House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer,the Hon. J. Kerin, M.P.)

Chapter 14 Tax File Number Withholding Tax

[Clause: Taxation Laws Amendment Bill (No. 3) 1991 2, 9, 74, 75, 76, 77, 85, Income Tax (Deferred Interest Securities) (Tax File Number Withholding Tax) Bill 1991 1, 2, 3, 4]

Overview

Introduces new rules for withholding tax from income accrued from certain deferred interest investments where an investor has not quoted a tax file number (TFN).

Summary of Proposed Changes

Who will pay the Tax File Number Withholding Tax?

14.1. The Taxation Laws Amendment Bill (No. 3) 1991 (the Bill) will amend the Income Tax Assessment Act 1936 (the Act) to support the existing tax file number (TFN) arrangements. The Bill will provide for the assessment and collection of a TFN withholding tax where an investor has not quoted a TFN for certain deferred interest investments. A separate bill, the Income Tax (Deferred Interest Securities) (Tax File Number Withholding Tax) Bill 1991 , will impose the TFN withholding tax.

14.2. Where an investor does not quote a TFN for certain deferred interest investments, a TFN withholding tax will be payable jointly and severally by the investor and the investment body. The investment body will be able, where necessary, to recover from the investor amounts of TFN withholding tax which it paid. This will mean that investment bodies are not disadvantaged by the new tax.

What investments will attract the new tax?

14.3. A deferred interest investment is basically a security with a term of more than one year. More precisely, it is a "qualifying security" within the meaning of Division 16E of Part III of the Act.

14.4. The TFN withholding tax will apply only to deferred interest investments which are issued on or after 1 February 1992 which are:

•

interest bearing accounts or deposits with a financial institution; or

•

non-transferable loans to government bodies or bodies corporate.

14.5. Limiting the types of investments dealt with by the new arrangements will clarify the identification of investments subject to the new rules and the calculation of the withholding tax that is to be paid.

Background to the Legislation

Tax file number arrangements for investments

14.6. In 1988, the Government introduced expanded tax file number (TFN) arrangements. Phase 2 of those arrangements (which became effective from 1 July 1991) provided for the quotation of TFNs by investors on certain investments.

14.7. Subsection 202D(1) of the Income Tax Assessment Act 1936 (the Act) sets out in tabular form the types of investments which are included in the TFN arrangements. These investments are:

(i)

Interest-bearing accounts with a financial institution, where the investor is the person in whose name the account is held.

(ii)

Interest-bearing deposits with a financial institution (other than a deposit to the credit of an account), where the investor is the person in whose name the deposit is held.

(iii)

Loans of money to a government body or to a body corporate (other than an interest-bearing account or deposit with a financial institution or a loan made in the ordinary course of business by a person in the business of lending money), where the investor is the person in whose name the money is lent.

(iv)

Deposits with a solicitor which the solicitor will invest, or is lent under an agreement to be arranged by or on behalf of the solicitor, where the investor is the person for whose benefit the money is to be invested or lent.

(v)

Units in a unit trust, where the investor is the person in whose name the units are held.

(vi)

Shares in a public company where the investor is the shareholder.

14.8. If a TFN is not quoted on these investments, the relevant investment body is required to deduct tax at the top marginal rate plus medicare levy (currently 48.25%) on any income earned from the investment. The deducted amount is then paid to the Commissioner and can be applied as a credit against any tax which the investor must pay.

Taxation of deferred interest investments

14.9. Division 16E of Part III of the Act assesses income earned on deferred interest securities on an accruals basis. Income on these securities is assessed as it accrues rather than when the security matures or is redeemed (sections 159GQ and paragraph 159GR(2)(c)). Broadly speaking, a deferred interest security is a security with a term of more than one year (e.g. deferred interest debentures under which all interest is paid at maturity).

