EXPLANATORY STATEMENT
Veterans' Entitlements (Attribution of Income – Ineligible Deductions) Determination 2001
Summary
Sections 52ZZO and 52ZZZO of the Veterans' Entitlements Act 1986 (the Veterans' Entitlements Act) provide that to calculate the income of a company or trust, for the purposes of Subdivision G of Division 11A of Part IIIB of the Veterans' Entitlements Act, any deductions allowable under the Income Tax Assessment Act 1936 or Income Tax Assessment Act 1997 can be deducted from the gross income of the company or trust, unless the Commission has determined that they are an ineligible deduction, or part of a deduction.
The purpose of the attached instrument is for the Commission to determine those tax deductions that are ineligible to be applied against the gross income of a company or trust for Veterans' Entitlements purposes.
Background
The Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Act 2000 amended the Social Security Act 1991 and the Veterans' Entitlements Act to give effect to a measure in the Government's 2000-2001 Budget to revise the means test treatment of private companies and private trusts. The measure aims to ensure that income support pensioners who hold their assets in private companies or private trusts receive comparable treatment under the means test to those income support pensioners who hold their assets directly. The assets and income of the structure will be attributed to the person or persons who control the company or trust, or to the person or persons who were the source of the capital or corpus of the company or trust.
Explanation of the provisions
Part 1
Section 1 of the instrument states the name of the disallowable instrument and section 2 states that the instrument (Determination) commences on gazettal. Section 3 contains interpretation provisions.
Part 2
Section 4 of the instrument states that for the purposes of sections 52ZZO(3) and 52ZZZO(3) of the Veterans' Entitlements Act, those deductions listed in Parts 1 and 2 of Schedules 1 and 2 (respectively) of the instrument, that would normally be allowable deductions under the Income Tax Assessment Act 1936 or Income Tax Assessment Act 1997 are ineligible deductions, for the purposes of Division 11A of Part IIIB of the Veterans' Entitlements Act.
Sections 5 to 11 provide rules that deal with the application of subsections 52ZZO(5) and 52ZZZO(5) of the Veterans' Entitlements Act in relation to particular types of deductions.
Section 5 provides that any part of a contribution to an employee’s superannuation fund will not be allowed as a deduction in so far as it is greater than the ‘superannuation guarantee’ levy amount.
Section 6 states that, where a company or trust pays wages or a salary to an attributable stakeholder of that entity, or an associate of such a person, then such part of the salary or wages payment that is greater than reasonable remuneration for the work undertaken will be an ineligible deduction for the purposes of Division 11A of Part IIIB of the Veterans' Entitlements Act.
Section 7 provides that any part of an interest payment to a creditor of a company or trust will be an ineligible part of the allowable deduction in so far as it is greater than a reasonable rate of interest.
Section 8 states that, where a company or trust artificially depreciates the value of its trading stock by changing its method of valuing the stock from one year to the next in accordance with an election under section 70-45 of the Income Tax Assessment Act 1997, then any part of the depreciation which is solely attributable to this altered valuation method will be an ineligible part of the allowable deduction.
Section 9 provides that, where a primary production company or trust artificially depreciates the value of its trading stock by changing its method of valuing the stock from one year to the next in accordance with an election under section 70-45 of the Income Tax Assessment Act 1997, then any part of the depreciation which is solely attributable to this altered valuation method will be an ineligible part of the allowable deduction.
Section 10 states that, where a company or trust artificially depreciates the value of its trading stock by changing its method of valuing the stock during an income year in accordance with an election under section 70-50 of the Income Tax Assessment Act 1997, then any part of the depreciation which is solely attributable to this altered valuation method will be an ineligible part of the allowable deduction.
Section 11 provides that, where a primary production company or trust artificially depreciates the value of its trading stock by changing its method of valuing the stock during an income year in accordance with an election under section 70-50 of the Income Tax Assessment Act 1997, then any part of the depreciation which is solely attributable to this altered valuation method will be an ineligible part of the allowable deduction.
Schedule 1 – Part 1
This part provides a list of deductions which would otherwise be allowable under the Income Tax Assessment Act 1936, but are determined to be ineligible deductions for the purposes of section 52ZZO of the Veterans' Entitlements Act.
Schedule 1 - Part 2
This part provides a list of deductions, which would otherwise be allowable under the Income Tax Assessment Act 1997, but are determined to be ineligible deductions for the purposes of section 52ZZO of the Veterans' Entitlements Act.
