Tax Laws Amendment (2005 Measures No. 5) Act 2005 (162 of 2005)

Schedule 4   Thin capitalisation

Income Tax (Transitional Provisions) Act 1997

1   At the end of Division 820

Add:

820-45 Transitional provision - accounting standards and prudential standards

(1) This section applies to 3 consecutive income years of an entity beginning on or after 1 January 2005.

(2) Subject to subsection (3), the entity may choose, for any or all of those income years, to use the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 (rather than the current accounting standards) for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997.

Note 1: Making the choice for an income year does not require the entity to maintain a full set of accounts based on those old accounting standards.

Note 2: The choice is only for the purposes of calculating amounts for the purposes of the thin capitalisation regime.

(3) If the entity makes a choice under subsection (2) for an income year but an associate entity of that entity does not, the entity may, in working out its associate entity excess amount so far as it relates to that associate entity at a time in that year, use either the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 or the current accounting standards.

(4) If an ADI makes a choice under subsection (2) for an income year, the ADI must also choose to use for that year the prudential standards in force under the Banking Act 1959 immediately before 1 January 2005 (rather than the current prudential standards) for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997.

Note 1: Making the choice for an income year does not require the entity to maintain capital adequacy calculations based on those old prudential standards.

Note 2: The choice is only for the purposes of calculating amounts for the purposes of the thin capitalisation regime.

(5) For an income year for which an entity does not make a choice under subsection (2), the current accounting standards will be used for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997.

(6) For an income year for which an ADI does not make a choice under subsection (2), the current prudential standards will be used for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997.