Commonwealth: Tax Laws Amendment (2010 Measures No. 1) Act 2010 (Cth)

Tax Laws Amendment (2010 Measures No. 1) Act 2010 Act No. 56 of 2010 as amended This compilation was prepared on 23 August 2011 taking into account amendments up to Act No. 41 of 2011 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) 4 Amendment of assessments Schedule 1—Approved superannuation clearing house Part 1—Main amendments Retirement Savings Accounts Act 1997 Superannuation Guarantee (Administration) Act 1992 Superannuation Industry (Supervision) Act 1993 Part 2—Amendments conditional on the Tax Laws Amendment (Confidentiality of Taxpayer Information) Act 2010 Income Tax Assessment Act 1936 Taxation Administration Act 1953 Part 3—Application provision Schedule 2—Forestry managed investment schemes Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Taxation Administration Act 1953 Schedule 3—Managed investment trusts Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Taxation Administration Act 1953 Schedule 4—25% entrepreneurs' tax offset Income Tax Assessment Act 1997 Schedule 5—Consolidation Part 1—Use of the tax cost setting amount Division 1—Main amendments Income Tax Assessment Act 1997 Division 2—Foreign currency gains and losses Income Tax Assessment Act 1997 Division 3—Application and transitional provisions Part 2—Group restructures Income Tax Assessment Act 1997 Part 3—Pre‑CGT proportions Income Tax Assessment Act 1997 Part 4—No double counting of amounts in ACA Income Tax Assessment Act 1997 Part 5—Pre‑joining time roll‑overs Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 6—Phasing out over‑depreciation adjustments Division 1—Joining times between 8 May 2007 and 30 June 2009 Income Tax Assessment Act 1997 Division 2—Repeal of section 705‑50 with effect from 1 July 2009 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 7—Leaving time liabilities Division 1—Timing Income Tax Assessment Act 1997 Division 2—Adjustment of step 4 amount Income Tax Assessment Act 1997 Part 8—Accounting principles Income Tax Assessment Act 1997 Part 9—Inherited deductions Income Tax Assessment Act 1997 Part 10—General insurance companies Income Tax Assessment Act 1997 Part 11—Retained cost base assets Division 1—Cash management trusts Income Tax Assessment Act 1997 Division 2—Rights to future income assets Income Tax Assessment Act 1997 Division 3—Application provision Part 12—Removal of CGT event L7 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 13—Reduction in tax cost setting amount that exceeds market value of certain retained cost base assets Income Tax Assessment Act 1997 Part 14—Blackhole expenditure for MEC Groups Income Tax Assessment Act 1997 Part 15—Transitional concession for SAPs New Business Tax System (Consolidation and Other Measures) Act 2003 Part 16—Loss multiplication rules for widely held companies Income Tax Assessment Act 1997 Part 17—CGT straddles Income Tax Assessment Act 1997 Part 18—Choice to consolidate Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Taxation Administration Act 1953 Part 19—Life insurance companies Division 1—Amendments applying before the introduction of first home saver accounts Income Tax Assessment Act 1997 Division 2—Amendments applying from the introduction of first home savers accounts Income Tax Assessment Act 1997 Part 20—Non‑membership equity interests Income Tax Assessment Act 1997 Schedule 6—Miscellaneous amendments Part 1—CGT main residence exemption for replacement dwelling Income Tax Assessment Act 1997 Part 2—Small business retirement exemption Division 1—Main amendment Income Tax Assessment Act 1997 Division 2—Related amendments Income Tax Assessment Act 1997 Part 3—Waiver connected with proceeds of crime proceedings Taxation Administration Act 1953 Part 4—Amendments relating to higher education A New Tax System (Goods and Services Tax) Act 1999 Fringe Benefits Tax Assessment Act 1986 Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Taxation Administration Act 1953 Taxation (Interest on Overpayments and Early Payments) Act 1983 Part 5—PAYG withholding from delayed payments for termination of employment Division 1—Main amendments Taxation Administration Act 1953 Division 2—Related amendments Child Support (Registration and Collection) Act 1988 Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Part 6—Administrative penalties for false or misleading statements Division 1—Main amendments Taxation Administration Act 1953 Division 2—Consequential amendments Product Grants and Benefits Administration Act 2000 Superannuation Industry (Supervision) Act 1993 Division 3—Application provision Division 4—Amendments with contingent commencement Taxation Administration Act 1953 Part 7—Offsets against superannuation guarantee charge Tax Laws Amendment (2008 Measures No. 2) Act 2008 Part 8—Status of certain superannuation funds Income Tax Assessment Act 1936 Part 9—Technical corrections A New Tax System (Luxury Car Tax) Act 1999 Taxation Administration Act 1953 Tax Laws Amendment (2009 Measures No. 4) Act 2009 Part 10—Repeal of redundant material Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Taxation Administration Act 1953 Part 11—Other minor changes A New Tax System (Goods and Services Tax) Act 1999 Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Taxation Administration Act 1953 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 (2010 Measures No. 1) Act 2010. 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 this Act receives the Royal Assent. 3 June 2010 2. Schedule 1, Part 1 1 July 2010. 1 July 2010 3. Schedule 1, item 7 1 July 2010. 1 July 2010 However, if item 32 of Schedule 2 to the Tax Laws Amendment (Confidentiality of Taxpayer Information) Act 2010 commences on or before 1 July 2010, the provision(s) do not commence at all. 4. Schedule 1, item 8 The later of: 17 December 2010 (a) the start of 1 July 2010; and (paragraph (b) applies) (b) immediately after the commencement of item 1 of Schedule 1 to the Tax Laws Amendment (Confidentiality of Taxpayer Information) Act 2010. However, the provision(s) do not commence at all if the event mentioned in paragraph (b) does not occur. 5. Schedule 1, Part 3 1 July 2010. 1 July 2010 6. Schedule 2 The day after this Act receives the Royal Assent. 4 June 2010 7. Schedules 3 and 4 The day this Act receives the Royal Assent. 3 June 2010 8. Schedule 5, Parts 1 to 5 The day this Act receives the Royal Assent. 3 June 2010 9. Schedule 5, Part 6, Division 1 The day this Act receives the Royal Assent. 3 June 2010 10. Schedule 5, Part 6, Division 2 Immediately after the commencement of the provision(s) covered by table item 9. 3 June 2010 11. Schedule 5, Part 7 The day this Act receives the Royal Assent. 3 June 2010 11A. Schedule 5, items 90 to 110 The day this Act receives the Royal Assent. 