Taxation Laws Amendment Act 1994

(56 of 1994)

An Act to amend the law relating to taxation

(Assented to 7 April 1994)

Part 1 PRELIMINARY

1 Short title

This Act may be cited as the Taxation Laws Amendment Act 1994.

2 Commencement

(1) Subject to this section, this Act commences on the day on which it receives the Royal Assent.

(2) Subdivision A of Division 4 of Part 3 is taken to have commenced on 1 July 1993.

(3) Subdivision B of Division 4 of Part 3 commences, or is taken to have commenced, on 20 March 1994.

(4) Division 8 of Part 3 commences on 1 July 1994.

(5) Subsection 70(1) is taken to have commenced immediately after the commencement of section 16 of the Taxation Laws Amendment (Superannuation) Act 1989.

(6) Subsection 71(1) is taken to have commenced immediately after the commencement of section 11 of the Taxation Laws Amendment Act (No. 5) 1989.

(7) Subsection 75(1) is taken to have commenced immediately after section 12 of the Taxation Laws Amendment Act (No. 5) 1989.

(8) Subsection 83(1) is taken to have commenced immediately after the commencement of section 24 of the Taxation Laws Amendment (Superannuation) Act 1989.

(9) Subsections 70(2), 71(2) and 83(2) are taken to have commenced immediately after the commencement of the Taxation Laws Amendment (Foreign Income) Act 1990.

(10) Section 112 is taken to have commenced immediately after the commencement of section 17 of the Taxation Laws Amendment (Superannuation) Act 1989.

Part 2 AMENDMENT OF THE FRINGE BENEFITS TAX ASSESSMENT ACT 1986

Division 1 Principal Act

3 Principal Act

In this Part, "Principal Act" means the Fringe Benefits Tax Assessment Act 1986.*1*

Fringe Benefits Tax Assessment Act 1986

*1* No. 39, 1986, as amended. For previous amendments, see Nos. 48 and 112, 1986; Nos. 23 and 145, 1987; No. 139, 1987 (as amended by Nos. 11 and 78, 1988); Nos. 6, 78, 95, 97 and 153, 1988; Nos. 2, 11, 97 and 107, 1989; Nos. 37, 58, 60 and 135, 1990; Nos. 48, 100 and 216, 1991; Nos. 35, 92, 101, 118, 191, 210, 223 and 237, 1992; and Nos. 17 and 18, 1993.

Division 2 Employees employed in foreign locations

4 Object of Division

The object of this Division is to remove the requirement that a foreign location must be prescribed by regulations before an exemption from fringe benefits tax is allowed in respect of a benefit paid to employees working at that location to enable them to travel from their workplace to receive medical treatment.

5 Exempt benefits-certain travel to obtain medical treatment

Section 58L of the Principal Act is amended by omitting from subparagraphs (1)(d)(i), (ii) and (iii) "prescribed".

6 Application of amendment

The amendment made by this Division:

(a) applies in respect of medical treatment provided on or after the day on which this Division commences; and

(b) is taken also to have applied in respect of medical treatment provided on or after 1 July 1986 and before the day referred to in paragraph (a) if:

(i) the Minister for Foreign Affairs certifies in writing that the relevant foreign country is a developing country; or

(ii) that Minister certifies in writing that the relevant foreign country ceased to be a developing country at a time stated in the certificate, and the treatment was provided, or began to be provided, before that time.

Division 3 Car parking benefits

7 Object of Division

The objects of this Division are:

(a) to ensure that a car parking benefit is valued only by reference to fees charged by commercial parking station operators during daylight hours; and

(b) to exclude kerbside parking meters from being regarded as a commercial parking station.

8 Interpretation

Section 136 of the Principal Act is amended by omitting from subsection (1) the definitions of "all-day parking" and "commercial parking station" and substituting respectively the following definitions:

"'all-day parking', in relation to a particular day, means parking of a single car for a continuous period of 6 hours or more during a daylight period on that day;

'commercial parking station', in relation to a particular day, means a permanent commercial car parking facility where any or all of the car parking spaces are available in the ordinary course of business to members of the public for all-day parking on that day on payment of a fee, but does not include a parking facility on a public street, road, lane, thoroughfare or footpath paid for by inserting money in a meter or by obtaining a voucher;".

9 Application of amendments

The amendments made by this Division:

(a) in so far as they relate to fringe benefits tax, apply to assessments of the fringe benefits taxable amount of the year of tax beginning on 1 April 1994 and of all later years of tax; and

(b) in so far as they relate to income tax, apply in relation to expenditure incurred by a taxpayer on or after 1 July 1994.

Division 4 Non-government schools

10 Object of Division

The object of this Division is to allow certain non-government schools to receive a rebate against their liability to fringe benefits tax.

11 Rebate for certain non-profit employers etc.

Section 65J of the Principal Act is amended by inserting after paragraph (1)(b) the following paragraph:

"(ba) a school (including a pre-school but not including a tertiary institution) that:

(i) although established by or under a law of the Commonwealth, a State or a Territory, is not conducted for or on behalf of the Commonwealth, a State or a Territory; and

(ii) is not conducted for the purpose of profit or gain to the persons or body of persons conducting it;".

12 Application of amendment

The amendment made by this Division applies in relation to fringe benefits tax (including instalments) for the year of tax beginning on 1 April 1994 and for all later years of tax.

Part 3 AMENDMENT OF THE INCOME TAX ASSESSMENT ACT 1936

Division 1 Principal Act

13 Principal Act

In this Part, "Principal Act" means the Income Tax Assessment Act 1936.*2*

Income Tax Assessment Act 1936

*2* No. 27, 1936, as amended. For previous amendments, see No. 88, 1936; No. 5, 1937; No. 46, 1938; No. 30, 1939; Nos. 17 and 65, 1940; Nos. 58 and 69, 1941; Nos. 22 and 50, 1942; No. 10, 1943; Nos. 3 and 28, 1944; Nos. 4 and 37, 1945; No. 6, 1946; Nos. 11 and 63, 1947; No. 44, 1948; No. 66, 1949; No. 48, 1950; No. 44, 1951; Nos. 4, 28 and 90, 1952; Nos. 1, 28, 45 and 81, 1953; No. 43, 1954; Nos. 18 and 62, 1955; Nos. 25, 30 and 101, 1956; Nos. 39 and 65, 1957; No. 55, 1958; Nos. 12, 70 and 85, 1959; Nos. 17, 18, 58 and 108, 1960; Nos. 17, 27 and 94, 1961; Nos. 39 and 98, 1962; Nos. 34 and 69, 1963; Nos. 46, 68, 110 and 115, 1964; Nos. 33, 103 and 143, 1965; Nos. 50 and 83, 1966; Nos. 19, 38, 76 and 85, 1967; Nos. 4, 70, 87 and 148, 1968; Nos. 18, 93 and 101, 1969; No. 87, 1970; Nos. 6, 54 and 93, 1971; Nos. 5, 46, 47, 65 and 85, 1972; Nos. 51, 52, 53, 164 and 165, 1973; No. 216, 1973 (as amended by No. 20, 1974); Nos. 26 and 126, 1974; Nos. 80 and 117, 1975; Nos. 50, 53, 56, 98, 143, 165 and 205, 1976; Nos. 57, 126 and 127, 1977; Nos. 36, 57, 87, 90, 123, 171 and 172, 1978; Nos. 12, 19, 27, 43, 62, 146, 147 and 149, 1979; Nos. 19, 24, 57, 58, 124, 133, 134 and 159, 1980; Nos. 61, 92, 108, 109, 110, 111, 154 and 175, 1981; Nos. 29, 38, 39, 76, 80, 106 and 123, 1982; Nos. 14, 25, 39, 49, 51, 54 and 103, 1983; Nos. 14, 42, 47, 63, 76, 115, 124, 165 and 174, 1984; No. 123, 1984 (as amended by No. 65, 1985); Nos. 47, 49, 104, 123, 168 and 174, 1985; No. 173, 1985 (as amended by No. 49, 1986); Nos. 41, 46, 48, 51, 109, 112 and 154, 1986; No. 49, 1986 (as amended by No. 141, 1987); No. 52, 1986 (as amended by No. 141, 1987); No. 90, 1986 (as amended by No. 141, 1987); Nos. 23, 58, 61, 120, 145 and 163, 1987; No. 62, 1987 (as amended by No. 108, 1987); No. 108, 1987 (as amended by No. 138, 1987); No. 138, 1987 (as amended by No. 11, 1988); No. 139, 1987 (as amended by Nos. 11 and 78, 1988); Nos. 8, 11, 59, 75, 78, 80, 87, 95, 97, 127 and 153, 1988; Nos. 2, 11, 56, 70, 73, 105, 107, 129, 163 and 167, 1989; No. 97, 1989 (as amended by No. 105, 1989); Nos. 20, 35, 45, 57, 58, 60, 61, 87, 119 and 135, 1990; Nos. 4, 5, 6, 48, 55, 100, 203, 208 and 216, 1991; Nos. 3, 35, 69, 70, 80, 81, 92, 98, 101, 118, 138, 167, 190, 191, 208, 223, 224, 227, 237 and 238, 1992; and Nos. 7, 17, 18, 27 and 32, 1993.

Division 2 Tax-exempt infrastructure borrowings

14 Object of Division

The objects of this Division are:

(a) to allow tax-exempt infrastructure borrowings made after 17 August 1993 to be used to finance interest on direct infrastructure borrowings falling due during the construction of the relevant infrastructure facility; and

(b) to extend the tax exemption to borrowings raised for the construction of infrastructure facilities on certain leases of Crown land granted under commercial contracts.

15 General

Section 159GZZZU of the Principal Act is amended by omitting the definition of "Crown lease" and substituting the following definition:

"'Crown lease' means a lease of land granted by:

(a) the Commonwealth, a State or a Territory; or

(b) an authority of the Commonwealth, a State, or a Territory, if, assuming that the authority derived income at the time when the lease is granted, that income would be exempt from tax because of a relevant exempting provision (within the meaning of section 160K);".

16 Direct infrastructure borrowing-requirement relating to spending of borrowed money

Section 159GZZZZA of the Principal Act is amended:

(a) by adding at the end of subsection (1) the following word and paragraph:

"; or (c) subject to subsection (2A), the payment of interest, or of amounts in the nature of interest, on a direct infrastructure borrowing.";

(b) by inserting after subsection (2) the following subsection:

"(2A) Spending money on the payment of interest, or of amounts in the nature of interest, only qualifies under subsection (1):

(a) to the extent that the interest or those amounts relate to that part of the period of the borrowing that occurs during the period (the 'construction period') in which any of the facilities referred to in paragraph (1)(a), or any of the facilities referred to in paragraph (1)(b) that are being constructed, are under construction; and

(b) if the payment is made during the construction period.".

