Income Tax Assessment Amendment Act 1985 (Cth)

Income Tax Assessment Amendment Act 1985

No. 129 of 1985

  

An Act to amend the law relating to income tax

[Assented to 18 November 1985]

BE IT ENACTED by the Queen, and the Senate and the House of Representatives of the Commonwealth of Australia, as follows:

Short title, &c.

1. (1) This Act may be cited as the Income Tax Assessment Amendment Act 1985.

(2) The Income Tax Assessment Act 19361 is in this Act referred to as the Principal Act.

Commencement

2. This Act shall come into operation on the day on which it receives the Royal Assent.

Interpretation

3. Section 27a of the Principal Act is amended—

(a) by omitting paragraph (c) of the definition of “approved rules” in sub-section (1) and substituting the following paragraph:

“(c) require the repayment to a depositor or the legal personal representative of a depositor of the whole of the amount

 

deposited with the fund by the depositor, together with accumulated earnings on such amount, not later than—

(i) in a case where the depositor has died—90 days after the grant of probate or letters of administration in relation to the estate of the depositor; or

(ii) in any other case—the sixty-fifth anniversary of the birth of the depositor;”;

(b) by omitting paragraph (b) of the definition of “eligible termination payment” in sub-section (1) and substituting the following paragraph:

“(b) any payment made from a superannuation fund in respect of the taxpayer by reason that the taxpayer is or was a member of the fund, not being a payment—

(i) that is income of the taxpayer;

(ii) to which paragraph (d) or (e) applies; or

(iii) that is a benefit to which sub-section 26af (1) or 26afa (1) applies,

reduced by any amount that has been or will be included in the assessable income of the taxpayer under sub-section 26af (2) or 26afa (3) in respect of the transfer by the taxpayer of a right to receive the payment or any part of the payment;”;

(c) by inserting after the definition of “life assurance company” in sub-section (1) the following definition:

“ ‘non roll-over deductible amount’, in relation to an annuity or superannuation pension, means so much of an amount that, in relation to any taxpayer in relation to any year of income in relation to the annuity or superannuation pension, is a deductible amount under section 27h as consists of an amount other than a rolled-over amount;”;

(d) by omitting “eligible” from paragraph (b) of the definition of “purchase price” in sub-section (1);

(e) by omitting from sub-section (1) the definition of “unused undeducted purchase price” and substituting the following definition:

“‘unused undeducted purchase price’ means—

(a) in relation to an annuity or superannuation pension, other than an annuity or superannuation pension to which paragraph (b) or (c) applies—so much of the undeducted purchase price of the annuity or superannuation pension as has not been excluded from the assessable income of any taxpayer of any year of income—

(i) under section 26aa of this Act as in force before the commencement of the Income Tax Assessment Amendment Act (No. 3) 1984 (including that section as continued in force by that last-mentioned Act); or

 

(ii) under section 27h;

(b) in relation to an annuity or superannuation pension the purchase price of which consists wholly of a rolled-over amount or rolled-over amounts—nil; and

(c) in relation to an annuity or superannuation pension the purchase price of which consists only partly of a rolled-over amount or rolled-over amounts—an amount ascertained in accordance with the formula , where—

A is so much of the undeducted purchase price in relation to the annuity or superannuation pension as does not consist of a rolled-over amount or rolled-over amounts; and

B is the aggregate of the non roll-over deductible amounts in relation to the annuity or superannuation pension.”;

(f) by inserting after sub-section (2) the following sub-section:

“(2a) For the purposes of the definition of ‘concessional component’ in sub-section (1), an eligible termination payment shall be deemed not to be attributable to so much of the purchase price of an annuity or superannuation pension as—

(a) is taken, by virtue of section 27d, to consist of an amount to which sub-sub-paragraph 27d (1) (b) (iii) (d) applies; and

(b) is taken, by virtue of sub-section (16) of this section, to form part of a deductible amount in relation to the annuity or superannuation pension.”;

(g) by inserting after sub-section (5) the following sub-sections:

“(5a) For the purposes of paragraph (d) of the definition of ‘eligible termination payment’ in sub-section (1), the amount or value of any consideration received or receivable by a taxpayer in respect of the transfer by the taxpayer to another person (whether by assignment, declaration of trust or otherwise) of a right (whether vested or contingent) to receive a superannuation pension or part of a superannuation pension shall be taken to be the amount of a payment made in respect of the taxpayer in relation to the commutation of the superannuation pension or the part of the superannuation pension, as the case may be.

