Commonwealth: Taxation Laws Amendment Act (No. 5) 2003 (Cth)

Taxation Laws Amendment Act (No. 5) 2003 Act No. 142 of 2003 as amended This compilation was prepared on 16 August 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—Thin Capitalisation: amendments taking effect on 1 July 2001 Part 1—Application of amendments Part 2—Exemption of certain special purpose entities Income Tax Assessment Act 1997 Part 3—Choice by some financial entities to be treated as ADIs for thin capitalisation purposes Income Tax Assessment Act 1997 Part 4—Revaluing assets for thin capitalisation purposes Income Tax Assessment Act 1997 Income Tax Assessment Act 1936 Part 5—Arrangements for borrowing securities Income Tax Assessment Act 1997 Part 6—Definition of financial entity Income Tax Assessment Act 1997 Part 7—Cost‑free debt capital Income Tax Assessment Act 1997 Part 8—Associate entity debt Income Tax Assessment Act 1997 Part 9—Debt deductions for borrowing expenses Income Tax Assessment Act 1997 Part 10—Foreign controlled Australian partnerships Income Tax Assessment Act 1997 Part 11—Arm's length debt amount Income Tax Assessment Act 1997 Part 12—Maximum allowable debt Income Tax Assessment Act 1997 Part 13—Non‑debt liabilities Income Tax Assessment Act 1997 Schedule 2—Thin Capitalisation: amendments taking effect on 1 July 2002 Part 1—Application of amendments Part 2—Records about Australian permanent establishments Income Tax Assessment Act 1997 Income Tax Assessment Act 1936 Part 3—Equity interests excluded in working out safe harbour debt amount Income Tax Assessment Act 1997 Part 4—Adjusted average equity capital for grouping purposes Income Tax Assessment Act 1997 Part 5—Disallowed deductions not included in cost base of a CGT asset Income Tax Assessment Act 1997 Taxation Laws Amendment Act (No. 7) 2000 Part 6—Premium excess amount Income Tax Assessment Act 1997 Part 7—Attributable safe harbour excess amount Income Tax Assessment Act 1997 Schedule 3—Thin Capitalisation: amendments taking effect on 1 July 2003 Part 1—Definition of equity capital and related concepts Income Tax Assessment Act 1997 Part 2—Assets and liabilities Income Tax Assessment Act 1997 Schedule 4—Foreign dividend accounts Income Tax Assessment Act 1936 Schedule 5—FBT exemption for public hospitals Fringe Benefits Tax Assessment Act 1986 Schedule 6—Reducing tax on excessive ETPs Part 1—Main amendments Income Tax Rates Act 1986 Superannuation Contributions Tax (Assessment and Collection) Act 1997 Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 Part 2—Technical correction Income Tax Rates Act 1986 Schedule 7—Application of same business test Part 1—Tax losses Division 1—Main amendment Income Tax Assessment Act 1997 Division 2—Consequential amendments Income Tax Assessment Act 1997 Division 3—Application of amendments Part 2—Bad debts Division 1—Main amendment Income Tax Assessment Act 1997 Division 2—Consequential amendments Income Tax Assessment Act 1997 Division 3—Technical correction Income Tax Assessment Act 1997 Division 4—Application of amendments Schedule 8—Tax losses Income Tax Assessment Act 1936 Income Tax Assessment 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 Taxation Laws Amendment Act (No. 5) 2003. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, on the day or at the time specified in column 2 of the table. 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 17 December 2003 2. Schedule 1 The day on which this Act receives the Royal Assent 17 December 2003 3. Schedule 2 The day on which this Act receives the Royal Assent 17 December 2003 4. Schedule 3, Part 1 Immediately after the commencement of Part 4 of Schedule 2 to this Act 17 December 2003 5. Schedule 3, Part 2 The day on which this Act receives the Royal Assent 17 December 2003 6. Schedule 4 The day on which this Act receives the Royal Assent 17 December 2003 7. Schedule 5 The day on which this Act receives the Royal Assent 17 December 2003 8. Schedule 6, Part 1 The day on which this Act receives the Royal Assent 17 December 2003 9. Schedule 6, Part 2 Immediately after the commencement of Division 2 of Part 3 of the Taxation Laws Amendment (Superannuation) Act 1993 1 July 1994 10. Schedule 7 The day on which this Act receives the Royal Assent 17 December 2003 11. Schedule 8, items 1 to 22 The day on which this Act receives the Royal Assent 17 December 2003 12. Schedule 8, item 23 The later of: 17 December 2003 (a) immediately after the commencement of Schedule 24 to the New Business Tax System (Consolidation and Other Measures) Act 2003; and (b) the day on which this Act receives the Royal Assent 13. Schedule 8, item 24 The day on which this Act receives the Royal Assent 17 December 2003 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 is for additional information that is not part of this Act. This information may be included 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—Thin Capitalisation: amendments taking effect on 1 July 2001 Part 1—Application of amendments 1 Application The amendments made by this Schedule apply in relation to an income year that begins on or after 1 July 2001. Part 2—Exemption of certain special purpose entities Income Tax Assessment Act 1997 2 After section 820‑37 Insert: 820‑39 Exemption of certain special purpose entities (1) Subdivision 820‑B, 820‑C, 820‑D or 820‑E does not apply to disallow any *debt deduction of an entity for an income year if the entity meets the conditions in subsection (3) throughout the income year. (2) Subdivision 820‑B, 820‑C, 820‑D or 820‑E does not apply to disallow any *debt deduction of an entity for an income year that is an amount incurred by the entity during a part of that year, if the entity meets the conditions in subsection (3) throughout that part. (3) The conditions are: (a) the entity is one established for the purposes of managing some or all of the economic risk associated with assets, liabilities or investments (whether the entity assumes the risk from another entity or creates the risk itself); and (b) the total value of *debt interests in the entity is at least 50% of the total value of the entity's assets; and (c) the entity is an insolvency‑remote special purpose entity according to criteria of an internationally recognised rating agency that are applicable to the entity's