House of Representatives

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

General outline and financial impact

General outline and financial impact

Interest withholding tax exemptions

Schedule 1 to this bill amends the IWT provisions of the ITAA 1936 to:

•

exclude certain associates from the associates prohibitions contained in section 128F;

•

restore the concessional treatment under section 128F to certain securities by exempting from IWT gains deemed to be interest under section 128AA; and

•

exempt from IWT interest derived by a non-resident on nostro accounts held by financial institutions.

Date of effect: The amendments to exclude certain associates will apply to all new debentures issued after 29 August 2001 and to pre-existing issues that did not fail the public offer test. The amendments to restore the concessional treatment under section 128F to certain securities caught by section 128AA will apply to amounts of deemed interest paid on or after 29 August 2001. The nostro account amendments will apply to interest paid on nostro accounts on or after 29 August 2001.

Proposal announced: The proposal was announced by former Assistant Treasurer and former Minister for Financial Services and Regulation in Press Release No. 42 of 29 August 2001.

Financial impact: The revenue cost of these measures is estimated to be $10 million per annum.

Compliance cost impact: The amendments will reduce and eliminate compliance costs.

Summary of regulation impact statement

Regulation impact on business

Impact: These proposals will enhance Australia's development as a centre for financial services in the region by removing tax impediments and reducing and eliminating compliance costs.

Main points:

•

Excluding certain associates from the associates prohibitions contained in section 128F will remove a perceived impediment for companies issuing debentures under that section in Australia. This will make it easier for companies to issue IWT-free debentures in Australia and thereby encourage this activity. This will further assist in integrating the domestic and offshore corporate debt markets.

•

Restoring the concessional treatment under section 128F to certain securities by exempting from IWT gains deemed to be interest under section 128AA will benefit Australian entities which issue these securities under section 128F, non-residents who acquire them and residents who acquire the securities from non-residents before their maturity.

•

Exempting from IWT interest paid on nostro accounts will benefit Australian banks and financial institutions which provide finance on a commercial basis as it will eliminate the compliance costs imposed in meeting the IWT obligation associated with these accounts.

CGT exemption for certain compensation payments

Schedule 2 to this bill amends the CGT provisions of the ITAA 1997 to provide a CGT exemption for payments received by Australian residents under the GFLCP.

Date of effect: The amendment will apply to assessments for the 2001-2002 income year and later income years.

Proposal announced: The amendment was announced by the former Assistant Treasurer, Senator the Hon. Rod Kemp, in Assistant Treasurer's Press Release No. 52 of 18 October 2001.

Financial impact: The amendment is expected to cost less than $1 million per year.

Compliance cost impact: Nil.

Friendly society investment products

Schedule 3 to this bill amends the ITAA 1936 and the ITAA 1997 so that, from 1 January 2003, friendly societies will be allowed a deduction for investment income paid or credited to recipients of special purpose investment products (income bonds, scholarship plans and funeral policies) where that income has been included in the assessable income of the friendly society.

Schedule 3 also clarifies the taxation treatment of distributions paid from these products.

Date of effect: 1 January 2003.

Proposal announced: Minister for Revenue and Assistant Treasurer's Press Release No. C46/02 of 14 May 2002.

Financial impact: None. There may be a small unquantifiable bring forward of revenue.

Compliance cost impact: The compliance costs will be minimal.

Summary of regulation impact statement

Regulation impact on business

Impact: Low.

Main points:

•

Friendly societies will need to make minor system changes to allow deductions for investment income when they are paid or credited to recipients of affected policies.

•

Friendly societies will incur some compliance costs notifying recipients of the changes to the taxation treatment of their product.

Goods and services tax

Government amendments to the Taxation Laws Amendment Bill (No. 6) 2002 adds Schedule 4 to this bill. Schedule 4 amends the GST Transition Act, so that an entity is not entitled to claim an input tax credit for the acquisition of CTP insurance where the acquisition relates to a period of insurance that commences before 1 July 2003. That is, input tax credits will be denied because of the commencement date of the CTP insurance rather than payment date for the acquisition of the CTP insurance.

Date of effect: The amendments apply, and are taken to have applied, in relation to net amounts for tax periods starting on, or after, 1 July 2000.

Proposal announced: Not previously announced.

Financial impact: $5 million in the first year after the transition period ends.

Compliance cost impact: Reduction in compliance costs for providers of CTP insurance.

Chapter 1 - Interest withholding tax exemptions

Outline of chapter

1.1 Schedule 1 to this bill explains amendments to Division 11A of Part III of the ITAA 1936 that will remove certain impediments to Australian businesses raising finance and reduce certain compliance costs. The measures will further enhance Australia's development as a centre for financial services in the Asia-Pacific region.

Context of amendments

1.2 The amendments explained in this chapter give effect to three measures announced by the former Assistant Treasurer and the former Minister for Financial Services and Regulation in Press Release No. 42 of 29 August 2001 which relate to:

•

the associates prohibitions contained in section 128F of the ITAA 1936;

•

deemed interest payments under section 128AA of the ITAA 1936 and the interaction with section 128F; and

•

interest paid on nostro accounts.

1.3 Although each of the measures is distinct, they all relate to the imposition of IWT.

What is IWT?

1.4 The taxation of Australian sourced interest paid or credited to non-residents, and residents operating through offshore permanent establishments, is subject to the IWT provisions contained in Division 11A of Part III of the ITAA 1936. These provisions provide, in conjunction with the Income Tax (Dividends, Interest and Royalties) Withholding Tax Act 1974, that the recipient of Australian sourced interest is subject to WHT on the gross amount paid or credited. A rate of 10% of the gross amount of the interest is imposed. The obligation for collecting the IWT is placed on the person making the payment.

The associates tests

What is section 128F?

1.5 Section 128F of the ITAA 1936 provides an exemption from IWT where an Australian resident company or a non-resident company carrying on business at or through a permanent establishment in Australia issues debentures and the issue satisfies requirements of the public offer test contained in subsection 128F(3) or (4). In the absence of the exemption, IWT would be payable on the interest paid to foreign debenture holders.

What are the associates tests

1.6 Under subsection 128F(5) an issue of debentures will fail the public offer test, with consequential loss of eligibility for the exemption, if at the time of issue the company was aware or suspected that the debentures would be acquired by the issuing company's associates other than associates acting in the capacity of a dealer, manager or underwriter. Additionally, subsection 128F(6) denies the exemption if the issuing company was aware or suspects that the interest in respect of the debentures was paid to an associate of the company. For ease of explanation, these prohibitions will be referred to in this chapter as the 'associates tests'.