“(5b) For the purposes of paragraph (g) of the definition of ‘eligible termination payment’ in sub-section (1), the amount or value of any consideration received or receivable by a taxpayer in respect of the transfer by the taxpayer to another person (whether by assignment, declaration of trust or otherwise) of a right (whether vested or contingent) to receive an annuity or part of an annuity shall be taken to be the amount of a payment made in respect of the taxpayer in relation to the commutation of the annuity or the part of the annuity, as the case may be.

 

“(5c) In the definition of ‘purchase price’ in sub-section (1)—

(a) a reference to contributions made by any person to a superannuation fund to obtain superannuation benefits does not include a reference to contributions made to a superannuation fund by an employer, or by another person under an agreement to which the employer is a party, for the purpose of providing superannuation benefits for, or for dependants of, an employee of the employer; and

(b) a reference to payments made to purchase, or solely to purchase, an annuity does not include a reference to payments made by an employer, or by another person under an agreement to which the employer is a party, to purchase, or solely to purchase, an annuity for, or for dependants of, an employee of the employer.”;

(h) by omitting sub-section (7) and substituting the following sub-section:

“(7) For the purposes of the definition of ‘undeducted contributions’ in sub-section (1)—

(a) a payment made to a superannuation fund shall be disregarded to the extent to which an eligible termination payment is deemed by section 27d to have been applied in making the payment to the fund;

(b) a reference in that definition to contributions made to a superannuation fund by a person other than the taxpayer in order to obtain superannuation benefits does not include a reference to payments made to a superannuation fund by an employer, or by another person under an agreement to which the employer is a party, for the purpose of providing superannuation benefits for, or for dependants of, an employee of the employer; and

(c) an eligible termination payment shall be deemed not to be attributable to so much of the purchase price of an annuity or superannuation pension as—

(i) is taken, by virtue of section 27d, to consist of an amount to which sub-sub-paragraph 27d (1) (b) (iii) (c) applies; and

(ii) is taken, by virtue of sub-section (16) of this section, to form part of a deductible amount in relation to the annuity or superannuation pension.”;

(j) by inserting after sub-section (8) the following sub-section:

“(8a) Where—

(a) a transfer of property to, or for the benefit of, a person is deemed by sub-section (8) to be a payment to, or for the benefit of, the person; and

 

(b) but for this sub-section, the payment would be an eligible termination payment under paragraph (a) of the definition of ‘eligible termination payment’ in sub-section (1),

the amount of the payment shall be reduced by the amount or value of any consideration provided, paid or payable by the person in respect of the transfer.”;

(k) by omitting sub-section (10) and substituting the following sub-section:

“(10) Where—

(a) a part of an eligible termination payment is deemed to have been applied in accordance with section 27d; and

(b) the eligible service period (in this sub-section referred to as the ‘original eligible service period’) in relation to the eligible termination payment commenced before 1 July 1983,

then, for the purposes of the application of this Act in relation to any subsequent eligible termination payment that is made in relation to the taxpayer and is attributable to the eligible termination payment, there shall be deducted from the beginning of the original eligible service period the number of whole days included in the original eligible service period that is ascertained in accordance with the formula , where—

A is the number of whole days in the original eligible service period that occurred before 1 July 1983;

B is, in relation to the eligible termination payment, the number of whole dollars in the amount represented by component X in the formula  in paragraph 27c (1) (c); and

C is, in relation to the eligible termination payment, the number of whole dollars in the amount represented by component Y in the formula  in paragraph 27c (1) (c).”;

(m) by inserting in paragraph (12) (c) “eligible” before “annuity”; and

(n) by adding at the end the following sub-sections:

“(15) Where—

(a) but for this sub-section, a fund would not be an approved deposit fund for the purposes of this Subdivision by reason that a requirement or requirements of the definition of ‘approved deposit fund’ in sub-section (1) were not complied with; and

(b) the trustee of the fund satisfies the Commissioner that, by reason of special circumstances that existed in relation to the fund at the time it was established, it would be reasonable for the fund to be treated as an approved deposit fund for the purposes of this Subdivision,

the fund is an approved deposit fund for the purposes of this Subdivision.

 

“(16) For the purposes of this Subdivision, an amount that, under section 27h, is a deductible amount in relation to an annuity or superannuation pension the purchase price of which consists wholly or partly of a rolled-over amount or rolled-over amounts shall be taken to consist of the same components as the undeducted purchase price in relation to the annuity or superannuation pension and in the same respective proportions as those components bear to the undeducted purchase price.”.

