{"id":"C2004A04652","name":"Financial Corporations (Transfer of Assets and Liabilities) Act 1993","slug":"financial-corporations-transfer-of-assets-and-liabilities-act-1993","collection":"act","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":"97 of 1993","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":38539,"registerId":"commonwealth-C2004A04652-current","compilationNumber":null,"startDate":"2026-04-01","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Part 1","sectionType":"part","heading":"Preliminary","content":"## Part 1—Preliminary","sortOrder":0},{"sectionNumber":"1","sectionType":"section","heading":"Short title","content":"#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.","sortOrder":1},{"sectionNumber":"2","sectionType":"section","heading":"Commencement","content":"#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.","sortOrder":2},{"sectionNumber":"Part 2","sectionType":"part","heading":"General provisions","content":"## Part 2—General provisions","sortOrder":3},{"sectionNumber":"3","sectionType":"section","heading":"Interpretation","content":"#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.","sortOrder":4},{"sectionNumber":"4","sectionType":"section","heading":"Eligible money market corporation","content":"#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.","sortOrder":5},{"sectionNumber":"5","sectionType":"section","heading":"Transferring and receiving corporations","content":"#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.","sortOrder":6},{"sectionNumber":"6","sectionType":"section","heading":"Object of Act","content":"#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.","sortOrder":7},{"sectionNumber":"7","sectionType":"section","heading":"Application of Act","content":"#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.","sortOrder":8},{"sectionNumber":"8","sectionType":"section","heading":"Extension of Act to external Territories","content":"#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.","sortOrder":9},{"sectionNumber":"9","sectionType":"section","heading":"Transfer of asset etc. not to require consent etc. of third party","content":"#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.","sortOrder":10},{"sectionNumber":"10","sectionType":"section","heading":"Exemption from taxes etc.","content":"#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.","sortOrder":11},{"sectionNumber":"11","sectionType":"section","heading":"Compensation for acquisition of property","content":"#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.","sortOrder":12},{"sectionNumber":"12","sectionType":"section","heading":"Delegation","content":"#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.","sortOrder":13},{"sectionNumber":"Part 3","sectionType":"part","heading":"Income tax relief for transfers","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":14},{"sectionNumber":"Division 1","sectionType":"division","heading":"Preliminary","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":15},{"sectionNumber":"13","sectionType":"section","heading":"Object of Part","content":"#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.","sortOrder":16},{"sectionNumber":"14","sectionType":"section","heading":"Part to be treated as if it were a provision of the income tax law","content":"#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.","sortOrder":17},{"sectionNumber":"14A","sectionType":"section","heading":"Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.","content":"#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.","sortOrder":18},{"sectionNumber":"Division 2","sectionType":"division","heading":"General relief","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":19},{"sectionNumber":"15","sectionType":"section","heading":"Asset transfers—general","content":"#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.","sortOrder":20},{"sectionNumber":"16","sectionType":"section","heading":"Liability transfers—general","content":"#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.","sortOrder":21},{"sectionNumber":"Division 3","sectionType":"division","heading":"Securities","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":22},{"sectionNumber":"17","sectionType":"section","heading":"Securities—adjustment of cost base","content":"#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.","sortOrder":23},{"sectionNumber":"Division 4","sectionType":"division","heading":"Capital gains and capital losses","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":24},{"sectionNumber":"18","sectionType":"section","heading":"Additional roll‑over relief","content":"#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.","sortOrder":25},{"sectionNumber":"19","sectionType":"section","heading":"For the receiving corporation, asset is taxable Australian property","content":"#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.","sortOrder":26},{"sectionNumber":"Division 5","sectionType":"division","heading":"Trading stock","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":27},{"sectionNumber":"21","sectionType":"section","heading":"Transfers of trading stock","content":"#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.","sortOrder":28},{"sectionNumber":"Division 6","sectionType":"division","heading":"Bad debts","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":29},{"sectionNumber":"22","sectionType":"section","heading":"Deductions for bad debts","content":"#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.","sortOrder":30},{"sectionNumber":"Division 7","sectionType":"division","heading":"Interest withholding tax","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":31},{"sectionNumber":"23","sectionType":"section","heading":"Exemption from interest withholding tax","content":"#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.","sortOrder":32},{"sectionNumber":"Division 8","sectionType":"division","heading":"Tax losses","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":33},{"sectionNumber":"Subdivision B","sectionType":"subdivision","heading":"Tax losses and the Income Tax Assessment Act 1997","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":34},{"sectionNumber":"26A","sectionType":"section","heading":"Application of this Subdivision","content":"#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.","sortOrder":35},{"sectionNumber":"26C","sectionType":"section","heading":"Deduction for tax loss—easing of restrictions on transferring corporation","content":"#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.","sortOrder":36},{"sectionNumber":"Division 9","sectionType":"division","heading":"Continuity of partnerships","content":"An Act making provision relating to the transfer of assets and liabilities from and to certain financial corporations\n\n## Part 1—Preliminary\n\n#### 1 Short title\n\n This Act may be cited as the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.\n\n#### 2 Commencement\n\n This Act commences on the day on which it receives the Royal Assent.\n\n## Part 2—General provisions\n\n#### 3 Interpretation\n\n In this Part, unless the contrary intention appears:\n\n> ADI (authorised deposit‑taking institution) means a body corporate that is an ADI for the purposes of the Banking Act 1959.\n\n> ADI authority means an authority under subsection 9(3) of the Banking Act 1959.\n\n> asset means property, or a right, of any kind, and includes:\n\n (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and\n (b) any chose in action; and\n (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and\n (e) a CGT asset within the meaning of the Income Tax Assessment Act 1997.\n\n> eligible foreign ADI means an ADI:\n\n (a) that is a foreign ADI for the purposes of the Banking Act 1959; and\n (b) that:\n (i) was granted its ADI authority before this Act commenced; or\n (ii) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> eligible local ADI means a local ADI that was granted its ADI authority on or before 18 June 1993.\n\n> eligible money market corporation has the meaning given by section 4.\n\n> eligible subsidiary, in relation to an eligible local ADI or eligible money market corporation, means a body that:\n\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is a financial corporation that is a registered entity under the Financial Sector (Collection of Data) Act 2001; and\n (c) is a subsidiary of the eligible local ADI or money market corporation.\n\n> financial corporation means a financial corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> foreign corporation means a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.