Taxation Laws Amendment Act (No. 2) 1995 (169 of 1995)
Schedule 1 AMENDMENTS RELATING TO STATE/TERRITORY BODIES
Part 1 STATE/TERRITORY BODIES
Division 1 Income Tax Assessment Act 1936
Subdivision A Subdivision A-Certain State/Territory bodies exempt from tax
1 After Division 1AA of Part III
Insert:
"Division 1AB-Certain State/Territory bodies exempt from income tax
"Subdivision A-Exemption for certain State/Territory bodies
Key principle
"24AK.
A body that is a State/Territory body (an STB) is exempt from income
tax under this Division unless it is an excluded STB. There are 5
different ways in which a body can be an STB.
Diagram-guide to work out if body is exempt under this Division
"24AL. The following diagram is a guide to help work out whether a
body is exempt from income tax under this Division:
(DIAGRAM OMITTED)
Certain STBs exempt from tax
"24AM. The income of a State/Territory body (an STB) is exempt from
income tax unless section 24AN applies to the STB.
Certain STBs not exempt from tax under this Division
"24AN. Income derived by an STB is not exempt from income tax under
this Division if, at the time that it is derived, the STB is an
excluded STB or an SGIO.
Notes: 1. For the definition of excluded STB see section 24AT.
2. Even though an excluded STB is not exempt from income tax
under this Division, it may still be exempt under another provision of
this Act.
3. Subsection 112A(1A) operates to exempt certain income of
SGIOs.
First way in which a body can be an STB
"24AO. A body is an STB if:
(a) it is a company limited solely by shares; and
(b) all the shares in it are beneficially owned by one or more
government entities.
Note: For the definition of government entity see section 24AT. Note
that an excluded STB is not a government entity.
Second way in which a body can be an STB
"24AP. A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation provides that it must distribute all of its
profits (if any) only to one or more government entities; and
(d) if the legislation makes provision as to the way its net assets
may be distributed if it is dissolved or wound up-the provision is
that, if it is dissolved, all of its net assets (if any) must be
distributed only to one or more government entities.
Third way in which a body can be an STB
"24AQ. A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation gives the power to appoint or dismiss its
governing person or body only to one or more government entities.
Fourth way in which a body can be an STB
"24AR. A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation gives the power to direct its governing person
or body as to the conduct of its affairs only to one or more
government entities.
Fifth way in which a body can be an STB
"24AS. A body is an STB if:
(a) it is not a company limited solely by shares; and
(b) it is not established by State or Territory legislation; and
(c) all the legal and beneficial interests (including, but not
limited to, interests as to income, profits, dividends, capital and
distributions of capital) in it are held only by one or more
government entities; and
(d) all the rights or powers (if any) to vote, appoint or dismiss
its governing person or body and direct its governing person or body
as to the conduct of its affairs are held only by one or more
government entities.
What do excluded STB, government entity and Territory mean?
"24AT. In this Division:
excluded STB means an STB that:
(a) at a particular time, is prescribed as an excluded STB in
relation to that time; or
(b) is a municipal corporation or other local governing body (within
the meaning of paragraph 23(d)); or
(c) is a public educational institution (within the meaning of
paragraph 23(e)); or
(d) is a public hospital (within the meaning of paragraph 23(ea));
or
(e) is a superannuation fund;
government entity means:
(a) a State; or
(b) a Territory; or
(c) another STB that is not an excluded STB;
Territory means the Northern Territory or the Australian Capital
Territory.
Governor, Minister and Department Head taken to be a government entity
"24AU. For the purposes of sections 24AQ, 24AR and 24AS, if the
power to appoint, dismiss or direct the governing body is given to, or
is held by:
(a) a Governor of a State; or
(b) a Minister of the Crown of a State; or
(c) a Minister of a Territory; or
(d) the head of a Department of a State or a Territory; or
(e) any combination of paragraphs (a) to (d);
the power is taken to be given to, or held by, a government entity.
Regulations prescribing excluded STBs
States and Territories to consent to STBs being excluded STBs
"24AV.(1) The regulations may prescribe that an STB is an excluded
STB only if all States and Territories consent to the STB being so
prescribed.
Regulations prescribing excluded STBs may be retrospective
"(2) Despite section 48 of the Acts Interpretation Act 1901, a
regulation prescribing an STB as an excluded STB may provide that the
STB is an excluded STB in relation to a time before the day of the
notification of the regulation in the Gazette.
