Note: If the asset is, or is part of, a Division 230 financial arrangement, section 57‑32 may affect how the market value of the asset is worked out.
Excluded provisions
(4) For the purposes of subsection (2), the excluded provisions are:
(e) former Division 10B of Part III of this Act (about industrial property); and
(f) former Division 10BA of Part III of this Act (about Australian films); and
(ga) Division 40 of the Income Tax Assessment Act 1997 (about capital allowances); and
(i) Division 43 of the Income Tax Assessment Act 1997 (about deductions for capital works); and
(j) section 70‑120 of the Income Tax Assessment Act 1997 (about deducting capital costs of acquiring trees);
(la) Division 373 of the Income Tax Assessment Act 1997 (about intellectual property).
Listed provisions not affected
(5) If the transition taxpayer:
(a) acquired an asset (whether before the transition time or otherwise) before the commencement of a provision listed in subsection (6); and
(b) after acquiring the asset, owned the asset at all times before the transition time;
the deemed acquisition of the asset under subsection (2) does not affect the operation of the listed provision.
Listed provisions
(6) The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold, are provisions of the Income Tax Assessment Act 1936.
Listed provisions
Item Provision
1 section 26BB
3 section 70B
4 the former Division 3B of Part III
5 Division 16E of Part III
6 Subdivision 20‑A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under the former subsection 82Z(1)
6A Division 230
7 Division 775
8 Subdivision 20‑A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under section 775‑30
(6A) For the purposes of the application of subsection (5) to the transition taxpayer, a provision covered by item 7 or 8 of the table in subsection (6) is taken to have commenced at the start of the taxpayer’s applicable commencement date (within the meaning of Division 775 of the Income Tax Assessment Act 1997).
Note: For applicable commencement date, see section 775‑155 of the Income Tax Assessment Act 1997.
(6B) The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer in relation to a provision covered by item 7 or 8 of the table in subsection (6) if the taxpayer makes an election under section 775‑150 of the Income Tax Assessment Act 1997.
(7) To avoid doubt, an effect of subsection (2) is that the sum of all allowable deductions (if any) in respect of the writing off as bad of the whole or part of a debt to which that subsection applies will not exceed the market value of the debt at the transition time.
Avoidance of doubt—disposal need not involve an alienation
(8) To avoid doubt, an asset may be disposed of for the purposes of this section whether or not the disposal involves alienating the asset.
57‑30 Deemed cessation and re‑assumption of liabilities
(1) Subject to subsection (3), for the purposes of determining a deduction allowable to, or an amount included in the assessable income of, the transition taxpayer after the transition time in respect of the satisfaction of a liability owed by the transition taxpayer immediately before the transition time, the transition taxpayer is taken:
(a) to have ceased immediately before the transition time to have any liabilities; and
(b) to have assumed each of its liabilities again at the transition time in return for consideration equal to the adjusted market value (see subsection (2)) at that time of the right or other asset, corresponding to the liability, that was held by the person to whom the liability was owed.
(2) The adjusted market value of the corresponding right or other asset is the market value of that right or asset at the transition time:
(a) reduced by any amount paid or that becomes payable by the transition taxpayer in respect of the liability at or after the transition time, where:
(i) because of subsection 57‑20(2); or
(ii) because all of the transition taxpayer’s income was wholly exempt from income tax before the transition time;
the amount is not an allowable deduction; and
(b) increased by any amount paid or that became payable by the transition taxpayer in respect of the liability before the transition time, where:
(i) because of subsection 57‑20(1); or
(ii) because the transition taxpayer’s income ceased to be exempt from income tax at the transition time;
the amount is an allowable deduction.
Note: If the liability is, or is part of, a Division 230 financial arrangement, section 57‑32 may affect how the market value of the corresponding right or other asset is worked out.
(3) A provision listed in subsection (4) only applies to a liability of the transition taxpayer at the transition time if the liability first came into existence after the day on which Division 3B of Part III commenced.
(4) The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold, are provisions of the Income Tax Assessment Act 1936.
Listed provisions
Item Provision
1 the former Division 3B of Part III
2 Subdivision 20‑A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under the former subsection 82Z(1).
(5) A provision listed in subsection (6) only applies to a liability of the transition taxpayer at the transition time if the taxpayer first assumed the liability on or after the taxpayer’s applicable commencement date (within the meaning of Division 775 of the Income Tax Assessment Act 1997).