3 June 2010 11B. Schedule 5, item 111 Immediately after the commencement of Part 1 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009. 26 March 2009 11C. Schedule 5, items 112 to 113 The day this Act receives the Royal Assent. 3 June 2010 11D. Schedule 5, Parts 9 to 18 The day this Act receives the Royal Assent. 3 June 2010 12. Schedule 5, Part 19, Division 1 The day this Act receives the Royal Assent. 3 June 2010 13. Schedule 5, Part 19, Division 2 Immediately after the commencement of the provision(s) covered by table item 12. 3 June 2010 14. Schedule 5, Part 20 The day this Act receives the Royal Assent. 3 June 2010 15. Schedule 6, Parts 1 to 5 The day this Act receives the Royal Assent. 3 June 2010 16. Schedule 6, Part 6, Divisions 1 to 3 The day after this Act receives the Royal Assent. 4 June 2010 17. Schedule 6, Part 6, Division 4 The later of: 4 June 2010 (a) the start of the day after this Act receives the Royal Assent; and (paragraph (a) applies) (b) immediately after the commencement of item 23 of Schedule 1 to the Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009. 18. Schedule 6, Part 7 Immediately after the commencement of Schedule 2 to the Tax Laws Amendment (2008 Measures No. 2) Act 2008. 24 June 2008 19. Schedule 6, Part 8 1 July 2006. 1 July 2006 20. Schedule 6, items 109 to 111 The day this Act receives the Royal Assent. 3 June 2010 21. Schedule 6, item 112 Immediately after the time specified in the Tax Laws Amendment (2009 Measures No. 4) Act 2009 for the commencement of item 132 of Schedule 5 to that Act. 18 September 2009 22. Schedule 6, item 113 Immediately after the time specified in the Tax Laws Amendment (2009 Measures No. 4) Act 2009 for the commencement of item 133 of Schedule 5 to that Act. 18 September 2009 23. Schedule 6, Parts 10 and 11 The day this Act receives the Royal Assent. 3 June 2010 Note: This table relates only to the provisions of this Act as originally passed by both Houses of 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. 4 Amendment of assessments (1) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment if: (a) the assessment was made before the commencement of Schedule 2 to this Act; and (b) the amendment is made for the purpose of giving effect to item 1 or 2 of that Schedule; and (c) the amendment is made within 4 years after the end of the income year in which the relevant CGT event happened. (2) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment if: (a) the assessment was made before the commencement of this section; and (b) the amendment is made within 2 years after that commencement; and (c) the amendment is made for the purpose of giving effect to Schedule 5 to this Act. Schedule 1—Approved superannuation clearing house Part 1—Main amendments Retirement Savings Accounts Act 1997 1 After subsection 183(2) Insert: (2A) Subsection (2) does not apply if: (a) the employer pays to an approved clearing house (within the meaning of the Superannuation Guarantee (Administration) Act 1992) the amount of the deduction before the end of period mentioned in that subsection; and (b) the approved clearing house accepts the payment. Superannuation Guarantee (Administration) Act 1992 2 Subsection 6(1) Insert: approved clearing house has the meaning given by subsection 79A(3). 3 After section 23A Insert: 23B Contributions through an approved clearing house For the purposes of sections 23 and 23A: (a) treat an employer that, at a particular time, pays an amount to an approved clearing house for the benefit of an employee as having made a contribution of the same amount to a complying superannuation fund or an RSA for the benefit of the employee at that time, if the approved clearing house accepts the payment; and (b) disregard any contribution that the approved clearing house makes to a complying superannuation fund or an RSA as a result of the payment. 4 After subsection 32C(2A) Insert: Contributions through an approved clearing house (2B) A contribution to a fund by an employer for the benefit of an employee is made in compliance with the choice of fund requirements if: (a) section 79A (which is about a contribution through an approved clearing house) applies to the contribution; and (b) the employee gives the employer written notice to the effect that the employee wants a fund to be a chosen fund for the employee in accordance with Division 4 of Part 3A (Choosing a fund); and Note: Under section 32G (Limit on funds that may be chosen), the fund chosen by the employee must be an eligible choice fund and must be a fund to which the employer can make contributions. (c) the employer passes onto the approved clearing house mentioned in section 79A the information that the employee included in the written notice, and any other prescribed information: (i) within 21 days after the employee gives the notice to the employer; and (ii) before or at the time the contribution is made; and (d) the approved clearing house accepts the information. 5 After section 79 Insert: 79A Approved clearing house (1) This section applies if: (a) an employer pays an amount to an approved clearing house for the benefit of an employee; and (b) as a result, the approved clearing house makes a contribution to an RSA, a superannuation fund or a superannuation scheme for the benefit of the employee. (2) To avoid doubt, the approved clearing house makes the contribution to the RSA, superannuation fund or superannuation scheme on behalf of the employer, as the employer's agent. (3) Approved clearing house means a body specified in the regulations for the purposes of this subsection. Superannuation Industry (Supervision) Act 1993 6 After subsection 64(2) Insert: (2A) Subsection (2) does not apply if: (a) the employer pays to an approved clearing house (within the meaning of the Superannuation Guarantee (Administration) Act 1992) the amount of the deduction before the end of the period mentioned in that subsection; and (b) the approved clearing house accepts the payment. Part 2—Amendments conditional on the Tax Laws Amendment (Confidentiality of Taxpayer Information) Act 2010 Income Tax Assessment Act 1936 7 After paragraph 16(4)(hba) Insert: (hbb) an approved clearing house (within the meaning of the Superannuation Guarantee (Administration) Act 1992), for the purposes of that body performing its functions in relation to superannuation contributions; or Taxation Administration Act 1953 8 Subsection 355‑65(3) in Schedule 1 (at the end of the table) Add: 9 an approved clearing house (within the meaning of the Superannuation Guarantee (Administration) Act 1992) is for the purposes of that body performing its functions in relation to superannuation contributions. Part 3—Application provision 9 Application provision The amendments made by Part 1 