SENATE

Taxation Laws Amendment Bill (No. 2) 1993

Taxation Laws Amendment Act (No. 2) 1993

REPLACEMENT Explanatory Memorandum

(Circulated by the authority of the Treasurer the Hon John Dawkins, M.P.)THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE House of Representatives TO THE BILL AS INTRODUCED

Glossary of Commonly Used Terms

Term Definition
Accounts Accounts means ledgers, journals, profit and loss accounts and balance sheets. It also includes statements, reports and notes attached to, or intended to be read with, any of the above items.
Approved exchanges / approved markets The stock exchanges and financial markets whose quoted market values are accepted for the market value method. The list of approved stock exchanges can be found at Schedule 3 of the Act.
Attribution account An attribution account establishes a link between:

•
income that has been attributed to a taxpayer from an attribution account entity; and
•
income actually distributed to that taxpayer by the entity.
Attribution account entity An attribution account entity is an entity for which a resident taxpayer is to maintain an attribution account (in order to trace distributions of attributed income). An entity includes:

•
a company that is not a Part X Australian resident;
•
a partnership;
•
a trust; and
•
a FLP
Attribution credit When an amount is attributed to a taxpayer from an entity, the attribution account is credited (attribution credit) with the amount of the attributable income.
Attribution debit When an entity subsequently distributes income that has been attributed to a taxpayer, the amount of the distribution is debited (attribution debit) to the attribution account. The amount of the debit cannot exceed the balance of the account, which is referred to as the attribution surplus.
Attribution surplus An attribution surplus exists if the total of the attribution credits for an entity exceeds its attribution debits.
Calculated profit The profit arising to a FIF in the FIF's notional accounting period as calculated under the FIF measures using the calculation method. The taxpayer's share of these profits is included in assessable income.
Calculation method An alternative method, available at the taxpayer's election, to determine the amount to be included in a taxpayer's assessable income under the FIF measures. The amount is calculated by determining a taxpayer's share of a FIF's profits. A FIF's profits are calculated using rules similar to (but simpler than) those that apply for a resident taxpayer.
Cash surrender value method Method of taxation applying to taxpayers who have an interest in a FLP. In general, the amount included in assessble income is calculated by measuring the increase, if any, in the cash surrender value of an interest in a FLP between the last day of the previous notional accounting period and the last day of the current notional accounting period, with an adjustment for acquisitions, disposals and distributions.
Certificate of allotment Certificate from the Chief of Defence Force stating a period of allotment and that the duty in the particular area is in respect of service with a specified organisation
Certificate of revocation Certificate revoking certificate of allotment
Controlled foreign company or CFC A company that is not a resident of Australia and is controlled by five or fewer residents.
Deemed rate of return method The backup method to determine the amount to be included in a taxpayer's assessable income under the FIF measures. The amount is calculated by applying a deemed rate of return to the value of the FIF or FLP interest.
Eligible duty Where a person serves with a specified organisation in a specified area after a specified date, that duty qualifies for exemption
FIF Foreign Investment Fund, i.e., a foreign company or foreign trust.
FIF interest An interest in a Foreign Investment Fund.
Foreign Life Policy (FLP) A foreign life policy is a life assurance policy issued by a non-resident.
Interest in a FIF The total of all instruments in a company held by the taxpayer (such as a share, option, convertible note etc.) or interests held in a trust (such as a unit, option to acquire a unit, a note convertible into a unit).
Market value method The primary method to determine the amount to be included in a taxpayer's assessable income under the FIF measures. In general, the amount is calculated by measuring the increase, if any, in the market value of a FIF interest between the last day of the previous notional accounting period and the last day of the current notional accounting period with adjustment for acquisitions, disposals and distributions.
Non-portfolio interest An interest of 10 per cent or more of the voting interests in a company.
Notional accounting period The period by reference to which the FIF measures apply. In general, this will be the same as a taxpayer's year of income. The taxpayer may elect that the notional accounting period coincide with the accounting period which the FIF uses for reporting to shareholders or beneficiaries. In relation to FLPs, the taxpayer may elect that the notional accounting period of the FLP coincide with the period for which cash surrender values are available .
Operational area An area specified by section 23AC to be eligible for the income tax exemption
Operational service Service for which an income tax exemption is provided under section 23AC
Specified area An area designated as eligible for the concession
Specified date Earliest date from which service in a specified area with a specified organisation can be eligible for the income tax exemption
Specified organisation Allotment with a particular force or operation, as prescribed by the Regulations
Termination date Date an operational area ceases to be operational and, therefore, eligible for the exemption
Transferor trust A non-resident trust to which a resident taxpayer has made, or is deemed to have made, a transfer of property or services under Division 6AAA of Part III the Act.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).