Note: For applicable commencement date, see section 775‑155 of the Income Tax Assessment Act 1997.
(6) The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text.
Listed provisions
Item Provision
1 Division 775
2 Subdivision 20‑A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under section 775‑30.
(7) The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer if the taxpayer makes an election under section 775‑150 of the Income Tax Assessment Act 1997.
57‑32 Division 230 financial arrangements—market value of assets and rights
(1) This section applies in relation to an asset (the subject asset) held by an entity (the holder) if:
(a) the subject asset is:
(i) covered by subsection 57‑25(1); or
(ii) a right, or other asset, corresponding to a liability covered by subsection 57‑30(1); and
(b) the subject asset, or the corresponding liability for the subject asset, is or is part of a Division 230 financial arrangement at the transition time; and
(c) when the arrangement was entered into:
(i) the parties to the arrangement were not dealing at arm’s length (within the meaning of the Income Tax Assessment Act 1997) in relation to the subject asset; or
(ii) if the subject asset gives rise to an interest that is not an equity interest in an entity—the return on the interest would reasonably be expected to be less than the benchmark rate of return (within the meaning of that Act) for the interest.
(2) For the purposes mentioned in subsection (3), assume at the transition time that the market value of the subject asset is the total amount (the initial amount) of the financial benefits (within the meaning of the Income Tax Assessment Act 1997) that the holder provided in relation to the subject asset before the transition time:
(a) reduced by:
(i) repayments of principal made in relation to the subject asset before the transition time; and
(ii) the amount of any impairment (within the meaning of the accounting principles (within the meaning of that Act)) of the subject asset at the transition time; and
(b) increased by the amount of the cumulative amortisation (worked out using the effective interest method recognised by the accounting principles (within the meaning of that Act)) of any difference at the transition time between:
(i) the initial amount; and
(ii) the amount payable on the maturity of the subject asset.
(3) Subsection (2) has effect for the purposes of working out the subject asset’s adjusted market value under section 57‑25 or 57‑30 for use when applying Division 230 of the Income Tax Assessment Act 1997 to the subject asset or the corresponding liability for the subject asset.
57‑33 Division 230 financial arrangements—transition taxpayer’s right to receive or obligation to provide payment
(1) This section applies in relation to the following:
(a) an asset covered by subsection 57‑25(1) to which section 57‑32 applies;
(b) the corresponding liability for a right, or other asset, covered by subsection 57‑30(1) to which section 57‑32 applies.
Note: Section 57‑32 applies if the asset or liability is or is part of a Division 230 financial arrangement.
(2) For the purposes of section 230‑60 of the Income Tax Assessment Act 1997, assume the following:
(a) in the case of an asset—that the transition taxpayer acquired the asset at the transition time in return for the transition taxpayer starting to have an obligation to provide one or more financial benefits in relation to the Division 230 financial arrangement;
(b) in the case of a liability—that the transition taxpayer started to have the liability at the transition time in return for the transition taxpayer starting to have a right to receive one or more financial benefits under the Division 230 financial arrangement.
57‑35 Interpretation
In this Subdivision:
asset means property, or a right, of any kind, and includes:
(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
(b) any chose in action; and
(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
(e) a CGT asset;
but does not include trading stock.
liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).
Subdivision 57‑F—Superannuation deductions
57‑40 Contributions under defined benefit superannuation schemes
(1) This section applies to a deduction allowable apart from this Subdivision to the transition taxpayer under section 290‑60 of the Income Tax Assessment Act 1997 for a contribution made to a fund in relation to a person if:
(a) the person was an employee of the transition taxpayer at any time before or after the transition time; and
(b) the contribution was made under a defined benefit superannuation scheme (within the meaning of section 6A of the Superannuation Guarantee (Administration) Act 1992).
Deduction allowable only if sum of all deductions exceeds defined benefit threshold amount
(2) The deduction is not allowable for a year of income if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the defined benefit threshold amount (see subsection (4)) for the year of income.
