Taxation Laws Amendment (Foreign Income Measures) Act 1997

(155 of 1997)

An Act to amend the law relating to taxation

[Assented to 24 October 1997]

The Parliament of Australia enacts:

[Minister's second reading speech made in - House of Representatives on 4 September 1997; Senate on 29 September 1997]

1 Short title

This Act may be cited as theTaxation Laws Amendment (Foreign Income Measures) Act 1997.

2 Commencement

This Act commences on the day on which it receives the Royal Assent.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

4 Amendment of income tax assessments

Section 170 of theIncome Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section for the purposes of giving effect to this Act.

Schedule 1 Foreign source income

Part 1 General amendments

Income Tax Assessment Act 1936

1 Paragraph 23AH(1)(c)

Repeal the paragraph, substitute:

(c) if the listed country is a broad-exemption listed country - the foreign income is not eligible designated concession income in relation to any broad-exemption listed country in relation to the year of income;

(ca) if the listed country is a limited-exemption listed country - either:

(i) the foreign income is not adjusted tainted income of the permanent establishment (as defined by subsection (10A)) in relation to the year of income; or

(ii) the permanent establishment passes the active income test (as defined by subsection (10B)) in relation to the year of income;

2 Paragraph 23AH(6)(f)

Repeal the paragraph, substitute:

(f) if the listed country is a broad-exemption listed country - that gain or profit is not eligible designated concession income in relation to any broad-exemption listed country in relation to the disposal year of income;

(fa) if the listed country is a limited-exemption listed country - that gain or profit is not adjusted tainted income of the permanent establishment (as defined by subsection (10A)) in relation to the disposal year of income;

3 Paragraph 23AH(7)(f)

Repeal the paragraph, substitute:

4 After subsection 23AH(10)

Insert:

(10A) For the purposes of this section, the adjusted tainted income of a permanent establishment of a taxpayer is income or other amounts that would be adjusted tainted income of the taxpayer for the purposes of Part X if it were assumed that, for the purposes of that Part:

(a) except in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b), the only income or other amounts derived by the taxpayer were the income derived in carrying on business at or through the permanent establishment; and

(b) the taxpayer's statutory accounting periods were the same as the taxpayer's years of income; and

(d) in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b):

(i) the part of the taxpayer's operations that consists of the business carried on at or through the permanent establishment were a company (the PE company ); and

(ii) the remaining part of the taxpayer's operations were a separate company (the HQ company ); and

(iii) the HQ company were an associate of the PE company; and

(iv) the PE company and the HQ company had carried out the sale of goods transactions that they would have carried out if the PE company were engaged in the same or similar activities as the permanent establishment under the same or similar conditions as the permanent establishment and were dealing wholly independently with the HQ company; and

(v) any income derived by the HQ company were disregarded; and

(e) paragraphs 447(1)(b), (d) and (f) had not been enacted; and

(f) in a case where the taxpayer is an AFI entity (within the meaning of subsection 326(2)) - the taxpayer were an AFI subsidiary.

(10B) For the purposes of this section, a permanent establishment of a taxpayer passes the active income test in relation to a year of income if the taxpayer would have passed theactive income test (within the meaning of Part X) if it were assumed that, for the purposes of that Part:

(b) the taxpayer's statutory accounting periods were the same as the taxpayer's years of income; and

(d) subsections 446(2) and (3) had not been enacted; and

(e) in applying paragraphs 447(1)(a), (c) and (e) and 450(6)(c), (7)(d) and (8)(b):

(i) the part of the taxpayer's operations that consists of the business carried on at or through the permanent establishment were a company (the PE company ); and

(ii) the remaining part of the taxpayer's operations were a separate company (the HQ company ); and

(iii) the HQ company were an associate of the PE company; and

(v) any income derived by the HQ company were disregarded; and

(f) paragraphs 447(1)(b), (d) and (f) had not been enacted; and

(g) in a case where the taxpayer is an AFI entity (within the meaning of subsection 326(2)) - the taxpayer were an AFI subsidiary; and

(h) any income or other amounts derived by the taxpayer before 1 July 1997 were disregarded.

(10C) In subsections (10A) and (10B):

goods has the same meaning as in Part X.

sale has the same meaning as in Part X.

5 Subsection 23AH(12)

Insert:

broad-exemption listed country has the same meaning as in Part X.

6 Subsection 23AH(12)

Insert:

limited-exemption listed country has the same meaning as in Part X.

7 Section 102AAB

Insert:

broad-exemption listed country has the same meaning as in Part X.

8 Section 102AAB

Insert:

broad-exemption listed country trust estate has the meaning given by section 102AAE.

9 Section 102AAB (definition of listed country )

Repeal the definition.

