Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello MP)Chapter 10 - Technical corrections and amendments
Outline of chapter
10.1 Schedule 10 to this Bill makes technical corrections and amendments to the taxation laws but generally does not make any substantive changes.
Context of amendments
10.2 These minor corrections and amendments to the taxation laws are part of the Government's ongoing commitment to improve the quality of the taxation laws. They fix technical errors such as duplications of definitions, missing asterisks from defined terms, incorrect numbering and referencing and outdated guide material that detract from the readability of the taxation laws and sometimes confuse or mislead readers.
Summary of new law
10.3 Schedule 10 makes minor technical corrections and amendments to the taxation laws. Amendments encompass: repealing link notes and duplicate definitions; correcting misdescribed amendments; ensuring that defined terms are properly asterisked; and fixing incorrect, incomplete or inconsistent referencing, numbering and wording. More substantive amendments involve:
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- updating and correcting non-operative guides, notes, headings and examples;
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- merging two or three definitions of one term or similar terms into single definitions;
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- deleting unnecessary definitions;
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- amending an application provision so that it does what it was intended to do when it was enacted;
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- relocating a Division; and
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- updating terminology, figures and definitions.
10.4 The technical amendments will generally commence on Royal Assent. However, some amendments will apply retrospectively for the reasons set out in paragraphs 10.52 to 10.63.
Detailed explanation of new law
10.5 Amendments made by this Schedule fall into a number of categories.
Deleting a definition where the same term is defined twice
10.6 Some terms are defined twice. The insertion of two definitions for one term occurs because a defined term is needed for two tax measures which are introduced into Parliament around the same time. Because one measure cannot rely on Parliament enacting the other measure in time and using that other measure's definition, both the measures may insert the same or similar definitions for the one term. For example, there are two definitions for the term 'government entity' in the Income Tax Assessment Act 1997 (ITAA 1997). The first definition was inserted by the A New Tax System (Tax Administration) Act 1999 and the second by the A New Tax System (Tax Administration) Act (No. 2) 2000. The two definitions are substantially the same. In each of these cases, one of the duplicate definitions will be removed. [Schedule 10, items 210, 214, 216, 246, 261 and 262, subsection 995-1(1) of the ITAA 1997, definitions of 'group turnover', 'non-compulsory uniform', 'taxable supply', 'government entity', and 'participant' and subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986, definition of 'approved form']
Merging multiple definitions of one term or similar terms into single definitions
10.7 Sometimes a term is defined more than once where a similar idea is applied in different contexts. For example, there are currently four definitions of 'member' in the ITAA 1997. The substance of the four definitions is different. However, the drafting approach used in Australia's tax laws insists on only one definition for each term but allows for contextual differences. Therefore in each case the multiple definitions will be replaced with one definition with the different contextual meanings set out in separate paragraphs. [Schedule 10, items 45, 205, 212, 213 and 219 to 221, heading to section 34-15 and subsections 960-345(2) and 995-1(1) of the ITAA 1997, definitions of 'member', 'value' and 'value of the business supplies']
Deleting an unnecessary definition
10.8 Section 124-520 of the ITAA 1997 defines 'company law' for the purposes of the entire Act. However, a definition is unnecessary because 'company law' is only used in paragraphs 124-520(1)(a) and (b). Amendments will repeal the definition of 'company law' in subsection 124-520(2) and will replace the label 'company law' in paragraphs 124-520(1)(a) and (b) with its current meaning. The definition of 'company law' in subsection 995-1(1) will also be repealed as it merely refers the reader to subsection 124-520(2). [Schedule 10, items 99, 100, 102, 103 and 207, paragraphs 124-520(1)(a) and (b) and subsections 124-520(2) and 995-1(1) of the ITAA 1997]
Fixing incorrect references to provisions