Amount of deduction not allowable
(3) If the sum is greater than that amount, 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 of the transition taxpayer to which this section applies for the year of income end fraction times Defined benefit threshold amount for the year of income end formula
Meaning of defined benefit threshold amount
(4) The defined benefit threshold amount for a year of income is:
(a) if the year of income is the transition year—the unfunded liability amount (see subsection (5)); or
(b) in any other case—that amount as reduced by the total amount of deductions to which this section applies, that, because of subsection (2) or (3), have not (disregarding section 57‑55) been allowable to the transition taxpayer for all previous years of income.
Meaning of unfunded liability amount
(5) The unfunded liability amount is the value, worked out as at the transition time in accordance with actuarial principles, of the liabilities of the transition taxpayer to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer, where the liabilities:
(a) had accrued as at the transition time; and
(b) were, according to actuarial principles, unfunded at that time; and
(c) were liabilities only under defined benefit superannuation schemes.
57‑45 Deduction for surplus to meet defined benefit superannuation scheme liabilities
If:
(a) at the transition time, according to a particular defined benefit superannuation scheme’s accounts, an amount is available to meet liabilities of the transition taxpayer under the scheme to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer; and
(b) the amount exceeds the total value (as worked out according to actuarial principles) of the liabilities of that kind that have accrued as at the transition time; and
(c) before the transition time, the transition taxpayer makes a written election that the excess is to be used solely to meet liabilities of that kind accruing after the transition time, and the excess is later used solely to meet such liabilities;
the excess is an allowable deduction of the transition taxpayer for the transition year.
57‑50 Contributions generally
(1) This section applies to a deduction allowable apart from this Subdivision to the transition taxpayer under section 290‑60 of the Income Tax Assessment Act 1997 for a contribution made to a fund in relation to a person if the person was an employee of the transition taxpayer at any time before or after the transition time.
Deduction allowable only if sum of all deductions exceeds general superannuation threshold amount
(2) The deduction is not allowable for a year of income if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the general superannuation threshold amount (see subsection (4)) for the year of income.
Amount of deduction not allowable
(3) If the sum is greater than the general superannuation threshold amount, 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 of the transition taxpayer to which this section applies for the year of income end fraction times General superannuation threshold amount end formula
Meaning of general superannuation threshold amount
(4) The general superannuation threshold amount for a year of income is:
(a) if the year of income is the transition year—the undischarged superannuation liability amount (see subsection (5)); or
(b) in any other case—the amount applicable under paragraph (a), reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not (disregarding section 57‑55) been allowable to the transition taxpayer for all previous years of income.
Meaning of undischarged superannuation liability amount
(5) This is how to work out the transition taxpayer’s undischarged superannuation liability amount:
Step 1. For each person who was an employee of the transition taxpayer at any time before the transition time, take the sum of:
(a) if the whole or any part of the person’s period of employment with the transition taxpayer took place before the beginning of the superannuation guarantee period (see subsection (6)) and there were one or more required award etc. contribution amounts (see subsection (7)) in respect of any of that whole or part—that amount or those amounts; and
(b) if, for the whole or any part or parts of the superannuation guarantee period, there were one or more required award etc. contribution amounts that were greater than the required superannuation guarantee contribution amount or amounts (see subsection (8))—that greater amount or those greater amounts; and
(c) if, for the whole or any part or parts of the superannuation guarantee period, either there was no required award etc. contribution amount or there was such an amount but it was not greater than the required superannuation guarantee contribution amount—the required superannuation guarantee contribution amount for the whole or the part of the period, or the sum of the required superannuation guarantee contribution amounts for the parts of the period, as the case may be.
Step 2. Reduce the sum from Step 1 by the sum of amounts that the transition taxpayer actually contributed before the start of the transition year:
(a) in payment of required award etc. contribution amounts or required superannuation guarantee contribution amounts for the employee that are included in the sum in Step 1; or
(b) voluntarily to a superannuation fund for the purpose of providing superannuation benefits for the employee, or dependants of the employee;
in respect of any period of employment of the employee with the transition taxpayer before the transition time.
Step 3. If the result after applying Step 2 for a particular employee is less than nil, it is nil instead.
Step 4. Add up the results for all of the employees. This final sum is the transition taxpayer’s undischarged superannuation liability amount.