of this Schedule apply to a payment made to an approved clearing house on or after the commencement of this item. Schedule 2—Forestry managed investment schemes Income Tax Assessment Act 1936 1 After subsection 82KZMGA(1) Insert: (1A) Paragraph (1)(b) does not apply to a CGT event if: (a) the CGT event happens because of circumstances outside the taxpayer's control; and Example: The interest is compulsorily acquired. (b) when the taxpayer acquired the interest, the taxpayer could not reasonably have foreseen the CGT event happening. Income Tax Assessment Act 1997 2 After subsection 394‑10(5) Insert: (5A) Paragraph (5)(b) does not apply to a *CGT event if: (a) the CGT event happens because of circumstances outside your control; and Example: The forestry interest is compulsorily acquired. (b) when you acquired the *forestry interest, you could not reasonably have foreseen the CGT event happening. Taxation Administration Act 1953 3 After subsection 290‑50(2) in Schedule 1 Insert: (2A) For the purposes of subsection (2), disregard: (a) subsection 82KZMGA(1A) of the Income Tax Assessment Act 1936; and (b) subsection 394‑10(5A) of the Income Tax Assessment Act 1997. Note 1: Those 2 subsections relate to forestry managed investment schemes. Note 2: The effect of this subsection is that a scheme will have been implemented in a way that is materially different from that described in a product ruling if the tax outcome for participants in the scheme is the same as that described in the ruling only because of the operation of the subsections mentioned in paragraphs (a) and (b). 4 Application provision The amendments made by this Schedule apply to CGT events that happen on or after 1 July 2007. Schedule 3—Managed investment trusts Income Tax Assessment Act 1936 1 Subsection 95(1) (at the end of the note to the definition of net income) Add "to this Act or Division 275 of the Income Tax Assessment Act 1997". Income Tax Assessment Act 1997 2 Section 10‑5 (after table item headed "lotteries") Insert: managed investment trusts gains etc. from carried interests ................. 275‑200(2) 3 Section 12‑5 (after table item headed "losses") Insert: managed investment trusts losses from carried interests ................... 275‑200(4) 4 After Part 3‑10 Insert: Part 3‑25—Particular kinds of trusts Division 275—Australian managed investment trusts Table of Subdivisions Guide to Division 275 275‑A Extended concept of managed investment trust for the purposes of this Division 275‑B Choice for capital treatment of managed investment trust gains and losses 275‑C Carried interests in managed investment trusts Guide to Division 275 275‑1 What this Division is about The trustee of certain Australian managed investment trusts may make a choice that certain assets of the trust be dealt with under CGT rules. If the trustee does not make such a choice, those assets will be treated as revenue assets (see Subdivision 275‑B). Gains and profits from carried interests held in entities that are or were Australian managed investment trusts are included in the assessable income of the holder of the interests. The holder is entitled to a deduction from losses from such interests (see Subdivision 275‑C). Subdivision 275‑A—Extended concept of managed investment trust for the purposes of this Division Table of sections 275‑5 Trust operated or managed by a financial services licensee etc. 275‑10 Managed investment schemes that are not subject to requirement to be operated by financial services licensee 275‑15 Every member of trust is a managed investment trust 275‑20 No fund payment made in relation to the income year 275‑25 Trust held by small group not to be treated as managed investment trust 275‑30 Temporary circumstances outside the control of the trustee 275‑35 Application of subsections 102L(15) and 102T(16) 275‑15 Every member of trust is a managed investment trust (1) For the purposes of this Division, treat a trust in the same way as a *managed investment trust in relation to an income year if: (a) the condition in item 1 of the table in subsection 12‑400(1) in Schedule 1 to the Taxation Administration Act 1953 is satisfied; and (b) every *member of the trust is a managed investment trust in relation to the income year (or a trust that is treated in the same way as a managed investment trust in relation to the income year through the operation of this Subdivision). (2) A requirement in paragraph (1)(a) is satisfied if, and only if, it is satisfied: (a) at the time the trustee of the trust makes the first *fund payment in relation to the income year; or (b) if the trustee does not make such a payment in relation to the income year—at both the start and the end of the income year. 275‑20 No fund payment made in relation to the income year For the purposes of this Division, treat a trust in the same way as a *managed investment trust in relation to an income year if: (a) the trustee of the trust does not make a *fund payment in relation to the income year; and (b) the trust would be a managed investment trust in relation to the income year (or a trust that would be treated in the same way as a managed investment trust in relation to the income year through the operation of this Subdivision) if the trustee of the trust had made the first fund payment in relation to the income year on the first day of the income year; and (c) the trust would be a managed investment trust in relation to the income year (or a trust that would be treated in the same way as a managed investment trust in relation to the income year through the operation of this Subdivision) if the trustee of the trust had made the first fund payment in relation to the income year on the last day of the income year. 275‑30 Temporary circumstances outside the control of the trustee If, apart from a particular circumstance, a trust would be treated under this Subdivision in the same way as a *managed investment trust in relation to an income year, treat the trust in the same way as a managed investment trust in relation to the income year for the purposes of this Division if: (a) the circumstance is temporary; and (b) the circumstance arose outside the control of the trustee of the trust; and (c) it is fair and reasonable to treat the trust as a managed investment trust in relation to the income year, having regard to the following matters: (i) the matters in paragraphs (a) and (b); (ii) the nature of the circumstance; (iii) the actions (if any) taken by the trustee of the trust to address or remove the circumstance, and the speed with which such actions are taken; (iv) the extent to which treating the trust as a managed investment trust in relation to the income year would increase or reduce the amount of tax otherwise payable by the trustee, the beneficiaries of the trust or any other entity; (v) any other relevant matter. 