Old TFN rules for deferred interest investments

14.10. Former subsection 221YHZA(2B) of the Act (omitted by the Taxation Laws Amendment Act (No. 2) 1991 ) imposed deduction obligations on investment bodies in relation to deferred interest investments. Subsection 221YHZA(2B) applied when a person became obliged under section 159GQ of Division 16E to include in his or her assessable income an amount for an investment covered by the TFN provisions. The subsection provided that such an amount was to be taken as income paid to a person from the investment when the person became obliged to include the amount as assessable income.

14.11. If an investor had chosen not to quote a TFN for a deferred interest investment under the former rule, then the investment body was required to remit amounts to the Commissioner for notionally accrued interest at a time when no interest had actually been paid to the investor.

Why change the law?

14.12. Subsection 221YHZA (2B) was found to be technically defective as it did not say whether the amount to be remitted should come from the principal of the investment or whether it should be funded by the investment bodies themselves. This led to uncertainty among investment bodies. Accordingly, the Government has decided to introduce a new system for the application of the TFN arrangements to deferred interest investments. The new rules will provide certainty as to the obligations of investment bodies in relation to deferred interest investments where a TFN has not been quoted by the investor.

Why a TFN withholding tax for deferred interest investments?

14.13. Had investment bodies been required to fund TFN deductions from deferred interest investments using the old TFN arrangements, a question could have been raised as to the constitutionality of that legislation. It was possible that it was constitutionally invalid to require an investment body to pay to the Commissioner money that was owing or accruing to an investor, but had not yet been paid.

14.14. The imposition of a new tax on investors and investment bodies by the Income Tax (Deferred Interest Securities) (Tax File Number Withholding Tax) Bill 1991 for deferred interest investments which have not had a TFN quoted prevents any constitutional objection being raised.

14.15. TFN withholding tax will not be a new source of revenue. Rather, the tax will be a mechanism for collecting the amount that would have been deducted if no TFN was quoted and the amount of income accrued to the investor under Division 16E had actually been paid.

Explanation of the proposed amendments

How will the new rules operate?

14.16. The Parliament has levied tax by two separate statutes. One provides for the assessment and collection of tax; the other provides for the imposition of tax.

14.17. This legislation scheme has been adopted because of section 55 of the Constitution which provides that "laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect".

14.18. For this reason, an Act to impose the TFN withholding tax is proposed by the Income Tax (Deferred Interest Securities) (Tax File Number Withholding Tax) Bill 1991 . The amendments to the Income Tax Assessment Act 1936 (the Act) made by the Bill will provide for the assessment and collection of TFN withholding tax.

What investments will be subject to the new rules?

14.19. The new rules will apply to qualifying securities (as defined in Division 16E of the Act) which fall within one of the following categories:

•

interest-bearing account with a financial institution (item 1 of the table in subsection 202D(1) of the Act);

•

interest-bearing deposit with a financial institution (item 2 of the table); and

•

loan of money to a government body or body corporate (item 3 of the table) but only where the security is non-transferable.

14. 20. A "qualifying security" is, broadly, a security (excluding some annuities):

•

that is issued after 16 December 1984;

•

that is not a seasonal security or Commonwealth security that does not bear interest (refer to section 26C of the Act);

•

the term of which exceeds one year.

14.21. These securities will be known as "eligible deferred interest investments" for TFN withholding tax purposes. [Subclause 75(a) - new subsection 221YHZA(1)]

14.22. In addition, the new rules will only apply to those eligible deferred interest investments issued on or after 1 February 1992 [Subclause 85(15)] . Agreements of deposit made after the new rules commence will, therefore, be able to take account of the TFN withholding tax rules.

14.23. However, the Income Tax Regulations will be amended to require investment bodies to report on accrued income earned on existing and new eligible deferred interest investments. Deferred interest securities issued before 1 February 1992 will remain subject to the existing TFN rules. Accordingly, if a TFN has not been quoted for the investment when the term of the investment ends and income is paid to the investor, 48.25% will be deducted from the income paid.