10 Section 102AAB (definition of listed country trust estate )

Repeal the definition.

11 Section 102AAB

Insert:

non-broad-exemption listed country has the same meaning as in Part X.

12 Subsection 102AAU(6)

Omit " listed " (first occurring), substitute " broad-exemption listed ".

13 Subsection 102AAU(6) (formula)

Repeal the formula, substitute:

Taxed amount * (Broad-exemption listed country trust amount / Net income)

14 Subsection 102AAU(6) (definition of Listed country trust amount )

Repeal the definition.

15 Subsection 102AAU(6) (before the definition of Taxed amount )

Insert:

Broad-exemption listed country trust amount means the number of dollars in the broad-exemption listed country trust amount.

16 Section 160AFCA

Omit all the words after "equal to the attribution percentage", substitute:

of the sum of:

(c) the total amount of the notional allowable deductions under section 393 in relation to the attributable income of the CFC for the statutory accounting period; and

(d) the total of amounts of foreign tax not actually paid, but deemed to have been paid, by the CFC for the statutory accounting period, in relation to a law of a listed country, as mentioned in sub-subparagraph 324(1)(b)(i)(A) or (B).

17 After paragraph 160ZFB(1)(a)

Insert:

(aa) subsection 457(3) does not apply to the change of residence; and

18 Section 317

Insert:

broad-exemption listed country has the meaning given by section 320.

19 Section 317

Insert:

limited-exemption listed country has the meaning given by section 320.

20 Section 317

Insert:

non-broad-exemption listed country has the meaning given by section 320.

21 Section 317

Insert:

special excluded rental income , in relation to a company, in relation to a statutory accounting period, means income derived by the company in the statutory accounting period by way of rent, where:

(a) the income was derived by the company from a CFC; and

(b) at all times during the statutory accounting period when the income accrued:

(i) the CFC was an associate of the company; and

(ii) the company was a resident of a particular listed country or a particular unlisted country; and

(iii) the CFC was also a resident of that listed country or that unlisted country, as the case may be; and

(c) the income was taxed in that listed country or that unlisted country, as the case may be, at the country's normal company tax rate (see section 325); and

(d) the income would not have been, in whole or in part, a notional allowable deduction of the CFC if it were assumed that the CFC had failed to pass the active income test in relation to any statutory accounting period of the CFC.

22 Section 317 (definition of tainted rental income )

After "income" (first occurring), insert "(other than special excluded rental income)".

23 Subsection 319(4)

Omit "subsection (5)", substitute "subsections (4A) and (5)".

24 After subsection 319(4)

Insert:

(4A) Subject to subsection (5), if:

(a) the election is made in the company's statutory accounting period in which the company first became a CFC; and

(b) the new day occurs after the election is made but before the old day;

then, subject to any further application of subsection (2):

(d) later statutory accounting periods are the successive periods of 12 months finishing at the end of the new day.

25 At the end of section 319

Add:

(7) For the purposes of applying this section to a company, if:

(a) the company is a CFC at a particular time; and

(b) an entity is the only attributable taxpayer in relation to the company at that time; and

then, instead of a notice being given under subsection (2) by the company at that time, the notice may be given at that time by the entity.

26 Subsection 320(1)

Insert:

broad-exemption listed country means a foreign country, or a part of a foreign country, that is declared by the regulations to be a broad-exemption listed country for the purposes of this Part.

27 Subsection 320(1)

Insert:

limited-exemption listed country means a foreign country, or a part of a foreign country, that is declared by the regulations to be a limited-exemption listed country for the purposes of this Part.

28 Subsection 320(1) (definition of listed country )

Repeal the definition, substitute:

listed country means:

(a) a broad-exemption listed country; or

(b) a limited-exemption listed country.

29 Subsection 320(1)

Insert:

non-broad-exemption listed country means:

(a) an unlisted country; or

(b) a limited-exemption listed country.

30 At the end of section 325

Add:

(2) For the purposes of this Part, a dividend or other amount of a particular kind is taken to be taxed in an unlisted country at the country's normal tax rate if, and only if:

(a) foreign tax is payable under a tax law of the unlisted country in respect of the dividend or the other amount of a particular kind at the same rate as, or a higher rate than, is payable under the tax law in respect of non-dividend income, or non-dividend amounts not of that particular kind, as the case may be, included in the tax base of a company that is a resident of the unlisted country; and

(b) the tax law of the unlisted country does not provide for any credit, rebate or other tax concession in respect of the dividend or the other amount of a particular kind, other than for foreign tax payable under a tax law of a different unlisted or a listed country.

Note: The heading to section 325 of the Income Tax Assessment Act 1936 is altered by omitting " listed ".