17 Direct infrastructure borrowing-requirement relating to use of facilities on which borrowed money is to be spent

Section 159GZZZZB of the Principal Act is amended by omitting subsection (2) and substituting the following subsection:

"(2) For the purposes of paragraph (1)(a), if the borrower intends that any of the facilities concerned will be a fixture on land that is the subject of a Crown lease and:

(a) if the Crown lease is a lease of land granted under a statutory law of the Commonwealth, of a State or of a Territory-it can reasonably be expected, when the borrowing takes place, that the Crown lease will run, or (because of law, custom or otherwise) be extended or renewed to run, for at least the 25 year assessable use period; or

(b) in any other case-at the time (the 'relevant time') when the first of the facilities begins to be constructed:

(i) if the term of the lease will not end before the last day of the 25 year assessable use period-both the lessor and the lessee intend that the lessee will continue to hold the lease throughout the whole of that period on the same terms and conditions as those on which the lease is held at the relevant time; or

(ii) if the term of the lease will end before the last day of the 25 year assessable use period:

(A) the lessee has an option to renew the lease on the terms and conditions referred to in subparagraph (i) for a period that will not end, or has successive options to renew the lease on those terms and conditions for periods the last of which will not end, before the last day of the 25 year assessable use period; and

(B) both the lessor and the lessee intend that the lessee will continue to hold the lease throughout the whole of that period on the same terms and conditions as those on which the lease is held at the relevant time;

then the borrower is taken to intend to own the facility concerned.".

18 Application of amendments

(1) The amendments made by sections 15 and 17 apply to borrowings that took place after 23 June 1993.

(2) The amendment made by section 16 applies to borrowings that took place after 17 August 1993.

Division 3 Pensions and annuity rebates

19 Object of Division

The object of this Division is to extend the rebate that applies to superannuation pensions and roll-over annuities paid from a taxed source so that it applies to:

(a) superannuation pensions and roll-over annuities bought by rolling over an eligible termination payment representing the commutation of a deferred annuity; and

(b) superannuation pensions and roll-over annuities bought by rolling over an eligible termination payment representing the commutation of a pension from an untaxed superannuation fund.

20 Interpretation

Section 159SJ of the Principal Act is amended by adding at the end of the definition of "commutation type ETP" in subsection (1) "but does not include an ETP paid on the commutation of a deferred annuity as defined by subsection 27A(1)".

21 Components in respect of superannuation pensions

Section 159SN of the Principal Act is amended by omitting from paragraph (b) "in respect of a particular non-commutation type ETP".

22 Components in respect of rebatable ETP annuities

Section 159SV of the Principal Act is amended by omitting from paragraph (b) "in respect of a particular non-commutation type ETP".

23 Application of amendments

The amendments made by this Division apply to pensions and annuities that began to be paid on or after 1 July 1988.

Division 4 Exemptions for pensions and allowances

Subdivision A Bereavement payments

24 Objects of Subdivision

This Subdivision amends the income tax law to take account of recent changes to the bereavement payments available under the social security law.

25 Interpretation

Section 24A of the Principal Act is amended:

(a) by inserting after subparagraph (a)(vi) of the definition of "bereavement Subdivision" the following subparagraphs:

"(via) Subdivision AA of Division 9 of Part 2.11;

(vib) Subdivision AA of Division 9 of Part 2.12;

(vic) Subdivision AA of Division 9 of Part 2.14;

(vid) Subdivision AA of Division 9 of Part 2.15;";

(b) by inserting ", 589A(1)(f), 660LA(1)(f), 728PA(1)(f), 768A(1)(f)" after "501(1)(e)" in the definition of "exclusion provision".

26 Carer pension

Section 24ABF of the Principal Act is amended:

(a) by omitting subsection (2) and substituting the following subsection:

"(2) Subsection (1) has effect subject to:

(a) subsection (4) (which deals with taxpayers who derive bereavement lump sum payments under section 239 of the Social Security Act 1991); and

(b) subsection (4A) (which deals with taxpayers who derive bereavement lump sum payments under section 236A of the Social Security Act 1991).";

(b) by inserting after subsection (4) the following subsection:

"(4A) If a taxpayer derives a payment under section 236A of the Social Security Act 1991:

(a) so much of the sum of that payment and other payments under the Social Security Act 1991 derived by the taxpayer on pension paydays that occurred during the bereavement lump sum period as does not exceed the tax-free amount calculated using the exempt bereavement payment calculator AA in section 24ABZC is exempt; and

(b) the balance of the sum is not exempt.".

27 Job search allowance

Section 24ABL of the Principal Act is amended by adding at the end the following subsections:

"(2) Payments under section 589B, 592C or 592D of the Social Security Act 1991 (which deal with bereavement payments) are exempt.

"(3) If a taxpayer derives a payment under section 589C of the Social Security Act 1991:

(a) so much of the sum of that payment and other payments under the Social Security Act 1991 derived by the taxpayer during the bereavement lump sum period as does not exceed the tax-free amount calculated using the exempt bereavement payment calculator AB in section 24ABZD is exempt; and

(b) the balance of the sum is not exempt.

"(4) If:

(a) a taxpayer's partner died; and

(b) the taxpayer would have been qualified for payments under a bereavement Subdivision but for an exclusion provision (taxpayer's pension or allowance increased on partner's death to such an extent that no bereavement payments); and

then those payments are not treated under subsection (1) but as follows:

(d) the supplementary amounts are exempt;

(e) so much of the balance as exceeds what would have been the balance (payments less supplementary amounts) if the partner had not died is exempt;

(f) the rest of the balance is not exempt.".

28 Newstart allowance

Section 24ABM of the Principal Act is amended by adding at the end the following subsections:

"(2) Payments under section 660LB, 660R or 660S of the Social Security Act 1991 (which deal with bereavement payments) are exempt.

"(3) If a taxpayer derives a payment under section 660LC of the Social Security Act 1991:

(b) the balance of the sum is not exempt.

"(4) If:

(a) a taxpayer's partner died; and

then those payments are not treated under subsection (1) but as follows:

(d) the supplementary amounts are exempt;

(e) so much of the balance as exceeds what would have been the balance (payments less supplementary amounts) if the partner had not died is exempt;

(f) the rest of the balance is not exempt.".

29 Sickness allowance

Section 24ABO of the Principal Act is amended by omitting subsection (2) and substituting the following subsections:

"(2) Payments under section 728PB, 728X or 728Y of the Social Security Act 1991 (which deal with bereavement payments) are exempt.

"(3) If a taxpayer derives a payment under section 728PC of the Social Security Act 1991:

(b) the balance of the sum is not exempt.

"(4) If:

(a) a taxpayer's partner died; and

then those payments are not treated under subsection (1) but as follows:

(d) the supplementary amounts are exempt;

(e) so much of the balance as exceeds what would have been the balance (payments less supplementary amounts) if the partner had not died is exempt;

(f) the rest of the balance is not exempt.".

30 Special benefit

Section 24ABP of the Principal Act is amended by adding at the end the following subsections:

"(2) Payments under section 768B, 771C or 771D of the Social Security Act 1991 (which deal with bereavement payments) are exempt.

"(3) If a taxpayer derives a payment under section 768C of the Social Security Act 1991:

(b) the balance of the sum is not exempt.

"(4) If:

(a) a taxpayer's partner died; and

then those payments are not treated under subsection (1) but as follows:

(d) the supplementary amounts are exempt;

(e) so much of the balance as exceeds what would have been the balance (payments less supplementary amounts) if the partner had not died is exempt;

(f) the rest of the balance is not exempt.".

31 Insertion of new sections

After section 24ABZB of the Principal Act the following sections are inserted in Subdivision B of Division 1AA of Part III:

Exempt bereavement payment calculator AA

"24ABZC. The exempt bereavement payment calculator AA is as follows:

EXEMPT BEREAVEMENT PAYMENT CALCULATOR AA

This is how to work out the tax-free amount:

Method statement

Step 1: Work out the amount of payments under the Social Security Act 1991 that would have been derived by the taxpayer during the bereavement lump sum period and that would have been exempt if:

(a) the severely handicapped person had not died; and

(b) the severely handicapped person had been under pension age;

the result is called the notional exempt amount for the taxpayer.

Step 2: Work out the amount of payments under the Social Security Act 1991 that would have been derived by the severely handicapped person during the bereavement lump sum period if the severely handicapped person had not died:

the result is called the notional amount for the caree.

Step 3: Add up the notional exempt amount for the taxpayer and the notional amount for the caree: the result is the tax-free amount.

Exempt bereavement payment calculator AB

"24ABZD. The exempt bereavement payment calculator AB is as follows:

EXEMPT BEREAVEMENT PAYMENT CALCULATOR AB

This is how to work out the tax-free amount:

Method statement

Step 1: Work out the amount of payments under the Social Security Act 1991 that would have been derived by the taxpayer during the bereavement lump sum period and that would have been exempt if:

(a) the partner had not died; and

(b) the partner had been under pension age; and

(c) if immediately before the partner's death the couple were an illness separated couple or a respite care couple-they were not such a couple;

the result is called the notional exempt amount for the taxpayer.

Step 2: Work out the amount of payments (if any) under the Social Security Act 1991 that would have been derived by the partner during the bereavement lump sum period if the partner had not died; the result is called the notional amount for the partner.

Step 3: Add up the notional exempt amount for the taxpayer and the notional partner amount: the result is the tax-free amount.".

32 Application of amendments

The amendments made by this Subdivision apply to payments received under the Social Security Act 1991 on or after 1 July 1993.

Subdivision B Mature age allowance and mature age partner allowance

33 Objects of Subdivision

This Subdivision amends the income tax law to take account of mature age allowance and mature age partner allowance payments becoming available under the social security law.

34 Interpretation

Section 24A of the Principal Act is amended:

(a) by inserting after subparagraph (a)(vib) of the definition of "bereavement Subdivision" the following subparagraph:

"(viba) Subdivision A of Division 11 of Part 2.12A;";

(b) by inserting ", 66OXKA(1)(e)" after "660LA(1)(f)" in the definition of "exclusion provision".

35 Index of payments covered by Subdivision

Section 24AB of the Principal Act is amended by inserting in the Table after the entry for job search allowance the following entry:

"Mature age allowance 24ABMA

Mature age partner allowance 24ABMB".

36 Interpretation-supplementary amounts

Section 24ABA of the Principal Act is amended:

(a) by omitting from the Table in subsection (1) "Special needs widow B pension" and substituting:

"Special needs widow B pension

Mature age allowance

Mature age partner allowance".

(b) by adding at the end the following subsection:

"(4) For the purposes of this section, a payment under section 660XKH of the Social Security Act 1991 is taken to be a payment of a mature age partner allowance.".

37 Insertion of new sections

After section 24ABM of the Principal Act the following sections are inserted:

Mature age allowance

"24ABMA.(1) The treatment of payments of mature age allowance under Part 2.12A of the Social Security Act 1991 is as follows:

(a) the supplementary amount is exempt;

(b) the balance is not exempt.

"(2) Subsection (1) has effect subject to subsection (4) (which deals with taxpayers who derive bereavement lump sum payments under section 660XKC of the Social Security Act 1991).

"(3) Payments under sections 660XKB, 660XKE and 660XKG of the Social Security Act 1991 (which deal with bereavement payments) are exempt.

"(4) If a taxpayer derives a payment under section 660XKC of the Social Security Act 1991:

(a) so much of the sum of that payment and other payments under the Social Security Act 1991 derived by the taxpayer on pension paydays that occurred during the bereavement lump sum period as do not exceed the tax-free amount calculated using the exempt bereavement payment calculator A in section 24ABZB is exempt; and

(b) the balance of the sum is not exempt.