\n\n> interest, in relation to land, includes:\n\n (a) a legal or equitable estate or interest in the land; or\n (b) a right, power or privilege over, or in relation to, the land.\n\n> liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).\n\n> local ADI means an ADI that is incorporated under a law of the Commonwealth, a State or a Territory relating to companies.\n\n> newly established local ADI means a local ADI that:\n\n (a) was granted its ADI authority before this Act commenced but after 18 June 1993; or\n (b) is or was granted its ADI authority after this Act commenced pursuant to an application made before this Act commenced, or made after this Act commenced but before 1 July 2003.\n\n> receiving corporation has the meaning given by section 5.\n\n> subsidiary has the same meaning as in the Corporations Act 2001.\n\n> transfer, in relation to an asset or liability, means an act as a result of which the asset or liability:\n\n (a) ceases to be vested in a person; and\n (b) becomes vested in another person.\n\n> transferring corporation has the meaning given by section 5.\n\n#### 4 Eligible money market corporation\n\n For the purposes of this Act, a body corporate is an eligible money market corporation if it:\n (a) is incorporated under a law of the Commonwealth, of a State or a Territory relating to companies; and\n (b) is, under the Financial Sector (Collection of Data) Act 2001, a registered entity included in the category for money market corporations.\n\n#### 5 Transferring and receiving corporations\n\n If a financial corporation is proposing to transfer, or transfers, an asset or liability to another financial corporation, then, for the purposes of this Act;\n (a) the first‑mentioned corporation is the transferring corporation; and\n (b) the other corporation is the receiving corporation;\n in relation to the transfer.\n\n#### 6 Object of Act\n\n The object of this Act is to facilitate, in accordance with Commonwealth Government policy, the transfer of assets and liabilities from certain subsidiaries of a foreign corporation that is:\n (a) an eligible foreign ADI; or\n (b) the holding company (within the meaning of the Corporations Act 2001) of an eligible foreign ADI or of a newly established local ADI;\n to the foreign corporation or one of the subsidiaries referred to in paragraph (b) (as the case may be) if the assets and liabilities are reasonably required to be so transferred for the proper organisation of the activities in Australia of the transferring corporation and the receiving corporation, following the grant of an ADI authority to the receiving corporation.\n\n#### 7 Application of Act\n\n (1) This Act applies only as provided in this section.\n (2) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (3) Subject to subsection (6), if:\n (a) an eligible local ADI is a subsidiary of a foreign corporation (parent corporation); and\n (b) the eligible local ADI or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to an eligible foreign ADI that is a subsidiary of the parent corporation;\n this Act applies in relation to the transfer.\n (4) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the foreign corporation is an eligible foreign ADI; and\n (c) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to the foreign corporation;\n this Act applies in relation to the transfer.\n (5) Subject to subsection (6), if:\n (a) an eligible money market corporation is a subsidiary of a foreign corporation; and\n (b) the eligible money market corporation or one of its eligible subsidiaries (if any) is proposing to transfer, or transfers, an asset or liability to a newly established local ADI that is a wholly‑owned subsidiary (within the meaning of the Corporations Act 2001) of the foreign corporation;\n this Act applies in relation to the transfer.\n (6) This Act applies in relation to the transfer of an asset or liability only if:\n (a) the Treasurer determines in writing that the transfer is reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation; and\n (b) within the prescribed period (see subsection (7)) in relation to the transfer, the transferring corporation gives notice in writing of the proposed transfer, identifying the asset or liability to be transferred, to:\n (i) the Treasurer; and\n (ii) if the law of a State or Territory requires that the transfer be registered—the person authorised under that law to register the transfer; and\n (c) the transfer is effected before 1 July 2006.\n (7) For the purposes of paragraph (6)(b), the prescribed period in relation to the transfer of an asset or liability is:\n (a) if the receiving corporation was in possession of an ADI authority on the day on which this Act commences—the period of 6 months from that day; or\n (b) if paragraph (a) does not apply—the period of 6 months from the day on which the receiving corporation is granted an ADI authority.\n\n#### 8 Extension of Act to external Territories\n\n This Act extends to every external Territory.\n\n#### 9 Transfer of asset etc. not to require consent etc. of third party\n\n If:\n (a) a financial corporation is proposing to transfer an asset or liability to another financial corporation; and\n (b) apart from this Act, the transferring corporation or receiving corporation would be required (whether under an instrument or otherwise):\n (i) to obtain the consent or approval of a third person in a particular respect; or\n (ii) to give particular information to a third person;\n before effecting the transfer of the asset or liability;\n the transfer may be validly effected without the consent or approval being obtained, or the information given, as the case requires.\n\n#### 10 Exemption from taxes etc.\n\n If, apart from this section, a transferring corporation or a receiving corporation would be liable to pay a tax or fee under:\n (a) a law of the Commonwealth (other than the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997); or\n (b) a law of a State or Territory;\n in respect, or as a result, of the transfer of an asset or liability or in respect of the registration of such a transfer, that corporation is exempted from paying the tax or fee.\n\n#### 11 Compensation for acquisition of property\n\n (1) If, apart from this section, the transfer of an asset or liability from a financial corporation to another financial corporation would result in an acquisition of property from a person by one of those corporations otherwise than on just terms, there is payable to the person by that corporation such reasonable amount of compensation as is agreed on between the person and that corporation or, failing agreement, as is determined by a court of competent jurisdiction.\n (2) Any damages or compensation recovered or other remedy given in a proceeding that is commenced otherwise than under this section is to be taken into account in assessing compensation payable in a proceeding that is commenced under this section and arises out of the same event or transaction.\n (3) In this section:\n\n> acquisition of property and just terms have the same respective meanings as in paragraph 51(xxxi) of the Constitution.\n\n#### 12 Delegation\n\n The Treasurer may by signed instrument delegate his or her powers under paragraph 7(6)(a) to:\n (a) APRA (the Australian Prudential Regulation Authority); or\n (aa) an APRA member, within the meaning of the Australian Prudential Regulation Authority Act 1998; or\n (b) an APRA staff member, within the meaning of the Australian Prudential Regulation Authority Act 1998.\n\n## Part 3—Income tax relief for transfers\n\n### Division 1—Preliminary\n\n#### 13 Object of Part\n\n The object of this Part is to provide income tax relief for transfers by modifying the effect of certain provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.\n\n#### 14 Part to be treated as if it were a provision of the income tax law\n\n (1) An expression used in this Part and in the Income Tax Assessment Act 1936 has the same meaning in this Part as it has in that Act.\n (2) For the purposes of the application of the Income Tax Assessment Act 1936 to a taxpayer, the provisions of this Part are to be treated as if they were provisions of that Act.\n\n#### 14A Modified operation of this Part in relation to transfers from subsidiary members of consolidated groups etc.\n\n Object\n (1) The object of this section is to modify the operation of other provisions of this Part in relation to a transfer of an asset or liability from a subsidiary member of a consolidated group or MEC group to a receiving corporation so that, where appropriate:\n (a) relevant provisions affect the income tax position of the head company of the group in relation to the transfer; and\n (b) the effect of the relevant provisions on the income tax position of the receiving corporation is worked out by reference to income tax attributes of the head company, including ones it has because of the following provisions of the Income Tax Assessment Act 1997:\n (i) section 701‑1 (the single entity rule);\n (ii) section 701‑5 (the entry history rule);\n (iii) section 701‑10 (the head company tax cost setting rule).