Div 55of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years.

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Division 55 of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. Without limiting subsection 59‑50(6) of the Income Tax Assessment Act 1997, an entity was an Indigenous holding entity at a time if: (b) at that time, the entity was endorsed under Subdivision 50‑B of the Income Tax Assessment Act 1997 as exempt from income tax because the entity was covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50‑5 of that Act, as in force at that time. Subdivision 61‑L (Tax offset for Medicare levy surcharge (lump sum payments in arrears)) of the Income Tax Assessment Act 1997 applies to assessments for the 2005‑06 income year and later income years. 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years (1) Division 70 (Trading stock) of the Income Tax Assessment Act 1997 applies to assessments for the 1997‑98 income year and later income years. (2) However, the sections of that Division listed in the table apply in accordance with the corresponding sections of this Act. <table cellspacing="0" cellpadding="0" style="margin-left:56.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:258.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">Application provisions for specific sections</td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"> Item</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">This section of the Income Tax Assessment Act 1997 ...</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">Applies as described in this provision of this Act ...</td></tr></thead><tbody><tr><td style="width:24.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">1</td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑20</td><td style="width:106.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑20</td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">2</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑55</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑55(1)</td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">3</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑70</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑70</td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">4</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑90</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑90</td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">5</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑95</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑90</td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">6</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑100</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑100</td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">7</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑105</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑105</td></tr><tr><td style="width:24.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">8</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑115</td><td style="width:106.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top">70‑115</td></tr></tbody></table> ``` (a) just before that income year, the item was an item of your trading stock, as defined in subsection 6(1) of the Income Tax Assessment Act 1936 as in force at that time; and (b) at no time since that time has the item been an item of your trading stock, as defined in section 70‑10 of the Income Tax Assessment Act 1997. > Note: Example: This section applies to an item you produced, manufactured, acquired or purchased before 1997‑98 for manufacture, sale or exchange, but have not held for that purpose at any time since just before the start of that year. (b) former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business) would have applied to the disposal if it had occurred before 1 July 1997; sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 (dealing with disposals of trading stock outside the ordinary course of business) apply to your disposal of the item as if it were an item of your trading stock (as defined in section 70‑10 of the Income Tax Assessment Act 1997). > Note: This ensures that your assessable income includes the market value of the item on the day of disposal. This counters your deduction under the Income Tax Assessment Act 1936 for your expenditure to acquire the item as trading stock. (3) If the disposal occurred before 1 July 1997, then, for the purposes of former subsection 36(1) of the Income Tax Assessment Act 1936 (dealing with disposals of trading stock outside the ordinary course of business), the item is taken to have been, at the time of the disposal, trading stock as defined in section 70‑10 of the Income Tax Assessment Act 1997. (a) former subsection 36(1) of the Income Tax Assessment Act 1936 applies to the disposal, or would have if it had occurred before 1 July 1997; and (b) the item’s value was taken into account at the end of the 1996‑97 income year under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936; > Note: This deduction offsets the effect of the item’s value not having been taken into account under Subdivision 70‑C of the Income Tax Assessment Act 1997 at the start of the income year of the disposal. #### 70‑20 Application of section 70‑20 of the Income Tax Assessment Act 1997 to trading stock bought on or after 1 July 1997 Section 70‑20 (Non‑arm’s length transactions) of the Income Tax Assessment Act 1997 applies to purchases that take place on or after 1 July 1997. (1) Section 70‑55 of the Income Tax Assessment Act 1997 applies to animals acquired by natural increase in or after the 1997‑98 income year. (2) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by natural increase before the 1997‑98 income year is the cost price of the animal under former section 34 of the Income Tax Assessment Act 1936. (3) For the purposes of Subdivision 70‑C of the Income Tax Assessment Act 1997, the cost of an animal acquired by a partnership by natural increase before the 1997‑98 income year depends on whether its cost price has been used in working out the share of a partner in the partnership’s net income or partnership loss for an earlier income year: (a) if it has, the cost is that cost price, or the lowest of those cost prices if more than one cost price was used to work out the respective shares of partners; (b) if it has not, the cost is the minimum cost price prescribed for the purposes of former section 34 of the Income Tax Assessment Act 1936 for that class of animal for the time when the animal was acquired, or the animal’s actual cost price if no minimum was prescribed. > Note 1: Former section 93 of the Income Tax Assessment Act 1936 allowed each partner to choose the cost price of an animal for working out the partner’s share of the partnership’s net income or partnership loss for income years before the 1997‑98 income year. > Note 2: Former section 34 of the Income Tax Assessment Act 1936 provides for the valuation of live stock acquired by natural increase before the 1997‑98 income year. (b) that interest was also an item of your trading stock on hand at the end of the 1997‑98 income year or a later income year; the value of the item at the end of the 1997‑98 or later income year is the value of the item as taken into account under former Subdivision B (Trading stock) of Division 2 of Part III of the Income Tax Assessment Act 1936 at the start of the 1991‑92 income year. (2) This section has effect despite section 70‑45 (the general rule about how to value your trading stock at the end of the income year) of the Income Tax Assessment Act 1997, but subject to subsection 70‑70(2) (which allows you to elect to value all your interests in FIFs at their market value instead) of that Act. (3) If you made an election under former subsection 31(5) of the Income Tax Assessment Act 1936 (to value all your interests in FIFs at market value), subsection 70‑70(2) of the Income Tax Assessment Act 1997 applies to your interests in FIFs as if you had made an election under subsection 70‑70(2). #### 70‑90 Application of sections 70‑90 and 70‑95 of the Income Tax Assessment Act 1997 to disposals of trading stock outside the ordinary course of business Sections 70‑90 (Assessable income on disposal of trading stock outside the ordinary course of business) and 70‑95 (Purchase price is taken to be market value) of the Income Tax Assessment Act 1997 apply to a disposal of an item of trading stock that takes place on or after 1 July 1997. #### 70‑100 Application of section 70‑100 of the Income Tax Assessment Act 1997 to disposals of trading stock outside ordinary course of business (1) Section 70‑100 (Notional disposal when you stop holding an item as trading stock) of the Income Tax Assessment Act 1997 applies to trading stock that stops being trading stock on hand of an entity on or after 1 July 1997. (2) The value of trading stock to which subsection (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (4) of that section to value trading stock at what would have been its value at the end of an income year ending on the day it became trading stock on hand of the second entity. > Note: Section 70‑100 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if any of the entities with an interest in the trading stock (either before or after it becomes trading stock on hand of the second entity) has a 1996‑97 income year ending on or after 1 July 1997. (1) Section 70‑105 (Death of owner) of the Income Tax Assessment Act 1997 applies to trading stock that devolves as a result of a person dying on or after 1 July 1997. (2) The value of an item to which subsection (3) or (4) of that section applies is to be worked out using the rules in the Income Tax Assessment Act 1936 (and not the rules in Subdivision 70‑C of the Income Tax Assessment Act 1997) if: (b) an election is made under subsection (3) or (4) of that section to value the item at an amount other than its market value. > Note: Section 70‑105 of the Income Tax Assessment Act 1997 may affect an assessment for the 1996‑97 income year if an entity on which the item devolves has a 1996‑97 income year ending on or after 1 July 1997. #### 70‑115 Application of section 70‑115 of the Income Tax Assessment Act 1997 to insurance and indemnity payments in 1997‑98 and later income years Section 70‑115 (Compensation for lost trading stock) of the Income Tax Assessment Act 1997 applies to an amount received in the 1997‑98 income year or a later income year by way of insurance or indemnity for a loss of trading stock, even if the loss occurred earlier. However, that section does not apply to an amount that is assessable income for an income year before the 1997‑98 income year. (a) the payment is received by you because you are entitled to it under a written contract, a law of the Commonwealth, a State, a Territory or another country, an instrument under such a law, a collective agreement within the meaning of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 or an AWA within the meaning of that Act; and (b) the entitlement is provided for under that contract, law, instrument or agreement as in force just before 10 May 2006. (2) However, this Division does not apply in relation to a life benefit termination payment received by you on or after 1 July 2012 (except to the extent provided by Subdivision 82‑E). (3) This Division applies in relation to a life benefit termination payment only to the extent that the contract, law or agreement as in force just before 10 May 2006 specifies the amount of the payment, or a way to work out a specific amount of the payment. (4) For the purpose of subsection (3), a specific amount can be worked out in ways including either or both of the following: (b) by provision for you or another person (or entity) to make a choice between forms of payment allowing amounts to be worked out as provided by subsection (3) and paragraph (a) of this subsection. > Note: Example: For paragraph (b), a specific amount of a life benefit termination payment that you receive on 1 July 2007 can be worked out from the terms of your written contract if the contract provided (just before 10 May 2006) for you to choose between payment in the form of a cash amount of $100,000 or the transfer to you of 10,000 shares in a specified company. > Note: Section 80‑15 of the Income Tax Assessment Act 1997 allows for employment termination payments to include the transfer of property (for example, shares). If so, the market value of the property is included in the amount of the payment (except any part of the property for which separate consideration has been given). (5) To the extent that this Division applies to a life benefit termination payment, Subdivision 82‑A of the Income Tax Assessment Act 1997 does not apply to the payment (subject to Subdivision 82‑E of this Act). (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are your preservation age or older on the last day of the income year in which you receive the payment. > Note 2: Under section 82‑10C, you may also be entitled to a tax offset on the taxable component of a transitional termination payment you receive in an income year before the year in which you reached your preservation age. