Commonwealth: Tax Laws Amendment (2004 Measures No. 2) Act 2004 (Cth)

Tax Laws Amendment (2004 Measures No. 2) Act 2004 Act No. 83 of 2004 as amended This compilation was prepared on 6 September 2010 taking into account amendments up to Act No. 75 of 2010 The text of any of those amendments not in force on that date is appended in the Notes section The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section Prepared by the Office of Legislative Drafting and Publishing, Attorney‑General's Department, Canberra Contents 1 Short title [see Note 1]........................... 2 Commencement 3 Schedule(s) Schedule 1—Life insurance companies Part 1—Amendments commencing on 30 June 2000 Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Taxation Administration Act 1953 Part 2—Amendments commencing on 30 June 2001 Income Tax Assessment Act 1997 Part 3—Amendments commencing on 24 October 2002 Income Tax Assessment Act 1997 Part 4—Amendment commencing on 19 December 2002 Income Tax Assessment Act 1997 Part 5—Amendments commencing on 30 June 2003 Income Tax Assessment Act 1997 Part 6—Amendments commencing on 17 December 2003 Income Tax Assessment Act 1997 Taxation Administration Act 1953 Part 7—Amendments commencing on Royal Assent Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Taxation Administration Act 1953 Part 8—Application of the amendments Schedule 2—Consolidation etc. Part 1—Application Part 2—Certain unit trusts heading consolidated groups Division 1—Main amendment Income Tax Assessment Act 1997 Division 2—Related amendments Income Tax Assessment Act 1936 Part 3—Technical amendments relating to membership rules Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 4—Cost setting for assets that the head company does not hold under the single entity rule Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 5—Partnership leaving consolidated group Income Tax Assessment Act 1997 Part 6—Cost base and reduced cost base for allocable cost amount purposes Income Tax Assessment Act 1997 Part 7—MEC groups and transitional entities Income Tax (Transitional Provisions) Act 1997 Part 8—Foreign losses Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Part 9—International tax Division 1—Elections about valuing interests in FIFs held as trading stock Income Tax Assessment Act 1997 Division 2—Foreign dividend accounts Income Tax Assessment Act 1997 New Business Tax System (Consolidation and Other Measures) Act 2003 Division 3—Foreign tax credits Income Tax Assessment Act 1997 Part 10—Liability for payment of tax where head company fails to pay on time Income Tax Assessment Act 1997 Part 11—Technical amendment of cost base and reduced cost base calculation Income Tax Assessment Act 1997 Part 12—Financial Corporations (Transfer of Assets and Liabilities) Act 1993 Part 13—Privatised assets Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Schedule 3—Venture capital Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Schedule 4—FBT housing benefits Fringe Benefits Tax Assessment Act 1986 Schedule 5—CGT event K6 and demergers Income Tax Assessment Act 1997 Schedule 6—Deductions for United Medical Protection Limited support payments Income Tax Assessment Act 1997 Schedule 7—Compulsory third party insurance A New Tax System (Goods and Services Tax) Act 1999 Schedule 8—Public ambulance services Fringe Benefits Tax Assessment Act 1986 Income Tax Assessment Act 1997 Schedule 9—Overseas superannuation payments Income Tax Assessment Act 1936 Schedule 10—Franked distributions received through certain partnerships and trustees Part 1—Amendments commencing on 1 July 2000 Income Tax Assessment Act 1936 Part 2—Amendments commencing on 29 June 2002 Income Tax Assessment Act 1997 Part 3—Amendments commencing on 30 June 2003 Income Tax Assessment Act 1997 Part 4—Other amendments Income Tax Assessment Act 1997 Part 5—Application and transitional provisions Schedule 11—Technical corrections Income Tax Assessment Act 1936 Schedule 12—Personal service business determinations Part 1—Amendments applying from the 2000‑2001 income year Income Tax Assessment Act 1997 Part 2—Amendments applying from the income year after the income year in which this Act receives the Royal Assent Income Tax Assessment Act 1997 Notes An Act to amend the law relating to taxation, and for related purposes 1 Short title [see Note 1] This Act may be cited as the Tax Laws Amendment (2004 Measures No. 2) Act 2004. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provision(s) Commencement Date/Details 1. Sections 1 to 4 and anything in this Act not elsewhere covered by this table The day on which this Act receives the Royal Assent. 25 June 2004 2. Schedule 1, items 1 to 84 Immediately after the commencement of item 84 of Schedule 2 to the New Business Tax System (Miscellaneous) Act (No. 2) 2000. 30 June 2000 3. Schedule 1, items 85 to 89 Immediately after the commencement of Schedule 1 to the New Business Tax System (Capital Allowances) Act 2001. 30 June 2001 4. Schedule 1, items 90 to 92 Immediately after the commencement of Schedule 1 to the New Business Tax System (Capital Allowances—Transitional and Consequential) Act 2001. 30 June 2001 5. Schedule 1, items 93 and 94 Immediately after the commencement of Schedule 1 to the New Business Tax System (Capital Allowances) Act 2001. 30 June 2001 6. Schedule 1, items 95 to 99 Immediately after the commencement of Schedule 6 to the New Business Tax System (Consolidation and Other Measures) Act 2003. 24 October 2002 7. Schedule 1, item 100 Immediately after the commencement of Schedule 1 to the Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002. 19 December 2002 8. Schedule 1, items 101 to 103 Immediately after the commencement of item 126 of Schedule 3 to the Taxation Laws Amendment Act (No. 4) 2003. 30 June 2003 9. Schedule 1, item 104 Immediately after the commencement of item 127 of Schedule 3 to the Taxation Laws Amendment Act (No. 4) 2003. 30 June 2003 10. Schedule 1, items 105 and 106 Immediately after the commencement of item 9 of Schedule 8 to the Taxation Laws Amendment Act (No. 5) 2003. 17 December 2003 11. Schedule 1, item 107 Immediately after the commencement of item 22 of Schedule 8 to the Taxation Laws Amendment Act (No. 5) 2003. 17 December 2003 12. Schedule 1, items 108 to 126 The day on which this Act receives the Royal Assent. 25 June 2004 13. Schedule 2, Parts 1 and 2 The day on which this Act receives the Royal Assent. 25 June 2004 14. Schedule 2, items 5 to 8 The day on which this Act receives the Royal Assent. 25 June 2004 15. Schedule 2, item 9 The provision(s) do not commence at all unless the Bill introduced into the Parliament as the Taxation Laws Amendment Bill (No. 7) 2003 is enacted (with or without amendments), in which case the provision(s) are taken to have commenced immediately after the commencement of Schedule 5 to that Act. 24 October 2002 16. Schedule 2, Parts 4 to 13 The day on which this Act receives the Royal Assent. 