\n\n> Note 1: The single entity rule has the effect that a subsidiary member of a consolidated group or MEC group is taken to be part of the head company.\n\n> Note 2: The entry history rule treats things that happened in relation to an entity before it became a subsidiary member of a consolidated group or MEC group as having happened in relation to the head company.\n\n> Note 3: The head company tax cost setting rule sets the amount taken to be the cost to the head company of assets that became assets of the head company because of the single entity rule when an entity became a subsidiary member of the consolidated group or MEC group.\n\n Circumstances in which this section has effect\n (2) This section modifies the way in which a provision of this Part (except this Division) operates in relation to a transfer of an asset or liability from a financial corporation that (ignoring the single entity rule) is a subsidiary member of a consolidated group or MEC group to the receiving corporation.\n Modified operation of the provision\n (3) If the head company of the group is not a financial corporation, the provision operates in relation to the head company in the way in which it would operate in relation to the transferring corporation apart from this subsection.\n\n> Note: This ensures that, even though the head company is not the transferring corporation (because it is not a financial corporation), the provision operates as though it were. On this basis, the provision may affect the head company and/or the receiving corporation.\n\n (4) So far as the provision affects the receiving corporation, it does so on the basis that the single entity rule, the entry history rule and the head company tax cost setting rule affect the head company of the group.\n\n> Note 1: This subsection ensures that, where the effect of the provision on the receiving corporation depends on the transferring corporation, the results of those rules in relation to the head company are taken into account in determining the effect of the provision on the receiving corporation. Some examples of this are as follows:\n\n (a) the head company tax cost setting rule affects subsection 15(3) and section 18 by setting the head company’s cost base for assets an entity brought into the group when the entity became a subsidiary member of the group;\n (b) the entry history rule affects paragraph 16(3)(d) by treating the head company as having been paid, for assuming a liability that was brought into the group by an entity becoming a subsidiary member, the amount paid to the entity for assuming the liability;\n (c) the entry history rule affects subsections 17(1) and 22(4) and table item 1 in subsection 22(1) by treating the head company as having included in its assessable income amounts included in the assessable income of an entity that later became a subsidiary member of the group;\n (d) the entry history rule affects subsections 17(1) and (2) and 22(4) by treating deductions allowable to an entity before becoming a subsidiary member of the group as having been allowable to the head company.\n\n> Note 2: This subsection also ensures that, if the head company is a financial corporation, the receiving corporation is affected by the provision operating in relation to the head company of the group as the transferring corporation (because the single entity rule operates to treat the subsidiary member of the group as part of the head company, so the transfer is treated as being from that company).\n\n Provisions whose operation is not modified\n (5) To avoid doubt, this section does not affect the operation of the following provisions:\n (b) section 23;\n (c) Division 8.\n\n### Division 2—General relief\n\n#### 15 Asset transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 25A, 26BB or 159GS of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 52, 70B or 159GS of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of an asset, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not entitled to a deduction for expenditure incurred in acquiring asset\n (2) A deduction is not allowable to the receiving corporation under section 8‑1 of the Income Tax Assessment Act 1997 in respect of expenditure incurred in the acquisition of an asset as the result of a transfer. However, this subsection does not apply to the acquisition of trading stock.\n Receiving corporation to inherit transferring corporation’s cost base\n (3) If an asset is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under section 25A or 26BB or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5, 15‑15 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under section 52, 70B or Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the holding, or any subsequent disposal, of the asset, the receiving corporation is to be treated as if it had acquired the asset for an amount equal to what would have been the asset’s cost base to the transferring corporation for the purposes of working out under the Income Tax Assessment Act 1997 whether the transferring corporation made a capital gain from the transfer.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n#### 16 Liability transfers—general\n\n Tax treatment of transferring corporation\n (1) In determining:\n (a) whether an amount is included in the assessable income of the transferring corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the transferring corporation under section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of a transfer of a liability, the transferring corporation is to be treated as if the transfer had not occurred.\n Receiving corporation not assessable in respect of assumption of liability\n (2) An amount is not to be included in the assessable income of the receiving corporation under section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997 in respect of the assumption of the liability as a result of the transfer.\n Assumption of liability by receiving corporation\n (3) If a liability is transferred, then, in determining:\n (a) whether an amount is included in the assessable income of the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 6‑5 or 775‑15 of the Income Tax Assessment Act 1997; or\n (b) whether an amount is allowable as a deduction to the receiving corporation under Division 16E of Part III of the Income Tax Assessment Act 1936 or section 8‑1 or 775‑30 of the Income Tax Assessment Act 1997;\n in respect of the subsistence, or any subsequent transfer, of the liability, the receiving corporation is to be treated as if:\n (c) it had been paid or given consideration for the original transfer; and\n (d) the amount of the consideration were equal to the amount (if any) of the consideration paid or given to the transferring corporation in respect of the assumption by the transferring corporation of the liability.\n\n> Note: For transitional provisions about former sections 82Y and 82Z of the Income Tax Assessment Act 1936, see Part 2 of Schedule 4 to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003.\n\n### Division 3—Securities\n\n#### 17 Securities—adjustment of cost base\n\n Adjustment where security is transferred\n (1) If:\n (a) a security is transferred; and\n (b) either:\n (i) one or more amounts (other than periodic interest) are or were included in the transferring corporation’s assessable income under former section 25, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 6‑5 of the Income Tax Assessment Act 1997 in respect of the security; or\n (ii) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given by the receiving corporation in respect of the acquisition of the security as the result of the transfer were:\n (c) increased by the amount, or the sum of the amounts, covered by subparagraph (b)(i); and\n (d) reduced by the amount, or the sum of the amounts, covered by subparagraph (b)(ii).\n Adjustment where liability under security is transferred\n (2) If:\n (a) a liability under a security is transferred; and\n (b) one or more amounts (other than periodic interest) are or were allowable as deductions to the transferring corporation under former section 51, or under Division 16E of Part III, of the Income Tax Assessment Act 1936 or under section 8‑1 of the Income Tax Assessment Act 1997 in respect of the security;\n those Acts have effect as if the amount that, apart from this subsection, would have been the consideration paid or given to the receiving corporation in respect of the assumption of the liability as the result of the transfer were increased by the amount, or the sum of the amounts, covered by paragraph (b).