31 Section 331

After "332", insert ", 332A".

32 Section 332

Repeal the section, substitute:

332 Companies that are residents of broad-exemption listed countries

(1) For the purposes of this Part, a company is a resident of a broad-exemption listed country at a particular time if, and only if, the company is, in accordance with subsection (2), a resident of a particular broad-exemption listed country at that time.

(2) For the purposes of this Part, a company is a resident of a particular broad-exemption listed country at a particular time if, and only if, both of the following conditions are satisfied at that time:

(a) the company is not a Part X Australian resident;

(b) the company is treated as a resident of the broad-exemption listed country for the purposes of the tax law of the broad-exemption listed country.

332A Companies that are residents of limited-exemption listed countries

(1) For the purposes of this Part, a company is a resident of a limited-exemption listed country at a particular time if, and only if, the company is, in accordance with subsection (2), a resident of a particular limited-exemption listed country at that time.

(2) For the purposes of this Part, a company is a resident of a particular limited-exemption listed country at a particular time if, and only if, all of the following conditions are satisfied at that time:

(a) the company is not a Part X Australian resident;

(b) the company is treated as a resident of the limited-exemption listed country for the purposes of the tax law of the limited-exemption listed country;

(c) the company is not treated as a resident of a broad-exemption listed country at that time for the purposes of the tax law of the broad-exemption listed country.

33 Subparagraph 377(1)(a)(i)

Repeal the subparagraph, substitute:

(i) if the listed country is a broad-exemption listed country - the income or profits are not eligible designated concession income in relation to any broad-exemption listed country in relation to the qualifying period; and

(ia) if the listed country is a limited-exemption listed country - the income or profits are not adjusted tainted income (within the meaning of section 386); and

34 After paragraph 384(2)(a)

Insert:

(aa) if the eligible CFC is a resident of a limited-exemption listed country at the end of the eligible period - amounts that would be included in the notional assessable income of the eligible CFC for the eligible period under this Act as modified in accordance with Subdivisions B to E if the only income or other amounts derived during the eligible period, and any earlier statutory accounting period, by the eligible CFC were income or other amounts that:

(i) are not adjusted tainted income (within the meaning of section 386); and

(ii) are not treated as derived from sources in the limited-exemption listed country for the purposes of the tax law of the limited-exemption listed country; and

(iii) are not subject to tax in any listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period; and

35 After subparagraph 384(2)(d)(i)

Insert:

(ia) if the eligible CFC is a resident of a limited-exemption listed country at the end of the eligible period - amounts that would be included if the only income or other amounts derived by the partnership were income or other amounts that:

(A) are not adjusted tainted income (within the meaning of section 386); and

(B) are not treated as derived from sources in the limited-exemption listed country for the purposes of the tax law of the limited-exemption listed country; and

(C) are not subject to tax in any listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period; and

36 Subparagraph 384(2)(d)(iv)

Omit "modified.", substitute "modified; and".

37 At the end of subsection 384(2)

Add:

(e) in a case where:

(i) paragraph 457(3)(d) applies, or has at any time applied, to the eligible CFC in relation to a particular change of residence; and

(ii) the eligible CFC subsequently disposes of an asset that it has held since the residence-change time concerned; and

(iii) the disposal takes place during the eligible period;

the amount included in the notional assessable income of the eligible CFC for the eligible period in respect of the disposal under this Act as modified in accordance with Subdivisions B to E.

38 Sub-subparagraph 385(2)(a)(ii)(C)

Repeal the sub-subparagraph, substitute:

Note: The heading to section 385 of the Income Tax Assessment Act 1936 is altered by omitting " listed " and substituting " broad-exemption listed ".

39 Sub-subparagraph 385(2)(d)(ii)(C)

Repeal the sub-subparagraph, substitute:

40 Subparagraph 385(2)(d)(v)

Omit "modified.", substitute "modified; and".

41 At the end of subsection 385(2)

Add:

(e) in a case where:

(i) paragraph 457(3)(d) applies, or has at any time applied, to the eligible CFC in relation to a particular change of residence; and

(ii) the eligible CFC subsequently disposes of an asset that it has held since the residence-change time concerned; and

(iii) the disposal takes place during the eligible period;

the amount included in the notional assessable income of the eligible CFC for the eligible period in respect of the disposal under this Act as modified in accordance with Subdivisions B to E.