Schedule 2 – Part 1
This part provides a list of deductions, which would otherwise be allowable under the Income Tax Assessment Act 1936, but are determined to be ineligible deductions for the purposes of section 52ZZZO of the Veterans' Entitlements Act
Schedule 2 – Part 2
This part provides a list of deductions, which would otherwise be allowable under the Income Tax Assessment Act 1997, but are determined to be ineligible deductions for the purposes of section 52ZZZO of the Veterans' Entitlements Act.
Schedule 1 – Part 1
Section 51AE | Deductions for entertainment expenses |
Section 54, as applied by section 53I | Application of depreciation provisions |
Section 67 | Expenses of borrowing |
Section 67AAA | Interest on loans to finance certain superannuation contributions and life assurance premiums |
Section 67A | Expenses of discharge of mortgage |
Section 68 | Expenses relating to lease documents |
Section 68A | Expenses relating to grant of patents etc |
Section 70 | Cost of extending telephone lines |
Section 70A | Cost of mains electricity connections |
Section 73B | Expenditure on research and development activities |
Section 73BA | Deduction for certain assets etc used for the purpose of carrying on research and development |
Section 73BH | Deduction for plant etc used for the purpose of carrying on research and development |
Section 73EB | Section 73BM roll-over relief on disposal of plant to another member of wholly-owned group |
Section 75AA | Deduction for capital expenditure incurred in establishing grape vines |
Section 75D | Deduction of expenditure on prevention of land degradation |
Section 78 | Deduction for gifts, pensions etc |
Section 79E | General domestic losses of 1989–90 to 1996–97 years of income |
Section 80AAA | Film losses of pre-1990 years of income |
Section 82AAD | Deduction for contribution to non-complying superannuation fund that taxpayer reasonably believes to be a complying superannuation fund |
Section 82AADA | Deduction for contributions to retirement savings accounts |
Section 122D | General mining — deduction of residual previous capital expenditure |
Section 122DB | General mining — deduction of residual capital expenditure |
Section 122DF | General mining — deduction of residual (19 August 1981 to 19 July 1982) capital expenditure |
Section 122DG | General mining — deduction of allowable (post |
Section 122J | General mining — exploration and prospecting expenditure |
Section 122JE | Mining and quarrying — deduction of allowable capital expenditure |
Section 122JF | Mining and quarrying — exploration and prospecting expenditure |
Section 123B | Transport of certain minerals — deduction of expenditure |
Section 123BE | Transport of certain minerals — deduction of expenditure |
Section 123C | Disposal, loss, destruction or termination of use of property |
Section 124AD | Prospecting and mining for petroleum — deduction of residual previous capital expenditure |
Section 124ADB | Prospecting and mining for petroleum — deduction of residual previous capital expenditure |
Section 124ADD | Prospecting and mining for petroleum — deduction of residual (1 May 1981 to 18 August 1981) capital expenditure |
Section 124ADF | Prospecting and mining for petroleum — deduction of residual (19 August 1981 to 19 July 1982) capital expenditure |
Section 124ADG | Prospecting and mining for petroleum — deduction of allowable (post 19 July 1982) capital expenditure |
Section 124AF | Prospecting and mining for petroleum — deduction of unrecouped previous capital expenditure |
Section 124AH | Prospecting and mining for petroleum — exploration and prospecting expenditure |
Section 124AM | Prospecting and mining for petroleum — disposal, loss, destruction or termination of use of property |
Section 124BA | Deduction of expenditure on rehabilitation-related activities |
Section 124F | Timber operations — deduction of expenditure |
Section 124G | Timber operations — disposal, destruction or termination of use of property |
Section 124J | Timber felled upon acquired land or under right |
Section 124JA | Timber mill buildings — deduction of expenditure |
Section 124JB | Timber mill buildings — disposal, destruction or termination of use of building |
Section 124M | Industrial property — annual deductions |
Section 124N | Deductions on the disposal or lapse of a unit of industrial property |
Section 124ZAF | Australian films — deductions for capital expenditure under pre-13 January 1983 contracts and certain other contracts |
Section 124ZAFA | Australian films — deductions for capital expenditure under post-12 January 1983 contracts |
Section 124ZC | Traveller accommodation — deductions in respect of capital expenditure |
Section 124ZE | Traveller accommodation — deduction in respect of destruction of building |
Section 124ZH | Certain buildings and structural improvements — deductions in respect of qualifying expenditure |
