[Schedule 7, item 1, section 41]

195-1 (paragraph (e) of education course definition)

195-1 ( Masters or Doctoral course definition)

195-1 ( Tertiary course definition )195-1 ( Tertiary residential college course definition)

A consequential amendment to the GST definition of 'tertiary residential college course' is also necessary. This amendment omits the reference to a Masters or Doctoral course (as defined) as those kinds of courses now come within the definition of 'tertiary course'.

These amendments have no effect on the GST law except for how it is expressed. They do, however, have an effect on the income tax law, which relies on the GST definition of 'tertiary course' for provisions about the tax deductibility of gifts.

Section 30-37 of the Income Tax Assessment Act 1997 (ITAA 1997) refers to certain education courses including tertiary courses (as defined). The income tax definition of 'tertiary course' is defined by reference to the GST definition.

The purpose of expanding the GST definition of 'tertiary course' is to extend the income tax deductibility of gifts to public funds that provide money for scholarships, bursaries or prizes for education courses to include Masters or Doctoral courses.

This amendment gives effect to what has always been the policy intent of the extended gift deductibility arrangements that have applied since 1 July 2006.

A special commencement provision in clause 2 of the Bill for items 2 to 6 of this Schedule ensures that these amendments commence from 1 July 2006. This back-dated commencement provision (which favours the taxpayers affected) allows for the extended income tax deductibility of gifts to apply from 1 July 2006.

[Schedule 7, items 2 to 6 and clause 2, paragraph 38-90(2)(a) and section 195-1]

This change is not done by formal amendment given that section headings are not part of this Act, as per subsection 13(3) of the Acts Interpretation Act 1901 .

[Schedule 7, sections 5 and 7]

At present, the formula incorrectly uses the figure of 150 per cent. This figure is intended to be based on the income tax diminishing value capital allowance figure. It is no longer correct for a car that a person began to hold on or after 10 May 2006 given the change to the relevant figure in 2006.

The amendment ensures that whatever figure is used for working out a car's diminishing value depreciation rate for income tax purposes at the start of an FBT year is used for working out its depreciation rate for FBT purposes throughout that FBT year.

Any change to the income tax figure would only affect the FBT figure from the start of the next FBT year. A car that begins to be held during an FBT year would use the income tax figure that applied to such cars at the start of that FBT year, even though the car was not held at that time.

An application provision (item 8) ensures that this amendment applies only prospectively from the 2008-09 FBT year as it would cause an increase in FBT payable in some cases.

[Schedule 7, items 7 and 8, subsection 11(1AA)]

This provision only applied up to the 1996-97 income year (see the Taxation Laws Amendment Act (No. 2) 2000 , Schedule 2, item 4). After that, it was replaced by section 51-57 of the ITAA 1997. Section 23GA is therefore inoperative.

(See also the explanation in Table 7.6 of item 18.)

[Schedule 7, item 9, section 23GA]

This amendment is consequential to that proposed by item 99 (see Table 7.8) to repeal section 23B of the Income Tax Rates Act 1986 . Subsection 46A(8AA) is concerned with the 'average rate of tax' for life assurance companies.

[Schedule 7, item 10, subsection 46A(8AA)]

References to 'income equalization deposits' in section 97A itself were repealed by the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 (the Inoperative Provisions Act). Therefore, the words 'income equalization deposits' in the heading are unnecessary and potentially misleading.

This change is not done by formal amendment given that section headings are not part of this Act, as per subsection 13(3) of the Acts Interpretation Act 1901 .

[Schedule 7, section 97A]

Section 128B is concerned with liability to withholding tax. Subsection 128BA(3A) excludes income that is equivalent to interest on a loan if it is derived by the trustee of a trust or a partnership. The subsection refers to 'income consisting of a dividend...that is derived by the trustee of a trust, or to a partnership...'. This is grammatically incorrect as income is derived by a partnership not to a partnership.

[Schedule 7, item 11, subsection 128B(3A)]

These subsections currently require a taxpayer making certain elections relating to employee share schemes to do so in writing 'in a form approved by the Commissioner'.

There has been a move towards using the defined term 'approved form' instead of 'a form approved by the Commissioner'.