42 After subsection 385(2)

Insert:

(2A) For the purposes of sub-subparagraphs (2)(a)(ii)(C) and (2)(d)(ii)(C), income or other amounts pass the test set out in this subsection if:

(a) the income or other amounts are not subject to tax in the broad-exemption listed country or any other listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period; or

(b) both:

(i) the income or other amounts are adjusted tainted income (within the meaning of section 386); and

(ii) the income or other amounts are not subject to tax in the broad-exemption listed country or in any other broad-exemption listed country in a tax accounting period ending before the end of the eligible period or commencing during the eligible period.

43 Paragraph 389(a)

Omit "Division 15", substitute "Divisions 15, 16F and 16G".

44 After paragraph 400(a)

Insert:

(aa) for the purposes of Division 13 of Part III, an agreement is not an international agreement if, at all times when the agreement was in force, all of the parties to the agreement were CFCs and were residents of the same broad-exemption listed country; and

45 Paragraph 419(a)

Omit "unlisted" (first and second occurring), substitute "non-broad-exemption listed".

46 Paragraphs 421(1)(c) and (d)

Repeal the paragraphs, substitute:

(c) if there is only one attributable taxpayer in relation to the eligible CFC at the end of the eligible period - on or before the date of lodgment of the taxpayer's return of income of the year of income in which the end of the eligible period occurs; or

(d) if there are 2 or more attributable taxpayers in relation to the eligible CFC at the end of the eligible period:

(i) if the taxpayers' returns of income of the year of income in which the end of the eligible period occurs are lodged on different dates - on or before the later or latest of those dates; or

(ii) if the taxpayers' returns of income of the year of income in which the end of the eligible period occurs are lodged on the same date - on or before that date; or

(e) in any case - within such further period as the Commissioner allows.

47 After subsection 421(1)

Insert:

(1A) For the purposes of applying subsection (1) to an eligible CFC in relation to an eligible period, if:

(a) an entity (the designated entity ) is the only attributable taxpayer in relation to the eligible CFC at the end of the eligible period; and

(b) the designated entity's attribution percentage in relation to the company is 100% at the end of the eligible period;

then, instead of the election being given by the eligible CFC, or by the eligible CFC and another entity (which other entity may be the designated entity), the election may be given by:

(d) if the designated entity is not the same as the other entity - the designated entity and the other entity;

as the case requires.

48 After paragraph 422(2)(a)

Insert:

(aa) subsection 457(3) does not apply to the change of residence; and

49 Subsection 431(4)

Repeal the subsection, substitute:

(4) A loss for a statutory accounting period is not to be taken into account under subsection (2):

(a) where the eligible CFC is a resident of a broad-exemption listed country at the end of the eligible period - if that statutory accounting period is one at whose end the CFC was:

(i) if that statutory accounting period began on or after 1 July 1997 - not a resident of a broad-exemption listed country; or

(ii) if that statutory accounting period began before 1 July 1997 - not a resident of a listed country (within the meaning of this Act as in force immediately before 1 July 1997);

or is any statutory accounting period before such a period; or

(b) where the eligible CFC is a resident of a non-broad-exemption listed country at the end of the eligible period - if that statutory accounting period is one at whose end the CFC was:

(i) if that statutory accounting period began on or after 1 July 1997 - not a resident of a non-broad-exemption listed country; or

(ii) if that statutory accounting period began before 1 July 1997 - not a resident of an unlisted country (within the meaning of this Act as in force immediately before 1 July 1997);

or is any statutory accounting period before such a period.

(4A) If:

(a) the eligible CFC is a resident of a broad-exemption listed country at the end of the eligible period; and

(b) at the end of a prior statutory accounting period, the CFC was a resident of the same country; and

(i) if that statutory accounting period began on or after 1 July 1997 - a non-broad-exemption listed country; or

(ii) if that statutory accounting period began before 1 July 1997 - an unlisted country (within the meaning of this Act as in force immediately before 1 July 1997);

subsection (4) does not prevent a loss for that statutory accounting period, or an earlier statutory accounting period, from being taken into account under subsection (2).

(4B) If:

(a) the eligible CFC is a resident of a non-broad-exemption listed country at the end of the eligible period; and

(b) that country emerged from the dissolution of another country; and

(d) at the end of that statutory accounting period, the CFC was a resident of the other country; and

(e) the other country was:

(i) if that statutory accounting period began on or after 1 July 1997 - a broad-exemption listed country at the end of that statutory accounting period; or

(ii) if that statutory accounting period began before 1 July 1997 - a listed country (within the meaning of this Act immediately before 1 July 1997) at the end of that statutory accounting period;

subsection (4) does not prevent a loss for that statutory accounting period, or an earlier statutory accounting period, from being taken into account under subsection (2).