1.7 Amendments to the ITAA 1936 were made in 1999 to widen the IWT exemption provided under section 128F by removing:

•

the requirement that debentures be issued outside Australia and that interest be paid outside Australia; and

•

the restriction prohibiting the acquisition of debentures by Australian residents.

1.8 These amendments implemented parts of the 'Australia - Regional Financial Centre' component of the Investing for Growth statement announced by the Government on 8 December 1997. Those measures were aimed at making Australia a more attractive regional financial centre by building on Australia's existing advantages to ensure its participation in the increasing global trade in financial services.

1.9 Despite these changes, major Australian issuers are not issuing debentures in Australia because of the perceived risk of breaching the associates tests. This risk primarily arises where the issuer has Australian associates that are fund managers, custodians, nominees or superannuation funds that are independently required to take a weighting in major new Australian debenture issues. In these cases the associates of the issuer hold the debentures for the benefit of another party. Australian issuers indicate that they are continuing to issue into overseas markets rather than to issue domestically and expose themselves to that risk (the risk is much lower in the former case). This is frustrating the Government's policy intention behind the 1999 amendments.

1.10 A similar difficulty arises in relation to offshore issues of debentures. Offshore associates of major Australian issuers which act in the capacity of clearing houses, paying agents, custodians or funds managers also hold the debentures for short periods or in a non-beneficial capacity. There is some concern that these associates will acquire the debentures in an offshore issue and so put at risk the IWT exemption.

1.11 The associates tests will be amended to remove the perceived impediment for companies issuing debentures in Australia and remove the remaining concerns when issuing offshore. This will make it easier for companies to issue IWT-free debentures in Australia and thereby encourage this activity and reduce borrowing costs. It will also facilitate issues offshore. The amendments will further assist in integrating the domestic and offshore corporate debt markets by allowing companies to issue debt on equal terms in both markets.

Deemed interest payments under section 128AA

1.12 The interaction between section 128AA of the ITAA 1936 and section 128F is also frustrating the implementation of the 'Australia - Regional Financial Centre' measures.

1.13 Under section 128AA, where a security is sold and the transfer price of a qualifying security exceeds either the issue price or the reduced issue price of a partially redeemed security the excess is deemed to be interest income which may be subject to IWT. Section 128AA hampers the concessional treatment offered by section 128F when a non-resident on-sells a debenture issued under section 128F to an Australian resident before the debenture's maturity date. The sale triggers section 128AA to impose WHT on part of the payment made to the non-resident for the debenture. In these circumstances the concession provided by section 128F is not available because it is not the issuing company making the payment to the non-resident.

1.14 Restoring the concessional treatment will enhance the liquidity of these securities issued under section 128F and thereby improve access to global capital market funding for Australian businesses. Non-residents who acquire these securities will not be subject to WHT when they sell them and residents who acquire the securities from non-residents before their maturity will be relieved of the compliance costs associated with deducting and remitting WHT.

Interest paid on nostro accounts

What are nostro accounts?

1.15 Broadly speaking, nostro accounts are foreign currency denominated accounts maintained by ADIs with foreign banks for the purpose of settling foreign currency transactions.

1.16 IWT is currently payable on interest paid by financial institutions to an overseas bank if their nostro account held with that bank is overdrawn. The overdraft generally results from a short payment (or no payment) by an overseas counterparty depositing funds into the nostro account. These overdrafts are settled on notification and are not outstanding over considerable amounts of time. The compliance costs imposed on financial institutions in meeting the IWT obligation are very high relative to the amount of tax collected. Exempting interest paid on nostro accounts from IWT will eliminate the compliance costs imposed in meeting the current IWT obligation associated with these accounts.

Summary of new law

1.17 This bill amends the WHT provisions in Division 11A of the ITAA 1936 to:

•

exclude certain associates from the associates prohibitions contained in section 128F;

•

restore the concessional treatment under section 128F to certain securities by exempting gains deemed to be interest under section 128AA from IWT; and

•

exempt interest derived by a non-resident on nostro accounts held by certain financial institutions from IWT.

Comparison of key features of new law and current law

Detailed explanation of new law

The associates tests

1.18 For the purposes of section 128F the term 'associates' has the meaning given by section 318 of the ITAA 1936 with certain modifications. The definition of associates in section 318 is very broad.

1.19 Subsections 128F(5) and (6) rely on this definition to prevent debentures being issued and interest being paid to entities that are associates of the company issuing the debentures. The Government has decided to amend subsections 128F(5) and (6) in order to remove the perceived impediments for companies issuing debentures in Australia and remove the remaining concerns with offshore issues. The amendments make a distinction between associates operating in Australian and those that operate offshore. Broadly speaking, onshore associates are excluded from the associates test. However, offshore associates are only excluded if they acquire the debenture or receive the interest whilst acting in certain capacities.

What is the public offer test?

1.20 There are a number of tests listed in subsections 128F(3) and (4) which are collectively referred to as the 'public offer' test. Companies are required, at the time of issuing debentures, to satisfy at least one of these tests in order to qualify for the section 128F exemption. The purpose of these tests is to ensure that lenders on the capital markets are aware that a company is offering debentures for issue.

Subsection 128F(5)

1.21 As a result of the amendments, the issue of a debenture will not satisfy the public offer test if, at the time of issue, the company knew, or had reasonable grounds to suspect all of the following:

•

the debenture will be acquired by an associate and that the associate is either:

•

a non-resident and the debenture is not acquired in carrying on business at or through a permanent establishment in Australia; or

•

an Australian resident and the debenture is acquired in carrying on business at or through a permanent establishment in a country outside Australia; and

•

the debenture is not acquired by the associate in the capacity of:

•

a dealer, manager or underwriter in relation to the placement of the debenture; or

•

a clearing house, custodian, funds manager or responsible entity of a registered scheme.