Therefore subsections 139E(2) and (4) are being amended to bring them into line with current practice.

Subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) defines 'approved form' as having the meaning given by section 388-50 in Schedule 1 to the Taxation Administration Act 1953 (TAA 1953).

[Schedule 7, item 12, subsections 139E(2) and (4)]

When the Inoperative Provisions Act was drafted, the words 'a person who receives or is entitled to receive work and income support related withholding payments and benefits' were inserted in the definition of 'employee' in subsection 139GA(1). Those words had previously been part of the repealed definition in section 221A of the ITAA 1936. However, the equivalent reference was not included in subsection 139GA(3) for the definition of 'employer'.

Unincorporated bodies, partnerships and Australian government agencies (part of the former section 221A definition) were included. These references are being removed. The references are not required in the context of employee share schemes, given the insertion in the definition of a reference to a person who pays, or is liable to pay, work and income support related withholding payments and benefits.

Finally, the words 'a person in foreign service' were incorrectly included instead of 'a person who engages another person in foreign service'.

An application provision (item 14) ensures that the amendment applies to income derived in the 2006-07 income year and later income years.

This date of effect ensures that the Inoperative Provisions Act did not cause an unintended substantive change to the employee share scheme provisions.

[Schedule 7, items 13 and 14, paragraphs 139GA(3)(a) to (d)]

Section 202DAA treats the quotation by a corporate investor of an investment body remitter number as the quotation of a TFN in certain circumstances. Investment body remitter numbers were replaced by Australian Business Numbers in 2000.

[Schedule 7, item 15, section 202DDA]

This amendment is necessary as a result of changes made by the Inoperative Provisions Act. Those changes have resulted in payments to exempt foreign superannuation funds being technically subject to TFN withholding. This consequence was unintended.

An application provision (item 17) ensures that the amendment (which favours the taxpayers affected) applies to income derived in the 2006-07 income year and later income years. The 2006-07 income year is the year from which the changes made by the Inoperative Provisions Act applied.

[Schedule 7, items 16 and 17, paragraph 202EE(1)(d)]

[Schedule 7, item 18, section 11-10]

12-15 (item in the table headed 'dividends')

[Schedule 7, items 19 and 20, sections 11-15 and 12-15]

Section 15-55 includes in assessable income certain amounts paid under a funeral policy. Paragraph 15-55(1)(b) refers to paragraph 320-15(k), a provision that does not exist. The correct reference clearly should be to paragraph 320-15(1)(k).

Section 15-60 includes in assessable income certain amounts paid under scholarship plans. Paragraph 15-60(4)(b) also refers to the non-existent paragraph 320-15(k). Once again, the correct reference clearly should be to paragraph 320-15(1)(k).

An application provision (item 22) ensures that the amendments apply to assessments for the income year including 1 January 2003 and later income years. These amendments, if anything, favour the taxpayers affected as any substantive effect would be to reduce the amount to be included in assessable income. However, the courts would be likely to read the existing provisions in their intended form given the obvious drafting error.

[Schedule 7, items 21 and 22, paragraphs 15-55(1)(b) and 15-60(4)(b)]

30-255

30-265(4)

30-270(4)

30-275(c)

30-280(1)

30-280(4)

30-285(1)

31-5(5)(c)

995-1(1)

There is an existing definition of Environment Secretary, which identifies the Secretary responsible for administering the Environment Protection and Biodiversity Conservation Act 1999 .

The new definition of the Environment Minister is in similar terms. This reduces the need to amend the law if future changes are made to the portfolio name.

There is no need to back-date these amendments as section 19BA of the Acts Interpretation Act 1901 already makes allowance for changed administrative arrangements of this kind.

[Schedule 7, items 23 to 33 and 64, paragraph 30-60(c), section 30-255, subsections 30-265(4) and 30-270(4), paragraph 30-275(c), subsections 30-280(1), 30-280(4) and 30-285(1), paragraph 31-5(5)(c) and subsection 995-1(1)]

Section 50-70 has special conditions for certain items in the tables for Subdivision 50-A. The heading at present incorrectly includes a reference to item 4.1, an item that is no longer referred to in section 50-70 itself.