"(5) If:

(a) a taxpayer's partner died; and

(c) the taxpayer derives payments of mature age allowance under Part 2.12A of the Social Security Act 1991 on one or more of the 7 pension paydays after the death;

then those payments on that payday or each of those paydays are not treated under subsection (1) but as follows:

(d) supplementary amounts are exempt;

(e) so much of the balance as exceeds what would have been the balance (payments less supplementary amounts) if the partner had not died is exempt;

(f) the rest of the balance is not exempt.

Mature age partner allowance

"24ABMB.(1) The treatment of payments of mature age partner allowance under Part 2.12A of the Social Security Act 1991 is as follows:

------------------------------------------------------------------------

Supplementary Balance of

Item Category amounts payment

------------------------------------------------------------------------

1 Taxpayer not under pension age Exempt Not exempt

2 Taxpayer under pension age Exempt Exempt

------------------------------------------------------------------------

"(2) Subsection (1) has effect subject to subsection (4) (which deals with taxpayers who derive bereavement lump sum payments under section 660XKL of the Social Security Act 1991).

"(3) Payments under sections 660XKK and 660XKM of the Social Security Act 1991 (which deal with bereavement payments) are exempt.

"(4) If a taxpayer derives a payment under section 660XKL of the Social Security Act 1991:

(a) so much of the sum of that payment and other payments under the Social Security Act 1991 derived by the taxpayer on pension paydays that occurred during the bereavement lump sum period as do not exceed the tax-free amount calculated using the exempt bereavement payment calculator A in section 24ABZB is exempt; and

(b) the balance of the sum is not exempt.

"(5) For the purposes of this section, a payment under section 660XKH of the Social Security Act 1991 is taken to be a payment of a mature age partner allowance.".

38 Application of amendments

The amendments made by this Subdivision apply to payments received under the Social Security Act 1991 on or after 20 March 1994.

Division 5 Payment of instalments by companies and certain trustees

39 Objects of Division

The objects of this Division are:

(a) to include in the new company tax instalment rules provision for treating a medium taxpayer as large for instalment purposes, if the taxpayer is part of a group of controlled instalment taxpayers; and

(b) to make it clear that, in calculating the base amount in relation to a penalty under section 221AZP, only a taxpayer's first estimate for the current year is relevant; and

(c) to make minor technical amendments of the company tax instalment rules.

40 Deemed assessment

Section 166A of the Principal Act is amended by omitting from subsection (2) "Subdivision" and substituting "Division".

41 Interpretation

Section 221AZH of the Principal Act is amended:

(a) by inserting "or because of section 221AZMA" after "221AZK" in the definition of "large taxpayer";

(b) by inserting ", subject to section 221AZMA," after "means" in the definition of "medium taxpayer".

42 Liability to pay instalments

Section 221AZK of the Principal Act is amended by inserting in paragraph (3)(a) "subject to section 221AZMA," before "a taxpayer".

43 Insertion of new Subdivision

After Subdivision B of Division 1C of Part VI of the Principal Act the following Subdivision is inserted:

"Subdivision BA-Instalment taxpayer groups

Medium taxpayer in large group treated as large taxpayer

"221AZMA. An instalment taxpayer is classified as large, and is not classified as medium, if:

(a) apart from this section, it would be classified as medium; and

(b) at the beginning of the first day of month 9:

(i) it is a member of an instalment taxpayer group; and

(ii) the total of the respective amounts of likely tax of all members of the group (including the taxpayer) is more than $300,000.

Instalment taxpayer groups

"221AZMB. An instalment taxpayer group consists of:

(a) an instalment taxpayer that:

(i) controls at least one other instalment taxpayer; but

(ii) is itself controlled by no other instalment taxpayer; and

(b) each instalment taxpayer that the first-mentioned taxpayer controls.

When one instalment taxpayer controls another

"221AZMC. For the purposes of section 221AZMB, an instalment taxpayer ('the first taxpayer') controls another instalment taxpayer ('the second taxpayer') if, and only if:

(a) the second taxpayer is a company and:

(i) the first taxpayer is in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the second taxpayer; or

(ii) the first taxpayer has the power to appoint or remove the majority of the directors of the second taxpayer; or

(iii) the second taxpayer is, or a majority of its directors are, accustomed or under an obligation, whether formal or informal, to act according to the directions, instructions or wishes of the first taxpayer; or

(b) the second taxpayer is a trustee covered by any of paragraphs 221AZK(1)(b) to (f) and:

(i) the first taxpayer beneficially owns, or is able in any way, whether directly or indirectly, to control the application of, more than 50% of the interests in the trust property or in the trust income; or

(ii) the first taxpayer has the power to appoint or remove the trustee of the trust; or

(iii) the trustee of the trust is accustomed or under an obligation, whether formal or informal, to act according to the directions, instructions or wishes of the first taxpayer; or

(c) in any case-the first taxpayer is taken, because of any other application or applications of this subsection, to control an instalment taxpayer that in turn is so taken to control the second taxpayer.".

44 Penalty applies if estimate is too low

Section 221AZP of the Principal Act is amended by omitting from paragraph (1)(a) "the estimate" and substituting "its first or only estimate for the current year".

45 Due date for payment of tax

Section 221AZT of the Principal Act is amended by inserting in paragraph (a) "the" after "if".

46 Application of amendments

(1) The amendments made by sections 40, 44 and 45 apply for the 1994-95 year of income and all later years of income.

(2) The amendments made by sections 41, 42 and 43 apply for the 1995-96 year of income and all later years of income.

Division 6 Penalties for over-franking dividends

47 Object of Division

The object of this Division is to alter the rules about over-franking of dividends so that liability for franking additional tax is not affected by an initial payment of company tax that reduces franking deficit tax by the amount calculated according to subsection 160AQJ(2).

48 Penalty for over-franking

(1) Section 160ARX of the Principal Act is amended by omitting from subsection (1) "payable" and substituting "that would be payable apart from subsection 160AQJ(2)".

(2) Section 160ARX of the Principal Act is amended by omitting from subsection (2) "payable" and substituting "that would be payable apart from subsection 160AQJ(2)".

(3) Section 160ARX of the Principal Act, as it applies in relation to a company in relation to a franking year in relation to which the amendments made by section 103 of the Taxation Laws Amendment Act (No. 3) 1993 do not apply, is amended by omitting "payable" and substituting "that would be payable apart from subsection 160AQJ(2)".

49 Application of amendments

The amendment made by subsection 48(1), (2) or (3) applies in relation to a franking year of a company if, and only if:

(a) all of the following are the case:

(i) 14 December 1993 fell during that franking year;

(ii) the franked amount, class A franked amount, or class B franked amount, as the case requires, of a dividend paid, during that franking year, to a shareholder in the company exceeded the required franking amount, class A required franking amount, or class B required franking amount, as the case may be, for that dividend;

(iii) the declaration under section 160AQF of the Principal Act that relates to the dividend mentioned in subparagraph (ii) of this paragraph was made after 14 December1993; or

(b) that franking year began after 14 December 1993.

Division 7 Heritage conservation rebate

50 Object of Division

The object of this Division is to provide a rebate of tax for expenditure on certain conservation work on heritage listed buildings and structures.

51 Insertion of new Subdivision

After Subdivision AAC of Division 17 of Part III of the Principal Act, the following Subdivision is inserted:

"Subdivision AAD-Heritage conservation rebate

Object

"159U. The object of this Subdivision is to provide a rebate of tax for expenditure on certain conservation work on heritage listed buildings and structures.

Outline of Subdivision

"159UA. The following is a simplified outline of this Subdivision:

A: General

1. The Subdivision provides for rebates of tax for approved expenditure on certain conservation work on heritage listed buildings and structures. The expenditure must be at least $5,000. The entitlement to the rebate is set out in section 159UQ (taxpayers other than partnerships or trustees), section 159UR (partnerships), section 159US (trust estates) and section 159UT (corporate unit trusts and public trading trusts).

2. The Subdivision also contains a provision (subsection 159UU(1)) ensuring that deductions are not obtained for amounts for which there is an entitlement to a rebate.

3. Obtaining a rebate is a 2 step process.

B: Step 1-provisional certificate

1. The taxpayer applies for a provisional certificate (section 159UG)

2. The Minister then determines whether a provisional certificate is to be issued to the taxpayer and, if it is, issues the certificate (sections 159UJ and 159UK). The certificate specifies the maximum amount of expenditure that will be eligible for a rebate. In making his or her decision, the Minister will take into account criteria and procedures that he or she issues (sections 159UF and 159UJ).

3. The total of the amounts specified in certificates that the Minister approves in a financial year is not to exceed a limit set by the Minister (section 159UD). As a result, not all applications that may otherwise have been approved will be able to be approved, and some taxpayers may get approval for only part of the expenditure that they will incur.

C: Step 2-final certificate

1. When a taxpayer who has been issued with a provisional certificate finishes the work, the taxpayer may apply for a final certificate (section 159UM). The work must be completed, and the final certificate applied for, while the provisional certificate is in force.

2. If the work is to the standard specified in the provisional certificate (section 159UO) and the expenditure is at least $5,000 (section 159UM), the taxpayer will be issued with a final certificate.

Definitions

"159UB. In this Subdivision:

'Crown lease' means a lease granted by the Crown under a statutory law of the Commonwealth, a State or a Territory;

'eligible heritage conservation works expenditure' has the meaning given by paragraph 159UO(1)(b);

'final certificate' means a certificate issued under section 159UO;

'heritage conservation works' means works for the purpose of the conservation, maintenance, preservation, restoration, reconstruction, or adaptation, of a building, or other structure, where the building or structure:

(a) is of cultural significance; and

(b) is listed in a heritage register declared in writing by the Minister to be a recognised heritage register;

'maximum approval limit' has the meaning given by section 159UD;

'Minister' means the Minister for Communications and the Arts;

'provisional certificate' means a certificate issued under section 159UJ;

'provisional certificate criteria' means criteria determined under section 159UF;

'provisional certificate procedures' means procedures determined under section 159UF;

'qualifying expenditure limit' means an amount specified under paragraph 159UK(d);

'recognised heritage body' means a body declared in writing by the Minister to be a recognised heritage body;

'Secretary' means the Secretary to the Department of Communications and the Arts.

Expenditure does not include expenditure on plant or articles

"159UC. In this Subdivision, 'expenditure' does not include expenditure on plant or articles within the meaning of section 54.

Minister must set maximum approval limit

"159UD.(1) The Minister must, by written notice, specify an amount as the maximum approval limit for each financial year in respect of applications for provisional certificates.

"(2) The maximum approval limit for a financial year must be specified before the Minister issues any provisional certificates in that financial year.

"(3) The Minister must not, under paragraph 159UK(d), specify a qualifying expenditure limit that would cause the maximum approval limit for that financial year to be exceeded.

Minister may set closing date for applications

"159UE.(1) The Minister may, by notice published in the Gazette, specify a day as the closing day for applications for provisional certificates in relation to a financial year.

"(2) The day specified in the notice must be at least 21 days after the day on which the notice is published in the Gazette.

"(3) The Minister may, but need not, consider an application given to the Minister after the day specified in the notice.

Provisional certificate criteria and procedures

"159UF. (1) The Minister must, in writing, determine provisional certificate criteria to be applied, and provisional certificate procedures to be complied with, by the Minister in deciding:

(a) whether to issue provisional certificates; and

(b) how much to specify in provisional certificates as qualifying expenditure limits in respect of expenditure proposed to be incurred on heritage conservation works, so that each amount specified is at least $5,000 and that the total specified in respect of a financial year does not exceed the maximum approval limit for the year; and

(c) the standards to state in provisional certificates in order for the works to qualify for the issue of final certificates.

