{"id":"C2004A02489","name":"Income Tax (Diverted Income) Act 1981","slug":"income-tax-diverted-income-act-1981","collection":"act","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":"112 of 1981","makingDate":null,"administeringDepartment":null,"currentVersion":{"id":7007,"registerId":"commonwealth-C2004A02489-current","compilationNumber":null,"startDate":"2026-03-30","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Income Tax (Diverted Income) Act 1981","content":"---\nmeta-content-style-type: text/css\nmeta-content-type: application/xhtml+xml; charset=utf-8\n---\n\n?xml version=\"1.0\" encoding=\"utf-8\" standalone=\"no\"?>\n\n![](image.001.png)\n\n \n\n \n\n \n\n \n\n \n\n \n\nIncome Tax (Diverted Income) Act 1981\n\n \n\nNo. 112, 1981\n\n \n\n \n\n \n\n \n\n \n\nAn Act to impose tax on certain income derived under tax avoidance schemes\n\n \n\n \n\n \n\nContents\n\n1 Short title\n\n2 Commencement\n\n3 Interpretation\n\n4 Incorporation\n\n5 Imposition of tax\n\n6 Rate of tax\n\n \n\n![](image.002.png)\n\n \n\n \n\nIncome Tax (Diverted Income) Act 1981\n\nNo. 112, 1981\n\n \n\n \n\n \n\nAn Act to impose tax on certain income derived under tax avoidance schemes\n\n[Assented to 24 June 1981]\n\nThe Parliament of Australia enacts:\n\n##### 1  Short title\n\n  This Act may be cited as the Income Tax (Diverted Income) Act 1981.\n\n##### 2  Commencement\n\n  This Act shall come into operation on the day on which it receives the Royal Assent.\n\n##### 3  Interpretation\n\n  In this Act, Assessment Act means the Income Tax Assessment Act 1936.\n\n##### 4  Incorporation\n\n  The Assessment Act is incorporated, and shall be read as one, with this Act.\n\n##### 5  Imposition of tax\n\n  The tax known as income tax, to the extent that that tax is payable in accordance with Division 9C of Part III of the Assessment Act, is imposed by this Act in respect of the financial year that commenced on 1 July 1979 and in respect of each subsequent financial year.\n\n##### 6  Rate of tax\n\n  The rate of tax imposed by this Act in respect of a financial year is the rate of tax payable, in respect of that financial year, by a trustee of a trust estate in respect of the net income of the trust estate in respect of which the trustee is liable, in pursuance of section 99A of the Assessment Act, to be assessed to pay tax.\n\n \n","sortOrder":0}],"analysis":{"kimi_summary":{"content_quality":"ok","complexity_score":2,"scope_assessment":{"changed":false,"description":"This legislation remains tightly focused on its original purpose of imposing tax on diverted income. It has not expanded beyond its initial scope as a machinery provision that gives legal effect to the diverted income tax rules contained in the Income Tax Assessment Act 1936. The Act operates exactly as intended: as a short, technical statute that imposes (rather than merely assesses) the tax on diverted income."},"complexity_factors":["Extremely short statute: only 6 sections spanning approximately 1 page","Minimal defined terms: only 1 definition ('Assessment Act') in section 3","Heavy reliance on external legislation: the entire operation depends on Division 9C of Part III of the Income Tax Assessment Act 1936, which is not reproduced in this Act","No conditional logic or exceptions within the Act itself","Simple rate structure: single rate reference to section 99A of the Assessment Act","No cross-references between sections of this Act itself"],"plain_english_summary":"This law imposes a special tax on income that people or companies have tried to hide or redirect through tax avoidance schemes. It works as a 'backstop' to catch money that has been diverted away from normal income tax rules.\n\n**What it does:**\n- Creates a specific tax called \"diverted income tax\" that applies when someone uses artificial arrangements to avoid paying normal income tax\n- The tax is calculated at the highest personal tax rate (the same rate that trustees pay on trust income under section 99A of the Income Tax Assessment Act 1936)\n- It applies to financial years starting from 1 July 1979 onwards\n\n**Who it affects:**\n- Taxpayers who enter into schemes designed to divert income away from themselves or their businesses to avoid tax\n- The Australian Taxation Office, which uses this law to impose additional tax on diverted income\n\n**Why it matters:**\n- This is a **penalty-style tax** designed to make tax avoidance schemes unprofitable\n- By taxing diverted income at the highest marginal rate, it removes the financial benefit of complex tax avoidance structures\n- It operates alongside the main Income Tax Assessment Act 1936 (which it references and incorporates), specifically targeting Division 9C of Part III of that Act\n\n**How it works in practice:**\nThe Act itself is very short because it relies heavily on the main Income Tax Assessment Act 1936. It essentially says: \"For income that falls under the diverted income rules in the main tax law, we impose a tax at the top trustee rate.\""},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"},"flash_summary":{"complexity_score":5,"scope_assessment":{"changed":false,"description":"This Act is narrowly framed to impose the income tax charge tied to Division 9C of the Income Tax Assessment Act 1936 from the 1979–80 financial year onward. It does not, on its face, expand beyond that original, targeted purpose: the substantive tests and rates are supplied by the incorporated Assessment Act. Any substantive broadening or narrowing of scope would arise from amendments to the Assessment Act’s Division 9C or s99A, not from this Act itself. Therefore the statutory scope of this instrument has not changed beyond its original, narrowly focused purpose."