275‑35 Application of subsections 102L(15) and 102T(16) To avoid doubt, subsections 102L(15) and 102T(16) of the Income Tax Assessment Act 1936 do not apply for the purposes of this Division. Subdivision 275‑B—Choice for capital treatment of managed investment trust gains and losses Table of sections 275‑100 Consequences of making choice—CGT to be primary code for calculating MIT gains or losses 275‑105 Covered assets 275‑110 MIT not to be corporate unit trust or trading trust 275‑115 MIT CGT choices 275‑120 Consequences of not making choice—revenue account treatment 275‑100 Consequences of making choice—CGT to be primary code for calculating MIT gains or losses (1) The modifications in subsection (2) apply if: (a) a *CGT event happens at a time involving a *CGT asset; and (b) the CGT asset is owned at that time by an entity that is a *managed investment trust in relation to the income year in which the time occurs; and (c) the CGT event happens because the managed investment trust *disposes of, ceases to own or otherwise realises the asset; and (d) the asset is covered by section 275‑105; and (e) the entity meets the requirement in section 275‑110 at the time; and (f) a choice under section 275‑115 covering the entity is in force for the income year in which the time occurs. (2) These provisions do not apply to the *CGT event: (a) sections 6‑5 (about *ordinary income), 8‑1 (about amounts you can deduct), and 15‑15 and 25‑40 (about profit‑making undertakings or plans); (b) sections 25A and 52 of the Income Tax Assessment Act 1936 (about profit‑making undertakings or schemes); (c) section 118‑20 (about reducing capital gains if amount otherwise assessable); (d) Division 70 and section 118‑25 (about trading stock). General exceptions (3) The provisions referred to in subsection (2) can apply to the *CGT event if a *capital gain or *capital loss from the event is disregarded because of one of the provisions in this table: Where gain or loss disregarded because of CGT provision Item Provision Brief description 1 Paragraph 104‑15(4)(a) Title in a CGT asset does not pass when a hire purchase or similar agreement ends 2 Section 118‑13 Shares in a PDF 3 Section 118‑60 Certain gifts Trading stock and profit‑making undertakings or plans involving land etc. (4) The provisions referred to in subsection (2) can also apply to the *CGT event if: (a) where the *CGT asset is land (including an interest in land), or a right or option to *acquire or *dispose of land (including an interest in land): (i) the CGT asset is *trading stock; or (ii) the circumstances existing at the time of the event would, disregarding this Subdivision, give rise to an amount being included in the assessable income of the entity under section 15‑15 or to a deduction for the entity under section 25‑40 (about profit‑making undertakings or plans); or (b) where paragraph (a) does not apply: (i) the *managed investment trust acquired the CGT asset in an income year for which the choice mentioned in paragraph (1)(f) was not in force; and (ii) the CGT asset was treated as trading stock in the managed investment trust's financial report for the most recent income year ending before the start of the income year in which that choice first came into force; and (iii) the CGT asset was treated as trading stock in the *income tax return for the managed investment trust for the most recent income year ending before the start of the income year in which that choice first came into force; and (iv) the CGT asset was treated as trading stock in the managed investment trust's financial report for the most recent income year ending before the time of the event; and (v) the CGT asset was treated as trading stock in the income tax return for the managed investment trust for the most recent income year ending before the time of the event. Treatment of outgoings to acquire trading stock (5) The modifications in subsection (6) apply if: (a) an entity that is a *managed investment trust in relation to the income year *acquires a *CGT asset at a time in that income year; and (b) the CGT asset is an item of *trading stock; and (c) the CGT asset is not land (including an interest in land), or a right or option to acquire or *dispose of land (including an interest in land); and (d) the entity incurs an outgoing in connection with acquiring the asset; and (e) the asset is covered by section 275‑105; and (f) the entity meets the requirement in section 275‑110 at the time; and (g) a choice under section 275‑115 covering the entity is in force for the income year in which the time occurs. (6) The modifications are as follows: (a) section 8‑1 (about amounts you can deduct) does not apply to the *acquisition; (b) Division 70 (about trading stock) does not apply in relation to the asset in respect of: (i) the income year in which the time occurs; and (ii) any later income year in relation to which the entity is a *managed investment trust and throughout which the entity meets the requirement in section 275‑110. 275‑105 Covered assets (1) An asset is covered by this section if it is any of the following: (a) a *share in a company (including a share in a *foreign hybrid company); (b) a *non‑share equity interest in a company; (c) a unit in a unit trust; (d) land (including an interest in land); (e) a right or option to *acquire or *dispose of an asset of a kind mentioned in paragraph (a), (b), (c) or (d). (2) However, the asset is not covered by this section if it is any of the following: (a) a *Division 230 financial arrangement; (b) a *debt interest. 275‑110 MIT not to be corporate unit trust or trading trust (1) An entity that is a trust meets the requirement in this section at a time if the entity is not any of the following at that time: (a) a corporate unit trust (within the meaning of section 102J of the Income Tax Assessment Act 1936) in relation to the income year in which the time occurs; (b) a trading trust for the purposes of Division 6C of Part III of that Act in relation to that income year. (2) If, apart from a particular circumstance, a trust would meet the requirement in paragraph (1)(b) at a time, the trust also meets the requirement in this section at a time if: (a) the circumstance is temporary; and (b) the circumstance arose outside the control of the trustee of the trust; and (c) the trustee of the trust is not liable to pay income tax on the net income of the trust under section 102S of the Income Tax Assessment Act 1936 for the income year in which the time occurs; and (d) it is fair and reasonable to treat the trust as meeting the requirement in this section at that time, having regard to the following matters: (i) the matters in paragraphs (a), (b) and (c); (ii) the nature of the circumstance; (iii) the actions (if any) taken by the trustee of the trust to address or remove the circumstance, and the speed with which such actions are taken; (iv) the extent to which treating the trust as meeting the requirement in this section at that time would increase or reduce the amount of tax otherwise payable by the trustee, the beneficiaries of the trust or any other entity; (v) any other relevant matter. 