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (6) (the low rate part) does not exceed 15%. (5) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (7) (the middle rate part) does not exceed 30%. (6) The low rate part is so much of the taxable component of the payment as does not exceed your lower cap amount under section 82‑10B. ![Start formula Your upper cap amount under section 82-10D minus Your lower cap amount under section 82-10B end formula](image.006.png) > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your lower cap amount in relation to a transitional termination payment you receive at a time in an income year is the ETP cap amount for the year, reduced in accordance with this section. (b) by so much of the total amounts of transitional termination payments (if any) that you received at an earlier time (whether in the income year or in an earlier income year) for which you are entitled to a tax offset under subsection 82‑10A(4). Step 1. Work out the total of the taxable components of all the amounts (if any) of transitional termination payments received by you (including any directed termination payments received on your behalf) in any income year before the income year in which you reached your preservation age. Step 2. Work out the total of the taxable components of all the directed termination payments (if any) received on your behalf at an earlier time, in the income year in which you reached your preservation age or later. Step 3. Work out the amount (the cap difference) by which $1,000,000 exceeds the ETP cap for the income year in which you receive the payment to which subsection (1) applies. Step 4. The cap excess is the amount (not less than zero) by which the sum of the amounts in steps 1 and 2 exceeds the cap difference in step 3. (4) For the purposes of this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (5) For the purposes of this section, disregard any reduction of the ETP cap amount under section 82‑10 of the Income Tax Assessment Act 1997. (1) This section applies to a transitional termination payment you receive (except any part of the payment that is a directed termination payment) if you are under your preservation age on the last day of the income year in which you receive the payment. (4) You are entitled to a tax offset that ensures that the rate of income tax on the amount mentioned in subsection (5) does not exceed 30%. > Note: The remainder of the taxable component is taxed at the top marginal rate in accordance with the Income Tax Rates Act 1986. (5) The amount is so much of the taxable component of the payment as does not exceed your upper cap amount under section 82‑10D. > Note: If you have received another life benefit termination payment in the same income year (or in an earlier income year) that is not a transitional termination payment, your entitlement to a tax offset under this section is not affected by your entitlement (if any) to a tax concession for the other payment (under section 82‑10 of the Income Tax Assessment Act 1997). (1) Your upper cap amount in relation to a transitional termination payment you receive at a time in an income year is $1,000,000, reduced in accordance with this section. (a) by the total of all the amounts (if any) included in your assessable income under subsection 82‑10C(3) and subsection 82‑10A(3) that you received at an earlier time (whether in the income year or in an earlier income year); and (b) by the total amount of the taxable components of all directed termination payments (if any) received on your behalf at an earlier time (whether in the income year or in an earlier income year). (3) For this section, a directed termination payment is taken to be received on your behalf at the time the entity to which it is directed receives the payment. (a) the individual chooses, in accordance with this section, to direct the payment (or part of the payment) to be made; and (2) An individual may choose, within 30 days after a pre‑payment statement about a transitional termination payment is given to the individual under section 82‑10E, to direct the payer to use all or part of the payment to make a payment on behalf of the individual: (a) give the entity (or entities) to which payment is directed written notice of the amount that is to be paid, and of the tax free component of the amount; and A directed termination payment made on your behalf, that you are taken to receive under section 80‑20 of the Income Tax Assessment Act 1997, is not assessable income and is not exempt income. > Note 1: Directed termination payments are paid into a complying superannuation plan (or to purchase a superannuation annuity) on your behalf: see section 82‑10F. > Note 2: The taxable component of the payment is included in the assessable income of the entity receiving the payment: see section 295‑190 of the Income Tax Assessment Act 1997. > Note 3: In addition, income tax may be payable on a benefit you later receive from the plan to which the directed termination payment is made: see Divisions 301‑307 of the Income Tax Assessment Act 1997. #### 82‑10H Transitional termination payments may reduce ETP cap amount for payments under section 82‑10 after 1 July 2012 (1) This section deals with the application of paragraph 82‑10(4)(b) of the Income Tax Assessment Act 1997 to an income year beginning on or after 1 July 2012. (2) For the purposes of that paragraph, the ETP cap amount is taken to be further reduced (but not below zero) by the amount mentioned in subsection (3) (the concessional amount) of any transitional termination payment made in consequence of the same employment termination as the employment termination to which the paragraph applies. (3) The concessional amount of a transitional termination payment is the part (if any) of the taxable component of the payment for which you are entitled to a tax offset under section 82‑10A or 82‑10C of this Act. (b) the relevant share or right (within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced, (former Division 13A)) was not acquired (within the meaning of former Division 13A) before 1 July 2009. (2) Furthermore, Subdivision 83A‑C of the Income Tax Assessment Act 1997 (and the rest of Division 83A of that Act, to the extent that it relates to that Subdivision) also applies in relation to an ESS interest if: (i) at the pre‑Division 83A time, subsection 139B(3) of the Income Tax Assessment Act 1936 applied in relation to the interest; (iii) the cessation time mentioned in subsection 139B(3) of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, for the interest did not occur before 1 July 2009; or (i) at the pre‑Division 83A time, section 26AAC of the Income Tax Assessment Act 1936, as in force at that time, (former section 26AAC) applied in relation to the interest; (iii) an amount has not been included in a person’s assessable income under former section 26AAC in relation to the interest before 1 July 2009. (2A) To avoid doubt, for the purposes of subparagraph (2)(a)(i), section 139CDA of the Income Tax Assessment Act 1936 applied to the interest at the pre‑Division 83A time if the taxpayer in question first became or becomes an employee, as mentioned in that section, before the cessation time for the interest. It does not matter whether the employee so became or becomes an employee before, on or after the pre‑Division 83A time. (4) If Subdivision 83A‑C of the Income Tax Assessment Act 1997 applies in relation to an ESS interest because of subsection (2): (a) do not include an amount in your assessable income under subsection 83A‑110(1) of that Act in relation to the ESS interest to the extent that the amount relates to your employment outside Australia; and (b) subject to subsection 83A‑115(3) or 83A‑120(3) of that Act, whichever is applicable, treat the ESS deferred taxing point for the interest as being: (ii) if paragraph (2)(b) applies—the earliest time at which an amount is included in a person’s assessable income under former section 26AAC in relation to the interest; and (c) treat the reference in subsection 83A‑115(3) or 83A‑120(3) (30 day rule for ESS deferred taxing point), whichever is applicable, of that Act to the time worked out under subsection 83A‑115(2) or 83A‑120(2) of that Act as being a reference to the time worked out under paragraph (b) of this subsection; and (d) treat the requirements in paragraphs 83A‑310(1)(a), (b) and (c) of that Act as being satisfied in relation to the interest if, and only if: (i) if paragraph (2)(a) applies—the 2 requirements mentioned in section 139DD of the Income Tax Assessment Act 1936 (as in force at the pre‑Division 83A time) are satisfied in relation to the interest; or (ii) if paragraph (2)(b) applies—the requirements in paragraphs (8D)(a), (b) and (c) of former section 26AAC are satisfied in relation to the interest; and (e) Subdivision 14‑C in Schedule 1 to the Taxation Administration Act 1953 (about TFN withholding tax (ESS)) does not apply to the ESS interest; and (i) for the purposes of Division 115 of the Income Tax Assessment Act 1997 (Discount capital gains and trusts’ net capital gains), treat the ESS interest as having been acquired by an individual when the individual acquired the legal title in the share or right of which the ESS interest forms part; and (ii) for the purposes of Division 392 in Schedule 1 to the Taxation Administration Act 1953 (Statements), disregard any election made under former section 139E of the Income Tax Assessment Act 1936; and (g) if paragraph (2)(b) applies—paragraph 82‑135(m) of the Income Tax Assessment Act 1997 does not apply in relation to the ESS interest. (a) at the time (the pre‑Division 83A time) occurring just before Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 commenced: (i) Division 13A of Part III of the Income Tax Assessment Act 1936, as in force at that time, (former Division 13A) applied in relation to a share or right (within the meaning of former Division 13A); or (ii) section 26AAC of that Act, as in force at that time, applied in relation to a share or right (within the meaning of that section as in force at that time); and (b) if there is a beneficial interest in the share or right that is an ESS interest—Division 83A of the Income Tax Assessment Act 1997 does not apply in relation to the interest under section 83A‑5. (2) If subparagraph (1)(a)(i) applies, to avoid doubt, former Division 13A continues to apply (in spite of its repeal) to the share or right. (3) If subparagraph (1)(a)(ii) applies, to avoid doubt, sections 26AAC and 26AAD of the Income Tax Assessment Act 1936, as in force at the pre‑Division 83A time, continue to apply (in spite of their repeal) to the share or right. (2) Division 13A of the Income Tax Assessment Act 1936 is taken to have applied as if the right had always been a right to acquire the beneficial interest in the share. (3) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment at any time for the purpose of giving effect to subsection (2) of this section. Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (about capital gains and capital losses) apply to assessments for the 1998‑99 income year and later income years. (1) In working out whether you have made a capital gain or a capital loss from a CGT event that happens in relation to a CGT asset in the 1998‑99 income year or a later income year, you use only the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3‑3 of this Act also requires you to use another provision. > Note 1: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998‑99 income year (except where this Act requires you to use another provision). > Note 2: In most cases, the other provision is a provision of this Act. However, in some cases, other provisions may be relevant (for example, provisions of the Income Tax Assessment Act 1936). > Note 3: Part X of the Income Tax Assessment Act 1936 includes provisions that modify the operation of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997. (a) an entity acquired a CGT asset before the start of the 1998‑99 income year as part of a transaction or event or series of transactions or events in respect of which there was a roll‑over under the Income Tax Assessment Act 1936; and the provisions of Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply to the asset from the time when the roll‑over happened except that the first element of the cost base and reduced cost base of the asset (when the roll‑over happened) is the amount the entity is taken to have paid as consideration in respect of the acquisition of the asset under the relevant provision of the Income Tax Assessment Act 1936. (1) In working out whether you have a net capital gain for the 1998‑99 income year, the amount of any net capital loss for the 1997‑98 income year or an earlier income year must be worked out under the Income Tax Assessment Act 1936. (2) If you had a net capital loss for the 1997‑98 income year, or some unapplied net capital loss for either of the 2 preceding income years, under former Part IIIA of the Income Tax Assessment Act 1936, it can be carried forward to a later income year to be applied under the Income Tax Assessment Act 1997. > Note: The way in which capital losses can be applied may be affected by other provisions: see section 102‑30 of the Income Tax Assessment Act 1997. (3) If you had a net listed personal‑use asset loss for the 1997‑98 income year under former Part IIIA of the Income Tax Assessment Act 1936, it is taken for the purposes of the Income Tax Assessment Act 1997 to be a net capital loss from collectables for that income year. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in the Territory of Cocos (Keeling) Islands on or before 30 June 1991; and (d) had a CGT event happened in relation to the asset immediately before 1 July 1991, and had the Income Tax Assessment Act 1997 been in force at the time of the event, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; (f) the first element of the asset’s cost base in the hands of the entity (at the end of that day) is its market value at that time. > Note: A prescribed person was a Territory resident, a Territory company or a trustee of a Territory trust, as defined by former sections 24C, 24D and 24E of the Income Tax Assessment Act 1936. (a) an entity was a prescribed person (within the meaning of former Division 1A of Part III of the Income Tax Assessment Act 1936) because of residence in Norfolk Island on or before 23 October 2015; and (d) had a CGT event happened in relation to the asset immediately before 24 October 2015, any capital gain or capital loss from the event would have been disregarded because the entity was a prescribed person; then Parts 3‑1 and 3‑3 of the Income Tax Assessment Act 1997 apply in relation to the asset as if references in those Parts to 20 September 1985 were references to 24 October 2015. (a) the date of acquisition of an asset in relation to which subsection (1) of this section applies, or its cost base on 30 June 1991; or (4) However, the entity may choose that subsection (1) does not apply in relation to an asset to which it would (apart from this subsection) apply if: (b) as at the date on which it happens, the entity has complied with Division 121 of the Income Tax Assessment Act 1997 in relation to the asset. The capital proceeds from an ending referred to in subsection 104‑25(3) of the Income Tax Assessment Act 1997 in relation to shares are reduced by any amount that was taken into account as a capital gain for the shares under former section 160ZL of the Income Tax Assessment Act 1936 for the 1997‑98 income year or an earlier income year. (a) you made the capital gain or capital loss for the 1997‑98 income year or an earlier income year under former Part IIIA of the Income Tax Assessment Act 1936 because you granted an option to an entity, or renewed or extended an option you had granted; and (1) Section 104‑70 of the Income Tax Assessment Act 1997 applies for the purpose of working out the cost base of a unit or an interest you own in a trust if these conditions are satisfied: (b) you were taken to have disposed of the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936 (the former equivalent of CGT event E4) because of a payment made by the trustee before 18 December 1986; and (d) some or all of the non‑assessable part (the attributable part) was attributable to a deduction under former Division 10C or 10D of Part III of the Income Tax Assessment Act 1936 (about capital works). (3) Subsection 104‑70(5) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a unit or interest to nil if an amount was taken into account as a capital gain for the unit or interest under former section 160ZM of the Income Tax Assessment Act 1936. Subsection 104‑135(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of a share to nil if an amount was taken into account as a capital gain for the share under former section 160ZL of the Income Tax Assessment Act 1936. (b) because of the choice, an asset is taken to have the necessary connection with Australia under subsection 104‑165(3) of the Income Tax Assessment Act 1997 just before the commencement of Schedule 4 of the Tax Laws Amendment (2006 Measures No. 4) Act 2006. (2) To avoid doubt, the choice has effect for the purposes of subsection 104‑165(3) of the Income Tax Assessment Act 1997 as in force on and after that commencement. > Note: This means that the asset will be taxable Australian property under the Income Tax Assessment Act 1997 as in force on and after that commencement. Subsection 104‑165(1) of the Income Tax Assessment Act 1997 continues to apply, despite its repeal by item 20 of Schedule 1 to the Tax Laws Amendment (2006 Measures No. 1) Act 2006, to an individual: (b) who remains an Australian resident from that day until the time subsection 104‑165(1) is applied in respect of him or her. 