The income of a State/Territory body (an STB) is exempt from income tax unless section 24AN applies to the STB.
24AN Certain STBs not exempt from tax under this Division
Income derived by an STB is not exempt from income tax under this Division if, at the time that it is derived, the STB is an excluded STB.
Notes: 1. For the definition of excluded STB see section 24AT.
2. Even though an excluded STB is not exempt from income tax under this Division, it may still be exempt under another provision of this Act.
24AO First way in which a body can be an STB
A body is an STB if:
(a) it is a company limited solely by shares; and
(b) all the shares in it are beneficially owned by one or more government entities.
Note: For the definition of government entity see section 24AT. Note that an excluded STB is not a government entity.
24AP Second way in which a body can be an STB
A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation provides that it must distribute all of its profits (if any) only to one or more government entities; and
(d) if the legislation makes provision as to the way its net assets may be distributed if it is dissolved or wound up—the provision is that, if it is dissolved, all of its net assets (if any) must be distributed only to one or more government entities.
24AQ Third way in which a body can be an STB
A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation gives the power to appoint or dismiss its governing person or body only to one or more government entities.
24AR Fourth way in which a body can be an STB
A body is an STB if:
(a) it is established by State or Territory legislation; and
(b) it is not a company limited solely by shares; and
(c) the legislation gives the power to direct its governing person or body as to the conduct of its affairs only to one or more government entities.
24AS Fifth way in which a body can be an STB
A body is an STB if:
(a) it is not a company limited solely by shares; and
(b) it is not established by State or Territory legislation; and
(c) all the legal and beneficial interests (including, but not limited to, interests as to income, profits, dividends, capital and distributions of capital) in it are held only by one or more government entities; and
(d) all the rights or powers (if any) to vote, appoint or dismiss its governing person or body and direct its governing person or body as to the conduct of its affairs are held only by one or more government entities.
24AT What do excluded STB, government entity and Territory mean?
In this Division:
excluded STB means an STB that:
(a) at a particular time, is prescribed as an excluded STB in relation to that time; or
(b) is a municipal corporation or other local governing body (within the meaning of section 50‑25 of the Income Tax Assessment Act 1997); or
(c) is a public educational institution to which any of paragraphs 50‑55(1)(a) to (c) of the Income Tax Assessment Act 1997 applies; or
(d) is a public hospital to which any of paragraphs 50‑55(1)(a) to (c) of the Income Tax Assessment Act 1997 applies; or
(e) is a superannuation fund.
government entity means:
(a) a State; or
(b) a Territory; or
(ba) a municipal corporation or other local governing body (within the meaning of section 50‑25 of the Income Tax Assessment Act 1997); or
Note: The effect of this paragraph is that some bodies owned or controlled by a municipal corporation or other local governing body may be an STB even though the municipal corporation or other local governing body is an excluded STB.
(c) another STB that is not an excluded STB.
Territory means the Northern Territory or the Australian Capital Territory.
24AU Governor, Minister and Department Head taken to be a government entity
For the purposes of sections 24AQ, 24AR and 24AS, if the power to appoint, dismiss or direct the governing body is given to, or is held by:
(a) a Governor of a State; or
(b) a Minister of the Crown of a State; or
(c) a Minister of a Territory; or
(d) the head of a Department of a State or a Territory; or
(e) any combination of paragraphs (a) to (d);
the power is taken to be given to, or held by, a government entity.
24AV Regulations prescribing excluded STBs
States and Territories to consent to STBs being excluded STBs
(1) The regulations may prescribe that an STB is an excluded STB only if all States and Territories consent to the STB being so prescribed.
Retrospective application of regulations prescribing excluded STBs
(2) Subsection 12(2) (retrospective application of legislative instruments) of the Legislation Act 2003 does not apply to a regulation prescribing an STB as an excluded STB.
Subdivision B—Body ceasing to be an STB
24AW Body ceasing to be an STB
If a body ceases to be an STB in a year of income (the cessation year), this Act applies to the body as if:
(a) the cessation were a change which requires a company to calculate its taxable income and tax loss under Subdivision 165‑B of the Income Tax Assessment Act 1997; and
(b) the references in that Subdivision to “company” were references to “body”; and
(c) if the body is not a company—there were no further requirement for the body to calculate its taxable income for the year of income under that Subdivision; and
(d) the amount of any notional loss of the body calculated under section 165‑50 of that Act for the period before the cessation were nil; and
(e) the body’s deductions for tax losses were attributed under section 165‑55 of that Act to the period before the cessation and not to any other period; and
(f) those deductions were taken not to be full year deductions under section 165‑55 of that Act; and
(g) the application of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 were modified, for the purposes of that Subdivision, in accordance with section 24AX of this Act.
