Taxation Laws Amendment Act (No. 1) 1996

Taxation Laws Amendment Act (No. 1) 1996

Act No. 31 of 1996 as amended

This compilation was prepared on 1 September 2010
taking into account amendments up to Act No. 75 of 2010

The text of any of those amendments not in force
on that date is appended in the Notes section

The operation of amendments that have been incorporated may be
affected by application provisions that are set out in the Notes section

Prepared by the Office of Legislative Drafting and Publishing,
Attorney‑General’s Department, Canberra

Contents

1 Short title [see Note 1]

2 Commencement [see Note 1]

3 Schedule(s)

Schedule 1—Various amendments of the Income Tax Assessment Act 1936

Part 1—Provisional tax uplift factor

Part 2—Share buy‑backs

Division 1—Amendments

Division 2—Application, transitional etc.

Part 3—Deductions for gifts

Notes

An Act to amend the law relating to taxation

1  Short title [see Note 1]

  This Act may be cited as the Taxation Laws Amendment Act (No. 1) 1996.

2  Commencement [see Note 1]

  This Act commences on the day on which it receives the Royal Assent.

3  Schedule(s)

  Each Act that is specified in a Schedule to this Act is amended or repealed in accordance with the applicable item in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Various amendments of the Income Tax Assessment Act 1936

Part 1—Provisional tax uplift factor

1  Subsection 221YA(1) (definition of provisional tax uplift factor)

Repeal the definition, substitute:

provisional tax uplift factor has the meaning given by section 221YAAA.

2  After section 221YA

Insert:

221YAAA  Provisional tax uplift factor

 (1) This section sets out the meaning of provisional tax uplift factor for a year of income.

 (2) The provisional tax uplift factor for the 1996‑97 year of income is 6%.

 (3) The provisonal tax uplift factor for a later year of income (the later provisional tax year) is the percentage worked out using the formula:

 (4) The GDP amount for a quarter is the amount published in the document mentioned in subsection (5) as the original gross domestic product (GDP(I)) at current prices for the quarter.

 (5) The document for the purposes of subsection (4) is the first document published by the Australian Statistician after the end of the later calendar year that sets out amounts as mentioned in subsection (4) for all of the quarters in both the later calendar year and the earlier calendar year.

 (6) For the purposes of subsections (3) to (5):

earlier calendar year means the calendar year that occurs immediately before the later calendar year.

later calendar year means the calendar year ending on the
31 December occurring most recently before the later provisional tax year.

quarter means a period of 3 months ending on 31 March, 30 June, 30 September or 31 December.

 (7) In working out the percentage under subsection (3), any substituted accounting period is disregarded.

 (8) If the percentage worked out under subsection (3) is not a whole number, it is rounded to the nearest whole number (rounding a number ending in .5 downwards).

 (9) If the percentage worked out under subsection (3) is negative, it is instead 0%.

3  Application

The amendments made by this Part apply in relation to provisional tax (including instalments) payable for the 1996‑97 year of income and for all later years of income.

Part 2—Share buy‑backs

Division 1—Amendments

3  Subsection 159GZZZP(1)

After “this Act”, insert “, but subject to subsection (1A)”.

4  After subsection 159GZZZP(1)

Insert:

 (1A) If the dividend is included to any extent in the seller’s assessable income of any year of income, it is not taken into account to that extent under paragraph 160ZA(4)(b).

5  Section 159GZZZQ

Omit “If”, substitute “Subject to this section, if”.

6  Section 159GZZZQ

Omit “so much of the purchase price in respect of the buy‑back as is not a dividend”, substitute “an amount equal to the purchase price in respect of the buy‑back”.

7  At the end of section 159GZZZQ

Add:

Deemed consideration increased to market value

 (2) If, apart from this section:

 (a) the purchase price in respect of the buy‑back;

is less than:

 (b) the amount that would have been the market value of the share at the time of the buy‑back if the buy‑back did not occur and was never proposed to occur;

then, subject to subsection (3), in making the determinations mentioned in paragraphs (1)(a) and (b), the amount of consideration that the seller is taken to have received or to be entitled to receive in respect of the sale of the share is equal to the market value mentioned in paragraph (b) of this subsection.

Deemed consideration reduced where dividend assessable etc.

 (3) Subject to subsection (8), if there is a reduction amount in respect of the buy‑back (see subsection (4)), then, in making the determinations mentioned in paragraphs (1)(a) and (b), the amount of consideration that the seller is taken to have received or to be entitled to receive in respect of the sale of the share, after any application of subsection (2), is reduced by the reduction amount.

Reduction amount

 (4) The following steps are to be taken in working out whether there is a reduction amount in respect of the buy‑back:

 (a) first, work out whether the whole or part of the purchase price in respect of the buy‑back is taken to be a dividend by section 159GZZZP;

 (b) second, for any amount satisfying paragraph (a), work out whether the whole or part of it is either:

 (i) included in the seller’s assessable income of any year of income (disregarding section 128D); or

 (ii) an eligible non‑capital amount (see subsection (5)).

The amount worked out is the reduction amount in respect of the buy‑back.

Eligible non‑capital amount

 (5) An amount is an eligible non‑capital amount if it is neither:

 (a) debited against a share premium account, a share capital account or a reserve to the extent that it consists of profits from the revaluation of assets of the company that have not been disposed of by the company; nor

 (b) attributable, either directly or indirectly, to amounts that were transferred from such an account or reserve of the company.

Tainting of share premium account disregarded

 (6) For the purposes of subsection (5), if an account would cease to be a share premium account because the thing mentioned in paragraph (a) or (b) of the definition of share premium account in subsection 6(1) happens, the account does not so cease to be a share premium account.

