(d) this Division does not apply in relation to the partnership in relation to the property by reason only that the qualifying arrangement was entered into before the time (in this subsection referred to as the earliest application time) referred to in whichever subparagraph of paragraph 159GH(1)(b) would be applicable if this Division applied as mentioned in paragraph (c); and
(e) the taxpayer became a partner in the partnership under a contract entered into by the taxpayer after the earliest application time;
the following provisions have effect:
(f) there shall be included in the assessable income of the taxpayer of the relevant year of income an amount that bears to the amount of the relevant deduction the same proportion as the individual interest of the taxpayer in that net income bears to that net income or, as the case requires, as the individual interest of the taxpayer in that partnership loss bears to that partnership loss;
(g) there shall be allowable as a deduction in the assessment of the taxpayer of the relevant year of income an amount that bears to the amount of the relevant arrangement payment the same proportion as the individual interest of the taxpayer in that net income bears to that net income or, as the case requires, as the individual interest of the taxpayer in that partnership loss bears to that partnership loss.
(2) Where:
(a) the individual interest of a taxpayer in the net income of a partnership has been or is to be included in the assessable income of the taxpayer of a year of income (in this subsection referred to as the relevant year of income), or the individual interest of a taxpayer in a partnership loss has been allowed or is allowable as a deduction from the assessable income of the taxpayer of a year of income (in this subsection also referred to as the relevant year of income);
(b) either a deduction or an arrangement payment, or both, were taken into account in calculating that net income or partnership loss;
(c) the deduction or a part of the deduction (which deduction or part of the deduction, as the case may be, is referred to in this subsection as the relevant deduction), or the arrangement payment or a part of the arrangement payment (which arrangement payment or part of the arrangement payment, as the case may be, is referred to in this subsection as the relevant arrangement payment), would not have been taken into account for the purpose of that calculation if this Division applied in relation to the partnership in relation to particular property that is arrangement property in relation to a qualifying arrangement;
(d) this Division does not apply in relation to the partnership in relation to the property by reason only that the qualifying arrangement was entered into before the time (in this subsection referred to as the earliest application time) referred to in whichever subparagraph of paragraph 159GH(1)(b) would be applicable if this Division applied as mentioned in paragraph (c);
(e) the taxpayer became a partner in the partnership under a contract entered into by the taxpayer before the earliest application time;
(f) after the earliest application time, the taxpayer made or agreed to make a contribution or contributions (which contribution is or contributions are in this subsection referred to as the additional contribution) to the capital of the partnership in addition to any contribution or contributions to the capital of the partnership that, under a contract or contracts entered into at or before that time, the taxpayer had made or agreed to make; and
(g) by reason of making or agreeing to make the additional contribution, the individual interest of the taxpayer in that net income or partnership loss, being that individual interest expressed as a fraction of the aggregate of the individual interests of the partners in that net income or partnership loss, is greater than it would otherwise have been;
the following provisions have effect:
(h) where a deduction was taken into account in calculating that net income or partnership loss—there shall be included in the assessable income of the taxpayer of the relevant year of income an amount ascertained in accordance with the formula A (B – C);
(j) where an arrangement payment was taken into account in calculating that net income or partnership loss—there shall be allowable as a deduction in the assessment of the taxpayer of the relevant year of income an amount ascertained in accordance with the formula A (B – C);
where:
A is the amount of the relevant deduction or of the relevant arrangement payment, as the case requires;
B is the individual interest of the taxpayer in that net income or partnership loss, being that individual interest expressed as a fraction of the aggregate of the individual interests of the partners in that net income or partnership loss; and
C is the fraction that would be B if that fraction were ascertained on the basis of the individual interests of the partners immediately before the earliest application time and the net income or partnership loss at that time were equal to the net income or partnership loss of the relevant year of income.
Division 16E—Accruals assessability etc. in respect of certain security payments
159GP Interpretation
(1) In this Division, unless the contrary intention appears:
accrual amount has the meaning given by subsection 159GQB(1).
accrual period has the meaning given by section 159GQA.
agreement has the same meaning as in Subdivision D of Division 3.
annuity has the same meaning as in section 10 of the Superannuation Industry (Supervision) Act 1993.
associate has the same meaning as in Subdivision D of Division 3.
deferred superannuation income stream has the same meaning as in the Income Tax Assessment Act 1997.
eligible return has the meaning given by subsection (3).
