Income Tax Assessment Amendment Act (No. 6) 1980 (Cth)

Income Tax Assessment Amendment Act (No. 6) 1980

No. 159 of 1980

An Act to amend the law relating to income tax

[Assented to 10 December 1980]

BE IT ENACTED by the Queen, and the Senateand 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 (No. 6) 1980.

(2) The Income Tax Assessment Act 1936 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.

Divisible deductions

3. (1) Section 50g of the Principal Act is amended—

(a) by omitting from paragraph (a) of sub-section (1) “or 57ae” and substituting “, 57ae or 57ah”;

(b) by omitting from paragraph (a) of sub-section (2) “or 57ae” and substituting “, 57ae or 57ah”;

(c) by inserting in sub-paragraph (i) of paragraph (ba) of sub-section (2) “or 57ah” after “57ae”;

(d) by inserting in sub-paragraph (ii) of paragraph (ba) of sub-section (2) “or 57ah, as the case may be” after “57ae”; and

(e) by inserting in paragraph (bb) of sub-section (2) “or 57ah” after “57ae”.

(2) The amendments made by sub-section (1) apply to assessments in respect of income of the year of income in which 1 October 1980 occurred and in respect of income of all subsequent years of income.

Depreciation

4. Section 54 of the Principal Act is amended by adding at the end thereof the following sub-sections:

“(9) Subject to sub-section (10), depreciation of a unit of property is not an allowable deduction to a taxpayer in respect of any year of income if expenditure incurred by the taxpayer or another person in respect of the unit of property—

(a) has been allowed, or is allowable, as a deduction under section 75d from the assessable income of the taxpayer or that other person of any year of income; or

(b) would have been allowed, or would be allowable, as a deduction under that section from the assessable income of any year of income of the taxpayer or that other person but for sub-section (4) of that section.

“(10) Sub-section (9) does not operate to prevent depreciation being allowed to a taxpayer in respect of expenditure incurred in respect of a unit of property to the extent to which a deduction has not been allowed, and is not allowable, under section 75d (otherwise than by reason of the operation of sub-section (4) of that section) to any taxpayer in respect of that expenditure.”.

Calculation of depreciation

5. (1) Section 56 of the Principal Act is amended by omitting from sub-section (3) “or Subdivision B of Division 3” and substituting “, Subdivision B of Division 3 or Subdivision BB of Division 3”.

(2) The amendment made by sub-section (1) applies to assessments in respect of income of the year of income in which 22 August 1979 occurred and in respect of income of all subsequent years of income.

(3) Nothing in section 170 of the Income Tax Assessment Act 1936 prevents the amendment of an assessment made before the commencement of this section for the purposes of giving effect to the amendment made by sub-section (1).

Special depreciation on plant

6. Section 57ag of the Principal Act is amended by inserting in paragraph (b) of sub-section (2) “or 57ah” after “57ae”.

7. After section 57ag of the Principal Act the following section is inserted:

Special depreciation on property used for primary production

“57ah. (1) Subject to sub-sections (2) and (4), this section applies to a unit of property in relation to a taxpayer in relation to a year of income if—

(a) depreciation is allowable to the taxpayer under section 54 in respect of the unit of property in relation to that year of income;

(b) the unit of property was not, at any time during the year of income when it was owned by the taxpayer, used, or installed ready for use and held in reserve otherwise than wholly and exclusively for the purposes of agricultural or pastoral pursuits, forest operations or fishing operations;

(c) the unit of property—

(i) was acquired by the taxpayer under a contract entered into after 30 September 1980; or

(ii) was constructed by the taxpayer and commenced to be constructed after 30 September 1980; and

(d) at the time when the unit of property was acquired by the taxpayer or at the time when construction of the unit of property by the taxpayer was completed, the unit of property was new.

“(2) This section does not apply in relation to a unit of property that is—

(a) a structural improvement;

(b) a motor car, station wagon or motor cycle or any other motor vehicle (including a vehicle known as a four-wheel drive vehicle) that is designed primarily or principally for the transport of persons; or

(c) a unit of property in respect of which sub-section (2) of section 55 or sub-section (5) of section 73a applies.