\n Definitions\n (3) In this section:\n\n> periodic interest has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n> security has the same meaning as in Division 16E of Part III of the Income Tax Assessment Act 1936.\n\n### Division 4—Capital gains and capital losses\n\n#### 18 Additional roll‑over relief\n\n There is a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 (which normally applies only to certain transfers between companies in the same wholly‑owned group) if:\n (a) the trigger event is a transfer to which this Act applies; and\n (b) the requirements of that Subdivision are met, disregarding:\n (i) subsections 126‑50(1), (5), (6), (7), (8) and (9) of that Act; and\n (ii) section 126‑55 of that Act.\n This is in addition to that Subdivision’s effect apart from this section.\n\n#### 19 For the receiving corporation, asset is taxable Australian property\n\n Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to an asset acquired by the receiving corporation as a result of a transfer as if the asset is, while it is an asset of the receiving corporation, taxable Australian property.\n\n### Division 5—Trading stock\n\n#### 21 Transfers of trading stock\n\n Trading stock on hand at beginning of year of income\n (1) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was on hand at the beginning of that year of income;\n then:\n (c) section 70‑35 of the Income Tax Assessment Act 1997 has effect as if the trading stock were not on hand at the beginning of the year of income; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the value of the trading stock as at the end of the immediately preceding year of income of the transferring corporation (being the value that applies for the purposes of section 70‑45 of the Income Tax Assessment Act 1997); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n Trading stock not on hand at beginning of year of income\n (2) If:\n (a) a transfer of trading stock occurred during a year of income of the transferring corporation; and\n (b) the trading stock was not on hand at the beginning of that year of income;\n then:\n (c) a deduction is not allowable under the Income Tax Assessment Act 1997 to the transferring corporation in respect of expenditure incurred in the acquisition of the trading stock; and\n (d) section 8‑1 of the Income Tax Assessment Act 1997 has effect as if:\n (i) the receiving corporation had incurred expenditure in the acquisition of the trading stock; and\n (ii) the amount of that expenditure were equal to the amount of the expenditure mentioned in paragraph (c); and\n (iii) that expenditure had been so incurred immediately after the transfer; and\n (e) sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 do not apply in relation to the transfer of the trading stock.\n\n### Division 6—Bad debts\n\n#### 22 Deductions for bad debts\n\n General\n (1) In relation to a transfer of a debt, these rules about deductions for bad debts have effect as shown in the table:\n (a) section 25‑35 of the Income Tax Assessment Act 1997;\n (b) subsection 63(1A) of the Income Tax Assessment Act 1936.\n\n```html\n

Effect of rules about deductions for bad debts

Case

If:

then those rules have effect as if:

1

the debt was included in the transferring corporation’s assessable income of a year of income

the debt had been included in the receiving corporation’s assessable income of that year of income

2

the debt is in respect of money lent by the transferring corporation in the ordinary course of its business of lending money

the debt were in respect of money lent by the receiving corporation in the ordinary course of a business of lending money

3

the transferring corporation bought the debt in the ordinary course of its business of lending money

the receiving corporation had bought the debt in the ordinary course of a business of lending money

\n```\n\n Modification of tests for receiving corporation to deduct bad debt\n (2) In relation to a transfer of a debt, Subdivisions 165‑C, 166‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.\n\n> Note: Those Subdivisions are about companies deducting bad debts.\n\n Easing of restrictions on transferring corporation\n (3) If:\n (a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and\n (b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and\n (c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and\n (d) any one or more of Subdivisions 165‑C, 175‑C, 709‑D and 719‑I of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n none of those Subdivisions prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.\n\n> Note: Subdivision 175‑C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.\n\n> Note: Subdivision 709‑D of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a consolidated group and has for another period been owed to an entity that was not a member of that group for the period.\n\n> Note: Subdivision 719‑I of that Act is about the conditions that must be met for an entity to deduct a bad debt that has for a period been owed to a member of a MEC group.\n\n Limit on deductions for partly written‑off debt\n (4) If this Act applies to the transfer of a debt that has been partly written off, the maximum that the receiving corporation can deduct for the debt for one or more years of income under section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997 is worked out using the formula:\n ![](image.002.png)\n where:\n\n> unrecouped deductions means the total of the amounts that the transferring corporation has deducted or can deduct for any year of income under:\n\n (a) section 8‑1 or 25‑35 of the Income Tax Assessment Act 1997; or\n (b) section 63 or former section 51 of the Income Tax Assessment Act 1936;\n reduced by the total of any amounts included in its assessable income in respect of the debt under:\n (c) Subdivision 20‑A of the Income Tax Assessment Act 1997; or\n (d) former subsection 63(3) of the Income Tax Assessment Act 1936.\n\n### Division 7—Interest withholding tax\n\n#### 23 Exemption from interest withholding tax\n\n (1) In addition to its effect apart from this section, section 128F of the Income Tax Assessment Act 1936 also has the effect it would have if the change set out in subsection (2) of this section were made.\n (2) The change is that paragraphs (1)(a) and (b) of section 128F of the Income Tax Assessment Act 1936 (being that section in the form that applies under item 16 of Schedule 5 to the Taxation Laws Amendment Act (No. 2) 1997) are to be replaced by the following paragraphs:\n “(a) the liability to pay the interest was transferred to the company by another company (the transferor);\n (b) the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 applies to the transfer;\n (c) before the transfer, this section applied to interest paid by the transferor in discharge of the liability;\n (ca) the transferor issued the debentures or debt interests;”.\n\n### Division 8—Tax losses\n\n#### Subdivision B—Tax losses and the Income Tax Assessment Act 1997\n\n#### 26A Application of this Subdivision\n\n This Subdivision applies to assessments for the 1997‑98 income year or a later income year.\n\n#### 26C Deduction for tax loss—easing of restrictions on transferring corporation\n\n (1) If:\n (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and\n (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and\n (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and\n (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and\n (e) the transferring corporation did not, at any time in the deduction year, derive income from:\n (i) a business of a kind that it did not carry on; or\n (ii) a transaction of a kind that it had not entered into in the course of its business operations;\n before the transfer, or the earliest of the transfers, occurred;\n neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.\n\n> Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.\n\n> Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.\n\n (2) Subsection (1) operates on the basis described in subsection (3) if:\n (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and\n (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and\n (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.\n\n> Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.\n\n (3) Subsection (1) operates as if:\n (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and\n (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and\n (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).