10.9 Some provisions refer to other provisions but use the wrong cross reference. For example, section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 lists provisions under which a goods and services tax decreasing adjustment arises. One of the provisions it lists is section 132-15, which does not exist. The table states that the subject matter of section 132-15 is 'supplies of things acquired or imported to make supplies'. This is the subject matter of section 132-5. The table should therefore list section 132-5, and not section 132-15. In each case, the incorrect reference will be corrected. [Schedule 10, items 1, 11, 13, 31, 33, 42, 88, 209, 232 and 260, subsection 29-15(2) and section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999, paragraphs 214A(2)(e) and 410(c) of the ITAA 1936, subsections 27-10(1), 122-140(1), 820-617(1) and 995-1(1) of the ITAA 1997 and subsection 19(3) of the Superannuation Guarantee (Administration) Act 1992]
10.10 Sometimes the ITAA 1997 uses incorrect terminology. For example, subsection 995-1(1) defines 'refund of income tax' to have the meaning given by section 205-35. However, section 205-35 does not define 'refund of income tax'. It defines 'receives a refund of income tax' instead. An amendment will replace the definition of 'refund of income tax' in subsection 995-1(1) with one for 'receives a refund of income tax'. [Schedule 10, items 263 and 264, subsection 995-1(1) of the ITAA 1997]
10.11 Another example of the incorrect use of terminology in the ITAA 1997 is the use of the term 'non-resident' instead of 'foreign resident'. While the term 'non-resident' is used for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936), it has no meaning in the ITAA 1997. 'Foreign resident' is the equivalent term for the ITAA 1997. Amendments will replace references to 'non-resident' with 'foreign resident' throughout the ITAA 1997. [Schedule 10, items 40, 41, 76 to 81, 115, 116, 118, 120, 123, 132 to 135, 150 to 155, 166, 184, 185, 208, 215, 217, 218, 239, 240 and 243, sections 12-5, 118-435, 118-500, 136-1, 136-5, 136-10, 136-25 and 180-1, paragraphs 118-415(2)(a), 118-420(1)(a), 165-235(4)(a), 180-5(4)(a), 180-15(4)(a) and 320-37(1)(c), subsections 118-420(3), 165-115ZC(3), 165-235(1), 165-235(4), 180-5(4), 180-15(4), 207-95(4), 320-37(2) and 995-1(1), subparagraphs 118-420(6)(b)(ii), 170-255(1)(d)(v), heading to Division 136 of the ITAA 1997, headings to Subdivision 260-D and section 260-105 in Schedule 1 to the TAA 1953, paragraph 21-5(3)(b) of the Venture Capital Act 2002]
10.12 There are other instances of the ITAA 1997 using incorrect terminology which will also be amended. [Schedule 10, items 7, 8, 36 to 38, 47, 50, 53, 55 to 58, 61, 62, 65, 82, 84 to 87, 89 to 98, 101, 105 to 109, 112 to 114, 117, 119, 121, 122, 124, 125, 149, 156, 158, 160, 167, 168, 173, 174, 182, 183, 189 to 194 and 241, paragraphs 80-90(a) and 80-95(a) of the A New Tax System (Goods and Services Tax) Act 1999, subsections 4-15(2), 6-5(3), 6-10(5), 36-20(2), 104-160(5), 104-165(1), 104-215(2), 104-230(7), 122-25(6), 122-25(7), 122-135(6), 122-135(7), 124-85(2), 124-795(1), 124-795(4), 124-870(3), 128-15(1), 128-25(2), 208-155(4), 396-75(2) and 405-50(5), sections 104-5, 104-160, 104-165, 128-10, 136-1, 136-20, 136-40 and 202-10, paragraphs 104-215(1)(e), 118-515(1)(a), 124-70(3)(a), 124-295(7)(b), 124-300(7)(b), 124-365(4)(b), 124-375(4)(b), 124-450(4)(b), 124-460(4)(b), 136-5(a), 202-20(a), 204-30(8)(a), 208-40(1)(a), 208-40(4)(a), 208-155(3)(a), and 220-215(1)(c), subparagraphs 124-240(f)(ii), 124-245(e)(ii), 124-520(1)(e)(ii), 124-795(5)(b)(ii), 170-255(1)(d)(i), 220-605(1)(c)(i), 376-5(1)(d)(ii), 376-15(1)(a)(ii) and 376-50(a)(i) and heading to Subdivision 136-B of the ITAA 1997 and paragraph 260-105(1)(a) to the TAA 1953]
Inserting missing asterisks before defined terms
10.13 Most defined terms in more recent tax laws are identified by an asterisk appearing at the start of the term (e.g. '*business'). A footnote on each page of the Act refers readers to the Dictionary for definitions which are marked with an asterisk. Some defined terms have not been identified by an asterisk. In such cases, amendments will insert asterisks. For example, in paragraphs 124-70(1)(a) and (2)(a) of the ITAA 1997, an asterisk is to be inserted before the term 'foreign law'. [Schedule 10, items 15, 44, 46, 74, 104, 127, 186 to 188, 195, 196, 204 and 233 to 236, subparagraph 5-15(1)(a)(ii) of the A New Tax System (Wine Equalisation Tax) Act 1999, section 703-25, subsections 34-10(1), 34-25(1), 328-375(2) and (3), 328-380(1), 721-15(2), subparagraph 116-30(3)(a)(ii) and paragraphs 124-710(1)(a), 124-710(2)(a), 152-25(1)(a), 328-375(1)(a), 960-345(1)(a) of the ITAA 1997 and subsections 12-60(1) and 12-315(1) and paragraphs 12-47(c) and 12-155(a) in Schedule 1 to the TAA 1953]
10.14 Because a proposed amendment in this Schedule will replace the definition of 'refund of income tax' with 'receives a refund of income tax' in subsection 995-1(1) of the ITAA 1997 (see paragraph 10.10), asterisks will be inserted before the term 'receives a refund of income tax'. [Schedule 10, items 249 to 257 and 259, section 210-120, subsections 205-50(2) and (3), 210-150(2) and (3) and paragraphs 214-45(1)(a), 214-45(2)(a), 214-105(1)(b), 214-150(4)(a), 705-90(4)(a) and (9)(a) of the ITAA 1997]
10.15 Subsection 975-100(1) of the ITAA 1997 and subsection 432(2) of the ITAA 1936 define 'in existence' by reference to a company's incorporation. Companies for the purposes of the taxation laws do not need to be incorporated. So, under these definitions, companies which are not incorporated (such as unincorporated associations), literally can never be 'in existence'. This is an unintended consequence.