fixed return security means a qualifying security under which the amount or amounts payable are or consist of:
(a) a specified amount or specified amounts;
(b) an amount or amounts the method of calculation of which does not involve an interest or indexation rate or other factor, being a rate or factor that varies or may vary during the term of the security; or
(c) any combination of amounts referred to in paragraph (a) or (b).
holder, in relation to a security at a particular time, means the person who, if the amount or amounts payable under the security were due and payable at that time, would be entitled to receive payment of the amount or amounts.
implicit interest rate has the meaning given by subsection 159GQB(2).
ineligible annuity means:
(a) an annuity that is issued by a life assurance company to or for the benefit of a natural person other than in the capacity of trustee of a trust estate; or
(b) an annuity that is issued by a life assurance company to a complying superannuation fund if:
(i) the annuity is held by the fund for the sole purpose of meeting its liabilities to provide one or more deferred superannuation income streams to one or more members of the fund; and
(ii) the value of the annuity and the one or more deferred superannuation income streams is the same or substantially the same; and
(iii) the terms on which the annuity and the one or more deferred superannuation income streams are payable are the same or substantially the same; or
(c) an annuity that is issued by a life assurance company to an RSA provider if:
(i) the annuity is held by the RSA provider for the sole purpose of meeting its liabilities to provide one or more deferred superannuation income streams to one or more holders of the RSA; and
(ii) the value of the annuity and the one or more deferred superannuation income streams is the same or substantially the same; and
(iii) the terms on which the annuity and the one or more deferred superannuation income streams are payable are the same or substantially the same.
issue, in relation to a security other than a bill of exchange, means the creation of the liability to pay an amount or amounts under the security.
issue price, in relation to a security, means the consideration (if any) for the issue of the security.
issuer, in relation to a security (other than a bill of exchange) at a particular time, means the person who, if the amount or amounts payable under the security were due and payable at that time, would be liable to pay the amount or amounts.
partial redemption, in relation to a security, means the discharging of a part (other than the final part) of a liability to pay an amount or amounts under the security representing a return of the issue price of the security.
partial redemption payment, in relation to a security, means a payment that has the effect of partially redeeming the security.
qualifying security means any security:
(a) that is issued after 16 December 1984;
(ba) that is not part of an exempt series (see subsection (9A));
(c) the term of which, ascertained as at the time of issue of the security will, or is reasonably likely to, exceed 1 year;
(d) that has an eligible return; and
(e) where the precise amount of the eligible return is able to be ascertained at the time of issue of the security—in relation to which the amount of the eligible return is greater than 1½% of the amount ascertained by multiplying the amount of the payment or the sum of the payments (excluding any periodic interest) liable to be made under the security by the number (including any fraction) of years in the term of the security;
but does not, except as provided by subsection (10), include an annuity.
redemption, in relation to a security, means the discharging of all liability to pay any amount or amounts under the security representing a return of the issue price of the security.
redemption payment, in relation to a security, means any payment that has the effect of redeeming the security.
security means:
(a) stock, a bond, debenture, certificate of entitlement, bill of exchange, promissory note or other security;
(b) a deposit with a bank or other financial institution;
(c) a secured or unsecured loan; or
(d) any other contract, whether or not in writing, under which a person is liable to pay an amount or amounts, whether or not the liability is secured.
taxpayer’s maximum term, in relation to a security held by a taxpayer, means:
(a) if the security was issued to the taxpayer—the term of the security; or
(b) if the security was transferred to the taxpayer—the part of the term remaining after the transfer.
term, in relation to a security, means the period from the issue of the security until the time at which the liability to make the payment or final payment or payments, as the case requires, under the security arises.
transfer, in relation to a security, means transfer, sell, assign or dispose in any way of the security or of the right to receive payment of the amount or amounts payable under the security, but does not include a redemption or partial redemption of the security.
transfer price, in relation to the transfer of a security, means the consideration (if any) for the transfer of the security.
variable return security means a qualifying security that is not a fixed return security.
(2) Where:
(a) the Commissioner, having regard to any connection between the parties to the issue or transfer of a security and to any other relevant circumstances, is satisfied that the parties were not dealing with each other at arm’s length in relation to the issue or transfer; and
(b) the Commissioner determines that this subsection should apply in relation to the issue or transfer;
then, for the purposes of the application of the definition of issue price or transfer price, as the case may be, in subsection (1) in relation to the issue or transfer, the consideration for the issue or transfer shall be taken to be equal to:
(c) the consideration that might reasonably be expected for the issue or transfer if the parties to the issue or transfer were independent parties dealing at arm’s length with each other in relation to the issue or transfer; or
(d) where, for any reason (including an insufficiency of information available to the Commissioner), it is not possible or not practicable for the Commissioner to ascertain the amount referred to in paragraph (c)—such amount as the Commissioner determines.
