Income Tax Amendment Regulations 2004 (No. 3)

(115 of 2004)

Dated 10 June 2004

Income Tax Assessment Act 1936

1   Name of Regulations

These Regulations are the Income Tax Amendment Regulations 2004 (No. 3).

2   Commencement

These Regulations commence on 1 July 2004.

3   Amendment of Income Tax Regulations 1936

 

(1) Schedule 1 amends the Income Tax Regulations 1936.

      

(2) Schedule 2 amends the Income Tax Regulations 1936 as amended by Schedule 1.

4   Transitional

The amendments made by Schedules 1 and 2 apply in relation to:

(a) accounting periods; and

(b) statutory accounting periods; and

(c) years of income;

commencing on or after 1 July 2004.

Schedule 1   Amendments

[1]   Before regulation 152A

insert

Division 1 General

[2]   Subregulation 152A (2), definition of asset

substitute

CGT asset has the meaning given by section 108-5 of the Income Tax Assessment Act 1997.

[3]   Subregulation 152A (2), definition of compulsory acquisition

omit

an asset,

insert

a CGT asset,

[4]   Subregulation 152A (2), definitions of concessional rate of tax, interest income, normal company tax rate, offshore banking business, offshore financial business, offshore income, offshore insurance business, offshore investment business and offshore reinsurance business

omit

[5]   Subregulation 152A (2), definitions of relevant broad-exemption listed country, relevant period, relevant tax accounting period and shipping income

substitute

wholly-owned group has the meaning given by section 975-500 of the Income Tax Assessment Act 1997.

[6]   Subregulations 152A (3) and (4)

substitute

(3) In this Part (other than in regulation 152D):

capital gains means gains or profits of a capital nature that arise from the sale or disposal of all or part of a CGT asset, other than gains or profits that would not be capital gains but for a provision of Australian tax law.

(4) In this Part:

passive income means passive income described in section 446 of the Act, subject to the following modifications:

(a) omit paragraph 446 (1) (k) and insert the following paragraph:

'(k) capital gains in respect of tainted assets;';

(b) if it is necessary to identify the designated concession income of an entity to which Division 6AAA of Part III of the Act applies, as part of using Schedule 9:

(i) read each reference, as appropriate, in Part X to a company as a reference to the entity; and

(ii) read each reference, as appropriate, in Part X to a statutory accounting period as a reference to a year of income;

(c) if it is necessary to identify the designated concession income of an entity to which section 23AH of Part III of the Act applies, as part of using Schedule 9, read each reference, as appropriate, in Part X to a statutory accounting period as a reference to a year of income.

[7]   After regulation 152A

insert

Division 2 Controlled foreign companies

[8]   Regulations 152B to 152H

substitute

152B Income or profits as designated concession income

(1) For the definition of designated concession income in section 317 of the Act, if:

(a) a listed country is mentioned in column2 of an item in Part 2 of Schedule 9; and

(b) an entity mentioned in column 3 of the item derived income or profits that are:

(i) of a kind specified in column 4 of the item; and

(ii) further described in column 5 of the item;

the income or profits are designated concession income.

(2) For subregulation (1), the income or profits of an entity include:

(a) the entity's interest in the income or profits of a partnership in which the entity is a partner; and

(b) the entity's beneficial interest in the income or profits of a trust estate in which the entity is a beneficiary.

152C Broad-exemption listed countries and limited-exemption listed countries

(1) For the definition of broad-exemption listed country in subsection 320 (1) of the Act, a foreign country or a part of a foreign country listed in Part 1 of Schedule 10 is declared to be a broad-exemption listed country for the purposes of Part X of the Act.

(2) For the definition of limited-exemption listed country in subsection 320 (1) of the Act, a foreign country or a part of a foreign country listed in Part 2 of Schedule 10 is declared to be a limited-exemption listed country for the purposes of Part X of the Act.