\n\n> Note 1: Subdivision 707‑B of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a consolidated group or MEC group because of Subdivision 707‑A of that Act.\n\n> Note 2: Subdivision 719‑F of the Income Tax Assessment Act 1997 affects the operation of Subdivision 165‑A of that Act in relation to the deduction of a tax loss incurred by the head company of a MEC group because of Subdivision 707‑A of that Act.\n\n (4) An expression used in this section and in the Income Tax Assessment Act 1997 has the same meaning in this section as it has in that Act. This subsection does not apply to the expressions deduction year, loss year, this Act and transfer.\n\n### Division 9—Continuity of partnerships\n\n#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":37},{"sectionNumber":"27","sectionType":"section","heading":"Transfer of an interest in a partnership does not affect continuity of partnership","content":"#### 27 Transfer of an interest in a partnership does not affect continuity of partnership\n\n (1) This section applies if an interest in a partnership is transferred.\n (2) For the purposes of the Income Tax Assessment Act 1936, the transfer does not affect the continuity of the partnership.","sortOrder":38}],"analysis":{"flash_summary_failed":{"failed":true,"reason":"Unauthenticated. Configure AI_GATEWAY_API_KEY or use a provider module. Learn more: https://ai-sdk.dev/unauthenticated-ai-gateway","source":"analysis-cron"},"flash_summary":{"complexity_score":8,"scope_assessment":{"changed":false,"description":"The Act remains narrowly focused on facilitating transfers of assets and liabilities within a defined class of financial corporations (eligible foreign ADIs, specified local ADIs and eligible money market corporations) and on providing associated income‑tax relief. Its provisions — eligibility gating by Treasurer determination (s 7(6)(a)), tax modifications (Part 3) and administrative delegation (s 12) — are all consistent with that original, operational objective (s 6 and s 13). There is no evident significant broadening of the Act’s substantive scope beyond that original purpose; instead, later sections add technical detail to implement the same objective across particular tax rules (for example, consolidated group interactions in s 14A and multiple carve‑ins/carve‑outs across Part 3)."},"complexity_factors":["Multiple cross‑references to two income tax statutes (Income Tax Assessment Act 1936 and 1997) across many provisions (Part 3), requiring tax law mapping for each transfer type","Detailed eligibility and timing logic in s 7 (six application scenarios plus three cumulative conditions in s 7(6) and the 6‑month prescribed period in s 7(7))","Section 14A: special, conditional modifications for transfers from subsidiary members of consolidated/MEC groups (single entity/entry history/head company tax‑cost rules) — adds layering for group tax outcomes","Numerous subject matters handled across divisions: assets (s 15), liabilities (s 16), securities (s 17), CGT roll‑overs (s 18), taxable Australian property treatment (s 19), trading stock (s 21), bad debts (s 22), interest withholding (s 23), tax losses (s 26C), partnership continuity (s 27)","Delegation of Treasurer power to APRA and APRA officials (s 12) — introduces administrative law and agency decision complexity","Overrides of third‑party consent and state registration consequences (s 9 and s 7(6)(b)(ii)) — raises intergovernmental and property‑law coordination issues","Time‑limited application element (s 7(6)(c) — transfers had to be effected before a statutory date), which creates conditional cut‑offs and transitional interactions","Compensation rule tied to constitutional \"just terms\" (s 11) — introduces potential litigation and valuation complexity","Many defined terms concentrated in s 3 (roughly 16–20 significant defined expressions) which must be cross‑checked across the Act","Substantial sets of exceptions and ‘as if’ treatments (for example s 15(1), s 16(1), s 18) that modify normal tax rules, increasing interpretive effort"],"plain_english_summary":"**What this law does (in plain English)\n\n- Purpose claimed by the Act: to make it easier for certain foreign banks and closely related entities to move assets and liabilities between their Australian subsidiaries and related companies, and to adjust income‑tax rules so those internal transfers don't create unintended tax outcomes (see s 6 and s 13).\n\n- Who it applies to\n - Eligible foreign ADIs (authorised deposit‑taking institutions incorporated overseas) and their Australian subsidiaries, certain newly established Australian ADIs and eligible money‑market companies (definitions and eligibility tests are in s 3–5 and s 4).\n - Transfers only qualify if the Treasurer (or a delegate) certifies the transfer is reasonably required for organising the group’s Australian activities after an ADI authority is granted (s 7(6)(a)). Transfers must also meet the statutory notice and time requirements (s 7(6)(b)–(c) and s 7(7)).\n\n- The mechanical effects (what the law actually does)\n - Overrides requirements for third‑party consents or notices that would otherwise block or delay an internal transfer between financial corporations (s 9).\n - Exempts the transferring or receiving corporation from certain Commonwealth, State or Territory taxes or fees that would otherwise apply to the transfer or registration of the transfer (s 10).\n - Preserves compensation rights where a transfer would otherwise amount to an acquisition of property contrary to the Constitution’s \"just terms\" requirement (s 11).\n - Allows the Treasurer to delegate key decision‑making to APRA (s 12).\n\n Tax outcomes (major changes to tax law for qualifying transfers)\n - Treats transferring corporations for many income‑tax provisions as if the transfer had not happened (so the transferring entity is not taxed as though it had sold the asset) (s 15(1), s 16(1)).\n - Prevents the receiving corporation from claiming an immediate acquisition deduction for the transfer (except trading stock) and makes the receiving corporation inherit the transferring corporation’s cost base on capital gains rules (s 15(2)–(3)).\n - For liabilities, receiving corporations are not assessable on assumption of liabilities, but future tax treatment is worked out as if the receiving corporation had given/received the same consideration the transferring corporation had (s 16(2)–(3)).\n - Specific adjustments for securities, trading stock, partly written‑off debts, bad‑debt deductions, tax‑loss continuity and CGT roll‑over relief are provided so the internal transfers do not trigger unintended taxable events or deny deductions unexpectedly (see s 17, s 18, s 19, s 21, s 22, s 26C, and related subsections).\n - Exemption from interest withholding tax for certain transferred liabilities where pre‑conditions hold (s 23).\n - Continuity rules for partnership interests (transfer does not break partnership continuity) (s 27).\n\n- Why it matters practically\n - Removes legal and tax frictions that can prevent or penalise internal group reorganisations after an ADI licence is granted. That reduces transactional friction (consents, registration taxes, immediate tax liabilities) when a foreign bank reorganises its Australian businesses (s 6–7, s 9–10, s 15–19).\n - Concentrates decision power in the Treasurer (and APRA by delegation) about which transfers qualify (s 7(6)(a), s 12). That creates a single gatekeeper for eligibility.\n\nAnalysis: claimed purpose and trade‑offs\n\n- Claimed purpose\n - The Act states its object is to \"facilitate\" transfers of assets and liabilities for the \"proper organisation\" of the ADI group's Australian activities after an ADI authority is granted (s 6). It therefore removes or modifies legal and tax barriers for a specific category of cross‑border banking restructures.\n\n- Who pays and who benefits\n - Primary beneficiaries: the eligible foreign ADIs and specified subsidiaries that can move assets and liabilities without triggering tax or registration costs or needing third‑party consents (s 6–7, s 10, s 9).\n - Potential costs: Commonwealth and State/Territory revenue from taxes/fees that are expressly exempted for these transfers (s 10); administrative cost to Treasury and APRA of deciding which transfers are \"reasonably required\" (s 7(6)(a), s 12); and complexity for tax administration because the Act carves out exceptions across multiple tax provisions (Part 3).