[Schedule 1, items 6, 8 and 9, subsection 128F(5) and definition of 'registered scheme' and 'responsible entity' in subsection 128F(9)]

1.22 In effect, this will mean that a company will be able to issue a debenture to the following associates without failing the public offer test:

•

an Australian resident that does not acquire the debenture in carrying on business at or through a permanent establishment in a country outside Australia;

•

an Australian resident that acquires the debenture in carrying on business at or through a permanent establishment in a country outside Australia if the debenture is acquired in the capacity of:

•

a dealer, manager or underwriter in relation to the placement of the debenture; or

•

a clearing house, custodian, funds manager or responsible entity of a registered scheme;

•

a non-resident that acquires the debenture in carrying on business at or through a permanent establishment in Australia; and

•

a non-resident that acquires the debenture in carrying on business outside Australia if the debenture is acquired in the capacity of:

•

a dealer, manager or underwriter in relation to the placement of the debenture; or

•

a clearing house, custodian or funds manager.

Subsection 128F(6)

1.23 The exemption will not apply to interest paid by a company if, at the time of the payment, the company knows, or has reasonable grounds to suspect all of the following:

•

the recipient of the interest is an associate and the associate is either:

-

a non-resident and the payment is not received in respect of a debenture that was acquired in carrying on business at or through a permanent establishment in Australia; or

-

* an Australian resident and the payment was received in respect of a debenture that was acquired in carrying on business at or through a permanent establishment in a country outside Australia; and

•

the associate does not receive the payment in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered scheme.

[Schedule 1, items 7 to 9, subsection 128F(6) and definition of 'registered scheme' and 'responsible entity' in subsection 128F(9)]

1.24 As a result of the amendments, interest payments to the following associates will be eligible for the exemption if the issue of the debenture otherwise satisfies the requirements of section 128F:

•

an Australian resident that does not acquire the debenture in carrying on business at or through a permanent establishment in a country outside Australia;

•

an Australian resident that acquires the debenture in carrying on business at or through a permanent establishment in a country outside Australia if the interest is received in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered scheme;

•

a non-resident that acquires the debenture in carrying on business at or through a permanent establishment in Australia; and

•

a non-resident that acquires the debenture in carrying on business outside Australia if the interest is received in the capacity of a clearing house, paying agent, custodian or funds manager.

Paying agent

1.25 It is not uncommon for an issuer of debentures to appoint another entity to make payments to debenture holders on its behalf. Paying agents acting in that capacity do not acquire the debentures. Rather, they receive the interest payments from the issuer which they then distribute to the debenture holders. For this reason, interest payments made to paying agents operating offshore will retain the exemption [Schedule 1, item 7, subsection 128F(6)]. However, the issue of a debenture to an offshore paying agent will not satisfy the public offer test because acting in that capacity does not require the paying agent to acquire the debentures [Schedule 1, item 6, subsection 128F(5)].

Deemed interest payments under section 128AA

1.26 This bill amends section 128F in order restore the concessional treatment to amounts that are deemed interest under section 128AA where the deemed interest is paid on a debenture which complies with the section 128F requirements. Specifically, the section 128F exemption will also apply where:

•

income derived on the sale of a debenture is deemed to be interest under section 128AA; and

•

at the time of issue the debenture satisfied the public offer test in section 128F.

[Schedule 1, item 5, subsection 128F(1B)]

No associates test requirement when interest is paid

1.27 Importantly, although the issue of the debenture must have satisfied the associates test in subsection 128F(5) at the time of issue, there is no associates test applied when an amount deemed to be interest under section 128AA is paid. [Schedule 1, item 5, subsection 128F(1B)]

Interest paid on nostro accounts

1.28 Paragraph 128B(3)(gc) will exempt income that consists of interest derived on a nostro account by a non-resident from IWT. [Schedule 1, item 4, paragraph 128B(3)(gc)]

1.29 To qualify for the exemption the interest must be derived on a 'nostro account'. The term 'nostro account' is defined to mean an account:

•

that an ADI or non-ADI financial institution holds with a foreign bank and maintains for the sole purpose of settling international transactions; and

•

which is operated by the ADI or non-ADI financial institution on the basis that;

•

amounts deposited in the account are held in the account for no more than 10 days; and

•

any overdrafts on the account are repaid within 10 days.

[Schedule 1, item 3, definition of 'nostro account' in subsection 128A(1)]

1.30 An 'ADI' is a body corporate that is an authorised deposit-taking institution for the purposes of the Banking Act 1959 [Schedule 1, item 1, definition of 'ADI' in subsection 128A(1)]. A non-ADI financial institution is a registered entity within the meaning of the Financial Sector (Collection of Data) Act 2001, included as a Money Market Corporation in a list kept under that Act. This means that the exemption will be limited to merchant banks and similarly classified financial institutions that carry on the business of providing finance on a commercial basis, predominantly to unrelated parties [Schedule 1, item 2A, definition of 'non-ADI financial institution' in subsection 128A(1)]. These entities include Australian banking entities, foreign bank branches and merchant banks that carry on a general business of providing finance on a commercial basis. A 'foreign bank' is defined to mean a non-resident company that carries on banking business. There is no requirement for the foreign bank to be an ADI for the purposes of the Banking Act 1959 [Schedule 1, item 2, definition of 'foreign bank' in subsection 128A(1)]. Accordingly, interest paid by these financial institutions on nostro accounts held with foreign banks will qualify for the exemption.

Application and transitional provisions

1.31 The amendments to section 128F to exclude certain associates will apply to:

•

issues of debentures by a company on or after 29 August 2001; and

•

interest paid on or after 29 August 2001 by a company in respect of a debenture that satisfied the public offer test when it was issued. [Schedule 1, subitems 10(3) and (4)]

1.32 The amendments to restore the concessional treatment under section 128F to certain debentures caught by section 128AA will apply to the amount of the transfer price of a debenture that is, on or after 29 August 2001, deemed by section 128AA to be interest. [Schedule 1, subitem 10(2)]

1.33 The exemption for interest derived on nostro accounts in paragraph 128B(3)(gc) will apply to interest income derived on or after 29 August 2001. [Schedule 1, subitem 10(1)]

REGULATION IMPACT STATEMENT

Policy objective

1.34 The policy objective of these measures is to enhance Australia's development as a centre for financial services in the Asia-Pacific region. The proposed amendments will assist in improving Australia's capital markets by removing certain impediments to Australian businesses raising finance and by reducing and eliminating certain compliance costs.

Implementation options

1.35 Legislative amendments are necessary to implement the measures which were announced by former Assistant Treasurer and former Minister for Financial Services and Regulations in Press Release No. 42 of 29 August 2001. The amendments reflect the initiatives announced in that Press Release.

