Tax Laws Amendment (2008 Measures No. 5) Act 2008 (145 of 2008)

Schedule 5   Eligible investment business rules

Income Tax Assessment Act 1936

8   After section 102M

Insert:

102MA Arrangements not covered

(1) For the purposes of paragraph (c) of the definition of eligible investment business in section 102M, the excepted arrangements are those specified in this section.

Note: This section does not affect an arrangement that satisfies paragraph (a) or (b) of that definition.

Leasing or property arrangement

(2) A right or obligation arising under:

(a) an arrangement to which Division 42A (about leases of luxury cars) in Schedule 2E applies; or

(b) an arrangement to which Division 240 of the Income Tax Assessment Act 1997 (about arrangements treated as a sale and loan) applies; or

(c) a financial arrangement in the form of a loan that is taken to exist by subsection 250-155(1) of the Income Tax Assessment Act 1997; or

(d) an arrangement that, in substance or effect, depends on the use of a specific asset that is:

(i) real property; or

(ii) goods or a personal chattel (other than money or a money equivalent); or

(iii) intellectual property;

and gives a right to control the use of the asset; or

(e) an arrangement that is a licence to use:

(i) real property; or

(ii) goods or a personal chattel (other than money or a money equivalent); or

(iii) intellectual property.

Interest in partnership or trust estate

(3) A right carried by an interest in a partnership or a trust estate, or an obligation that corresponds to such a right, if:

(a) there is only one class of interest in the partnership or trust estate; or

(b) the interest is an equity interest in the partnership or trust estate; or

(c) for a right or obligation relating to a trust estate - the trust estate is managed by a funds manager or custodian, or a responsible entity (as defined in the Corporations Act 2001) of a registered scheme (as so defined).

General insurance policies

(4) A right or obligation under a general insurance policy.

Guarantees and indemnities

(5) A right or obligation under a guarantee or indemnity unless:

(a) the financial arrangement is one where:

(i) its value changes in response to changes in a specified variable or variables (such as an interest rate, foreign exchange rate, credit rating, index or commodity or financial instrument price); and

(ii) there is no requirement for a net investment, or there is such a requirement but the net investment is smaller than would be required for other types of financial arrangement that would be expected to have a similar response to changes in market factors; or

(b) the guarantee or indemnity is given or entered into in relation to a financial arrangement.

Superannuation and pension income

(6) A right to receive, or an obligation to provide, a financial benefit (as defined in the Income Tax Assessment Act 1997) if the right or obligation arises from a person's membership of a superannuation or pension scheme.

Retirement village arrangements

(7) A right or obligation arising under:

(a) a contract that gives rise to a right to occupy residential premises in a retirement village (as defined in the A New Tax System (Goods and Services Tax) Act 1999); or

(b) a contract under which a resident of such a retirement village is provided with general or personal services in the retirement village.

102MB Investing in land

Moveable property

(1) For the purposes of this Division, investments in moveable property, being property that is:

(a) incidental to and relevant to the renting of land; and

(b) customarily supplied or provided in connection with the renting of land; and

(c) ancillary to the ownership and use of land;

are taken to be investments in land.

Safe harbour rule

(2) For the purposes of this Division, an entity's investments in land are taken to be for the purpose, or primarily for the purpose, of deriving rent during a year of income if:

(a) each of those investments is for purposes (other than the purpose of trading) that include a purpose of deriving rent; and

(b) at least 75% of the gross revenue from those investments for the year of income consists of rent (except excluded rent); and

(c) none of the remaining gross revenue from those investments for the year of income is:

(i) excluded rent; or

(ii) from the carrying on of a business that is not incidental and relevant to the renting of the land.

(3) In working out the gross revenue referred to in paragraph (2)(b), payments for the provision of services that:

(a) are incidental to and relevant to the renting of land; and

(b) are ancillary to the ownership and use of the land;

are taken to be rent derived from the land.

Example: Payments as reimbursement for expenses incurred by the lessor in providing security services for a shopping centre would be covered by this subsection.

(4) In working out the gross revenue referred to in subsection (2), disregard any capital gains and capital losses from a CGT event arising from a disposal or other realisation of ownership of land.

Meaning of entity

(5) In this section:

entity has the same meaning as in the Income Tax Assessment Act 1997.

102MC When trading business not carried on

A trustee of a unit trust that would, apart from this section, carry on a trading business at a time during a year of income is taken for the purposes of this Division not to carry on a trading business at a time during that year if, for that year, not more than 2% of the gross revenue of the trustee (as trustee of the unit trust) was income from things other than eligible investment business (except from the carrying on of a business that is not incidental and relevant to the eligible investment business).