeal the gift must be made after 6 September 1999 and before 7 September 2000
.
9.2.11 Australian Red Cross Society - American Disaster Fund the gift must be made after 9 September 2001 and before 11 September 2003

SECTION 30-95 [ARCHIVE]   30-95   Philanthropic trusts  



Philanthropic trusts - Specific
Item Fund, authority or institution Special conditions
11.2.6 the Queen Elizabeth II Silver Jubilee Trust for Young Australians the gift must be made before 1 July 2001

SECTION 30-100 [ARCHIVE]   Cultural organisations  

30-100(2)  


Cultural organisations - Specific
Item Fund, authority or institution Special conditions
12.2.3 The Centenary of Federation Trust Fund the gift must be made after 26 November 1998 and before 1 July 2001

SECTION 30-102 [ARCHIVE]   30-102   Fire and emergency services  



Fire and emergency services - Specific
Item Authority or institution Established under legislation of the following State or Territory Special conditions
12A.2.11 Rural Firefighting Service Australian Capital Territory the gift must be made after 22 December 2003 and before 1 July 2004
12A.2.12 ACT Emergency Service Australian Capital Territory the gift must be made after 22 December 2003 and before 1 July 2004

SECTION 30-105 [ARCHIVE]   30-105   OTHER RECIPIENTS  



Other recipients - specific
Item Fund, authority or institution Special conditions
13.2.1 St Patrick's Cathedral Parramatta Rebuilding Fund the gift must be made after 24 February 1998 and before 1 July 2004

SECTION 30-315 [ARCHIVE]   INDEX  

30-315(2)  


Index
Topic Provision
 2AA ACT Emergency Service item 12A.2.12
.
 2A Albert Coates Memorial Trust item 5.2.17
.
 18 Australian Chinese Ex-Services National Reunion War Memorial Fund item 5.2.12
.
 20B Australian Ex-Prisoners of War Memorial Fund item 5.2.9
.
 23A Australian National Korean War Memorial Trust Fund item 5.2.6
.
 25B Australian Red Cross Society - American Disaster Fund item 9.2.11
.
 28 Borneo Memorials Trust Fund item 5.2.5
.
 28B Centenary of Federation Trust Fund item 12.2.3
.
 29 Central Synagogue Restoration Fund item 5.2.4
.
 32 Cobram and District War Memorial Incorporated Fund item 5.2.3
.
 34A Community Disaster Relief (Sydney Hail Storm Assistance) Fund item 4.2.19
.
 59 H.R.H. The Duke of Edinburgh's Commonwealth Study Conferences (Australia) Incorporated item 2.2.12
.
 64A Katherine District Business Re-establishment Fund item 4.2.16
.
 67A Linton Trust 4.2.18
.
 68A Manly Warringah War Memorial Regional Park Remembrance Trust item 5.2.20
.
 72AA Monash Mt Eliza Graduate School of Business and Government Limited item 2.2.5
.
 72B Mount Macedon Memorial Cross Restoration, Development and Maintenance Trust Fund item 5.2.8
.
 72BB Mount Macedon Memorial Cross Trust item 5.2.19
.
 74A National Nurses' Memorial Trust item 5.2.7
.
 81 Nursing Mothers' Association of Australia item 8.2.1
.
 94 Queen Elizabeth II Silver Jubilee Trust for Young Australians item 11.2.6
.
 97AA Royal Australian Air Force (RAAF) Memorial Trust Fund item 5.2.13
.
104A RSL and 6th Division Australian-Hellenic Educational Memorial Fund item 5.2.10
.
104C Rural Firefighting Service (ACT) item 12A.2.11
.
106 Sandakan Memorials Trust Fund item 5.2.2
.
110B Sir Hughie Edwards VC Foundation Incorporated item 5.2.14
.
112A Stolen Children's Support Fund item 8.2.2
.
112B St Patrick's Cathedral Parramatta Rebuilding Fund item 13.2.1
.
112D Tamworth Waler Memorial Fund item 5.2.23
.
114A Tea Gardens/Hawks Nest War Memorial Committee item 5.2.18
.
118AA United Hellenic Earthquake Appeal item 9.2.9
.
123A Warringah, Australia Remembers Trust 5.2.15
.

PART 2-15 - NON-ASSESSABLE INCOME  

Division 51 - Exempt amounts  

SECTION 51-60 [ARCHIVE]   51-60   Income from GST Direct Assistance Certificate  
Your *ordinary income and *statutory income for the 1999-2000 and 2000-01 income years are exempt from income tax so far as they are attributable to a certificate that:


(a) is commonly called a GST Direct Assistance Certificate; and


(b) is issued to you by an organisation known as the GST Start-Up Assistance Office in the Department of the Treasury; and


(c) is expressed to have a maximum value of $200.

PART 2-20 - TAX OFFSETS  

Division 61 - Generally applicable tax offsets  

Subdivision 61-G - Private health insurance offset complementary to Private Health Insurance Incentives Act 1997  

SECTION 61-300 [ARCHIVE]   What this Subdivision is about  

You can choose to claim a tax offset for premiums paid under private health insurance policies, instead of having premiums reduced under the Private Health Insurance Incentives Act 1997.

Operative provisions

SECTION 61-305 [ARCHIVE]   Entitlement to the private health insurance tax offset  

61-305(1)  
You are entitled to a *tax offset for an income year in respect of premiums paid under a private health insurance policy (within the meaning of the Private Health Insurance Incentives Act 1997) if:


(a) the policy was one in respect of which you were eligible under Division 3 of the Private Health Insurance Incentives Act 1997 to participate in the incentives scheme (within the meaning of that Act); or


(b) the policy was one in respect of which another person was so eligible, but your taxable income for that year was required by subsection 3-3(2) or 3-4(2) of that Act to be taken into account for the purpose of determining whether the other person was so eligible.

61-305(2)  
You are also entitled to the *tax offset if:


(a) you are a trustee who is liable to be assessed under section 98 of the Income Tax Assessment Act 1936 in respect of a share of the net income of a trust estate; and


(b) the beneficiary who is presently entitled to the share of the income of the trust estate would be entitled to the tax offset because of subsection (1) if his or her taxable income for the income year were limited to that share.

61-305(3)  
However:


(a) you are not entitled to the *tax offset in respect of any premiums that were reduced under section 5-1 of the Private Health Insurance Incentives Act 1997; and


(b) you are not entitled to the tax offset in respect of any premiums in respect of which another person's entitlement to the tax offset has priority under section 61-315; and


(c) if, on a day during the income year, the policy ceased to be a dependent child policy (within the meaning of section 5-4 of that Act) - you are not entitled to the tax offset in respect of premiums to the extent that they relate to a part of the income year occurring after that day; and


(d) if all of the persons covered by the policy were dependent children at any time during the income year - you are not entitled to the tax offset unless your taxable income for that year was required by subsection 3-3(2) or 3-4(2) of that Act to be taken into account in applying the income test under section 3-3 or 3-4 of that Act.

SECTION 61-310 [ARCHIVE]   Amount of the private health insurance tax offset  

61-310(1)  
The amount of the *tax offset is:


(a) if the premiums in respect of which you are entitled to the tax offset cover the whole of the income year - the annual incentive amount for the private health insurance policy in question; or


(b) if those premiums cover only part of the income year - the amount worked out as follows:


Annual incentive amount × Number of days covered by those premiums
     during the income year     
Number of days in the income year

61-310(2)  
In subsection (1):

annual incentive amount
means the annual incentive amount for the private health insurance policy under section 5-3 of the Private Health Insurance Incentives Act 1997.