25 June 2004 17. Schedules 3 to 7 The day on which this Act receives the Royal Assent. 25 June 2004 18. Schedule 8, items 1 to 3 The day on which this Act receives the Royal Assent. 25 June 2004 19. Schedule 8, item 4 Immediately after the commencement of Schedule 10 to the Tax Laws Amendment (2004 Measures No. 1) Act 2004. 1 July 2005 20. Schedule 8, items 5 to 11 The day on which this Act receives the Royal Assent. 25 June 2004 21. Schedule 9 The day on which this Act receives the Royal Assent. 25 June 2004 22. Schedule 10, items 1 and 2 Immediately after the commencement of Schedule 2 to the New Business Tax System (Miscellaneous) Act (No. 1) 2000. 1 July 2000 23. Schedule 10, items 3 to 22 Immediately after the commencement of the New Business Tax System (Imputation) Act 2002. 29 June 2002 24. Schedule 10, items 23 to 29 The day on which the Taxation Laws Amendment Act (No. 4) 2003 received the Royal Assent. 30 June 2003 25. Schedule 10, items 30 to 40 Immediately after the commencement of Part 1 of Schedule 10 to the Taxation Laws Amendment Act (No. 6) 2003. 30 June 2003 26. Schedule 10, items 41 and 42 The provision(s) do not commence at all unless the Bill introduced into the Parliament as the Taxation Laws Amendment Bill (No. 7) 2003 is enacted (with or without amendments), in which case the provision(s) are taken to have commenced immediately after the commencement of Schedule 7 to that Act. 30 June 2003 27. Schedule 10, items 43 and 44 The day on which this Act receives the Royal Assent. 25 June 2004 28. Schedule 11 The day on which this Act receives the Royal Assent. 25 June 2004 29. Schedule 12, Part 1 The day on which this Act receives the Royal Assent. 25 June 2004 30. Schedule 12, Part 2 Immediately after the commencement of Part 1 of Schedule 12 to this Act. 25 June 2004 Note: This table relates only to the provisions of this Act as originally passed by the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent. (2) Column 3 of the table contains additional information that is not part of this Act. Information in this column may be added to or edited in any published version of this Act. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Life insurance companies Part 1—Amendments commencing on 30 June 2000 Income Tax Assessment Act 1936 1 At the end of section 148 Add: Application to a life assurance company (10) This section applies to a life assurance company in relation to the whole or a part of a risk if, and only if, the risk or that part of the risk: (a) is covered by a disability policy as defined in subsection 995‑1(1) of the Income Tax Assessment Act 1997; and (b) relates to a benefit that is payable in an event mentioned in that definition. Income Tax Assessment Act 1997 2 At the end of section 4‑15 Add: Note: A life insurance company can have a taxable income of the complying superannuation class and/or a taxable income of the ordinary class for the purposes of working out its income tax for an income year: see Subdivision 320‑D. 3 Section 12‑5 (table item headed "tax losses") After: film losses............................... Subdivision 375‑G insert: life insurance companies...................... Subdivision 320‑D 4 Section 36‑25 (at the end of the table headed "Tax losses of companies") Add: 5. A *life insurance company Subdivision 320‑D 5 Section 320‑1 Omit all the words from and including "The taxable income of life insurance companies" to and including "the company tax rate.", substitute: Life insurance companies can have one or both of these taxable incomes for any income year for the purposes of working out their income tax for that year: • a taxable income of the complying superannuation class, which consists of taxable income that relates to complying superannuation business and is taxed at the rate of tax that applies to complying superannuation funds; • a taxable income of the ordinary class, which consists of taxable income that relates to other businesses and is taxed at the corporate tax rate. Life insurance companies can also have tax losses that correspond to those 2 classes. The Division provides that tax losses of a particular class can be deducted only from incomes in respect of that class. The Division ensures that the income tax worked out on the basis of these taxable incomes and tax losses is a single amount of income tax on one taxable income. 6 Paragraphs 320‑5(2)(c), (d) and (e) Repeal the paragraphs, substitute: (c) enables a life insurance company to have taxable incomes and *tax losses of the following classes for the purposes of working out its income tax for an income year: (i) the *complying superannuation class; (ii) the *ordinary class; and (d) contains other provisions necessary to enable the income tax on the taxable income of a life insurance company to be worked out. 7 Paragraph 320‑15(b) After "*contracts of reinsurance", insert "(except amounts that relate to a risk, or part of a risk, in relation to which subsection 148(1) of the Income Tax Assessment Act 1936 applies)". 8 Paragraph 320‑15(c) Omit "a *contract of reinsurance", substitute "a contract of reinsurance (except any amount that relates to a risk, or part of a risk, in relation to which subsection 148(1) of the Income Tax Assessment Act 1936 applies)". 9 After paragraph 320‑15(d) Insert: (da) the *transfer values of assets transferred by the company from a *virtual PST under subsection 320‑180(1) or 320‑195(3); and (db) the transfer values of assets transferred by the company to a virtual PST under subsection 320‑180(3) or 320‑185(1); and 10 Paragraph 320‑15(e) Omit "*virtual PST under subsection 320‑180(1) or (2)", substitute "virtual PST under subsection 320‑180(1) or (3)". 11 Paragraph 320‑15(f) Repeal the paragraph, substitute: (f) the transfer values of assets transferred by the company from the company's *segregated exempt assets under subsection 320‑235(1) or 320‑250(2); and 12 Paragraph 320‑15(g) Omit "320‑235(2)", substitute "320‑235(3)". 13 Paragraph 320‑15(h) Before "if", insert "subject to subsection (2),". 14 After paragraph 320‑15(j) Insert: (ja) amounts imposed by the company in respect of risk riders for *ordinary investment policies in an income year in which the company did not receive any life insurance premiums for those policies; and 15 Paragraph 320‑15(k) After "included in", insert ", or taken into account in working out,". 16 At the end of section 320‑15 Add: (2) Paragraph (1)(h) does not cover any liabilities under: (a) a *life insurance policy that provides for *participating benefits or *discretionary benefits; or (b) an *exempt life insurance policy; or (c) a *funeral policy. 