10.16 Further, the definition of 'in existence' in the ITAA 1997 incorporates the concept of corporate dormancy contained in the company law. The concept of 'corporate dormancy' was removed from Australia's company law in 1998.
10.17 Amendments will repeal section 975-100 of the ITAA 1997 as well as the reference to 'in existence' in subsection 995-1(1) of that Act and subsection 432(2) of the ITAA 1936 [Schedule 10, items 34, 206 and 211, subsection 432(2) of the ITAA 1936, section 975-100 and subsection 995-1(1) of the ITAA 1997]. An amendment will also repeal the definition of 'in existence' in the A New Tax System (Goods and Services Tax) Act 1999, which refers to the ITAA 1997 definition of 'in existence'. As a consequence, companies will be 'in existence' if they exist within the ordinary meaning of that expression. Apart from correcting the unintended consequence mentioned in paragraph 10.15, this is the meaning given by the provisions being removed. [Schedule 10, item 14, section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999]
10.18 The repeal of section 975-100 will require the removal of asterisks from 'in existence' in the ITAA 1997 and the A New Tax System (Goods and Services Tax) Act 1999 [Schedule 10, items 3 to 5, 136 to 138, 140 to 143 and 145 to 148, subsections 60-5(1) and 60-20(1) and paragraph 60-15(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999, subsections 170-30(1), (2) and (4), 170-32(4) and (5), 170-130(1) and (2), 170-130(4), 170-132(4) and (5), 170-133(2) and (3) and paragraphs 170-210(1)(e), 170-210(2)(f), 170-215(1)(e), 170-215(2)(f), 170-220(1)(e), 170-220(2)(f), 170-225(1)(e) and 170-225(2)(f) of the ITAA 1997]. An amendment will also remove a reference in the ITAA 1936 to 'in existence' within the meaning of the ITAA 1997. The repeal of subsection 432(2) of the ITAA 1936 will involve removing cross references to section 432 and subsection 432(2). [Schedule 10, items 20, 28 and 35, paragraph 23AH(12)(b), subsection 159GZZT(1) and subparagraph 437(2)(c)(ii) of the ITAA 1936]
Deleting asterisks from terms which do not require an asterisk
10.19 Some defined terms have been incorrectly marked with an asterisk. Items 7 and 17 in the table of section 109-55 of the ITAA 1997 contain the defined and asterisked terms '*prospecting or mining entitlement', '*CGT event', '*100% subsidiary' and '*wholly owned group'. Because section 109-55 is non-operative guide material, the defined terms should not be asterisked (see subsection 2-15(2) of the ITAA 1997). Amendments will remove the asterisks from these defined terms. [Schedule 10, items 67 and 68, section 109-55 of the ITAA 1997]
10.20 The terms 'Australian resident' and 'company' are also incorrectly marked with an asterisk throughout the ITAA 1997. Although 'Australian resident' and 'company' are defined terms, they are on the list of terms that occur too frequently to need an asterisk (see subsection 2-15(3) of the ITAA 1997). Amendments will remove the asterisks in these cases. [Schedule 10, items 54, 59, 60, 63, 75, 157, 159, 161 to 165, 169 to 172, 175 to 180 and 197 to 203, sections 205-30 and 208-215, subsections 104-160(1), 104-165(1), 204-25(4) to (6), 208-45(2), 208-80(2), 960-60(1), 960-80(1) and 960-90(1), paragraphs 104-165(3)(b), 104-215(2)(a), 118-37(4)(a), 202-15(c), 205-25(1)(a), 207-75(a) and (b), 208-45(1)(a), 208-155(2)(a), 208-205(a), 208-235(a), 208-240(b), 215-10(1)(a) and 960-140(a) and subparagraphs 205-25(1)(a)(i) and 215-10(2)(a)(ii) of the ITAA 1997]
10.21 Because a proposed amendment in this Schedule will replace the definition of 'refund of income tax' with 'receives a refund of income tax' in subsection 995-1(1) of the ITAA 1997 (see paragraph 10.10), asterisks will be removed from the term 'refund of income tax'. [Schedule 10, items 249 to 257 and 259, section 210-120, subsections, 205-50(2) and (3) and 210-150(2) and (3) and paragraphs 214-45(1)(a), 214-45(2)(a), 214-105(1)(b), 214-150(4)(a), 705-90(4)(a) and (9)(a) of the ITAA 1997]
