Taxation Laws Amendment Act (No. 2) 1995 (169 of 1995)

Schedule 1   AMENDMENTS RELATING TO STATE/TERRITORY BODIES

Part 1   STATE/TERRITORY BODIES

Division 1   Income Tax Assessment Act 1936

Subdivision A   Subdivision A-Certain State/Territory bodies exempt from tax

1   After Division 1AA of Part III

Insert:

"Division 1AB-Certain State/Territory bodies exempt from income tax

"Subdivision A-Exemption for certain State/Territory bodies

Key principle

"24AK.

A body that is a State/Territory body (an STB) is exempt from income

tax under this Division unless it is an excluded STB. There are 5

different ways in which a body can be an STB.

Diagram-guide to work out if body is exempt under this Division

"24AL. The following diagram is a guide to help work out whether a

body is exempt from income tax under this Division:

(DIAGRAM OMITTED)

Certain STBs exempt from tax

"24AM. The income of a State/Territory body (an STB) is exempt from

income tax unless section 24AN applies to the STB.

Certain STBs not exempt from tax under this Division

"24AN. Income derived by an STB is not exempt from income tax under

this Division if, at the time that it is derived, the STB is an

excluded STB or an SGIO.

Notes: 1. For the definition of excluded STB see section 24AT.

2. Even though an excluded STB is not exempt from income tax

under this Division, it may still be exempt under another provision of

this Act.

3. Subsection 112A(1A) operates to exempt certain income of

SGIOs.

First way in which a body can be an STB

"24AO. A body is an STB if:

(a) it is a company limited solely by shares; and

(b) all the shares in it are beneficially owned by one or more

government entities.

Note: For the definition of government entity see section 24AT. Note

that an excluded STB is not a government entity.

Second way in which a body can be an STB

"24AP. A body is an STB if:

(a) it is established by State or Territory legislation; and

(b) it is not a company limited solely by shares; and

(c) the legislation provides that it must distribute all of its

profits (if any) only to one or more government entities; and

(d) if the legislation makes provision as to the way its net assets

may be distributed if it is dissolved or wound up-the provision is

that, if it is dissolved, all of its net assets (if any) must be

distributed only to one or more government entities.

Third way in which a body can be an STB

"24AQ. A body is an STB if:

(a) it is established by State or Territory legislation; and

(b) it is not a company limited solely by shares; and

(c) the legislation gives the power to appoint or dismiss its

governing person or body only to one or more government entities.

Fourth way in which a body can be an STB

"24AR. A body is an STB if:

(a) it is established by State or Territory legislation; and

(b) it is not a company limited solely by shares; and

(c) the legislation gives the power to direct its governing person

or body as to the conduct of its affairs only to one or more

government entities.

Fifth way in which a body can be an STB

"24AS. A body is an STB if:

(a) it is not a company limited solely by shares; and

(b) it is not established by State or Territory legislation; and

(c) all the legal and beneficial interests (including, but not

limited to, interests as to income, profits, dividends, capital and

distributions of capital) in it are held only by one or more

government entities; and

(d) all the rights or powers (if any) to vote, appoint or dismiss

its governing person or body and direct its governing person or body

as to the conduct of its affairs are held only by one or more

government entities.

What do excluded STB, government entity and Territory mean?

"24AT. In this Division:

excluded STB means an STB that:

(a) at a particular time, is prescribed as an excluded STB in

relation to that time; or

(b) is a municipal corporation or other local governing body (within

the meaning of paragraph 23(d)); or

(c) is a public educational institution (within the meaning of

paragraph 23(e)); or

(d) is a public hospital (within the meaning of paragraph 23(ea));

or

(e) is a superannuation fund;

government entity means:

(a) a State; or

(b) a Territory; or

(c) another STB that is not an excluded STB;

Territory means the Northern Territory or the Australian Capital

Territory.

Governor, Minister and Department Head taken to be a government entity

"24AU. For the purposes of sections 24AQ, 24AR and 24AS, if the

power to appoint, dismiss or direct the governing body is given to, or

is held by:

(a) a Governor of a State; or

(b) a Minister of the Crown of a State; or

(c) a Minister of a Territory; or

(d) the head of a Department of a State or a Territory; or

(e) any combination of paragraphs (a) to (d);

the power is taken to be given to, or held by, a government entity.

Regulations prescribing excluded STBs

States and Territories to consent to STBs being excluded STBs

"24AV.(1) The regulations may prescribe that an STB is an excluded

STB only if all States and Territories consent to the STB being so

prescribed.

Regulations prescribing excluded STBs may be retrospective

"(2) Despite section 48 of the Acts Interpretation Act 1901, a

regulation prescribing an STB as an excluded STB may provide that the

STB is an excluded STB in relation to a time before the day of the

notification of the regulation in the Gazette.