61-310(3)  
However, if 2 or more persons are entitled to the *tax offset in respect of those premiums, each person having made payments in respect of those premiums, the amount of the tax offset is the amount worked out as follows:


Amount of tax offset under subsection (1) × Amount paid by you
  in respect of those premiums 
Total amount paid in respect
of those premiums

61-310(4)  
For the purposes of subsection (3), a payment made jointly in respect of a premium by 2 or more persons is taken to be a separate payment, made by each of them, of an amount equal to the joint payment divided by the number of persons who made it.

61-310(5)  
For the purposes of subsection (3), if:


(a) 2 or more persons are entitled to the *tax offset in respect of those premiums; and


(b) payments have been made in respect of those premiums by another person who is not entitled to the tax offset;

each of the persons entitled to the tax offset is taken to have made a payment in respect of those premiums of an amount equal to the amount of the payments made by the other person divided by the number of persons entitled to the tax offset.

SECTION 61-315 [ARCHIVE]   Priority between different taxpayers  

61-315(1)  
This section establishes the priority of entitlements to the *tax offset if more than one person would, apart from paragraph 61-305(3)(b), be entitled to the tax offset in respect of the same premiums paid under a private health insurance policy (within the meaning of the Private Health Insurance Incentives Act 1997).

Note:

See paragraph 61-305(3)(b) for the significance of priority of entitlements.

61-315(2)  
All of the persons who would, apart from paragraph 61-305(3)(b), be entitled to the *tax offset in respect of those premiums may make an agreement (a priority agreement ) in respect of the income year specifying one of them as the person whose entitlement is to have priority.

Note:

Section 61-320 contains further provisions about priority agreements.

61-315(3)  
That person's entitlement in respect of those premiums has priority over the entitlements of all of the others.

61-315(4)  
If:


(a) a *priority agreement is not made in respect of the income year; and


(b) one of the persons who would, apart from paragraph 61-305(3)(b), be entitled to the *tax offset in respect of those premiums has made payments in respect of those premiums; and


(c) another of the persons who would, apart from paragraph 61-305(3)(b), be entitled to the tax offset in respect of those premiums has not made payments in respect of those premiums;

the entitlement of the person who made those payments has priority over the entitlement of the person who has not.

61-315(5)  
If:


(a) a *priority agreement is not made in respect of the income year; and


(b) none of the persons who would, apart from paragraph 61-305(3)(b), be entitled to the *tax offset in respect of those premiums has made payments in respect of those premiums;

the entitlement of the contributor in respect of the private health insurance policy has priority over the entitlement of each person other than the contributor.

61-315(6)  
In subsection (5):

contributor
means the person who is treated as the contributor by the health fund (within the meaning of the Private Health Insurance Incentives Act 1997) that issued the private health insurance policy.

61-315(7)  
Despite paragraph 61-305(3)(b) and subsections (3), (4) and (5) of this section, the entitlement to the *tax offset of either of the following persons in respect of those premiums:


(a) a trustee who is liable to be assessed under section 98 of the Income Tax Assessment Act 1936 in respect of a share of the net income of a trust estate;


(b) the beneficiary who is presently entitled to the share of the income of the trust estate;

is not affected by the other person's entitlement to the tax offset in respect of those premiums having priority.

SECTION 61-320 [ARCHIVE]   Priority agreements  

61-320(1)  
A *priority agreement has no effect unless it is made on or before:


(a) the day on which the first *income tax return of any of the persons who made the agreement was lodged for the income year in respect of which the agreement was made; or


(b) such later day as the Commissioner allows.

61-320(2)  
A *priority agreement has no effect, and is taken never to have had effect, if none of the persons who made the agreement retain the agreement for the period of 5 years starting on the day on which the agreement was made.

61-320(3)  
If the *priority agreement is lost or destroyed and the Commissioner is satisfied that one of the persons who made the agreement has a document (the substitute priority agreement ) that:


(a) is a copy of the priority agreement; or


(b) properly records all the matters set out in the priority agreement and was in existence when the priority agreement was lost or destroyed;

the substitute priority agreement is taken, for the purposes of this Subdivision, to be, and to have been at all times after the priority agreement was lost or destroyed, the priority agreement.

61-320(4)  
If:


(a) the *priority agreement is lost or destroyed; and


(b) the Commissioner is satisfied that the loss or destruction occurred because of circumstances beyond the control of the persons who made the agreement; and


(c) subsection (3) does not apply;

the agreement is not affected, and is taken never to have been affected, by subsection (2).

61-320(5)  
Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purposes of giving effect to this section.

PART 2-25 - TRADING STOCK  

Division 70 - Trading stock  

Subdivision 70-C - Accounting for trading stock you hold at the start or end of the income year  

SECTION 70-40 [ARCHIVE]   Value of trading stock at start of income year  

70-40(2)  

Note 1:

For the value of trading stock at the start of the 1997-98 income year, see section 70-40 of the Income Tax (Transitional Provisions) Act 1997.

Note 2:

If you held, as trading stock at the start of the 2001-2002 income year, oysters that were acquired by using the traditional stick farming method, see section 70-41 of the Income Tax (Transitional Provisions) Act 1997.

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 104 - CGT events  

Subdivision 104-B - Use and enjoyment before title passes  

SECTION 104-15 [ARCHIVE]   Use and enjoyment before title passes: CGT event B1  

104-15(4)  

Note:

A capital gain or capital loss is disregarded if it is made in the 1997-98 income year or an earlier one and the relevant agreement ends in the 1998-99 income year or a later one and title in the asset does not pass: see section 104-15 of the Income Tax (Transitional Provisions) Act 1997.

Subdivision 104-K - Other CGT events  

SECTION 104-210 [ARCHIVE]   Bankrupt pays amount in relation to debt: CGT event K2  

104-210(1)  

Note:

A net capital loss mentioned in subsection 160ZC(4A) of the Income Tax Assessment Act 1936 is also relevant: see section 104-210 of the Income Tax (Transitional Provisions) Act 1997.

Division 115 - Discount capital gains and trusts' net capital gains  

Subdivision 115-A - Discount capital gains  

SECTION 115-10 [ARCHIVE]   115-10   Who can make a discount capital gain?  


Note:

Section 115-10 of the Income Tax (Transitional Provisions) Act 1997 provides that a capital gain made by a life insurance company or registered organisation after 11.45 am on 21 September 1999 and before 1 July 2000 may be a discount capital gain in certain circumstances.

Division 118 - Exemptions  

Subdivision 118-A - General exemptions  

SECTION 118-14 [ARCHIVE]   118-14   GST Direct Assistance Certificate  
A *capital gain or *capital loss you make in the 1999-2000 or 2000-01 income year is disregarded if the gain or loss is from a *CGT event that happens when you use a certificate that:


(a) is commonly called a GST Direct Assistance Certificate; and


(b) is issued to you by an organisation known as the GST Start-Up Assistance Office in the Department of the Treasury; and


(c) is expressed to have a maximum value of $200.