Debit for deemed dividend

 (7) For the purposes of subsection (5), an amount of the purchase price that is taken to be a dividend by section 159GZZZP is taken to have been debited against the accounts or reserves against which the purchase price was debited, and to the same extent.

Rebatable amount excluded from reduction where loss

 (8) If:

 (a) the amount of consideration that the seller is taken by subsection (1) or (2) to have received or to be entitled to receive in respect of the sale of the share is, apart from this subsection, reduced by a reduction amount under subsection (3); and

 (b) the dividend mentioned in paragraph (4)(a), so far as it does not exceed the reduction amount, consists to any extent of a rebatable amount (see subsection (9)); and

 (c) disregarding this subsection, as a result of the operation of this section:

 (i) for the purposes of Part IIIA, the seller incurs a capital loss or an increased capital loss (which loss or increase is the loss amount) in respect of the buy‑back; or

 (ii) a loss, or an increased loss, (which loss or increase is also the loss amount) in respect of the buy‑back is allowable as a deduction to the seller under a provision of a Part of this Act other than Part IIIA; or

 (iii) the amount of a deduction allowable from the seller’s assessable income of any year of income in respect of the issue or acquisition of the share exceeds, or exceeds by a greater amount, (the excess or increased excess is also the loss amount) the amount included in the seller’s assessable income of any year of income in respect of the buy‑back of the share;

then the reduction in the amount of the consideration under subsection (3) is instead a reduction equal to:

 (d) the reduction amount;

less:

 (e) so much of the rebatable amount as does not exceed the loss amount.

Meaning of rebatable amount

 (9) For the purposes of subsection (8), if the seller is entitled to a rebate of tax under section 46 or 46A in the seller’s assessment for a year of income in respect of the dividend, the dividend consists of a rebatable amount worked out using the formula:

8  Section 160APA (paragraph (ba) of the definition of frankable dividend)

Repeal the paragraph, substitute:

 (ba) if any of the purchase price in respect of the buy‑back of a share is taken by section 159GZZZP to be a dividend:

 (i) where the purchase price exceeds the amount that would be the market value of the share at the time of the buy‑back if the buy‑back did not take place and was never proposed to take place—the amount that is taken to be a dividend, reduced by the amount of the excess; or

 (ii) in any other case—the amount that is taken to be a dividend;

9  After subsection 160ZZRM(2)

Insert:

Where subsection 159GZZZQ(2) applies to share buy‑back

 (2A) If:

 (a) it is reasonable to conclude that a decrease in the market value of a share is caused by a proposed buy‑back of the share by the company; and

 (b) the buy‑back of the share takes place; and

 (c) subsection 159GZZZQ(2) applies in respect of the buy‑back;

then the decrease in market value is disregarded for the purposes of this section.

Division 2—Application, transitional etc.

10  Interpretation

In this Division:

starting time means 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995.

11  Application

Subject to item 12, the amendments made by this Part apply to buy‑backs of shares taking place after the starting time.

12  Excluded transitional arrangements

(1) The amendments made by this Part do not apply to buy‑backs of shares under an excluded transitional arrangement.

(2) An excluded transitional arrangement is an arrangement, plan or proposal where:

 (a) notice of the arrangement, plan or proposal was given before the starting time:

 (i) at a general meeting of the company; or

 (ii) in writing available to all shareholders in the company; or

 (iii) in writing to the Commissioner of Taxation or to an officer of the Australian Taxation Office; and

 (b) the arrangement, plan or proposal began to be implemented before the starting time; and

 (c) it is not the case that the purpose, or one of the purposes, of any party to the arrangement, plan or proposal was to ensure that, as a result of the operation of Division 16K of Part III of the Income Tax Assessment Act 1936 as in force before the commencement of this Part:

 (i) there would be a capital loss, or an increased capital loss, under Part IIIA of that Act in respect of the buy‑back of any share under the arrangement, plan or proposal; or

 (ii) a loss, or an increased loss, in respect of the buy‑back of any share under the arrangement, plan or proposal would be an allowable deduction under that Act other than Part IIIA; or

 (iii) the amount of an allowable deduction in respect of the issue or acquisition of a share bought‑back under the arrangement, plan or proposal would exceed, or exceed by a greater amount, any amount included in assessable income in respect of the buy‑back.

13  Effect of item 4 on previous law

The amendment made by item 4 is to be disregarded in applying paragraph 160ZA(4)(b) of the Income Tax Assessment Act 1936, as in force before the commencement of that item, to buy‑backs of shares taking place before the starting time.

Part 3—Deductions for gifts

14  Subsection 78(3) (after the entry relating to Australian Conservation Foundation Incorporated)

Insert:

15  Subsection 78(3) (after the entry relating to Child Accident Prevention Foundation of Australia)

Insert:

16  Subsection 78(3) (after the entry relating to political parties)

Insert:

17  Subsection 78(4) (after item 2.2.15 of Table 2)

Insert:

18  Subsection 78(4) (item 5.2.1 of Table 5, column headed special conditions)

Omit “before 1 July 1995”, substitute “after 24 November 1992 and before 1 July 1999”.

19  Subsection 78(4) (item 5.2.2 of Table 5, column headed special conditions)

Omit “30 July 1995”, substitute “30 July 1997”.

20  Subsection 78(4) (after item 5.2.6 of Table 5)

Insert:

21  Subsection 78(4) (after item 10.2.5 of Table 10)

Insert:

Notes to the Taxation Laws Amendment Act (No. 1) 1996

Note 1

The Taxation Laws Amendment Act (No. 1) 1996 as shown in this compilation comprises Act No. 31, 1996 amended as indicated in the Tables below.

Table of Acts

Table of Amendments