circumstances. (4) The condition in paragraph (3)(c) can be met without the rating agency determining that the entity meets those criteria. Note 1: While an entity meets the conditions in subsection (3), it is treated for the purposes of this Division as not being: * in a resident TC group (see section 820‑552); or * a member of a consolidated group or MEC group (see section 820‑584). Note 2: An entity that does not qualify for the exemption in this section may still be a securitisation vehicle under subsection 820‑942(2), in which case the value of its securitised assets will count towards its zero‑capital amount under Subdivision 820‑K. Multi‑tier special purpose entities (5) An entity is taken to meet the conditions in subsection (3) throughout a period that is all or part of an income year, if the entity is one of 2 or more entities that together satisfy the condition that, assuming: (a) each of the entities had been a division or part of the same entity (the notional entity), rather than a separate entity, throughout that period; and (b) the notional entity had consisted only of those divisions and parts throughout that period; the notional entity would meet the conditions in subsection (3) throughout that period. 3 After subsection 820‑550 Insert: 820‑552 Treatment of exempt special purpose entities (1) The fact that an entity meets the conditions in subsection 820‑39(3) (about insolvency‑remote special purpose entities established to manage economic risk) throughout a period ending at the end of an income year does not prevent the entity from being in a *resident TC group for that income year. (2) However, the entity is treated as not being in that group for the purposes of sections 820‑550, 820‑555, 820‑565 and 820‑575. (3) While an entity meets the conditions in subsection 820‑39(3), it is treated for the purposes of this Division (except this section) as not being in a *resident TC group that it is in. Note: This section has the effect that the circumstances of the entity are not taken into account in applying this Division to the resident TC group. The entity itself is exempt from this Division because of section 820‑39. 4 After subsection 820‑583 Insert: 820‑584 Exempt special purpose entities treated as not being member of group While an entity meets the conditions in subsection 820‑39(3) (about insolvency‑remote special purpose entities established to manage economic risk), the entity is treated for the purposes of this Division (except this section) as not being a *member of a *consolidated group or *MEC group of which it is a member. Note: This section has the effect that the circumstances of the entity are not taken into account in applying this Division to the head company of the group. The entity itself is exempt from this Division because of section 820‑39. 5 At the end of 820‑942(2) Add: Note: An entity that does not qualify as a securitisation vehicle may be exempt from the thin capitalisation rules under section 820‑39. Part 3—Choice by some financial entities to be treated as ADIs for thin capitalisation purposes Income Tax Assessment Act 1997 6 After Subdivision 820‑E Insert: Subdivision 820‑EA—Some financial entities may choose to be treated as ADIs Table of sections 820‑430 When choice can be made, and what effect it has 820‑435 Conditions 820‑440 Revocation of choice 820‑445 How this Subdivision interacts with Subdivisions 820‑F, 820‑FA and 820‑FB 820‑430 When choice can be made, and what effect it has (1) An entity may choose to be treated, for the purposes of this Division (except this Subdivision), as set out in the table. However, the entity can make the choice only if subsection (5) is satisfied. Choice by financial entity to be treated as an ADI Column 1 Column 2 Item For a period that the choice covers, and for which the entity would, apart from this Subdivision, have been: The entity is treated as if it had instead been: 1 an *outward investor (financial) an *outward investing entity (ADI) 2 an *inward investor (financial) an *inward investing entity (ADI) 3 an *inward investment vehicle (financial) an *outward investing entity (ADI) (2) The choice: (a) has effect accordingly, except as provided in subsection (4); and (b) ceases to have effect only as provided in this Subdivision; and (c) covers each period: (i) that started on or after a day specified in the choice (or on the day the choice is made if no day is specified); and (ii) that is all or part of an income year. (3) Subdivision 820‑E applies to the entity, in relation to a period for which this section treats it as an *inward investing entity (ADI), as if all the entity's *business were banking business of the entity. (4) The choice does not have effect for the purposes of determining whether the entity is covered by paragraph 820‑910(2)(a) (about working out the associate entity debt of another entity). Conditions for making the choice (5) For the income year that is or includes the first period for which the entity would be treated in accordance with the choice, the entity must satisfy: (a) subsection 820‑435(1); or (b) subsections 820‑435(2) and (3). Also, the entity must not have made a previous choice under this section that has ceased to have effect. Conditions are retested every 3 years (6) The choice ceases to have effect, or is taken to have ceased to have effect, as appropriate, at the end of an income year covered by subsection (7) of this section, unless the entity: (a) satisfies subsection 820‑435(1) for that income year; or (b) satisfies subsections 820‑435(2) and (3) for that income year. (7) This subsection covers every third income year after the one referred to in subsection (5). 