"(2) The criteria or procedures mayrequire the Minister, in issuing provisional certificates, to take into account:

(a) specified heritage conservation criteria; or

(b) recommendations of recognised heritage bodies; or

Application for provisional certificate

"159UG. (1) A taxpayer may apply for a provisional certificate in relation to expenditure that the taxpayer proposes to incur on heritage conservation works.

"(2) An application may only be made if the taxpayer, either alone or with another person or persons:

(a) holds a freehold interest in the land on which the building or structure concerned is situated; or

(b) holds a Crown lease over the land on which the building or structure concerned is situated.

Form etc. of application

"159UH. An application for a provisional certificate must:

(a) be in a form approved in writing by the Minister; and

(b) specify the amount of expenditure that the taxpayer proposes to incur on the works; and

(d) be accompanied by such other information as the Minister, by written notice, requires.

Minister may request further information

"159UI. (1) The Minister may, in writing, ask a taxpayer to provide additional information for the purpose of determining the taxpayer's application.

"(2) The Minister does not have to consider, or further consider, the taxpayer's application until the additional information has been provided.

Issue of provisional certificate

"159UJ.(1) If the Minister is satisfied that:

(a) the application complies with the requirements of sections 159UG and 159UH; and

(b) the provisional certificate procedures have been complied with; and

(d) in accordance with the provisional certificate criteria, an amount would be specified in the provisional certificate as the qualifying expenditure limit;

the Minister must notify the taxpayer in accordance with subsection (2).

"(2) The Minister must notify the taxpayer in writing that a provisional certificate will be issued if the taxpayer:

(a) pays to the Minister the prescribed fee (if any); and

(b) gives the Minister a statement, signed by the taxpayer, that the taxpayer has obtained all building and other approvals that are necessary to enable the work to be lawfully carried out.

"(3) If the taxpayer pays the fee (if any) and gives the Minister the statement, the Minister must issue the provisional certificate to the taxpayer.

"(4) If the Minister is not satisfied of the matters in subsection (1), the Minister must notify the taxpayer, in writing, that the Minister refuses to issue the certificate.

Contents of provisional certificate

"159UK. The provisional certificate must:

(a) state the taxpayer's name; and

(b) describe the heritage conservation works that the taxpayer proposes to carry out in relation to the building or structure; and

(c) specify the standard to which the works must be completed in order to qualify for the issue of a final certificate; and

(d) specify, in accordance with the provisional certificate criteria, the qualifying expenditure limit in respect of the works.

When provisional certificate in force

"159UL.(1) A provisional certificate is in force from the time of issue until the earliest of the following happens:

(a) the taxpayer disposes of his or her interest in the property; or

(b) the taxpayer dies or, being a partnership, company or trust, is dissolved or otherwise terminated; or

(c) 24 months elapse from the date of the issue of the provisional certificate without the Minister granting an extension under subsection (2); or

(d) an extension under subsection (2) expires; or

(e) a final certificate is issued in respect of the work.

"(2) The Minister may, on written application by a taxpayer to whom a provisional certificate has been issued, extend the period under paragraph (1)(c) in relation to the certificate from 24 months to 27 months.

"(3) An application for an extension must be given to the Minister before the end of the period of 23 months starting when the provisional certificate is issued.

Application for final certificate

"159UM. (1) The taxpayer may apply to the Minister for a final certificate, if the taxpayer has:

(a) completed the heritage conservation works covered by the provisional certificate, to the standard specified in the provisional certificate, while the provisional certificate was in force; and

(b) incurred expenditure of at least $5,000 during the period in carrying out the works.

"(2) The application must:

(a) be in a form approved in writing by the Minister; and

(b) specify the amount of expenditure incurred by the taxpayer during the period in carrying out the works; and

(d) be accompanied by such other information as the Minister, by written notice, requires.

Person dying-application for final certificate

"159UN. (1) If:

(a) an individual who holds a provisional certificate, or who is a partner in a partnership that holds a provisional certificate, dies; and

(b) within 3 months after the death, a person mentioned in subsection (2) makes a written application to the Minister for a final certificate;

for the purposes of this Subdivision, the application is taken to have been made immediately before the death.

"(2) The application may only be made by:

(a) in any case-an executor, administrator or other personal representative of the individual; or

(b) if a partnership holds the provisional certificate-one of the surviving partners.

Final certificate

"159UO.(1) If the Minister is satisfied that the requirements of section 159UM are satisfied in relation to a provisional certificate, the Minister must issue the taxpayer with a final certificate:

(a) stating the taxpayer's name; and

(b) specifying an amount, being so much of the amount specified by the taxpayer under paragraph 159UM(2)(b) as does not exceed the qualifying expenditure limit in the provisional certificate, as the eligible heritage conservation works expenditure in respect of the heritage conservation works.

"(2) If the Minister is not satisfied that the requirements of section 159UM are satisfied in relation to a provisional certificate, the Minister must notify the taxpayer, in writing, that the Minister refuses to issue the final certificate.

Transactions between persons not at arm's length

"159UP. If:

(a) a taxpayer applies to the Minister for a final certificate; and

(b) the Minister considers that the taxpayer and another party, or parties, to any transaction involving the incurring of any of the expenditure mentioned in the application were not dealing with each other at arm's length in relation to the transaction; and

(c) the Minister considers that the amount of the expenditure exceeds the amount that would have been incurred if the parties had been dealing with each other at arm's length in relation to the transaction;

the Minister must, for the purposes of section 159UO, disregard the excess.

Heritage conservation rebate

"159UQ. If a taxpayer, other than a partnership or trustee, is issued with a final certificate that specifies an amount of eligible heritage conservation works expenditure, the taxpayer is entitled to a rebate of tax in the taxpayer's assessment for the year of income in which the taxpayer applied for the final certificate equal to 20% of the eligible heritage conservation works expenditure.

Heritage conservation rebate-partnerships

"159UR. If:

(a) a partnership is issued with a final certificate that specifies an amount of eligible heritage conservation works expenditure; and

(b) the partnership has net income for the year of income in which the partnership applied for the final certificate;

each partner is entitled to a rebate of tax in the partner's assessment for the year of income equal to:

20% * Eligible heritage conservation works expenditure * (Partner's individual interest in the net income of the partnership of the year of income / Net income of the partnership of the year of income)

Heritage conservation rebate-trust estates

"159US.(1) This section applies if:

(a) the trustee of a trust estate is issued with a final certificate that specifies an amount of eligible heritage conservation works expenditure; and

(b) the trust estate has net income for the year of income in which the trustee applied for the final certificate; and

(c) the trust estate is not a corporate unit trust (within the meaning of section 102J), or a public trading trust (within the meaning of section 102R) in relation to the year of income.

"(2) If a share of the net income of the trust estate is included, under section 97, in the assessable income of a beneficiary of the trust estate of the year of income, the beneficiary is entitled to a rebate of tax in the beneficiary's assessment for the year of income equal to:

20% * Eligible heritage conservation works expenditure * (Beneficiary’s share of the net income of the trust estate of the year of income / Net income of the trust estate of the year of income)

"(3) If the trustee is liable to be assessed under section 98 in respect of a share, or shares, of the net income of the trust estate of the year of income, the trustee is entitled, in respect of each such share, to a rebate of tax in the trustee's assessment for the year of income equal to:

20% * Eligible heritage conservation works expenditure * (Share of the net income of the trust estate of the year of income / Net income of the trust estate of the year of income)

"(4) If the trustee is liable to be assessed under section 99 or 99A in respect of the net income, or a part of the net income, of the trust estate of the year of income, the trustee is entitled to a rebate of tax in the trustee's assessment for the year of income equal to:

20% * Eligible heritage conservation works expenditure * (Net income, or part of the net income, of the trust estate of the year of income / Net income of the trust estate of the year of income)

Heritage conservation rebate-corporate unit trusts and public trading trusts

"159UT. If the trustee of a corporate unit trust (within the meaning of section 102J), or a public trading trust (within the meaning of section 102R), in relation to a year of income in which the trustee applies for a final certificate is issued with the final certificate, the trustee is entitled to a rebate of tax in the trustee's assessment for the year of income equal to 20% of the eligible heritage conservation works expenditure specified in the certificate.

No deduction allowed in respect of work covered by a certificate

"159UU.(1) If:

(a) while a provisional certificate is in force, expenditure is incurred by a taxpayer in carrying out heritage conservation works that are covered by the certificate; and

(b) apart from this subsection, a deduction or deductions would be allowable from the taxpayer's assessable income of one or more years of income in relation to that expenditure;

the deduction is, or the deductions are, only allowable in respect of so much of the expenditure as exceeds the greater of nil and the amount worked out using the formula:

Qualifying expenditure limit specified in the provisional certificate - Total expenditure previously incurred by the taxpayer in relation to the works while the certificate was in force

"(2) If a provisional certificate ceases to be in force and either:

(a) the taxpayer did not apply for a final certificate in respect of the works while the certificate was in force; or

(b) the Minister notifies the taxpayer that the Minister refuses to issue a final certificate and:

(i) the time for making an application under section 159UV for review of the refusal decision has expired without an application being made; or

(ii) an application under section 159UV for review of the refusal decision has been made and the Tribunal has dismissed the application or affirmed the Minister's decision; then:

(c) a deduction, equal to the total amount of deductions not allowed because of subsection (1) for the year of income in which the provisional certificate ceases to be in force, and all prior years of income, is allowable from the taxpayer's assessable income of the year of income in which the provisional certificate ceases to be in force; and

(d) the amount of any deduction not allowable because of subsection (1) that would have been allowable for a later year of income is allowable for that later year of income.

Review of final certificate decision

"159UV.(1) Applications may be made to the Tribunal for review of a decision of the Minister:

(a) refusing to issue a final certificate; or

(b) specifying a particular amount as the amount of the eligible heritage conservation works expenditure in a final certificate.

"(2) If the Minister makes a decision covered by subsection (1) and gives written notice of the decision to the taxpayer, that notice must:

(a) in all cases-include a statement to the effect that, subject to the Administrative Appeals Tribunal Act 1975, application may be made to the Tribunal, by or on behalf of any person whose interests are affected by the decision, for review of the decision; and

(b) except where subsection 28(4) of that Act applies-include a statement to the effect that a request may be made under section 28 of that Act by or on behalf of such a person for a statement:

(i) setting out the findings on material questions of fact; and

(ii) referring to the evidence or other material on which those findings were based; and

(iii) giving the reasons for the decision.

"(3) A failure to comply with the requirements of subsection (2) in relation to a decision does not affect the validity of the decision.

Provision of information to recognised heritage bodies

"159UW. (1) In spite of section 16, if the Minister considers that it would assist in determining whether to issue a provisional certificate or final certificate in relation to any heritage conservation works, the Minister may give information about the works, that was provided under section 159UG or 159UI, to a recognised heritage body for the purpose of enabling that body to provide advice to the Minister in relation to the works.