Section 124ZK | Certain buildings and structural improvements — deduction in respect of destruction of building |
Section 266-25 of Schedule 2F | Fixed trust may be denied tax loss deduction |
Section 266-35 of Schedule 2F | Fixed trust may be denied debt deduction |
Section 266-50 of Schedule 2F | Fixed trust — deducting part of a tax loss |
Section 267-20 of Schedule 2F | Non-fixed trust may be denied tax loss deduction |
Section 267-50 of Schedule 2F | Non-fixed trust — deducting part of a tax loss |
Schedule 1 – Part 2
Section 25-25 | Borrowing expenses |
Section 25-30 | Expenses of discharging a mortgage |
Section 30-15 | Table of gifts or contributions that you can deduct |
Section 32-20 | Fringe benefits |
Section 32-25 | Deductions for losses and outgoings relating to entertainment |
Section 36-15 | How to deduct tax losses of earlier income years |
Section 36-40 | Deductions for amounts paid for debts incurred before bankruptcy |
Section 40-25 | Deducting amounts for depreciating assets |
Section 40-285 | Capital allowances — balancing adjustments |
Section 40-335 | Deduction for in-house software where you will never use it |
Section 40-370 | Balancing adjustments where there has been use of different car expense methods |
Section 40-455 | In-house software — how to work out your deduction |
Section 40-645 | Electricity and telephone lines |
Section 40-730 | Mining and quarrying — deduction for expenditure on exploration or prospecting |
Section 40-735 | Deduction for expenditure on mining site rehabilitation |
Section 40-750 | Deduction for payments of petroleum resource rent tax |
Section 40-755 | Environmental protection activities |
Section 40-830 | Project pools |
Section 40-880 | Business related costs |
Section 42-15 | Deduction for depreciation of plant |
Section 42-195 | Depreciation of plant — deducting an amount |
Section 42-197 | Depreciation of plant — deducting a further amount |
Section 42-245 | Depreciation for some cars — deducting an amount |
Section 43-10 | Deductions for capital works |
Section 43-40 | Deduction for destruction of capital works |
Section 70-120 | Trading stock — capital costs of acquiring trees |
Section 165-10 | Changing ownership or control of a company — deducting tax losses |
Section 165-20 | Changing ownership or control of a company — deducting part of tax loss |
Section 165-96 | Changing ownership or control of a company — when company cannot apply a net capital loss |
Section 170-20 | Treatment of company groups — who can deduct transferred loss |
Section 330-15 | Mining and quarrying — deduction for exploration or prospecting expenditure |
Section 330-80 | Mining and quarrying — allowable capital expenditure |
Section 330-340 | Mining and quarrying — treatment of excess deductions |
Section 330-370 | Mining and quarrying — transport capital expenditure is deductible |
Section 330-435 | Mining and quarrying — deduction for expenditure on rehabilitation |
Section 373-5 | Intellectual property — expenditure incurred in registering an item |
Section 373-60 | Intellectual property — balancing adjustments |
Schedule 2 – Part 1
Section 51AE | Deductions for entertainment expenses |
Section 54, as applied by section 53I | Application of depreciation provisions |
Section 67 | Expenses of borrowing |
Section 67AAA | Interest on loans to finance certain superannuation contributions and life assurance premiums |
Section 67A | Expenses of discharge of mortgage |
Section 68 | Expenses relating to lease documents |
Section 70 | Cost of extending telephone lines |
Section 70A | Cost of mains electricity connections |
Section 73B | Expenditure on research and development activities |
Section 73BA | Deduction for certain assets etc used for the purpose of carrying on research and development |
Section 73BH | Deduction for plant etc used for the purpose of carrying on research and development |
Section 73EB | Section 73BM roll-over relief on disposal of plant to another member of wholly-owned group |
Section 75AA | Deduction for capital expenditure incurred in establishing grape vines |
Section 75B | Deduction of expenditure on conserving or conveying water |
Section 75D | Deduction of expenditure on prevention of land degradation |
Section 78 | Deduction for gifts, pensions etc |
Section 79E | General domestic losses of 1989–90 to 1996–97 years of income |
Section 80AA | Primary production losses of pre-1990 years of income |
Section 82AAD | Deduction for contribution to non-complying superannuation fund that taxpayer reasonably believes to be a complying superannuation fund |
Section 82AADA | Deduction for contributions to retirement savings accounts |
Section 124F | Timber operations — deduction of expenditure |
Section 124G | Timber operations — disposal, destruction or termination of use of property |
Section 124J | Timber felled upon acquired land or under right |
Section 124JA | Timber mill buildings — deduction of expenditure |