17 Paragraph 320‑40(5)(b) Repeal the paragraph, substitute: (b) so much of the sum of: (i) any amounts transferred to the virtual PST in the income year under subsection 320‑180(3) or 320‑185(1); and (ii) any of the amounts mentioned in paragraph (a) that are related to the company's liability to pay amounts on the death or disability of a person; and (iii) any of the amounts mentioned in paragraph (a) that are related to expenses incurred by the company in respect of policies that provide for *participating benefits or *discretionary benefits; and (iv) any of the amounts mentioned in paragraph (a) that are not covered by subparagraph (ii) or (iii) and are covered by subsection (5A); as does not exceed the sum of the amounts mentioned in paragraph (a). 18 After subsection 320‑40(5) Insert: (5A) This subsection covers amounts that: (a) are related to expenses incurred by the company directly in respect of *virtual PST assets in relation to a period during which the assets were virtual PST assets; and (b) were transferred from the *virtual PST in the income year (as mentioned in paragraph (5)(a)) because the expenses were not paid from the virtual PST as required by subsection 320‑195(4). Note: For example, the amounts were transferred out of the virtual PST under subsection 320‑195(3) because fees or charges were imposed to recover those expenses (as the expenses would have been paid from assets other than virtual PST assets). 19 Paragraphs 320‑40(6)(a) and (b) Repeal the paragraphs, substitute: (a) the sum of the amounts transferred from the segregated exempt assets in the income year under subsection 320‑235(1) or 320‑250(2); less: (b) so much of the sum of: (i) any amounts transferred to the segregated exempt assets in the income year under subsection 320‑235(3) or 320‑240(1); and (ii) any of the amounts mentioned in paragraph (a) that are related to expenses incurred by the company in respect of policies that provide for *participating benefits or *discretionary benefits; and (iii) any of the amounts mentioned in paragraph (a) that are not covered by subparagraph (ii) and are covered by subsection (6A); as does not exceed the sum of the amounts mentioned in paragraph (a). 20 After subsection 320‑40(6) Insert: (6A) This subsection covers amounts that: (a) are related to expenses incurred by the company directly in respect of *segregated exempt assets in relation to a period during which the assets were segregated exempt assets; and (b) were transferred from the segregated exempt assets in the income year (as mentioned in paragraph (6)(a)) because the expenses were not paid from the segregated exempt assets as required by subsection 320‑250(3). Note: For example, the amounts were transferred out of the segregated exempt assets under subsection 320‑250(2) because fees or charges were imposed to recover those expenses (as the expenses would have been paid from assets other than segregated exempt assets). 21 Subsection 320‑40(7) Repeal the subsection, substitute: (7) The applicable amount for other policies is: (a) the sum of: (i) the *life insurance premiums received in respect of the policies in the income year; and (ii) any amounts that the company includes in its assessable income in respect of the policies under paragraph 320‑15(1)(k) for the income year; less: (b) so much of the sum of: (i) the amounts that the company can deduct under section 320‑75 in respect of the policies in the income year; and (ii) the *risk components of claims paid under the policies in the income year; as does not exceed the sum of the amounts mentioned in paragraph (a). 22 Subsection 320‑55(3) Repeal the subsection, substitute: (3) For the purposes of subsection (2) only, the amount of a *life insurance premium that relates to the company's liability to pay amounts on the death or disability of a person is: (a) if the policy provides for *participating benefits or *discretionary benefits—nil; or (b) if paragraph (a) does not apply and the policy states that the whole or a specified part of the premium is payable in respect of such a liability—the whole or that part of the premium, as appropriate; or (c) if neither paragraph (a) nor (b) applies: (i) if the policy is an *endowment policy—10% of the premium; or (ii) if the policy is a *whole of life policy—30% of the premium; or (iii) otherwise—so much of the premium as an *actuary determines to be attributable to such a liability. 23 Subsection 320‑70(2) Repeal the subsection, substitute: (2) This section does not apply to: (a) *life insurance policies that provide for *participating benefits or *discretionary benefits; or (b) funeral policies. 24 Section 320‑75 Repeal the section, substitute: 320‑75 Deduction for ordinary investment policies (1) This section applies to a *life insurance company in respect of *ordinary investment policies issued by the company. (2) The company can deduct, in respect of *life insurance premiums received in the income year for those policies: (a) the sum of the *net premiums; less: (b) so much of the net premiums as an *actuary determines to be attributable to fees and charges charged in that income year. (3) In making a determination under subsection (2), an *actuary is to have regard to: (a) the changes over the income year in the sum of the *net current termination values of the policies; and (b) the movements in those values during the income year. (4) In addition, if an *actuary determines that: (a) there has been a reduction in the income year (the current year) of exit fees that were imposed in respect of those policies in a previous income year; and (b) the reduction (or a part of it) has not been taken into account in a determination under subsection (2) for the current year; the company can deduct so much of that reduction as has not been so taken into account. 25 Subparagraph 320‑80(2)(a)(ii) Repeal the subparagraph, substitute: (ii) the policy is neither an *exempt life insurance policy nor a *funeral policy; and 26 Paragraph 320‑80(2)(b) After "exempt life insurance policy", insert "or a funeral policy". 27 Subsection 320‑85(2) Repeal the subsection, substitute: (2) Subsection (1) does not cover any liabilities under: (a) a *life insurance policy that provides for *participating benefits or *discretionary benefits; or (b) an *exempt life insurance policy; or (c) a *funeral policy. 28 Section 320‑87 Repeal the section, substitute: 320‑87 Deduction for assets transferred from or to virtual PST (1) A *life insurance company can deduct the *transfer values of assets that are transferred by the company in the income year from a *virtual PST under subsection 320‑180(1) or 320‑195(3). (2) A *life insurance company can deduct the *transfer values of assets that are transferred by the company in the income year to a *virtual PST under subsection 320‑180(3) or 320‑185(1). (3) If an asset (other than money) is transferred by a *life insurance company: (a) from a *virtual PST under subsection 320‑180(1) or 320‑195(2) or (3); or (b) to a virtual PST under subsection 320‑180(3) or section 320‑185; the company can deduct the amount (if any) that it can deduct because of section 320‑200. 