How will the new arrangements fit in with the existing TFN rules?

14.24. The TFN withholding tax rules are designed to work together with the existing TFN arrangements which currently require 48.25% to be deducted from income paid on investments where a TFN is not quoted or an exemption claimed.

14.25. The new TFN withholding tax rules will apply, broadly, to accrued income earned on an eligible deferred interest investment during a year of income where there is no actual payment (i.e. years other than the final year of the term). [Clause 77 - new subsection 221YHZQ(1)]

14.26. As a consequence, the existing TFN rules apply to payments of periodic interest (such as monthly interest) paid on an eligible deferred interest investment (see below) and the amount of income accrued under Division 16E in the year of income in which the term of such an investment ends. [Clause 75 - new subsection 221YHZA(2B)]

14.27. The amount of the deferred interest payment made to the investor at the end of the term of an eligible deferred interest investment which is subject to normal TFN rules is equal to the income included in the investor's assessable income under Division 16E in the final year of income of the investment.

How will TFN withholding tax be calculated?

14.28. The amount of TFN withholding tax to be paid is equal to the amount that would have been deducted by an investment body if the income on the eligible deferred interest investment had been paid. It is calculated in two steps as follows: [Clause 77 - new subsection 221YHZQ(1)]

Step 1: Calculate the accrued amount to be included in the assessable income of the investor for the eligible deferred interest investment for a year of income (in accordance with the provisions of Division 16E). The Bill described this as the "deemed payment amount".

Step 2: Calculate the amount that would have been deducted for non-quotation of a TFN if the deemed payment amount had been paid to the investor as money. This will be the TFN withholding tax payable jointly and severally by the investor and investment body for the eligible deferred interest investment. It is described in the Bill as the "undeducted TFN amount".

14.29. When the income from an eligible deferred interest investment is actually paid at the end of the term of the investment, no deductions are required for failure to quote a TFN other than the amount that is included as assessable income under Division 16E for the final year and any periodic interest payment.

What about Substituted Accounting Periods?

14.30. A taxpayer may be given leave to adopt an accounting period for tax purposes, in place of the normal year of income (i.e. 1 July to 30 June).

14.31. In calculating the deemed payment amount (step 1) any substituted accounting period that may apply to the investor is ignored. [Clause 77 - new subsection 221YHZQ(2)]

An example of how TFN withholding tax is calculated

14.32. Kate invests in debentures with X Bank to the value of $1,000 for a term of two years commencing on 1 July 1992 and ending on 30 June 1994. Interest will be paid on the debentures at 6% per 6 months compound when the term ends on 30 June 1994.

14.33. This investment is an eligible deferred interest investment and will thus be subject to TFN withholding tax if a TFN is not quoted.

(Editorial note: *Corrected Page*)

14.34. The investment pays assessable income as follows.

14.35. "Notional accrual amount" is the amount of accrued interest which must be included in Kate's assessable income under Division 16E.

14.36. Kate fails to quote her TFN to X Bank. The TFN withholding tax rules are therefore applicable.

14.37. For the year of income ending 30 June 1993, Kate is assessed on the accrued income earned on the debentures. The amount of income included in her assessment under section 159GQ of Division 16E for that year is $123.60 (i.e. $60.00 + $63.60). Assuming a top tax rate plus medicare levy of 48.25%, the TFN withholding tax payable on the investment for 1992/93 is $59.35 (taking account of the rounding off provision in subsection 221YHZC(1C)).

14.38. The normal TFN rules apply to the first $138.87 ($67.42 + $71.45) of the final payment to the investor since that is the amount of accrued interest earned in the 1993/94 income year (i.e. the year in which the term ends).

(Editorial note: *Corrected Page*)

What happens if an investor gets periodic interest as well as deferred interest?

14.39. Some deferred interest investments pay income in two ways: by periodic interest and deferred interest:

•

Periodic interest is payments of interest (usually by coupon) paid to the investor at intervals of 12 months or less;

•

Deferred interest accrues over the term of the investment and is paid when the term ends.