Section 124JB | Timber mill buildings — disposal, destruction or termination of use of building |
Section 124ZH | Certain buildings and structural improvements — deductions in respect of qualifying expenditure |
Section 124ZK | Certain buildings and structural improvements — deduction in respect of destruction of building |
Section 124ZZF | 100% deduction for establishing horticultural plants where plant life is 3 or more years |
Section 124ZZG | Annual deduction for establishing horticultural plants where plant life is 3 or more years |
Section 124ZZM | Special deduction for destruction of horticultural plants |
Section 159GC | Deductions in respect of income equalization deposits |
Section 628 | Primary producer deduction in respect of drought investment allowance — expenditure qualifying for deduction |
Section 636 | Leasing company deduction in respect of drought investment allowance — expenditure qualifying for deduction |
Section 647 | Drought investment allowance — leasing company may transfer entitlement to lessee |
Section 670 | Drought investment allowance — deduction for property used by lessee |
Section 266-25 of Schedule 2F | Fixed trust may be denied tax loss deduction |
Section 266-35 of Schedule 2F | Fixed trust may be denied debt deduction |
Section 266-50 of Schedule 2F | Fixed trust — deducting part of a tax loss |
Section 267-20 of Schedule 2F | Non-fixed trust may be denied tax loss deduction |
Section 267-50 of Schedule 2F | Non-fixed trust — deducting part of a tax loss |
Section 393-10 of Schedule 2G | Deduction for making farm management deposit |
Schedule 2 – Part 2
Section 25-25 | Borrowing expenses |
Section 25-30 | Expenses of discharging a mortgage |
Section 30-15 | Table of gifts or contributions that you can deduct |
Section 32-20 | Fringe benefits |
Section 32-25 | Deductions for losses and outgoings relating to entertainment |
Section 36-15 | How to deduct tax losses of earlier income years |
Section 36-40 | Deductions for amounts paid for debts incurred before bankruptcy |
Section 40-25 | Deducting amounts for depreciating assets |
Section 40-285 | Balancing adjustments |
Section 40-335 | Deduction for in-house software where you will never use it |
Section 40-370 | Balancing adjustments where there has been use of different car expense methods |
Section 40-455 | In-house software — how to work out your deduction |
Section 40-515 | Water facilities, grapevines and horticultural plants |
Section 40-565 | Extra deduction for destruction of a horticultural plant or grapevine |
Section 40-630 | Landcare operations |
Section 40-645 | Electricity and telephone lines |
Section 40-755 | Environmental protection activities |
Section 40-830 | Project pools |
Section 40-880 | Business related costs |
Section 42-15 | Deduction for depreciation of plant |
Section 42-195 | Depreciation of plant — deducting an amount |
Section 42-197 | Depreciation of plant — deducting a further amount |
Section 42-245 | Depreciation for some cars — deducting an amount |
Section 43-10 | Deductions for capital works |
Section 43-40 | Deduction for destruction of capital works |
Section 70-120 | Trading stock — capital costs of acquiring trees |
Section 165-10 | Changing ownership or control of a company — deducting tax losses |
Section 165-20 | Changing ownership or control of a company — deducting part of tax loss |
Section 165-96 | Changing ownership or control of a company — when company cannot apply a net capital loss |
Section 170-20 | Treatment of company groups — who can deduct transferred loss |
Section 373-60 | Intellectual property — balancing adjustments |
Section 387-55 | Capital allowances for primary producers and some land‑holders — landcare operations |
Section 387-125 | Capital allowances for primary producers and some land‑holders — water facilities |
Section 387-165 | Capital allowances for primary producers and some land‑holders — establishment of horticultural plant |
Section 387-185 | Capital allowances for primary producers and some land‑holders — horticultural plant with effective life of 3‑years or more |
Section 387-190 | Capital allowances for primary producers and some land‑holders — extra deduction for destruction of horticultural plant with effective life of 3 years or more |
Section 387-305 | Capital allowances for primary producers and some land‑holders — establishment of grapevine |
Section 387-315 | Capital allowances for primary producers and some land‑holders — additional deduction if grapevine is destroyed |
Section 387-355 | Capital allowances for primary producers and some land‑holders — connecting or upgrading power to land |
Section 387-390 | Capital allowances for primary producers and some land‑holders — contributions to connecting or upgrading power to land |
Section 387-405 | Capital allowances for primary producers and some land‑holders — telephone line |
Section 387-460 | Capital allowances for primary producers and some land‑holders — forestry roads and timber mill buildings |