“(3) Notwithstanding anything contained in sections 55, 56, 56a and 57—

(a) the depreciation allowable to a taxpayer under this Act in relation to a year of income in respect of a unit of property to which this section applies in relation to the year of income is 20% of the cost of the unit;

(b) the depreciation referred to in paragraph (a) shall commence to be allowed to the taxpayer in relation to the year of income (in this sub-section referred to as the ‘relevant year of income’) during which that unit is first used for the purpose of producing assessable income or is first installed ready for use for that purpose and held in reserve; and

(c) no depreciation calculated in accordance with this section is allowable to the taxpayer in respect of that unit in relation to any year of income after the fourth year of income succeeding the relevant year of income.

“(4) A taxpayer may elect, for the purpose of the calculation of depreciation allowable as a deduction to him under this Act, that this section shall not apply in relation to a unit of property to which this section would otherwise apply and, where an election is so made, this section does not apply in relation to that unit of property in relation to the taxpayer in relation to any year of income.

“(5) An election referred to in sub-section (4) in respect of a unit of property—

(a) shall be exercised by notice in writing to the Commissioner; and

(b) shall be lodged with the Commissioner on or before the date of lodgment of the return of income of the taxpayer for the year of income during which the unit of property—

(i) is first used by the taxpayer for the purpose of producing assessable income (not having been installed ready for use for that purpose and held in reserve in a preceding year of income); or

(ii) is first installed ready for use for the purpose of producing assessable income by the taxpayer and held in reserve, or before such later date as the Commissioner allows.

“(6) For the purposes of the application of paragraph (a) of sub-section (3) in calculating the depreciation allowable to a taxpayer in respect of a unit of property to which this section applies in a case where—

(a) the amount that, but for this sub-section, would be the cost of the unit for the purposes of that paragraph is attributable, in whole or in part, to a transaction to which the taxpayer was a party;

(b) the Commissioner is satisfied that, having regard to any connection between any 2 or more of the parties to the transaction and to any other relevant circumstances, those parties were not dealing with each other at arm’s length in relation to the transaction; and

(c) the Commissioner is satisfied that the amount that, but for this sub-section, would be the cost of the unit for the purposes of that paragraph is greater than the amount (in this sub-section referred to as the ‘arm’s length amount’) that would have been the cost of the unit if the parties to the transaction had dealt with each other at arm’s length in relation to the transaction,

the arm’s length amount shall be deemed to be the cost of that unit for the purposes of that paragraph.

“(7) Where the Commissioner is satisfied that—

(a) a contract or arrangement was entered into by a taxpayer on or before 30 September 1980 for the acquisition of a unit of property (in this sub-section referred to as the ‘original unit’);

 

(b) after that date—

(i) the taxpayer entered into a contract (whether with the same or another person) for the acquisition (whether with or without the acquisition of other property) of the original unit or of another unit of property (in this sub-section referred to as the ‘substituted unit’) identical with, or having a purpose similar to that of, the original unit and intended by the taxpayer to be in lieu of the original unit; or

(ii) the taxpayer commenced the construction of a unit of property (in this sub-section also referred to as the ‘substituted unit’) identical with, or having a purpose similar to that of, the original unit and intended by the taxpayer to be in lieu of the original unit; and

(c) the taxpayer entered into the contract for the acquisition of the original unit or substituted unit, or commenced the construction of the substituted unit, for the purpose, or for purposes that included the purpose, of obtaining a deduction for depreciation calculated in accordance with sub-section (3),

the Commissioner may refuse to allow a deduction for depreciation calculated in accordance with that sub-section—

(d) in a case to which sub-paragraph (i) of paragraph (b) applies—in relation to the original unit or the substituted unit, as the case may be; or

(e) in a case to which sub-paragraph (ii) of paragraph (b) applies—in relation to the substituted unit.

“(8) Where the Commissioner is satisfied that—

(a) a taxpayer commenced the construction of a unit of property (in this sub-section referred to as the ‘original unit’) on or before 30 September 1980;

(b) after that date—

(i) the taxpayer commenced the construction of a unit of property (in this sub-section referred to as the ‘substituted unit’) identical with, or having a purpose similar to that of, the original unit and intended by the taxpayer to be in lieu of the original unit; or

(ii) the taxpayer entered into a contract for the acquisition (whether with or without the acquisition of other property) of the original unit or of another unit of property (in this sub-section also referred to as the ‘substituted unit’) identical with, or having a purpose similar to that of, the original unit and intended by the taxpayer to be in lieu of the original unit; and

(c) the taxpayer commenced the construction of the substituted unit, or entered into the contract for the acquisition of the original unit or of the substituted unit, for the purpose, or for purposes that included the purpose, of obtaining a deduction for depreciation calculated in accordance with sub-section (3),

the Commissioner may refuse to allow a deduction for depreciation calculated in accordance with that sub-section—

(d) in a case to which sub-paragraph (i) of paragraph (b) applies—in relation to the substituted unit; or

(e) in a case to which sub-paragraph (ii) of paragraph (b) applies—in relation to the original unit or the substituted unit, as the case may be.