Approved early retirement scheme payments

4. Section 27e of the Principal Act is amended—

(a) by omitting from paragraph (4) (a) “sub-section” and substituting “section”;

(b) by omitting paragraph (4) (b) and substituting the following paragraph:

“(b) the termination time was before—

(i) if there was a date before the sixty-fifth anniversary of the birth of the taxpayer on which the termination of the employment of the taxpayer would necessarily have occurred by reason of the taxpayer attaining a particular age or completing a particular period of service—that date; or

(ii) in any other case—the sixty-fifth anniversary of the birth of the taxpayer;”;

(c) by adding at the end of paragraph (4) (d) “after the termination time”;

(d) by inserting in sub-section (4) “(in this section referred to as the ‘termination amount’)” after “so much of the eligible termination payment as exceeds the amount”; and

(e) by adding at the end the following sub-section:

“(5) For the purposes of sub-section (4), where—

(a) in the opinion of the Commissioner, it is appropriate to regard a part (in this sub-section referred to as the ‘forgone benefit part’) of an eligible termination payment made in relation to a taxpayer as having been made in lieu of superannuation benefits to which the taxpayer may have become entitled at the termination time or a later time; and

(b) the forgone benefit part would not, but for this sub-section, be included in the termination amount,

the termination amount shall include the forgone benefit part.”.

Bona fide redundancy payments

5. Section 27f of the Principal Act is amended—

(a) by omitting from paragraph (a) “sub-section” and substituting “section”;

 

(b) by omitting paragraph (b) and substituting the following paragraph:

“(b) the termination time was before—

(i) if there was a date before the sixty-fifth anniversary of the birth of the taxpayer on which the termination of the employment of the taxpayer would necessarily have occurred by reason of the taxpayer attaining a particular age or completing a particular period of service—that date; or

(ii) in any other case—the sixty-fifth anniversary of the birth of the taxpayer;”;

(c) by adding at the end of paragraph (d) “after the termination time”;

(d) by inserting “(in this section referred to as the ‘termination amount’)” after “so much of the eligible termination payment as exceeds the amount”; and

(e) by adding at the end the following sub-section:

“(2) For the purposes of sub-section (1), where—

(a) in the opinion of the Commissioner, it is appropriate to regard a part (in this sub-section referred to as the ‘forgone benefit part’) of an eligible termination payment made in relation to a taxpayer as having been made in lieu of superannuation benefits to which the taxpayer may have become entitled at the termination time or a later time; and

(b) the forgone benefit part would not, but for this sub-section, be included in the termination amount,

the termination amount shall include the forgone benefit part.”.

Assessable income to include annuities and superannuation pensions

6. Section 27h of the Principal Act is amended—

(a) by omitting from paragraph (1) (a) “sub-section (2) or (3)” and substituting “the succeeding provisions of this section”;

(b) by omitting from sub-section (2) “sub-section (3)” and substituting “sub-sections (3) and (3a)”;

(c) by omitting sub-section (3) and substituting the following sub-sections:

“(3) Subject to sub-section (3a), where the Commissioner is of the opinion that the deductible amount ascertained in accordance with sub-section (2) is inappropriate having regard to—

(a) the terms and conditions applying to the annuity; and

(b) such other matters as the Commissioner considers relevant,

the deductible amount in relation to the annuity derived by the taxpayer during the year of income is so much of the annuity as, in the opinion of the Commissioner, represents the undeducted purchase price having regard to—

(c) the terms and conditions applying to the annuity;

 

(d) any certificate or certificates of an approved actuary or approved actuaries stating the extent to which, in the opinion of the approved actuary or approved actuaries, the amount of the annuity derived by the taxpayer during the year of income represents the undeducted purchase price; and

(e) such other matters as the Commissioner considers relevant.