(4C) If:

(a) the eligible CFC is a resident of a non-broad-exemption listed country at the end of the eligible period; and

(b) at the end of a prior statutory accounting period, the CFC was a resident of the same country; and

(i) if that statutory accounting period began on or after 1 July 1997 - a broad-exemption listed country; or

(ii) if that statutory accounting period began before 1 July 1997 - a listed country (within the meaning of this Act as in force immediately before 1 July 1997);

subsection (4) does not prevent a loss for that statutory accounting period, or an earlier statutory accounting period, from being taken into account under subsection (2).

(4D) If:

(a) as a result of the operation of subsection (4), a loss of a CFC for a statutory accounting period was not taken into account under subsection (2) in calculating the attributable income of the CFC for a later statutory accounting period (the second statutory accounting period ); and

(b) the eligible period is later than the second statutory accounting period;

then, despite anything in subsection (4), (4A), (4B) or (4C), the loss is not to be taken into account under subsection (2) in calculating the attributable income of the CFC for the eligible period.

50 Subsection 433(1)

Before "unlisted country", insert "listed country or a particular".

51 Subsection 433(2)

Repeal the subsection.

52 At the end of subparagraph 436(1)(b)(i)

Add "(other than a broad-exemption listed country of which the company is a resident)".

53 Paragraphs 438(3A)(c) and (d)

Repeal the paragraphs, substitute:

(c) if there is only one attributable taxpayer in relation to the company at the end of the statutory accounting period - on or before the date of lodgment of the taxpayer's return of income of the year of income in which the end of the statutory accounting period occurs; or

(d) if there are 2 or more attributable taxpayers in relation to the company at the end of the statutory accounting period:

(i) if the taxpayers' returns of income of the year of income in which the end of the statutory accounting period occurs are lodged on different dates - on or before the later or latest of those dates; or

(ii) if the taxpayers' returns of income of the year of income in which the end of the statutory accounting period occurs are lodged on the same date - on or before that date; or

(e) in any case - within such further period as the Commissioner allows.

54 After subsection 438(3A)

Insert:

(3B) For the purposes of applying subsection (3A) to a company in relation to a statutory accounting period, if:

(a) the company is a CFC at the end of the statutory accounting period; and

(b) an entity (the designated entity ) is the only attributable taxpayer in relation to the company at the end of the statutory accounting period; and

(c) the designated entity's attribution percentage in relation to the company is 100% at the end of the statutory accounting period;

then, instead of the election being given by the company, or by the company and another entity (which other entity may be the designated entity), the election may be given by:

(d) the designated entity; or

(e) if the designated entity is not the same as the other entity - the designated entity and the other entity;

as the case requires.

55 After subsection 448(6)

Insert:

(6A) The tainted services income of a company of a statutory accounting period does not include income where:

(a) the income was derived by the company from a CFC; and

(b) at all times during the statutory accounting period when the income accrued:

(i) the CFC was an associate of the company; and

(ii) the company was a resident of a particular listed country or a particular unlisted country; and

(iii) the CFC was also a resident of that listed country or that unlisted country, as the case may be; and

(c) the income was taxed in the listed country or that unlisted country, as the case may be, at the country's normal company tax rate (see section 325); and

56 At the end of section 457

Add:

(3) If:

(a) at the residence-change time, regulations made for the purposes of section 320 come into effect; and

(b) a result of those regulations coming into effect is that the company:

(i) ceases to be a resident of an unlisted country; and

(ii) becomes a resident of a listed country;

at the residence-change time;

then:

(c) if the company was a resident of that unlisted country throughout the period of 3 years ending at the residence-change time - no amount is to be included in the attributable taxpayer's assessable income under subsection (1) in relation to that change of residence; and

(d) in any other case - sub-subparagraph (a)(i)(A) of the definition of Adjusted distributable profits in subsection (2) does not apply in relation to that change of residence.

Part 2 Amendments to change 'listed country' to 'broad-exemption listed country'

Income Tax Assessment Act 1936

57 Amendment

The specified provisions of the Income Tax Assessment Act 1936 are amended by omitting "listed" (wherever occurring) and substituting "broad-exemption listed".

