INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 77F   MONEY PAID BEFORE 1 JULY 1991 ON SHARES IN MANAGEMENT AND INVESTMENT COMPANIES  

77F(1)   [Definitions]  

In this section:

"Act"
means the Management and Investment Companies Act 1983 ;

"agreement"
means:

(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; or

(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise;

"approved capital"
has the same meaning as in the Act;

"Board"
means the Management and Investment Companies Licensing Board established by section 5 of the Act;

"licence"
has the same meaning as in the Act;

"licensee"
means a company holding a licence;

"owner"
includes a beneficial owner;

"prescribed share capital"

"private company"
means a company other than one whose shares are listed for quotation in the official list of a stock exchange in Australia or elsewhere;

"private trust estate"
means a trust estate, other than a unit trust whose units are:

(a) listed for quotation in the official list of a stock exchange in Australia or elsewhere; or

(b) ordinarily available for subscription or purchase by the public;

77F(2)   [Interpretation]  

In this section:

(a) a reference to a fully paid-up share, in the case of a share issued at a premium, is a reference to a share the nominal value of which and the premium on which have been paid;

(b) a reference to moneys paid on shares, in relation to a company, is a reference to moneys that were or are paid to the company after 13 September 1983 and before 1 July 1991 in respect of shares in the company (whether on account of the nominal values of the shares or by way of premiums) by the owners of the shares, but does not include moneys paid to the company:

(i) in respect of shares issued on or before 13 September 1983; or

(ii) in respect of shares issued after 13 September 1983, if the terms of the issue were announced on or before, or the shares were issued pursuant to an agreement (other than the constituent document of the company) entered into on or before, that day;

(c) a reference to moneys unpaid on a share, in the case of a share issued at a premium, includes a reference to any amount of the premium that is unpaid;

(d) a reference to paying off a share, in the case of a share issued at a premium, includes a reference to paying off money paid as a premium on the share;

(e) a reference to a share in a licensee is a reference to a share in the share capital of the licensee; and

(f) a reference to the sale, or the disposal, of a share in a licensee includes a reference to the sale, or the disposal, of a share in a former licensee.

77F(3)   [No deduction]  

Where moneys paid on a share in a company (whether on application for or allotment of the share, to meet calls or otherwise) were not or are not applied by the company towards the paid-up value of the share or as a premium on the share, the moneys shall, for the purposes of this section, be deemed not to have been paid on the share.

77F(4)   [Deduction]  

The amount of any moneys paid on shares by a taxpayer in a year of income to a licensee is, subject to this section, an allowable deduction to the taxpayer in respect of the year of income.

77F(5)   [Reduced deduction]  

Where under this section a deduction in respect of moneys paid on a share in a licensee by a taxpayer in a year of income has been allowed or would, but for this subsection, be allowable, to the taxpayer in respect of the year of income and:

(a) the taxpayer sells or otherwise disposes of the share before the expiration of 2 years after the day that is the prescribed day in relation to the sale or disposal;

(b) the taxpayer sells or otherwise disposes of the share on the expiration of 2 years, or after the expiration of 2 years and before the expiration of 3 years, after the day that is the prescribed day in relation to the sale or disposal; or

(c) the taxpayer sells or otherwise disposes of the share on the expiration of 3 years, or after the expiration of 3 years and before the expiration of 4 years, after the day that is the prescribed day in relation to the sale or disposal;

the amount of the deduction in respect of the moneys paid on the share so allowed or allowable, as the case may be, to the taxpayer in respect of the year of income shall be reduced by an amount equal to:

(d) if paragraph (a) applies in relation to the share - the amount of the deduction;

(e) if paragraph (b) applies in relation to the share - one-half of the amount of the deduction; or

(f) if paragraph (c) applies in relation to the share - one-quarter of the amount of the deduction.

77F(6)   [Prescribed day]  

A reference in subsection (5) to the prescribed day, in relation to the sale or disposal by a taxpayer of a share in a licensee, is a reference to:

(a) where, immediately before the day on which the licence was granted, the share was a fully paid-up share - the day on which the licence was granted; or

(b) where paragraph (a) does not apply:

(i) if, immediately before the sale or disposal, the share was a fully paid-up share - the day on which the share became fully paid-up; or

(ii) if, immediately before the sale or disposal, the share was not a fully paid-up share - the latest day before the sale or disposal on which money was paid on the share.

77F(7)   [Disposal pursuant to an option]  

Where shares are sold or otherwise disposed of pursuant to an option or agreement, this section has effect as if the shares had been sold or otherwise disposed of, as the case may be, on the day on which the option was granted or the agreement was entered into.

77F(8)   [Deemed disposal]  

For the purposes of subsection (5):

(a) where a company redeems shares in the company, the owner of the shares shall be deemed to have disposed of the shares on the day on which the shares were redeemed;

(b) where a company reduces its share capital and, by reason of the reduction, shares are cancelled or wholly paid-off, the owner of the shares shall be deemed to have disposed of the shares on the day on which the shares were cancelled or wholly paid-off;

(c) where a company reduces its share capital and, by reason of the reduction, shares are partly paid-off, the owner of the shares shall be deemed to have disposed of, on the day on which the shares were partly paid-off, so many of the shares as bears to the total number of the shares the same proportion as the amount of moneys paid-off on the shares bears to the amount of moneys paid on the shares; and

(d) where a share in a company is forfeited by reason of a failure to pay a call on the share, the owner of the share shall be deemed to have disposed of the share on the day on which the share was forfeited.