\n\n- Incentives and likely behavioural effects\n - Lowers the tax and regulatory cost of internal restructuring for eligible foreign ADIs, which increases the likelihood that multinational banking groups will centralise or reorganise Australian operations (s 15–19).\n - By making tax outcomes neutral (so the receiving entity inherits cost base, bad‑debt and trading‑stock positions are preserved), the law reduces incentives to avoid tax or accelerate tax timing purely because of the transfer mechanics; but it also makes transfers an attractive tool for operational reorganisation.\n\n- Trade‑offs and risks\n - Concentrated benefit: the statutory package is narrowly targeted to eligible foreign ADIs and tightly patterned transfers (s 3–5, s 7). That concentrates the fiscal and compliance advantage in a defined class of entities.\n - Revenue risk: exemptions from certain taxes and tailored income‑tax rules will reduce tax or delay revenue collection for the Commonwealth and possibly States/Territories (s 10, Part 3). The Act mitigates this by limiting application with eligibility tests and Treasurer approval (s 7(6)).\n - Administrative discretion: the Treasurer’s written determination (delegateable to APRA) is the gating condition; that concentrates significant discretion in an executive decision and creates operational risk around timing and criteria (s 7(6)(a), s 12).\n - Complexity and compliance burden: affected entities must satisfy eligibility tests, give prescribed notices, comply with cross‑referenced tax calculations and document that transfers are \"reasonably required\" for organisation of activities — this will require tax and legal work to map the transfer to many income‑tax provisions (Part 3, notably s 14A, s 15–19, s 22, s 26C).\n - Interaction with State property registration: the Act requires the transferring corporation to give notice to the registrar if State/Territory law requires registration; but the Act also allows transfers to be effective without third‑party consents (s 7(6)(b)(ii), s 9). That creates a need for careful coordination across federal and state processes.\n\n- Implementation cost and opportunity cost\n - Implementation: Treasury/APRA need processes to assess and record written determinations, and the ATO must implement multiple carve‑ins and carve‑outs of its ordinary rules for qualifying transfers (s 7(6), Part 3). Entities must assemble evidence of eligibility and the \"reasonably required\" test.\n - Opportunity cost: resources spent by government and the firms on these restructures are resources not used elsewhere; the Act shifts private choice (restructure timing/shape) by lowering the tax/regulatory cost of internal reorganisations.\n\nKey statutory touchpoints (short reference list)\n- Eligibility, scope and timing: s 3–7 (Treasurer determination, 6‑month notice rules, transfer deadline requirement) \n- Consent and registration overrides: s 9–10 \n- Constitutional compensation: s 11 (acquisition on just terms) \n- Delegation to APRA: s 12 \n- Income‑tax modifications by transfer type (assets, liabilities, securities, trading stock, bad debts, tax losses, interest withholding): Part 3 (notably s 14A, s 15–19, s 21–23, s 26C) \n- Partnership continuity: s 27\n\nPractical takeaways for a business or adviser\n- Check eligibility early: the Act is limited to specific ADI categories and has time/notice requirements (s 3–7). \n- Treasurer/APRA decision is central: get the written determination or delegate process aligned before moving assets (s 7(6)(a), s 12). \n- Prepare tax mapping: transfers affect many income‑tax rules; taxpayers should expect to inherit cost bases and to apply the Act’s bespoke tax rules instead of the usual tax outcomes (s 15–19, s 22, s 26C). \n- Document interjurisdictional steps: if state registration would otherwise be required, provide the prescribed notice and reconcile the federal override with state registration practice (s 7(6)(b)(ii), s 9)."},"issue_detection":{"absurdities":[{"type":"other","section":"s 3 (definition of 'asset'), para (e)","severity":"low","reasoning":"A definition that lists paragraphs (a), (b), (c), (e) with no (d) is a drafting error that creates interpretive uncertainty. While courts would likely treat it as a mere mislabelling, it technically leaves open whether a missing category was intentionally omitted or accidentally deleted. This appears throughout each repeated iteration of the definition in the document.","confidence":0.95,"description":"The definition of 'asset' skips paragraph (d) entirely, jumping from paragraph (c) to paragraph (e). There is no paragraph (d) in the definition, creating a permanent gap in the statutory numbering that has no explanation or cross-reference."},{"type":"impossible_compliance","section":"s 7(6)(a) and s 6","severity":"high","reasoning":"Sections 7(2) and 7(4) explicitly permit transfers to a foreign corporation that is an eligible foreign ADI. The eligible foreign ADI already holds an ADI authority. The condition in 7(6)(a) refers to the transfer being required 'following the grant of an ADI authority to the receiving corporation,' implying a future grant. Where the receiving corporation is an already-authorised eligible foreign ADI, the condition makes no temporal sense — there is no future grant to follow. The Treasurer would have to determine something that is either already past or impossible, creating a latent impossibility in the gateway condition.","confidence":0.78,"description":"Section 7(6)(a) requires the Treasurer to determine that the transfer is 'reasonably required for the proper organisation of the activities in Australia of the transferring corporation and of the receiving corporation, following the grant of an ADI authority to the receiving corporation.' However, s 6 states the object is to facilitate transfers to the foreign corporation or its subsidiaries. Where the receiving corporation is the foreign corporation itself (as permitted under s 7(2) and s 7(4)), it may never be 'granted an ADI authority' in Australia (being a foreign ADI), making the precondition in s 7(6)(a) logically incapable of fulfilment in those scenarios."},{"type":"impossible_compliance","section":"s 7(6)(b) and s 7(7)(a)","severity":"medium","reasoning":"The notice under s 7(6)(b) is only meaningful if the Act applies, which itself depends on the Treasurer's determination under s 7(6)(a). But the determination has no required timeline. If the Treasurer delays beyond 6 months from commencement, the transferring corporation cannot give timely notice of a proposed transfer in respect of a corporation that already held authority on commencement, because the window has closed. The Act provides no solution to this sequencing problem.","confidence":0.72,"description":"Where a receiving corporation already held an ADI authority on commencement of the Act, the prescribed period for giving notice of a proposed transfer is 6 months from the commencement date. However, the Act also requires the Treasurer to first determine under s 7(6)(a) that the transfer is reasonably required. No mechanism or timeframe is specified for the Treasurer's determination, meaning the 6-month notice window could expire before the Treasurer acts, rendering compliance with s 7(6)(b) impossible without a prior determination."},{"type":"circular_definition","section":"s 14(2)","severity":"low","reasoning":"Treating a modifying provision as part of the Act it modifies creates a logical circularity. If Part 3 is a provision of the ITAA 1936, then s 14(1)'s interpretive rule (that expressions have the same meaning as in the ITAA 1936) would also apply to Part 3 as a provision of that Act, creating a recursive interpretive loop. Courts would likely resolve this purposively, but the drafting is logically inelegant.","confidence":0.65,"description":"Section 14(2) provides that the provisions of Part 3 are to be 'treated as if they were provisions of the Income Tax Assessment Act 1936' for the purposes of applying that Act to a taxpayer. This creates a self-referential loop: Part 3 modifies how the ITAA 1936 applies, but is simultaneously deemed to be part of the ITAA 1936, meaning it could theoretically modify itself through the modification mechanism it establishes."},{"type":"other","section":"s 14A(5)","severity":"medium","reasoning":"A statutory list that begins at (b) without any (a) is a clear drafting anomaly. Unlike the asset definition where (d) is merely skipped mid-list, here the very first entry is missing. This could indicate a provision was repealed without renumbering, leaving a gap that obscures the legislative history and potentially creates uncertainty about whether any exclusion was intended at (a).","confidence":0.92,"description":"Section 14A(5) lists provisions whose operation is not modified by s 14A, but the list begins at paragraph (b) with section 23 and paragraph (c) with Division 8. There is no paragraph (a), creating an unexplained gap in the list that raises the question of whether a provision was intentionally or accidentally omitted."