58 Section 102AAB (definition of tax law)

59 Section 102AAC

60 Subsection 102AAE(1)

61 Subsection 102AAE(2)

62 Subsection 102AAE(3)

63 Subparagraph 102AAM(1)(b)(i)

64 Subparagraph 102AAM(1)(b)(ii)

65 Paragraph 102AAM(1A)(a)

66 Paragraph 102AAM(1A)(b)

67 Paragraph 102AAM(7)(b)

68 Paragraph 102AAM(7)(c)

69 Paragraph 102AAU(1)(a)

70 Paragraph 102AAU(1)(b)

71 Sub-subparagraph 102AAU(1)(c)(ii)(A)

72 Sub-subparagraph 102AAU(1)(c)(ii)(B)

73 Sub-subparagraph 102AAU(1)(c)(viii)(A)

74 Sub-subparagraph 102AAU(1)(c)(viii)(B)

75 Subsection 102AAU(3)

76 Subsection 102AAU(4)

77 Section 102AAZE

78 Section 317 (definition of accruals tax law )

79 Section 317 (definition of designated concession income )

80 Section 317 (definition of eligible designated concession income )

81 Section 317 (subparagraph (c)(i) of the definition of tainted rental income )

82 Section 317 (subparagraph (c)(ii) of the definition of tainted rental income )

83 Section 317 (subparagraph (d)(i) of the definition of tainted rental income )

84 Section 317 (subparagraph (d)(ii) of the definition of tainted rental income )

85 Subsection 385(1)

86 Subparagraph 385(2)(a)(i)

87 Sub-subparagraph 385(2)(a)(ii)(A)

88 Sub-subparagraph 385(2)(a)(ii)(B)

89 Paragraph 385(2)(c)

90 Subparagraph 385(2)(d)(i)

91 Sub-subparagraph 385(2)(d)(ii)(A)

92 Sub-subparagraph 385(2)(d)(ii)(B)

93 Subparagraph 385(2)(d)(iv)

94 Paragraph 403(a)

95 Paragraph 418A(1)(a)

96 Paragraph 419(a)

97 Paragraph 432(1)(b)

98 Paragraph 432(1)(e)

99 Subparagraph 436(1)(b)(i)

100 Subparagraph 436(1)(b)(ii)

101 Subparagraph 436(1)(b)(iii)

102 Subparagraph 437(1)(c)(iii)

103 Subparagraph 437(2)(c)(ii)

104 Paragraph 456A(1)(c)

Note 1: The heading to section 102AAC of the Income Tax Assessment Act 1936 is altered by omitting " listed " and substituting " broad-exemption listed ".

Note 2: The heading to section 102AAE of the Income Tax Assessment Act 1936 is altered by omitting " listed " and substituting " broad-exemption listed ".

Note 3: The heading to section 418A of the Income Tax Assessment Act 1936 is altered by omitting " listed " and substituting " broad-exemption listed ".

Part 3 Amendments to change 'unlisted country' to 'non-broad-exemption listed country'

Income Tax Assessment Act 1936

105 Amendment

The specified provisions of the Income Tax Assessment Act 1936 are amended by omitting "unlisted" (wherever occurring) and substituting "non-broad-exemption listed".

106 Section 102AAC

107 Section 317 (subparagraph (c)(ii) of the definition of tainted rental income )

108 Section 317 (subparagraph (d)(ii) of the definition of tainted rental income )

109 Paragraph 432(1)(b)

110 Paragraph 432(1)(e)

111 Subparagraph 437(1)(c)(iii)

112 Subparagraph 437(2)(c)(ii)

Note: The heading to section 102AAC of the Income Tax Assessment Act 1936 is altered by omitting " unlisted " and substituting " non-broad-exemption listed ".

Part 4 Amendments to change 'an unlisted country' to 'a non-broad-exemption listed country'

Income Tax Assessment Act 1936

113 Amendment

The specified provisions of the Income Tax Assessment Act 1936 are amended by omitting "an unlisted" (wherever occurring) and substituting "a non-broad-exemption listed".

114 Section 102AAB (definition of tax law )

115 Section 317 (subparagraph (c)(i) of the definition of tainted rental income )

116 Section 317 (subparagraph (d)(i) of the definition of tainted rental income )

117 Subsection 384(1)

118 Paragraph 418A(1)(a)

119 Paragraph 419(a)

Note 1: The heading to section 384 of the Income Tax Assessment Act 1936 is altered by omitting " unlisted " and substituting " non-broad-exemption listed ".

Note 2: The heading to section 418A of the Income Tax Assessment Act 1936 is altered by omitting " unlisted " and substituting " non-broad-exemption listed ".

Part 5 Application and transitional

120 Application of amendments - section 23AH of the Income Tax Assessment Act 1936

(1) The amendment of subsection 23AH(1) of the Income Tax Assessment Act 1936 made by this Schedule applies to foreign income derived on or after 1 July 1997.

(2) The amendments of subsections 23AH(6) and (7) of the Income Tax Assessment Act 1936 made by this Schedule apply to disposals of assets on or after 1 July 1997.

(3) The amendments of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to subsections 23AH(1) and (5) of that Act, apply to foreign income derived on or after 1 July 1997.

(4) The amendments of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to subsections 23AH(6) and (7) of that Act, apply to disposals of assets on or after 1 July 1997.