1.36 This bill amends the WHT provisions in Division 11A of the ITAA 1936 to:

•

exclude certain associates from the associates prohibitions contained in section 128F;

•

restore the concessional treatment under section 128F to certain securities by exempting from IWT gains deemed to be interest under section 128AA; and

•

exempt from IWT interest derived by a non-resident on nostro accounts held by banks and financial institutions which provide finance on a commercial basis.

Assessment of impacts

Impact group identification

1.37 The proposed amendments will affect larger Australian businesses that issue debentures under section 128F, their associates and entities who acquire those debentures. They will also impact on banks and financial institutions which provide finance on a commercial basis and maintain nostro accounts with foreign banks.

1.38 These entities will need to be aware of these measures in order to receive the benefits.

Analysis of costs / benefits

1.39 The proposed amendments will not create any new obligations or requirements for the entities impacted. The amendments will have the following benefits.

The associates tests

1.40 Prior to the 'Investing for Growth' statement in 1997, section 128F provided an exemption from IWT where a company issued debentures offshore and the issue satisfied certain requirements. Legislative changes enacted in 1999 as a result of the 'Investing for Growth' statement allow for comparable issues in Australia to be IWT-free.

1.41 Major Australian issuers are not issuing debentures in Australia because of the perceived risk of breaching certain restrictions in section 128F which do not allow debentures to be issued to or interest to be paid to associates. This risk primarily arises where the issuer has Australian subsidiaries that are fund managers, custodians, nominees or superannuation funds that are independently required to take a weighting in major new Australian debenture issues. In these cases the subsidiaries hold the debentures in a non-beneficial capacity.

1.42 Australian issuers indicate that they are continuing to issue into overseas markets rather than to issue domestically and expose themselves to that risk. This is frustrating the Government's policy intention behind the 1999 amendments.

1.43 Similarly, associates of major Australian issuers that are offshore which act in the capacity of clearing houses, paying agents, custodians and funds managers also hold the debentures for short periods or in a non-beneficial capacity. There is some concern that these associates will acquire the debentures in an offshore issue and so put at risk the IWT exemption.

1.44 The amendments to the associates prohibitions will remove the perceived impediment for companies issuing debentures in Australia. This will make it easier for companies to issue IWT-free debentures in Australia and thereby encourage this activity and reduce borrowing costs. It will also facilitate issues offshore. The amendments will further assist in integrating the domestic and offshore corporate debt markets.

Deemed interest payments under section 128AA

1.45 Under section 128AA where the transfer price of a qualifying security exceeds either the issue price or the reduced issue price of a partially redeemed security the excess is deemed to be interest income which may be subject to IWT. Section 128AA hampers the concessional treatment offered by section 128F when a non-resident on-sells a debenture issued under section 128F to an Australian resident before the debenture's maturity date. The sale triggers section 128AA to impose WHT on part of the payment made to the non-resident for the debenture. In these circumstances, the concession provided by section 128F is not available because it is not the issuing company making the payment to the non-resident.

1.46 Restoring the concessional treatment will enhance the liquidity of these securities issued under section 128F and thereby improve access to global capital market funding for Australian businesses. Non-residents who acquire these securities will not be subject to WHT and residents who acquire the securities from non-residents before their maturity will be relieved of the compliance costs associated with deducting and remitting WHT.

Interest paid on nostro accounts

1.47 IWT is currently payable on interest paid by financial institutions (i.e. Australian ADIs, Australian branches of foreign banks and financial institutions that carry on a general business of providing finance on a commercial basis) to an overseas bank if their nostro account (clearing account) held with that bank is overdrawn. The overdraft generally results from a short payment (or no payment) by an overseas counterparty depositing funds into the nostro account. The compliance costs imposed on financial institutions in meeting this IWT obligation are very high relative to the amount of tax collected. Exempting interest paid on nostro accounts from IWT will eliminate the compliance costs imposed in meeting the current IWT obligation associated with these accounts.

Impact on the ATO

1.48 There will be no systems changes for the ATO. Some ATO information publications may need to be modified to include references to the measures. There will also be a need for ATO staff to be trained on the amendments. However, these should have minimal cost impacts on administration and will be absorbed as part of business as usual.

Impact on revenue

1.49 The revenue cost of these measures is estimated to be $10 million per annum.

Consultation

1.50 Financial industry representatives have been consulted extensively over a number of years and have actively assisted in developing these initiatives.

Conclusion

1.51 These proposals will enhance Australia's development as a centre for financial services in the region by removing tax impediments and reducing and eliminating certain compliance costs. The legislation will take effect from 29 August 2001 as foreshadowed in Press Release No. 42 announcing the measures.

Chapter 2 - CGT exemption for certain compensation payments

Outline of chapter

2.1 This chapter explains the CGT exemption for payments received by Australian residents under the GFLCP.

Context of amendments

German Forced Labour Compensation Programme

2.2 The amendment provides a CGT exemption for payments received by Australian residents under the GFLCP. The purpose of the GFLCP is to provide financial compensation to former slave and forced labourers and certain other victims of the National Socialist period. The payments are made under the GFLCP through the Foundation, established under German law, or its partner organisations.

2.3 The GFLCP provides for two types of payments:

•

for personal wrong or injury (including slave or forced labour); and

•

for property damage or loss, where relief under other funds is not available.

2.4 The payments are made to victims of injustices suffered during the National Socialist period, to a relative of the victim or to the victim's heir.

Current tax law

2.5 GFLCP payments made to victims, their relatives or heirs are not subject to income tax, as they do not constitute income according to ordinary concepts. However, payments are subject to CGT in certain circumstances.

2.6 Personal wrong or injury payments made to the victim or to the victim's relative, and property damage or loss payments made to the former property owner, are exempt from CGT. However, the payments are subject to CGT when paid to the victim's heir who is not a relative (in the case of personal wrong or injury payments) and when paid to the former property owner's heir (in the case of property damage or loss payments), whether or not the heir is a relative (see section 118-37 of the ITAA 1997).

2.7 The amendment extends the current CGT exemption to the victim's heir who is not a relative, in the case of personal wrong or injury payments, and to the former property owner's relative or heir, in the case of property damage or loss payments.

Summary of new law

2.8 The amendment introduces a specific exemption from CGT for GFLCP payments received by Australian residents.

Comparison of key features of new law and current law

Detailed explanation of new law

2.9 A payment received by an Australian resident under the programme known as the GFLCP, from the Foundation or its partner organisations, is exempt from CGT. [Schedule 2, item 1]

'Remembrance, Responsibility and Future' Foundation

2.10 The Foundation was established by the German government and came into force on 12 August 2000. The purpose of the Foundation is to provide financial compensation to former slave and forced labourers and certain other victims of injustices suffered during the National Socialist period.