10.22 'Decreasing adjustment' in section 132-5 of the A New Tax System (Goods and Services Tax) Act 1999 is also incorrectly marked by an asterisk. Because section 132-5 defines 'decreasing adjustment', the term should not be marked by an asterisk but should be in bold italics. An amendment will remove the asterisk and put 'decreasing adjustment' in bold italics. [Schedule 10, item 10, subsection 132(1) of the A New Tax System (Goods and Services Tax ) Act 1999]
Updating references to repealed law
10.23 Some provisions refer to repealed law. For example, paragraphs 69-5(3)(h) and 69-5(3)(i) of the A New Tax System (Goods and Services Tax) Act 1999 refer to the repealed Division 4A of Part III of the ITAA 1936. References to repealed law will be removed. [Schedule 10, items 6 and 21, paragraphs 69-5(3)(h) and (i) of the A New Tax System (Goods and Services Tax) Act 1999 and section 24AL of the ITAA 1936]
10.24 Paragraph 35(1)(b) of the Product Grants and Benefits Administration Act 2000 refers to section 36 which has now been repealed. Section 36 dealt with the penalty for making false and misleading statements. The relevant provision dealing with false and misleading statements is now subsection 284-75(1) in Schedule 1 to the Taxation Administration Act 1953 (TAA 1953). 'Section 36' will be replaced with'subsection 284-75(1) in Schedule 1 to the TAA 1953'. [Schedule 10, item 231, paragraph 35(1)(b) of the Product Grants and Benefits Administration Act 2000]
10.25 In another case, subsection 6(1) of the ITAA 1936 refers to a repealed definition of 'insurance funds'. The definition is still necessary for the operation of the provision so the repealed definition of 'insurance funds' will be inserted directly into subsection 6(1). [Schedule 10, item 19, subsection 6(1) of the ITAA 1936, definition of 'insurance funds']
Fixing incorrect numbering of provisions and Divisions
10.26 Some provisions are not in the correct numerical sequence. This typically occurs when two Bills are introduced into Parliament around the same time or are enacted in an unanticipated order. For example, there are two sections numbered 118-315 in the ITAA 1997. In each case, the ordering and numbering of the provisions is corrected. [Schedule 10, items 23 to 27, 48, 181, 223, 237, 238 and 247, sections 63CA, 63CB and 63CC and subsection 63CA(1) of the ITAA 1936, section 118-315, subsection 40-430(3) and Division 218 of the ITAA 1997, Subdivision 175-C of the Income Tax (Transitional Provisions) Act 1997 and subsections 18-75(3) and (4) in Schedule 1 to the TAA 1953]
Changing an inappropriate heading
10.27 Some headings in the taxation laws are inappropriate. For example, the heading to Subdivision 152-C in the ITAA 1997 does not accurately reflect the content of the Subdivision. The heading of Subdivision 152-C reads 'Applying the small business concessions' which is misleading, as Subdivision 152-C mainly covers the small business 50% reduction. It is also inconsistent with the style of the other two Subdivision headings dealing with small business concessions. The more appropriate heading 'Small business 50% reduction' will replace 'Applying the small business concessions'. This heading change may make it difficult to find the rule contained in section 152-215, so amendments will also insert the rule into the other two Subdivisions dealing with small business concessions. Other amendments will fix other inappropriate headings in the taxation laws. [Schedule 10, items 43, 66, 128 to 131 and 222, heading to Subdivision 27-B, heading to section 104-250, heading to Subdivision 152-C, sections 152-215, 152-330 and 152-430 of the ITAA 1997 and the heading to Subdivision 104-J of the Income Tax (Transitional Provisions) Act 1997]
10.28 Amendments will fix two grammatical errors in section 125-80 of the ITAA 1997. The first error is the position of a comma in subsection 125-80(7). The other error is in the note to subsection 125-80(7) which reads 'dispose your interests' when it should read 'dispose of your interests'. Amendments fix these errors. [Schedule 10, items 110 and 111, subsection 125-80(7) of the ITAA 1997]