77F(9)   [Deemed disposal]  

For the purposes of subsection (5), where the Board:

(a) revokes a licence pursuant to section 23 of the Act; or

(b) refuses to renew a licence pursuant to section 25 of the Act;

every owner of shares in the licensee shall be deemed to have disposed of his shares on such day as is determined by the Board in writing for the purposes of the application of this subsection in relation to the revocation of, or refusal to renew, the licence, being a day:

(c) not earlier than the earliest day on which an event occurred, or a state of affairs came into existence, constituting the ground, or one of the grounds, for the revocation of, or refusal to renew, the licence; and

(d) not later than the day on which the licence is revoked or expires, as the case may be.

77F(10)   [Disposal where interposed entity]  

Where:

(a) under this section a deduction in respect of moneys paid on shares in a licensee in a year of income has been allowed or would, but for this subsection, be allowable, to a private company, a partnership or the trustee of a private trust estate in respect of the year of the income; and

(b) on a day (in this subsection referred to as the ``relevant day'' ) after those moneys were paid, a person (in this subsection referred to as the ``vendor'' ) who, at the time when those moneys were paid, was the owner of shares, or of an interest in shares, in the private company, or was the owner of an interest in the partnership or trust estate, sells or otherwise disposes of all or any of his shares or the whole or a part of his interest in the shares, or in the partnership or trust estate, as the case may be;

then, for the purposes of subsection (5), the private company, the partnership or the trustee, as the case requires, shall be deemed to have disposed of, on the relevant day, so many of the shares in the licensee referred to in paragraph (a) as the Commissioner considers appropriate, having regard to:

(c) the period during which the vendor was the owner of the shares, or of the interest, sold or disposed of by him;

(d) the nature and extent, both before and after that sale or other disposition, of the vendor's ownership of, and of any interest in, shares in the private company, or interest in the partnership or trust estate, as the case requires;

(e) any benefit derived, or that would be derived, directly or indirectly, by the vendor by reason of the allowing of the deduction referred to in paragraph (a);

(f) the extent to which, on the relevant day, the assets of the private company, partnership or trust estate, as the case requires, consisted of shares in the licensee, or former licensee, as the case requires; and

(g) such other matters as the Commissioner considers relevant.

77F(11)   [Interest]  

A reference in subsection (10) to an interest in a share or in a partnership or trust estate includes an interest that is held indirectly through one or more interposed companies, partnerships or trusts.

77F(12)   [Change of ownership on death]  

Where, by reason of the death of a person, a change in the ownership of a share or an interest occurs, the person shall not, for the purposes of this section, be taken to have disposed of the share or the interest.

77F(13)   [No deduction]  

Notwithstanding any other provision of this section:

(a) where, immediately before moneys were paid on shares in a licensee by a taxpayer, the aggregate of the amount of paid-up share capital of the licensee and of all the amounts paid as premiums on shares in the licensee (and not paid-off by the licensee by way of a reduction of share capital) exceeded the approved capital of the licensee, a deduction in respect of those moneys is not allowable, and shall be deemed not to have been allowable, under this section to the taxpayer in respect of any year of income; and

(b) where, by reason of the payment of moneys on shares in a licensee by a taxpayer, the aggregate of the amount of paid-up share capital of the licensee and of all the amounts paid as premiums on shares in the licensee (and not paid-off by the licensee by way of a reduction of share capital) exceeds the approved capital of the licensee, so much of the amount of the moneys paid on the shares as is equal to the amount of that excess is not allowable, and shall be deemed not to have been allowable, as a deduction under this section to the taxpayer in respect of any year of income.

77F(14)   [No deduction]  

Where:

(a) a deduction in respect of moneys paid on a share in a licensee has been allowed, or is allowable, under this section to a taxpayer in respect of any year of income; and

(b) the taxpayer sells or otherwise disposes of the share;

a deduction under this section is not allowable in respect of any moneys paid on the share by a person who becomes the owner of the share by reason of that or any subsequent sale or disposal.

77F(15)   [Moneys paid before grant of licence]  

Where:

(a) at a time before a company is granted a licence under section 21 of the Act, moneys were paid on a share in the company;

(aa) the company is granted a licence before 1 July 1991; and

(b) after the grant of the licence, the Board notifies the Commissioner in writing that, in the opinion of the Board, the moneys were paid in anticipation of, or to ensure that the company would be eligible for, the grant of a licence;

this section has effect as if the moneys had been paid on a share in a licensee.

77F(16)   [Board to consider certain matters]  

In forming an opinion for the purposes of subsection (15) with respect to moneys paid on a share in a company, the Board shall have regard to:

(a) the date or dates on which the moneys were paid;

(b) the date on which an application for a licence by the company was made under subsection 20(1) of the Act;

(c) the business or businesses in which the company was engaged on the dates referred to in paragraphs (a) and (b); and

(d) such other matters as the Board considers relevant.

77F(17)   [Year deduction allowable]  

Where:

(a) by reason of subsection (15), a deduction is allowable under this section in respect of moneys paid by a taxpayer on a share in a company at a time before the company was granted a licence under section 21 of the Act; and

(b) the moneys were paid in any year of income of the taxpayer (in this subsection referred to as the ``payment year'' ) preceding the year of income of the taxpayer in which the licence was granted (in this subsection referred to as the ``licence year'' );

the deduction is not allowable to the taxpayer in respect of the payment year but is allowable to the taxpayer in respect of the licence year.