2.11 The GFLCP payments are made by one of the Foundation's partner organisations. There are seven partner organisations and each is responsible for payments to residents of a particular geographical region. GFLCP payments to Australian residents are made by the IOM.

2.12 Claims for GFLCP payments were required to be lodged by individual applicants with the relevant partner organisation by 31 December 2001. Claims were processed, and eligibility for payments determined, by the relevant partner organisation.

Reasons for payments

2.13 The GFLCP payments are in the nature of financial compensation for personal wrong or injury, or for loss of, or damage to, property.

2.14 Payments for personal wrong or injury include payments to a person relating to:

•

slave labour;

•

forced labour in industry, for a public authority, or in agriculture;

•

the death of, or severe damage to the health of, a child who was lodged in a home for children of slave or forced labourers; and

•

other personal injuries suffered as a result of National Socialist injustices, including being subjected to medical experiments.

2.15 Payments for property loss include payments to a person relating to:

•

property loss as a result of racial persecution, where relief under other funds is not available; and

•

other property loss suffered as a result of National Socialist injustices.

Payment recipients

2.16 GFLCP payments are made to the victims of Nationalist Socialist injustices. Where the victim has died after 15 February 1999, payments may be made to the victim's surviving relatives (including spouse, children and grandchildren and the victim's siblings) or to heirs named in a will.

Application and transitional provisions

2.17 The amendment applies to assessments for the 2001-2002 income year and later income years [Schedule 2, item 2]. No GFLCP payments were made before the closing date for applications, that is, 31 December 2001.

Chapter 3 - Friendly society investment products

Outline of chapter

3.1 Schedule 3 to this bill amends the ITAA 1936 and the ITAA 1997 so that, from 1 January 2003, friendly societies will be allowed a deduction for investment income paid or credited to recipients of special purpose investment products (income bonds, scholarship plans and funeral policies) where that income has been included in the assessable income of the friendly society.

3.2 Schedule 3 also clarifies the taxation treatment of distributions paid from these products.

Context of amendments

3.3 Currently, friendly societies are exempt from tax on:

•

amounts attributable to special purpose investment products issued before 1 December 1999;

•

amounts received before 1 January 2003 that are attributable to income bonds and funeral policies issued between 30 November 1999 and 1 January 2003; and

•

amounts received before 1 January 2003 that are attributable to scholarship plans issued between 30 November 1999 and 1 January 2003 if the friendly society that issued the plan is not carried on for profit or gain to individual members.

3.4 To reduce compliance costs, the current exemption will be extended so that it applies to special purpose investment products issued before 1 January 2003.

3.5 As a result of the removal of the tax exemption, from 1 January 2003, friendly societies will be allowed a deduction for investment income included in their assessable income that is paid or credited to:

•

recipients of special purpose investment products issued on or after 1 January 2003; and

•

recipients of scholarship plans issued before 1 January 2003 where the amounts that are attributable to those plans are not currently exempt from tax.

Summary of new law

3.6 Schedule 3 to this bill will amend the ITAA 1997 so that friendly societies will continue to be exempt from tax on:

•

amounts attributable to income bonds and funeral policies issued between 30 November 1999 and 1 January 2003; and

•

amounts attributable to scholarship plans issued between 30 November 1999 and 1 January 2003 if the friendly society that issued the plan is not carried on for profit or gain to individual members.

3.7 In addition, from 1 January 2003, friendly societies will be entitled to a deduction for investment income paid or credited on or after that date to:

•

special purpose investment products issued on or after 1 January 2003; and

•

scholarship plans issued before 1 January 2003 where the amounts that are attributable to those plans are not currently exempt from tax.

3.8 Schedule 3 will also amend the ITAA 1936 and the ITAA 1997 to clarify the taxation treatment of distributions paid from these products.

Comparison of key features of new law and current law

Detailed explanation of new law

Exempt income of friendly societies

3.9 Currently, paragraph 320-35(1)(f) of the ITAA 1997 exempts friendly societies from tax on:

•

amounts attributable to special purpose investment products issued before 1 December 1999;

•

amounts received before 1 January 2003 that are attributable to income bonds and funeral policies issued between 30 November 1999 and 1 January 2003; and

•

amounts received before 1 January 2003 that are attributable to scholarship plans issued between 30 November 1999 and 1 January 2003 if the friendly society that issued the plan is not carried on for profit or gain to individual members.

3.10 Paragraph 320-35(1)(f) will be amended to extend this exemption to:

•

amounts attributable to income bonds and funeral policies issued before 1 January 2003; and

•

amounts attributable to scholarship plans issued before 1 January 2003 provided that those amounts would have been exempt from income tax under section 50-1 if they had been received before 1 July 2001 (that is, if the friendly society that issued the plan is not carried on for profit or gain to individual members).

[Schedule 3, item 1, subparagraphs 320-35(1)(f)(ii) and (iii)]

Deduction for interest credited to income bonds

3.11 Section 320-110 allows friendly societies a deduction for interest credited to income bonds issued after 30 November 1999 where the interest accrues on or after 1 January 2003. This deduction is linked to the removal of the exemption on amounts derived by friendly societies that are attributable to these income bonds. Consequently, section 320-110 is amended to allow friendly societies a deduction for interest credited to income bonds issued on or after 1 January 2003. [Schedule 3, item 3, section 320-110]

Deduction for funeral policy payouts

3.12 As a consequence of the removal of the exemption on amounts derived by friendly societies that are attributable to funeral policies issued on or after 1 January 2003, friendly societies will be allowed a deduction for benefits paid in the income year to recipients of funeral policies issued on or after that date. [Schedule 3, item 5, section 320-111]

3.13 The amount of the deduction will be the benefit paid under the policy reduced by any part of the benefit that the friendly society has claimed, or can claim as a deduction under section 320-75. This part of the benefit represents the capital component of the premium paid in respect of the policy.

Example 3.1

Melissa takes out a funeral policy with Natasha Friendly Society on 14 December 2003 and pays a premium of $5,000. The premium includes an entry fee of $200. Therefore, Natasha Friendly Society includes $5,000 in its assessable income under paragraph 320-15(a) and is allowed a deduction for $4,800 under section 320-75.