Updating non-operative guide material, notes and examples
10.29 Some non-operative parts of the ITAA 1997, such as guide material, notes and examples, no longer accurately reflect the content of operative provisions. While this material is non-operative, it may be used for limited purposes in interpreting operative provisions. Therefore it should be updated. For example, the guide material in section 152-5 says that the only small business concession available for CGT events J2 and J3 is the small business roll-over. Since the insertion of this guide material, the Taxation Laws Amendment Act (No. 7) 2000 also made the small business retirement exemption available for CGT events J2 and J3 but did not amend the guide. Amendments will update this guide material and other outdated guides, notes and examples. [Schedule 10, items 39, 49, 51, 64, 69 to 73, 126, 139 and 144, sections 11-55, 109-60, 112-45, 112-97 and 152-5, subsections 102-5(1), 104-47(5), 104-215(5), 170-115(1) and 170-140(2) of the ITAA 1997]
10.30 The link notes in the ITAA 1936, the ITAA 1997, the Income Tax (Transitional Provisions) Act 1997, the TAA 1953 and the Venture Capital Act 2002 are no longer necessary and will be removed. This will involve consequential amendments to section 2-30 of the ITAA 1997, which refers to link notes, and the repeal of the definition of 'link note' in subsection 995-1(1) of the same Act. [Schedule 10, items 270 to 276, link notes in the ITAA 1936, the ITAA 1997, the Income Tax (Transitional Provisions) Act 1997, the TAA 1953 and the Venture Capital Act 2002 and section 2-30 and subsection 995-1(1) of the ITAA 1997]
10.31 Link notes are included at the end of one group of provisions to indicate the number of the next provision where there is a gap in the numerical sequence. They are also used to indicate the end of a Guide. Link notes were introduced to assist users with the new numbering system in the taxation Acts. As the new numbering system and the use of guides has been in place for some time and users are now familiar with them, link notes are no longer necessary. Maintaining the link notes has proved to be a burden for drafters and the source of frequent mistakes.
Updating terminology where an Act uses an outdated term
10.32 The taxation laws sometimes use outdated terms. For example, paragraph 59(2)(a) of the Petroleum Resource Rent Tax Assessment Act 1987 uses the term 'in the form provided or authorised by the Commissioner' to authorise the Commissioner of Taxation (Commissioner) to set the format required for lodgements of returns, applications, etc. The modern standard term used throughout the taxation laws for such authorisations is 'in the approved form'. That term is defined in section 388-50 in Schedule 1 to the TAA 1953. The amendment will replace the outdated wording with the standard term and insert a reference in section 2 of the Petroleum Resource Rent Tax Assessment Act 1987 to the definition of 'approved form' in the TAA 1953. Amendments will also update other outdated terminology in the taxation laws. [Schedule 10, items 22, 32, 52, 83 and 225 to 229, paragraphs 47(2B)(b) and 262A(5)(b) of the ITAA 1936, subsection 104-135(6) and paragraph 121-25(4)(b) of the ITAA 1997, section 2, subsections 45A(6) and 45B(6) and 98(1) and paragraph 59(2)(a) of the Petroleum Resource Rent Tax Assessment Act 1997]
10.33 A transitional rule will provide that forms approved before the commencement of the updating of terminology to 'approved form' will continue to have effect after that commencement as if they had been approved under section 388-50 in Schedule 1 to the TAA 1953. [Schedule 10, item 230]
10.34 Some amending Acts misdescribed amendments they sought to make to other Acts. Consequently, most of these misdescribed amendments failed.