"(2) In spite of section 16, if the Minister considers that it would assist in determining whether to issue a final certificate in relation to any heritage conservation works, the Minister may give a copy of the provisional certificate in relation to the works, or information about the works, that was provided under section 159UM, to a recognised heritage body for the purpose of enabling that body to provide advice to the Minister in relation to the issue of the final certificate in relation to the works.

"(3) Any person who is given information under this section, and any person or employee under his or her control, is subject to the same rights, privileges, obligations and liabilities, under subsections 16(2) and (3) in relation to that information, as if he or she were an officer within the meaning of section 16.

Delegation by Minister

"159UX. The Minister may, by written notice, delegate to the Secretary, or to a person holding or performing the duties of a Senior Executive Service office in the Minister's Department, all or any of the Minister's powers under this Subdivision other than:

(a) the Minister's power to make declarations for the purposes of the definition of 'heritage conservation works' or 'recognised heritage body' in section 159UB; and

(b) the Minister's powers under sections 159UD, 159UE and 159UF. In this section 'Senior Executive Service office' has the same meaning as in the Public Service Act 1922.

Disallowable instruments

"159UY. The following are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901:

(a) a declaration by the Minister for the purposes of the definition of 'heritage conservation works' or 'recognised heritage body' in section 159UB;

(b) a notice by the Minister under section 159UD;

(c) provisional certificate criteria and provisional certificate procedures issued by the Minister under section 159UF.".

52 Qualifying expenditure

Section 124ZB of the Principal Act is amended by adding at the end the following subsection:

"(4) References in subsection (1) or (2) to expenditure of a capital nature incurred in respect of the construction of a building, or of an extension, alteration or improvement to a building, are to be read as not applying to expenditure that is eligible heritage conservation expenditure within the meaning of Subdivision AAD of Division 17.".

53 Qualifying expenditure

Section 124ZG of the Principal Act is amended by adding at the end the following subsection:

"(5) References in subsection (2A) to expenditure of a capital nature incurred in respect of the construction of a building, or of an extension, alteration or improvement to a building, are to be read as not applying to expenditure that is eligible heritage conservation expenditure within the meaning of Subdivision AAD of Division 17.".

54 Reduction of amounts for purposes of reduced cost base

Section 160ZK of the Principal Act is amended:

(a) by inserting after subsection (1) the following subsection:

"(1A) The reference in paragraph (1)(a) to any part of the consideration, of the costs or of the expenditure that has been allowed, or is allowable as a deduction to the taxpayer in respect of any year of income is taken to include an amount that, apart from subsections 124ZB(4) and 124ZG(5), would have been so allowed or allowable under Division 10C or 10D of Part III.";

(b) by inserting after subsection (3) the following subsection:

"(3A) The reference in paragraph (3)(a) to any part of the consideration, of the costs or of the expenditure that has been allowed, or is allowable as a deduction to the partnership in respect of any year of income is taken to include an amount that, apart from subsections 124ZB(4) and 124ZG(5), would have been so allowed or allowable under Division 10C or 10D of Part III.".

Division 8 Savings banks

55 Object of Division

The object of this Division is to remove the exemption from income tax and withholding tax in respect of the income of certain savings banks.

56 Exemptions

Section 23 of the Principal Act is amended by omitting paragraph (i).

57 Interpretation

Section 102M of the Principal Act is amended by omitting ", (i)" from paragraph (a) of the definition of "exempt entity".

58 Interpretation

Section 121F of the Principal Act is amended by omitting "(i)," from paragraph (a) of the definition of "relevant exempting provision" in subsection (1).

59 Interpretation

Section 124ZA of the Principal Act is amended by omitting "(i)," from the definition of "exempt body" in subsection (1).

60 Liability to withholding tax

Section 128B of the Principal Act is amended by omitting from paragraph (3)(a) "(i),".

61 Other interpretative provisions

Section 160K of the Principal Act is amended by omitting "(i)," from paragraph (a) of the definition of "relevant exempting provision" in subsection (1).

62 Certain exempting provisions ineffective

Section 269B of the Principal Act is amended by omitting from subsection (1) "(i),".

63 Application of amendments

(1) The amendments made by this Division, other than by section 60, apply to assessments in respect of income of the 1994-95 year of income and of all later years of income.

(2) Subject to section 64, the amendment made by section 60 applies to income derived on or after 1 July 1994.

64 Transitional

(1) Subject to subsection (2), section 128B of the Principal Act, as in force immediately before its amendment by this Division, continues to apply to income consisting of amounts paid under a contract entered into before 1 July 1994 as if paragraph 23(i) of that Act had not been omitted by this Division.

(2) Subsection (1) does not apply if the income consists of:

(a) interest paid in respect of loan money:

(i) that was borrowed by the borrower on or after 1 July 1994; and

(ii) that, before 1 July 1994, the borrower was not under a contractual obligation to borrow; or

(b) interest paid in respect of a loan resulting from a 'roll-over', on or after 1 July 1994, of the whole or a part of a previous loan; or

(c) interest paid in respect of a period of extension of a period for which loan money was lent where the extension occurred on or after 1 July 1994.

Division 9 Exclusion of low income rebate from provisional tax arrangements

65 Object of Division

The object of this Division is to exclude the low income rebate from the provisional tax arrangements so that the rebate is provided only on assessment.

66 Uplifted provisional tax amendment

Section 221YCAA of the Principal Act is amended by inserting in paragraph (2)(m) "159N," after "159L,".

67 Provisional tax on estimated income

Section 221YDA of the Principal Act is amended:

(a) by inserting in paragraph (1)(da) "(other than section 159N)" after "Subdivision A";

(b) by inserting in subparagraph (2)(a)(ii) "(other than section 159N)" after "Subdivision A".

68 Application of amendments

(1) The amendment made by section 66 applies to provisional tax (including instalments) payable in respect of income of the 1994-95 year of income and in respect of income of all later years of income.

(2) The amendment made by paragraph 67(a) applies to estimates of provisional tax (including instalments) payable in respect of income of the 1993-94 year of income (other than estimates included in statements furnished to the Commissioner before 14 December 1993) and to estimates of provisional tax in respect of all later years of income.

(3) The amendment made by paragraph 67(b) applies to calculations of provisional tax on the basis of estimates to which the amendment made by paragraph 67(a) applies.

Division 10 Life assurance companies and registered organizations

69 Object of Division

The object of this Division is to clarify the deductions allowable to life assurance companies and registered organizations.

70 Deductions to be allowable for expenditure incurred in gaining superannuation premiums

(1) Section 111A of the Principal Act is amended by adding at the end the following subsection:

"(1A) For the purposes of the application of this section to assessments in respect of income of the year of income in which 1 July 1988 occurred and to assessments in respect of income of any later year of income that is derived before the end of the 1989-90 year of income, the reference in subsection (1) to superannuation premiums does not include a reference to premiums that are:

(a) received in respect of a superannuation policy issued by a life assurance company in the course of a business carried on by it at or through a permanent establishment of the company in a foreign country; or

(b) exempt from tax under paragraph 23(r).".

(2) Section 111A of the Principal Act is amended:

(a) by omitting subsection (2);

(b) by adding at the end the following subsection:

"(3) For the purposes of the application of this section to assessments in respect of income of the 1990-91 year of income or to assessments in respect of income of any later year of income, the reference in subsection (1) to superannuation premiums does not include a reference to premiums that are:

(a) received in respect of eligible non-resident policies; or

(b) exempt from tax under section 23AH; or

(3) Section 111A of the Principal Act is amended by adding at the end the following subsection:

"(4) This section does not apply, and is taken not to have applied, to superannuation premiums received on or after 1 January 1994.".

71 Deductions to be allowable for expenditure incurred in gaining the investment component of certain premiums

(1) Section 111AA of the Principal Act is amended by inserting after subsection (1) the following subsection:

"(1A) The reference in subsection (1) to premiums received in respect of life assurance policies does not include a reference to premiums that are received on or after 1 January 1990 and before the end of the 1989-90 year of income and:

(a) are so received in respect of a life assurance policy issued by a life assurance company in the course of a business carried on by it at or through a permanent establishment of the company in a foreign country; or

(b) are exempt from tax under paragraph 23(r).".

(2) Section 111AA of the Principal Act is amended:

(a) by omitting from paragraph (1)(c) "amounts; or" and substituting "amounts.";

(b) by omitting paragraphs (1)(d) and (e);

(c) by inserting after subsection (1A) the following subsection:

"(1B) For the purposes of the application of this section to assessments in respect of income of the 1990-91 year of income or to assessments in respect of income of later years of income, the reference in subsection (1) to premiums received in respect of life assurance policies does not include a reference to premiums that are:

(a) received in respect of eligible non-resident policies; or

(b) exempt from tax under section 23AH; or

(3) Section 111AA of the Principal Act is amended by adding at the end the following subsection:

"(4) This section does not apply, and is taken not to have applied, to premiums received on or after 1 January 1994.".

(4) If, in relation to a particular life assurance company:

(a) as a result of an amendment made by this section, the premiums to which section 111AA of the Principal Act as amended by this section applies in respect of a year of income differ from the premiums to which that section would have applied in respect of that year of income if the amendment had not been made; and

(b) the company obtained a certificate under section 111AA of the Principal Act in relation to that year of income;

section 111AA of the Principal Act as amended by this section is taken not to have applied to premiums received by the company in that year of income unless:

(c) after the commencement of this subsection the company furnishes an amended return in respect of that year of income; and

(d) after that commencement but before the amended return is furnished (or within such further period as the Commissioner allows) the company obtains a further certificate under section 111AA of the Principal Act as amended by this section with respect to the operation of that section in relation to that year of income.

72 Repeal of sections 111A and 111AA

Sections 111A and 111AA of the Principal Act are repealed.

73 Insertion of new sections

Before section 111B of the Principal Act the following sections are inserted:

Reinsurance recoveries and refunds of premiums not assessable income

"111AB. (1) If:

(a) a life assurance company has entered into a contract of reinsurance in respect of the whole or any part of a life assurance policy; and

(b) a premium paid or payable by the company under the contract of reinsurance is not an allowable deduction to the company because of paragraph 112BA(1)(c);

the company's assessable income does not include:

(c) any amount received or recovered by it under the contract of reinsurance in respect of its liability under the life assurance policy, or the part of that policy, that was reinsured; or

(d) any amount received or recovered by it that is a refund, or in the nature of a refund, of the premium.

"(2) This section applies to assessments in respect of income of the year of income in which 1 July 1988 occurred and to assessments in respect of income of all later years of income.

Deductions to be allowable for expenditure incurred in obtaining superannuation premiums

"111AC. (1) Subject to this section, the expenses mentioned in subsection (2) that are incurred by a life assurance company in the year of income in connection with the obtaining of superannuation premiums are allowable deductions.

"(2) The expenses to which subsection (1) applies are:

(a) salaries, wages, bonuses, commissions, allowances, or similar benefits, in respect of the sale, renewal or continuation of superannuation policies; and

(b) expenditure in recruiting or training people in the selling of superannuation policies; and

(c) salaries, wages, allowances or similar benefits paid or payable to employees of the company to the extent to which the benefits relate to the provision of administrative, technical or other assistance or support to people who sell superannuation policies; and

(d) expenditure in developing, or engaging in research in connection with, superannuation policies; and

(e) any other losses or outgoings to the extent to which they are incurred in preparing, selling or issuing superannuation policies or collecting superannuation premiums.