121 Application of amendments - section 23AJ of the Income Tax Assessment Act 1936

The amendments of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to section 23AJ of that Act, apply to dividends paid on or after 1 July 1997.

122 Application of amendments - sections 47A and 108 of the Income Tax Assessment Act 1936

The amendments of Division 1 of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to sections 47A and 108 of that Act, apply to a distribution time that occurs on or after 1 July 1997.

123 Application of amendments - Division 6AAA of Part III of the Income Tax Assessment Act 1936

(1) The amendments of Subdivision B of Division 6AAA of Part III of the Income Tax Assessment Act 1936 made by this Schedule apply in relation to a distributed amount of a trust estate's non-resident year of income beginning on or after 1 July 1997.

(2) The amendments of Subdivision A of Division 6AAA of Part III and Division 1 of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to Subdivision B of Division 6AAA of Part III of that Act, apply in relation to a distributed amount of a trust estate's non-resident year of income beginning on or after 1 July 1997.

(3) The amendments of Subdivision D of Division 6AAA of Part III of the Income Tax Assessment Act 1936 made by this Schedule apply in relation to the calculation of the attributable income of a non-resident trust estate of a year of income beginning on or after 1 July 1997.

(4) The amendments of Subdivision A of Division 6AAA of Part III and Division 1 of Part X of the Income Tax Assessment Act 1936, in so far as they are relevant to Subdivision D of Division 6AAA of Part III of that Act, apply in relation to the calculation of the attributable income of a non-resident trust estate of a year of income beginning on or after 1 July 1997.

(5) For the purposes of this item, in determining the beginning of a year of income of a trust estate, subsection 6(2) of the Income Tax Assessment Act 1936 is to be disregarded.

124 Application of amendments - Division 18 of Part III of the Income Tax Assessment Act 1936

(1) The amendments of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to sections 160AFC and 160AFCC of that Act, apply in relation to dividends paid on or after 1 July 1997.

(2) The amendment of section 160AFCA of the Income Tax Assessment Act 1936 made by this Schedule applies in relation to statutory accounting periods beginning on or after 1 July 1997.

125 Application of amendments - Part IIIA of the Income Tax Assessment Act 1936

(1) The amendments of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to subsections 160M(12A), (12AA) and (12AB) of that Act, apply in relation to a residence-change time that occurs on or after 1 July 1997.

(2) The amendments of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to section 160ZFB of that Act, apply in relation to a residence-change time that occurs on or after 1 July 1997.

126 Application of amendments - Part X of the Income Tax Assessment Act 1936

(1) The amendments of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to the calculation of the attributable income of a CFC, apply in relation to the calculation of attributable income for eligible periods beginning on or after 1 July 1997.

(2) The amendments of section 377 of the Income Tax Assessment Act 1936 made by this Schedule apply in relation to an accounting period that began on or after 1 July 1997.

(3) The amendments of Division 1 of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to sections 377 and 378 of that Act, apply in relation to an accounting period that began on or after 1 July 1997.

(4) The amendments of Division 1 of Part X of the Income Tax Assessment Act 1936 made by this Part, in so far as they are relevant to section 380 of that Act, apply to dividends paid on or after 1 July 1997.

(5) The amendments of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to determining whether a company passes the active income test in relation to a statutory accounting period, apply in relation to statutory accounting periods beginning on or after 1 July 1997.

(6) The amendments of Division 1 of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to subsection 456(2) of that Act, apply in relation to a change of residence that occurs on or after 1 July 1997.

(7) The amendments of section 456A of the Income Tax Assessment Act 1936 made by this Schedule apply in relation to a statutory accounting period beginning on or after 1 July 1997.

(8) The amendments of Division 1 of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to section 456A of that Act, apply in relation to a statutory accounting period beginning on or after 1 July 1997.

(9) The amendment of section 457 of the Income Tax Assessment Act 1936 made by this Schedule applies in relation to a residence-change time that occurs on or after 1 July 1997.

(10) The amendments of Division 1 of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to section 457 of that Act, apply in relation to a residence-change time that occurs on or after 1 July 1997.

(11) The amendments of Division 1 of Part X of the Income Tax Assessment Act 1936 made by this Schedule, in so far as they are relevant to sections 458 and 459 of that Act, apply in relation to dividends paid on or after 1 July 1997.

127 Transitional - when regulations may take effect

(1) If the first regulations made for the purposes of a provision of the Income Tax Assessment Act 1936 inserted by this Schedule are made before the commencement of the Legislative Instruments Act 1997, those regulations may be expressed:

(a) to have been in effect at all relevant times before the date of notification of the regulations; or

(b) to apply in relation to a period any part of which occurred before the date of notification of the regulations; or

(i) a specified date; or

(ii) a specified time on a specified date;

before the date of notification of the regulations.