10.35 Item 6 in Schedule 21 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2003 attempted to amend a note after subsection 705-35(1) of the ITAA 1997. The amendment failed because it referred to 'subsection 705-35' instead of to 'subsection 705-35(1)'. 'Subsection 705-35' will be replaced by 'subsection 705-35(1)'. [Schedule 10, item 266, item 6 in Schedule 21 to the New Business Tax System (Consolidation and Other Measures) Act 2003]
10.36 Item 85 in Schedule 2 to the A New Tax System (Pay As You Go) Act 1999 attempted to amend subsection 12A(1) of the Taxation (Interest on Overpayments and Early Payments) Act 1983 by inserting 'section 163AA, section 170AA' after 'under' in subparagraph 12A(1)(a)(i). The amendment failed because it did not specify after which 'under' the insertion should go. 'Under' will be replaced by 'under (last occurring)'. [Schedule 10, item 244, item 85 in Schedule 2 to the A New Tax System (Pay As You Go) Act 1999]
10.37 Item 16 in Schedule 4 to the Energy Grants (Credits) Scheme (Consequential Amendments) Act 2003 states 'repeal the definition'. A literal reading would repeal the entire definition of 'excise law' in the Excise Act 1901. However, the intention, as shown by the heading of item 6 - 'Subsection 159(6) (paragraph (c) of the definition of excise law)', was to repeal only paragraph (c) of the definition. 'Definition' will be replaced by 'paragraph'. [Schedule 10, item 245, item 16 in Schedule 4 to the Energy Grants (Credits) Scheme (Consequential Amendments) Act 2003]
10.38 Item 3 in Schedule 7 to the New Business Tax System (Consolidation and Other Measures) Act 2003 attempted to replace the definition of 'previous capital losses, deductions or trading stock' in subsection 165-115BB(2) of the ITAA 1997. The amendment failed because it referred to the definition of 'residual unrealised net loss' when it should have referred to the definition of 'previous capital losses, deductions or trading stock losses'. The definition of 'previous capital losses, deductions or trading stock losses' will be changed as intended by the previously attempted amendment. [Schedule 10, items 224 and 248, item 3 in Schedule 7 to the New Business Tax System (Consolidation and Other Measures) Act 2003 and subsection 165-115BB(2) of the ITAA 1997]
10.39 Some items in Schedule 5 to the Taxation Laws Amendment (Company Law Review) Act 1998 failed because their commencement was linked to the commencement of the Taxation Laws Amendment Act (No. 7) 1997 which never came into existence with that short title. An amendment will insert the intended commencement date into subsection 2(2) of the Taxation Laws Amendment (Company Law Review) Act 1998. [Schedule 10, item 267, subsection 2(2) of the Taxation Laws Amendment (Company Law Review) Act 1999]
10.40 Item 2 in Schedule 4 to the Taxation Laws Amendment (Research and Development) Act 2001 attempted to amend paragraph 73C(3)(b) of the ITAA 1936 but failed because it referred to paragraph 73(3)(b), which does not exist, instead of paragraph 73C(3)(b). 'Paragraph 73(3)(b)' will be replaced by 'paragraph 73C(3)(b)'. [Schedule 10, item 268, item 2 in Schedule 4 to the Taxation Laws Amendment (Research and Development) Act 2001]
10.41 Items 6 and 7 in Schedule 1 to the Taxation Laws Amendment Act (No. 5) 2002 attempted to insert a note at the end of the definition of 'value of an item of trading stock' in subsection 995-1(1) of the ITAA 1997. This amendment failed because there was no definition of 'value of an item of trading stock', only a definition of 'value'. The note intended by the misdescribed amendment will be inserted. [Schedule 10, items 221 and 242, subsection 995-1(1) of the ITAA 1997, items 6 and 7 in Schedule 1 to the Taxation Laws Amendment Act (No. 5) 2002]
10.42 Item 9 in the table in subsection 2(1) of the Tax Laws Amendment (2004 Measures No. 2) Act 2004 provides that item 104 in Schedule 1 to that Act is to commence immediately after the commencement of item 127 in Schedule 3 to the New Business Tax System (Miscellaneous) Act (No. 4) 2003. The New Business Tax System (Miscellaneous) Act (No. 4) 2003 does not exist, hence item 104 in Schedule 1 to the Tax Laws Amendment (2004 Measures No. 2) Act 2004 failed. The reference should have been to the Taxation Laws Amendment Act (No. 4) 2003. 'New Business Tax System (Miscellaneous) Act (No. 4) 2003' will be replaced by 'Taxation Laws Amendment Act (No. 4) 2003'. [Schedule 10, item 269, subsection 2(1) of the Taxation Laws Amendment (2004 Measures No. 2) Act 2001]
Applying a definition in the Fringe Benefits Tax Assessment Act 1986
10.43 Subsection 59(1) of the Fringe Benefits Tax Assessment Act 1986 uses the term 'remote area housing benefit', which is defined in subsection 58ZC(2) but only for the purposes of section 58ZC. The fringe benefits law has no other definition of the term. The intention was that 'remote area housing benefit' in subsection 59(1) should derive its meaning from the definition in subsection 58ZC(2). The definition of 'remote area housing benefit' in subsection 58ZC(2) will be applied for use throughout the fringe benefits taxation law. [Schedule 10, items 16 and 17, subsections 58ZC(2) and 136(1) of the Fringe Benefits Tax Assessment Act 1986]