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act (1) Unless subsection (2) or (3) of this section applies, sections 104‑175 and 104‑180 of the Income Tax Assessment Act 1997 apply if there was a roll‑over under former section 160ZZO of the Income Tax Assessment Act 1936 for a disposal of an asset from one company to another company (the transferee). (2) If CGT event J1 would happen in relation to the roll‑over in a situation involving something happening in relation to the transferee, that event does not happen if there would have been no deemed disposal and re‑acquisition of the asset by the transferee in that situation under whichever of these provisions would have been relevant for that situation if it had happened before the start of the 1998‑99 income year: (3) In working out whether subsection (2) affects you, take into account provisions of other Acts that amended former Part IIIA of the Income Tax Assessment Act 1936 and that affect the situation referred to in that subsection. #### 104‑185 Change of status of replacement asset for a roll‑over under Division 17A of former Part IIIA of the 1936 Act or Division 123 of the 1997 Act in the same way as it applies to a replacement asset for a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997. Subsection 104‑205(3) of the Income Tax Assessment Act 1997 also reduces the cost base and reduced cost base of the item to nil if an amount was taken into account as a capital gain for the item under former section 160ZZD of the Income Tax Assessment Act 1936. (a) a balancing adjustment event happens in an income year commencing on or after 1 July 2011 for an asset held by the R&D entity; and (b) at some time when the R&D entity held the asset, it used the asset for the purpose of the carrying on by or on its behalf of research and development activities (within the meaning of former section 73B of the Income Tax Assessment Act 1936). (2) Sections 104‑235 and 104‑240 of the Income Tax Assessment Act 1997 (the new Act) apply to the R&D entity for the event as if: (a) a reference in those sections to the purpose of conducting R&D activities for which you were registered under section 27A of the Industry Research and Development Act 1986; (a) sections 104‑235 and 104‑240 of the new Act (as amended by the Tax Laws Amendment (Research and Development) Act 2011); (b) sections 104‑235 and 104‑240 of the new Act (as those sections apply because of Part 2 of Schedule 4 to the Tax Laws Amendment (Research and Development) Act 2011); to the extent that they would otherwise apply apart from this section to the R&D entity for the event, do so apply to the R&D entity for the event. > Note 1: The sections described in paragraph (a) would otherwise apply for the event in a case where the R&D entity had used the asset for the purpose of conducting R&D activities for which it was registered under section 27A of the Industry Research and Development Act 1986. > Note 2: The sections described in paragraph (b) would otherwise apply in respect of the purpose described in paragraph (1)(b) of this section. If: (a) an entity owned a thing that is not a form of property before 26 June 1992 and at all times from that day to the start of the entity’s 1998‑99 income year; and (b) that thing was not, before 26 June 1992, an asset as defined in former section 160A of the Income Tax Assessment Act 1936; Section 108‑15 of the Income Tax Assessment Act 1997 does not apply to a collectable you own that you last acquired before 16 December 1995. (1) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWA of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑J of the Income Tax Assessment Act 1997. (2) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZF of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑L of the Income Tax Assessment Act 1997. (3) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZZPE of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑C of the Income Tax Assessment Act 1997. (4) Subsection 108‑75(2) of the Income Tax Assessment Act 1997 applies to a roll‑over under former section 160ZWC of the Income Tax Assessment Act 1936 in the same way that it applies to a roll‑over under Subdivision 124‑K of the Income Tax Assessment Act 1997. > Note: This provision covers the case where the roll‑over occurred in the 1997‑98 income year or an earlier one and the relevant CGT event in the 1998‑99 income year or a later one. Despite section 108‑85 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the improvement threshold for the 1998‑99 income year: (a) the circumstances specified in the second column of the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 for CGT event E1, E2 or E3 happened in relation to an asset before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994; and (b) the trustee that owned the asset just after those circumstances happened also owned it at all times from then until the start of the trustee’s 1998‑99 income year; the question whether those circumstances resulted in an acquisition of an asset by the trustee is to be determined under the Income Tax Assessment Act 1936 as in force just before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (2) The acquisition rule for CGT event E9 (about an entity creating a trust over future property) in the table in subsection 109‑5(2) of the Income Tax Assessment Act 1997 does not apply to you as trustee if the agreement to create the trust was made before 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. For the purpose of working out the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the cost base includes indexation only if the company or organisation chooses that the cost base includes indexation. Despite subsection 110‑35(2) of the Income Tax Assessment Act 1997, expenditure for professional advice about taxation incurred before 1 July 1989 does not form part of the cost base of a CGT asset. (b) to which paragraph 112‑20(2)(b) or (c), or item 5 or 6 in the table in subsection 112‑20(3), of the Income Tax Assessment Act 1997 would apply (apart from this section); > Note: This section preserves the pre‑16 August 1989 position for, among other things, shares or units issued or allotted to you by allowing the market value substitution rule to apply. (1) This section affects how to work out a capital gain or capital loss you make from a CGT event that happens to a CGT asset after 31 December 1990 if: (a) before 1 January 1991, you used the asset (other than on a prior holding of it) solely for the purpose of producing exempt income, and principally for the purpose of producing exempt income to which former paragraph 23(o) or former subsection 23C(1) of the Income Tax Assessment Act 1936 (about income from producing or selling gold) applied; and (2) For the purposes of working out a capital gain you make from the CGT event, if the asset’s market value at the end of 31 December 1990 was more than its cost base at that time, the first element of its cost base at that time is that market value. (4) If the asset’s market value at the end of 31 December 1990 was less than its reduced cost base at that time, the first element of its reduced cost base at that time is that market value. (a) treat your notional deductions (within the meaning of Subdivision B or C of former Division 16H of Part III of the Income Tax Assessment Act 1936) as amounts you have deducted; and Indexation is not relevant to the capital gain of a life insurance company or a registered organisation from a CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the cost base include indexation for the purposes of the Income Tax Assessment Act 1997. (2) A capital gain or capital loss you make from the interest is disregarded if the first element of its cost base is $500 or less. (1) Disregard a capital gain or capital loss you make from a CGT event happening in relation to pilot plant, as defined in former subsection 73B(1) of the Income Tax Assessment Act 1936: (iii) the change of ownership constituting the disposal occurred after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999. (1) None of the amendments made by Part 1 of Schedule 1 to the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Act 2019 apply in relation to a capital gain or capital loss you make from a CGT event if: (2) For the purposes of paragraph (1)(b), treat the ownership interest in the dwelling as having been held by you during a time during which the interest was held by: (a) in relation to sections 118‑195 to 118‑210 of the Income Tax Assessment Act 1997—the deceased or the trustee of the deceased estate; or (a) that acquired an ownership interest in a dwelling as trustee of a deceased estate on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996; or (2) Item 1 in the table in subsection 118‑195(1) of the Income Tax Assessment Act 1997 applies to the entity in relation to the dwelling as if that item required the dwelling to be the deceased’s main residence throughout the deceased’s ownership period. Despite section 118‑260 of the Income Tax Assessment Act 1997, the Commissioner is entitled to publish the business exemption threshold for the 1998‑99 income year: If you were retaining records under former section 160ZZU of the Income Tax Assessment Act 1936 for an asset, you must continue to retain them in accordance with Division 121 of the Income Tax Assessment Act 1997. (1) A superannuation fund to which former subsection 160ZZU(6A) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year must keep the records referred to in that subsection, and retain them until the end of 30 June 2002. (2) A superannuation fund to which former subsection 160ZZU(6B) of the Income Tax Assessment Act 1936 applied just before the start of the 1998‑99 income year in relation to a CGT asset must keep the records referred to in that subsection for the asset, and retain them until the end of 5 years after CGT event A1, B1, C1, C2, G1 or G3 happens in relation to the asset. (3) Subsection (1) or (2) does not require a fund to retain records if the Commissioner notifies the fund that the retention of the records is not required. (i) your ownership of one or more statutory licences (each of which is an original licence) ends, resulting in CGT event C2 happening to the licence (or to each of the licences as part of an arrangement); and (ii) you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and (c) if there was more than one original licence—at least one of the original licences was covered under subsection (2); and (f) the original licence (or at least one of the original licences) has an ineligible part (as described in section 124‑150 of the Income Tax Assessment Act 1997). (a) an aquifer access licence under the Water Management Act 2000 of New South Wales issued in accordance with the New South Wales Achieving Sustainable Groundwater Entitlements program (the ASGE program); or (1) For an original licence that has an ineligible part, the cost base of the ineligible part is the cost base of the original licence multiplied by the amount worked out under the formula: ![Start formula start fraction Total ineligible proceeds over Total ineligible proceeds plus Value of new licence end fraction end formula](image.007.png) > total ineligible proceeds is the total of the ineligible proceeds (as described in section 124‑150 of the Income Tax Assessment Act 1997) in relation to all of the original licences that have an ineligible part. (a) if the new licence is an aquifer access licence mentioned in paragraph 124‑40(3)(a)—the 2002 value assigned under the ASGE program to the new licence; or (2) The regulations may specify one or more ways of working out the value of a licence (other than an aquifer access licence mentioned in paragraph 124‑40(3)(a)) for the purposes of this section. (3) For an original licence that has an ineligible part, the reduced cost base of the ineligible part is the reduced cost base of the original licence multiplied by the amount worked under the formula set out in subsection (1). (1) The first element of the cost base and reduced cost base of the new licence that is covered under subsection 124‑140(3) is the total of the cost bases of the original licences. > Note: For the purposes of this section, the cost base of each original licence that has an ineligible part is reduced in accordance with subsection 124‑150(4) of the Income Tax Assessment Act 1997. (c) subsection 124‑165(2) of the Income Tax Assessment Act 1997 applies in relation to the new licence that is covered under subsection 124‑140(3) (splitting that licence into 2 separate CGT assets). (4) For the purposes of subsection (2), treat the asset that is taken under paragraph 124‑165(2)(a) of that Act to have been acquired on or after 20 September 1985 as a new licence that is covered under subsection 124‑140(3) of this Act. (5) Work out the first element of the cost base and reduced cost base of that asset in accordance with subsection 124‑165(3) of that Act. Subdivision 124‑I of the Income Tax Assessment Act 1997, as amended by Schedule 2 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012, applies to CGT events happening after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. Despite the amendment of section 125‑75 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (1) of