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 165 - Income tax consequences of changing ownership or control of a company  

Subdivision 165-B - Working out the taxable income and tax loss for the income year of the change  

SECTION 165-55 [ARCHIVE]   How to attribute deductions to periods  

165-55(5)  

(d) deductions allowable under 78B (Promoters recoupment tax) of the Income Tax Assessment Act 1936;


(e) if the company is a *leasing company, deductions allowable under:


(i) Subdivision B (Development Allowance) of Division 3 of Part III of the Income Tax Assessment Act 1936; or

(ii) Part XII of the Income Tax Assessment Act 1936, in respect of an item of drought mitigation property;


(i) deductions for Income Equalization Deposits;

See Division 16C of Part III of the Income Tax Assessment Act 1936.

165-55(6)  

See subsection 330-485(2).

Subdivision 165-F - Special provisions relating to ownership by non-fixed trusts  

SECTION 165-240 [ARCHIVE]   Notices where requirements of section 165-235 are met  

No offences or penalties

165-240(7)  
To avoid doubt, subsections (4) to (6) do not cause the company to commit any offence or be liable to any penalty under Part VII of the Income Tax Assessment Act 1936 for:


(a) deducting the *tax loss mentioned in paragraph 165-235(2)(a); or


(b) not calculating its taxable income and tax loss under Subdivision 165-B as it applies in accordance with subsection (5) of this section; or


(c) not calculating its *net capital gain and *net capital loss under Subdivision 165-CB as it applies in accordance with subsection (6) of this section; or


(d) applying the *net capital loss mentioned in paragraph 165-235(2)(c); or


(e) deducting the debt mentioned in paragraph 165-235(2)(d);

in the company's return.

PART 3-35 - INSURANCE BUSINESS  

Division 320 - Life insurance companies  

Subdivision 320-B - What is included in a life insurance company's assessable income  

SECTION 320-40 [ARCHIVE]   One-third of certain management fees received under contracts made before 1 July 2000 are non-assessable non-exempt income  

320-40(1)  
One-third of a *life insurance company's *specified management fees for the income year in respect of *life insurance policies constituted by contracts made with the company before 1 July 2000 are not assessable income and are not *exempt income.

Note:

The effect of this section is modified when the life insurance business of a life insurance company is transferred to another life insurance company: see section 320-345.

320-40(2)  
This section does not apply to amounts that become *specified management fees after 30 June 2005.

320-40(3)  
There are no *specified management fees in respect of *life insurance policies that, at 30 June 2000, were:


(a) policies under which amounts are to be paid only on the death or disability of a person; or


(b) policies to which both of the following apply:


(i) the policies provide for *participating benefits or *discretionary benefits;

(ii) the policies do not become policies under which the company's liabilities are to be discharged out of its *virtual PST assets or its *segregated exempt assets.

320-40(4)  
The specified management fees for the income year in respect of *life insurance policies to which subsection (3) does not apply are so much of the sum of the amounts applicable in respect of the policies under subsections (5), (6) and (7) (the applicable amounts ) as does not exceed any fees or charges made by the *life insurance company that the company was entitled to make under the terms of the policies as applying immediately before 1 July 2000.

320-40(5)  
The applicable amount for *virtual PST life insurance policies where the company's liabilities under the policies are to be discharged out of its *virtual PST assets is:


(a) the sum of the amounts transferred from the *virtual PST in the income year under subsection 320-180(1) or 320-195(3);

less:


(b) so much of the sum of:


(i) any amounts transferred to the virtual PST in the income years under subsection 320-185(3) or 320-185(1); and

(ii) any of the amounts mentioned in paragraph (a) that are related to the company's liability to pay amounts on the death or disability of a person; and

(iii) any of the amounts mentioned in paragraph (a) that are related to expenses incurred by the company in respect of policies that provide for *participating benefits or *discretionary benefits; and

(iv) any of the amounts mentioned in paragraph (a) that are not covered by subparagraph (ii) or (iii) and are covered by subsection (5A);
as does not exceed the sum of the amounts mentioned in paragraph (a).

320-40(5A)  
This subsection covers amounts that:


(a) are related to expenses incurred by the company directly in respect of *virtual PST assets in relation to a period during which the assets were virtual PST assets; and


(b) were transferred from the *virtual PST in the income year (as mentioned in paragraph (5)(a)) because the expenses were not paid from the virtual PST as required by subsection 320-195(4).

Note:

For example, the amounts were transferred out of the virtual PST under subsection 320-195(3) because fees or charges were imposed to recover those expenses (as the expenses would have been paid from assets other than virtual PST assets).

320-40(6)  
The applicable amount for *exempt life insurance policies where the company's liabilities under the policies are to be discharged out of its *segregated exempt assets is:


(a) the sum of the amounts transferred from the segregated exempt assets in the income year under subsection 320-235(1) or 320-250(2);

less:


(b) so much of the sum of:


(i) any amounts transferred to the segregated exempt assets in the income year under subsection 320-235(3) or 320-240(1); and

(ii) any of the amounts mentioned in paragraph (a) that are related to expenses incurred by the company in respect of policies that provide for *participating benefits or *discretionary benefits; and

(iii) any of the amounts mentioned in paragraph (a) that are not covered by subparagraph (ii) and are covered by subsection (6A);
as does not exceed the sum of the amounts mentioned in paragraph (a).

320-40(6A)  
This subsection covers amounts that:


(a) are related to expenses incurred by the company directly in respect of *segregated exempt assets in relation to a period during which the assets were segregated exempt assets; and


(b) were transferred from the segregated exempt assets in the income year (as mentioned in paragraph (6)(a)) because the expenses were not paid from the segregated exempt assets as required by subsection 320-250(3).

Note:

For example, the amounts were transferred out of the segregated exempt assets under subsection 320-250(2) because fees or charges were imposed to recover those expenses (as the expenses would have been paid from assets other than segregated exempt assets).

320-40(7)  
The applicable amount for other policies is:


(a) the sum of:


(i) the *life insurance premiums received in respect of the policies in the income year; and

(ii) any amounts that the company includes in its assessable income in respect of the policies under paragraph 320-15(1)(k) for the income year;

less:


(b) so much of the sum of:


(i) the amounts that the company can deduct under section 320-75 in respect of the policies in the income year; and

(ii) the *risk components of claims paid under the policies in the income year;
as does not exceed the sum of the amounts mentioned in paragraph (a).

320-40(8)  
An amount that is not assessable income and is not *exempt income under this section is taken to be assessable income of the *life insurance company for the purposes of section 8-1.

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS  

Division 328 - STS taxpayers  

Subdivision 328-E - Trading stock for STS taxpayers  

SECTION 328-295 [ARCHIVE]   Value of trading stock on hand  

328-295(1)  

Note 2:

If you held, as trading stock at the start of the 2001-2002 income year, oysters that were acquired by using the traditional stick farming method, see section 70-41 of the Income Tax (Transitional Provisions) Act 1997.

Division 405 - Above-average special professional income of authors, inventors, performing artists, production associates and sportspersons  

Subdivision 405-A - Above-average special professional income  

SECTION 405-15 [ARCHIVE]   When do you have above-average special professional income?  

405-15(1)  

Note:

Your taxable income for an income year can include above-average special professional income even if you meet the requirement in subparagraph (1)(d)(ii) for an income year before the 1998-99 income year: see section 405-1 of the Income Tax (Transitional Provisions) Act 1997.