Updating a definition in the Income Tax Assessment Act 1936
10.44 Section 159S of the ITAA 1936 defines 'tax threshold' as $5,100. The definition is incorrect because the tax threshold is now $6,000. Therefore '$5,100' will be changed to the amount that is the tax-free threshold from time to time. That will ensure the same problem does not recur the next time the tax threshold amount is changed. [Schedule 10, item 29, section 159S of the ITAA 1936]
Minor consequential amendments resulting from Parliamentary amendments to substantive provisions
10.45 The Senate removed a taxation measure from the New Business Tax (Miscellaneous) Bill (No. 2) 2000 (enacted as the New Business Tax (Miscellaneous) Act (No. 2) 2000). It removed the substantive provisions of the measure but some minor consequential amendments remained. Most of these consequential amendments have previously been removed. An amendment in Schedule 10 will remove the remaining consequential amendment. [Schedule 10, item 258, subsection 320-195(1) of the ITAA 1997]
Technical amendment to an application provision
10.46 A technical amendment to the rules for the transition from the former Subdivision 126-B of the ITAA 1997 to the new Subdivision 126-B will ensure that capital gains tax (CGT) roll-over relief is available when a foreign resident company transfers an asset to an Australian resident company between 1 July 2003 and the start of the Australian company's income year beginning on or after 1 July 2004. This will ensure Australian companies with substituted accounting periods are not disadvantaged.
10.47 Subdivision 126-B sets out when a company can obtain roll-over relief when transferring or creating a CGT asset. Before the introduction of consolidation on 1 July 2002, Subdivision 126-B allowed roll-over relief for companies transferring a CGT asset to members of the same wholly-owned group. After the consolidation regime allowed wholly-owned groups of Australian resident entities to form a single entity for income tax purposes, it was no longer necessary to provide roll-over relief for transfers within a wholly-owned group. However, as foreign residents cannot form part of a consolidated group, Subdivision 126-B was modified and in its new form, applies only where one of the companies is a foreign resident.
10.48 A transitional rule allowed companies with substituted accounting periods, which were considering whether to consolidate, temporary access to the former Subdivision 126-B up until the first day of their income year starting after 30 June 2003 and before 1 July 2004. Where a foreign resident company transferred an asset to an Australian resident company who had not consolidated between 1 July 2003 and the start of the Australian company's next substituted accounting period, access to the former Subdivision 126-B was necessary for roll-over relief. This is because the new Subdivision 126-B only provides roll-over relief if the Australian resident company was a member of a consolidated group when the asset was transferred.
10.49 For example (see Diagram 10.1), if in September 2003, a foreign resident company transferred an asset to an Australian resident company with a substituted accounting period and the Australian resident company consolidated on the first day of its substituted accounting period (1 November 2003), roll-over relief would have been unavailable. Roll-over relief would only be available for transfers occurring after consolidation on 1 November 2003.
10.50 Under the transitional rule, the former Subdivision 126-B still applies if the company transferring the asset becomes a member of a consolidated group on the first day of its substituted accounting period (see subitem 23(2) in Schedule 3 to the New Business Tax System (Consolidation) Act (No. 1) 2002). However, a foreign resident company cannot become a member of a consolidated group, so the transitional rule is unavailable when the asset is transferred from a foreign resident company.
10.51 To allow the transitional rule to apply in this situation, subitem 23(2) will be amended so that it applies if either the company transferring, or the company receiving, the asset becomes a member of a consolidated group on the first day of its substituted accounting period. [Schedule 10, item 265, paragraph (2)(a) of item 23 in Schedule 3 to the New Business Tax System (Consolidation) Act (No. 1) 2002]
Application and transitional provisions
10.52 Generally, the technical amendments proposed by Schedule 10 will commence and apply from Royal Assent [Subclause 2(1), item 4 in the table]. Exceptions to this are explained below.