(2) Subitem (1) has effect despite anything in the Acts Interpretation Act 1901.

(3) If the first regulations made for the purposes of a provision of the Income Tax Act Assessment 1936 inserted by this Schedule are made after the commencement of the Legislative Instruments Act 1997, those regulations may be expressed:

(a) to have been in effect at all relevant times before the day on which the regulations were entered in the Federal Register of Legislative Instruments; or

(b) to apply in relation to a period any part of which occurred before the day on which the regulations were entered in the Federal Register of Legislative Instruments; or

(i) a specified date; or

(ii) a specified time on a specified date;

before the day on which the regulations were entered in the Federal Register of Legislative Instruments.

(4) Subitem (3) has effect despite anything in the Legislative Instruments Act 1997.

128 Transitional - Vietnam and the Czech Republic

(1) For the purposes of this item, the transitional period is the period:

(a) beginning on 24 December 1996; and

(b) ending at the end of 30 June 1997.

(2) For the purposes of sections 47A, 458 and 459 of the Income Tax Assessment Act 1936, Vietnam and the Czech Republic are taken to have been listed countries throughout the transitional period.

(3) For the purposes of sections 23AH, 23AJ and 380 of the Income Tax Assessment Act 1936, the Czech Republic is taken to have been a listed country throughout the transitional period.

(4) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to this item.

129 Transitional - countries that emerged on the dissolution of Czechoslovakia, the USSR or Yugoslavia

(1) For the purposes of this item, each of the following is a designated country :

(a) Armenia;

(b) Azerbaijan;

(d) Bosnia and Herzegovina;

(e) Croatia;

(f) Czech Republic;

(g) Estonia;

(h) Federal Republic of Yugoslavia;

(i) Former Yugoslav Republic of Macedonia;

(j) Georgia;

(k) Kazakstan;

(l) Kyrgyzstan;

(m) Latvia;

(n) Lithuania;

(o) Moldova;

(p) Russian Federation;

(q) Slovak Republic;

(r) Slovenia;

(s) Tajikistan;

(t) Turkmenistan;

(u) Ukraine;

(v) Uzbekistan.

(2) An entity may, by writing, elect that this item applies to the entity.

(3) If:

(a) an election is made by a company under subitem (2); and

(b) at the time when the election is made, the company is related to one or more other companies that are Part X Australian residents;

the election has no effect unless that other company, or each of those other companies, as the case requires, also make or makes an election under subitem (2).

(4) If an election is made by an entity under subitem (2), the amount included in the entity's assessable income under section 456 of the Income Tax Assessment Act 1936 in relation to a particular CFC is to be determined as if each designated country were a listed country throughout each statutory accounting period of the CFC that began before 24 December 1996.

(5) If an election is made by an entity under subitem (2), then, for the purposes of the application of the Income Tax Assessment Act 1936 to a company that, apart from this subitem, is a resident of a designated country (other than the Czech Republic) during the whole or a part of the interim period, the exempting profits, in relation to the entity, of the company during the interim period are to be determined as if the company were a resident of an unlisted country throughout the interim period. For this purpose, the interim period is the period:

(a) beginning on 24 December 1996; and

(b) ending at the end of the accounting period of the company in which 24 December 1996 occurs.

(6) If an election is made by an entity under subitem (2), the assessable income of the entity is to be determined as if each designated country were a listed country for the purposes of sections 23AH, 23AJ, 47A, 380, 457, 458 and 459 of the Income Tax Assessment Act 1936 at all times before 24 December 1996.

(7) If an election is made by an entity under subitem (2), the amount included in the entity's assessable income under section 102AAZD of the Income Tax Assessment Act 1936 in relation to a particular trust estate is to be determined as if each designated country were a listed country throughout each year of income of the trust estate that began before 24 December 1996.

(8) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to this item.

(9) For the purposes of this item, the question whether companies are related to each other is to be determined in accordance with section 160G of the Income Tax Assessment Act 1936.

(10) An election under subitem (2) is irrevocable.

(11) An expression used in this item and in Part X of the Income Tax Assessment Act 1936 has the same meaning in this item as it has in that Part.

Schedule 2 Foreign investment funds

Income Tax Assessment Act 1936

1 Subsection 485A(1)

Omit "provisions", substitute "provision".

2 Subsection 485A(3)

Repeal the subsection.

3 Division 8 of Part XI

Repeal the Division.

4 Schedule 6

Repeal the Schedule.

5 Application

The amendments made by this Schedule apply in relation to notional accounting periods beginning on or after 1 January 1997.