Supplementary Explanatory Memorandum
Notes on Clauses
Page 74, after clause 56, insert the following new clause:
"56A. After section 290 of the Principal Act the following section is inserted: Fixed interest complying ADFs - exemption of income attributable to certain 25 May 1988 deposits
'290A.(1) For each amount that, apart from this section, would be normal assessable income of a continuously complying fixed interest ADF of a year of income, the proportion (if any) calculated under subsection (2) is exempt from tax.
'(2) The proportion is calculated using the formula:
(Aggregate of current 25 May balances)/(Aggregate current balance)
- Aggregate of current 25 May balances is the aggregate of the current 25 May balances of eligible depositors, as at the reckoning time in relation to the year of income;
- Aggregate current balance is the total amount deposited with the fund (together with accumulated earnings), as at the reckoning time in relation to the year of income.
'(3) An election for the purposes of the definition of "reckoning time" in subsection (4):
- shall be made by notice in writing to the Commissioner; and
- shall be lodged with the Commissioner on or before the date of lodgment of the return of income of the ADF for the year of income to which the election relates, or before such later date as the Commissioner allows.
'(4) In this section, unless the contrary intention appears:
- "continuously complying fixed interest ADF", in relation to a year of income (in this definition called the "current year of income"), means a fund that is a fixed interest complying ADF in relation to each of the following years of income:
- the current year of income;
- the year of income in which 1 July 1988 occurred;
- each year of income later than the year of income mentioned in paragraph (b) and earlier than the current year of income;
- "CS policy" has the same meaning as in Division 8 of Part III;
- "current 25 May balance", in relation to an eligible depositor as at the reckoning time, is the balance as at that time determined by varying the original 25 May balance, in accordance with the following rules, during the period from 26 May 1988 to the reckoning time:
- the balance from time to time is not to exceed the original 25 May balance and is not to be less than nil;
- subject to paragraph (a), an amount deposited with the ADF by the depositor before 1 July 1989 is to be added to the balance;
- subject to paragraph (a), an amount repaid to the depositor from the ADF is to be deducted from the balance;
- "eligible depositor", in relation to an ADF, means:
- a depositor whose 55th birthday occurred on, or before 25 May 1988; or
- a depositor whose 50th birthday occurred on or before 25 May 1988 and who, on or before that date, made a deposit with the ADF that consisted wholly or partly of the roll-over (within the meaning of Subdivision AA of Division 2 of Part III) of an eligible termination payment, being an eligible termination payment that included a concessional component (within the meaning of that Subdivision);
- "fixed interest complying ADF", in relation to a year of income, means a complying ADF where both of the following conditions are satisfied:
- not less than 90% of the amount that, apart from this section, would be the normal assessable income of the ADF of the year of income consists of either or both of the following:
- interest or a payment in the nature of interest;
- an amount included in assessable income under Division 16E of Part III;
- at no time during the year of income did the assets of the fund consist of or include any of the following:
- units in a PST;
- CS policies issued by a life assurance company or a registered organization;
- "original 25 May balance", in relation to an eligible depositor, means the amount of the deposits (together with accumulated earnings) standing to the credit of the depositor as at the end of 25 May 1988;
- "reckoning time", in relation to an ADF in relation to a year of income, means the beginning of the year of income, or such other time during the year of income as the ADF elects in accordance with subsection (3).
'(5) This section does not apply to an ADF in relation to a year of income unless the Commissioner is satisfied that the whole of the benefit that would accrue to the ADF from the application of this section in relation to the year of income has been, or will be, passed on to eligible depositors.'.".
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).