“(9) A reference in sub-sections (6), (7) and (8) to a unit of property shall be read as including a reference to a portion of a unit of property.

“(10) In this section, a reference to the acquisition by a taxpayer of property shall be read as including a reference to the construction of the property for the taxpayer by another person or other persons.

“(11) In this section, ‘new’ means not having previously been either used by any person or acquired or held by any person for use by that person, but does not include reconditioned or wholly or mainly reconstructed.”.

Deduction of certain expenditure on land used for primary production

8. (1) Section 75a of the Principal Act is amended—

(a) by omitting paragraph (a) of sub-section (1);

(b) by omitting paragraph (c) of sub-section (1); and

(c) by omitting paragraph (g) of sub-section (1) and substituting the following paragraph:

“(g) preventing or combating flooding on the land otherwise than by way of an operation of the kind referred to in paragraph (e) or (f) of sub-section (1) of section 75d.”.

(2) The amendments made by sub-section (1) apply in relation to expenditure incurred by a taxpayer on or after 1 October 1980 not being—

(a) expenditure incurred in pursuance of a contract entered into before that date; or

(b) expenditure incurred on an operation of the kind referred to in sub-section 75d(1) of the Income Tax Assessment Act 1936 or an extension of such an operation where that operation or that extension, as the case may be, was commenced before that date.

9. After section 75c of the Principal Act the following section is inserted:

Deduction of expenditure on soil conservation

“75d. (1) Subject to this section, this section applies to expenditure of a capital nature incurred by a taxpayer who carries on a business of primary production on any land in Australia, being expenditure incurred in—

(a) an operation for the purpose of the eradication or extermination of animal or vegetable pests from the land;

(b) an operation for the purpose of the destruction of weed or plant growth detrimental to the land;

(c) an operation for the purpose of preventing or combating soil erosion otherwise than by the erection of fences on the land;

(d) an operation consisting of the erection of fences (including any extension, alteration or addition to fences) on the land for the purpose of excluding live-stock or vermin from areas affected by soil erosion or excessive salinity in order to prevent or limit any extension or aggravation of soil erosion or salinity in those areas and to assist in the reclamation of those areas;

(e) an operation consisting of the construction on the land of levee banks or similar improvements having like uses; or

(f) an operation (not being an operation consisting of the draining of swamp or low-lying land) consisting of the construction on the land, for the purpose of controlling salinity or assisting in drainage control, of surface drainage works or sub-surface drainage works,

or an extension of such an operation.

“(2) Subject to the succeeding provisions of this section, where a taxpayer incurs expenditure to which this section applies, the amount of that expenditure is an allowable deduction to the taxpayer in respect of the year of income in which that expenditure is incurred.

“(3) This section does not apply to expenditure on property that is plant or an article for the purposes of section 54 other than—

(a) fences erected for the purposes mentioned in paragraph (d) of sub-section (1) of this section; and

(b) dams or other structural improvements (not being fences), being dams or structural improvements that are plant for the purposes of section 54 by virtue of the operation of paragraph (b) of sub-section (2) of that section.

“(4) This section does not apply, and shall be deemed never to have applied, to expenditure incurred by a taxpayer where—

(a) the taxpayer is recouped, or becomes entitled to be recouped, in respect of the expenditure by the Commonwealth, by a State, by a Territory, by an authority constituted by or under a law of the Commonwealth, of a State or of a Territory, or by any other person; and

(b) the amount recouped or to be recouped is not, and will not be, included in the assessable income of the taxpayer of any year of income.

“(5) Where a taxpayer receives, or becomes entitled to receive, an amount that constitutes to an unspecified extent a recoupment of expenditure to which this section would, apart from sub-section (4), apply, the Commissioner may, for the purposes of sub-section (4), determine the extent to which the amount constitutes a recoupment of that expenditure.

“(6) This section does not apply, in relation to a taxpayer, to—

(a) expenditure incurred in pursuance of a contract entered into by the taxpayer before 1 October 1980; or

(b) expenditure incurred by the taxpayer in respect of an operation referred to in sub-section (1) or an extension of such an operation where that operation or that extension, as the case may be, was commenced before 1 October 1980.