820‑435 Conditions (1) An entity satisfies this subsection for an income year if the average value, for that income year, of the entity's *on‑lent amount is at least 80% of the average value, for that income year, of all the entity's assets. (2) An entity satisfies this subsection for an income year if the first period that is all or part of that income year, and for which the entity would be treated in accordance with a choice under section 820‑430, consists of one or more periods, each of which is either or both of these: (a) a period throughout which the entity is a *financial entity because of paragraph (d) of the definition of financial entity in subsection 995‑1(1) (which covers licensed (or exempt) dealers in derivatives); (b) a period throughout which: (i) the entity is the *head company of a *consolidated group or *MEC group; and (ii) at least one *member of the group is a financial entity because of that paragraph. (3) An entity satisfies this subsection for an income year if it satisfies subsection (2) and the amount worked out using this formula is greater than or equal to 0.8: where: on‑lent amount means the average value, for that income year, of the entity's *on‑lent amount. total assets means the average value, for that income year, of all the entity's assets. UG on derivatives means the average value, for that income year, of the entity's assets consisting of unrealised gains on trading derivatives within the meaning of the Corporations Act 2001. UL on derivatives means the lesser of: (a) the average value, for that income year, of the entity's liabilities consisting of unrealised losses on trading derivatives within the meaning of the Corporations Act 2001; and (b) the average value, for that income year, of the entity's assets consisting of unrealised gains on trading derivatives within the meaning of that Act. On‑lent amount increased for financial entity whose assets include precious metals (4) In working out whether an entity satisfies subsection (1) or (3) for an income year, the average value, for that income year, of the entity's *on‑lent amount is increased by the average value, for that income year, of the entity's assets that consist of *precious metals, but only if the entity satisfies subsection (5) for that income year. (5) An entity satisfies this subsection for an income year if the first period that is all or part of that income year, and for which the entity would be treated in accordance with a choice under section 820‑430, consists of one or more periods, each of which is either or both of these: (a) a period throughout which the entity is a *financial entity; (b) a period throughout which: (i) the entity is the *head company of a *consolidated group or *MEC group; and (ii) at least one *member of the group is a financial entity. 820‑440 Revocation of choice (1) A choice under section 820‑430 can be revoked only with the written approval of the Commissioner. The Commissioner may approve a revocation only if satisfied that the entity's circumstances have changed significantly since the choice was made. (2) If revoked, the choice does not have effect for a period that starts on or after the day on which the Commissioner's approval is given, unless the revocation is expressed to take effect on an earlier day. In that case, it does not have effect for a period that starts on or after the earlier day. 820‑445 How this Subdivision interacts with Subdivisions 820‑F, 820‑FA and 820‑FB Subdivision 820‑F (1) A choice under section 820‑430 does not affect how section 820‑550 (Classification of the resident TC group) applies to a *resident TC group for an income year unless the group could have made a choice under section 820‑430 covering the whole of that income year if: (a) the group had been a company throughout the income year; and (b) each entity in the group had been a division or part of that company, rather than a separate entity, at all times during the income year when the entity was in the group. Note: To work out the times during the income year when an entity was in the group, see section 820‑530. (2) A choice under section 820‑430 does not have effect for so much of a period as happens while the entity is in a *resident TC group for an income year if, apart from the choice, section 820‑575 would apply Subdivision 820‑E to the group for that income year as if the group were an *inward investing entity (ADI). Subdivision 820‑FA (3) A choice under section 820‑430 does not have effect for so much of a period as happens while the entity is a *subsidiary member of a *consolidated group or *MEC group. Note: If the head company of the group makes a choice under that section, that choice will have effect instead. Subdivision 820‑FB (4) A choice under section 820‑430 does not have effect for so much of a period as happens during the grouping period for a choice by the entity under section 820‑597 or 820‑599 (about treating foreign bank branches as part of the entity). Note: Instead, the choice under section 820‑597 or 820‑599 will result in the entity being an outward investing entity (ADI) or an inward investing entity (ADI) for the grouping period: see section 820‑609. 7 Subsection 995‑1(1) (at the end of the definition of inward investing entity (ADI)) Add: Note: Section 820‑430 allows an inward investor (financial) to be treated as an inward investing entity (ADI) in certain cases. 8 Subsection 995‑1(1) (at the end of the definition of inward investment vehicle (financial)) Add: Note: Section 820‑430 allows an inward investment vehicle (financial) to be treated as an outward investing entity (ADI) in certain cases. 9 Subsection 995‑1(1) (at the end of the definition of inward investor (financial)) Add: Note: Section 820‑430 allows an inward investor (financial) to be treated as an inward investing entity (ADI) in certain cases. 10 Subsection 995‑1(1) (at the end of the definition of outward investing entity (ADI)) Add: Note: Section 820‑430: * allows an outward investor (financial) to be treated as an outward investing entity (ADI) in certain cases; and * allows an inward investment vehicle (financial) to be treated as an outward investing entity (ADI) in certain cases. 11 Subsection 995‑1(1) (at the end of the definition of outward investor (financial)) Add: Note: Section 820‑430 allows an outward investor (financial) to be treated as an outward investing entity (ADI) in certain cases. 12 Subsection 995‑1(1) Insert: precious metal has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999. Part 4—Revaluing assets for thin capitalisation purposes Income Tax Assessment Act 1997 13 At the end of subsection 820‑680(2) Add: Note: The entity must also keep records in accordance with section 820‑985 about the revaluation, unless the exception in subsection (2A) of this section applies. 