152D Capital gains regarded as subject to tax

(1) In this regulation:

capital gains means gains or profits or other amounts of a capital nature.

roll-over relief , in relation to a particular tax accounting period in relation to a listed country, means the deferral of tax liability in the tax accounting period under a tax law of the listed country because of a circumstance specified in regulation 152E.

(2) For section 324 of the Act, if:

(a) capital gains that are derived by an entity are not subject to tax in a listed country in a particular tax accounting period; and

(b) apart from the availability of roll-over relief, the capital gains would have been subject to tax in the listed country in the tax accounting period;

the capital gains are to be treated as if they were subject to tax in the listed country in the tax accounting period.

152E Circumstances specified for the definition of roll-over relief in regulation 152D

For the definition of roll-over relief in subregulation 152D (1), each of the following circumstances is specified:

(a) an entity:

(i) is taken to have disposed of all or part of a CGT asset because of an act, transaction or event as a result of which the entity has received an amount of money or a replacement CGT asset:

(A) by way of compensation for the compulsory acquisition, or for the loss or destruction, of the original CGT asset; or

(B) under a policy of insurance against the risk of loss or destruction of the original CGT asset; and

(ii) after receiving an amount of money mentioned in subparagraph (i), in order to achieve a deferral of tax liability under the tax law of the listed country, is required:

(A) to incur expenditure in acquiring a CGT asset in place of the original CGT asset; or

(B) to incur expenditure of a capital nature in repairing or restoring the original CGT asset;

(b) a company disposes of a CGT asset to another company, and the transferee is a member of the same wholly-owned group as the transferor;

(c) a company redeems or cancels all the shares of a particular class in the company, and:

(i) an entity holds shares of that class in the company; and

(ii) the company issues to the entity other shares in the company in substitution for the redeemed or cancelled shares; and

(iii) the market value of the new shares immediately after they were issued is not less than the market value of the redeemed or cancelled shares immediately before the redemption or cancellation; and

(iv) the entity did not receive any consideration (other than the new shares) in respect of the redemption or cancellation;

(d) an entity owns an option to acquire shares in a company or a right, issued by a company, to acquire shares in the company or to acquire an option to acquire shares in the company, and:

(i) any of the shares:

(A) are consolidated and divided into new shares of a larger amount; or

(B) are subdivided into shares of a smaller amount; and

(ii) as a result of the consolidation or subdivision:

(A) the original option is cancelled; or

(B) the original right is cancelled; and

(iii) the company issues to the entity:

(A) another option relating to the new shares in substitution for the original option; or

(B) another right relating to the new shares, in substitution for the original right; and

(iv) the market value of the new option or the new right, immediately after it was issued, is not less than the market value of the original option or original right immediately before its cancellation; and

(v) the entity did not receive any consideration in respect of the cancellation, other than the new option or right.

[9]   Regulations 152I and 152J

omit

[10]   Before regulation 152L

insert

Division 3 Foreign investment funds

[11]   Schedule 9

substitute

Schedule 9 Designated concession income

(regulation 152B)

Part 1 Interpretation

101 In this Schedule, unless the contrary intention appears, words and phrases have the same meanings as they have in Part X of the Act or Part 8A of these Regulations, as the case requires.

Note Section 324 of the Act explains the meaning of the expression subject to tax . Section 325 of the Act explains when taxation occurs in a country at the country's normal company tax rate.

Part 2 Items of designated concession income

[12]   Schedule 10, heading

substitute

Schedule 10 Broad-exemption listed countries and limited-exemption listed countries for the purposes of Part X of the Act

(regulation 152C)

Schedule 2   Amendments to numbering

[1]   Renumbering

The Regulations, as amended by Schedule 1, are renumbered as follows:

[2]   Schedule 12, heading

substitute

Schedule 12 Approved stock exchanges for the purposes of Part XI of the Act

(regulation 152I)

[3]   Schedule 13, heading

substitute

Schedule 13 Approved international sectoral classification systems for the purposes of Part XI of the Act

(regulation 152J)