"(3) If:

(a) a provision of this Act (other than this section or section 51 or 111AD) allows a deduction from a taxpayer's assessable income in respect of a loss, outgoing or expenditure; and

(b) the provision extends to a taxpayer that is a life assurance company; the provision has effect in determining the deductions allowable to a life assurance company as if any reference in the provision to assessable income included a reference to superannuation premiums.

"(4) Expenses incurred by a life assurance company that are of a capital nature (other than expenses in respect of which a deduction is allowable because of subsection (3)) are not allowable deductions under this section.

"(5) Expenses incurred by a life assurance company in the general management of the business of the company within the meaning of section 113 or 113A are not allowable deductions under this section.

"(6) If, assuming that:

(a) the Taxation Laws Amendment Act 1994 had not been enacted; and

(b) this Act provided that a life assurance company's assessable income included the superannuation premiums received by the company;

a deduction would not have been allowed to a life assurance company in respect of a loss, outgoing or expenditure or a part of a loss, outgoing or expenditure, then, a deduction is not allowable to the company in respect of the loss, outgoing or expenditure or the part of the loss, outgoing or expenditure, as the case may be, under this section or under another provision of this Act as it has effect because of this section.

"(7) A reference in this section to a deduction in respect of a loss, outgoing or expenditure includes a reference to a deduction based on, or calculated by reference to, all or a portion of the loss, outgoing or expenditure.

"(8) In this section:

'superannuation premiums' does not include:

(a) premiums received in respect of eligible non-resident policies; or

(b) premiums exempt from tax under section 23AH; or

"(9) This section applies to expenses incurred, or to deductions in respect of a loss, outgoing or expenditure incurred, on or after 1 January 1994.

Deductions to be allowable for expenditure incurred in obtaining the investment component of certain premiums

"111AD.(1) In this section:

'relevant life assurance premiums' means premiums received in respect of life assurance policies other than:

(a) superannuation premiums; or

(b) premiums received in respect of exempt policies; or

(d) premiums received in respect of eligible non-resident policies; or

(e) premiums exempt from tax under section 23AH; or

(f) premiums exempt from tax under paragraph 23(r);

'relevant life assurance policy' means a life assurance policy in respect of which premiums received are relevant life assurance premiums.

"(2) Subject to this section, the expenses mentioned in subsection (3) that are incurred by a life assurance company in the year of income in connection with the obtaining of relevant life assurance premiums, to the extent to which the expenses relate to the investment component of those premiums, are allowable deductions.

"(3) The expenses to which subsection (2) applies are:

(a) salaries, wages, bonuses, commissions, allowances, or similar benefits, in respect of the sale, renewal or continuation of relevant life assurance policies; and

(b) expenditure in recruiting or training people in the selling of relevant life assurance policies; and

(d) expenditure in developing, or engaging in research in connection with, relevant life assurance policies; and

(e) any other losses or outgoings to the extent to which they are incurred in preparing, selling or issuing relevant life assurance policies or collecting relevant life assurance premiums.

"(4) If:

(a) a provision of this Act (other than this section or section 51 or 111AC) allows a deduction from a taxpayer's assessable income in respect of a loss, outgoing or expenditure; and

(b) the provision extends to a taxpayer that is a life assurance company;

the provision has effect in determining the deductions allowable to a life assurance company as if any reference in the provision to assessable income included a reference to the investment component of relevant life assurance premiums.

"(5) Expenses incurred by a life assurance company that are of a capital nature (other than expenses in respect of which a deduction is allowable because of subsection (4)) are not allowable deductions under this section.

"(6) Expenses incurred by a life assurance company in the general management of the business of the company within the meaning of section 113 or 113A are not allowable deductions under this section.

"(7) If, assuming that:

(a) the Taxation Laws Amendment Act 1994 had not been enacted; and

(b) this Act provided that a life assurance company's assessable income included the investment component of relevant life assurance premiums received by the company;

"(8) This section does not apply to premiums derived by a life assurance company in a year of income unless the company obtains a certificate by an authorised actuary, in the approved form, with respect to the operation of this section in relation to that year of income, before the date of lodgment of the return of income of the company of the year of income or within such further time as the Commissioner allows.

"(9) A reference in this section to a deduction in respect of a loss, outgoing or expenditure includes a reference to a deduction based on, or calculated by reference to, all or a portion of the loss, outgoing or expenditure.

"(10) This section applies to expenses incurred, or to deductions in respect of a loss, outgoing or expenditure incurred, on or after 1 January 1994.".

74 Reduction in deductions that are not exclusively related to producing assessable income

(1) Section 111C of the Principal Act is amended:

(a) by omitting from paragraph (1)(a) "51 or 113" and substituting "51, 111AC (other than subsection (3)), 111AD (other than subsection (4)) or 113";

(b) by omitting from subsection (2) all the words from and including "where:" to the end of the subsection;

(c) by adding at the end the following subsection:

"(4) In this section:

'Deduction' means the amount of the deduction concerned;

'Assessable income', in relation to a life assurance company includes:

(a) superannuation premiums to which section 111AC applies that are received by the company; and

(b) the investment component of relevant life assurance premiums to which section 111AD applies that are received by the company;

'Total income' means the total of all the amounts that would be assessable income of the company apart from any exempting provision.".

(2) The amendment made by paragraph (1)(a) applies in apportioning deductions in respect of a loss, outgoing or expenditure (including a deduction based on, or calculated by reference to, all or a portion of a loss, outgoing or expenditure) incurred on or after 1 January 1994.

(3) The amendments made by paragraphs (1)(b) and (c) apply in respect of premiums received on or after 1 January 1994.

75 Deductions not allowable for expenditure incurred in gaining certain premium income

(1) Section 112 of the Principal Act is amended by inserting in subparagraph (1)(a)(i) "to which section 111A applies" after "premiums".

(2) The amendment made by subsection (1) applies to expenditure incurred on or after 1 January 1990.

76 Repeal of section and substitution of new section

Section 112 of the Principal Act is repealed and the following section is substituted:

Deductions not allowable for expenditure incurred in gaining certain premium income

"112. (1) A deduction is not allowable to a life assurance company in respect of expenditure incurred exclusively in gaining:

(a) premiums that are excluded from assessable income by section 111 other than:

(i) superannuation premiums to which section 111AC applies; or

(ii) the investment component of relevant life assurance premiums to which section 111AD applies; or

(b) the risk component of any such relevant life assurance premiums.

"(2) This section applies to expenditure incurred on or after 1 January 1994.".

77 Insertion of new section

After section 112A of the Principal Act the following section is inserted:

Deductions not allowable for benefits or reinsurance premiums

"112BA. (1) Despite any other provision of this Act, a deduction is not allowable to a life assurance company in respect of:

(a) a benefit paid or payable under a life assurance policy; or

(b) the inclusion of an amount in the company's reserves for the purpose of meeting any future liability (including a contingent liability) of the company to pay benefits to which paragraph (a) would apply; or

(c) a premium paid or payable by the company in respect of the reinsurance of the whole or any part of a life assurance policy; or

(d) an amount paid or payable to, or to an associate of, the holder of a life assurance policy in settlement of a dispute as to the liability of the company under the policy.

"(2) A reference in subsection (1) to a benefit paid or payable under a life assurance policy:

(a) includes a reference to an amount paid or payable:

(i) in respect of a claim under the policy; or

(ii) as consideration for, in connection with, or as a consequence of, the surrender, cancellation, forfeiture, termination or disposal of the policy or any rights under the policy; or

(iii) in respect of a bonus under the policy; or

(iv) in respect of an annuity under the policy; or

(v) that is a refund, or is in the nature of a refund, of a premium that, under section 111, is not included in the company's assessable income; but

(b) does not include any interest payable under section 57 of the Insurance

Contracts Act 1984.

"(3) To remove any doubt, it is declared that a supplementary benefit (known as a rider benefit) that is paid or payable in respect of a non-life assurance risk (including an accident and disability risk, a sickness risk and a trauma risk) and in respect of which the premiums received by the life assurance company that issued the relevant life assurance policy are included in the company's assessable income is not a benefit paid or payable under a life assurance policy for the purposes of subsection (1).

"(4) In this section:

'associate' has the same meaning as in subsection 26AAB(14).

"(5) This section applies to assessments in respect of income of the year of income in which 1 July 1988 occurred and to assessments in respect of income of all later years of income.".

78 Expenses of general management relating to producing assessable income

(1) Section 113 of the Principal Act is amended by adding at the end the following subsection:

"(5) In this section:

'assessable income', in relation to a life insurance company, includes:

(a) superannuation premiums to which section 111AC applies that are received by the company; and

(b) the investment component of relevant life assurance premiums to which section 111AD applies that are received by the company.".

(2) The amendment made by subsection (1) applies to expenditure incurred on or after 1 January 1994.

79 Insertion of new section

After section 113 of the Principal Act the following section is inserted:

Expenses of general management incurred in obtaining certain premiums

"113A. (1) If:

(a) expenditure is incurred by a life assurance company in the year of income in the general management of the company's business; and

(b) the expenditure is not an allowable deduction under section 113 because of paragraph 113(3)(b);

the expenditure is an allowable deduction to the extent to which it was incurred in gaining or producing:

(d) the investment component of relevant life insurance premiums to which section 111AD applies.

"(2) If, assuming that:

(a) the Taxation Laws Amendment Act 1994 had not been enacted; and

(b) this Act provided that a life assurance company's assessable income included the superannuation premiums and the investment component of relevant life assurance premiums received by the company;

"(3) For the purposes of this section, expenditure of a capital nature is taken not to be expenditure incurred in the general management of the business of the company.

"(4) A reference in this section to a deduction in respect of a loss, outgoing or expenditure includes a reference to a deduction based on, or calculated by reference to, all or a portion of the loss, outgoing or expenditure.

"(5) In this section:

'relevant life assurance premiums' means premiums received in respect of life assurance policies other than:

(a) superannuation premiums; or

(b) premiums received in respect of exempt policies; or

(d) premiums received in respect of eligible non-resident policies; or

(e) premiums exempt from tax under section 23AH; or

(f) premiums exempt from tax under paragraph 23(r).

"(6) This section applies to expenses incurred, or to deductions in respect of a loss, outgoing or expenditure incurred, on or after 1 January 1994.".

80 Apportionment of current year deductions between classes

(1) Section 116CF of the Principal Act is amended:

(a) by omitting from subsections (4), (5) and (6) "subsection 111A(1)" and substituting "section 111AC"; and

(b) by omitting from subsections (4), (6) and (7) "section 111AA" and substituting "section 111AD".

(2) Subsections 116CF(4), (5), (6) and (7) of the Principal Act as amended by subsection (1) of this section apply in relation to premiums received by a life assurance company on or after 1 January 1994.

81 Insertion of new section

After section 116GD of the Principal Act the following section is inserted:

Reinsurance recoveries and refunds of premiums not assessable income

"116GE. (1) If:

(a) a registered organization has entered into a contract of reinsurance in respect of the whole or any part of a life assurance policy; and

(b) a premium paid or payable by the organization under the contract of reinsurance is not an allowable deduction to the organization because of paragraph 116HAD(1)(c);

the organization's assessable income does not include:

(c) any amount received or recovered by it under the contract of reinsurance in respect of its liability under the life assurance policy, or the part of that policy, that was reinsured; or

(d) any amount received or recovered by it that is a refund, or in the

nature of a refund, of the premium.