14.40. Payments of periodic interest are not caught by the TFN withholding tax rules. These payments are subject to the normal TFN arrangements. That is, if a TFN is not quoted by the investor, 48.25% of the period interest must be deducted and remitted to the Commissioner. The balance can be paid to the investor. [Clause 75 - new subsection 221YHZA(2B)]

14.41. If a TFN is not quoted on the investment, the deferred interest for years other than the final year of the term is subject to TFN withholding tax.

Example

14.42. Andrew deposits $1,000 with Z Bank for a four year term commencing on 1 July 1992 and ending on 30 June 1996. The investment earns income by way of:

•

periodic payments of interest of $40 every 6 months; and

•

accruing interest paid at the end of the term at 4% per 6 months compound.

14.43. Andrew's yield to redemption on his investment is 7.53% compound per 6 months.

14.44. This investment is an eligible deferred interest investment and will thus be subject to TFN withholding tax if a TFN is not quoted.

(Editorial note: *Corrected Page*)

14.45. The investment pays assessable income as follows:

14.46. "Cash flow" is the payments of periodic interest and the payment on 30/06/96 which represents $40.00 periodic interest and $1,368.57 accrued interest plus capital.

14.47. "Notional accrual amount" is the amount of accrued interest which must be included in Andrew's assessable income under Division 16E.

14.48. Andrew fails to quote his TFN to Z Bank. The TFN withholding tax rules are therefore applicable to the accrued interest for the 1992/93 to 1994/95 income years while the normal TFN rules apply to the periodic interest and the accrued interest for the 1995/96 income year.

(Editorial note: *Corrected Page*)

Periodic interest

14.49. Assuming a top rate of tax plus medicare levy of 48.25%, Z Bank is required to deduct $19.30 under the normal TFN rules from each payment of periodic interest when it is paid.

Accrued interest for 1992/93 income year

14.50. For the year of income ending 30 June 1993, Andrew is assessed on the accrued income earned on the term deposit. The amount of income included in his assessment under Division 16E for that year is $73.15 (i.e. $35.25 + $37.90) Assuming a top rate of tax plus medicare levy of 48.25%, the TFN withholding tax payable on the investment for 1992/93 is $35.20 (taking account of the rounding off provision in subsection 221YHZC(1C)).

Who has to pay the TFN withholding tax?

14.51. This will depend on whether the investment body is an untaxable Commonwealth entity. Untaxable Commonwealth entities are defined in the Bill to be the Commonwealth or a Commonwealth authority that cannot, by a law of the Commonwealth, be made liable to pay Commonwealth tax [Clause 77 - new section 221YHZP] . An example of an untaxable Commonwealth entity is the Reserve Bank of Australia. An example of an investment body which is not an untaxable Commonwealth entity is a bank or building society.

14.52. Where the investment body is not an untaxable Commonwealth entity, the investor and investment body are jointly and severally liable to pay TFN withholding tax. [Clause 77 - new paragraph 221YHZT(b)]

14.53. Where the investment body is an untaxable Commonwealth entity, the investor is solely liable to pay TFN withholding tax [Clause 77 - new paragraph 221YHZT(a)] . In this case, the investor will be taken to have authorised the investment body to pay the tax on behalf of the investor.

(Editorial note: *Corrected Page*)

Can investment bodies recover tax they pay for an investor?

14.54. When an investment body pays TFN withholding tax on an eligible deferred interest investment, the investor will be liable to pay the investment body an amount equal to the TFN withholding tax paid by the investment body for that investment. The investment body will be able to recover that amount from the investor as a debt owing to it. [Clause 77 - new subsection 221YHZV(1)]

14.55. When an investment body has paid TFN withholding tax on an eligible deferred interest investment, and there is either an amount accruing to that investment or the investment has a credit balance, then the investment body may recover the amount of TFN withholding tax paid on that investment by:

(a)

reducing an amount accruing to that investment or the balance of that investment by the amount of TFN withholding tax the investment body has paid; or

(b)

deducting or otherwise setting off the amount of TFN withholding tax the investment body has paid from the amount accruing to the investment or the balance of the investment.