},{"type":"impossible_compliance","section":"s 22(4)","severity":"high","reasoning":"A formula that cannot be read cannot be applied. While this is a document reproduction issue rather than a drafting flaw in the original Act, the result is that s 22(4) is functionally void as presented. Any party attempting to calculate the maximum deduction cap has no legislative basis to do so from this text.","confidence":0.98,"description":"Section 22(4) purports to set a maximum deduction for the receiving corporation for a partly written-off debt using a formula, but the formula itself is represented by a missing image placeholder ('image.002.png'). The operative provision of the section is therefore unascertainable on the face of the document, rendering the subsection incapable of application."},{"type":"impossible_compliance","section":"s 7(6)(c)","severity":"high","reasoning":"A hard deadline of 1 July 2006 as a precondition for the Act's application means the Act is permanently spent in respect of its core transfer-facilitation function. All of Part 2 (ss 7-12) and Part 3 (the tax relief provisions) are predicated on the Act 'applying' to a transfer under s 7. Since no transfer can now meet s 7(6)(c), none of these provisions can be engaged. The Act is a legislative zombie — formally alive but functionally dead for its primary purpose.","confidence":0.99,"description":"Section 7(6)(c) requires that 'the transfer is effected before 1 July 2006.' Since this Act has been in force since 1993 and the deadline has long passed, no transfer can now satisfy this condition. The Act therefore cannot apply to any future transfer, yet it remains on the statute books with no sunset or repeal mechanism, making the entire operative scheme of ss 7(2)-(5) permanently incapable of engagement."},{"type":"other","section":"s 9","severity":"medium","reasoning":"Section 9's chapeau does not incorporate the s 7 application conditions. Unlike ss 15-27 which are triggered by 'a transfer to which this Act applies,' s 9 simply requires a financial corporation proposing to transfer to another financial corporation. This broader drafting could permit the consent-override mechanism to operate for transfers that would not otherwise attract the Act's benefits, creating an unintended expansion of the provision's scope beyond the policy purpose in s 6.","confidence":0.7,"description":"Section 9 applies to 'a financial corporation proposing to transfer an asset or liability to another financial corporation' without limiting itself to transfers to which this Act applies under s 7. Read literally, s 9 could override third-party consent requirements for any inter-financial-corporation transfer, well beyond the limited categories in s 7, and regardless of the s 7(6)(c) deadline."},{"type":"other","section":"s 26C(1)(c)","severity":"medium","reasoning":"Anchoring a temporal condition to a 'former section' that has been repealed requires external research into the legislative history to determine when that former section commenced. This is not apparent on the face of the Act and creates interpretive difficulty, particularly as the Act does not define or cross-reference when 'former section 26' commenced. The same issue appears in s 22(3)(c) which anchors relief to 'the income year in which this section (as originally enacted) commenced.'","confidence":0.8,"description":"Section 26C(1)(c) restricts the easing of tax loss deduction restrictions to loss years that are 'the income year in which former section 26 of this Act commenced or an earlier income year.' The reference to 'former section 26' is a reference to a repealed provision, making the temporal anchor of the relief dependent on ascertaining the commencement date of a section that no longer exists in the Act."},{"type":"other","section":"Entire document structure","severity":"high","reasoning":"Substantive legislative text that appears multiple times in identical form creates a risk of interpretive conflict if any version were ever to differ. It also makes it impossible to determine the document's true structure — for instance, 'Division 1 Preliminary' appears as a heading after Part 3 has apparently concluded, suggesting a formatting collapse. While likely a document reproduction error, in a legal document such structural incoherence is a significant flaw.","confidence":0.97,"description":"The entire substantive content of the Act (Parts 1-3 with all sections) is duplicated three times in the document. The text of Parts 1 and 2, and then Part 3, each appear in full at least twice, interspersed with section headings that repeat identically. This creates profound uncertainty about which version of a section is operative and whether any amendments were made between iterations."}],"contradictions":[{"severity":"medium","section_a":"s 6 (Object of Act)","section_b":"s 7(3)","confidence":0.75,"description":"Section 6 states the object is to facilitate transfers 'to the foreign corporation or one of the subsidiaries referred to in paragraph (b)' — i.e., to the eligible foreign ADI parent or its subsidiaries that are newly established local ADIs. However, s 7(3) permits transfers from an eligible local ADI to an eligible foreign ADI that is a subsidiary of the same parent — a lateral transfer between siblings, not upward to the parent foreign corporation. This sibling transfer is not captured by the stated object in s 6."},{"severity":"high","section_a":"s 7(6)(a) (Treasurer determination — 'following the grant of an ADI authority to the receiving corporation')","section_b":"s 7(2) and s 7(4) (transfers to eligible foreign ADI)","confidence":0.77,"description":"Sections 7(2) and 7(4) permit the transferring corporation to transfer to the foreign corporation that is itself an eligible foreign ADI. But s 7(6)(a) conditions the Act's application on the Treasurer determining the transfer is required 'following the grant of an ADI authority to the receiving corporation.' An eligible foreign ADI has already been granted its authority; there is no future grant event. The gateway condition in s 7(6)(a) is expressed in future-tense terms that are inconsistent with transfers to already-authorised entities under ss 7(2) and 7(4)."},{"severity":"low","section_a":"s 10 (Exemption from taxes — excludes ITAA 1936 and ITAA 1997)","section_b":"Part 3 (Income tax relief for transfers)","confidence":0.6,"description":"Section 10 expressly excludes the ITAA 1936 and ITAA 1997 from the tax exemption it provides, meaning income tax on transfers is not exempted by s 10. Part 3 then separately provides income tax relief through deemed non-occurrence of transfers and cost base inheritance. Read together, there is a structural tension: the general exemption provision explicitly withholds income tax relief, while Part 3 provides that relief through a different mechanism. This is not strictly contradictory but creates a misleading implication in s 10 that income tax is not addressed, when in fact it is addressed — just elsewhere — potentially causing a reader to miss the relief entirely."},{"severity":"medium","section_a":"s 15(1) (transferring corporation treated as if transfer had not occurred)","section_b":"s 15(3) (receiving corporation inherits transferring corporation's cost base)","confidence":0.68,"description":"Section 15(1) deems the transfer not to have occurred for the transferring corporation's income tax purposes. Section 15(3) then calculates the receiving corporation's deemed acquisition cost by reference to 'what would have been the asset's cost base to the transferring corporation for the purposes of working out under the [ITAA 1997] whether the transferring corporation made a capital gain from the transfer.' But if the transfer is deemed not to have occurred under s 15(1), there is no CGT event from which a capital gain could be computed, making the reference point in s 15(3) — the cost base 'for the purposes of working out whether the transferring corporation made a capital gain from the transfer' — logically vacuous, as that calculation is notional rather than real."