14 After subsection 820‑680(2) Insert: Revaluation reflected in statutory financial statements for the same period (2A) A revaluation of an asset need not comply with subsection (2) if: (a) the revaluation is for the purpose of the entity calculating the value of its assets for the purposes of this Division as applying to the entity for a particular period; and (b) the entity is required by an Australian law to prepare financial statements for a period that is or includes all or part of that period; and (c) those financial statements reflect the revaluation. External validation of a revaluation made internally (2B) A revaluation of assets mentioned in paragraph (1)(a) may be made by a person (the internal expert) if: (a) apart from this subsection, paragraph (2)(b) would prevent the internal expert from making the revaluation, but only because, in making it, he or she would be: (i) performing duties as an employee of the entity; or (ii) providing services under an *arrangement with the entity that is substantially similar to a contract of employment; and (b) another person (the external expert): (i) is not prevented by subsection (2) from making the revaluation; and (ii) has reviewed the methodology for making it (including the validity of any assumptions to be made, and the accuracy and reliability of the data and other information to be used); and (iii) has agreed that that methodology is suitable for making it; and (c) the internal expert makes the revaluation in accordance with that methodology. Revaluation of individual assets (2C) Subsection (1) does not prevent the entity from revaluing one or more assets in a class of assets (as distinct from revaluing all the assets in the class) if the value of no asset in that class has fallen since the entity last calculated the total value of all the assets in that class in accordance with the *accounting standards. When further revaluation of assets required (2D) If: (a) the entity revalues one or more assets (whether constituting a class of assets or not) for the purpose of calculating the value of its assets for the purposes of this Division as applying to the entity for a particular period (the first period); and (b) the revaluation is not required by the *accounting standards; and (c) if the revaluation had been required by the accounting standards, the entity could have relied on it in preparing financial statements that the entity is required by an Australian law to prepare for a period (the later period) that ends after the first period; the entity may also rely on the revaluation in calculating the value of its assets for the purposes of this Division as applying to the entity for a period that is or includes all or part of the later period. (2E) If subsection (2D) does not permit the entity to rely on the revaluation in calculating the value of its assets for the purposes of this Division as applying to the entity for a period that is later than the first period, the revaluation is disregarded in determining whether subsection (1) requires the entity to revalue the one or more assets in calculating the value of its assets for those purposes. Note: As a result, the entity may not be required to make a further revaluation of the one or more assets. However, if the entity does not, it must use the value of the one or more assets that is reflected in financial statements for the relevant period that comply with the accounting standards. Accounting standards need not otherwise apply to the entity 15 After section 820‑980 Insert: Records about asset revaluations 820‑985 Methodology of revaluation and independence of valuer (1) An entity must keep records under this section for a revaluation of assets mentioned in subsection 820‑680(2) (except a revaluation that need not comply with that subsection because of subsection 820‑680(2A)). (2) The records must contain particulars about: (a) the methodology used in making the revaluation (including any assumptions made); and (b) how that methodology was applied (including the data and other information used); and (c) who made the revaluation; and (d) that person's qualifications and experience as an expert in valuing assets of the relevant kind; and (e) the remuneration and expenses paid to that person. (3) If the revaluation was made in accordance with subsection 820‑680(2B) (about external validation of a revaluation made internally), the records must also contain particulars of: (a) who was the external expert referred to in that subsection; and (b) his or her qualifications and experience as an expert in valuing assets of the relevant kind; and (c) the remuneration and expenses paid to him or her; and (d) his or her review of the methodology for making the revaluation (as required by subparagraph 820‑680(2B)(b)(ii)); and (e) his or her agreement that the methodology is suitable for making it (as required by subparagraph 820‑680(2B)(b)(iii)). (4) The entity must prepare the records before the time by which the entity must lodge its *income tax return for the income year in relation to all or a part of which the revaluation is made. Note: A person must comply with the requirements in section 262A of the Income Tax Assessment Act 1936 about the keeping of these records (see subsections (2AA) and (3) of that section). Income Tax Assessment Act 1936 16 Subsection 262A(2AA) Omit "or 820‑980", substitute ", 820‑980 or 820‑985". 17 At the end of subsection 262A(3) Add: ; and (e) for records required to be kept under section 820‑985 of that Act—comply with subsections (2) and (3) of that section. Part 5—Arrangements for borrowing securities Income Tax Assessment Act 1997 18 Subsection 820‑85(3) (step 4 of the method statement) Repeal the step, substitute: Step 4. If the entity is a *financial entity throughout the relevant year, add to the result of step 3 the average value, for the relevant year, of the entity's *borrowed securities amount. 19 Subsection 820‑120(2) (step 4 of the method statement) Repeal the step, substitute: Step 4. If the entity is a *financial entity throughout that period, add to the result of step 3 the average value, for that period, of the entity's *borrowed securities amount. 20 Subsection 820‑185(3) (step 3 of the method statement) Repeal the step, substitute: Step 3. If the entity is a *financial entity throughout the relevant year, add to the result of step 2 the average value, for the relevant year, of the entity's *borrowed securities amount. 