Subdivision 405-C - Taxable professional income and average taxable professional income  

SECTION 405-45 [ARCHIVE]   405-45   Working out your taxable professional income  


Note:

To work out your taxable professional income for income years before the 1998-99 income year: see section 405-1 of the Income Tax (Transitional Provisions) Act 1997.

SECTION 405-50 [ARCHIVE]   Working out your average taxable professional income  

405-50(1)  

Note:

You may need to work out your average taxable professional income taking into account your taxable professional income for income years before the 1998-99 income year: see section 405-1 of the Income Tax (Transitional Provisions) Act 1997.

405-50(3)  

Note:

Your professional year 1 may be before the 1998-99 income year: see section 405-1 of the Income Tax (Transitional Provisions) Act 1997.

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-EA - Some financial entities may choose to be treated as ADIs  

SECTION 820-445 [ARCHIVE]   How this Subdivision interacts with Subdivision 820-FA  

Subdivision 820-F

820-445(1)  
A choice under section 820-430 does not affect how section 820-550 (Classification of the resident TC group) applies to a *resident TC group for an income year unless the group could have made a choice under section 820-430 covering the whole of that income year if:


(a) the group had been a company throughout the income year; and


(b) each entity in the group had been a division or part of that company, rather than a separate entity, at all times during the income year when the entity was in the group.

Note:

To work out the times during the income year when an entity was in the group, see section 820-530.

820-445(2)  
A choice under section 820-430 does not have effect for so much of a period as happens while the entity is in a *resident TC group for an income year if, apart from the choice, section 820-575 would apply Subdivision 820-E to the group for that income year as if the group were an *inward investing entity (ADI).

Subdivision 820-F - Thin capitalisation rules for resident TC groups  

SECTION 820-450 [ARCHIVE]   What this Subdivision is about  

This Subdivision sets out the thin capitalisation rules that apply to a group of entities (called a resident TC group). If those rules apply to the group, the rest of the Division does not apply separately to the entities in the group.

This Subdivision tells you:

  • · how to construct a resident TC group; and
  • · how to classify the group (in terms of which Subdivision of this Division to apply); and
  • · how to apply this Division to the group (including how the application is modified).
  • Operative provisions

    SECTION 820-455 [ARCHIVE]   Removal of grouping under this Subdivision  

    820-455(1)  
    This section and sections 820-456 to 820-458 affect the making, by the *top entity of a *maximum TC group for an income year, of a choice under section 820-500 for the income year if:


    (a) the choice would result in entities (the potential group members ) for which the income year ends on the same day being treated as a *resident TC group for the income year; and


    (b) the income year includes, or starts after, the day (the cut-off day ) worked out under the table.

    Note:

    If the top entity can and does make the choice, subsection 820-458(1) affects a foreign bank's ability to choose under paragraph 820-515(c) to include its Australian permanent establishments in the resident TC group.


    Cut-off day for thin capitalisation grouping
    Item In this case: The cut-off day is:
    1 The first day (the consolidation day ) on which at least one of the potential group members becomes a *member of a *consolidated group or *MEC group is on or before 1 July 2003 the consolidation day
    2 The consolidation day is before 1 July 2004 and is the first day of the first income year starting after 30 June 2003 of the group's *head company (for a *consolidated group) or *provisional head company (for a *MEC group) on the consolidation day the consolidation day
    3 Any other case 1 July 2003

    820-455(2)  
    The *top entity cannot make the choice if:


    (a) the cut-off day is before 1 July 2003 and the income year starts on or after 1 July 2003; or


    (b) the cut-off day is on or after 1 July 2003 and the income year starts on or after the cut-off day.

    Note:

    This means that the top entity can make the choice in a case covered by item 2 of the table in subsection (1) if the income year ends immediately before the one described in that item. In these circumstances neither of sections 820-456 and 820-457 will apply.

    SECTION 820-456 [ARCHIVE]   Income year starts on or after cut-off day but before 1 July 2003  

    820-456(1)  
    This section applies if:


    (a) the cut-off day is before 1 July 2003; and


    (b) the income year starts on or after the cut-off day but before 1 July 2003; and


    (c) the top entity makes the choice referred to in section 820-455.

    820-456(2)  
    This Subdivision (except sections 820-455 to 820-458) applies to each of the potential group members on the following basis:


    (a) the income year is treated as ending on 30 June 2003;


    (b) the *resident TC group is treated as consisting only of each (if any) of the potential group members that, at no time before 1 July 2003, was a *member of a *consolidated group or *MEC group.

    820-456(3)  
    For each of the potential group members, for each of the following periods:


    (a) the period beginning at the start of the income year and ending on 30 June 2003;


    (b) the rest (if any) of the income year;

    this Division (except sections 820-455 to 820-458) is to have either:


    (c) a single application in relation to the whole of the period; or


    (d) 2 or more applications, each in relation to a part of that period.

    Note:

    Subsection (3) is similar to section 820-581, which sets out an example of how that section works.

    SECTION 820-457 [ARCHIVE]   Income year includes, but does not start on, cut-off day  

    820-457(1)  
    This section applies if:


    (a) the income year includes, but does not start on, the cut-off day; and


    (b) the top entity makes the choice referred to in section 820-455.

    820-457(2)  
    This Subdivision (except sections 820-455 to 820-458) applies to each of the potential group members as if the income year ended immediately before the cut-off day.

    820-457(3)  
    If the cut-off day is before 1 July 2003, this Subdivision (except sections 820-455 to 820-458) has an additional application to each of the potential group members on the following basis:


    (a) the income year is treated as consisting of the period starting on the cut-off day and ending on 30 June 2003, or on the day when the income year would otherwise have ended, whichever is earlier;


    (b) the *resident TC group is treated as consisting only of each (if any) of the potential group members that, at no time before or during that period, was a *member of a *consolidated group or *MEC group.

    820-457(4)  
    For each of the potential group members, for each of the following periods:


    (a) the period starting at the start of the income year and ending immediately before the cut-off day;


    (b) if the cut-off day is before 1 July 2003:


    (i) the period referred to in paragraph (3)(a);

    (ii) the rest (if any) of the income year;


    (c) if the cut-off day is 1 July 2003 - the period starting on the cut-off day and ending at the end of the income year;

    this Division (except sections 820-455 to 820-458) is to have either:


    (d) a single application in relation to the whole of the period; or


    (e) 2 or more applications, each in relation to a part of that period.

    Note:

    If the cut-off day is the consolidation day, this section complements provisions ensuring that, for the potential group members, this Division has at least one separate application to the part of the income year before the consolidation day:

  • · in the case of subsidiary members of a consolidated group or MEC group, this result is achieved by paragraph 701-30(3)(a); and
  • · in the case of the head company of the consolidated group or MEC group, it is achieved by section 820-581.
  • Section 820-581 sets out an example of how that section works. The example discusses how that section interacts with this one, and illustrates the operation of provisions like subsection (4) of this section.

    SECTION 820-458 [ARCHIVE]   Choice by foreign bank to include its Australian permanent establishments in the resident TC group  

    820-458(1)  
    If:


    (a) the *top entity makes the choice referred to in section 820-455; but


    (b) subsection 820-455(2) would have prevented the choice if the potential group members had included an *Australian permanent establishment of a *foreign bank;

    the foreign bank cannot make a choice under paragraph 820-515(c) that would result in the *resident TC group including that Australian permanent establishment.