275‑115 MIT CGT choices (1) The trustee of an entity that is a *managed investment trust may make a choice under this section that covers the managed investment trust. (2) The choice must be made in the *approved form. (3) The choice can be made only: (a) if the entity became a *managed investment trust in the 2009‑10 income year or a later income year (whether or not the entity existed before it became a managed investment trust)—on or before the latest of the following days: (i) the day it is required to lodge its *income tax return for the income year in which it became a managed investment trust; (ii) if the Commissioner allows a later day for the managed investment trust—that later day; or (b) otherwise—on or before the latest of the following days: (i) the last day in the 3 month period starting on the day on which this section commences; (ii) the last day of the 2009‑10 income year; (iii) if the Commissioner allows a later day for the managed investment trust—that later day. (4) The choice, once made, cannot be revoked. (5) The choice is in force: (a) in the circumstances mentioned in paragraph (3)(a)—for the income year in which the entity became a *managed investment trust (whether or not the entity existed before it became a managed investment trust) and later income years; or (b) in the circumstances mentioned in paragraph (3)(b)—for the 2008‑09 income year and later income years. 275‑120 Consequences of not making choice—revenue account treatment (1) This section applies if: (a) the requirements in subsection 275‑100(1) are met in relation to a *CGT asset held by a *managed investment trust, apart from the requirement in paragraph 275‑100(1)(f); and (b) the CGT asset is not: (i) land (including an interest in land); or (ii) a right or option to *acquire or *dispose of land (including an interest in land); and (c) the managed investment trust disposes of, ceases to own or otherwise realises the asset; and (d) disregarding this section: (i) the net proceeds (if any) from the disposal, cessation or realisation would not be reflected in an amount being included in the assessable income of the managed investment trust (other than under Part 3‑1 or 3‑3); and (ii) the gain or profit (if any) on the disposal, cessation or realisation would not be reflected in an amount being included in the assessable income of the managed investment trust (other than under Part 3‑1 or 3‑3); and (iii) the loss (if any) on the disposal, cessation or realisation would not be reflected in an amount being deductible by the managed investment trust. (2) For the purposes of this Act, treat the disposal, cessation of ownership of or realisation of the asset in the same way as the disposal, cessation of ownership of or realisation of a *revenue asset. Subdivision 275‑C—Carried interests in managed investment trusts Table of sections 275‑200 Gains and losses etc. from carried interests in managed investment trusts reflected in assessable income or deduction 275‑200 Gains and losses etc. from carried interests in managed investment trusts reflected in assessable income or deduction (1) This section applies if: (a) you hold a *CGT asset in an income year that carries an entitlement to a distribution from an entity; and (b) the entitlement to such a distribution is contingent upon the attainment of profits by the entity; and (c) the entity satisfies any of these requirements: (i) it is a *managed investment trust in relation to the income year; (ii) it was a managed investment trust in relation to a previous income year; and (d) you acquired the asset because of services you or your *associate provided, or will provide, to the entity; and (e) you or your associate provided, or will provide, those services: (i) as a manager of the entity; or (ii) as an associate of a manager of the entity; or (iii) as an employee of a manager of the entity; or (iv) as an associate of an employee of a manager of the entity; and (f) any of the following apply: (i) you become entitled in the income year to such a distribution (regardless of whether the distribution is made immediately, or is to be made in the future); (ii) a *CGT event happens in relation to the asset in the income year. (2) Include in your assessable income for the income year: (a) the amount of the distribution (except to the extent that it represents a return of capital that you or your associate contributed in order for you to *acquire the asset); or (b) the amount of your gain or profit (if any) on the *CGT event. (3) Subsection (2) does not apply to the extent that the amount is included in your assessable income as: (a) *ordinary income under section 6‑5; or (b) *statutory income under a section of this Act, other than a provision in Part 3‑1 or 3‑3. (4) An amount to which subsection (2) applies is taken, for the purposes of the *income tax laws, to have a source in Australia. For the purposes of this subsection, disregard subsection (3). (5) You are entitled to a deduction for the income year for the amount of your loss (if any) on the *CGT event. (6) Subsection (5) does not apply to the extent that you can deduct the amount under another provision of this Act. (7) Subdivision 115‑C does not apply to the amount of a distribution mentioned in subparagraph (1)(f)(i) if: (a) that amount is included in your assessable income under subsection (2); or (b) an amount referable to that amount is included in your assessable income under Division 6 of Part III of the Income Tax Assessment Act 1936. 5 Subsection 840‑805(6) (subsection heading) Repeal the heading, substitute: Exception—Australian permanent establishments 6 At the end of section 840‑805 Add: Exception—distributions on carried interests (7) Subsections (2) and (3) do not apply to you to the extent that the fund payment part: (a) is included in your assessable income under subsection 275‑200(2) (Gains etc. from carried interests) for the income year because you hold or held a *CGT asset that carries an entitlement to a distribution mentioned in subsection 275‑200(2); or (b) would be so included if subsection 275‑200(3) were disregarded. (8) Subsection (4) does not apply to you to the extent that the fund payment part: (a) is attributable to an amount included in the net income of the trust mentioned in that subsection because of subsection 275‑200(2) (Gains etc. from carried interests) for the income year because the trust holds or held a *CGT asset that carries an entitlement to a distribution mentioned in subsection 275‑200(2); or (b) would be so included if subsection 275‑200(3) were disregarded. 