“(3a) For the purposes of this section, where the annuity derived by a taxpayer during a year of income is part of an annuity of which a part has been commuted in the year of income or a preceding year of income, the deductible amount ascertained under sub-section (2) or (3) shall be reduced by such amount as, in the opinion of the Commissioner, is appropriate having regard to—

(a) the extent to which the payment made in relation to the commutation was, for the purposes of the definition of ‘eligible termination payment’ in sub-section 27a (1), reduced by the unused undeducted purchase price in relation to the annuity;

(b) if the purchase price of the annuity consisted wholly or partly of a rolled-over amount or rolled-over amounts and the payment, or part of the payment, made in relation to the commutation was an eligible termination payment—the extent to which that eligible termination payment consisted of components other than the amount referred to in sub-section 27b (1) as the relevant amount;

(c) any deductible amount ascertained under this section in relation to the annuity in relation to a preceding year of income; and

(d) such other matters as the Commissioner considers relevant.”; and

(d) by omitting paragraph (c) of the definition of “relevant number” in sub-section (4) and substituting the following paragraph:

“(c) in any other case—the number that the Commissioner considers appropriate having regard to the number of years in the total period during which the annuity will be, or may reasonably be expected to be, payable;”.

Rebate in respect of annual leave, long service leave and eligible termination payments

7. Section 160aa of the Principal Act is amended by adding at the end the following sub-section:

“(3) Where an amount (in this sub-section referred to as the ‘relevant amount’) has been included in the assessable income of a year of income (in this sub-section referred to as the ‘relevant year of income’) of a trust estate under

 

sub-section 101a (3) in respect of an amount included in the assessable income of a deceased taxpayer under sub-section 27b (1)—

(a) for the purposes of this section, the trustee of the trust estate shall be taken to be a taxpayer who has attained the age that the deceased taxpayer had attained at the date of death and who has had the relevant amount included in assessable income of the relevant year of income under sub-section 27b (1); and

(b) for the purposes of the definition of ‘residual amount’ in sub-section (2), where an amount has been included in the assessable income of the deceased taxpayer under sub-section 27b (1) in respect of an eligible termination payment made in respect of the deceased taxpayer during the lifetime of the deceased taxpayer and on or after the date on which the deceased taxpayer attained the age of 55 years—

(i) the eligible termination payment shall be deemed to have been made in relation to the trustee of the trust estate; and

(ii) the amount so included in the assessable income of the deceased taxpayer shall be treated as having been included in the assessable income of the estate of the deceased taxpayer of a year of income preceding the relevant year of income.”.

Interpretation

8. Section 221a of the Principal Act is amended by adding “or by way of an annuity or a supplement to a pension or annuity” at the end of paragraph (c) of the definition of “salary or wages” in sub-section (1).

Application of amendments

9. (1) The amendment made by paragraph 3 (a) does not apply for the purpose of determining whether a fund that was established before the twenty-eighth day after the day on which this Act comes into operation is an approved deposit fund for the purposes of Subdivision aa of Division 2 of Part III of the Principal Act as amended by this Act.

(2) Sub-section 27a (5c) and paragraph 27a (7) (b) of the Principal Act as amended by this Act apply to contributions made to a superannuation fund, and payments made to purchase an annuity, after 23 May 1985.

(3) The amendment made by paragraph 3 (b) applies to payments made after 23 May 1985.

(4) Paragraph 27a (7) (c) and sub-section 27a (16) of the Principal Act as amended by this Act, and the amendments made by paragraphs 3 (c), (e) and (f) of this Act, in so far as that paragraph and sub-section and those amendments relate to annuities, apply to—

(a) the commutation of annuities after 18 February 1985; and

(b) payments after that date in relation to residual capital values of annuities other than payments of amounts that became payable on or before that date.

 

(5) Paragraph 21a(7) (c) and sub-section 27a (16) of the Principal Act as amended by this Act, and the amendments made by paragraphs 3 (c), (e) and (f) of this Act, in so far as that paragraph and sub-section and those amendments relate to superannuation pensions, apply to—

(a) the commutation of superannuation pensions after 23 May 1985; and

(b) payments after that date in relation to residual capital values of superannuation pensions other than payments of amounts that became payable on or before that date.

(6) The amendment made by paragraph 3 (d) applies to annuities derived on or after 1 July 1983.

(7) Sub-sections 27a (5a) and (5b) of the Principal Act as amended by this Act apply to a transfer after 23 May 1985 of a right to receive a pension or annuity or part of a pension or annuity.

(8) The amendment made by paragraph 3 (j) applies to eligible termination payments made on or after 1 July 1983.

(9) The amendment made by paragraph 3 (k) applies to eligible termination payments made on or after 1 July 1983.

(10) The amendment made by paragraph 3 (m) applies to payments made after 23 May 1985.

(11) Sub-section 27a (15) of the Principal Act as amended by this Act applies to funds established on or after 1 July 1983.