“(7) Where—

(a) apart from this sub-section, a deduction would be allowable to a taxpayer under this section in relation to a year of income in respect of expenditure incurred in respect of land in respect of an operation of a kind referred to in sub-section (1) or an extension of such an operation; and

(b) the land in respect of which the expenditure was incurred was, at any time during the year of income after the expenditure was incurred, used by the taxpayer otherwise than for the purpose of carrying on a business of primary production,

the amount of that deduction shall be reduced by such amount as, in the opinion of the Commissioner, is fair and reasonable.

“(8) This section does not apply in relation to the calculation of the net income of a partnership, or a partnership loss, in accordance with section 90, but, where a partnership has incurred expenditure to which this section would apply if the partnership were a taxpayer, then, for the purposes of the application of sub-section (2) in respect of a partner in the partnership, that partner shall be deemed to have incurred—

(a) so much of the amount of that expenditure as the partners have agreed is to be borne by that partner; or

 

(b) if the partners have not agreed as to the part of that amount that is to be borne by that partner—so much of that amount as bears to that amount the same proportion as the individual interest of the partner in the net income of the partnership of the year of income in which the relevant expenditure was incurred bears to that net income or, as the case requires, as the individual interest of the partner in the partnership loss for that year of income bears to that partnership loss.

“(9) Where—

(a) a taxpayer has incurred expenditure to which this section applies (in this sub-section referred to as the ‘relevant expenditure’) in respect of an operation of a kind referred to in sub-section (1);

(b) the relevant expenditure is attributable, in whole or in part, to a transaction to which the taxpayer was a party;

(c) the Commissioner is satisfied that, having regard to any connection between any 2 or more of the parties to the transaction and to any other relevant circumstances, those parties were not dealing with each other at arm’s length in relation to the transaction; and

(d) the Commissioner is satisfied that the amount of the relevant expenditure is greater than the amount (in this sub-section referred to as the ‘arm’s length amount’) that would have been the amount of expenditure incurred by the taxpayer in respect of that operation if the parties to the transaction had dealt with each other at arm’s length in relation to the transaction,

the arm’s length amount shall, for the purposes of this section, be deemed to be the amount of expenditure incurred by the taxpayer in respect of that operation.

“(10) Where the Commissioner is satisfied that—

(a) a contract or arrangement was entered into by a taxpayer before 1 October 1980 for the carrying out of an operation of a kind mentioned in sub-section (1) (in this sub-section referred to as the ‘original operation’);

(b) on or after that date—

(i) the taxpayer entered into a contract or arrangement (whether with the same or another person) for the carrying out of the original operation (whether or not the contract or arrangement also relates to other matters) or of another operation (in this sub-section referred to as the ‘substituted operation’) identical with, or having a purpose similar to that of, the original operation and intended by the taxpayer to be in lieu of the original operation; or

(ii) the taxpayer commenced the carrying out of an operation (in this sub-section also referred to as the ‘substituted operation’) identical with, or having a purpose similar to that of, the original operation and intended by the taxpayer to be in lieu of the original operation; and

(c) the taxpayer entered into the contract or arrangement for the carrying out of the original operation or substituted operation, or commenced the carrying out of the substituted operation, for the purpose, or for purposes that included the purpose, of obtaining a deduction under this section,

the Commissioner may refuse to allow a deduction under this section—

(d) in a case to which sub-paragraph (i) of paragraph (b) applies—in relation to the original operation or the substituted operation, as the case may be; or

(e) in a case to which sub-paragraph (ii) of paragraph (b) applies—in relation to the substituted operation.

“(11) Where the Commissioner is satisfied that—

(a) a taxpayer commenced the carrying out of an operation of a kind referred to in sub-section (1) (in this sub-section referred to as the ‘original operation’) before 1 October 1980;

(b) on or after that date—

(i) the taxpayer commenced the carrying out of another operation (in this sub-section referred to as the ‘substituted operation’) identical with, or having a purpose similar to that of, the original operation and intended by the taxpayer to be in lieu of the original operation; or

(ii) the taxpayer entered into a contract or arrangement (whether or not the contract or arrangement also relates to other matters) for the carrying out of the original operation or of another operation (in this sub-section also referred to as the ‘substituted operation’) identical with, or having a purpose similar to that of, the original operation and intended by the taxpayer to be in lieu of the original operation; and

(c) the taxpayer commenced the carrying out of the substituted operation, or entered into the contract or arrangement for the carrying out of the original operation or of the substituted operation, for the purpose, or for purposes that included the purpose, of obtaining a deduction under this section,

the Commissioner may refuse to allow a deduction under this section—

(d) in a case to which sub-paragraph (i) of paragraph (b) applies—in relation to the substituted operation; or

(e) in a case to which sub-paragraph (ii) of paragraph (b) applies—in relation to the original operation or the substituted operation, as the case may be.