24AX Special provisions relating to capital gains and losses
Period after cessation date—prior net capital losses to be disregarded
(1) In determining if an amount is to be included in the assessable income of the body under Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 for a period that occurred after the cessation, any net capital losses incurred before the cessation are to be disregarded.
Special cases where net capital gain before cessation and net capital loss after cessation
(2) Subsections (3) and (4) apply if:
(a) a net capital gain accrued in the period before the cessation; and
(b) if the period from the cessation until the end of the year of income were treated as a year of income—a net capital loss would have accrued in that period.
Special case 1—gain exceeds loss
(3) If this subsection applies and the net capital gain exceeds the net capital loss:
(a) the amount that is to be included in the assessable income of the body for the period that occurred before the cessation as a result of the net capital gain accruing to the body is taken to be the amount by which the net capital gain exceeds the net capital loss; and
(b) no net capital gain is taken to have accrued, and no net capital loss is taken to have been incurred, in any period in the cessation year after the cessation; and
(c) in determining if a net capital gain accrued to, or a net capital loss was incurred by, the body for the year following the cessation year, no net capital loss is taken to have been incurred by the body in the cessation year.
Special case 2—loss equal to or exceeds gain
(4) If this subsection applies and the net capital gain does not exceed the net capital loss:
(a) no amount is to be included in the assessable income of the body for any period in the cessation year as a result of a net capital gain accruing to the body; and
(b) in determining if a net capital gain accrued to, or a net capital loss was incurred by, the body for the year following the cessation year, the net capital loss that the body incurred in the cessation year is taken to be the amount (if any) by which the net capital loss exceeds the net capital gain.
24AY Losses from STB years not carried forward
(1) If a body is an STB on the last day of a year of income in which it incurs a tax loss, the tax loss is not allowable as a deduction from the body’s assessable income of a later year of income unless the body is an STB on the first day of that later year of income.
Note: This section prevents losses from years prior to the cessation year from being carried forward to years after the cessation year.
(2) This section only applies to a tax loss incurred in the 1995‑96 year of income or a later year of income.
24AYA Effect of unfunded superannuation liabilities
(1) This section applies to a deduction under section 290‑60 of the Income Tax Assessment Act 1997 in respect of a contribution made in relation to a person who was an employee of a prescribed excluded STB when it ceased to be an STB.
(2) A deduction to which this section applies is not allowable to the body for any year of income unless the requirements of subsections (3) and (4) are complied with.
(3) For the deduction to be allowable, the body must obtain a certificate by an authorised actuary stating the actuarial value, as at the time the body ceases to be an STB, of liabilities of the STB to provide superannuation benefits for, or for SIS dependants of, employees of the body, where the liabilities:
(a) accrued after 30 June 1995 and before the time when the body ceased to be an STB; and
(b) were, according to actuarial principles, unfunded at that time.
(4) The certificate must be in a form approved in writing by the Commissioner. The body must obtain the certificate:
(a) before the date of lodgment of its return of income of the year of income in which the body ceased to be an STB; or
(b) within such further time as the Commissioner allows.
(5) If the body obtains the certificate, a deduction to which this section applies is nevertheless not allowable for a year of income if the sum of all deductions to which this section applies for the year of income is less than or equal to the unfunded liability limit (see subsection (6)) for the year of income.
(6) If the sum is greater than that limit, so much of the deduction as is worked out using the following formula is not allowable:
Start formula start fraction Amount of deduction over Sum of all deductions to which this section applies for the year of income end fraction times Unfunded liability limit for the year of income end formula
where:
Unfunded liability limit for a year of income is:
(a) if the year of income is the one in which the body ceases to be an STB—the actuarial value of the liabilities set out in the actuary’s certificate; or
(b) in any other case—that actuarial value as reduced by the total amount of deductions to which this section applies that, because of subsection (5), have not been allowable to the body for all previous years of income.
(7) Expressions used in this section that are also used in section 290‑60 of the Income Tax Assessment Act 1997 have the same respective meanings as in that section.
24AZ Meaning of period and prescribed excluded STB
In this Subdivision:
period means any of the periods into which the cessation year is divided under section 165‑45 of the Income Tax Assessment Act 1997.
prescribed excluded STB means an STB that is an excluded STB as a result of regulations made for the purposes of paragraph (a) of the definition of excluded STB in section 24AT.
Division 2—Income
Subdivision A—Assessable income generally
25A Assessable income to include certain profits
(1A) This section does not apply in respect of the sale of property acquired on or after 20 September 1985.