that section continues to apply, from the commencement of that Schedule, to each ownership interest that it applied to just before that commencement. (a) the transferee acquired the asset from another superannuation fund in circumstances to which former section 160ZZPI of the Income Tax Assessment Act 1936 applied; and (2) The first element of the cost base of the asset in the hands of the transferee (at the time the transferee acquired the asset) is the asset’s cost base (in the hands of the other fund) at that time. (a) a CGT event happens because all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (b) the originating company and the recipient company were members of the same wholly‑owned group just before the transfer; and (ii) if the originating company and the recipient company are members of the same consolidated group or consolidatable group and the head company of that group has a substituted accounting period—before the end of the head company’s income year in which 30 June 2004 occurs. (2) The CGT asset involved (the roll‑over asset) must not be trading stock of the recipient company just after the time of the transfer. (a) the roll‑over asset is a right or convertible interest referred to in Division 130, or an option referred to in Division 134, of the Income Tax Assessment Act 1997 or an exchangeable interest; and (b) the recipient company acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest; (2) The first element of the cost base of the original asset or the replacement asset for the recipient company is the cost base of the original asset for the originating company just before the time of the CGT event. (3) The first element of the reduced cost base of the original asset or the replacement asset for the recipient company is worked out similarly. (4) For a case where the originating company creates a CGT asset in the recipient company, the first element of the asset’s cost base (in the hands of the recipient company) is the amount applicable under this table. The first element of its reduced cost base is worked out similarly. <table cellspacing="0" cellpadding="0" style="width:362.55pt; border-collapse:collapse"><thead><tr><td colspan="2" style="width:351.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Creating a CGT asset</td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">CGT event number</td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Applicable amount</td></tr></thead><tbody><tr><td style="width:50.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">D1</td><td style="width:290.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">the incidental costs the originating company incurred that relate to the CGT event</td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">D2</td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">the expenditure the originating company incurred to grant the option</td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">D3</td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">the expenditure the originating company incurred to grant the right</td></tr><tr><td style="width:50.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">F1</td><td style="width:290.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">the expenditure the originating company incurred on the grant, renewal or extension of the lease</td></tr></tbody></table> ``` (5) If the originating company acquired the original asset before 20 September 1985, the recipient company is taken to have acquired the original asset or the replacement asset before that day. A reference in an Act to a roll‑over under Subdivision 126‑B of the Income Tax Assessment Act 1997 includes a reference to a roll‑over under this Subdivision. (a) CGT event J1 may happen if the recipient company stops being a 100% subsidiary of a member of a company group after a roll‑over under this Subdivision; and The rule in item 3 in the table in subsection 128‑15(4) of the Income Tax Assessment Act 1997 (about a dwelling that was your main residence just before you died and was not being used for the purpose of producing assessable income) does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996. (b) on or before the day specified in subsection (2) or (3), the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. (b) you work out the cost base and reduced cost base of the bonus equities under subsection 130‑20(3) of that Act regardless of whether any part of the amount owed to you by the company is a dividend. (3) The rule in item 2 of the table in subsection 130‑20(3) of the Income Tax Assessment Act 1997 does not apply if the bonus equities were issued on or before 1 pm, by legal time in the Australian Capital Territory, on 10 December 1986 and you were required to pay or give something for them. Instead, you are taken to have acquired the bonus equities when you acquired the original equities. (1) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company before 16 August 1989) to acquire shares, or options to acquire shares, in that company, only if you were a shareholder of that company. (2) The modifications in section 130‑40 of the Income Tax Assessment Act 1997 apply to you for rights (issued to you by a company after 15 August 1989 and before the start of the 1993‑94 income year) to acquire shares, or options to acquire shares in the company because you were a shareholder of another company, only if the companies were members of the same wholly‑owned group for the whole of the income year in which the issue occurred. (3) The modification in item 3 of the table in section 130‑40 of the Income Tax Assessment Act 1997 applies also to your exercise of rights (that you acquired before 20 September 1985) to acquire shares, or options to acquire shares, in a company. (1) The modification in item 1 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares or units in a unit trust you acquire by converting a convertible note (that is a traditional security) that you acquired after 10 May 1989 and before 16 August 1989. Instead, the first element of the cost base and reduced cost base of the shares or units is the sum of: (2) The modification in item 2 of the table in subsection 130‑60(1) of the Income Tax Assessment Act 1997 does not apply to shares you acquire by converting a convertible note (that is not a traditional security) that you acquired before 20 September 1985 where you paid or gave something in relation to the conversion. Instead, the first element of the cost base and reduced cost base of the shares is the sum of: (3) Subsection 130‑60(2) of the Income Tax Assessment Act 1997 does not apply to the acquisition of shares by the conversion of a convertible note that you acquired before 20 September 1985 if you did not pay or give anything in relation to the conversion. Instead, you are taken to have acquired them when you acquired the convertible note. (1) The modification in item 1 in the table in subsection 134‑1(1) of the Income Tax Assessment Act 1997 does not apply to an option (that was granted before 20 September 1985 and exercised after that day) that binds the grantor to create (including grant or issue) or dispose of a CGT asset. Instead, the first element of the cost base and reduced cost base of the CGT asset acquired by the grantee by exercising the option includes the market value of the option when it was exercised. (b) it acquired the asset as a result of a disposal (for the purposes of former Part IIIA of the Income Tax Assessment Act 1936) for which there was a roll‑over under former section 160ZZN or 160ZZO of that Act; and (ii) an entity that was a trustee of a trust that was not a resident trust estate, or a resident unit trust, for the purposes of that Act. You make adjustments to the cost base and reduced cost base of shares under Division 140 of the Income Tax Assessment Act 1997 only in relation to schemes where the decrease in market value and increase in market value occur after 12 noon, by legal time in the Australian Capital Territory, on 12 January 1994. (a) the company concerned buys back the shares after 7.30 pm, by legal time in the Australian Capital Territory, on 9 May 1995; and (b) the buy back is not done under an arrangement that is an excluded transitional arrangement within the meaning of subitem 12(2) of Schedule 1 of the Taxation Laws Amendment Act (No 1) 1996. (c) the entity was taken to have acquired on a day (the acquisition day) on or after 20 September 1985 under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (b) the first element of the cost base and reduced cost base of the asset on the acquisition day is the amount for which the entity is taken to have acquired it under Division 20 of former Part IIIA of the Income Tax Assessment Act 1936. (a) you chose a roll‑over under Subdivision 152‑E of the Income Tax Assessment Act 1997 (or under former Division 123 of that Act) for a capital gain you made for an income year from a CGT event that happened in relation to a CGT asset before the commencement of this section; and (c) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose that roll‑over. (3) If you acquired a replacement asset within the period (the replacement asset period) ending 2 years after the last CGT event in the income year for which you obtained the roll‑over but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. (a) you made a capital gain for an income year from a CGT event that happened before the commencement of this section; and (c) at the commencement of this section, you have not acquired a replacement asset but the replacement asset period had not expired; and (d) assuming that you had acquired a replacement asset before the CGT event, you would have been entitled to choose a roll‑over under Subdivision 152‑E of that Act. (3) If you acquired a replacement asset within the replacement asset period but the total of the first and second elements of the cost base of that asset is less than the amount of the capital gain that would, apart from this subsection, be disregarded, the amount to be disregarded is that total. (4) However, if you do not acquire a replacement asset within the replacement asset period, that Act applies to you as if you had never chosen the roll‑over, and the capital gain is not disregarded. Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment made before the commencement of this section at any time in the period of 4 years starting at that commencement for the purpose of giving effect to this Division. Subdivision 165‑CA of the Income Tax Assessment Act 1997 (about companies applying net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 165‑CB of the Income Tax Assessment Act 1997 (about companies working out the net capital gain and the net capital loss for the income year of the change) applies to assessments for the 1998‑99 income year and later income years. A choice under section 165‑115E of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an unrealised net loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: A choice under section 165‑115U of the Income Tax Assessment Act 1997 to use the global method of working out whether a company has an adjusted unrealised loss at a particular time must be made within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if: (1) A notice under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 must be given within 6 months after the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent if the alteration time is before that day. (2) If, because of amendments made by Schedule 14 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002, a notice already given under subsection 165‑115ZC(4) or (5) of the Income Tax Assessment Act 1997 before the day referred to in subsection (1) of this section no longer complies with section 165‑115ZC of the Income Tax Assessment Act 1997, the entity required to give the notice may comply with that section 165‑115ZC by giving a further notice. (a) must vary the notice referred to in subsection (2) in such a way (which may include setting out additional information) that the notice as varied complies with section 165‑115ZC of the Income Tax Assessment Act 1997 as affected by the amendments; and (b) must be given within the 6 months referred to in subsection (1) of this section, or within a further period allowed by the Commissioner; and (a) the alteration time mentioned in section 165‑115ZC of the Income Tax Assessment Act 1997 is after 10 November 1999 and before 1 July 2004; and (b) apart from this section, subsection 165‑115ZC(4) or (5) of that Act would require an entity (the notifying entity) to give a notice to another entity (the receiving entity) in relation to the alteration time; and (c) just before the alteration time, the notifying entity and the receiving entity were both members of the same consolidatable group or potential MEC group. (5) Subsections 165‑115ZC(4) and (5) of the Income Tax Assessment Act 1997 do not apply to the notifying entity if both it and the receiving entity became members of the same consolidated group or MEC group before 1 July 2004. (6) Even if subsection (5) does not apply, the notifying entity is not required to give the notice to the receiving entity before the end of 6 months after the commencement of this subsection. (1) This section affects how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply to an interest (the equity) in, or a debt owed by, a company if apart from this section, a loss (the realised loss): (b) would be so realised but for Subdivision 170‑D of that Act (which defers realisation of capital losses and deductions); and the company chose to use the global method of working out whether it had an adjusted unrealised loss at the last alteration time: (i) if the company was a loss company at that alteration time—a relevant equity interest, or a relevant debt interest, that an entity had in the company; or (e) that last alteration time is before the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent; and (f) the entity that owns the equity or debt immediately before the realisation event chooses to apply this section to the equity or debt, in relation to that last alteration time, instead of section 165‑115ZD of the Income Tax Assessment Act 1997; and (ii) the day on which the entity lodges its income tax return for the income year in which the realisation event occurred; (2) In addition to any application to the equity or debt, in relation to that last alteration time, that sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 have apart from this section, those sections apply (and are taken always to have applied) to the equity or debt, in relation to that last alteration time, as if: (a) the company had an adjusted unrealised loss at that time equal to the realised loss (see subsection (1) or (5), as appropriate, of this section) of this section, except so much of the loss as it is reasonable to conclude is attributable to none of these: (i) a notional capital loss, or a notional revenue loss, that the company has at that last alteration time in respect of a CGT asset; (ii) a trading stock decrease in relation to that time for a CGT asset that was trading stock of the company at that time; and (3) For the purposes of how sections 165‑115ZA and 165‑115ZB of the Income Tax Assessment Act 1997 apply because of this section, the adjustment amount under section 165‑115ZB of that Act is to be worked out and applied in accordance with subsection 165‑115ZB(6) (the non‑formula method) of that Act. (a) a notice need not be given under section 165‑115ZC of the Income Tax Assessment Act 1997 because of this section; and (b) this section does not affect the requirements that apply to a notice that otherwise must be given under that section. (5) If the equity or debt is a revenue asset at the time of the realisation event, subsection (2) applies on the basis that the realised loss is the total of: (a) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a CGT asset; and (b) the loss (if any) realised for income tax purposes by the realisation event happening to the equity or debt in its character as a revenue asset. Subdivision 165‑C of the Income Tax Assessment Act 1997 (about companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. Subdivision 166‑C of the Income Tax Assessment Act 1997 (about listed public companies deducting bad debts) applies to assessments for the 1998‑1999 income year and later income years. (ii) that could have been deducted, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the deduction had not been limited by the company’s income for that income year; and (ii) that could have been applied, in accordance with Divisions 165 and 166 of that Act as in force at that time, in the first income year commencing after 30 June 2002 if the application of the loss had not been limited by the company’s capital gains for that income year. 170‑C Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred #### 170‑45 Special rules affecting utilisation of losses in a bundle do not affect the amount of a tax loss that can be transferred In working out an amount under subsection 170‑45(4) of the Income Tax Assessment Act 1997 (which may limit the amount of a tax loss that can be transferred under Subdivision 170‑A of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑55 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑A of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred Subdivision 170‑B of the Income Tax Assessment Act 1997 (about transfer of net capital losses within wholly‑owned groups of companies) applies to assessments for the 1998‑99 income year and later income years. #### 170‑145 Special rules affecting utilisation of losses in a bundle do not affect the amount of a net capital loss that can be transferred In working out an amount under subsection 170‑145(7) of the Income Tax Assessment Act 1997 (which may limit the amount of a net capital loss that can be transferred under Subdivision 170‑B of that Act), disregard these sections of this Act: (b) section 707‑327 (which effectively lets the available fraction relevant to the utilisation of a loss be chosen in some cases); #### 170‑155 Ordering rule for losses previously transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 If 2 or more losses that a company can transfer for an income year under Subdivision 170‑B of the Income Tax Assessment Act 1997 were previously transferred to it under Subdivision 707‑A of that Act, it must transfer first those losses (if any) covered by subsection 707‑350(1). #### Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies Any reduction in the cost base and reduced cost base of a share or in the reduced cost base of a debt that has been made or is required to be made under former subsection 160ZP(13) of the Income Tax Assessment Act 1936 (as that subsection applied from time to time) is taken to have been made or to be required to be made under section 170‑220 of the Income Tax Assessment Act 1997. Any increase in the cost base and reduced cost base of a share or debt that has been made or is authorised to be made under former subsections 160ZP(14) and (15) of the Income Tax Assessment Act 1936 (as those subsections applied from time to time) is taken to have been made or to be authorised to be made under section 170‑225 of the Income Tax Assessment Act 1997. If: (a) all or part of the life insurance business of a life insurance company (the originating company) is transferred to another life insurance company (the recipient company): (i) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or (d) that capital loss were a net capital loss transferred by the originating company to the recipient company by an agreement under section 170‑150 of that Act; and (e) the application year referred to in section 170‑225 of that Act were the year in which the transfer of life insurance business took place. Subdivision 175‑CA of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused net capital losses of earlier income years) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑CB of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused capital losses of the current income year) applies to assessments for the 1998‑99 income year and later income years. Subdivision 175‑C of the Income Tax Assessment Act 1997 (about companies obtaining tax benefits from unused bad debt deductions) applies to assessments for the 1998‑99 income year and later income years. > introduction day means the day on which the Bill for the Act that added this Division was introduced into the Parliament. Subject to Subdivision 197‑C of this Division, new Division 197 applies to transfers made into a company’s share capital account after the introduction day. #### Subdivision 197‑C—Special provisions about companies whose share capital accounts were tainted when old Division 7B was closed off 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting #### 197‑10 Subdivision applies to companies whose share capital accounts were tainted when old Division 7B was closed off This Subdivision applies to a company if, immediately before the old Division 7B close‑off day, the company’s share capital account was tainted under old Division 7B. (1) The company’s share capital account is taken to have ceased to be tainted under old Division 7B at the start of the Division 7B close‑off day. (2) No liability to untainting tax, and no franking debit, arises under old Division 7B in relation to the share capital account being taken to have ceased to be tainted. #### 197‑20 After introduction day, account taken to have become tainted under new Division 197 to extent of previous tainting (1) Immediately after the introduction day, the company’s share capital account is taken to become tainted under new Division 197 as if: (a) the company had, at that time, transferred an amount (the notionally transferred amount) to its share capital account from another of its accounts that equalled the tainting amount (the old Division 7B tainting amount), within the meaning of old Division 7B, in relation to the share capital account immediately before the old Division 7B close‑off day; and (b) none of the exclusions in sections 197‑10 to 197‑40 of new Division 197 applied, to any extent, in relation to the notionally transferred amount. (2) No franking debit arises under Subdivision 197‑B of new Division 197 in relation to the notionally transferred amount. (1) This section applies if, after the introduction day, the company chooses under section 197‑55 of new Division 197 to untaint its share capital account. (2) For the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. > Note 2: If the company is covered by subsection (6), the old Division 7B tainting amount components will not be included in the tainting amount for the purpose of section 197‑60. (3) For the purpose of section 197‑60 of new Division 197, a reference to the section 197‑45 franking debit that arose in relation to an old Division 7B tainting amount component is taken to be a reference to the tax‑paid‑basis franking debit amount in relation to that component (see subsection (4)). (4) For the purpose of subsection (3), the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula: ![Start formula open bracket Class A franking debit times start fraction 39 over 61 end fraction close bracket plus open bracket Class C franking debit times start fraction 30 over 70 end fraction close bracket end formula](image.008.png) > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. (5) The company is not liable to untainting tax under section 197‑60 of new Division 197 in relation to the choice to untaint if: (a) during the period from the time when the company’s share capital account became tainted under old Division 7B to the time when the choice to untaint is made, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); and (b) the tainting amount for the purpose of section 197‑60 of new Division 197 does not include any amounts of the kind mentioned in paragraph (2)(b) of this section. (a) the tainting amount for the purpose of section 197‑60 of new Division 197 consists of or includes an amount or amounts of the kind mentioned in paragraph (2)(b) of this section; and (b) during the period from the time when the company’s share capital account became tainted to the time when the amount, or the first of the amounts, referred to in paragraph (a) of this subsection was transferred into the company’s share capital account, the company was a company with only lower tax shareholders (as defined in subsection 197‑60(1) of new Division 197); then, despite subsection (2) of this section, for the purpose of section 197‑60 of new Division 197, the tainting amount at the time of the choice to untaint does not include the old Division 7B tainting amount components. (7) For the purpose of section 197‑65 of new Division 197, the tainting amount at the time of the choice to untaint is taken to consist of: (b) any amounts to which new Division 197 applies that have been transferred to the company’s share capital account since the introduction day and before the choice to untaint is made. (8) Paragraph 197‑65(1)(b) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the following paragraph (the notionally substituted paragraph) were substituted for it: (b) the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component is less than the amount calculated by the formula in subsection 197‑65(3) in relation to the component. (9) Subsection 197‑65(3) of new Division 197 has effect in relation to each old Division 7B tainting amount component as if the reference to the amount of the franking debit that arose under section 197‑45 in relation to the transferred amount were instead a reference to the tax‑paid‑basis franking debit amount in relation to the old Division 7B tainting amount component. (10) For the purpose of the notionally substituted paragraph, and of subsection (9) of this section, the tax‑paid‑basis franking debit amount, in relation to an old Division 7B tainting amount component, is the amount worked out in accordance with the formula: ![Start formula open bracket Class A franking debit times start fraction 39 over 61 end fraction close bracket plus open bracket Class C franking debit times start fraction 30 over 70 end fraction close bracket end formula](image.008.png) > class A franking debit means the class A franking debit (if any) that arose under section 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. > class C franking debit means the class C franking debit that arose under section 160ARDQ or 160ARDV of old Division 7B in relation to the old Division 7B tainting amount component. Former Part IIIAA of the Income Tax Assessment Act 1936 does not apply to any of the following acts if it is done on or after 1 July 2002: (b) lodging an application with the Commissioner for a determination of an estimated debit in substitution for an earlier determination; (c) a determination by the Commissioner of an estimated debit (including a determination in substitution for an earlier determination); (e) the deemed determination of an estimated debit in accordance with an application (including an application for a determination in substitution for an earlier determination); (f) the deemed service of notice of a determination on a company (including service of notice of a determination in substitution for an earlier determination). Where, but for this section, 1 July 2002 would fall within a franking period for a corporate tax entity, but would not be the first day of the franking period, the franking period: 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If a company has a franking account under former Part IIIAA of the Income Tax Assessment Act 1936 (the old account) at the end of 30 June 2002, the old account is closed off and an opening balance is created in the company’s franking account under section 205‑10 as follows: (a) any estimated debits in the old account at the end of 30 June 2002 are washed out of the account under section 205‑5; and (i) in the case of a company whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑10 to a tax paid basis; and (ii) in the case of a company whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the company’s franking account balances are converted under section 205‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment Act 1936, the termination time in relation to an estimated debit of a company would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. > Note: A franking credit of the appropriate class equal to the debit will arise under former section 160APU of that Act at the beginning of 30 June 2002. #### 205‑10 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If the company has a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002: (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from a franking surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Conversion of 1936 Act franking surplus into 1997 Act franking credit</td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Item</td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Franking surplus</td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Franking credit generated under paragraph (2)(b)</td></tr></thead><tbody><tr><td style="width:23.5pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">1</td><td style="width:87.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class A franking surplus</td><td style="width:220.