Section headings are part of the ITAA 1997 by reason of the third dot point in subsection 950-100(1).

[Schedule 7, item 34, section 50-70]

197-20(b)

Section 51-7 exempts from income tax interest on a judgment debt relating to personal injury provided certain conditions are met. Subsection 51-57(1) uses the expression 'a law of the Commonwealth, a State or Territory'.

Paragraph 197-20(b) is part of Division 197, which is concerned with tainted share capital accounts. It also uses the expression 'a law of the Commonwealth, a State or Territory'.

This expression should no longer be used given that the defined term 'Australian law' covers the same ground.

[Schedule 7, items 35 and 57, subsection 51-57(1) and paragraph 197-20(b)]

Section 61-560 provides for an entitlement to the mature age worker tax offset for individuals aged 55 or over at the end of the income year. The note to section 61-560 has a minor error in that it states 'if have you no net income' instead of 'if you have no net income'.

[Schedule 7, item 36, section 61-560]

Under the mutuality principle, non-commercial dealings between members of a mutual organisation are not generally included in income.

The 2004 judicial decision in Coleambally Irrigation Mutual Co-operative Ltd v Commissioner of Taxation
[2004] FCA 2 brought mutual receipts of those organisations with a prohibition on distributing surpluses to members (or 'not-for-profit mutuals') into the income tax system as assessable income.

In contrast, mutual receipts of those organisations without a prohibition on distribution to members (or 'true mutuals') were not affected by the judicial decision, and such receipts remained outside the income tax system.

The Tax Laws Amendment (2005 Measures No. 6) Act 2005 amended the ITAA 1997 by inserting section 59-35 to ensure 'not-for-profit mutuals' are not subject to income tax on ordinary income from their members merely because they are prohibited from distributing funds to members. Section 59-35 states that these receipts are non-assessable non-exempt income.

The intent of section 59-35 was to restore the tax treatment of 'not-for-profit mutuals' and thus ensure similar treatment to 'true mutuals'.

An unintended consequence of inserting section 59-35 was that CGT assets used solely to produce the mutual receipts of 'not-for-profit mutuals' became exempt from CGT because of subsection 118-12(1). That subsection ensures that a capital gain or capital loss made from a CGT asset used solely to produce exempt income or non-assessable non-exempt income is disregarded.

This amendment restores the intention of the original amendment that 'not-for-profit mutuals' should be taxed in the same way as 'true mutuals'.

An application provision (item 38) ensures that the amendment applies to assessments for income years commencing on or after 1 July 2000 (ie, when section 59-35 first applied).

The unintended CGT exemption would apply only in rare cases. The 'not-for-profit mutual' organisation would need to have acquired the asset on or after 1 July 2000 and not to have used it to any extent to derive non-mutual receipts.

[Schedule 7, items 37 and 38, subparagraph 118-12(2)(a)(i)]

165-12(8)

165-12(9)

165-37(4)(b)

165-37(5)

165-37(6)

165-115C(4)(b)

165-115C(5)

165-115C(6) and (7)

165-115GB(2)(a)

165-123(7)(b)

165-123(8)

165-123(9) and (10)

166-272(8)(b)

166-272(8) (note)

166-272(10)

166-272(10) (note)

166-272(11)

727-95(b)

995-1(1) ( direct equity interests definition)

Subsection 165-37(6) defines 'direct equity interests' and 'indirect equity interests' but only for the purposes of subsections 165-37(4) and (5). This is undesirable under the approach generally taken for defined terms to be included in the Dictionary and to have an Act-wide application. Subsections 165-115C(6) and (7) define those terms for the whole Act but without a Dictionary entry for either of them. The definitions are the same and also appear in various other places.

Various amendments repeal all the definitions of 'direct equity interests' and 'indirect equity interests' throughout the ITAA 1997 and add the definitions of those terms to the Dictionary together with appropriate asterisking where the defined terms are used.