    Note:

    Subdivision 820-FB allows the head company of a consolidated group or MEC group, or a single Australian company that cannot form such a group, to choose to treat as part of itself certain Australian permanent establishments of a foreign bank.

    Section 820-603 then treats an Australian permanent establishment covered by the choice as an entity, and as a member of a consolidated group or MEC group, for the purposes of this Division. This means that the Australian permanent establishment in effect becomes a member of a consolidated group or MEC group, which then triggers the operation of item 1 or 2 in the table in subsection 820-455(1).

    820-458(2)  
    If:


    (a) the *top entity makes the choice referred to in section 820-455; and


    (b) a *foreign bank makes a choice under paragraph 820-515(c) (that does not contravene subsection (1) of this section);

    sections 820-456 and 820-457 apply (and are taken always to have applied) as if the potential group members included each *Australian permanent establishment included in the *resident TC group because of the choice under paragraph 820-515(c).

    Note:

    This subsection will only change the effect of this section in a situation of the kind described in the note to subsection (1) of this section.

    SECTION 820-460 [ARCHIVE]   Application  

    820-460(1)  
    This Subdivision modifies how this Division applies to:


    (a) each entity in a *resident TC group for an income year; and


    (b) each *foreign bank of which an *Australian permanent establishment is in the group.

    820-460(2)  
    However, it does so only if:


    (a) the group is one of these for the income year (because of section 820-550):


    (i) an *outward investor (general);

    (ii) an *outward investor (financial);

    (iii) an *inward investment vehicle (general);

    (iv) an *inward investment vehicle (financial);

    (v) an *outward investing entity (ADI); or


    (b) section 820-555 prevents this Division (except this Subdivision) from applying to any entity in the group for the income year (because the group is headed by a foreign-controlled Australian ADI); or


    (c) section 820-565 applies Subdivision 820-D to the group for the income year as if the group were an outward investing entity (ADI); or


    (d) section 820-575 applies Subdivision 820-E to the group for the income year as if the group were an inward investing entity (ADI).

    Note:

    This Subdivision does not affect:

  • · how this Division applies to entities that are not in a resident TC group, even if they are members of the same wholly-owned group as an entity that is in a resident TC group; or
  • · how this Division applies to entities that are in a resident TC group that is not covered by any of paragraphs (2)(a) to (d).
  • 820-460(3)  
    This Division (except this Subdivision) applies to each entity in the group as if:


    (a) the group had been a company throughout the income year; and


    (b) each entity in the group had been a division or part of that company, rather than a separate entity, at all times during the income year when the entity was in the group; and


    (c) without limiting paragraph (b), each *debt deduction, for the income year, of each entity in the group were a debt deduction of the group (even if it was incurred at a time when the entity was not in the group);

    but with the modifications set out in sections 820-550 to 820-575.

    Note:

    To work out the times during the income year when the entity was in the group, see section 820-530.

    820-460(3A)  
    This Division (except this Subdivision) does not apply to an entity in the group except as mentioned in subsection (3).

    820-460(4)  
    If an *Australian permanent establishment of a *foreign bank is in the group, this Division (except this Subdivision) applies as if:


    (a) at all times when it was in the group during the income year, the Australian permanent establishment had been a division or part of the group; and


    (b) the Australian permanent establishment had been a division or part of the foreign bank at no time during the income year; and


    (c) without limiting paragraph (a) or (b), each deduction that:


    (i) is a *debt deduction of the foreign bank for the income year; and

    (ii) is attributable to the Australian permanent establishment;
    were a debt deduction of the group (even if it was incurred at a time when the Australian permanent establishment was not in the group);

    but with the modifications set out in sections 820-550 to 820-575.

    Note:

    To work out the times during the income year when the Australian permanent establishment was in the group, see section 820-530.

    820-460(5)  
    For the purposes of this Division (as applying because of this Subdivision), this Act (except this Division) applies as if the matters referred to in subsections (3) and (4) of this section were the case.

    Note:

    This means that the group is treated for the purposes of this Division as if it had debt deductions for the income year, based on the actual costs incurred by the entities and Australian permanent establishments that are treated as divisions or parts under subsections (3) and (4).

    SECTION 820-465 [ARCHIVE]   820-465   Effect on entities in group if debt deduction disallowed  
    If:


    (a) this Division (as applying because of this Subdivision) disallows all or part of a *debt deduction of the group for an income year; and


    (b) apart from this Division, the deduction would be a deduction of an entity for that income year;

    this subsection disallows the deduction of that entity to the same extent.

    Note 1:

    This section does not disallow a debt deduction to the extent that, at the time when the entity incurred the cost, the amount of the cost was paid or owed to another entity that was in the group at that time.

    This is because the cost would not be a deduction for the group, since both entities are treated as divisions or parts of the group (see subsection 820-460(3)).

    Note 2:

    The disallowed amount also does not form part of the cost base of a CGT asset. See section 110-54.

    SECTION 820-470 [ARCHIVE]   Values to be based on what would be in consolidated accounts for group  

    820-470(1)  
    For the purposes of this Division as applying because of this Subdivision to a *resident TC group for an income year, the value or amount of a particular matter as at a particular time is to be worked out, so far as practicable, on the basis of the information that would be contained in a set of consolidated accounts:


    (a) prepared, in accordance with the *accounting standard on consolidated accounts, as at that time; and


    (b) covering the entities of which the group consisted at that time.

    Note:

    This subsection does not depend on whether such a set of consolidated accounts was prepared, or had to be prepared, for other purposes.

    820-470(2)  
    To avoid doubt, subsection (1) also applies to working out the value or amount, as at a particular time, of a matter mentioned in any of sections 820-550 to 820-575 (for example, an entity's tier 1 capital (within the meaning of the *prudential standards) or *paid-up share capital).

    How to construct a resident TC group for an income year

    SECTION 820-500 [ARCHIVE]   Choice to be made by top entity of a maximum TC group  

    820-500(1)  
    The *top entity of a *maximum TC group for an income year may make one only of the 3 choices set out in sections 820-505, 820-510 and 820-520.

    820-500(2)  
    If there are 2 or more *top entities of the maximum TC group, only one of them can make the choice.

    820-500(3)  
    A maximum TC group for an income year consists of:


    (a) a company that, at the end of that income year, is a *100% subsidiary of no other company; and


    (b) each 100% subsidiary of that company at the end of that income year.

    820-500(4)  
    A top entity of a *maximum TC group for an income year is a company in the group of which each company in the group (other than that company) that, at the end of that income year:


    (a) is an *Australian entity; and


    (b) is not a *prescribed dual resident;

    is a 100% subsidiary.

    SECTION 820-505 [ARCHIVE]   Single group  

    820-505(1)  
    The first choice can be made only if the income year ends on the same day for all companies ( eligible companies ) in the *maximum TC group that meet the conditions in subsection (3) at the end of the income year.

    Note:

    If this condition is not met, those eligible companies for which the income year does end on the same day may be able to form one or more resident TC groups under section 820-510.

    820-505(2)  
    The choice is to treat as a single resident TC group for the income year:


    (a) all the eligible companies; and


    (b) each partnership and trust that section 820-515 includes in the resident TC group; and


    (c) each *Australian permanent establishment of a *foreign bank that section 820-515 includes in the resident TC group.

    820-505(3)  
    The conditions for each company are that it:


    (a) is an *Australian entity; and


    (b) is not a *prescribed dual resident.