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.009.png" width="175" height="58" alt="Start formula Amount of the class A franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 39 over 61 end fraction end formula"></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">2</td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class B franking surplus</td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.010.png" width="190" height="56" alt="Start formula Amount of the class B franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 33 over 67 end fraction end formula"></td></tr><tr><td style="width:23.5pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">3</td><td style="width:87.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class C franking surplus</td><td style="width:220.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.011.png" width="190" height="56" alt="Start formula Amount of the class C franking surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula"></td></tr></tbody></table> ``` #### 205‑15 Converting the franking account balance to a tax paid basis—companies whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to companies whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (2) If, but for this subsection, the company would have a franking surplus of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original surplus): (a) a franking debit equal to the surplus is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking credit arises on 1 July 2002 in the franking account established under section 205‑10 of the Income Tax Assessment Act 1997 (the 1997 Act) for the company. (3) The franking credit generated under paragraph (2)(b) from an original surplus of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Conversion of 1936 Act franking surplus into 1997 Act franking credit</td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Item</td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Original surplus</td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Franking credit generated under paragraph (2)(b)</td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">1</td><td style="width:85.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class A</td><td style="width:220.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.012.png" width="169" height="38" alt="Start formula Amount of the original class A surplus times start fraction 39 over 61 end fraction end formula"></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">2</td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class B</td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.013.png" width="169" height="38" alt="Start formula Amount of the original class B surplus times start fraction 33 over 67 end fraction end formula"></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">3</td><td style="width:85.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class C</td><td style="width:220.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.014.png" width="169" height="38" alt="Start formula Amount of the original class C surplus times start fraction 30 over 70 end fraction end formula"></td></tr></tbody></table> ``` (4) If, but for this subsection, the company would have a franking deficit of a particular class under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (an original deficit): (a) a franking credit equal to the deficit is taken to arise for the company under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a franking debit arises on 1 July 2002 in the franking account established under section 205‑10 of the 1997 Act for the company. (5) The franking debit generated under paragraph (4)(b) from an original deficit of a class specified in column 2 of the following table is worked out using the formula in column 3 of the table for that class. <table cellspacing="0" cellpadding="0" style="width:364.65pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:353.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Conversion of 1936 Act franking deficit into 1997 Act franking debit</td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Item</td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Original deficit</td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Franking debit generated under paragraph (4)(b)</td></tr></thead><tbody><tr><td style="width:26.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">1</td><td style="width:70.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class A</td><td style="width:235.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.015.png" width="164" height="38" alt="Start formula Amount of the original class A deficit times start fraction 39 over 61 end fraction end formula "></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">2</td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class B</td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.016.png" width="164" height="38" alt="Start formula Amount of the original class B deficit times start fraction 33 over 67 end fraction end formula"></td></tr><tr><td style="width:26.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">3</td><td style="width:70.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">class C</td><td style="width:235.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><img src="image.017.png" width="164" height="38" alt="Start formula Amount of the original class C deficit times start fraction 30 over 70 end fraction end formula"></td></tr></tbody></table> ``` (2) A corporate tax entity’s liability to pay franking deficit tax is determined under sections 205‑25 and 205‑30 of this Act (the transitional provisions), and not under sections 205‑45 and 205‑50 of the Income Tax Assessment Act 1997 (the ongoing provisions), if: (c) the entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions. (3) The entity makes a valid election to have its liability to pay franking deficit tax determined under the transitional provisions if: (b) the election is made on the day on which liability for franking deficit tax would be determined under those provisions, or earlier than that day but in the income year in which that day occurs; and (1) While recognising that an entity may anticipate franking credits when franking distributions, the object of this section is to prevent those credits from being anticipated indefinitely by requiring the entity to reconcile its franking account at certain times and levying tax if the account is in deficit. (2) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if its franking account is in deficit at the end of 30 June in the year 2003 or a later year. (3) An entity is liable to pay franking deficit tax imposed by the New Business Tax System (Franking Deficit Tax) Act 2002 if: > Note: The tax is imposed in the New Business Tax System (Franking Deficit Tax) Act 2002 and the amount of the tax is set out in that Act. (1) The object of this section is to ensure that an entity does not avoid franking deficit tax by deferring the time at which a franking debit occurs in its franking account. (a) a corporate tax entity receives a refund of income tax within 3 months after 30 June in the year 2003 or a later year; and (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, at the end of 30 June in that year if the refund had been received immediately before that time; (3) If an entity ceases to be a franking entity during a period of 12 months ending on 30 June in the year 2003 or a later year, a refund of income tax is taken to have been paid to it immediately before it ceased to be a franking entity, for the purposes of subsection 205‑25(3), if: (c) the franking account of the entity would have been in deficit, or in deficit to a greater extent, immediately before it ceased to be a franking entity, if the refund had been received before it ceased to be a franking entity. #### 205‑35 No franking deficit tax if franking account in deficit at the close of the 2001‑02 income year of a late balancing entity If: the entity is not liable to pay franking deficit tax under subsection 205‑45(2) of the Income Tax Assessment Act 1997 because the account is in deficit at that time. (1) Section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to a corporate tax entity’s assessments for the 2002‑2003 income year and later income years, except as provided in the following subsections. (2) If a corporate tax entity’s 2001‑2002 income year ends after 30 June 2002, section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred before 30 June 2003. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that date. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after 30 June 2003. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) and was incurred in the 2001‑2002 income year. Step 6. Add up the results of steps 1, 2, 3, 4 and 5. The result is the tax offset to which the entity is entitled under this section for the relevant year. section 205‑70 of the Income Tax Assessment Act 1997 has effect in relation to the entity’s assessment for that income year as if the following method statement had replaced the method statement in that section. Step 1. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred on or before the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 2. Work out the total amount of franking deficit tax that is covered by paragraph (1)(a) and was incurred after the 30 June in the relevant year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in the relevant year. Step 3. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred on or before the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account during the period of 12 months immediately preceding that 30 June. Step 4. Work out the total amount of franking deficit tax that is covered by paragraph (1)(b) in relation to a previous income year and was incurred after the 30 June in that income year. Then reduce it by 30% if it exceeds 10% of the total amount of franking credits that arose in the entity’s franking account after that date and before the end of the last day on which the entity incurred a franking deficit tax liability in that income year. Step 7. Add up the results of steps 1, 2, 5 and 6. The result is the tax offset to which the entity is entitled under this section for the relevant year. (5) If a franking credit has been taken into account previously in reducing an amount worked out under a step in the method statement in: that credit is not to be taken into account again in reducing another amount worked out under a step in such a method statement. (6) The 30% reductions for an entity in steps 2 and 3 of the method statement in subsection (3), and in steps 1, 2, 3 and 4 of the method statement in subsection (4), apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (7) The 30% reductions in those steps do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (2) The 30% reductions for an entity in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 apply only to franking deficit tax that is attributable to franking debits of the entity: (a) that arose under table item 1, 3, 5 or 6 in section 205‑30 of the Income Tax Assessment Act 1997 for the relevant income year; and (b) if the entity has franking debits covered by paragraph (a) for the relevant income year—that arose under table item 2 in that section of that Act for the relevant income year. (3) The 30% reductions in steps 1 and 2 of the method statement in subsection 205‑70(2) of the Income Tax Assessment Act 1997 do not apply in working out the amount of the tax offset to which an entity is entitled for the relevant year if the Commissioner determines in writing, on application by the entity in the approved form, that the excess referred to in those steps was due to events outside the control of the entity. (i) are covered by paragraph (1)(a) of former section 160AQK or of former section 160AQKAA (as appropriate) of the Income Tax Assessment Act 1936; and (a) so much of the relevant liabilities as were incurred by the entity during the first income year were liabilities to pay franking deficit tax under that Act; and (b) so much of the relevant liabilities as were incurred by the entity before the start of the first income year were the excess mentioned in paragraph (1)(c) of that section. (a) whether or not the entity is entitled to a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 for the first income year or a later income year; and (1) This section applies if Subdivision C of Division 5 of former Part IIIAA of the Income Tax Assessment Act 1936 would, apart from former section 160AOAA of that Act, apply in relation to an entity’s assessment for a year of income that ends before 1 July 2002. (a) the making of a determination under that Subdivision on or after that date for an offset to reduce the entity’s income tax liability for that year of income; and (3) However, in working out the amount of that offset, any liabilities to pay franking deficit tax or deficit deferral tax that have been taken into account in working out a tax offset under section 205‑70 of the Income Tax Assessment Act 1997 must be disregarded. (1) This section has effect for the purposes of working out the following for a company that was a former exempting company (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) whether the company has an exempting surplus or an exempting deficit for the purposes of the Income Tax Assessment Act 1997 at a time after 30 June 2002; (2) If the company had a class A exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class A exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (3) If the company had a class C exempting surplus (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002: (a) a class C exempting debit equal to the surplus is taken to have arisen immediately before the end of 30 June 2002 for the purposes of that Part; and (b) an exempting credit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: Section 205‑5 (with former sections 160APU and 160AQCNM of the Income Tax Assessment Act 1936) may affect whether the company had such a surplus at the end of 30 June 2002 and the amount of that surplus, but this section does not (because this section affects the company’s exempting account balance only after then). (4) If the company had a class A exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class A exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class A exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. (5) If the company had a class C exempting deficit (as defined in former Part IIIAA of the Income Tax Assessment Act 1936) at the end of 30 June 2002 and its 2001‑02 franking year (as defined in that Part) ended earlier: (a) a class C exempting credit equal to the deficit is taken to have arisen at the end of 30 June 2002 for the purposes of that Part; and (b) an exempting debit of the amount worked out using the formula is taken to have arisen at the start of 1 July 2002 in the exempting account that the company has under section 208‑110 of the Income Tax Assessment Act 1997: > Note: If the company’s 2001‑02 franking year ended at the end of 30 June 2002 and it would have had a class C exempting deficit at that time apart from former section 160AQCNO of the Income Tax Assessment Act 1936, that section will have eliminated the deficit and either: (b) reduced the franking credit arising under section 205‑10 of this Act in the franking account the company has under the Income Tax Assessment Act 1997. 