7 Subsection 995‑1(1) (definition of instalment income) Omit "and 45‑465", substitute ", 45‑286 and 45‑465". Income Tax (Transitional Provisions) Act 1997 8 After Part 3‑10 Insert: Part 3‑25—Particular kinds of trusts Division 275—Australian managed investment trusts Table of Subdivisions 275‑A Choice for capital treatment of MIT gains and losses Subdivision 275‑A—Choice for capital treatment of MIT gains and losses Table of sections 275‑10 Consequences of making choice—Commissioner cannot make certain amendments to previous assessments 275‑10 Consequences of making choice—Commissioner cannot make certain amendments to previous assessments (1) This section applies if: (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: (i) the trustee of the managed investment trust; (ii) a beneficiary of the managed investment trust; (iii) an entity that holds interests in the managed investment trust indirectly, through a chain of trusts; and (c) the previous assessment was made on the basis that: (i) a CGT event happened at a time involving a CGT asset that was owned by the managed investment trust; and (ii) a gain or loss was realised for income tax purposes because of the circumstances that gave rise to the CGT event; and (d) the previous assessment was also made on the basis that: (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 (e) the previous assessment was also made on one of these bases: (i) the CGT asset was a revenue asset; (ii) the CGT asset was not a revenue asset; 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. (2) The Commissioner cannot amend the previous assessment on the basis that: (a) if subparagraph (1)(e)(i) applies—the CGT asset should not have been treated as a revenue asset; or (b) if subparagraph (1)(e)(ii) applies—the CGT asset should have been treated as a revenue asset. (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. (4) Subsection (2) does not apply in any of these cases: (a) if the entity for which the assessment was made gives the Commissioner a written consent to the amendment; (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. Taxation Administration Act 1953 9 After section 45‑285 in Schedule 1 Insert: 45‑286 Instalment income includes distributions by certain managed investment trusts Your instalment income for a period includes trust income or trust capital that a trust distributes to you, or applies for your benefit, during that period if: (a) the income or capital is not included in your instalment income under section 45‑280 or 45‑285; and (b) the trust satisfies the condition in item 1 of the table in subsection 12‑400(1) in relation to the income year that is or includes that period; and (c) the trust is: (i) a *managed investment trust for that income year; or (ii) treated as a managed investment trust for that income year for the purposes of Division 275 of the Income Tax Assessment Act 1997; and (d) the trust meets the requirement in section 275‑110 of that Act throughout the income year. (It does not matter whether the trust income or trust capital is included in your assessable income for the income year that is or includes that period.) 10 Application provision (1) The amendments made by this Schedule apply in relation to CGT events that happen on or after the start of the 2008‑09 income year. (2) Despite subitem (1), subsections 275‑100(5) and (6) of the Income Tax Assessment Act 1997 as inserted by this Schedule (and any other provision inserted by this Schedule, to the extent that it relates to those subsections) apply in relation to acquisitions of assets that happen on or after the start of the 2008‑09 income year. (3) Despite subitem (1), section 275‑120 of the Income Tax Assessment Act 1997 as inserted by this Schedule (and any other provision inserted by this Schedule, to the extent that it relates to that section) applies in relation to: (a) disposals of assets; and (b) cessations of ownership of assets; and (c) other realisations of assets; that happen on or after the commencement of this item. (4) Despite subitem (1), Subdivision 275‑C of the Income Tax Assessment Act 1997 as inserted by this Schedule (and any other provision inserted by this Schedule, to the extent that it relates to that Subdivision) applies in relation to: (a) entitlements to distributions that arise on or after the commencement of this item; and (b) CGT events that happen on or after the commencement of this item. (5) Despite subitem (1), section 45‑286 in Schedule 1 to the Taxation Administration Act 1953 as inserted by this Schedule (and any other provision inserted by this Schedule, to the extent that it relates to that section) applies in relation to distributions or applications of benefits that are made on or after the commencement of this item. Schedule 4—25% entrepreneurs' tax offset Income Tax Assessment Act 1997 1 Section 61‑500 Omit: Your entitlement to the offset varies depending on what kind of entity you are. The amount of your offset varies depending on whether your aggregated turnover is $50,000 or less or is more than $50,000. Substitute: Your entitlement to the offset varies depending on what kind of entity you are. The amount of your offset varies depending on: (a) whether your aggregated turnover is $50,000 or less or is more than $50,000; and (b) if you are an individual—whether you (and your spouse, if you have a spouse) have significant income from sources other than your small business. 2 Subsection 61‑505(2) (at the end of step 4 of the method statement) Add: Note: If you are an individual, section 61‑523 may reduce the amount of the tax offset. 3 Subsection 61‑505(2) (at the end of step 5 of the method statement) Add: Note: If you are an individual, section 61‑523 may reduce the amount of the tax offset. 4 Subsection 61‑510(2) (at the end of step 4 of the method statement) Add: Note: If you are an individual, section 61‑523 may reduce the amount of the tax offset. 5 Subsection 61‑510(2) (at the end of step 5 of the method statement) Add: Note: If you are an individual, section 61‑523 may reduce the amount of the tax offset. 6 Subsection 61‑520(2) (at the end of step 4 of the method statement) Add: Note: If you are an individual, section 61‑523 may reduce the amount of the tax offset. 7 Subsection 61‑520(2) (at the end of step 5 of the method statement) Add: Note: If you are an individual, section 61‑523 may reduce the amount of the tax offset. 