    SECTION 820-510 [ARCHIVE]   Multiple groups  

    820-510(1)  
    The second choice is to treat the eligible companies referred to in section 820-505 as forming one or more resident TC groups for the income year, on the basis that each resident TC group consists of:


    (a) one or more subgroups constructed under subsection (3) of this section; and


    (b) each partnership and trust that section 820-515 includes in the resident TC group; and


    (c) each *Australian permanent establishment of a *foreign bank that section 820-515 includes in the resident TC group.

    820-510(2)  
    However, a resident TC group under subsection (1) can consist of or include 2 or more subgroups constructed under subsection (3) only if:


    (a) each company in the 2 or more subgroups is at the end of the income year a *100% subsidiary of the same company (the link company ) in the *maximum TC group; and


    (b) for each company in the 2 or more subgroups, the income year ends on the same day; and


    (c) the resident TC group includes every company:


    (i) that is a *100% subsidiary of the link company at the end of the income year; and

    (ii) that meets the conditions in subsection 820-505(3) at the end of the income year; and

    (iii) for which the income year ends on that same day.

    820-510(3)  
    A subgroup constructed under this subsection consists of:


    (a) an entity (the node entity ) that:


    (i) is in the *maximum TC group; and

    (ii) meets the conditions in subsection 820-505(3) at the end of the income year; and

    (iii) is a *100% subsidiary of no other entity in the maximum TC group that meets those conditions at the end of the income year; and


    (b) each 100% subsidiary (if any) of the node entity:


    (i) that meets those conditions at the end of the income year; and

    (ii) for which the income year ends on the same day as for the node entity.

    SECTION 820-515 [ARCHIVE]   820-515   Partnerships, trusts, and Australian permanent establishments of foreign banks, included in a resident TC group  
    A *resident TC group for an income year also includes:


    (a) each partnership:


    (i) all interests in whose income and capital are beneficially owned at the end of the income year by one or more companies in the group; and

    (ii) for which the income year ends on the same day as for the companies in the group; and


    (b) each trust:


    (i) all interests in whose income and capital are beneficially owned at the end of the income year by one or more entities, each of which is a company in the group or is covered by paragraph (a); and

    (ii) for which the income year ends on the same day as for the companies in the group; and


    (c) for each *foreign bank:


    (i) that is in the *maximum TC group and chooses to include its *Australian permanent establishments in the resident TC group; and

    (ii) for which the income year ends on the same day as for the companies in the resident TC group;
    each Australian permanent establishment through which the foreign bank carries on its banking business in Australia.

    SECTION 820-520 [ARCHIVE]   820-520   No grouping  
    The third choice is to have this Division apply to each entity in the *maximum TC group without being affected by this Subdivision.

    SECTION 820-525 [ARCHIVE]   820-525   Effect of choice  
    A choice has effect accordingly, and cannot be revoked. It binds each entity in the *maximum TC group, and each entity in each *resident TC group (if any).

    SECTION 820-530 [ARCHIVE]   Entities making up group before end of income year  

    820-530(1)  
    A *resident TC group for an income year is treated as consisting, at a particular time (the test time ) before the end of that income year, only of:


    (a) the companies in the group determined under subsection (2); and


    (b) each partnership in the group, all interests in whose income and capital are beneficially owned at the test time by one or more of those companies; and


    (c) each trust in the group, all interests in whose income and capital are beneficially owned at the test time by one or more entities, each of which is covered by paragraph (a) or (b) of this subsection; and


    (d) for each *foreign bank:


    (i) that is in the *maximum TC group; and

    (ii) that, at the test time, is a 100% subsidiary of the *top entity of the *maximum TC group or is that top entity;
    each *Australian permanent establishment that is in the resident TC group, and through which the foreign bank carries on its banking business in Australia at the test time.
    Note:

    This section affects how Subdivision 820-G (about calculating average values) applies to the group when there are 2 or more measurement days to consider.

    820-530(2)  
    The companies in the group determined under this subsection are:


    (a) in the case of a resident TC group under section 820-505 - each company in the group that, at the test time:


    (i) is a 100% subsidiary of the *top entity of the *maximum TC group or is that top entity; and

    (ii) meets the conditions in subsection 820-505(3); or


    (b) in the case of a resident TC group under section 820-510 that consists of only one subgroup constructed under subsection 820-510(3) - each company in the group that, at the test time:


    (i) is a 100% subsidiary of the node entity or is the node entity; and

    (ii) is a 100% subsidiary of the top entity of the maximum TC group or is that top entity; and

    (iii) meets the conditions in subsection 820-505(3); or


    (c) in the case of a resident TC group under section 820-510 that consists of 2 or more subgroups constructed under subsection 820-510(3) - each company in the group that, at the test time:


    (i) is a 100% subsidiary of the link company mentioned in paragraph 820-510(2)(a) or is that link company; and

    (ii) is a 100% subsidiary of the top entity of the maximum TC group or is that top entity; and

    (iii) meets the conditions in subsection 820-505(3).

    How this Division applies to a resident TC group

    SECTION 820-550 [ARCHIVE]   Classification of the resident TC group   Outward investing entity (non-ADI)

    820-550(1)  
    A *resident TC group for an income year is an outward investing entity (non-ADI) for the income year if, and only if, it is:


    (a) an *outward investor (general) for the income year (because of subsection (2)); or


    (b) an *outward investor (financial) for the income year (because of subsection (3) or (4)). Outward investor (general)

    820-550(2)  
    A *resident TC group for an income year is an outward investor (general) for the income year if:


    (a) the group includes at least one entity that, apart from this Subdivision, would be an *outward investor (general) for a period ending at the end of the income year; and


    (b) the group includes no entity that is a *financial entity or *ADI at the end of the income year. Outward investor (financial)

    820-550(3)  
    A *resident TC group for an income year is an outward investor (financial) for the income year if:


    (a) the group includes at least one entity that, apart from this Subdivision, would be an *outward investor (financial) for a period ending at the end of the income year; and


    (b) the group includes no entity that is an *ADI at the end of the income year.

    820-550(4)  
    A *resident TC group for an income year is also an outward investor (financial) for the income year if:


    (a) the group includes at least one entity that, apart from this Subdivision, would be an *outward investor (general) for a period ending at the end of the income year; and


    (b) the group includes at least one entity that is a *financial entity at the end of the income year; and


    (c) the group includes no entity that is an *ADI at the end of the income year. Inward investing entity (non-ADI)

    820-550(5)  
    A *resident TC group for an income year is an inward investing entity (non-ADI) for the income year if, and only if, it is:


    (a) an *inward investment vehicle (general) for the income year (because of subsection (6)); or


    (b) an *inward investment vehicle (financial) for the income year (because of subsection (7)). Inward investment vehicle (general)

    820-550(6)  
    A *resident TC group for an income year is an inward investment vehicle (general) for the income year if:


    (a) the group includes at least one entity that, apart from this Subdivision, would be an *inward investment vehicle (general) for a period ending at the end of the income year; and


    (b) the group includes no entity that, apart from this Subdivision, would be an *outward investing entity (non-ADI) for a period ending at the end of the income year; and


    (c) the group includes no entity that is a *financial entity or *ADI at the end of the income year. Inward investment vehicle (financial)

    820-550(7)  
    A *resident TC group for an income year is an inward investment vehicle (financial) for the income year if:


    (a) the group includes at least one entity that, apart from this Subdivision, would be an *inward investment vehicle (financial) for a period ending at the end of the income year; and


    (b) the group includes no entity that, apart from this Subdivision, would be an *outward investing entity (non-ADI) for a period ending at the end of the income year; and


    (c) the group includes no entity that is an *ADI at the end of the income year. Outward investing entity (ADI)

    820-550(8)  
    A *resident TC group for an income year is an outward investing entity (ADI) for the income year if, and only if:


    (a) the group includes at least one entity that, apart from this Subdivision, would be an *outward investing entity (ADI) for a period ending at the end of the income year; or


    (b) the group includes:


    (i) at least one entity that, apart from this Subdivision, would be an *outward investing entity (non-ADI) for a period ending at the end of the income year; and

    (ii) at least one entity that is an *ADI at the end of the income year.