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 The venture capital sub‑account of a PDF under former Part IIIAA of the Income Tax Assessment Act 1936 (the old sub‑account) is closed off at the end of 30 June 2002 and an opening balance is created in the PDF’s venture capital sub‑account under section 210‑100 of the Income Tax Assessment Act 1997 as follows: (a) any estimated venture capital debits in the old sub‑account at the end of 30 June 2002 are washed out of the account under section 210‑5; and (i) in the case of a PDF whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑10 to a tax paid basis; and (ii) in the case of a PDF whose 2001‑02 franking year ends before 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936—the PDF’s venture capital sub‑account balance is converted under section 210‑15 to a tax paid basis. If, under former Part IIIAA of the Income Tax Assessment act 1936, the termination time in relation to an estimated venture capital debit of a PDF would, but for this section, occur after the end of 30 June 2002, it is taken to have occurred at the end of 30 June 2002. #### 210‑10 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends on 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends on 30 June 2002 under former Part IIIAA of the Income Tax Assessment Act 1936 (the 1936 Act). (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 for the PDF. ![Start formula Amount of the venture capital surplus at the end of 30 June 2002 under the 1936 Act times start fraction 30 over 70 end fraction end formula](image.022.png) #### 210‑15 Converting the venture capital sub‑account balance to a tax paid basis—PDFs whose 2001‑02 franking year ends before 30 June 2002 (1) This section applies to PDFs whose 2001‑02 franking year ends before 20 June 2002 under former Part IIIAA of the Income Tax Assessment 1936 (the 1936 Act). (2) If, but for this subsection, the PDF would have a venture capital surplus under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original surplus): (a) a venture capital debit equal to the original surplus is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital credit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the Income Tax Assessment Act 1997 (the 1997 Act) for the PDF. (4) If, but for this subsection, the PDF would have a venture capital deficit under former Part IIIAA of the 1936 Act at the end of 30 June 2002 (the original deficit): (a) a venture capital credit equal to the original deficit is taken to arise for the PDF under former Part IIIAA of the 1936 Act at the end of 30 June 2002; and (b) a venture capital debit arises on 1 July 2002 in the venture capital sub‑account established under section 210‑100 of the 1997 Act for the PDF. This Division applies to a corporate tax entity if a liability to pay franking deficit tax arises for the entity under section 205‑25 of this Act because of events that occur within a period of 12 months ending on 30 June in any year (the balancing period). (1) The entity must give the Commissioner a franking return for the balancing period setting out the following information before the end of the month immediately following the end of the period: (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (1) The Commissioner may give the entity a written notice requiring the entity to give the Commissioner a franking return for the balancing period. (2) The entity must comply with the requirement within the time specified in the notice, or within any further time allowed by the Commissioner. (3) The entity must comply with the requirement regardless of whether the entity has given, or has been required to give, the Commissioner a return under section 214‑5. (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3) of this Act; and (c) when the refund is received, the entity does not have a franking return that is outstanding for the balancing period in which the liability arose; and (d) the entity receives the refund within the period of 14 days ending on the day by which the outstanding return must be given to the Commissioner; the entity may, instead of accounting for the liability, or increased liability, in the outstanding return, account for it in a further return given to the Commissioner within 14 days after the refund is received. (3) A franking return for a balancing period is outstanding at a particular time if each of the following is true at that time: (1) A franking return for a balancing period is in addition to any franking return that the entity is required to give to the Commissioner under Subdivision 214‑A of the Income Tax Assessment Act 1997 for the income year in which the balancing period ends. (2) However, if an entity is required to give a franking return for a balancing period, it is not required to include in its franking return for the income year in which that period ends anything that should have been included in the franking return for the balancing period. (a) if the entity is a franking entity at the end of the balancing period—its franking account balance at the end of the period; and (b) if the entity ceases to be a franking entity during the balancing period—its franking account balance immediately before it ceased to be a franking entity; and (c) the amount (if any) of franking deficit tax that the entity is liable to pay under section 205‑25 of this Act because of events that have occurred, or are taken to have occurred, during the balancing period. (a) the entity gives the Commissioner a franking return under section 214‑5 or 214‑10 of this Act on a particular day (the return day); and the Commissioner is taken to have made a franking assessment for the entity for the period on the return day, and to have assessed: (d) the entity’s franking account balance at a particular time as that stated in the return as the balance at that time; and (e) the amount (if any) of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the return. (2) The return is taken to be notice of the assessment signed by the Commissioner and given to the entity on the return day. (1) The Commissioner may amend a franking assessment for the entity for the balancing period at any time during the period of 3 years after the original assessment day for the entity for the period. (2) The original assessment day for the entity for the balancing period is the day on which the first franking assessment for the entity for the period is made. Once an amended franking assessment for the entity for the balancing period is made, it is taken to be a franking assessment for the entity for the period. (b) on a particular day (the further return day) the entity gives the Commissioner a further return for the balancing period under subsection 214‑15(1) of this Act (because the entity has received a refund of income tax that affects its liability to pay franking deficit tax); the Commissioner is taken to have amended the entity’s franking assessment on the further return day, and to have assessed: (c) the entity’s franking account balance at a particular time as that stated in the further return as the balance at that time; and (d) the amount of franking deficit tax payable by the entity because of events that have occurred, or are taken to have occurred, during the period as those stated in the further return. (2) The further return is taken to be notice of the amended assessment signed by the Commissioner and given to the entity on the further return day. The Commissioner may amend a franking assessment for the entity for the balancing period after the end of a period of 3 years after the original franking assessment day if, within that 3 year period: If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and the Commissioner may amend the assessment at any time during the period of 6 years after the original franking assessment day. If: (a) the entity does not make a full and true disclosure to the Commissioner of the information necessary for a franking assessment for the entity for the balancing period; and If: (a) a franking assessment for the entity for the balancing period has been amended (the first amendment) in any particular; and (b) the Commissioner is of the opinion that it would be just to further amend the assessment in that particular so as to reduce the assessment; In a case not covered by sections 214‑50, 214‑55, 214‑60 or 214‑65, the Commissioner may amend the franking assessment for the entity for the balancing period after the period of 3 years after the original assessment day has expired, but not so as to reduce the assessment. If the Commissioner amends the entity’s franking assessment for the balancing period, the Commissioner must give the entity notice of the amendment as soon as practicable after making the amendment. The validity of a franking assessment for the entity for the balancing period is not affected because any of the provisions of this Act (as defined in the Income Tax Assessment Act 1997) have not been complied with. If a corporate tax entity is dissatisfied with a franking assessment made in relation to the entity under this Division, the entity may object against the assessment in the manner set out in Part IVC of the Taxation Administration Act 1953. (1) Unless this section provides otherwise, franking deficit tax assessed for the entity because of events that have occurred, or are taken to have occurred, during the balancing period is due and payable on the last day of the month immediately following the end of the balancing period. (a) the Commissioner amends a franking assessment for the entity for the balancing period (the earlier assessment) other than because of the operation of section 214‑30 (an amendment because of a refund of tax that affects franking deficit tax liability); and (b) the amount of franking deficit tax payable under the amended assessment exceeds the amount of franking deficit tax payable under the earlier assessment; (b) the receipt of the refund gives rise to a liability, or an increased liability, to pay franking deficit tax because of the operation of subsection 205‑30(2) or (3); the franking deficit tax or, if there is an increase in an existing liability to pay franking deficit tax, the difference between the original liability and the increased liability, is due and payable on: (c) if the entity accounts for the liability, or increased liability, in a franking return that is outstanding for the balancing period in which the liability arose—the day on which the outstanding return is required to be given to the Commissioner; or If: Section 172 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if references in that section to tax included references to franking deficit tax. Section 264 of the Income Tax Assessment Act 1936 applies for the purposes of this Division as if the reference in paragraph (1)(b) of that section to a person’s income or assessment were a reference to a matter relevant to the administration or operation of this Division. If an expression is defined in this Division, it has the meaning given in that definition, and not the meaning given in the Income Tax Assessment Act 1997. (a) a franking credit arose before 1 July 2002 in the franking account of a life insurance company under former section 160APVJ of the Income Tax Assessment Act 1936 in relation to a PAYG instalment in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking debit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on the assessment day: (3) On the assessment day, a franking credit of the amount mentioned in item 2 of the table in section 219‑15 of the Income Tax Assessment Act 1997 arises in the new franking account in relation to a payment of the PAYG instalment mentioned in paragraph (1)(a) of this section that was made before 1 July 2002. (a) a franking debit arose before 1 July 2002 in the franking account of a life insurance company under former section 160AQCNCE of the Income Tax Assessment Act 1936 in relation to a PAYG instalment variation credit in respect of an income year; and (c) the company has a franking account (the new franking account) under section 205‑10 of the Income Tax Assessment Act 1997. (2) A franking credit of the amount worked out in accordance with the following formula is taken to have arisen in the new franking account on 1 July 2002: > Note: As the effects of former sections 160AQCNCE and 160APVN of the Income Tax Assessment Act 1936 are not duplicated in the Income Tax Assessment Act 1997, this section ensures that a debit arising under former section 160AQCNCE before 1 July 2002 is reversed on a tax paid basis on that date if it has not been reversed under former section 160APVN before that date. (b) the amendments of that Act made by Division 1 of Part 2 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003 relating to Division 220 of the Income Tax Assessment Act 1997. In determining whether an NZ franking company meets the residency requirement for the income year including 1 April 2003 regard may be had to things that happened in relation to the company before 1 April 2003. (1) A company that is an NZ resident may make an NZ franking choice that comes into force at the start of the company’s income year including 1 April 2003 by giving notice in the approved form to the Commissioner before the end of the next income year. (a) a company (the Australian company) that is an Australian resident becomes a former exempting entity at a time (the switch time) because of: (i) the period must start as soon as possible after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997 and end immediately before the switch time; (iii) the Australian company must meet either or both of the conditions in subsections (2) and (3) for the whole of the period; (2) One condition relating to the Australian company is that the company would not have been effectively owned by prescribed persons as described in sections 208‑25 to 208‑45 of the Income Tax Assessment Act 1997 if: (b) an accountable membership interest or accountable partial interest in the Australian company had, at a time in the period, been held by, or indirectly for the benefit of, a post‑choice NZ franking company if, at that time: (ii) the interest holder was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. (b) was an NZ resident or would have been one had section 220‑20 of the Income Tax Assessment Act 1997, and section 995‑1 of that Act so far as it relates to section 220‑20 of that Act, applied throughout the period. > Note: This franking credit will partly or fully offset the franking debit that arises under item 1 of the table in section 208‑145 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. > Note: This exempting debit will partly or fully offset the exempting credit that arises under item 1 of the table in section 208‑115 of the Income Tax Assessment Act 1997 because the Australian company becomes a former exempting entity at the switch time. (7) Work out the amount of the franking credit arising under subsection (5) and the exempting debit arising under subsection (6) using the table: <table cellspacing="0" cellpadding="0" style="width:365.35pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:354.