14.56. Investment bodies will be authorised to recover amounts of TFN withholding tax paid on an investment irrespective of the particular wording of the investment contract. [Clause 77 - new subsection 221YHZV(2)]

14.57. Nothing in the Bill will prevent the investor and investment body making their own arrangements or agreements allowing the investment body to recover TFN withholding tax paid by the investment body on an eligible deferred interest investment made by the investor. [Clause 77 - new subsection 221YHZV(3)]

When is TFN withholding tax payable?

14.58. For the purposes of these new rules, TFN withholding tax is calculated on the amount of income accrued on an eligible deferred interest investment during a year of income which is taken to end on 30 June. The TFN withholding tax imposed by these new rules for a year of income will be due and payable:

(a)

21 days after the end of that year; [Clause 77 - new paragraph 221YHZW(a)] or

(b)

at a later date which is allowed by the Commissioner of Taxation, if special circumstances exist. [Clause 77 - new paragraph 221YHZW(b)]

Example

14.59. Kate did not quote her TFN for an eligible deferred interest investment she had during the year ended 30 June 1992. As a result TFN withholding tax was imposed on the income that accrued during the year ended 30 June 1992. The TFN withholding tax will become due and payable on 21 July 1992.

What happens if TFN withholding tax is not paid by the due date?

14.60. Late payment penalties may be applied if TFN withholding tax is not paid by the due date. This occurs in exactly the same way as subsection 221YHZD(2) imposes late payment penalties where amounts deducted from income payments under the normal TFN rules are not paid by the due date.

14.61. Broadly, a late payment penalty of 20% of the amount that should have been paid will be imposed (except for Government bodies). In addition, an interest penalty, currently at 20% per annum, may be imposed for the period by which the amount is late. In appropriate circumstances, the Commissioner of Taxation may remit the late payment penalties. [Clause 77 - new subsection 221YHZX(1)]

14.62. Existing subsection 221YHZD(3) will apply to TFN withholding tax in the same way as it applies to amounts payable because an amount was deducted from a payment of income under the existing TFN rules. [Clause 77 - new subsection 221YHZX(2)]

How do investors get credit in their income tax returns for TFN withholding tax paid?

14.63. A person will be entitled to a credit in their income tax return for amounts of TFN withholding tax paid for not quoting a TFN on an eligible deferred interest investment. This will apply in a similar way as under the existing TFN arrangements. However, because the new TFN withholding tax provisions ignore substituted accounting periods when calculating the amount from which TFN withholding tax is to be withheld, the year of income to which the credit will relate will depend on whether the investor had a substituted accounting period.

Investors who have a year of income ending on 30 June

14.64. For investors with a normal year of income, the credit for the amount of TFN withholding tax paid for a year of income because the investor did not quote a TFN for an eligible deferred interest investment will be treated as if the amount paid was actually an amount deducted during that year of income under the existing TFN rules.

14.65. Accordingly, where TFN withholding tax is paid for a particular year of income (say a payment for the year ended 30 June 1992 made in July 1992) credit for that payment will be allowed in the year of income to which the payment relates, not the year of income it is actually paid. [Clause 77 - new paragraph 221YHZX(3)(a)]

Example

14.66. Ian has an eligible deferred interest investment with Y Bank and does not have a substituted accounting period. He did not quote a TFN for the investment.

14.67. In the year ended 30 June 1992 his investment accrued $1,000. On 21 July 1992 Y Bank paid $482.50 TFN withholding tax to the Commissioner of Taxation for that investment.

14.68. Ian will be required $1,000 accrued income to include in his assessable income for the year ended 30 June 1992 (under Division 16E of the Act) and will be entitled to $482.50 credit, in that year, for the amount paid by the investment body in relation to the year of income ended 30 June 1992.