29 Section 320‑100 Repeal the section, substitute: 320‑100 Deduction for life insurance premiums paid under certain contracts of reinsurance A *life insurance company can deduct amounts that: (a) were paid by the company in the income year as *life insurance premiums under *contracts of reinsurance; and (b) do not relate to a risk, or part of a risk, in relation to which subsection 148(1) of the Income Tax Assessment Act 1936 applies. 30 Section 320‑105 Omit "320‑235(2)" (wherever occurring), substitute "320‑235(3)". 31 At the end of section 320‑120 Add: Note: This section affects the amount of assessable income that is to be taken into account in working out a taxable income or tax loss of the ordinary class: see sections 320‑139 and 320‑143. 32 At the end of section 320‑125 Add: Note: This section affects the amount of assessable income that is to be taken into account in working out a taxable income or tax loss of the complying superannuation class: see sections 320‑137 and 320‑141. 33 Subdivisions 320‑D and 320‑E Repeal the Subdivisions, substitute: Subdivision 320‑D—Income tax, taxable income and tax loss of life insurance companies Guide to Subdivision 320‑D 320‑130 What this Subdivision is about This Subdivision explains how a life insurance company's income tax is worked out. For that purpose, this Subdivision enables a life insurance company to have taxable incomes and tax losses of the following classes: • the complying superannuation class; • the ordinary class. 320‑131 Overview of Subdivision Working out the income tax (1) In any income year, a life insurance company can have: (a) a taxable income of the complying superannuation class and/or a taxable income of the ordinary class; or (b) a tax loss of the complying superannuation class and/or a tax loss of the ordinary class; or (c) a taxable income of one class and a tax loss of the other class. Note: The taxable incomes mentioned in paragraph (a) are taxed at different rates: see section 23A of the Income Tax Rates Act 1986. (2) Taxable incomes and tax losses of both classes are taken into account in working out the amount of income tax that the company has to pay for the income year (see section 320‑134). That amount is then taken to be the income tax on the company's taxable income for that income year. Working out taxable income and tax loss of each class (3) In general, the rules in this Act about working out a company's taxable income or tax loss, or deducting a company's tax loss, apply to a life insurance company in relation to: (a) working out a taxable income or tax loss of a particular class; or (b) deducting a tax loss of a particular class. (4) However, that general rule is subject to the following: (a) sections 320‑137 to 320‑143, which allocate amounts of incomes and deductions for the purposes of working out a taxable income or tax loss of a particular class; (b) subsections 320‑141(2) and 320‑143(2), which provide that tax losses of a particular class can be deducted only from incomes in respect of that class; (c) section 320‑149, which sets out the provisions in this Act that have effect only in relation to a taxable income or tax loss of the ordinary class. Table of sections General rules 320‑133 Object of Subdivision 320‑134 Income tax of a life insurance company 320‑135 Taxable income and tax loss of each of the 2 classes Taxable income and tax loss of life insurance companies 320‑137 Taxable income—complying superannuation class 320‑139 Taxable income—ordinary class 320‑141 Tax loss—complying superannuation class 320‑143 Tax loss—ordinary class 320‑149 Provisions that apply only in relation to the ordinary class [This is the end of the Guide.] General rules 320‑133 Object of Subdivision (1) The object of this Subdivision is to ensure that: (a) for the purposes of working out the amount of a *life insurance company's income tax for an income year: (i) the company's taxable income or *tax loss of one *class is worked out separately from its taxable income or tax loss of the other class; and (ii) the company's tax losses of a particular class can be deducted only from its incomes in respect of that class; and (b) for the purposes of this Act, that amount of income tax is treated as the company's income tax on its taxable income for that income year. (2) In subsection (1), a class means the *complying superannuation class or the *ordinary class. 320‑134 Income tax of a life insurance company Working out the income tax (1) Work out a *life insurance company's income tax for an income year under section 4‑10 as follows: (a) apply steps 1 and 2 of the method statement in subsection 4‑10(3) to work out separately the amount that would be the company's basic income tax liability for its taxable income of each *class for that year; (b) treat the sum of these amounts as the company's basic income tax liability for that year and apply step 4 of the method statement to subtract its *tax offsets from that sum. (2) For the purposes of this Act: (a) the income tax worked out in accordance with subsection (1) is taken to be the company's income tax on its taxable income for the income year; and (b) except as provided by subsection (1) of this section and sections 320‑135 to 320‑149, the company's taxable income for that year is taken to be equal to the sum of the company's taxable incomes of the 2 *classes for that year. Note: This means that there is only one assessment in respect of the company's taxable income for the income year and that the income tax constitutes only one debt to the Commonwealth. Working out the income tax on certain assumptions (3) Subsection (1) also has effect in relation to working out an amount that would be the company's income tax if certain assumptions were made. It has that effect in the same way as it has effect in relation to working out the company's income tax under section 4‑10 (except in regard to those assumptions). Note: This means, for example, subsection (1) also has effect in relation to working out the amount of a life insurance company's income tax on the basis of the assumptions mentioned in section 67‑30 (about getting a refund of a tax offset). 