[Schedule 7, items 39 to 56, 60, 63 and 66, paragraph 165-12(7)(b), subsections 165-12(8) and (9), paragraph 165-37(4)(b), subsections 165-37(5) and (6), paragraph 165-115C(4)(b), subsections 165-115C(5) to (7), paragraphs 165-115GB(2)(a) and 165-123(7)(b), subsections 165-123(8) to (10), paragraph 166-272(8)(b), subsections 166-272(8), (10) and (11), subsection 713-545(6), paragraph 727-95(b) and subsection 995-1(1)]

[Schedule 7, item 57]

Section 320-85 allows life insurance companies to deduct increases in their liabilities under net risk components of life insurance policies. Note 1 to subsection 320-85(1) points readers to paragraph 320-15(h), a non-existent provision. The correct reference is to paragraph 320-15(1)(h).

[Schedule 7, item 58, subsection 320-85(1) (note 1)]

At present, the definition of 'ordinary class tax rate' directs the reader to subparagraph 23A(a)(ii) of the Income Tax Rates Act 1986 whereas the reference is now to be to paragraph 23A(a) of that Act.

This amendment is consequential to that proposed by item 92 (see Table 7.8) to amend paragraphs 23A(a) and (b) of the Income Tax Rates Act 1986 .

[Schedule 7, item 59, subsection 713-545(6)]

[Schedule 7, item 60]

These subsections provide that an Australian-owned multi-national entity that is not foreign controlled (ie, an 'outward investing entity') is not subject to the disallowance of debt deductions under the thin capitalisation rules if 90 per cent or more of the total average assets of the entity and its associates are Australian assets. In determining what are 'Australian assets', assets attributable to the entity's 'overseas permanent establishments' are disregarded (see subparagraph (a)(i) of the definition of 'average Australian assets' in section 820-37). An 'overseas permanent establishment' of an entity is defined in subsection 995-1(1) as 'a permanent establishment of the entity that is in a country other than Australia'.

Subsections 820-37(2) and (3) refer to 'foreign permanent establishments' of an Australian entity. However, this expression is not defined in subsection 995-1(1), nor is it used elsewhere in the ITAA 1997 (or the ITAA 1936).

It is clear that the two expressions are in practical terms describing the same concept. The amendment therefore replaces '*foreign permanent establishments' with '*overseas permanent establishments'.

[Schedule 7, item 61, subsections 820-37(2) and (3)]

Subsection 820-946(3) forms part of the definition of 'cost-free debt capital' (see subsection 820-946(2)). Subsection (3) states that it covers a debt interest or equity interest held 'at that time'. Originally, it referred to the 'particular time' mentioned in subsection (2), but the later addition of subsection (2A) has made it less clear to what it refers. This amendment clarifies (consistent with the policy intent) that it refers to the times in both subsections (2) and (2A).

[Schedule 7, item 62, subsection 820-946(3)]

[Schedule 7, item 63]

[Schedule 7, item 64]

Subsection 995-1(1) at present has duplicate definitions of 'GST joint venture'. The first definition reads ' GST joint venture has the meaning given by section 51-5 of the *GST Act'. It was inserted by the A New Tax System (Pay as You Go) Act 1999 and was effective from 22 December 1999.

The second definition reads ' GST joint venture has the meaning given by section 195-1 of the *GST Act'. It was inserted by the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 effective from 1 July 2000.

The definitions are essentially the same because section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 refers to the meaning given by section 51-5.

This amendment repeals the second definition.

[Schedule 7, item 65, subsection 995-1(1)]

[Schedule 7, item 66]

The current definition of 'member' uses the word 'person' in relation to a copyright collecting society. A person is a company or individual. This means that a reference to a 'person' could at present prevent the definition covering members that were trusts or partnerships.

The amendment replaces the words 'person who' with 'entity that'.

[Schedule 7, item 67, subsection 995-1(1)]

Subsection 995-1(1) at present has three separate definitions of 'share'. This amendment consolidates the definitions without changing their meaning.

[Schedule 7, item 68, subsection 995-1(1)]

Section 3 repeals the Income Tax (Non-resident Dividends and Interest) Act 1967 and the Income Tax (Non-resident Dividends and Interest) Act 1973 . Since that repeal occurred over 30 years ago, section 3 is now inoperative.

[Schedule 7, item 69, section 3]

Section 4 at present refers to the ' Income Tax Assessment Act 1936 -1974', which is an outdated way of citing the ITAA 1936.