Amending an application provision so that it operates in accordance with what was intended when it was enacted
10.53 The amendment, discussed in paragraphs 10.46 to 10.51, will commence immediately after 24 October 2002. As the amendment applies a Subdivision to events which have already happened, it is necessary to apply it from when the Subdivision commenced. It will have no adverse effects on taxpayers as it is concessionary treatment only. [Subclause 2(1), item 17 in the table]
Deleting a definition where the same term is defined twice
10.54 The amendment discussed in paragraph 10.6 removes a duplicate definition of the term 'government entity'. It will commence just after the second definition was added (1 July 2000). The amendment applies retrospectively so that, at all times, there is only one definition of 'government entity'. This avoids any confusion from having two definitions but will not adversely affect taxpayers because the two definitions have identical substantive operation. [Subclause 2(1), item 15 in the table]
10.55 The first retrospective amendment fixing incorrect terminology is to paragraphs 80-90(a) and 80-95(a) of the A New Tax System (Goods and Services Tax) Act 1999 [Schedule 10, items 7 and 8]. This amendment will replace 'nominal defendant settlement arrangement' with the correct defined term 'nominal defendant settlement sharing arrangement'. This amendment will apply from the time when the incorrect term 'nominal defendant settlement arrangement' was inserted.
10.56 This amendment is to apply retrospectively so that the current paragraphs 80-90(a) and 80-95(a) do not adversely affect insurers. A literal reading of the current paragraphs could deny decreasing adjustments in certain situations. Making the correction retrospective will ensure that insurers are able to access the decreasing adjustments. [Schedule 10, item 9]
10.57 The second retrospective amendment fixing incorrect terminology was discussed in paragraph 10.10. Because the corrected expression - 'receives a refund of income tax' - is only used in relation to the rewritten imputation system, this amendment is to apply from the time when the rewritten imputation system commenced (29 June 2002). This will avoid confusion which would result from having different commencement dates for amendments to the imputation system and will not have any adverse effects for taxpayers. [Subclause 2(1), item 16 in the table]
10.58 An amendment fixing incorrect referencing was discussed in paragraph 10.9. That amendment and two other amendments fixing incorrect referencing are to apply from the times when the incorrect references were inserted. This ensures the integrity of the taxation system is maintained and the law operates as intended. The intended rights and obligations of taxpayers are clear under the current law and retrospectivity prevents abuse of the system. [Schedule 10, items 2 and 12, Subclause 2(1), item 14 in the table]
Updating a definition in the Fringe Benefits Tax Assessment Act 1986
10.59 This amendment which was discussed in paragraph 10.43 will apply from the time that sections 58ZC and 59 of the Fringe Benefits Tax Assessment Act 1986 were introduced: 1 April 2000. The retrospective operation of this amendment will not affect the practical operation of the law as the Commissioner has been administering the law since that time as if the definition of 'remote area housing benefit' already applied for the purposes of subsection 59(1). [Schedule 10, item 18]
Updating a definition in the Income Tax Assessment Act 1936
10.60 The amendment, which updates the definition of 'tax threshold' in section 159S of the ITAA 1936, was discussed in paragraph 10.44. This amendment will apply to assessments for the 2000-01 income years and later income years. It will not adversely affect taxpayers because the Commissioner has been administering the sections as if the tax threshold were $6,000 and not $5,100. [Schedule 10, item 30]
Renumbering incorrectly numbered provisions and Divisions
10.61 The amendment discussed in paragraph 10.26 will commence just after the commencement of the second insertion of section 118-315 in the ITAA 1997. This amendment will commence retrospectively so that the section which is being renumbered will be treated as always having been section 118-317. It will have no substantive effect as the amendment only changes the numbering of a section, not its operation.
10.62 The other amendments which renumber incorrectly numbered provisions will commence on Royal Assent. [Subclause 2(1), item 4 in the table]
10.63 The removal of link notes will commence on the later of:
- •
- Royal Assent of this Bill; and
- •
- the commencement in Schedule 1 to the Tax Laws Amendment (2004 Measures No. 6) Bill 2004.
The link notes must be removed after the commencement of the Tax Laws Amendment (2004 Measures No. 6) Bill 2004 because that Bill relies on the existence of link notes to make amendments. [Subclause 2(1), item 22 in the table]
Amending misdescribed amendments
10.64 Amendments fixing misdescribed amendments are to apply retrospectively from the date at which the original amendments attempted to amend the respective provisions. These amendments will be retrospective to ensure that the sequence of amendments made by the respective amending Acts work properly. Because the intention of the amendments was clear, taxpayers understood their intended rights and obligations. This retrospective application will maintain the integrity of the taxation system by ensuring the amendments operate as intended. [Subclause 2(1), items 5, 6 and 19 to 21 in the table]
Minor consequential amendments resulting from Parliamentary amendments to substantive provisions
10.65 The amendment discussed in paragraph 10.45, removing a paragraph from the ITAA 1997, will commence when the paragraph was originally inserted (30 June 2000). This is consistent with the timing of the removal of the other consequential amendments made as a result of the Senate's removal of the primary tax measure. [Schedule 10, Subclause 2(1), item 12 in the table]