    SECTION 820-552 [ARCHIVE]   Treatment of exempt special purpose entities  

    820-552(1)  
    The fact that an entity meets the conditions in subsection 820-39(3) (about insolvency-remote special purpose entities established to manage economic risk) throughout a period ending at the end of an income year does not prevent the entity from being in a *resident TC group for that income year.

    820-552(2)  
    However, the entity is treated as not being in that group for the purposes of sections 820-550, 820-555, 820-565 and 820-575.

    820-552(3)  
    While an entity meets the conditions in subsection 820-39(3), it is treated for the purposes of this Division (except this section) as not being in a *resident TC group that it is in.

    Note:

    This section has the effect that the circumstances of the entity are not taken into account in applying this Division to the resident TC group. The entity itself is exempt from this Division because of section 820-39.

    SECTION 820-555 [ARCHIVE]   Rest of Division not to apply to group headed by foreign-controlled Australian ADI or its holding company  

    820-555(1)  
    This Division (except this Subdivision) does not apply to any entity that is in a *resident TC group for an income year, if the group:


    (a) is not an *outward investing entity (ADI) for the income year; and


    (b) consists solely of 2 or more entities, each of which is, at the end of the income year:


    (i) an entity that is both a *foreign controlled Australian entity and an *ADI; or

    (ii) a 100% subsidiary of an entity in the group that is covered by subparagraph (i); or

    (iii) a partnership, all interests in whose income and capital are beneficially owned by one or more entities in the group, each of which is covered by subparagraph (i) or (ii); or

    (iv) a trust, all interests in whose income and capital are beneficially owned at the end of the income year by one or more entities in the group, each of which is covered by subparagraph (i), (ii) or (iii); or

    (v) a company that meets the condition in subsection (2).

    820-555(2)  
    To be covered by subparagraph (1)(b)(v), a company:


    (a) must be a *foreign controlled Australian company at the end of the income year; and


    (b) must beneficially own at the end of the income year all the *shares in an entity in the group that is covered by subparagraph (1)(b)(i); and


    (c) must have no other assets at the end of the income year; and


    (d) must have no *debt capital at any time during the income year.

    SECTION 820-560 [ARCHIVE]   Application of Subdivisions 820-B and 820-C to group  

    820-560(1)  
    This section has effect for the purposes of:


    (a) applying Subdivision 820-B to a *resident TC group that is an *outward investor (financial) for an income year; or


    (b) applying Subdivision 820-C to a *resident TC group that is an *inward investment vehicle (financial) for an income year.

    820-560(2)  
    An *on-lent amount, or *zero-capital amount, of an entity in the group is to be taken into account only if the entity is a *financial entity throughout the income year.

    SECTION 820-562 [ARCHIVE]   Application of Subdivision 820-D to group  

    820-562(1)  
    This section has effect for the purposes of applying Subdivision 820-D to a *resident TC group that is an *outward investing entity (ADI) for an income year.

    820-562(2)  
    The group's adjusted average equity capital for the income year is the average value, for that year, of the amount worked out under subsection (3).

    Note:

    To calculate an average value for the purposes of this Division, see Subdivision 820-G.

    820-562(3)  
    The amount worked out under this subsection as at a particular day is:


    (a) the total of the amounts worked out under the table below for each member of the group that is covered by an item in the table and is in the group on that day (except so much of that total as is attributable to any of the *overseas permanent establishments of such members); minus


    (b) the total of the *controlled foreign equity, at the end of that day, of each member of the group that is in the group on that day (except so much of that total as is attributable to any of the overseas permanent establishments of such members).

    Note:

    To work out the times during the income year when an entity or Australian permanent establishment was in the group, see section 820-530.


    Resident TC group that is an outward investing entity (ADI)
    Item For: The amount is:
    1 a company that, at the end of the income year:
    (a) is an *ADI; or

    (b) is a *100% subsidiary of an *ADI
    the total value of all the company's tier 1 capital (within the meaning of the *prudential standards) as at the end of that day; minus

    the value of the company's *debt capital that is part of that tier 1 capital at the end of that day
    2 a partnership or trust, all interests in whose income and capital are beneficially owned at the end of the income year by one or more entities in the group covered by item 1 the total value of all the tier 1 capital (within the meaning of the *prudential standards) of the partnership or trust as at the end of that day; minus

    the value of the *debt capital of the partnership or trust that is part of that tier 1 capital at the end of that day
    3 a company that is not covered by item 1 the total value, as at the end of that day, of the company's *paid-up share capital, retained earnings, general reserves and asset revaluation reserves; minus

    the value of the company's *debt capital that is part of the company's paid-up share capital at the end of that day; plus

    the value of the company's debt capital at the end of that day that does not give rise to any *debt deductions of the company for the income year or any other income year
    4 a partnership or trust that is not covered by item 2 the total value, as at the end of that day, of the capital and reserves of the partnership or trust; minus

    the value of the *debt capital of the partnership or trust that is part of the capital of the partnership or trust at the end of that day; plus

    the value of the debt capital of the partnership or trust at the end of that day that does not give rise to any *debt deductions of the partnership or trust for the income year or any other income year
    5 an *Australian permanent establishment through which a *foreign bank carries on its banking business in Australia the *equity capital of the foreign bank, as at the end of that day, that:

    (a) is attributable to that Australian permanent establishment; but

    (b) has not been allocated to the *OB activities of the foreign bank;

    plus the total of the amounts that, as at the end of that day:

    (c) are made available by the foreign bank to the Australian permanent establishment as loans to the Australian permanent establishment; and

    (d) do not give rise to any *debt deductions of the foreign bank for the income year or any other income year

    820-562(4)  
    For each *Australian permanent establishment through which a *foreign bank carries on its banking business in Australia and that is in the group, the group's *risk-weighted assets include that part of the *risk-weighted assets of the foreign bank that:


    (a) is attributable to that Australian permanent establishment; but


    (b) is not attributable to the *OB activities of the foreign bank.

    SECTION 820-565 [ARCHIVE]   820-565   Additional application of Subdivision 820-D to group that includes foreign-controlled Australian ADI  
    Subdivision 820-D applies to a *resident TC group for an income year, as if the group were an *outward investing entity (ADI), if:


    (a) the group is not an outward investing entity (ADI) for the income year; and


    (b) the group includes at least one entity that is at the end of the income year both a *foreign controlled Australian entity and an *ADI; and


    (c) the group includes at least one company that is at the end of the income year a 100% subsidiary of no entity covered by paragraph (b) of this section.

