Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010 (114 of 2010)

Schedule 1   Repeal of the FIF and deemed present entitlement rules

Part 1   Main amendments

Income Tax Assessment Act 1936

7   Section 23AK

Repeal the section, substitute:

23AK Amounts paid out of attributed foreign investment fund income not assessable

When this section applies

(1) This section applies if:

(a) either:

(i) a FIF attribution account payment of a kind referred to in former paragraph 603(1)(a), (b), (c), (d), (f), (g) or (h) is made to a taxpayer (other than a partnership or taxpayer in the capacity of trustee of a trust); or

(ii) a FIF attribution account payment of a kind referred to in former paragraph 603(1)(e) is made to a taxpayer; and

(b) on the making of the payment, a post FIF abolition debit arises, for the FIF attribution account entity making the payment, in relation to the taxpayer.

Post FIF abolition debit arises

(2) A post FIF abolition debit arises for a FIF attribution account entity (the eligible entity ) in relation to a taxpayer if:

(a) the eligible entity makes a FIF attribution account payment to the taxpayer or to a FIF attribution account entity; and

(b) immediately before the eligible entity makes the FIF attribution account payment, there is a post FIF abolition surplus for the eligible entity in relation to the taxpayer.

Amount of post FIF abolition debit

(3) The amount of the post FIF abolition debit is the lesser of:

(a) the post FIF abolition surplus; and

(b) whichever of the following is applicable:

(i) if the attribution account payment is made to the taxpayer - the FIF attribution account payment;

(ii) in any other case - the taxpayer's FIF attribution account percentage (for the FIF attribution account entity to which the payment is made) of the FIF attribution account payment;

reduced by any attribution debit that arises under section 372 for the entity in relation to the taxpayer as a result of the making of the payment.

When the post FIF abolition debit arises

(4) The post FIF abolition debit arises when the FIF attribution account payment is made.

When a post FIF abolition surplus exists

(5) A post FIF abolition surplus for a FIF attribution account entity in relation to a taxpayer exists at a particular time (the relevant time ) if the sum of:

(a) the entity's total FIF attribution credits (within the meaning of former section 605) that arose before the commencement of Schedule 1 to the Tax Laws Amendment (Foreign Source Income Deferral) Act (No. 1) 2010; and

(b) the entity's total post FIF abolition credits arising before the relevant time in relation to the taxpayer;

exceeds the sum of:

(c) the entity's total FIF attribution debits (within the meaning of former section 606) that arose before that commencement in relation to the taxpayer; and

(d) the entity's total post FIF abolition debits arising before the relevant time in relation to the taxpayer.

Post FIF abolition credit arises

(6) A post FIF abolition credit arises for a FIF attribution account entity (the eligible entity ) in relation to a taxpayer if a FIF attribution account payment that requires a post FIF abolition debit for another entity in relation to the taxpayer is made to the eligible entity.

Amount of post FIF abolition credit

(7) The amount of the post FIF abolition credit is equal to the amount of the post FIF abolition debit for the other entity.

When the post FIF abolition credit arises

(8) The post FIF abolition credit arises when the FIF attribution account payment referred to in subsection (6) is made.

Effect of this section applying

(9) If this section applies, the following provisions have effect:

(a) if the payment is of a kind referred to in former paragraph 603(1)(a) or (b) - the payment is not assessable income, and is not exempt income, to the extent of the debit;

(b) if the payment is of a kind referred to in former paragraph 603(1)(c) and, apart from this section, an amount would be included in the taxpayer's assessable income under section 92 in respect of an individual interest in the net income of the partnership of the year of income referred to in that paragraph - that amount is not assessable income, and is not exempt income, to the extent of the debit;

(c) if the payment is of a kind referred to in former paragraph 603(1)(d) and, apart from this section, an amount would be included in the taxpayer's assessable income under section 97, 98A or 100 in respect of a share of the net income of the trust of the year of income referred to in that paragraph - that amount is not assessable income, and is not exempt income, to the extent of the debit;

(d) if the payment is of a kind referred to in former paragraph 603(1)(d) and, apart from this section, an amount would be assessable to the trustee of the trust referred to in that paragraph under section 98 in respect of a share of the net income of the trust of the year of income referred to in that paragraph - that amount is not so assessable to the extent of the debit;

(e) if the payment is of a kind referred to in former paragraph 603(1)(e) - the payment is not, to the extent of the debit, assessable to the taxpayer as mentioned in that paragraph;

(f) if the payment is of a kind referred to in former paragraph 603(1)(f) and, apart from this section, an amount would be included in the taxpayer's assessable income, of the year of income referred to in that paragraph, under section 99B in respect of the trust property referred to in that paragraph - that amount is not assessable income, and is not exempt income, to the extent of the debit;

(g) if the payment is of a kind referred to in former paragraph 603(1)(g) - the payment is not assessable income, and is not exempt income, to the extent of the debit;

(h) if the payment is of a kind referred to in former paragraph 603(1)(h) - the payment is not assessable income, and is not exempt income, to the extent of the debit.

(10) This section is to be disregarded for the purposes of applying any other provision of this Act to determine allowable deductions.

(11) In this section:

FIF attribution account entity has the same meaning as in former Part XI.

FIF attribution account payment has the same meaning as in former Part XI.

FIF attribution account percentage has the same meaning as in former Part XI.

trust has the same meaning as in former Part XI, but does not include a trust covered by former subsection 605(11).

23B Reduction of disposal consideration if FIF attributed income not distributed

(1) If:

(a) it is necessary, for the purposes of applying a provision of this Act in the assessment of a taxpayer for a year of income, to take into account:

(i) the amount of consideration received, entitled to be received or taken to have been received, by the taxpayer in respect of the disposal of an asset; or

(ii) the capital proceeds from a CGT event happening in relation to a CGT asset;

being an asset that is an interest in a FIF attribution account entity; and

(b) immediately before the disposal or CGT event takes place there is a post FIF abolition surplus for the FIF attribution account entity in relation to the taxpayer;

then, for the purposes of this Act:

(c) the consideration or capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the disposal or CGT event is taken to be reduced by so much of the amount of the post FIF abolition surplus as does not exceed the consideration or capital proceeds; and

(d) a post FIF abolition debit arises at the time of the disposal or the CGT event under this paragraph, in relation to the taxpayer, for the FIF attribution account entity; and

(e) the amount of the post FIF abolition debit is equal to so much of the surplus as is taken into account under paragraph (c).

(2) For the purposes of paragraph (1)(c), if the disposal of the asset or the CGT event causes the taxpayer's FIF attribution account percentage for the FIF attribution account entity to be reduced by a proportion, then only that proportion of the post FIF abolition surplus for the entity is to be taken into account under that paragraph.

(3) In this section:

FIF attribution account entity has the same meaning as in former Part XI.

FIF attribution account percentage has the same meaning as in former Part XI.