8 After section 61‑520 Insert: 61‑523 25% entrepreneurs' tax offset—reduction for non‑small business income Reduce the amount of your *tax offset worked out under subsection 61‑505(2), 61‑510(2) or 61‑520(2) by the amount worked out using the following formula (but not below nil), if: (a) you are an individual; and (b) the amount worked out using the formula is greater than nil: where: non‑ETO small business income for the income year is worked out by: (a) adding up the following: (i) your taxable income for the year; (ii) your *reportable fringe benefits total for the year; (iii) your *reportable superannuation contributions (if any) for the year; (iv) your *total net investment loss for the year; and (b) subtracting: (i) in a case covered by subsection 61‑505(2)—your *net small business income for the year; or (ii) in a case covered by subsection 61‑510(2) or 61‑520(2)—your net small business income share for the year (within the meaning of paragraph 61‑510(1)(e) or 61‑520(1)(e), whichever is applicable); and (c) adding the following in relation to each individual (if any) who, on the last day of the year, is your *spouse: (i) your spouse's taxable income for the year; (ii) your spouse's reportable fringe benefits total for the year; (iii) your spouse's reportable superannuation contributions (if any) for the year; (iv) your spouse's total net investment loss for the year. Note: ETO is short for 25% entrepreneurs' tax offset. threshold amount means: (a) $120,000 if: (i) on any day during the income year, you have a dependant (within the meaning of the definition of dependant in subsection 159P(4) of the Income Tax Assessment Act 1936, disregarding paragraph (a) (spouse) of that definition); or (ii) on the last day of the income year, you have a *spouse; or (b) otherwise—$70,000. 9 Application provision The amendments made by this Schedule apply in relation to assessments for income years that commence on or after 1 July 2009. Schedule 5—Consolidation Part 1—Use of the tax cost setting amount Division 1—Main amendments Income Tax Assessment Act 1997 1 Section 12‑5 (table item headed "financial arrangements" (first occurring)) Repeal the item, substitute: consolidated groups and MEC groups assets in relation to Division 230 financial arrangement . 701‑61(4) rights to future income ....................... 716‑405 2 Subsection 701‑55(3) After "Division 70", insert "(other than Subdivision 70‑E)". 3 Subsection 701‑55(6) Repeal the subsection, substitute: Rights to future amounts to be included in assessable income of head company (5C) If section 716‑410 (rights to future amounts that are expected to be included in assessable income) covers the asset at the particular time, the expression means that section 716‑405 may apply in relation to the asset after the particular time. Other provisions (6) If any provision of this Act that is not mentioned above is to apply in relation to the asset by including an amount in assessable income, or by allowing an amount as a deduction, in a way that brings into account (directly or indirectly) any of the following amounts: (a) the cost of the asset; (b) outgoings incurred, or amounts paid, in respect of the asset; (c) expenditure in respect of the asset; (d) an amount of a similar kind in respect of the asset; the expression means that the provision applies, for the purpose of determining the amount included in assessable income or the amount of the deduction, as if the cost, outgoing, expenditure or other amount had been incurred or paid to acquire the asset at the particular time for an amount equal to its tax cost setting amount. Note 1: This subsection modifies the application of the provision only for the purpose of determining the amount included in assessable income or the amount of the deduction. Therefore: (a) the acquisition mentioned in this subsection is recognised only for that purpose; and (b) apart from the things mentioned in subsection 701‑56(1), that acquisition does not affect the operation of section 701‑5 (the entry history rule) in relation to the asset for other purposes. Note 2: For specific clarifications of the operation of this subsection in relation to bad debts, see Subdivision 716‑S. 701‑56 Setting the tax cost of an asset—subsection 701‑55(6) Entry history rule (1) To avoid doubt, if subsection 701‑55(6) applies in relation to an asset at the time (the joining time) an entity (the joining entity) became a *subsidiary member of a *consolidated group, the things that are taken to have happened in relation to the *head company of the group under section 701‑5 (entry history rule) do not include: (a) the cost, outgoing, expenditure or other amount incurred or paid to acquire the asset by the joining entity; and (b) whether the cost, outgoing, expenditure or other amount incurred or paid by the joining entity to acquire the asset has been deducted by the joining entity before the joining time. Trading stock (2) Subsection 701‑55(6) does not apply in relation to an asset if it is *trading stock. Certain depreciating assets etc. (3) Subsection 701‑55(6) does not apply in relation to an asset if any of the following provisions are to apply in relation to the asset: (a) Subdivision 40‑F (Primary production depreciating assets); (b) Subdivision 40‑G (Capital expenditure of primary producers and other landholders); (c) Subdivision 40‑H (Capital expenditure that is immediately deductible); (d) Subdivision 40‑I (Capital expenditure that is deductible over time), other than section 40‑880 (Business related costs); (e) Subdivision 40‑J (Capital expenditure for the establishment of trees in carbon sink forests); (f) Division 41 (Additional deduction for certain new business investment); (g) Division 43 (Deductions for capital works). 3A Subsection 701‑58(2) After "(5A)", insert ", (5C)". 3B At the end of Division 701 Add: 701‑90 Valuable right to future income treated as separate asset (1) This subsection covers a valuable right (including a contingent right) to receive an amount for the performance of work or services or the provision of goods (other than *trading stock) if: (a) the valuable right forms part of a contract or agreement; and (b) the *market value of the valuable right (taking into account all the obligations and conditions relating to the right) is greater than nil. (2) For the purposes of this Part, treat a valuable right covered by subsection (1) as a separate asset. (3) For the purposes of this Part, if: (a) a valuable right is treated as a separate asset under subsection (2); and (b) the contract or agreement mentioned in paragraph (1)(a) also includes one or more other rights; for the purposes of this Part, treat the contract or agreement (excluding the valuable right) as a separate asset. (4) For the purposes of this Part: (a) take into account all the obligations and conditions relating to a valuable right treated as a separate asset under subsection (2) in working out the *market value of that separate asset; and (b) if a contract or agreement (excluding the valuable right) is treated as a separate asset under subsection (3)—take into account all the obligations and conditions relating to each right (other than the valuable right) that forms part of the contract or agreement in working out the market value of that separate asset. 