21 Subsection 820‑225(2) (step 3 of the method statement) Repeal the step, substitute: Step 3. If the entity is a *financial entity throughout that period, add to the result of step 2 the average value, for that period, of the entity's *borrowed securities amount. 22 Subsection 820‑942(1) (step 1 of the method statement) Repeal the step, substitute: Step 1. Work out the total value, as at that particular time, of all the assets of the entity that represent *debt interests that: (a) are of a kind commonly dealt in by entities that carry on a *business of dealing in securities; and (b) the entity has sold under a reciprocal purchase agreement (otherwise known as a repurchase agreement), sell‑buyback arrangement or securities loan arrangement; and (c) the entity has not yet repurchased under the agreement or arrangement. 23 Subsection 820‑942(1) (after step 3 of the method statement) Insert: Step 3A. Add to the result of step 3 the total value, as at that time, of all the assets of the entity, to the extent that they: (a) consist of rights to the return of assets covered by subsection (2A); and (b) are covered by none of steps 1, 2 and 3. 24 Subsection 820‑942(1) (step 4 of the method statement) Omit "step 3", substitute "step 3A". 25 After subsection 820‑942(1) Insert: (2A) This subsection covers an asset that: (a) the entity provided as security for the performance of its obligations in relation to securities it acquired under a reciprocal purchase agreement (otherwise known as a repurchase agreement), sell‑buyback arrangement or securities loan arrangement; and (b) does not consist of *shares. 26 Subsection 995‑1(1) Insert: borrowed securities amount of an entity at a particular time means the total of the liabilities of the entity, to the extent that they meet these conditions: (a) the value of the liability at that time is worked out by reference to the value at that time of securities that the entity has short sold; (b) as at that time, the entity has settled the sale using securities it acquired under one or more of these *arrangements: (i) a reciprocal purchase agreement (otherwise known as a repurchase agreement); (ii) a sell‑buyback arrangement; (iii) a securities loan arrangement. 27 Subsection 995‑1(1) (at the end of the definition of non‑debt liabilities) Add: ; or (e) a liability of the entity, to the extent that it meets the conditions for being taken into account in working out the *borrowed securities amount of the entity as at that time. 28 Subsection 995‑1(1) (at the end of the definition of on‑lent amount) Add: ; and (d) if the entity: (i) carries on a *business of dealing in securities; and (ii) does not carry on that business predominantly for the purposes of dealing in securities with, or on behalf of, the entity's *associates; all *shares that: (iii) the entity holds at that time; and (iv) are listed at that time for quotation in the official list of an *approved stock exchange; and (v) are not shares in an *associate entity at that time of the entity. Part 6—Definition of financial entity Income Tax Assessment Act 1997 29 Subsection 995‑1(1) (paragraph (c) of the definition of financial entity) Repeal the paragraph, substitute: (c) an entity that: (i) is a financial services licensee within the meaning of the Corporations Act 2001 whose licence covers dealings in at least one of the financial products mentioned in paragraphs 764A(1)(a), (b) and (j) of that Act; or (ii) under paragraph 911A(2)(h) or (l) of the Corporations Act 2001, is exempt from the requirement to hold an Australian financial services licence for dealings in at least one of those financial products; and carries on a *business of dealing in securities, but not predominantly for the purposes of dealing in securities with, or on behalf of, the entity's *associates; Note 1: Paragraphs 764A(1)(a), (b) and (j) of the Corporations Act 2001 deal respectively with securities, managed investment products and government debentures, stocks and bonds. Note 2: Paragraph 911A(2)(h) of that Act exempts financial services provided to wholesale clients in the course of a business that is regulated by an overseas regulatory authority approved by the Australian Securities and Investments Commission (ASIC). Note 3: Paragraph 911A(2)(l) of that Act empowers ASIC to exempt financial services. (d) an entity that: (i) is a financial services licensee within the meaning of the Corporations Act 2001 whose licence covers dealings in derivatives within the meaning of that Act; or (ii) under paragraph 911A(2)(h) or (l) of the Corporations Act 2001, is exempt from the requirement to hold an Australian financial services licence for dealings in such derivatives; and carries on a business of dealing in such derivatives, but not predominantly for the purposes of dealing in such derivatives with, or on behalf of, the entity's associates. Part 7—Cost‑free debt capital Income Tax Assessment Act 1997 30 Paragraph 820‑946(1)(c) Repeal the paragraph, substitute: (c) neither section 820‑35 ($250,000 debt deductions threshold) nor section 820‑37 (exemption for entity with 90% Australian assets) prevents Subdivision 820‑B, 820‑C, 820‑D or 820‑E from disallowing any *debt deduction of the entity for the income year; (da) for some or all of that period, the entity does not meet the conditions in subsection 820‑39(3) (about exemption of certain special purpose entities); 31 At the end of subsection 820‑946(4) Add: However, if the total period for which the interest remains on issue is 180 days or more, this subsection is taken not to have covered the interest at that time. Part 8—Associate entity debt Income Tax Assessment Act 1997 32 Subsection 820‑910(2) Repeal the subsection, substitute: (2) This section also applies, for the relevant entity, to an *associate entity (a relevant associate entity) of the relevant entity, if: (a) either: (i) the associate entity is an *outward investing entity (non‑ADI), an *inward investment vehicle (general), or an *inward investment vehicle (financial), for the relevant period; or (ii) the associate entity is an *inward investor (general) or an *inward investor (financial) for the relevant period, and the condition in subsection (2A) of this section is satisfied; and (b) neither section 820‑35 ($250,000 debt deductions threshold) nor section 820‑37 (exemption for entity with 90% Australian assets) prevents Subdivision 820‑B, 820‑C, 820‑D or 820‑E from disallowing any *debt deduction of the relevant associate entity for the income year; and (c) for some or all of the relevant period, the relevant associate entity does not meet the conditions in subsection 820‑39(3) (about exemption of certain special purpose entities); and (d) the relevant associate entity is not an *exempt entity for the income year. (2A) The condition referred to in subparagraph (2)(a)(ii) is that the relevant period consists of one or more periods each of which is either or both of these: (a) a period throughout which the *associate entity carries on its *business in Australia at or through one or more of its *Australian permanent establishments; (b) a period throughout which the associate entity holds any of the following assets: (i) assets that are attributable to the associate entity's Australian permanent establishments; (ii) other assets that are held for the purposes of producing the associate entity's assessable income. Part 9—Debt deductions for borrowing expenses Income Tax Assessment Act 1997 33 Paragraph 820‑40(1)(c) Repeal the paragraph, substitute: (c) the cost is not incurred before 1 July 2001 if the entity can deduct it under section 25‑25 of this Act or section 67 of the Income Tax Assessment Act 1936. Note: The sections referred to in paragraph (c) spread deductions for borrowing expenses over up to 5 years in most cases. Part 10—Foreign controlled Australian partnerships Income Tax Assessment Act 1997 34 Paragraph 820‑795(2)(a) Repeal the paragraph, substitute: (a) at least one of the partners is an *Australian entity; and Part 11—Arm's length debt amount Income Tax Assessment Act 1997 35 Paragraph 820‑105(2)(d) Omit "paragraph (e)", substitute "paragraphs (e), (f) and (g)". 36 At the end of subsection 820‑105(2) Add: ; (f) the entity's only activities during that year were the Australian business; (g) the entity's only assets and liabilities during that year were those referred to in paragraph (c) of this subsection. However, the assumptions set out in paragraphs (f) and (g) of this subsection are not to be made in taking into account the relevant factors mentioned in subsection (3). 37 Paragraph 820‑215(2)(d) Omit "paragraph (e)", substitute "paragraphs (e), (f) and (g)". 38 At the end of subsection 820‑215(2) Add: ; (f) the entity's only activities during that year were the Australian business; (g) the entity's only assets and liabilities during that year were those referred to in paragraph (c) of this subsection. However, the assumptions set out in paragraphs (f) and (g) of this subsection are not to be made in taking into account the relevant factors mentioned in subsection (3). Part 12—Maximum allowable debt Income Tax Assessment Act 1997 39 Paragraph 820‑90(1)(c) Before "the", insert "unless the entity has *worldwide equity of a negative amount—". Part 13—Non‑debt liabilities Income Tax Assessment Act 1997 40 Subsection 995‑1(1) (paragraph (c) of the definition of non‑debt liabilities) Repeal the paragraph, substitute: (c) if the entity is a *corporate tax entity—a provision for a *distribution of profit; or (ca) if paragraph (c) does not apply—a provision for a distribution to the entity's *members; or Schedule 2—Thin Capitalisation: amendments taking effect on 1 July 2002 Part 1—Application of amendments 1 Application The amendments made by this Schedule (except Part 5) apply in relation to an income year that begins on or after 1 July 2002. Part 2—Records about Australian permanent establishments Income Tax Assessment Act 1997 2 Section 820‑960 Repeal the section, substitute: 820‑960 Records about Australian permanent establishments (1) If an entity: (a) is an *inward investor (general), *inward investor (financial) or *inward investing entity (ADI), for all or a part of an income year; and (b) carries on its *business at or through one or more of its *Australian permanent establishments throughout that year; and (c) has total revenues attributable to those Australian permanent establishments for that year that are at least $2,000,000; the entity must keep for that year the records for which subsection (1A) or (1B) provides. Note: A person must comply with the requirements in section 262A of the Income Tax Assessment Act 1936 about the keeping of these records (see subsections (2AA) and (3) of that section). Australian accounting standards (1A) If the entity chooses this subsection, it must keep the following records for the *Australian permanent establishments: (a) a statement of financial position (within the meaning of the *accounting standards); (b) a statement of financial performance (within the meaning of those standards). The statements must: (c) be prepared in accordance with the *accounting standards (in particular, but not limited to, accounting standards AASB 1001, AASB 1018 and AASB 1040); and (d) include all the notes required to accompany them under the standards. Overseas and international accounting standards (1B) If the entity chooses this subsection, it must keep for the *Australian permanent establishments the statements (however described) that, under standards covered by subsection (1C) or (1D) (the overseas or international accounting standards), correspond to the statements referred to in subsection (1A). The statements must: (a) be prepared in accordance with those standards; and (b) include all the notes required to accompany them under those standards. (1C) This subsection covers the standards (however described) that correspond to the *accounting standards and are made by the responsible body in: (a) the United Kingdom of Great Britain and Northern Ireland; or (b) the United States of America; or (c) Canada; or (d) New Zealand; or (e) Japan; or (f) the French Republic; or (g) the Federal Republic of Germany. (1D) This subsection covers the international accounting standards made or adopted by the International Accounting Standards Board. Requirements for the records under subsection (1A) or (1B) (2) The entity must prepare the records for which subsection (1A) or (1B) provides: (a) before the time by which the entity must lodge its tax return for the income year; and (b) as if: (i) the *Australian permanent establishments were an entity (the notional