320‑135 Taxable income and tax loss of each of the 2 classes (1) Subject to the other provisions in this Subdivision: (a) this Act has effect for a *life insurance company in relation to working out a taxable income of a particular *class in the same way as it has effect in relation to working out a taxable income of any other company; and (b) this Act has effect for a life insurance company in relation to working out or deducting a *tax loss of a particular class in the same way as it has effect in relation to working out or deducting a tax loss of any other company. (2) Sections 320‑137 to 320‑143 have effect in addition to other provisions in this Act that relate to working out a taxable income or *tax loss, or deducting a tax loss (as appropriate). (3) Nothing in this Subdivision prevents a *life insurance company from: (a) having taxable incomes, or *tax losses, of both *classes for the same income year; or (b) having a taxable income of one class and a tax loss of the other class for the same income year. Note: In certain circumstances, a life insurance company can have a taxable income and a tax loss of the same class in an income year (see Subdivision 165‑B as it has effect under this Subdivision). Taxable income and tax loss of life insurance companies 320‑137 Taxable income—complying superannuation class (1) A *life insurance company's taxable income of the complying superannuation class is a taxable income worked out under this Act on the basis of only: (a) assessable income of the company that is covered by subsection (2); and (b) deductions of the company that are covered by subsection (4); and (c) *tax losses of the company that are of the *complying superannuation class. Note: For the usual way of working out a taxable income: see subsection 4‑15(1). For other ways of working out a taxable income: see subsection 4‑15(2). Relevant assessable income (2) This subsection covers the following assessable income of a *life insurance company: (a) assessable income derived by the company from the investment of its *virtual PST assets in relation to the period during which those assets were virtual PST assets; (b) so much of the amount that is included in the company's assessable income because of paragraph 320‑15(1)(a) as is equal to the total *transfer value of assets transferred in the income year by the company to a *virtual PST under subsection 320‑185(3); (c) if an asset (other than money) is transferred by the company from a virtual PST under subsection 320‑180(1) or 320‑195(2) or (3)—amounts that are included in the company's assessable income because of section 320‑200; (d) amounts that are included in the company's assessable income because of paragraph 320‑15(1)(db), (i) or (j); (e) amounts that are included in the company's assessable income under subsection 115‑280(4); (f) subject to subsection (3), so much of the company's assessable income for the income year as is: (i) the total amount credited during that year to the *RSAs provided by the company; less (ii) the total amount debited during that year from the RSAs. Amounts disregarded for RSAs (3) In working out the amount mentioned in paragraph (2)(f), disregard the following amounts: (a) contributions credited to the *RSAs that are not *taxable contributions; (b) amounts debited from the RSAs that are benefits paid to, or in respect of, the holders of the RSAs; (c) income tax debited from the RSAs; (d) if an *annuity was paid from an RSA in respect of the whole of the income year, or the whole of the part of the income year in which the RSA existed, the total amount credited to the RSA during the income year; (e) if an annuity was paid from an RSA in respect of a part, but not the whole, of the portion of the income year in which the RSA existed, so much of the total amount credited to the RSA during the income year as is equal to the amount worked out using the following formula: Relevant deductions (4) This subsection covers the following deductions of a *life insurance company: (a) amounts that the company can deduct under section 320‑55; (b) amounts that the company can deduct (other than any *tax losses) in respect of the investment of the company's *virtual PST assets in relation to the period during which those assets were virtual PST assets; (c) amounts that the company can deduct under section 320‑87 because of subsection (1) or paragraph (3)(a) of that section; (d) amounts that the company can deduct under subsection 115‑280(1); (e) so much of the amounts that the company can deduct under subsection 115‑215(6) as are attributable to *capital gains that: (i) the company is taken to have under subsection 115‑215(3); and (ii) are in respect of the investment of the company's virtual PST assets; and (iii) are in relation to the period during which those assets were virtual PST assets. 320‑139 Taxable income—ordinary class A *life insurance company's taxable income of the ordinary class is a taxable income worked out under this Act on the basis of only: (a) assessable income of the company that is not covered by subsection 320‑137(2); and (b) amounts (other than *tax losses) that the company can deduct and are not covered by subsection 320‑137(4); and (c) tax losses of the company that are of the *ordinary class. Note: For the usual way of working out a taxable income: see subsection 4‑15(1). For other ways of working out a taxable income: see subsection 4‑15(2). 320‑141 Tax loss—complying superannuation class Working out a tax loss of the complying superannuation class (1) A *life insurance company's *tax loss of the complying superannuation class is a tax loss worked out under this Act on the basis of only: (a) assessable income of the company that is covered by subsection 320‑137(2); and (b) deductions of the company that are covered by subsection 320‑137(4); and (c) *net exempt income of the company that is attributable to *exempt income derived: (i) from the company's *virtual PST assets; and (ii) in relation to the period during which those assets were virtual PST assets. Note: For the usual way of working out a tax loss: see section 36‑10. For other ways of working out a tax loss: see section 36‑25. Deducting a tax loss of the complying superannuation class (2) A *life insurance company's *tax loss of the complying superannuation class can be deducted under this Act only from: (a) *net exempt income of the company that is attributable to *exempt income derived: (i) from the company's *virtual PST assets; and (ii) in relation to the period during which those assets were virtual PST assets; and (b) assessable income of the company that is covered by subsection 320‑137(2), reduced by deductions of the company that are covered by subsection 320‑137(4). Note: For the usual way of deducting a tax loss: see section 36‑15. For other ways of deducting a tax loss: see section 36‑25. 