14.69. Ian and Y Bank will make their own arrangements on how Y Bank will recover the $482.50 paid to the Commissioner.

Investors who DO HAVE substituted accounting periods

14.70. Investors who have substituted accounting periods will be allowed credit for TFN withholding tax relating to an eligible deferred interest investment for which a TFN was not quoted in the year of income (substituted accounting period) in which the TFN withholding tax became due and payable.

14.71. The credit for the TFN withholding tax will not be apportioned over more than one financial year or accounting period.

14.72. In some cases this means that the credit for TFN withholding tax arising because an investor does not quote a TFN will be allowed in a financial year later than the year the accrued income is return as income. This result can be avoided, however, if the investor quotes its TFN to the investment body. [Clause 77 - new paragraph 221YHZX(3)(b)]

Example

14.73. Company Ltd has an eligible deferred interest investment with Y Bank and has a substituted accounting period which ends on 31 May each year. Company Ltd did not quote a TFN for the investment.

14.74. In the year ended 30 June 1992 the investment accrued $1,000. On 21 July 1992 Y Bank paid $482.50 TFN withholding tax to the Commissioner of Taxation for that investment. The TFN withholding tax became due and payable on 21 July 1992.

14.75. Company Ltd will be required to include $1,000 accrued income in its assessable income for the year ended 31 May 1992 (under Division 16E of the Act). Because, however, the TFN withholding tax was due and payable in the next year of income - because of the substituted accounting period - Company Ltd will be able to claim $482.50 credit for the amount paid by the investment body in its year of income ended 31 May 1993.

14.76. Company Ltd and Y Bank may make their own arrangements for the recovery of the $482.50 paid to the Commissioner.

What refund provisions will apply for TFN withholding tax?

14.77. Similar refund rules to those used for the existing TFN rules will apply for TFN withholding tax. The Commissioner will be able, if fair and reasonable, to remit TFN withholding tax where an investor did not claim an exemption from the TFN system that he or she was entitled to. [Clause 77 - new section 221YZH]

14.78. In addition, the Commissioner will be able to refund an amount of TFN withholding tax overpaid, whether as a result of a remission or otherwise. Where an amount is refunded, the investor will not be entitled to a credit against income tax assessed for the amount of the refund. This will prevent credits arising for TFN withholding tax not actually paid. [Clause 77 - new section 221YHZZ]

Is the TFN withholding tax a valid income tax deduction?

14.79. Not for investors. Since investors are entitled to credit for TFN withholding tax in their income tax returns, an income tax deduction will not be allowed to an investor for any payment in respect of TFN withholding tax. As a result, TFN withholding tax paid by an investor to the Commissioner of Taxation or to the investor's investment body as compensation for paying the TFN withholding tax for the investor will not be deductible. [Clause 77 - new section 221YHZZA]

14.80. Investment bodies will be normally entitled to an income tax deduction for the amount of TFN withholding tax they pay for an investor as a normal expense of carrying on their business operations. The timing of this deduction will be determined using ordinary concepts of income tax deductibility. Amounts recovered by the investment body from an investor will be assessable income to the investment body.

What anti-avoidance rules will operate?

14.81. Section 8WC of the Taxation Administration Act 1953 (the Administration Act) currently makes it an offence for a person to structure their investments to avoid the application of the TFN arrangements. That offence provision has been recast (by replacing subparagraph 8WC(1)(b)(iii) of the Administration Act with a new subparagraph) to ensure that the offence provisions will apply to prevent a person from structuring their investments to avoid the TFN withholding tax provisions.