Melissa dies on 14 September 2010 and Natasha Friendly Society pays $7,000 to Melissa's estate. Natasha Friendly Society can claim a deduction under section 320-111 for $2,200 (i.e. $7,000 - $4,800).

Deduction for scholarship plan payouts

3.14 Friendly societies will include in assessable income:

•

amounts attributable to scholarship plans issued on or after 1 January 2003; and

•

amounts attributable to scholarship plans issued before 1 January 2003 if those amounts are not exempt from income tax under paragraph 320-35(1)(f).

3.15 To avoid double taxation, from 1 January 2003 friendly societies will be allowed a deduction for benefits paid in the income year under a scholarship plan to, or on behalf of, students nominated under the plan. [Schedule 3, item 5, section 320-112]

3.16 The amount of the deduction will be the benefit paid under the plan reduced by any part of the benefit that the friendly society has claimed, or can claim as a deduction under section 320-75. This part of the benefit represents the capital component of the premium paid in respect of the plan.

3.17 If under a scholarship plan the investment income is paid to the nominated student and the capital component is returned to the investor, the friendly society will be entitled to a deduction for the full amount of the benefit paid to a nominated student.

3.18 If a nominated student does not qualify for benefits under a scholarship plan because he or she does not proceed to the specified level of education and some or all of the benefits accrued under the plan are paid back to the investor, the benefits under the plan are not applied for the specified purpose. In these circumstances, the life insurance policy will not qualify as a scholarship plan and the friendly society will not be entitled to a deduction for any part of the benefits paid to the investor.

Taxation of benefits paid from income bonds

3.19 Income bonds are defined in subsection 995-1(1) of the ITAA 1997 to be life insurance policies issued by friendly societies that have bonuses distributed regularly. Therefore, amounts credited to income bonds are non-reversionary bonuses and will continue to be included in the bond holder's assessable income under paragraph 26(i) of the ITAA 1936.

Taxation of benefits paid under funeral policies

3.20 Funeral policies are defined in subsection 995-1(1) to be life insurance policies issued by friendly societies for the sole purpose of providing benefits to pay for the funeral of the insured person.

3.21 Benefits paid in the income year to recipients of funeral policies issued on or after 1 January 2003 will be specifically excluded from being taxed as ordinary life insurance investment policy bonuses. [Schedule 3, item 7, subsection 26AH(1)]

3.22 Rather, benefits paid in the income year to recipients of funeral policies issued on or after 1 January 2003 will be included in assessable income under:

•

section 6-5;

•

section 102-5; or

•

section 15-55.

3.23 Section 6-5 includes ordinary income derived directly or indirectly from all sources in the assessable income of a resident of Australia. The full amount of a benefit paid under a funeral policy directly to a funeral director (including benefits paid as an assignee or a nominated beneficiary under the policy) is income according to ordinary concepts. Such amounts represent a payment for services rendered. Consequently, a funeral director will continue to include both the investment and capital component of the benefit paid under a funeral policy in assessable income.

3.24 Section 102-5 includes net capital gains in assessable income. However, section 118-300 prevents capital gains or losses made from the disposal, cancellation or transfer of an interest in a funeral policy from being taxed under the CGT provisions provided the gain or loss is made by:

•

the original beneficial owner of the policy; or

•

an entity that acquired the interest in the policy for no consideration.

3.25 Consequently, if a person pays an amount of money or other consideration to a previous owner to acquire rights or an interest in a funeral policy, the CGT provisions will continue to apply to any subsequent disposal of those rights or interest.

3.26 Section 15-55 will include benefits paid in the income year to recipients of funeral policies issued on or after 1 January 2003 where those benefits are not included in assessable income under section 6-5 or section 102-5. For example, the trustee of a policyholder's estate will include benefits paid under a funeral policy in the estate's assessable income under section 15-55. [Schedule 3, item 10, section 15-55]

3.27 The amount included in assessable income under section 15-55 will be the benefit paid by the friendly society reduced by any part of that benefit that reasonably relates to:

•

the return of the premiums paid by the policyholder in respect of the policy; and

•

any fees and charges deducted under the policy that are included in the friendly society's assessable income under paragraph 320-15(k).

[Schedule 3, item 10, section 15-55]

3.28 This will ensure that the amount included in assessable income is net of capital and fees paid under the policy.

Example 3.2

Melissa takes out a funeral policy with Natasha Friendly Society on 14 December 2003 and pays a premium of $5,000. The premium includes an entry fee of $200. Melissa dies on 14 September 2010 and Natasha Friendly Society pays $7,000 to Melissa's estate. The trustee of Melissa's estate will include $2,000 in the estate's assessable income (i.e. $7,000 - $5,000).

If Melissa had assigned her funeral policy to a funeral director, the trustee of Melissa's estate would not include any amount payable under the policy in the estate's assessable income. Instead, the funeral director would include the full amount received under the funeral policy (i.e. $7,000) in assessable income under section 6-5.

Taxation of benefits paid under scholarship plans

3.29 Scholarship plans are defined in subsection 995-1(1) to be life insurance policies issued by friendly societies for the sole purpose of providing benefits to help in the education of nominated beneficiaries. That definition will be amended to ensure that a life insurance policy will only qualify as a scholarship plan if it is not used as security for a loan on or after 1 January 2003. Scholarship plans issued on or after 1 January 2003 must contain a provision prohibiting the use of the plans as security for a loan. [Schedule 3, item 12, subsection 995-1(1)]

3.30 Benefits paid on or after 1 January 2003 in the income year under a scholarship plan to, or on behalf of, a student nominated under the plan will be included in the nominated student's assessable income. The amount included in assessable income will be the benefit paid by the friendly society reduced by any part of that benefit that reasonably relates to:

•

the return of the premiums paid by the investor in respect of the plan; and

•

any fees and charges deducted under the plan that are included in the friendly society's assessable income under paragraph 320-15(k).

[Schedule 3, item 10, section 15-60]

3.31 This will ensure that the amount included in assessable income is net of capital and fees paid under the plan.

3.32 A benefit will be paid under a scholarship plan on behalf of a student nominated under the plan if, for example:

•

the benefit is paid to the nominated student's parents or legal personal representative to reimburse education expenses incurred in relation to the nominated student; or

•

the benefit is paid directly to an educational institution to pay for education expenses of the nominated student.