"(2) This section applies to assessments in respect of income of the year of income in which 1 July 1988 occurred and to assessments in respect of income of all later years of income.".

82 Deductions allowable from assessable income of registered organizations

(1) Section 116H of the Principal Act is amended:

(a) by inserting after paragraph (a) the following paragraph:

"(aa) any deductions that, apart from this section, would be allowable to the organization in relation to the year of income under section 116HAB or 116HAC; and";

(b) by adding at the end the following subsection:

"(2) In paragraph (1)(b):

'assessable income', in relation to a registered organization:

(a) includes superannuation premiums to which section 116HAB applies that are received on or after 1 January 1994 by the organization; and

(b) includes the investment component of relevant life assurance premiums to which section 116HAC applies that are received on or after 1 July 1994 by the organization.".

(2) The amendment made by paragraph (1)(a) applies to deductions in respect of a loss, outgoing or expenditure (including a deduction based on, or calculated by reference to, all or a portion of a loss, outgoing or expenditure) incurred:

(a) in respect of deductions under section 116HAB-on or after 1 January 1994; or

(b) in respect of deductions under section 116HAC-on or after 1 July 1994.

83 Deductions to be allowable for expenditure incurred in gaining superannuation premiums

(1) Section 116HA of the Principal Act is amended by adding at the end the following subsection:

"(2) For the purposes of the application of this section to assessments in respect of income of the year of income in which 1 July 1988 occurred and to assessments in respect of income of any later year of income that is derived before the end of the 1989-90 year of income, if:

(a) a registered organization receives premiums (the 'foreign premiums') in respect of a superannuation policy issued by it in the course of a business carried on by it at or through a permanent establishment of the organization in a foreign country; and

(b) the organization's assessable income does not include the income from the investment of the foreign premiums;

then the reference in subsection (1) to superannuation premiums does not include a reference to the foreign premiums.".

(2) Section 116HA of the Principal Act is amended by adding at the end the following subsection:

(3) Section 116HA of the Principal Act is amended by adding at the end the following subsection:

"(4) This section does not apply to premiums received on or after 1 January 1994.".

84 Repeal of sections 116HA and 116HAA

Sections 116HA and 116HAA of the Principal Act are repealed.

85 Insertion of new sections

Before section 116HB of the Principal Act the following sections are inserted:

Deductions to be allowable for expenditure incurred in obtaining superannuation premiums

"116HAB. (1) Subject to this section, the expenses mentioned in subsection (2) that are incurred by a registered organization in the year of income in connection with the obtaining of superannuation premiums are allowable deductions.

"(2) The expenses to which subsection (1) applies are:

(a) salaries, wages, bonuses, commissions, allowances, or similar benefits, in respect of the sale, renewal or continuation of superannuation policies; and

(b) expenditure in recruiting or training people in the selling of superannuation policies; and

(c) salaries, wages, allowances or similar benefits paid or payable to employees of the organization to the extent to which the benefits relate to the provision of administrative, technical or other assistance or support to people who sell superannuation policies; and

(d) expenditure in developing, or engaging in research in connection with, superannuation policies; and

(e) any other losses or outgoings to the extent to which they are incurred in preparing, selling or issuing superannuation policies or collecting superannuation premiums; and

(f) expenses in the general management of the organization's business to the extent to which the expenses are incurred in gaining or producing superannuation premiums.

"(3) If:

(a) a provision of this Act (other than this section or section 51, 116H or 116HAC) allows a deduction from a taxpayer's assessable income in respect of a loss, outgoing or expenditure; and

(b) the provision extends to a taxpayer that is a registered organization;

the provision has effect in determining the deductions allowable to a registered organization as if any reference in the provision to assessable income included a reference to superannuation premiums.

"(4) Expenses incurred by a registered organization (other than expenses in respect of which a deduction is allowable because of subsection (3)) that are of a capital nature are not allowable deductions under this section.

"(5) If, assuming that:

(a) the Taxation Laws Amendment Act 1994 had not been enacted; and

(b) this Act provided that a registered organization's assessable income included the superannuation premiums received by the organization;

a deduction would not have been allowed to a registered organization in respect of a loss, outgoing or expenditure or a part of a loss, outgoing or expenditure, then, a deduction is not allowable to the organization in respect of the loss, outgoing or expenditure or the part of the loss, outgoing or expenditure, as the case may be, under this section or under another provision of this Act as it has effect because of this section.

"(6) A reference in this section to a deduction in respect of a loss, outgoing or expenditure includes a reference to a deduction based on, or calculated by reference to, all or a portion of the loss, outgoing or expenditure.

"(7) In this section:

'superannuation premiums' do not include premiums that are exempt from tax under section 23AH.

"(8) This section applies to expenses incurred, or to deductions in respect of a loss, outgoing orexpenditure incurred, on or after 1 January 1994.

Deductions to be allowable for expenditure incurred in obtaining the investment component of certain premiums

"116HAC. (1) In this section:

'authorised actuary', in relation to a registered organization, means a Fellow or an Accredited Member of the Institute of Actuaries of Australia;

'relevant life assurance premiums' means premiums received in respect of life assurance policies other than:

(a) superannuation premiums; or

(b) premiums received in respect of eligible policies; or

(d) premiums exempt from tax under section 23AH;

'relevant life assurance policy' means a life assurance policy in respect of which premiums received are relevant life assurance premiums.

"(2) Subject to this section, the expenses mentioned in subsection (3) incurred by a registered organization in the year of income in connection with the obtaining of relevant life assurance premiums, to the extent to which the expenses relate to the investment component of those premiums, are allowable deductions.

"(3) The expenses to which subsection (2) applies are:

(a) salaries, wages, bonuses, commissions, allowances, or similar benefits, in respect of the sale, renewal or continuation of relevant life assurance policies; and

(b) expenditure in recruiting or training people in the selling of relevant life assurance policies; and

(d) expenditure in developing, or engaging in research in connection with, relevant life assurance policies; and

(e) any other losses or outgoings to the extent to which they are incurred in preparing, selling or issuing relevant life assurance policies or collecting relevant life assurance premiums; and

(f) expenses in the general management of the organization's business to the extent to which the expenses are incurred in gaining or producing relevant life assurance premiums.

"(4) If:

(a) a provision of this Act (other than this section or section 51, 116H or 116HAB) allows a deduction from a taxpayer's assessable income in respect of a loss, outgoing or expenditure; and

(b) the provision extends to a taxpayer that is a registered organization;

the provision has effect in determining the deductions allowable to a registered organization as if any reference in the provision to assessable income included a reference to the investment component of relevant life assurance premiums.

"(5) Expenses incurred by a registered organization (other than expenses in respect of which a deduction is allowable because of subsection (4)) that are of a capital nature are not allowable deductions under this section.

"(6) If, assuming that:

(a) the Taxation Laws Amendment Act 1994 had not been enacted; and

(b) this Act provided that a registered organization's assessable income included the investment component of relevant life assurance premiums received by the organization;

"(7) This section does not apply to premiums derived by a registered organization in a year of income unless the organization obtains a certificate by an authorised actuary, in the approved form, with respect to the operation of this section, before the date of lodgment of the return of income of the organization of the year of income or within such further time as the Commissioner allows.

"(8) A reference in this section to a deduction in respect of a loss, outgoing or expenditure includes a reference to a deduction based on, or calculated by reference to, all or a portion of the loss, outgoing or expenditure.

"(9) This section applies to expenses incurred, or to deductions in respect of a loss, outgoing or expenditure incurred, on or after 1 July 1994.

Deductions not allowable for benefits or reinsurance premiums

"116HAD. (1) Despite any other provision of this Act, a deduction is not allowable to a registered organization in respect of:

(a) a benefit paid or payable under a life assurance policy; or

(b) the inclusion of an amount in the organization's reserves for the purpose of meeting any future liability (including a contingent liability) of the organization to pay benefits to which paragraph (a) would apply; or

(c) a premium paid or payable by the organization in respect of the reinsurance of the whole or any part of a life assurance policy; or

(d) an amount paid or payable to, or to an associate of, the holder of a life insurance policy in settlement of a dispute as to the liability of the organization under the policy.

"(2) A reference in subsection (1) to a benefit paid or payable under a life assurance policy includes a reference to an amount paid or payable:

(a) in respect of a claim under the policy; or

(b) as consideration for, in connection with, or as a consequence of, the surrender, cancellation, forfeiture, termination or disposal of the policy or any rights under the policy; or

(d) in respect of an annuity under the policy; or

(e) that is a refund, or is in the nature of a refund, of a premium that is not included in the organization's assessable income.

"(3) To remove any doubt, it is declared that a supplementary benefit (known as a rider benefit) that is paid or payable in respect of a non-life assurance risk (including an accident and disability risk, a sickness risk and a trauma risk) and in respect of which the premiums received by the registered organization that issued the relevant life assurance policy are included in the organization's assessable income is not a benefit paid or payable under a life assurance policy for the purposes of subsection (1).

"(4) If a registered organization makes a late payment in respect of an amount that the organization is liable to pay under, or in relation to, a life assurance policy, any interest paid or payable by the organization because of the late payment is not a benefit paid or payable under the policy for the purposes of subsection (1).

"(5) In this section:

'associate' has the same meaning as in subsection 26AAB(14).

"(6) This section applies to assessments in respect of income of the year of income in which 1 July 1988 occurred and to assessments in respect of income of all later years of income.".

86 Period allowed for furnishing amended returns without incurring penalty

(1) If:

(a) a taxpayer furnished a return of income before the commencement of this section; and

(b) the return included a claim for a deduction under Division 8 or 8A of the Principal Act; and

(d) that deduction is taken by the Principal Act as amended by this Division not to have been allowable; and

(e) within 6 months (or such further period as the Commissioner allows) after the day on which this Act received the Royal Assent the taxpayer furnishes an amended return that does not include a claim for the deduction;

no penalty is payable by the taxpayer because of the claim for the deduction but the Income Tax (Interest on Underpayments) Act 1986 applies in respect of any underpayment of tax as a result of any increase in tax that is payable because the deduction is not allowable.

(2) The question whether a matter was reasonably arguable as mentioned in paragraph (1)(c) is to be determined in the same way as the question would be determined under section 222C of the Income Tax Assessment Act 1936 if that section were applicable.

Division 11 Amendment of assessments

87 Amendment of assessments

Section 170 of the Principal Act does not prevent the amendment of an assessment made before the commencement of this section for the purpose of giving effect to this Act.

Part 4 AMENDMENT OF THE SUPERANNUATION GUARANTEE (ADMINISTRATION) ACT 1992

Division 1 Principal Act

88 Principal Act

In this Part, "Principal Act" means the Superannuation Guarantee (Administration) Act 1992.*3*

Superannuation Guarantee (Administration) Act 1992

*3* No. 111, 1992, as amended. For previous amendments, see No. 208, 1992; and No. 7, 1993.

Division 2 Liability of Commonwealth authorities

89 Object of Division

The object of this Division is to ensure that Commonwealth authorities are liable to pay superannuation guarantee charge.

90 Repeal of section and substitution of new section

(1) Section 5 of the Principal Act is repealed and the following section is substituted:

Application of Act to Commonwealth

"5. (1) The Commonwealth is not liable to pay superannuation guarantee charge.