[Schedule 7, item 70, section 4]

Section 7 lists rates of withholding tax. Subparagraph 7(a)(i) is inoperative because the rate it applies has been superseded by the double tax agreement with Papua New Guinea.

[Schedule 7, item 71, paragraph 7(a)]

Section 8 deems the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 not to be an Act declaring rates of income tax for the purposes of section 104 and subsection 221YB(3) of the ITAA 1936. As those provisions have been repealed, the section is inoperative.

[Schedule 7, item 72, section 8]

3(1) ( CS/RA component definition)

3(1) ( EIB component definition)

3(1) ( general fund component definition)

3(1) ( NCS component definition)

3(1) ( registered organisation definition)

3(1) ( RSA category A component definition)

3(1) ( RSA category B component definition)

3(1) ( RSA combined component definition)

3(1) ( RSA component ) definition

3(1) ( standard component definition)

23(1A)

23(2)(a) and (b)

23(2)(c), (ca) and (d)

23(3), (4), (4A) and (4B)

23(4BA), (4C), (4D), (5) and (6)

23(6) (as renumbered)

23A

23A(a) and (b)

23B and 23C

29(2)(c)(iii)

29(2)(c)(iv)

Subsection 3(1) of the Income Tax Rates Act 1986 has the definitions for that Act. Several definitions are no longer needed. Some definitions require modification to remove the part of the definition that is no longer operative.

The provisions to be repealed relate to the former Divisions 8 and 8A of Part III of the ITAA 1936 concerning life assurance companies and the annuity and insurance business of certain organisations.

The repeal of paragraph 23(2)(a) and subsection 23(3) relates to the fact that there is no longer a separate tax rate for private companies.

These amendments apply to assessments for the 2007-08 income year and later income years. In practical terms, the provisions being repealed in relation to the former Divisions 8 and 8A have no effect in relation to assessments after the 1999-2000 income year (or the 2000-01 income year for certain entities with substituted accounting periods).

The repeal of these provisions does not prevent the making of amended assessments for income years for which Divisions 8 and 8A applied if the taxation law otherwise permitted the making of those amended assessments.

[Schedule 7, items 73 to 96, subsections (3)(1) and 23(1A), paragraphs 23(2)(a) to (d), subsections 23(3) to (6), section 23A, paragraphs 23A(a) and (b), sections 23B and 23C, and subparagraphs 29(2)(c)(iii) and (iv)]

[Schedule 7, item 97, heading to Division 136]

Note 2: section 701C-15 (heading)

These changes are not done by formal amendment given that section headings are not part of the Income Tax (Transitional Provisions) Act 1997 , as per subsection 13(3) of the Acts Interpretation Act 1901 .

[Schedule 7, sections 701C-10 and 701C-15]

[Schedule 7, item 98]

14ZQ (paragraphs (b) and (g) of delayed administration (trustee) objection definition)

Section 14ZQ of the TAA 1953 defines terms for Part IVC of that Act. It has separate definitions of 'delayed administration (beneficiary) objection' and 'delayed administration (trustee) objection'. The definitions are virtually the same and refer in part to repealed Acts.

The Inoperative Provisions Act repealed paragraphs (c) to (f) of the definition of delayed administration (beneficiary) objection. Paragraphs (c) to (f) of the definition of delayed administration (trustee) objection should also have been repealed and now are.

Other amendments consequentially re-letter the remaining paragraphs.

[Schedule 7, items 99 to 101, section 14ZQ]

[Schedule 7, item 102, subsection 288-80(4) in Schedule 1]

Section 9 is concerned with entitlements to interest. The word 'time' is currently missing from paragraph 9(6)(b). The wording at present reads, '...at a later (in this subsection called the offset time ), the company...'.

[Schedule 7, item 103, paragraph 9(6)(b)]

At present, provisions that impose penalties and fines are expressed in some cases as dollar amounts and in others as penalty units.

Section 4AB of the Crimes Act 1914 already notionally converts penalties expressed in dollar amounts to penalty units using a formula. For example, a penalty expressed as

These amendments do not change the amounts payable as penalties.

[Schedule 7, item 104]