3.33 Division 6AA of Part III of the ITAA 1936 essentially applies to ensure that unearned income derived by children under 18 years of age in excess of $416 is taxed at the highest marginal rate. Where a benefit is paid from a scholarship plan to, or on behalf of, a nominated student under 18 years of age, the amount of the benefit included in assessable income is subject to Division 6AA.

3.34 If a nominated student does not qualify for benefits under a scholarship plan because he or she does not proceed to the specified level of education and some or all of the benefits accrued under the plan are paid back to the investor, the benefits under the plan are not applied for the specified purpose. In these circumstances, the life insurance policy will not qualify as a scholarship plan and benefits paid under the policy will be taxed under section 26AH of the ITAA 1936 as ordinary life insurance investment policy bonuses. That is:

•

for plans held for 8 years or less, recipients will include bonuses in assessable income and receive a 30% rebate;

•

for plans held for 9 years, recipients will include two-thirds of the bonuses in assessable income and receive a 30% rebate in respect of the two-thirds taxable portion;

•

for plans held for 10 years, recipients will include one-third of the bonuses in assessable income and receive a 30% rebate in respect of the one-third taxable portion; and

•

for plans held for more than 10 years, recipients will be exempt from tax on bonuses paid on the policy.

Application and transitional provisions

3.35 The amendments apply from 1 January 2003. [Schedule 3, items 2, 6, 11 and 13]

Consequential amendments

Deductibility of claims paid

3.36 Section 320-80 of the ITAA 1997 allows life insurance companies (including friendly societies) a deduction for the risk component of claims paid under life insurance policies. Subsection 320-80(3) prevents life insurance companies from claiming a deduction for any other component of claims paid under life insurance policies.

3.37 Special purpose investment products of friendly societies qualify as life insurance policies. Therefore, consequential amendments will ensure that subsection 320-80(3) does not prevent friendly societies from claiming a deduction for benefits paid from special purpose investment products. [Schedule 3, items 4 and 5, subsections 320-110(2), 320-111(2) and 320-112(4)]

Guide material in the ITAA 1997

3.38 Section 10-5 contains a list of provisions about assessable income to assist users to find relevant sections of the income tax law. Consequential amendments will add references to section 15-55 and section 15-60 to that list of provisions. [Schedule 3, items 8 and 9, section 10-5]

REGULATION IMPACT STATEMENT

Background

3.39 Currently, friendly societies are generally exempt from tax on amounts attributable to special purpose investment products - that is, income bonds, scholarship plans and funeral policies.

3.40 The Review of Business Taxation recommended that, to ensure comparable tax treatment with other investment products, the current exemption applying to special purpose investment products issued by friendly societies be removed. To avoid double taxation, the Review of Business Taxation also recommended that an imputation system apply to benefits paid from these products.

3.41 Consistent with this recommendation, the current exemption applying to special purpose investment products issued by friendly societies has been removed from 1 January 2003. However, following concerns raised by industry about applying the imputation system to benefits paid from these products, the Government considered alternative options.

Policy objective

3.42 The policy objective is to ensure that there is no double taxation as a result of the removal of the friendly societies' tax exemption (i.e. to ensure that tax is not payable by both friendly societies and benefit recipients).

Implementation options

3.43 Two implementation options were considered.

3.44 Option 1 allows friendly societies a deduction for investment income paid or credited to special purpose investment products issued on or after 1 January 2003 and to scholarship plans issued before 1 January 2003 where the amounts that are attributable to those plans are not currently exempt from tax.

3.45 Holders of income bonds will continue to include investment income credited in their assessable income.

3.46 Where a nominated student qualifies for benefits under a scholarship plan, the student will include investment income paid under the plan in assessable income. Where a nominated student does not qualify for benefits under a scholarship plan, the policy will be treated for taxation purposes as an ordinary life insurance policy. Amounts paid in these circumstances will be taxed as follows:

•

for policies held for 8 years or less, recipients will include bonuses in assessable income and receive a 30% rebate;

•

for policies held for 9 years, recipients will include two-thirds of the bonuses in assessable income and receive a 30% rebate in respect of the two-thirds taxable portion;

•

for policies held for 10 years, recipients will include one-third of the bonuses in assessable income and receive a 30% rebate in respect of the one-third taxable portion; and

•

for policies held for more than 10 years, recipients are exempt from tax on bonuses paid on the policy.

3.47 If the recipient of the proceeds of a funeral policy is the trustee of the policyholder's estate, the trustee will be assessable on the investment return at the time of receipt. If the recipient is a funeral director, the whole of the proceeds (i.e. the capital and the investment component) will be included in the funeral director's assessable income.

3.48 Under option 2, the proposals recommended by the Review of Business Taxation would be implemented. That is, from 1 January 2003 friendly societies would maintain a separate franking account for special investment products that are subject to the new tax treatment. They would:

•

credit this account with the amount of tax they pay on investment income received on or after 1 January 2003 that is attributable to these products; and

•

debit this account and attach refundable imputation credits when they credit or pay this investment income to recipients.

3.49 Recipients would include the investment income, grossed-up by imputation credits, in assessable income when the income is credited or paid. Tax payable by recipients would be partly or fully offset by refundable imputation credits attached to the investment income depending on the marginal tax rate of the recipients.

Assessment of impacts

Impact group identification

3.50 The proposals will impact on friendly societies that offer special investment products, financial planners, income bond holders, students nominated under a scholarship plan, funeral directors, trustees of deceased estates and the ATO.

Analysis of costs / benefits

Option 1

Compliance costs

3.51 The compliance costs associated with this option would be minimal. Friendly societies will need to make minor system changes to allow deductions for investment income when they are paid or credited to recipients of affected policies.

3.52 In addition, because the Government previously announced that option 2 would apply to these products, friendly societies will incur some compliance costs notifying recipients of the changes to the taxation treatment of their product.

3.53 In relation to financial planners, income bond holders, recipients of scholarship plans and funeral policies, this option generally represents a continuance of the current taxation treatment.

Administrative costs

3.54 The administration costs for the ATO would be minimal. In addition, legislation to implement this option would be relatively simple.

Government revenue

3.55 Friendly societies will pay tax on investment income in relation to these products in the year it is derived but may not get a deduction until it is paid or credited to recipients in a later year. Consequently, there will be a small, unquantifiable bring forward of revenue.

Option 2

Compliance costs

3.56 Compliance costs associated with this option would be substantially higher than under option 1.

3.57 Friendly societies would have to develop new systems to set up and maintain franking accounts and run a significant education program to ensure financial planners and recipients were aware of the changes.