},{"severity":"medium","section_a":"s 14A(2) (modifies all Part 3 provisions except Division 1)","section_b":"s 14A(5) (carves out section 23 and Division 8 from modification)","confidence":0.7,"description":"Section 14A(2) states that s 14A modifies 'a provision of this Part (except this Division)' — i.e., all of Part 3 except Division 1. Section 14A(5) then separately carves out s 23 and Division 8 from the modification. The carve-out in s 14A(5) is redundant if Division 8 is already excluded from 'this Division' — but Division 8 is not Division 1, making the carve-out in (5)(c) necessary but also potentially inconsistent with the scope of (2). More significantly, s 14A(5) has no paragraph (a), suggesting an additional exclusion was removed without renumbering, which could mean a provision formerly excluded is now inadvertently modified."},{"severity":"medium","section_a":"s 9 (no consent required from third parties)","section_b":"s 11(1) (compensation payable for acquisition of property without just terms)","confidence":0.72,"description":"Section 9 removes the need to obtain third-party consents before effecting a transfer. Section 11(1) then provides compensation where a third party suffers an acquisition of property otherwise than on just terms as a result of the transfer. These provisions operate in tension: s 9 extinguishes procedural protections for third parties (consent rights), while s 11 acknowledges those third parties may suffer compensable harm. The compensation mechanism is potentially inadequate because s 11 only covers acquisition of 'property' under s 51(xxxi) of the Constitution, whereas s 9 can override contractual consent rights that are not necessarily 'property' in the constitutional sense, leaving some third-party rights overridden with no compensation remedy."}]},"summary":{"complexity_score":9,"scope_assessment":{"changed":false,"description":"The Act's scope appears consistent with its stated object — facilitating asset and liability transfers for foreign banking groups reorganising their Australian operations following the grant of ADI authorities. The income tax relief provisions in Part 3 are detailed but are a logical and necessary extension of the core facilitation purpose: without them, the stamp duty and third-party consent exemptions in Part 2 alone would be insufficient to make restructuring viable. The hard deadline of 1 July 2006 also confirms the Act was always intended as a time-limited transitional measure rather than an ongoing general framework."},"complexity_factors":["Extensive cross-referencing to two separate income tax statutes (Income Tax Assessment Act 1936 and 1997), requiring the reader to understand provisions of both Acts simultaneously","Multiple layered eligibility categories (eligible foreign ADI, eligible local ADI, newly established local ADI, eligible money market corporation, eligible subsidiary) each with their own distinct date-based criteria","Interaction with the consolidated tax group regime (including the 'single entity rule', 'entry history rule', and 'head company tax cost setting rule') which themselves are highly complex tax concepts","Seven distinct categories of income tax relief (general asset transfers, general liability transfers, securities, capital gains/losses, trading stock, bad debts, interest withholding tax, tax losses) each with different rules","The Act modifies the operation of other Acts (rather than standing alone), meaning its effect cannot be understood without reading multiple pieces of legislation","References to former/repealed provisions of both income tax Acts, requiring knowledge of historical tax law","Constitutional law references (paragraphs 51(xx) and 51(xxxi) of the Constitution) which define who the Act applies to","Complex interplay between MEC groups (multiple entry consolidated groups), consolidated groups, head companies, and subsidiary members in the tax relief provisions","Date-specific application rules tied to when ADI authorities were granted create multiple eligibility scenarios","The Act appears to have duplicated sections in the provided text, adding structural confusion to an already intricate document"],"plain_english_summary":"This Act allowed eligible foreign ADIs and related Australian banking companies (including old subsidiaries and certain money‑market firms) to transfer assets and liabilities within a corporate group without stamp duty, other state taxes or third‑party consents, while preserving income‑tax attributes and deferring capital gains. Transfers required regulator approval and had to be completed by 1 July 2006, so the measure is largely historical, though its tax consequences for past transfers still matter."},"kimi_summary":{"_metrics":{"completionTokens":705},"content_quality":"ok","complexity_score":8,"scope_assessment":{"changed":true,"description":"The Act has grown significantly beyond its original 1993 scope. The original Act was a temporary measure for foreign bank restructurings around 1993-2006. However, multiple amendments have layered in complex tax provisions (Part 3, added later) dealing with consolidated groups, MEC groups, tax losses, and detailed modifications to the Income Tax Assessment Acts. The legislation now functions as a permanent part of Australia's tax consolidation framework rather than just a temporary restructuring tool."},"complexity_factors":["Multiple overlapping definitions of 'eligible' entities (eligible foreign ADI, eligible local ADI, eligible money market corporation, eligible subsidiary) with date-based cutoffs","Extensive cross-referencing to other Acts: Banking Act 1959, Corporations Act 2001, Income Tax Assessment Act 1936 and 1997, Financial Sector (Collection of Data) Act 2001","Complex conditional logic in section 7 with five different scenarios for when the Act applies, all subject to a six-part test in subsection (6)","Part 3 contains intricate tax modifications including: roll-over relief for capital gains, adjustments to cost bases for securities, special rules for trading stock, bad debts, interest withholding tax, and tax losses","Section 14A introduces complex modifications for consolidated groups involving 'single entity rule', 'entry history rule', and 'head company tax cost setting rule'","Sunset clause: transfers must be effected before 1 July 2006 (now expired, making the Act largely historical)","Delegation provisions with three levels of APRA delegation"],"plain_english_summary":"This Act makes it easier for foreign banks to reorganise their Australian operations by transferring assets and liabilities between related companies without triggering tax bills or needing third-party approvals.\n\n**What it does:**\n- **Facilitates corporate restructures**: Allows certain financial corporations (mostly foreign banks and their subsidiaries) to move assets and liabilities around their corporate group without normal legal obstacles.\n- **Tax relief**: When assets or liabilities are transferred under this Act, the transferring company doesn't pay tax on any gains, and the receiving company inherits the original cost base (so no tax is triggered by the transfer itself).\n- **Bypasses consent requirements**: Transfers can proceed without needing approval from third parties who might otherwise have a say (like creditors or contract counterparties).\n- **Exempts stamp duty and fees**: No state or federal taxes or fees apply to these transfers.\n- **Protects property rights**: If a transfer would unfairly take someone's property, compensation must be paid.\n\n**Who it affects:**\n- Foreign banks that have been granted an \"ADI authority\" (permission to operate as an authorised deposit-taking institution in Australia).\n- Their Australian subsidiaries, including \"eligible local ADIs\" (Australian-incorporated banks) and \"money market corporations\" (short-term finance companies).\n- The transfers must be approved by the Treasurer (or delegated to APRA) and completed by 1 July 2006.\n\n**Why it matters:**\nThis was designed to help foreign banks streamline their Australian operations—particularly when restructuring after receiving banking licences—without being hit with massive tax bills or getting bogged down in contractual red tape. It's a specialised piece of legislation that creates a \"safe harbour\" for specific corporate reorganisations in the financial sector."}},"importantCases":[],"_links":{"self":"/api/acts/financial-corporations-transfer-of-assets-and-liabilities-act-1993","history":"/api/acts/financial-corporations-transfer-of-assets-and-liabilities-act-1993/history","analysis":"/api/acts/financial-corporations-transfer-of-assets-and-liabilities-act-1993/analysis","conflicts":"/api/acts/financial-corporations-transfer-of-assets-and-liabilities-act-1993/conflicts","importantCases":"/api/acts/financial-corporations-transfer-of-assets-and-liabilities-act-1993/important-cases","documents":"/api/acts/financial-corporations-transfer-of-assets-and-liabilities-act-1993/documents"}}