(1B) This section does not apply to a profit arising in the 1997‑98 year of income or a later year of income from the carrying on or carrying out of a profit‑making undertaking or scheme, even if the undertaking or scheme was entered into, or began to be carried on or carried out, before the 1997‑98 year of income.
Note: Section 15‑15 (Profit‑making undertaking or plan) of the Income Tax Assessment Act 1997 deals with such a profit.
(1) The assessable income of a taxpayer shall include profit arising from the sale by the taxpayer of any property acquired by the taxpayer for the purpose of profit‑making by sale, or from the carrying on or carrying out of any profit‑making undertaking or scheme.
(2) Subject to subsection (3), where:
(a) after 23 August 1983, a taxpayer sold or sells property (in this subsection referred to as the relevant property) being:
(i) shares in a private company;
(ii) an interest in a partnership; or
(iii) an interest in a private trust estate; and
(b) at the time of sale of the relevant property:
(i) the company, partnership or trustee of the trust estate, as the case may be, held property that:
(A) was acquired for the purpose of profit‑making by sale by the company, partnership or trustee, as the case may be; and
(B) was not excepted property of the company, partnership or trust estate, as the case may be; or
(ii) the company, partnership or trustee of the trust estate, as the case may be, held an interest, through one or more interposed companies, partnerships or trusts, in property that:
(A) was acquired for the purpose of profit‑making by sale by another private company, partnership or trustee of a private trust estate; and
(B) was not excepted property of that other company, partnership or trust estate, as the case may be;
the taxpayer shall, for the purposes of the application of this Act (including any application of any other provision of this section), be deemed to have acquired the relevant property for the purpose of profit‑making by sale.
(3) Subsection (2) does not apply in relation to the sale by a taxpayer of property where the Commissioner, having regard to:
(a) the extent to which the assets of the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a), immediately before the time of sale, consisted of the property referred to in subparagraph (2)(b)(i) or the interest referred to in subparagraph (2)(b)(ii), as the case may be;
(b) the nature and extent, immediately before the time of sale, of the taxpayer’s control of the company, partnership or trust estate, as the case may be, referred to in paragraph (2)(a) including, in the case of a company, the nature and extent of the taxpayer’s shareholding in the company;
(c) the circumstances surrounding any other sale, whether or not by the taxpayer, of shares in the company, or an interest in the partnership or trust estate, as the case may be, referred to in paragraph (2)(a), being a sale at a time when the property of that company, partnership or trust estate included the property referred to in subparagraph (2)(b)(i) or the interest referred to in subparagraph (2)(b)(ii), as the case may be; and
(d) such other matters as the Commissioner considers relevant;
considers that it is not appropriate that that subsection should apply in relation to the sale of the property by the taxpayer.
(4) Where:
(a) a taxpayer acquired or acquires property, being shares in a company, for the purpose of profit‑making by sale; and
(b) after 23 August 1983:
(i) the company issued or issues other shares (in this subsection referred to as the bonus shares) to the taxpayer in satisfaction of a dividend (including an amount debited against an amount standing to the credit of a share premium account) payable to the taxpayer in respect of the shares referred to in paragraph (a); or
(ii) by reason that the taxpayer was the owner of the shares referred to in paragraph (a), the company issued or issues to the taxpayer rights to acquire other shares in the company;
the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the bonus shares or the rights, as the case may be, for the purpose of profit‑making by sale.
(5) Where, after 23 August 1983, property was or is acquired by a taxpayer as a result of a transfer in the prescribed manner by a person who acquired the property for the purpose of profit‑making by sale, the taxpayer shall, for the purposes of the application of this Act (including any other application of this subsection and any application of any other provision of this section), be deemed to have acquired the property for the purpose of profit‑making by sale.
(6) Where:
(a) after 23 August 1983, a taxpayer sold or sells property; and
(b) the property sold was:
(i) an interest in property, being property acquired by the taxpayer for the purpose of profit‑making by sale; or
(ii) property, or an interest in property, in which was merged an interest in property, being an interest acquired by the taxpayer for the purpose of profit‑making by sale;
the taxpayer shall, for the purposes of the application of this Act (including any application of any other provision of this section), be deemed to have acquired the property sold for the purpose of profit‑making by sale.
(7) For the purposes of subsection (2), where a company, partnership or trustee of a trust estate holds or held property (in this subsection referred to as the underlying property) consisting of:
(a) an interest in property, being property acquired by the company, partnership or trustee for the purpose of profit‑making by sale; or
(b) property, or an interest in property, in which was merged an interest in property, being an interest acquired by the company, partnership or trustee for the purpose of profit‑making by sale;