"(2) This Act applies in all other respects as if the Commonwealth were liable to pay superannuation guarantee charge.

"(3) Part 8 has effect as if any superannuation guarantee charge in respect of a superannuation guarantee shortfall of the Commonwealth had been paid on 14 August in the year following the year to which the charge relates.

"(4) Subsection 14ZX(4), section 14ZZ and Divisions 4 and 5 of Part IVC of the Taxation Administration Act 1953 do not apply to the Commonwealth.".

(2) The amendment made by subsection (1) applies to assessments of superannuation guarantee shortfall for the year beginning on 1 July 1993 and for all later years.

91 Insertion of new section

The following section is inserted at the end of Part 1 of the Principal Act:

Application of Act to Commonwealth authorities

"5A. (1) In this section:

'Commonwealth authority' means an authority or body that is established by or under a law of the Commonwealth.

"(2) If:

(a) a law, or a provision of a law, passed before the commencement of this section purports to exempt a Commonwealth authority from liability to pay:

(i) taxes under the laws of the Commonwealth; or

(ii) certain taxes under the laws of the Commonwealth; and

(b) apart from this subsection, the exemption would apply to superannuation guarantee charge;

that law or provision is taken, for the year beginning on 1 July 1993 and for all later years, not to have exempted, or not to exempt, that authority from liability to pay the charge.

"(3) If:

(a) a law, or a provision of a law, passed after the commencement of this section purports to exempt a Commonwealth authority from liability to pay:

(i) taxes under the laws of the Commonwealth; or

(ii) certain taxes under the laws of the Commonwealth; and

(b) apart from this subsection, the exemption would apply to superannuation guarantee charge;

the law or provision is not taken, for the year beginning on 1 July 1993 or for any later year, to have exempted, or to exempt, the authority from liability to pay the charge unless the law or provision expressly exempts the authority from liability to pay the charge.".

Division 3 Ordinary time earnings

92 Object of Division

The object of this Division is to provide that ordinary time earnings do not include certain lump sum payments made to employees on the termination of their employment.

93 Interpretation-general

(1) Section 6 of the Principal Act is amended by omitting subparagraph (a)(i) of the definition of "ordinary time earnings" in subsection (1) and substituting the following subparagraph:

"(i) earnings in respect of ordinary hours of work other than earnings consisting of a lump sum payment of any of the following kinds made to the employee on the termination of his or her employment:

(A) a payment in lieu of unused sick leave;

(B) a payment in lieu of unused annual leave within the meaning of subsection 26AC(1) of the Income Tax Assessment Act 1936;

(C) a payment in lieu of unused long service leave within the meaning of subsection 26AD(1) of the Income Tax Assessment Act 1936; and".

(2) The amendment made by subsection (1) applies to assessments of superannuation guarantee shortfall for the year beginning on 1 July 1993 and for all later years.

Division 4 Industrial award

94 Object of Division

The object of this Division is to allow employers in the maritime industry who contribute to the Seafarers' Retirement Fund to use the notional earnings base.

95 Interpretation: notional earnings base where employer contributing to superannuation fund for benefit of employee immediately before 21 August 1991

Section 13 of the Principal Act is amended by inserting after paragraph (a) of the definition of "reference earnings" in subsection (5) the following paragraph:

"(aa) if the employer is contributing for the benefit of the employee in relation to a contribution period to the superannuation fund known as the Seafarers' Retirement Fund that was established by a trust deed on 3 May 1973-the benchmark rate stated in the trust deed; and".

96 Insertion of new section

After section 13 of the Principal Act the following section is inserted:

Interpretation: notional earnings base where employer contributing to Seafarers' Retirement Fund

"13A. (1) This section deals with the meaning of the expression 'notional earnings base' in relation to an employee if:

(a) an employer is contributing for the benefit of the employee in relation to a contribution period to the superannuation fund known as the Seafarers' Retirement Fund that was established by a trust deed on 3 May 1973; and

(b) the employer was not so contributing immediately before 21 August 1991; and

(c) section 13 would apply in relation to the employee if the employer had been so contributing immediately before that date.

"(2) The expression 'notional earnings base' has, in relation to the employee, the same meaning as in section 13.".

97 Application of amendments

The amendments made by sections 95 and 96 have effect as if those sections had commenced on 1 July 1992, immediately after the commencement of the Principal Act.

Division 5 Contractors

98 Object of Division

The object of this Division is to make it clear that payments made to contractors for their labour are treated as salary or wages.

99 Interpretation-salary or wages

(1) Section 11 of the Principal Act is amended by inserting after paragraph (1)(b) the following paragraph:

"(ba) payments under a contract referred to in subsection 12(3) that are made in respect of the labour of the person working under the contract; and".

(2) The amendment made by subsection (1) has effect as if that subsection had commenced on 1 July 1992, immediately after the commencement of the Principal Act.

Division 6 Payments to estate of a dead employee

100 Object of Division

The object of this Division is to allow an employer to pay to the estate of an employee who has died contributions that could have been paid at the time of the death.

101 Reduction of charge percentage where contribution made to fund other than defined benefit superannuation scheme

(1) Section 23 of the Principal Act is amended by inserting after subsection (9) the following subsection:

(Contributions to estate of deceased employee)

"(9A) If:

(a) an employee has died; and

(b) the employer would, if the employee had not died, have made a contribution to a complying superannuation fund for the benefit of the employee; and

(c) the employer pays to the legal personal representative of the employee an amount equal to the amount of the contribution that would have been paid;

the amount paid is taken for the purposes of this section to have been a contribution made by the employer to a complying superannuation fund for the benefit of the employee.".

(2) The amendment made by subsection (1) has effect as if that subsection had commenced on 1 July 1992, immediately after the commencement of the Principal Act.

Division 7 Contribution periods

102 Object of Division

The object of this Division is to defer the introduction of quarterly contributions until the 1994-95 year.

103 Reduction of charge percentage if contribution made to fund other than defined benefit superannuation scheme

(1) Section 23 of the Principal Act is amended by inserting after subsection (6) the following subsection:

(Contribution made during a particular period may be taken into account for any of several periods)

"(6A) A contribution to a complying superannuation fund made by an employer for the benefit of an employee in the period starting on 1 July 1993 and ending on 28 July 1994 may be taken into account under this section as if it had been made in any of the contribution periods in the 1993-94 year.".

(2) The amendment made by subsection (1) applies to assessments of superannuation guarantee shortfall for the year beginning on 1 July 1993 and for all later years.

Division 8 Reduction of notional earnings base and ordinary time earnings

104 Object of Division

The object of this Division is to ensure that employers are not liable to superannuation guarantee charge in respect of amounts that are excluded from the definition of salary or wages.

105 Reduction of charge percentage if contribution made to fund other than defined benefit superannuation scheme

(1) Section 23 of the Principal Act is amended by adding at the end the following subsections:

(Reduction of notional earnings base if amount excluded from employee's salary or wages)

"(11) If an employee's notional earnings base includes an amount of the employee's salary or wages that, because of section 27 or 28, is not taken into account for the purpose of making a calculation under section 18 or 19, the employee's notional earnings base for the purposes of this section is taken to be reduced by that amount.

(Reduction of ordinary time earnings if amount excluded from employee's salary or wages)

"(12) If, because of section 27 or 28, an amount of an employee's salary or wages is not taken into account for the purpose of making a calculation under section 18 or 19, the employee's ordinary time earnings for the purposes of this section are taken to be reduced by that amount.".

(2) The amendment made by subsection (1) has effect as if that subsection had commenced on 1 July 1992, immediately after the commencement of the Principal Act.

Division 9 Flat dollar contributions and part-time employees

106 Object of Division

The object of this Division is to clarify the treatment of flat dollar superannuation contributions made by certain employers and to adjust notional earnings bases for part-time employees.

107 Certain contributions taken to be in accordance with industrial award that specifies notional earnings base

(1) Section 25A of the Principal Act is amended:

(a) by adding at the end of subsection (1) the following word and paragraphs:

"; and

(d) immediately before that date:

(i) the award specified an amount of money as mentioned in paragraph (a); and

(ii) that amount was required to be adjusted as mentioned in paragraph (b).";

(b) by omitting paragraph (2)(b) and substituting the following paragraph:

"(b) the award has not, on or after 21 August 1991, been amended in a way that has the effect of reducing an employee's notional earnings base;";

(c) by omitting subsection (3) and substituting the following subsection:

"(3) Subject to subsection (4), the employee's notional earnings base in relation to a contribution period for the purposes of subsection 23(2) is:

(a) subject to paragraph (b), the adjustment earnings in respect of the period; or

(b) if the employee is a part-time employee-the amount worked out using the formula:

(Number of hours employed / Full-time employee's hours) * Adjustment earnings

where:

'Number of hours employed' means the number of hours for which the employee is employed in the period;

'Full-time employee's hours' means the number of ordinary hours of work for which an equivalent full-time employee would have been employed in the period under the award;

'Adjustment earnings' means the adjustment earnings in respect of the

period.".

(2) The amendments made by subsection (1) apply to assessments of superannuation guarantee shortfall for the year beginning on 1 July 1993 and for all later years.

Division 10 Retirement of employee due to permanent incapacity or invalidity

108 Object of Division

The object of this Division is to provide for payment of a shortfall component to an employee who retires due to permanent incapacity or invalidity.

109 Repeal of section and substitution of new section

(1) Section 66 of the Principal Act is repealed and the following section is substituted:

Payment to employee retired due to permanent incapacity or invalidity

"66. If:

(a) the employee is under 55 but has retired because of permanent incapacity or permanent invalidity; and

(b) the former employee has lodged with the Commissioner:

(i) written notice of the retirement; and

(ii) a copy of a certificate signed by 2 registered medical practitioners certifying that the former employee is unlikely to be able to work again in a capacity for which he or she is reasonably qualified by education, training or experience;

the Commissioner must pay the amount of the shortfall component to the former employee.".

(2) The amendment made by subsection (1) applies to assessments of superannuation guarantee shortfall for the year beginning on 1 July 1993 and for all later years.

Part 5 AMENDMENT OF THE TAXATION LAWS AMENDMENT (SUPERANNUATION) ACT 1989

110 Principal Act

In this Part, "Principal Act" means the Taxation Laws Amendment (Superannuation) Act 1989.*4*

*4* No. 105, 1989.

111 Object of Part

This Part makes an amendment that is consequential on the amendments made by Division 10 of Part 3.

112 Amendment of section 17 of the Principal Act

(1) Section 17 of the Principal Act is amended by omitting subsection (2) of the section 112 that was inserted in the Income Tax Assessment Act 1936 by section 17 of the Principal Act and substituting the following subsection:

"(2) This section does not apply to superannuation premiums to which section 111A applies.".

(2) To remove any doubt, it is declared that, for all purposes (including the purposes of section 65 of the Taxation Laws Amendment (Superannuation) Act 1989), the section that was inserted in the Income Tax Assessment Act 1936 by section 17 of the Principal Act is taken to have been that section as amended by subsection (1) of this section.

(3) This section does not affect the operation of paragraph 12(b) of the Taxation Laws Amendment Act (No. 5) 1989 and, to remove any doubt, it is declared that the subsection 112(2) of the Income Tax Assessment Act 1936 that was omitted by that paragraph is taken to have been that subsection as amended by subsection (1) of this section.