    SECTION 820-570 [ARCHIVE]   Effect on safe harbour capital amount if foreign-controlled Australian ADI in the group on-lends section 128F amounts  

    820-570(1)  
    For the purposes of working out the *safe harbour capital amount of a *resident TC group for an income year, if:


    (a) the group includes an entity (the ADI subsidiary ) that is at the end of the income year both a *100% subsidiary of a *foreign bank and an *ADI; and


    (b) the ADI subsidiary has:


    (i) issued *debentures or *debt interests covered by section 128F (which exempts interest on the debentures or debt interests from withholding tax) of the Income Tax Assessment Act 1936; and

    (ii) made proceeds of the debentures or debt interests available to an *Australian permanent establishment of the foreign bank, as loans to the Australian permanent establishment, for use in its Australian business; and


    (c) the Australian permanent establishment is not in the resident TC group at the end of the income year;

    the group's *risk-weighted assets at a particular time are reduced by the total amounts of proceeds of the debentures or debt interests that are at that time so made available by the ADI subsidiary.

    820-570(2)  
    This section applies only to the 2001-2002 income year and to each of the next 4 income years.

    SECTION 820-575 [ARCHIVE]   Additional application of Subdivision 820-E to group that includes Australian permanent establishment of foreign bank  

    820-575(1)  
    Subdivision 820-E applies to a *resident TC group for an income year, as if the group were an *inward investing entity (ADI), if:


    (a) the group includes at least one *Australian permanent establishment through which a *foreign bank carries on its banking business in Australia; and


    (b) the group includes no entity that, apart from this Subdivision, would be an *outward investing entity (non-ADI), or an *outward investing entity (ADI), for a period ending at the end of the income year; and


    (c) the group includes no entity that is at the end of the income year both a *foreign controlled Australian entity and an *ADI.

    However, it applies with the modifications in this section (in addition to the other modifications in this Subdivision).

    820-575(2)  
    The group's average equity capital for the income year is the average value, for that year, of the amount worked out under subsection (2A).

    Note:

    To calculate an average value for the purposes of this Division, see Subdivision 820-G.

    820-575(2A)  
    The amount worked out under this subsection as at a particular day is the total of the amounts worked out under the table below for each member of the group that is covered by an item in the table and is in the group on that day.

    Note:

    To work out the times during the income year when an entity or Australian permanent establishment was in the group, see section 820-530.


    Resident TC group treated as an inward investing entity (ADI)
    Item For: The amount is:
    1 a company the total value, as at the end of that day, of the company's *paid-up share capital, retained earnings, general reserves and asset revaluation reserves; minus

    the value of the company's *debt capital that is part of the company's paid-up share capital at the end of that day; plus

    the value of the company's debt capital at the end of that day that does not give rise to any *debt deductions of the company for the income year or any other income year
    2 a partnership or trust the total value, as at the end of that day, of the capital and reserves of the partnership or trust; minus

    the value of the *debt capital of the partnership or trust that is part of the capital of the partnership or trust at the end of that day; plus

    the value of the debt capital of the partnership or trust at the end of that day that does not give rise to any *debt deductions of the partnership or trust for the income year or any other income year
    3 an *Australian permanent establishment through which a *foreign bank carries on its banking business in Australia the *equity capital of the foreign bank, as at the end of that day, that:

    (a) is attributable to that Australian permanent establishment; but

    (b) has not been allocated to the *OB activities of the foreign bank;

    plus the total of the amounts that, as at the end of that day:

    (c) are made available by the foreign bank to the Australian permanent establishment as loans to the Australian permanent establishment; and

    (d) do not give rise to any *debt deductions of the foreign bank for the income year or any other income year

    820-575(3)  
    The group's safe harbour capital amount for the income year is worked out using the following method statement. Method statement


    Step 1.

    Work out the average value, for the income year, of the group's *risk-weighted assets.


    Step 2.

    Multiply the result of step 1 by 4%. The result of this step is the safe harbour capital amount.

    820-575(4)  
    For each *Australian permanent establishment through which a *foreign bank carries on its banking business in Australia and that is in the group, the group's *risk-weighted assets include that part of the *risk-weighted assets of the foreign bank that:


    (a) is attributable to that Australian permanent establishment; but


    (b) is not attributable to the *OB activities of the foreign bank.

    Subdivision 820-FA - How the thin capitalisation rules apply to consolidated groups and MEC groups  

    SECTION 820-581 [ARCHIVE]   820-581   How this Division applies to head company for income year in which group comes into existence or ceases to exist  


    If some or all of the period of those first 6 months is before 1 July 2003, another consequence of this section is that Austco may become part of a resident TC group under Subdivision 820-F for so much of that period as is before 1 July 2003. See sections 820-455 to 820-458.

    CHAPTER 6 - THE DICTIONARY  

    PART 6-1 - CONCEPTS AND TOPICS  

    Division 960 - General  

    Subdivision 960-R - Pre-GST annual turnover  

    SECTION 960-370 [ARCHIVE]   Meaning of pre-GST annual turnover   General rule

    960-370(1)  
    Your pre-GST annual turnover for an income year is your *group turnover for the income year.

    Note:

    Your pre-GST annual turnover will not be relevant to an income year starting after 30 June 2000, because it is only relevant to deductions for costs related to preparing for the GST (see sections 25-80, 42-168 and 46-62).

    New businesses

    960-370(2)  
    However, if you, or one or more of the entities *connected with you, did not start to carry on *business until after the start of the income year:


    (a) you must make a reasonable estimate of the amount that would have been your *group turnover for the income year if you, and all of the entities connected with you, had carried on business throughout the income year; and


    (b) that estimate is your pre-GST annual turnover for the income year.

    PART 6-5 - DICTIONARY DEFINITIONS  

    Division 995 - Definitions  

    SECTION 995-1 [ARCHIVE]   Definitions  

    995-1(1)  

    BAS provisions

    (d) the following:


    (i) section 221AZK of the Income Tax Assessment Act 1936 in cases in which section 221AZKC applies (that section allows deferral of tax instalment payments);

    (ii) section 221AZKD (which requires notification of deferred tax instalment payments); and


    (e) sales tax law as defined in section 5 of the Sales Tax Assessment Act 1992.

    capital allowance

    (b) Subdivision B of Division 3 of Part III of the Income Tax Assessment Act 1936 (development allowance); or


    (c) Part XII of that Act (drought investment allowance); or

    exempting company
    has the same meaning as in Part IIIAA of the Income Tax Assessment Act 1936, as in force on 30 June 2002.

    leasing company
    has the meaning given by section 82AQ or 680, as appropriate, of the Income Tax Assessment Act 1936.

    maximum TC group
    has the meaning given by section 820-500.

    Pre-GST annual turnover
    has the meaning given by Subdivision 960-R.

    priority agreement
    has the meaning given by subsection 61-315(2).

    qualified person
    : a person is a qualified person in relation to adistribution if the person would have been a qualified person in relation to the distribution under Division 1A of Part IIIAA of the Income Tax Assessment Act 1936, as in force on 30 June 2002.

    resident TC group
    for an income year means 2 or more entities that, because of a choice under section 820-500, are to be treated as a resident TC group for that income year.

    safe harbour capital amount

    (c) for a *resident TC group to which section 820-575 applies - has the meaning given by that section.

    specified management fees
    has the meaning given by subsection 320-40(4).

    top entity
    of a *maximum TC group has the meaning given by section 820-500.