entity) for which those records would be required to be prepared under the *accounting standards or the overseas or international accounting standards, as appropriate; and (ii) for the purposes of the statement of financial position or the corresponding statement, as appropriate—the assets, liabilities (including *debt capital) and *equity capital that are attributable to the Australian permanent establishments for that income year were assets, liabilities and equity of the notional entity for that year; and (iii) for the purposes of the statement of financial performance or the corresponding statement, as appropriate—the revenues and expenses that are attributable to the Australian permanent establishments for that year were the revenues and expenses of the notional entity for that year; and (iv) the *accounting standards, or the overseas or international accounting standards, as appropriate, referred to income years instead of financial years or the corresponding term in the overseas or international accounting standards. Commissioner's power to exempt from complying with Australian accounting standards (4) The Commissioner may decide that an entity, or entities in a class of entities, need not comply with all or any part of the *accounting standards for one or more income years for the purposes of subsection (1A) if the Commissioner is satisfied that it would be unreasonable that the entity, or the entities in that class, be required to do so. Note: The Commissioner's power under this subsection does not extend to the overseas or international accounting standards. (5) The Commissioner: (a) may make a decision under subsection (4) in such cases and to such extent as the Commissioner thinks fit; and (b) must make the decision in writing; and (c) cause a copy of the decision to be published in the Gazette. The decision has effect despite subsection (1A). Excluding Australian permanent establishments not covered by applicable double tax treaty (6) An entity need not comply with this section for an income year in relation to an *Australian permanent establishment if: (a) throughout that year, the entity was, for the purposes of a double tax agreement (within the meaning of Part X of the Income Tax Assessment Act 1936) in relation to a foreign country, a resident of that foreign country (even if the entity was also an Australian resident or a resident of another foreign country); and (b) throughout the period during that year when the entity was carrying on its *business at or through that Australian permanent establishment, the Australian permanent establishment was not a permanent establishment within the meaning of that double tax agreement. Income Tax Assessment Act 1936 3 Paragraph 262A(3)(c) Omit "subsections (2) to (4)", substitute "the applicable provisions". Part 3—Equity interests excluded in working out safe harbour debt amount Income Tax Assessment Act 1997 4 Section 820‑10 (table item 8A) After "cost‑free debt capital", insert ", and excluded equity interest,". 5 Section 820‑95 (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 6 Section 820‑95 (step 2 of the method statement) Omit "step 1", substitute "step 1A". 7 Subsection 820‑100(2) (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 8 Subsection 820‑100(2) (step 2 of the method statement) Omit "step 1", substitute "step 1A". 9 Subsection 820‑100(3) (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 10 Subsection 820‑100(3) (step 2 of the method statement) Omit "step 1", substitute "step 1A". 11 Section 820‑195 (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 12 Section 820‑195 (step 2 of the method statement) Omit "step 1", substitute "step 1A". 13 Subsection 820‑200(2) (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 14 Subsection 820‑200(2) (step 2 of the method statement) Omit "step 1", substitute "step 1A". 15 Subsection 820‑200(3) (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 16 Subsection 820‑200(3) (step 2 of the method statement) Omit "step 1", substitute "step 1A". 17 Section 820‑205 (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 18 Section 820‑205 (step 2 of the method statement) Omit "step 1", substitute "step 1A". 19 Subsection 820‑210(2) (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 20 Subsection 820‑210(2) (step 2 of the method statement) Omit "step 1", substitute "step 1A". 21 Subsection 820‑210(3) (after step 1 of the method statement) Insert: Step 1A. Reduce the result of step 1 by the average value, for that year, of all the *excluded equity interests in the entity. 22 Subsection 820‑210(3) (step 2 of the method statement) Omit "step 1", substitute "step 1A". 23 Subdivision 820‑KA (heading) Repeal the heading, substitute: Subdivision 820‑KA—Cost‑free debt capital and excluded equity interests 24 Section 820‑945 After "cost‑free debt capital", insert ", and excluded equity interest,". 25 Section 820‑946 (heading) Repeal the heading, substitute: 820‑946 Cost‑free debt capital and excluded equity interest 26 Subsection 820‑946(1) After "period" (first occurring), insert "(the relevant period)". 27 Subsection 820‑946(2) Omit "If subsection (1) applies to an entity for a period (the relevant period), the", substitute "The". 28 After subsection 820‑946(2) Insert: (2A) An *equity interest in the entity is an excluded equity interest at a particular time during the relevant period if, and only if: (a) if subsection (1) does not apply to the holder of the interest for all or part of the relevant period: (i) the entity is an *associate of the holder; and (ii) at that time, the interest has been *on issue for a period of less than 180 days; or (b) if subsection (1) applies to the holder for all or part of the relevant period: (i) the entity is an associate of the holder; and (ii) at that time, the interest has been on issue for a period of less than 180 days; and (iii) the interest is covered by subsection (3) at that time. 29 Subsection 820‑946(3) After "*debt interest", insert "or *equity interest". 33 Subsection 995‑1(1) Insert: excluded equity interest has the meaning given by section 820‑946. 