14.82. Broadly, such restructuring of investments will be an offence if it could be reasonably concluded that it was done with the sole or dominant purpose of ensuring or attempting to ensure that although a TFN has not been quoted for those investments:

(a)

amounts are not deducted under the existing TFN arrangements (Division 3B of Part VI of the Income Tax Assessment Act 1936 ); and

(b)

amounts would not be paid to the Commissioner under subsection 221YHZD(1B) when income is paid on an investment subject to the TFN arrangements other than in money; and

(c)

TFN withholding tax would not be payable on an eligible deferred interest investment. [Clause 107 - new paragraph 8WC(1)(b)(iii) of the Administration Act]

Will other laws exempt a person from TFN withholding tax?

14.83. No. As a safeguard, any law or provision of a law passed before the date of the Royal Assent for the Taxation Laws Amendment Bill (No. 3) 1991 that purports to exempt a person from paying TFN withholding tax will be ineffective.

14.84. In addition, any law or provision of a law that is passed after the date the Royal Assent is given to the Taxation Laws Amendment Bill (No. 3) 1991 will not exempt a person from the new TFN withholding tax unless it expressly states its intention to exempt the person from paying the TFN withholding tax. [Clause 77 - new section 221YHZZB]

Will the TFN withholding tax rules bind the Crown?

14.85. Yes. The new TFN withholding tax arrangements proposed by the Taxation Laws Amendment Bill (No. 3) 1991 will place obligations on the Crown. Accordingly, the TFN withholding tax provisions contained in new Subdivision C of Division 3B of Part VI of the Act will bind the Crown in right of the Commonwealth, each of the States, the Australian Capital Territory, the Northern Territory and Norfolk Island. [Clause 77 - new section 221YHZZC]

Commencement date

14.86. The TFN withholding tax amendments will apply from the date the Royal Assent is given to the Taxation Laws Amendment Bill (No. 3) 1991 . [Clause 2]

14.87. As described above, TFN withholding tax will apply to eligible deferred interest investments whose term commences on or after 1 February 1992. [Subclause 85(15)]

Clauses involved in the proposed amendments

Taxation Laws Amendment Bill (No. 3) 1991

Clause 2: provides that the Act proposed by the Bill will commence on the date it is given the Royal Assent.

Clause 9: facilitates references to the Income Tax Assessment Act 1936 for the purposes of amendments to that Act made by the Bill.

Clause 74: inserts, before section 221YHZA of the Act, a new subdivision heading "Subdivision A - Interpretation". The new heading is to assist the readability of the legislation.

Clause 75: defines the types of deferred interest investments which will be subject to the proposed changes. The clause also makes it clear that any periodic interest payments, or deferred interest payments for the last year, will be subject to the existing TFN arrangements.

Clause 76: inserts, before section 221YHZO of the Act, a new subdivision heading "Subdivision C - Collection of TFN withholding tax payable on the non-quotation of tax file numbers in respect of eligible deferred interest securities". The new heading is to assist the readability of the legislation.

Clause 77: provides for the assessment and collection of a TFN withholding tax where an investor has not quoted a TFN for an eligible deferred interest investment. The TFN withholding tax will be imposed by the Income Tax (Deferred Interest Securities) (Tax File Number Withholding Tax) Act 1991 .

Subclause 85(15): ensures that the new TFN withholding tax arrangements will only apply to investments made on or after 1 February 1992.

Clause 106: facilitates references to the Taxation Administration Act 1953 for the purposes of amendments to that Act made by the Bill.

Clause 107: extends the operation of section 8WC so that it will apply where a person structures their investments to avoid the operation of the new TFN withholding tax arrangements.

Income Tax (Deferred Interest Securities) (Tax File Number Withholding Tax) Bill 1991

Clause 1: provides that the Act may be cited as the Income Tax (Deferred Interest Securities) (Tax File Number Withholding Tax) Act 1991 .

Clause 2: provides that the Act commences when new section 221YHZR of the Income Tax Assessment Act 1936 takes effect on the date of Royal Assent of the Taxation Laws Amendment Bill (No. 3) 1991 .

Clause 3: provides that the Act binds the Crown.

Clause 4: imposes the tax known as TFN withholding tax.