Tax Laws Amendment (2009 Measures No. 2) Act 2009 (42 of 2009)

Schedule 1   Tax treatment of payments under financial claims scheme

Income Tax Assessment Act 1997

20   At the end of Part 3-10

Add:

Division 253 Financial claims scheme for account-holders with insolvent ADIs

Table of Subdivisions

253-A Tax treatment of entitlements under financial claims scheme

Subdivision 253-A - Tax treatment of entitlements under financial claims scheme

Guide to Subdivision 253-A

253-1 What this Subdivision is about

This Act applies to a payment of an entitlement under Division 2AA (Financial claims scheme for account-holders with insolvent ADIs) of Part II of the Banking Act 1959 as if the payment were made by the ADI under the agreement for the account concerned.

Special rules prevent the arising and payment of such an entitlement from creating inappropriate capital gains or losses affecting assessable income.

Table of sections

Operative provisions

253-5 Payment of entitlement under financial claims scheme treated as payment from ADI

253-10 Disposal of rights against ADI to APRA and meeting of financial claims scheme entitlement have no CGT effects

253-15 Cost base of financial claims scheme entitlement and any remaining part of account that gave rise to entitlement

Operative provisions

253-5 Payment of entitlement under financial claims scheme treated as payment from ADI

(1) This Act applies to you as if an amount paid to you, or applied for your benefit, to meet your entitlement under Division 2AA (Financial claims scheme for account-holders with insolvent ADIs) of Part II of the Banking Act 1959 connected with an account with an *ADI had been paid to you by the ADI under the terms and conditions of the agreement for keeping the account.

Note: This section has effect subject to more detailed provisions about:

(a) entitlements relating to retirement savings accounts (see section 306-25); and

(b) entitlements relating to farm management deposits (see Subdivision 393-D in Schedule 2G to the Income Tax Assessment Act 1936).

(2) To avoid doubt, subsection (1) does not affect the operation of Part 2-5 in Schedule 1 to the Taxation Administration Act 1953.

Note: Division 21 in Schedule 1 to the Taxation Administration Act 1953 contains special provisions about how Part 2-5 in that Schedule operates in relation to the meeting of entitlements under Division 2AA of Part II of the Banking Act 1959.

253-10 Disposal of rights against ADI to APRA and meeting of financial claims scheme entitlement have no CGT effects

Disregard a *capital gain or *capital loss you make:

(a) because of the operation of section 16AI of the Banking Act 1959; or

(b) because your entitlement under Subdivision C of Division 2AA of Part II of that Act is met.

Note: Section 16AI of the Banking Act 1959 reduces the right of an account-holder who has a protected account with a declared ADI to be paid an amount by the ADI, by the account-holder's entitlement under Subdivision C of Division 2AA of Part II of that Act to be paid an amount by APRA in connection with the account.

253-15 Cost base of financial claims scheme entitlement and any remaining part of account that gave rise to entitlement

(1) This section applies if an entitlement arises under Division 2AA (Financial claims scheme for account-holders with insolvent ADIs) of Part II of the Banking Act 1959 in connection with an account-holder's account with an *ADI.

(2) The *cost base and *reduced cost base of the *CGT asset consisting of the entitlement are each the amount of the entitlement.

(3) The *cost base of the *CGT asset representing the part (if any) of the account-holder's right to be paid an amount by the *ADI in connection with the account that remains after the reduction of that right by section 16AI of the Banking Act 1959 (by the amount of the entitlement) is the difference (if any) between:

(a) the cost base of the right as it was immediately before the reduction; and

(b) the amount of the entitlement.

The *reduced cost base is worked out similarly.

(4) This section has effect despite:

(a) Division 110 (Cost base and reduced cost base); and

(b) subsections 112-30(2), (3), (4) and (5) (which are about apportioning a *cost base if a *CGT event happens to only part of a *CGT asset).