320‑143 Tax loss—ordinary class Working out a tax loss of the ordinary class (1) A *life insurance company's *tax loss of the ordinary class is a tax loss worked out under this Act on the basis of only: (a) assessable income of the company that is not covered by subsection 320‑137(2); and (b) amounts (other than tax losses) that the company can deduct and are not covered by subsection 320‑137(4); and (c) *net exempt income of the company that is not attributable to *exempt income derived: (i) from the company's *virtual PST assets; and (ii) in relation to the period during which those assets were virtual PST assets. Note: For the usual way of working out a tax loss: see section 36‑10. For other ways of working out a tax loss: see section 36‑25. Deducting a tax loss of the ordinary class (2) A *life insurance company's *tax loss of the ordinary class can be deducted under this Act only from: (a) *net exempt income of the company that is not attributable to *exempt income derived: (i) from the company's *virtual PST assets; and (ii) in relation to the period during which those assets were virtual PST assets; and (b) assessable income of the company that is not covered by subsection 320‑137(2), reduced by amounts (other than tax losses) that the company can deduct and are not covered by subsection 320‑137(4). Note: For the usual way of deducting a tax loss: see section 36‑15. For other ways of deducting a tax loss: see section 36‑25. 320‑149 Provisions that apply only in relation to the ordinary class (1) The provisions covered by subsection (2): (a) have effect as provided by section 320‑135 in relation to a *life insurance company's taxable income, or *tax loss, of the *ordinary class; but (b) have no effect in relation to the company's taxable income, or tax loss, of the *complying superannuation class. (2) This subsection covers these provisions: (a) section 36‑55; (b) Division 165 (except Subdivision 165‑CD). Example 1: A life insurance company that has an amount of excess franking offsets will need to recalculate its tax loss of the ordinary class under section 36‑55. But its tax loss of the complying superannuation class is unaffected by that section. Example 2: A life insurance company that fails to meet the relevant tests of Division 165 will need to recalculate the ordinary class of its taxable income and tax loss under Subdivision 165‑B. But the complying superannuation class of its taxable income and tax loss are unaffected by that Subdivision. 34 Subdivision 320‑F (heading) Repeal the heading, substitute: Subdivision 320‑F—Virtual PST 35 Section 320‑165 Repeal the section, substitute: 320‑165 What this Subdivision is about This Subdivision explains how a life insurance company can segregate assets (to be known as a virtual PST) to be used for the sole purpose of discharging its complying superannuation liabilities. 36 Subsection 320‑170(3) Repeal the subsection, substitute: (3) The assets segregated must have, as at the time of the segregation, a total *transfer value that does not exceed the sum of: (a) the company's *virtual PST liabilities as at that time; and (b) any reasonable provision made by the company at that time in its accounts for liability for income tax in respect of the assets segregated. 37 Section 320‑175 Repeal the section, substitute: 320‑175 Valuations of virtual PST assets and virtual PST liabilities for each valuation time (1) A *life insurance company that has established a *virtual PST must cause the following amounts to be calculated within the period of 60 days starting immediately after each *valuation time: (a) the total *transfer value of the company's *virtual PST assets as at the valuation time; (b) the company's *virtual PST liabilities as at the valuation time. (2) These are the valuation times: (a) the end of the income year in which the *virtual PST was established; (b) the end of each later income year. Note: A life insurance company that fails to comply with this section is liable to an administrative penalty: see section 288‑70 in Schedule 1 to the Taxation Administration Act 1953. 38 Section 320‑180 Repeal the section, substitute: 320‑180 Consequences of a valuation under section 320‑175 Transfer from the virtual PST (1) If the total *transfer value of the company's *virtual PST assets as at a *valuation time exceeds the sum of: (a) the company's *virtual PST liabilities as at that time; and (b) any reasonable provision made by the company at that time in its accounts for liability for income tax in respect of those assets; the company must transfer, from the *virtual PST, assets of any kind having a total transfer value equal to the excess. (2) A transfer under subsection (1) must be made within the period of 30 days starting immediately after: (a) the day on which the total *transfer value and the *virtual PST liabilities (as at the *valuation time) were calculated; or (b) if those amounts were calculated on different days—the later of those days. The transfer, once made, is taken to have been made at the valuation time (whether or not the transfer is made within those 30 days). Note: A life insurance company that fails to comply with subsections (1) and (2) is liable to an administrative penalty: see section 288‑70 in Schedule 1 to the Taxation Administration Act 1953. Transfer to the virtual PST (3) If the total *transfer value of the company's *virtual PST assets as at a *valuation time is less than the sum of: (a) the company's *virtual PST liabilities as at that time; and (b) any reasonable provision made by the company at that time in its accounts for liability for income tax in respect of those assets; the company can transfer, to the *virtual PST, assets of any kind having a total transfer value not exceeding the difference. (4) A transfer under subsection (3) is taken to have been made at the *valuation time if it is made within the period of 30 days starting immediately after: (a) the day on which the total *transfer value and the *virtual PST liabilities (as at the valuation time) were calculated; or (b) if those amounts were calculated on different days—the later of those days. 39 Section 320‑185 (heading) Repeal the heading, substitute: 320‑185 Transfer of assets to virtual PST otherwise than as a result of a valuation under section 320‑175 40 Subsection 320‑185(1) Repeal the subsection, substitute: (1) If a *life insurance company determines, at a time other than a *valuation time, that the total *transfer value of the company's *virtual PST assets as at that time is less than the sum of: (a) the company's *virtual PST liabilities as at that time; and (b) any reasonable provision made by the company at that time in its accounts for liability for income tax in respect of those assets; the company can transfer, to the *virtual PST, assets of any kind having a total transfer value not exceeding the difference. 41 Subsection 320‑185(4) Omit "320‑180(2)", substitute "320‑180(3)". 42 Section 320‑195 (heading) Repeal the heading, substitute: 320‑195 Transfer of assets and payment of amounts from a virtual PST otherwise than as a result of a valuation under section 320‑175 43 Paragraph 320‑195(3)(c) Repeal the paragraph, substitute: (c) determines, at a time other than a *valuation time, that the total *transfer value of the company's virtual PST assets as at that time exceeds the sum of: (i) the company's *virtual PST liabilities at that time; and (ii) any reasonable provision made by the company at that time in its accounts for liability for income tax in respect of those assets; 44 Subsection 320‑195(4) Repeal paragraph (c) and omit all the words after it, substitute: (c) any liabilities to pay *PAYG instalments, or income tax, that are attributable to the company's *virtual PST assets; the life insurance company must pay, from the virtual PST, any amounts required to discharge the liabilities, or amounts equal to the expenses (as appropriate). 