(12) The amendments made by paragraphs 4 (b) and 5 (b) apply to eligible termination payments made on or after 1 July 1983.

(13) The amendments made by paragraphs 4 (c) and 5 (c) apply to eligible termination payments made in relation to a termination of employment on or after 1 July 1983.

(14) The amendments made by paragraphs 4 (a), (d) and (e) and 5 (a), (d) and (e) apply to eligible termination payments made in relation to a termination of employment after 23 May 1985.

(15) Sub-section 27h (3) of the Principal Act as amended by this Act, and the amendment made by paragraph 6 (d) of this Act, apply to assessments in respect of income of the year of income commencing on 1 July 1985 and of all subsequent years of income.

(16) Sub-section 27h (3a) of the Principal Act as amended by this Act applies—

(a) in the case of an annuity—where the partial commutation referred to in that sub-section occurred after 18 February 1985; and

(b) in the case of a superannuation pension—where the partial commutation referred to in that sub-section occurred after 23 May 1985.

 

(17) The amendments made by section 7 apply to eligible termination payments received by the trustee of the estate of a deceased person on or after 1 July 1983.

(18) The amendment made by section 8 applies in relation to annuities, and supplements to pensions and annuities, paid on or after the first day of the second month following the month in which this Act comes into operation.

Deductions from eligible termination payments

10. The amendments made by this Act do not affect the obligation of an employer, in respect of eligible termination payments made before the first day of the second month following the month in which this Act comes into operation, to make deductions under section 221c of the Principal Act as amended by this Act.

Application of Income Tax Assessment Amendment Act (No. 3) 1984

11. The Income Tax Assessment Amendment Act (No. 3) 1984 has effect, and shall be deemed always to have had effect, as if the references in sub-sections 60 (4) and (7) of that Act to paragraph 29 (c) of that Act were references to paragraph 29 (d) of that Act.

Amendment of assessments

12. Nothing in section 170 of the Principal Act prevents the amendment of an assessment made before the commencement of this Act for the purpose of giving effect to this Act.

  

NOTE

1. No. 27, 1936, as amended. For previous amendments, see No. 88, 1936; No. 5, 1937; No. 46, 1938; No. 30, 1939; Nos. 17 and 65, 1940; Nos. 58 and 69, 1941; Nos. 22 and 50, 1942; No. 10, 1943; Nos. 3 and 28, 1944; Nos. 4 and 37, 1945; No. 6, 1946; Nos. 11 and 63, 1947; No. 44, 1948; No. 66, 1949; No. 48, 1950; No. 44, 1951; Nos. 4, 28 and 90, 1952; Nos. 1, 28, 45 and 81, 1953; No. 43, 1954; Nos. 18 and 62, 1955; Nos. 25, 30 and 101, 1956; Nos. 39 and 65, 1957; No. 55, 1958; Nos. 12, 70 and 85, 1959; Nos. 17, 18, 58 and 108, 1960; Nos. 17, 27 and 94, 1961; Nos. 39 and 98, 1962; Nos. 34 and 69, 1963; Nos. 46, 68, 110 and 115, 1964; Nos. 33, 103 and 143, 1965; Nos. 50 and 83, 1966; Nos. 19, 38, 76 and 85, 1967; Nos. 4, 60, 70, 87 and 148, 1968; Nos. 18, 93 and 101, 1969; No. 87, 1970; Nos. 6, 54 and 93, 1971; Nos. 5, 46, 47, 65 and 85, 1972; Nos. 51, 52, 53, 164 and 165, 1973; No. 216, 1973 (as amended by No. 20, 1974); Nos. 26 and 126, 1974; Nos. 80 and 117, 1975; Nos. 50, 53, 56, 98, 143, 165 and 205, 1976; Nos. 57, 126 and 127, 1977; Nos. 36, 57, 87, 90, 123, 171 and 172, 1978; Nos. 12, 19, 27, 43, 62, 146, 147 and 149, 1979; Nos. 19, 24, 57, 58, 124, 133, 134 and 159, 1980; Nos. 61, 92, 108, 109, 110, 111, 154 and 175, 1981; Nos. 29, 38, 39, 76, 80, 106 and 123, 1982; Nos. 14, 25, 39, 49, 51, 54 and 103, 1983; Nos. 14, 47, 115, 123 and 124, 1984; and Nos. 49 and 123, 1985.

[Minister’s second reading speech made in—

House of Representatives on 23 May 1985

Senate on 14 October 1985