3.58 Friendly societies would also incur additional on-going costs tracking tax paid on investment income that relates to affected products and passing the appropriate amount of franking credits to recipients. In addition, because the taxation treatment under this option is complex, both friendly societies and financial planners would receive and need to respond to more requests for advice than under option 1.

3.59 In relation to income bond holders, recipients of scholarship plans and funeral policies, this option involves significant change to the current taxation treatment and would be more difficult to explain and understand. Recipients would also incur additional on-going costs to comply with their tax obligations. Low marginal rate taxpayers would need to apply to the ATO for a refund of excess imputation credits.

Administrative costs

3.60 The administration costs for the ATO would be substantially higher under this option. The ATO would need to run a significant education program to ensure friendly societies, financial planners, recipients and tax agents were aware of the changes. In addition, because the taxation treatment under this option is complex, the ATO would receive and need to respond to more requests for advice than under option 1.

3.61 Legislation to implement this option would be substantially more complex compared to option 1 as significant changes would need to be made to the existing imputation provisions. For example, new provisions would be needed to allow friendly societies to retain and allocate franking credits to affected products. In addition, additional provisions would be needed to apply the imputation system to recipients.

Government revenue

3.62 The revenue impact of this option is the same as under option 1.

Consultation

3.63 The Australian Friendly Societies Association and affected friendly societies have been consulted in relation to the changes to the taxation treatment of special purpose investment products. The parties consulted unanimously agreed that the costs involved in complying with option 2 would be significant and that option 2 would be substantially more complex and difficult to understand than option 1.

Conclusion and recommended option

Option 1 is clearly the preferred option for implementing this measure. This option would be significantly easier for friendly societies and recipients to comply with and for the ATO to administer. Both compliance costs and administration costs are minimal compared to option 2.

Chapter 4 - Goods and services tax

Outline of chapter

4.1 This bill amends the GST Transition Act so that an entity is entitled to claim an input tax credit for the acquisition of CTP insurance, where the acquisition relates to a period of insurance that commences on or after 1 July 2003. That is, input tax credits will be claimable based on the commencement date of the CTP insurance rather than the payment date for the acquisition of the CTP insurance.

Context of amendments

4.2 Each State and Territory has a CTP motor accident injury insurance scheme (CTP insurance scheme) that operates with motor vehicle registration processes.

4.3 Under the GST, the supply of general insurance, including CTP insurance, is generally a taxable supply. Where the insurance is acquired for a creditable purpose, a business that is registered for GST would normally be entitled to claim an input tax credit. Insurers are entitled to claim a decreasing adjustment for payments or supplies made in settlement of claims, but only to the extent that an insured entity is not entitled to claim an input tax credit for the acquisition of the CTP insurance.

4.4 When the GST was introduced, CTP insurers were granted a special three year transitional measure, effective until 30 June 2003, to give them time to adapt their systems to comply with the GST. Section 23 of the GST Transition Act removes an entity's entitlement to claim an input tax credit for the acquisition of CTP insurance where payment for the insurance is made before 1 July 2003. Accordingly, for CTP policies paid for before 1 July 2003, a registered insured entity is not entitled to input tax credits and CTP insurers are entitled to full decreasing adjustments when they make payments or supplies in settlement of all claims.

4.5 From 1 July 2003, with the ending of the transitional measure for CTP insurers, input tax credits will be available to registered businesses in relation to CTP insurance premiums acquired. Under the current wording of section 23 of the GST Transition Act, a registered insured entity will only be allowed to claim input tax credits on CTP insurance policies paid on or after 1 July 2003. However, this will result in a number of unintended consequences:

•

Entities that make payment before 1 July 2003, for the acquisition of CTP insurance commencing on or after that date, will be denied input tax credits. (Policyholders will sometimes pay early as they often receive renewal notices six weeks prior to the policy expiry date.)

•

In some circumstances, entities acquiring CTP insurance commencing before 1 July 2003 may have an incentive to delay payment for the insurance until after that date, in order to claim an input tax credit on the acquisition.

•

Suppliers of CTP insurance would incur additional compliance costs in being required to identify and track within their systems these particular policies of insurance.

4.6 Amendments to section 23 of the GST Transition Act are required so that input tax credit entitlements are based on the commencement date of the policy (rather than the date of premium payment). This will avoid the issues described above. Further, CTP insurers support these amendments because it will be administratively easier for them to determine a policy's commencement date than to determine the premium payment date. In addition, the amendments will maintain the end of the transitional period at 30 June 2003.

Summary of new law

4.7 Section 23 of the GST Transition Act will be amended to allow input tax credits on the acquisition of CTP insurance only where the insurance commences on or after 1 July 2003, regardless of when payment is made.

Comparison of key features of new law and current law

Detailed explanation of new law

4.8 Paragraphs 23(1)(a) and 23(1)(b) of the GST Transition Act are amended to ensure that an entity is not entitled to claim an input tax credit for a creditable acquisition of CTP insurance, where the insurance commences before 1 July 2003 [Amendment 2, Schedule 4, items 1 and 2]. As a result, a registered supplier of CTP insurance will be entitled to claim a full decreasing adjustment (under section 78-10 of the GST Act) in relation to any settlement for CTP insurance that commenced before 1 July 2003.

4.9 New subsection 23(1AA) ensures that it does not matter when the entity makes payment to acquire the CTP insurance. For example, an entity that delays payment of premium for CTP insurance until 2 July 2003 for insurance that commenced on 29 June 2003, will not be entitled to claim an input tax credit on the acquisition. [Amendment 2, Schedule 4, item 3]

4.10 The amendments to section 23 also ensure that no matter when payment is made, a registered entity will be entitled to claim an input tax credit for the creditable acquisition of CTP insurance that commences on or after 1 July 2003. For example, an entity will be entitled to claim an input tax credit for the creditable acquisition of CTP insurance where it pays the insurance premium on 15 June 2003, for insurance commencing on 5 July 2003.

Application and transitional provisions

4.11 The amendments apply, and are taken to have applied, in relation to net amounts for tax periods starting, or that started, on or after 1 July 2000. The application date ensures that section 23 applies to CTP insurance that is, or has been, acquired since 1 July 2000. [Amendment 2, Schedule 4, item 4]

Index

Schedule 1: Interest withholding tax exemptions

Schedule 2: CGT exemption for certain compensation payments

Schedule 3: Friendly society investment products

Schedule 4: Goods and services tax