4 After Subdivision 716‑G Insert: Subdivision 716‑S—Miscellenous consequences of tax cost setting Table of sections 716‑400 Tax cost setting and bad debts 716‑405 Tax cost setting and rights to future income—deduction 716‑410 Rights to amounts that are expected to be included in assessable income after joining time 716‑400 Tax cost setting and bad debts (1) The object of this section is to clarify the effect of section 701‑5 (entry history rule) and subsection 701‑55(6) in relation to an asset that may give rise to a bad debt. It achieves this object by clarifying that certain things are taken to have happened in relation to the asset through the operation of section 701‑5 and subsection 701‑55(6). (2) This section applies if: (a) the tax cost of an asset was set at the time (the joining time) an entity (the joining entity) became a subsidiary member of a *consolidated group at the asset's tax cost setting amount; and (b) the asset is a debt; and (c) any of the following apply: (i) the debt was included in the joining entity's assessable income before the joining time; (ii) the debt was in respect of money that the joining entity lent before the joining time in the ordinary course of a business of lending money; (iii) the joining entity bought the debt before the joining time in the ordinary course of a business of lending money; and (d) the requirements in subsection 701‑58(1) (intra‑group assets) are not satisfied in relation to the asset. (3) To avoid doubt, in determining the extent to which the *head company of the group can deduct an amount under section 25‑35 (bad debts) in relation to the asset, section 701‑5 (entry history rule) and subsection 701‑55(6) have the effect that, before the joining time: (a) in a case covered by subparagraph (2)(c)(i)—the head company included an amount equal to the tax cost setting amount in its assessable income in respect of the debt; or (b) in a case covered by subparagraph (2)(c)(ii)—the head company lent an amount of money in respect of the debt equal to the tax cost setting amount in the ordinary course of a business of lending money; or (c) in a case covered by subparagraph (2)(c)(iii)—the head company incurred expenditure equal to the tax cost setting amount in buying the debt in the ordinary course of a business of lending money. 716‑405 Tax cost setting and rights to future income—deduction (1) This section applies if: (a) an entity (the joining entity) became a subsidiary member of a *consolidated group at a time (the joining time); and (b) subsection 701‑55(5C) applies in relation to the asset at the joining time. Note: Subsection 701‑55(5C) deals with assets covered by section 716‑410 (Rights to amounts that are expected to be included in assessable income after joining time). (2) An entity qualified for a deduction under subsection (5) for the asset for an income year ending after the joining time can deduct, for that income year: (a) unless paragraph (b) applies—the amount determined under subsection (3A); or (b) if it is reasonable to expect that no amount will be included in the assessable income of an entity qualified for a deduction under subsection (5) for the asset for any later income year—the unexpended tax cost setting amount for the asset for that income year. (3) Paragraph (2)(b) does not apply in relation to an entity qualified for a deduction under subsection (5) for the asset for that income year if: (a) the entity is the *head company of the group; and (b) another entity ceased to be a *subsidiary member of the group in that income year; and (c) the other entity can deduct an amount under subsection (2) for that income year because it is also qualified for a deduction under subsection (5) for the asset for that income year. (3A) For the purposes of paragraph (2)(a), the amount is the lesser of the following: (a) the *unexpended tax cost setting amount for the asset for that income year; (b) the unexpended tax cost setting amount for the asset for the first income year ending after the joining time, divided by the lesser of: (i) 10; or (ii) if the contract or agreement giving rise to the valuable right mentioned in paragraph 716‑410(a) is for a specified period—the number of days in that period that end after the joining time, divided by 365 and rounded upwards to the nearest whole number. (4) The unexpended tax cost setting amount for the asset for an income year is the *tax cost setting amount for the asset, reduced by: (a) the amounts (if any) of all deductions under this section in respect of the asset for previous income years ending after the joining time; and (b) in determining the amount of a deduction under this section in respect of the asset for that income year for an entity that ceased to be a *subsidiary member of the group in that income year—the amount (if any) that the *head company of the group can deduct under this section in respect of the asset for that income year. (5) An entity is qualified for a deduction under this subsection for an income year for the asset if: (a) the entity: (i) is the *head company of the group; and (ii) held the asset at a time in that income year (whether or not because of the operation of subsection 701‑1(1) (the single entity rule)); or (b) the entity: (i) held the asset at a time in that income year; and (ii) ceased to be a *subsidiary member of the group in that income year or an earlier income year. (6) An amount deducted under this section: (a) is not to be deducted under any other provision of this Act; and (b) is not to be taken into account in determining an amount that is included in the assessable income of any entity qualified for a deduction under subsection (5) for any income year for the asset; and (c) is not to be taken into account in determining an amount of a deduction of any entity qualified for a deduction under subsection (5) for any income year for the asset; and (d) despite paragraphs (b) and (c), is taken never to have been included in any of the elements of the *cost base of the asset. 716‑410 Rights to amounts that are expected to be included in assessable income after joining time This section covers an asset at a time if: (a) the asset is a valuable right covered by subsection 701‑90(1); and Note: Such a valuable right is treated as a separate asset for the purposes of this Part (see subsection 701‑90(2)). (b) the asset is held by an entity just before