45 Subsection 320‑200(1) Omit "320‑180(2)", substitute "320‑180(3)". 46 After subsection 320‑200(2) Insert: (2A) Without limiting subsection (2), where the asset transferred is a unit of *plant, Division 42 has effect for the company as if: (a) in relation to the sale of the asset that is taken to have occurred under paragraph (2)(c): (i) the sale were a *balancing adjustment event; and (ii) the *termination value of the asset for that event were equal to the consideration for the sale under that paragraph; and (iii) the company had ceased to be the owner or *quasi‑owner of the asset at the time of the sale; and (b) in relation to the purchase of the asset that is taken to have occurred under paragraph (2)(d): (i) the company had only become the owner or quasi‑owner of the asset after the purchase; and (ii) the asset's cost were equal to the consideration for the purchase under that paragraph; and (iii) the company had acquired the asset from an *associate of the company. Note: This means that, amongst other things, as a result of the transfer: * the asset's cost for the purposes of working out a deduction under Division 42 is reset; and * the company's assessable income might be adjusted under section 42‑30. 47 At the end of section 320‑200 Add: (4) Subsection (3) does not apply in relation to an amount that the company can deduct under a provision in Division 42. 48 Section 320‑205 Repeal the section. 49 Subdivision 320‑G Repeal the Subdivision. 50 Subsection 320‑225(3) Repeal the subsection, substitute: (3) The assets segregated must have, as at the time of the segregation, a total *transfer value that does not exceed the amount of the company's *exempt life insurance policy liabilities as at that time. 51 Section 320‑230 Repeal the section, substitute: 320‑230 Valuations of segregated exempt assets and exempt life insurance policy liabilities for each valuation time (1) A *life insurance company that has segregated any of its assets in accordance with section 320‑225 must cause the following amounts to be calculated within the period of 60 days starting immediately after each *valuation time: (a) the total *transfer value of the company's *segregated exempt assets as at the valuation time; (b) the amount of the company's *exempt life insurance policy liabilities as at the valuation time. (2) These are the valuation times: (a) the end of the income year in which the segregation occurred; (b) the end of each later income year. Note: A life insurance company that fails to comply with this section is liable to an administrative penalty: see section 288‑70 in Schedule 1 to the Taxation Administration Act 1953. 52 Section 320‑235 Repeal the section, substitute: 320‑235 Consequences of a valuation under section 320‑230 Transfer from the segregated exempt assets (1) If: (a) the total *transfer value of the company's *segregated exempt assets as at a *valuation time; exceeds (b) the amount of the company's *exempt life insurance policy liabilities as at that time; the company must transfer, from the segregated exempt assets, assets of any kind having a total transfer value equal to the excess. (2) A transfer under subsection (1) must be made within the period of 30 days starting immediately after: (a) the day on which the total *transfer value and the *exempt life insurance policy liabilities (as at the *valuation time) were calculated; or (b) if those amounts were calculated on different days—the later of those days. The transfer, once made, is taken to have been made at the valuation time (whether or not the transfer is made within those 30 days). Note: A life insurance company that fails to comply with subsections (1) and (2) is liable to an administrative penalty: see section 288‑70 in Schedule 1 to the Taxation Administration Act 1953. Transfer to the segregated exempt assets (3) If: (a) the total *transfer value of the company's *segregated exempt assets as at a *valuation time; is less than (b) the amount of the company's *exempt life insurance policy liabilities as at that time; the company can transfer, to the segregated exempt assets, assets of any kind having a total transfer value not exceeding the difference. (4) A transfer under subsection (3) is taken to have been made at the *valuation time if it is made within the period of 30 days starting immediately after: (a) the day on which the total *transfer value and the *exempt life insurance policy liabilities (as at the valuation time) were calculated; or (b) if those amounts were calculated on different days—the later of those days. 53 Section 320‑240 (heading) Repeal the heading, substitute: 320‑240 Transfer of assets to segregated exempt assets otherwise than as a result of a valuation under section 320‑230 54 Subsection 320‑240(1) Repeal the subsection, substitute: (1) If a *life insurance company determines, at a time other than a *valuation time, that: (a) the total *transfer value of the company's *segregated exempt assets as at that time; is less than (b) the company's *exempt life insurance policy liabilities as at that time; the company can transfer, to the segregated exempt assets, assets of any kind having a total transfer value not exceeding the difference. 55 Subsection 320‑240(4) Omit "320‑235(2)", substitute "320‑235(3)". 56 Subparagraph 320‑245(3)(a)(ii) Repeal the subparagraph. 57 After section 320‑245 Insert: 320‑246 Exempt life insurance policy (1) An exempt life insurance policy is a *life insurance policy (other than an *RSA): (a) that is held by the trustee of a *complying superannuation fund and provides solely for the discharge of the current pension liabilities (within the meaning of Part IX of the Income Tax Assessment Act 1936) of the fund; or (b) that is held by the trustee of a *pooled superannuation trust, where: (i) the policy provides solely for the discharge of the current pension liabilities (within the meaning of Part IX of the Income Tax Assessment Act 1936) of complying superannuation funds; and (ii) the funds are unit holders of the trust; or (c) that is held by another *life insurance company and is a *segregated exempt asset of that other company; or (d) that is held by the trustee of a *constitutionally protected fund; or (e) that provides for an *immediate annuity that: (i) was purchased on or before 9 December 1987 and was not purchased wholly or partly with a rolled‑over amount; or (ii) satisfies the conditions in subsections (3), (4) and (5) and was purchased on or before 9 December 1987 wholly or partly with a rolled‑over amount; or (iii) satisfies the conditions in subsections (3), (4) and (5) and was purchased after 9 December 1987. Note: A part of a life insurance policy may be taken to be an exempt life insurance policy under section 320‑247. (2) In subsection (1), a rolled‑over amount has the same meaning as it has under section 27A of the Income Tax Assessment Act 1936. (3) An *immediate annuity satisfies the conditions in this subsection if it is payable until the later of: (a) the death of a person (or the death of the last to die of 2 or more persons); or (b) the end of a fixed term. (4) An *immediate annuity satisfies the conditions in this subsection if the contract under which it is payable does not permit: (a) the total amount payable for its commutation to exceed its reduced purchase price (within the meaning of section 27A of the Income Tax Assessment Act 1936); and (b) any payment of its residual capital value (within the meaning of that section) to exceed its purchase price (within the meaning of that section). (5) An *immediate annuity satisfies the conditions in this subsection if there is no unreasonable deferral of the payments of the annuity, having regard to: (a) to the extent to which the payments depend on the returns of the investment of the assets of the *life insurance company paying the annuity—when the payments are made and when those returns are derived; and (b) to the extent to which the payments do not depend on those returns—the relative sizes of the payments from year to year; and (c) any other relevant factors. 320‑247 Policy split into an exempt life insurance policy and another life insurance policy When is a part of a policy taken to be an exempt life insurance policy? (1) A part of a *life insurance policy (the original policy) is taken to be an *exempt life insurance policy for the purposes of this Act if: (a) the part provides solely for the discharge of the current pension liabilities (within the meaning of Part IX of the Income Tax Assessment Act 1936) of a *complying superannuation fund; and (b) the trustee of the fund holds the original policy. (2) A part of a *life insurance policy (the original policy) is taken to be an *exempt life insurance policy for the purposes of this Act if: (a) the part provides solely for the discharge of liabilities that are attributable to the current pension liabilities (within the meaning of Part IX of the Income Tax Assessment Act 1936) of *complying superannuation funds; and (b) the trustee of a *pooled superannuation trust holds the original policy; and (c) the funds are unit holders of the trust. What happens to the rest of the policy? (3) If a part of a policy (the original policy) is taken to be an *exempt life insurance policy under subsection (1) or (2), the rest of the original policy is taken to be another *life insurance policy for the purposes of this Act. 58 Section 320‑250 (heading) Repeal the heading, substitute: 320‑250 Transfer of assets and payment of amounts from segregated exempt assets otherwise than as a result of a valuation under section 320‑230 59 Paragraph 320‑250(2)(c) Repeal the paragraph, substitute: (c) determines, at a time other than a *valuation time, that the total *transfer value of the company's segregated exempt assets as at that time exceeds the amount of the company's *exempt life insurance policy liabilities as at that time; 60 Subsection 320‑250(4) Repeal the subsection. 61 Subsection 320‑255(1) Omit "320‑235(2)", substitute "320‑235(3)". 62 After subsection 320‑255(3) Insert: (3A) Subsection (3) does not apply in relation to an amount that the company can deduct under a provision in Division 42. 63 Subsection 320‑255(7) Omit "*notional undeducted cost", substitute "*undeducted cost". 64 Subsection 320‑255(7) Omit "notional undeducted cost" (wherever occurring), substitute "undeducted cost". 65 At the end of section 320‑255 Add: (9) Division 42 has effect in relation to an asset covered by subsection (6), (7) or (8) as if: (a) in relation to the sale of the asset that is taken to have occurred under that subsection: (i) the sale were a *balancing adjustment event; and (ii) the *termination value of the asset for that event were equal to the consideration for the sale; and (iii) the company had ceased to be the owner or *quasi‑owner of the asset at the time of the sale; and (b) in relation to the purchase of the asset that is taken to have occurred under that subsection: (i) the company had only become the owner or quasi‑owner of the asset after the purchase; and (ii) the asset's cost were equal to the consideration for the purchase under that subsection; and (iii) the company had acquired the asset from an *associate of the company. Note: This means that, amongst other things, as a result of the transfer: * the asset's cost for the purposes of working out a deduction under Division 42 is reset; and * the company's assessable income might be adjusted under section 42‑30 if the transfer is a transfer to the company's segregated exempt assets. 66 Subsection 995‑1(1) Insert: class of a taxable income or a *tax loss of a *life insurance company has the meaning given by section 320‑133. 67 Subsection 995‑1(1) (definition of complying superannuation class) Repeal the definition, substitute: complying superannuation class for a taxable income of a *life insurance company has the meaning given by section 320‑137. 68 Subsection 995‑1(1) Insert: complying superannuation class for a *tax loss of a *life insurance company has the meaning given by section 320‑141. 69 Subsection 995‑1(1) (definition of exempt life insurance policy) Repeal the definition, substitute: exempt life insurance policy has the meaning given by section 320‑246. Note: This definition is affected by section 320‑247. 70 Subsection 995‑1(1) (definition of net risk component) Repeal the definition, substitute: net risk component of a *life insurance policy means so much of the policy's risk component as: (a) is not reinsured under a *contract of reinsurance; or (b) is reinsured under a contract of reinsurance to which subsection 148(1) of the Income Tax Assessment Act 1936 applies. 71 Subsection 995‑1(1) (definition of ordinary class) Repeal the definition, substitute: ordinary class for a taxable income of a *life insurance company has the meaning given by section 320‑139. 72 Subsection 995‑1(1) Insert: ordinary class for a *tax loss of a *life insurance company has the meaning given by section 320‑143. 73 Subsection 995‑1(1) Insert: ordinary investment policy means a *life insurance policy that is not: (a) a *virtual PST life insurance policy; or (b) an *exempt life insurance policy; or (c) a policy that provides for *participating benefits or *discretionary bene