},"complexity_factors":["Very short Act: 6 sections (including short title and commencement).","1 defined term in this Act: ‘Assessment Act’ (s3).","Incorporation by reference of the Income Tax Assessment Act 1936 (s4) — substantive rules live in another, larger statute.","Direct cross-reference to Division 9C of Part III of the Assessment Act to determine when tax is payable (s5).","Direct cross-reference to section 99A of the Assessment Act to determine the applicable rate (s6).","Applies from a specified historical start date (financial year commencing 1 July 1979), which is an unconditional temporal trigger (s5).","Operational complexity depends on the complexity of the incorporated provisions (Division 9C and s99A), which are fact‑intensive and can generate disputes. "],"plain_english_summary":"**What this law does (mechanically)**\n\n- This short Act makes a specific tax charge operate in Australia: it imposes income tax on amounts caught by Division 9C of Part III of the Income Tax Assessment Act 1936 (the “Assessment Act”). (s5)\n- The Act incorporates the Assessment Act so the rules in the 1936 Act apply together with this Act. (s3–s4)\n- The tax applies for the financial year that began 1 July 1979 and for every financial year after that. (s5)\n- The rate of tax that applies under this Act is the trustee tax rate that would apply under section 99A of the Assessment Act to the net income of a trust estate. In other words, where Division 9C bites, the tax is charged at the trustee rate set out in s99A. (s6)\n\n**Who is affected**\n\n- Trustees and persons involved with trusts and arrangements that are caught by Division 9C of the Assessment Act are the primary subjects of effect, because the Act causes the income identified by Division 9C to be taxed (s5).\n- Tax advisers, accountants and other parties involved in structuring distributions and arrangements around trusts are indirectly affected by the change in tax treatment.\n\n**Why it matters (official purpose, then practical implications)**\n\n- The Act’s stated role is to impose tax on income that is “diverted” into arrangements subject to Division 9C — that is, income derived under certain tax avoidance schemes (s5). This is an implementing, targeted measure: it does not itself set out the anti-avoidance rules but makes the Division 9C charge operational for the specified years by linking it into the income tax base.\n\nPractical implications and trade-offs (how it changes incentives and costs):\n\n- Who pays: where an arrangement falls within Division 9C, the tax is paid at the trustee rate under s99A (s6). The incidence therefore falls on the trustee or the person assessed under the Assessment Act provisions.\n- Behaviour change: making the Division 9C charge explicit reduces the tax advantage of routing income through the specific avoidance structures that Division 9C targets. That creates an incentive for taxpayers to avoid using those particular diversion techniques, reallocate income, or adopt alternative structures.\n- Compliance and administration: because the Act operates by reference to Division 9C and s99A of the 1936 Act (s3–s6), taxpayers and the Commissioner must apply the detailed, and potentially fact-intensive, rules in the Assessment Act. That raises compliance costs for taxpayers and advice costs for practitioners, and potential administrative and litigation costs for the tax authority where factual characterisation is contested.\n- Competition and private choice: the Act limits the scope for trust-based tax planning strategies covered by Division 9C. Businesses and individuals using trusts for allocation of income will face the risk that certain diversion arrangements will attract tax at the trustee rate, which may change the attractiveness of particular ownership or distribution arrangements.\n- Concentrated benefits/diffuse costs: the financial effect is concentrated on taxpayers who previously used the specific diversion schemes; the fiscal benefit (tax collected) is dispersed in public revenue. The Act itself centralises the decision about when tax applies around the existing Division 9C tests, so the Commissioner’s application of those tests can be a decisive factor in outcomes.\n\n**Where to look for the operative detail**\n\n- This Act is short and largely operates by reference: the substantive definitions, tests for when income is “diverted” and the mechanics of assessment are all in the Assessment Act (specifically Division 9C and s99A). To understand how the tax applies in practice you must read those provisions together with this Act (s3–s6)."}},"importantCases":[],"_links":{"self":"/api/acts/income-tax-diverted-income-act-1981","history":"/api/acts/income-tax-diverted-income-act-1981/history","analysis":"/api/acts/income-tax-diverted-income-act-1981/analysis","conflicts":"/api/acts/income-tax-diverted-income-act-1981/conflicts","importantCases":"/api/acts/income-tax-diverted-income-act-1981/important-cases","documents":"/api/acts/income-tax-diverted-income-act-1981/documents"}}