"Subdivision B-Body ceasing to be an STB
Body ceasing to be an STB
"24AW. This Act applies in relation to a body for a year of income
(the cessation year) in which the body ceases to be an STB as if:
(a) the cessation were, for the purposes of Subdivision B of
Division 2A, a disqualifying event that, by reason of section 50H, is
taken to have occurred; and
(b) the references in that Subdivision to 'company' were references
to 'body'; and
(c) subsection 50A(2) did not apply in relation to that
disqualifying event; and
(d) if the body is not a company-there were no other disqualifying
events for the body in the cessation year; and
(e) for the purposes of section 50D, the amount of any notional loss
incurred in the relevant period before the cessation were taken to be
nil; and
(f) paragraph 50F(1)(c) were amended by omitting '79E,' and '80,';
and
(g) deductions allowable under sections 79E and 80 were taken, under
section 50G, to be allowable in respect of the relevant period before
the cessation and not in respect of any other relevant period;
(h) for the purposes of Subdivision B of Division 2A, the
application of Part IIIA were modified in accordance with section
24AX. Special provisions relating to capital gains and losses
Period after cessation date-prior net capital losses to be disregarded
"24AX.(1) In determining if an amount is to be included in the
assessable income of the body under Part IIIA for a relevant period
that occurred after the cessation, any net capital losses incurred
before the cessation are to be disregarded.
Special cases where net capital gain before cessation and net capital
loss after cessation
"(2) Subsections (3) and (4) apply if:
(a) a net capital gain accrued in the relevant period before the
cessation; and
(b) if the period from the cessation until the end of the year of
income were treated as a year of income-a net capital loss would have
accrued in that period.
Special case 1-gain exceeds loss
"(3) If this subsection applies and the net capital gain exceeds the
net capital loss:
(a) the amount that is to be included in the assessable income of
the body for the relevant period that occurred before the cessation as
a result of the net capital gain accruing to the body is taken to be
the amount by which the net capital gain exceeds the net capital loss;
and
(b) no net capital gain is taken to have accrued, and no net capital
loss is taken to have been incurred, in any relevant period in the
cessation year after the cessation; and
(c) in determining if a net capital gain accrued to, or a net
capital loss was incurred by, the body for the year following the
cessation year, no net capital loss is taken to have been incurred by
the body in the cessation year.
Special case 2-loss equal to or exceeds gain
"(4) If this subsection applies and the net capital gain does not
exceed the net capital loss:
(a) no amount is to be included in the assessable income of the body
for any relevant period in the cessation year as a result of a net
capital gain accruing to the body; and
(b) in determining if a net capital gain accrued to, or a net
capital loss was incurred by, the body for the year following the
cessation year, the net capital loss that the body incurred in the
cessation year is taken to be the amount (if any) by which the net
capital loss exceeds the net capital gain.
Losses from STB years not carried forward
"24AY.(1) If a body is an STB on the last day of a year of income in
which it incurs a loss (within the meaning of section 79E or 79F), the
loss is not allowable as a deduction from the body's assessable income
of a later year of income unless the body is an STB on the first day
of that later year of income.
Note: This section prevents losses from years prior to the
cessation year from being carried forward to years after the cessation
year.
"(2) This section only applies to losses incurred in the 1995-96
year of income or a later year of income.
Effect of unfunded superannuation liabilities
"24AYA.(1) This section applies to a deduction under section 82AAC
in respect of a contribution made in relation to a person who was an
employee of a prescribed excluded STB when it ceased to be an STB.
"(2) A deduction to which this section applies is not allowable to
the body for any year of income unless the requirements of subsections
(3) and (4) are complied with.
"(3) For the deduction to be allowable, the body must obtain a
certificate by an authorised actuary stating the actuarial value, as
at the time the body ceases to be an STB, of liabilities of the STB to
provide superannuation benefits for, or for dependants of, employees
of the body, where the liabilities:
(a) accrued after 30 June 1995 and before the time when the body
ceased to be an STB; and
(b) were, according to actuarial principles, unfunded at that time.
"(4) The certificate must be in a form approved in writing by the
Commissioner. The body must obtain the certificate:
(a) before the date of lodgment of its return of income of the year
of income in which the body ceased to be an STB; or
(b) within such further time as the Commissioner allows.
"(5) If the body obtains the certificate, a deduction to which this
section applies is nevertheless not allowable for a year of income if
the sum of all deductions to which this section applies for the year
of income is less than or equal to the unfunded liability limit (see
subsection (6)) for the year of income.
"(6) If the sum is greater than that limit, so much of the deduction
as is worked out using the following formula is not allowable:
[(Amount of deduction)/(Sum of all deductions to which this section applies for the year of income)]*(Unfunded liability limit for the year of income)
where:
Unfunded liability limit for a year of income is:
(a) if the year of income is the one in which the body ceases to be
an STB-the actuarial value of the liabilities set out in the actuary's
certificate; or
(b) in any other case-that actuarial value as reduced by the total
amount of deductions to which this section applies that, because of
subsection (5), have not been allowable to the body for all previous
years of income.
"(7) Expressions used in this section that are also used in section
82AAC have the same respective meanings as in that section.
Meaning of relevant period and prescribed excluded STB
"24AZ. In this Subdivision:
prescribed excluded STB means an STB that is an excluded STB as a
result of regulations made for the purposes of paragraph (a) of the
definition of excluded STB in section 24AT;
relevant period has the same meaning as in Subdivision B of Division
2A.".