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Amount of the franking credit and the exempting debit</td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Item</td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">If:</td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">The amount of the credit and debit is:</td></tr></thead><tbody><tr><td style="width:22.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">1</td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">The period starts immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997</td><td style="width:141.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">The franking surplus in the Australian company’s franking account at the switch time</td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">2</td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">Both these conditions are met:(a) item 1 does not apply;(b) the Australian company’s franking account was not in surplus at the start of the period</td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">The franking surplus in the Australian company’s franking account at the switch time</td></tr><tr><td style="width:22.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">3</td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">All these conditions are met:(a) item 1 does not apply;(b) the Australian company’s franking account was in surplus at the start of the period;(c) the surplus in the account at the switch time is greater than the surplus at the start of the period</td><td style="width:141.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top">The difference between:(a) the franking surplus in the Australian company’s franking account at the switch time; and(b) the franking surplus in the Australian company’s franking account at the start of the period</td></tr></tbody></table> ``` (a) the start of the period is not immediately after 7.30 pm by legal time in the Australian Capital Territory on 13 May 1997; and (b) the franking surplus in the Australian company’s franking account at the switch time is not greater than the franking surplus in the Australian company’s franking account at the start of the period. Subdivision 235‑I of the Income Tax Assessment Act 1997 applies to assets acquired by the trustee of an instalment trust in: (1) Division 242 of the Income Tax Assessment Act 1997 (the new Division) applies to assessments for the 2010‑11 income year and later years. (2) However, the new Division does not apply to a lease of a car if the lease was granted on or before 7.30 pm, by legal time in the Australian Capital Territory, on 20 August 1996 unless the lease was extended after that time (whether the extension took effect before or after that time). (3) The definition of luxury car in subsection 995‑1(1) of the Income Tax Assessment Act 1997 applies to a reduction under former section 57AF of the Income Tax Assessment Act 1936 or former section 42‑80 of the Income Tax Assessment Act 1997 in the same way as it applies to a reduction under section 40‑230 of the Income Tax Assessment Act 1997. Sections 242‑20 and 242‑90 of the Income Tax Assessment Act 1997 apply to an amount included in assessable income under former Subdivision 42‑F or 42‑G of the Income Tax Assessment Act 1997 and former subsection 59(2) of the Income Tax Assessment Act 1936 in the same way as they apply to an amount included in assessable income under section 40‑285 of the Income Tax Assessment Act 1997. (2) Despite the repeal of Schedule 2C to the Income Tax Assessment Act 1936, that Schedule continues to apply to debts forgiven in: (1) Subdivisions 245‑C to 245‑G of the Income Tax Assessment Act 1997 do not apply to a forgiveness of a debt if the forgiveness occurs in accordance with the terms of an arrangement that: (b) is evidenced in writing otherwise than by a document evidencing the arrangement or transaction under which the debt arose. (a) if the asset in respect of which the expenditure was incurred was disposed of by you, or was lost or destroyed, on or before 27 June 1996; or The methodology set out in this Subdivision must be used to work out how much of an amount that a borrower incurs under or in respect of a capital protected borrowing is reasonably attributable to the capital protection provided under the capital protected borrowing if the capital protected borrowing is entered into or extended at or after 9.30 am, by legal time in the Australian Capital Territory, on 16 April 2003 and before 1 July 2007. > Note: To work out how much of such an amount is reasonably attributable to the capital protection provided under a capital protected borrowing entered into on or after 1 July 2007, see Division 247 of the Income Tax Assessment Act 1997. (b) contains an explicit put option that permits the underlying investment to be sold for at least the amount borrowed or amount of credit provided and has a separate price that reasonably reflects the market value of that option; the amount that is reasonably attributable to the capital protection is the amount specified by the lender under the capital protected borrowing as the cost of the put option. (3) For a capital protected borrowing acquired on the secondary market, the amount that is reasonably attributable to the capital protection for an income year is worked out in accordance with subsection (4) or (5). (4) If the market value of the underlying security at the time of acquisition is greater than the amount of the borrowing, the amount that is reasonably attributable to the capital protection is: (a) the sum of the market value of the instalment warrant and the amount of the borrowing or amount of credit provided; less (b) the sum of the market value of the underlying security and so much of the amount incurred as is attributable to pre‑paid interest. (5) If the market value of the underlying security at the time of acquisition is equal to or less than the amount of the borrowing or amount of credit provided, the amount that is reasonably attributable to the capital protection is: (6) If the amount worked out in accordance with subsection (4) or (5) is less than nil, the amount that is reasonably attributable to the capital protection is nil. (1) If section 247‑10 does not apply, the total amount that is reasonably attributable to the capital protection for an income year is the greater of the amount worked out using section 247‑20 (the indicator method) and section 247‑25 (the percentage method). If those amounts are the same, use either one. (2) If an arrangement involves more than one amount incurred in an income year, the total amount that is reasonably attributable to the capital protection for the year is distributed pro‑rata between those amounts incurred. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) Work out the amount that would have been incurred by applying the relevant indicator rate to a borrowing or provision of credit of the same amount for the income year. (3) If the subsection (1) amount exceeds the subsection (2) amount, the excess is reasonably attributable to the capital protection for the income year. (a) for a capital protected borrowing based on a variable interest rate, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Variable Rate at the time the first payment for the income year was incurred; and (b) for another capital protected borrowing, the Reserve Bank of Australia’s Indicator Rate for Personal Unsecured Loans—Fixed Rate at the time the borrowing was entered into. (1) Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. > Note: Example: Amounts that would be ignored under subsection (1) include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (2) The amount that is reasonably attributable to the capital protection for the income year is this percentage of the total amount incurred for the income year: Step 1. Work out the total amount incurred by the borrower under or in respect of the capital protected borrowing for the income year, ignoring amounts that are not in substance for capital protection or interest. Step 2. Work out the total interest that would have been incurred for the income year on a borrowing or provision of credit of the same amount as under the capital protected borrowing at the rate applicable under either or both of subsections (2) and (3). Step 3. If the step 1 amount exceeds the step 2 amount, the excess is reasonably attributable to the capital protection for the income year. > Note: Example: Amounts that would be ignored under step 1 include amounts that are in substance the repayment of a loan or credit, the payment of an application fee or brokerage commission and the payment of stamp duty or other tax. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and use the Reserve Bank of Australia’s Indicator Lending Rate for Personal Unsecured Loans—Variable Rate (the personal unsecured loan rate) at the first time an amount covered by step 1 of the method statement in subsection (1) was incurred, in any income year, during the term of the capital protected borrowing or that part of the term. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and use the average of the personal unsecured loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing (including one covered by Subdivision 247‑A or section 247‑75): (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (5) on or after 1 July 2013. (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the rate worked out under subsection (4) at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is on or after 1 July 2013; use the average of the adjusted loan rates applicable during those parts of the income year when the capital protected borrowing is at a variable rate. (1) This section applies to a capital protected borrowing entered into at or before the 2008 Budget time (including one covered by Subdivision 247‑A or section 247‑75) where, after that time, one or both of these events occurred: (2) Work out the amount that is reasonably attributable to the capital protection using the method statement in subsection 247‑75(1) and, for step 2 in that method statement, using the rate applicable under either or both of subsections (3) and (4) from the earlier of these times: (a) the capital protected borrowing is at a fixed rate for all or part of the term of the capital protected borrowing; and (b) that fixed rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the adjusted loan rate (as described in subsection 247‑80(4)) applicable at the first time an amount covered by step 1 of that method statement was incurred, in any income year, while the capital protected borrowing is at that fixed rate. (a) the capital protected borrowing is at a variable rate for all or part of the term of the capital protected borrowing; and (b) a variable rate is applicable to the capital protected borrowing for all or part of the income year that is at or after the switch‑over time; use the average of the adjusted loan rates (as described in subsection 247‑80(4)) applicable during those parts of the income year when the capital protected borrowing is at a variable rate. Section 253‑5 of the Income Tax Assessment Act 1997 applies to amounts paid or applied before, on or after the commencement of that section to meet entitlements arising under Division 2AA of Part II of the Banking Act 1959 after 17 October 2008. (a) the trustee of a managed investment trust makes a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the trust that is in force for the 2008‑09 income year; and (b) the Commissioner made an assessment (the previous assessment) for a previous income year for any of the following entities: (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (i) the gain or loss should be reflected in the net income of the managed investment trust for that previous income year; or (ii) the gain or loss should be reflected in a tax loss or net capital loss of the managed investment trust for that previous income year; and (f) none of the provisions mentioned in subsection 275‑100(2) of the Income Tax Assessment Act 1997 would have applied at the time of the CGT event in relation to the asset, if these assumptions were made: (i) Subdivision 275‑B of the Income Tax Assessment Act 1997 (and any other provision of that Act or of the Income Tax Assessment Act 1936, to the extent that it relates to that Subdivision) had applied in relation to the CGT event; (ii) a choice under section 275‑115 of the Income Tax Assessment Act 1997 covering the entity for which the assessment was made was in force for the previous income year. (3) Subsection (2) applies despite any other provision of this Act (apart from subsection (4) of this section), the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936. (b) if the Commissioner may amend the assessment in accordance with item 5 (fraud or evasion) or 6 (review or appeal) of the table in subsection 170(1) of the Income Tax Assessment Act 1936; (c) if the amendment is made for the purpose of giving effect to a provision specified in the regulations for the purposes of this paragraph. 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year #### 275‑605 Trustee taxed on amount of non‑arm’s length income of managed investment trust—not applicable for pre‑introduction scheme where amount derived before start of 2018‑19 income year (a) the requirements set out in paragraphs 275‑610(1)(a), (b) and (c) of the Income Tax Assessment Act 1997 are satisfied in respect of an amount of non‑arm’s length income of a managed investment trust in relation to an income year; and (b) the managed investment trust became a party to the scheme mentioned in paragraph 275‑610(1)(a) of that Act before the day on which the Bill that became the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016 was introduced into the House of Representatives; and