(3) For the purposes of this Division, there shall be taken to be an eligible return in relation to a security if at the time when the security is issued it is reasonably likely, by reason that the security was issued at a discount, bears deferred interest or is capital indexed or for any other reason, having regard to the terms of the security, for the sum of all payments (other than periodic interest payments) under the security to exceed the issue price of the security, and the amount of the eligible return is the amount of the excess.
(6) For the purposes of this Division, where an amount of interest is payable under a security, the amount shall be taken to be periodic interest if the period between the commencement of the period in respect of which the interest is expressed to be payable and the time at which the interest is payable is less than or equal to one year.
(7) Where:
(a) but for this subsection, an amount of interest payable under a security would, by reason of the application of subsection (6), be taken, for the purposes of this Division, to be periodic interest; and
(b) the Commissioner, having regard to the amount of the interest, considers that it is properly attributable to a period in excess of one year;
then, for purposes of the application of this Division:
(c) the amount of interest shall not be taken to be periodic interest; and
(d) the amount of interest shall be taken to be attributable to the period to which the Commissioner considers it is properly attributable.
(8) Where 2 or more of the amounts payable under a security are payable to different persons and in return for consideration given by different persons, the 2 or more amounts shall, for the purposes of this Division, be taken to be payable under a separate security having such of the terms of the first‑mentioned security as are relevant.
(9) For the purposes of the application of this Division in relation to the holding of a security acquired by a taxpayer on transfer, any prior holding of the security by the taxpayer, whether on issue or transfer, shall be disregarded.
(9A) For the purposes of paragraph (ba) of the definition of qualifying security in subsection (1), if:
(a) after 16 December 1984, a person issues a security (the first in the series) that is not a qualifying security; and
(b) during the period from the end of 16 December 1984 until the issuing of the first in the series, the person did not issue any qualifying security with exactly the same payment dates, payment amounts and other terms as the first in the series; and
(c) after issuing the first in the series, the person issues another security (the later security) with exactly the same payment dates, payment amounts and other terms as the first in the series;
the later security is part of an exempt series.
(9B) In determining for the purposes of paragraph (9A)(b) or (c) whether a security has exactly the same other terms as another security, the fact that the first‑mentioned security has a different issue price than the second‑mentioned security is to be disregarded.
(10) Where:
(a) an annuity is issued on or after 29 October 1987;
(b) the requirements of paragraphs (b) to (e) (inclusive) of the definition of qualifying security in subsection (1) are satisfied in relation to the annuity; and
(c) the annuity is not an ineligible annuity;
the annuity is a qualifying security for the purposes of this Division.
159GQ Tax treatment of holder of qualifying security
Accrual amounts to be worked out
(1) If a taxpayer holds a qualifying security for all or part of a year of income, the effect on the taxpayer’s taxable income is determined by working out the accrual amount (see section 159GQB) for each accrual period (see section 159GQA) in the year of income and then summing the accrual amounts.
Positive sum assessable
(2) If the sum is a positive amount, the amount is included in the assessable income of the taxpayer of the year of income.
Negative sum deductible
(3) If the sum is a negative amount, a deduction of the amount is allowable in the assessment of the taxpayer of the year of income.
159GQA Accrual period
Taxpayer’s maximum term to be divided into accrual periods
(1) The taxpayer’s maximum term for the qualifying security is divided into accrual periods in accordance with this section.
Whole year of income
(2) If a year of income is wholly taken up by any of the taxpayer’s maximum term, the year of income is divided into 2 accrual periods of 6 months.
Beginning of taxpayer’s maximum term
(3) If the taxpayer’s maximum term begins after the beginning of the year of income:
(a) if it begins less than 6 months after the beginning of the year of income—the period from the beginning of the taxpayer’s maximum term until the middle of the year of income is an accrual period and the second 6 months of the year of income is an accrual period; and
(b) in any other case—the part of the year of income taken up by the taxpayer’s maximum term is an accrual period.
End of taxpayer’s maximum term
(4) If the taxpayer’s maximum term ends before the end of a year of income:
(a) if it ends no later than 6 months after the beginning of the year of income—the part of the year of income taken up by the taxpayer’s maximum term is an accrual period; and
(b) in any other case—the first 6 months of the year of income is an accrual period and the period from the middle of the year of income until the end of the taxpayer’s maximum term is an accrual period.