“(12) In sub-sections (10) and (11)—

(a) a reference to the carrying out by the taxpayer of an operation shall be read as including a reference to the carrying out of the operation for the taxpayer by another person or other persons; and

(b) a reference to a contract or arrangement entered into by a taxpayer for the carrying out of an operation shall be read as including a reference to a contract or arrangement for the supply of goods or the provision of services in connection with such an operation.

“(13) A reference in sub-sections (10), (11) and (12) to an operation shall be read as including a reference to—

(a) a part of an operation; and

(b) an extension of an operation.”.

Gifts, calls on afforestation shares, pensions, &c.

10. Section 78 of the Principal Act is amended—

(a) by inserting after sub-paragraph (lviii) of paragraph (a) of sub-section (1) the following sub-paragraph:

“; (lix) a public fund established and maintained exclusively for the relief of persons affected by earthquakes in Italy,”; and

 

(b) by inserting after sub-section (6aa) the following sub-section:

“(6ab) A gift to a fund to which sub-paragraph (lix) of paragraph (a) of sub-section (1) applies is not an allowable deduction unless the gift was or is made on or after 1 July 1980 and on or before 30 June 1981.”.

Subdivision not to apply to certain structural improvements

11. Section 82aeof the Principal Act is amended by omitting paragraph (a) and substituting the following paragraph:

“(a) plumbing fixtures and fittings to which paragraph (c) of sub-section (2) of section 54 applies; or”.

Subdivision not to apply to certain other property

12. Section 82af of the Principal Act is amended by omitting paragraph (f) of sub-section (2).

Application of amendments made by sections 11 and 12

13. Subdivision B of Division 3 of Part III of the Income Tax Assessment Act 1936 applies in relation to units of property in relation to which that Subdivision would not have applied but for the amendments made by sections 11 and 12 of this Act as if—

(a) the reference in section 82aa of the Income Tax Assessment Act 1936 to 1 January 1976 were a reference to 1 October 1980;

(b) the references in sub-sections 82ab(1), (7) and (8) of the Income Tax Assessment Act 1936 to 1 January 1976 were references to 1 October 1980;

(c) sub-sections 82ab(2), (3), (4) and (5) of the Income Tax Assessment Act 1936 were omitted and the following sub-section were substituted:

“(2) The relevant amount in relation to an amount of eligible expenditure is—

(a) where the eligible expenditure is less than $526—1% of the eligible expenditure;

(b) where the eligible expenditure is not less than $526 but is less than $976—1% of the eligible expenditure increased by 1% for each whole $25 by which the amount of the eligible expenditure exceeds $501; or

(c) where the eligible expenditure is not less than $976—20% of the eligible expenditure.”;

(d) sub-sections 82ab(6a) and (6b) of the Income Tax Assessment Act 1936 were omitted;

(e) the references in paragraph 82ad(2)(a) of the Income Tax Assessment Act 1936 to 1 July 1976 and 8 July 1976 were references to 1 January 1981 and 8 January 1981 respectively;

(f) the reference in sub-section 82af(4) of the Income Tax Assessment Act 1936 to 1 January 1976 were a reference to 1 October 1980;

(g) the references in section 82al of the Income Tax Assessment Act 1936 to 1 January 1976 were references to 1 October 1980;

(h) the references in section 82ap of the Income Tax Assessment Act 1936 to 1 January 1976 and 30 June 1976 were references to 1 October 1980 and 31 December 1980 respectively; and

 

(j) the references in section 82ap of the Income Tax Assessment Act 1936 to the date of commencement of Subdivision B of Division 3 of Part III of the Income Tax Assessment Act 1936 were references to the date of commencement of this section.

Deduction under Subdivision to be in addition to certain other deductions

14. Section 82am of the Principal Act is amended by inserting in sub-section (2) “75d,” after “75c”.

Amendment of assessments

15.