"Subdivision B-Body ceasing to be an STB

Body ceasing to be an STB

"24AW. This Act applies in relation to a body for a year of income

(the cessation year) in which the body ceases to be an STB as if:

(a) the cessation were, for the purposes of Subdivision B of

Division 2A, a disqualifying event that, by reason of section 50H, is

taken to have occurred; and

(b) the references in that Subdivision to 'company' were references

to 'body'; and

(c) subsection 50A(2) did not apply in relation to that

disqualifying event; and

(d) if the body is not a company-there were no other disqualifying

events for the body in the cessation year; and

(e) for the purposes of section 50D, the amount of any notional loss

incurred in the relevant period before the cessation were taken to be

nil; and

(f) paragraph 50F(1)(c) were amended by omitting '79E,' and '80,';

and

(g) deductions allowable under sections 79E and 80 were taken, under

section 50G, to be allowable in respect of the relevant period before

the cessation and not in respect of any other relevant period;

(h) for the purposes of Subdivision B of Division 2A, the

application of Part IIIA were modified in accordance with section

24AX. Special provisions relating to capital gains and losses

Period after cessation date-prior net capital losses to be disregarded

"24AX.(1) In determining if an amount is to be included in the

assessable income of the body under Part IIIA for a relevant period

that occurred after the cessation, any net capital losses incurred

before the cessation are to be disregarded.

Special cases where net capital gain before cessation and net capital

loss after cessation

"(2) Subsections (3) and (4) apply if:

(a) a net capital gain accrued in the relevant period before the

cessation; and

(b) if the period from the cessation until the end of the year of

income were treated as a year of income-a net capital loss would have

accrued in that period.

Special case 1-gain exceeds loss

"(3) If this subsection applies and the net capital gain exceeds the

net capital loss:

(a) the amount that is to be included in the assessable income of

the body for the relevant period that occurred before the cessation as

a result of the net capital gain accruing to the body is taken to be

the amount by which the net capital gain exceeds the net capital loss;

and

(b) no net capital gain is taken to have accrued, and no net capital

loss is taken to have been incurred, in any relevant period in the

cessation year after the cessation; and

(c) in determining if a net capital gain accrued to, or a net

capital loss was incurred by, the body for the year following the

cessation year, no net capital loss is taken to have been incurred by

the body in the cessation year.

Special case 2-loss equal to or exceeds gain

"(4) If this subsection applies and the net capital gain does not

exceed the net capital loss:

(a) no amount is to be included in the assessable income of the body

for any relevant period in the cessation year as a result of a net

capital gain accruing to the body; and

(b) in determining if a net capital gain accrued to, or a net

capital loss was incurred by, the body for the year following the

cessation year, the net capital loss that the body incurred in the

cessation year is taken to be the amount (if any) by which the net

capital loss exceeds the net capital gain.

Losses from STB years not carried forward

"24AY.(1) If a body is an STB on the last day of a year of income in

which it incurs a loss (within the meaning of section 79E or 79F), the

loss is not allowable as a deduction from the body's assessable income

of a later year of income unless the body is an STB on the first day

of that later year of income.

Note: This section prevents losses from years prior to the

cessation year from being carried forward to years after the cessation

year.

"(2) This section only applies to losses incurred in the 1995-96

year of income or a later year of income.

Effect of unfunded superannuation liabilities

"24AYA.(1) This section applies to a deduction under section 82AAC

in respect of a contribution made in relation to a person who was an

employee of a prescribed excluded STB when it ceased to be an STB.

"(2) A deduction to which this section applies is not allowable to

the body for any year of income unless the requirements of subsections

(3) and (4) are complied with.

"(3) For the deduction to be allowable, the body must obtain a

certificate by an authorised actuary stating the actuarial value, as

at the time the body ceases to be an STB, of liabilities of the STB to

provide superannuation benefits for, or for dependants of, employees

of the body, where the liabilities:

(a) accrued after 30 June 1995 and before the time when the body

ceased to be an STB; and

(b) were, according to actuarial principles, unfunded at that time.

"(4) The certificate must be in a form approved in writing by the

Commissioner. The body must obtain the certificate:

(a) before the date of lodgment of its return of income of the year

of income in which the body ceased to be an STB; or

(b) within such further time as the Commissioner allows.

"(5) If the body obtains the certificate, a deduction to which this

section applies is nevertheless not allowable for a year of income if

the sum of all deductions to which this section applies for the year

of income is less than or equal to the unfunded liability limit (see

subsection (6)) for the year of income.

"(6) If the sum is greater than that limit, so much of the deduction

as is worked out using the following formula is not allowable:

[(Amount of deduction)/(Sum of all deductions to which this section applies for the year of income)]*(Unfunded liability limit for the year of income)

where:

Unfunded liability limit for a year of income is:

(a) if the year of income is the one in which the body ceases to be

an STB-the actuarial value of the liabilities set out in the actuary's

certificate; or

(b) in any other case-that actuarial value as reduced by the total

amount of deductions to which this section applies that, because of

subsection (5), have not been allowable to the body for all previous

years of income.

"(7) Expressions used in this section that are also used in section

82AAC have the same respective meanings as in that section.

Meaning of relevant period and prescribed excluded STB

"24AZ. In this Subdivision:

prescribed excluded STB means an STB that is an excluded STB as a

result of regulations made for the purposes of paragraph (a) of the

definition of excluded STB in section 24AT;

relevant period has the same meaning as in Subdivision B of Division

2A.".