34 Subsection 995‑1(1) (definition of on issue) Repeal the definition, substitute: on issue: (a) a *debt interest is on issue as provided in paragraph 974‑55(1)(e); and (b) an *equity interest in an entity: (i) is on issue from when it is issued until it stops being on issue because of subparagraph (ii); and (ii) stops being on issue when, for reasons other than the economic performance of the entity (or of a *connected entity of the entity), there is no longer a reasonable likelihood that a substantial *financial benefit will be provided in respect of the interest under the *scheme, or under any of the schemes, that give rise to the interest. Part 4—Adjusted average equity capital for grouping purposes Income Tax Assessment Act 1997 35 Subsection 820‑562(3) Repeal the subsection (but not the note or the table), substitute: (3) The amount worked out under this subsection as at a particular day is: (a) the total of the amounts worked out under the table below for each member of the group that is covered by an item in the table and is in the group on that day (except so much of that total as is attributable to any of the *overseas permanent establishments of such members); minus (b) the total of the *controlled foreign equity, at the end of that day, of each member of the group that is in the group on that day (except so much of that total as is attributable to any of the overseas permanent establishments of such members). 36 Subsection 820‑589(3) Omit all the words from and including "The amount" to and including "consolidated accounts:", substitute "The amount worked out under this subsection as at a particular day is:". 37 Paragraphs 820‑589(3)(a) and (b) Repeal the paragraphs, substitute: (a) the total of the amounts worked out under the table below for each entity that is a *member of the group on that day (except so much of that total as is attributable to any of the*overseas permanent establishments of such entities); minus (b) the total of the *controlled foreign equity, at the end of that day, of each such entity (except so much of that total as is attributable to any of the overseas permanent establishments of such entities). 38 Subsection 820‑589(3) (note) Repeal the note. 39 At the end of section 820‑589 Add: (4) The amounts referred to in paragraphs (3)(a) and (b) are to be worked out, so far as practicable, on the basis of the information that would be contained in a set of consolidated accounts: (a) prepared, in accordance with the *accounting standard on consolidated accounts, as at the end of that day; and (b) covering the *members of the group as at the end of that day. Note: This subsection does not depend on whether such a set of consolidated accounts was prepared, or had to be prepared, for other purposes. 40 Paragraphs 820‑613(3)(a) and (b) Repeal the paragraphs, substitute: (a) in the case of a choice under section 820‑597: (i) the amounts worked out under the table in subsection 820‑589(3) for that day for each entity that is a *member of the group on that day (except so much of those amounts as is attributable to any of the *overseas permanent establishments of such entities); minus (ii) the total of the *controlled foreign equity, at the end of that day, of each such entity (except so much of that total as is attributable to any of the overseas permanent establishments of such entities); and (b) in the case of a choice under section 820‑599: (i) the amount worked out under the table in subsection 820‑589(3) for that day for the single company (except so much of that total as is attributable to any of the single company's overseas permanent establishments); minus (ii) the single company's controlled foreign equity, at the end of that day (except so much of it as is attributable to any of the single company's overseas permanent establishments); and Part 5—Disallowed deductions not included in cost base of a CGT asset Income Tax Assessment Act 1997 41 At the end of Subdivision 110‑A Add: 110‑54 Debt deductions disallowed by thin capitalisation rules Expenditure does not form part of the third element of the cost base to the extent that Division 820 (Thin capitalisation rules) prevented or prevents you, or a partnership in which you are or were a partner, from deducting it. 42 At the end of section 820‑115 Add: Note: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54. 43 At the end of section 820‑220 Add: Note: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54. 44 At the end of section 820‑325 Add: Note: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54. 45 At the end of section 820‑415 Add: Note: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54. 46 Section 820‑465 (note) Omit "Note", substitute "Note 1". 47 At the end of section 820‑465 Add: Note 2: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54. 48 Section 820‑605 (before Note 1) Insert: Note 1A: The disallowed amount also does not form part of the cost base of a CGT asset. See section 110‑54. 49 Application The amendments made by this Part (except items 50 and 51) do not apply for the purposes of working out a capital gain made from a CGT event happening before 1 July 2002. Taxation Laws Amendment Act (No. 7) 2000 50 Item 31 of Schedule 4 Omit "Before section 110‑40", substitute "After the group heading before section 110‑40". 51 Application Item 31 of Schedule 4 to the Taxation Laws Amendment Act (No. 7) 2000 is taken always to have had effect as amended by item 50 of this Schedule. Part 6—Premium excess amount Income Tax Assessment Act 1997 52 Subsection 820‑920(3) (step 2 of the method statement) Repeal the step, substitute: Step 2. Work out the value, as at that time, of all the *equity capital of the *associate entity that is attributable to *equity interests that the relevant entity holds in the associate entity at that time (except equity interests whose value is all or a part of the relevant entity's *controlled foreign entity equity at that time). Part 7—Attributable safe harbour excess amount Income Tax Assessment Act 1997 53 Subsection 820‑920(4) (at the end of step 1 of the method statement) Add: ; and (d) if the associate entity would otherwise be treated as an *inward investor (financial) for that day and the relevant entity is not a financial entity throughout that day—the associate entity were an *inward investor (general) for that day. Schedule 3—Thin Capitalisation: amendments taking effect on 1 July 2003 Part 1—Definition of equity capital and related concepts Income Tax Assessment Act 1997 1 Subsection 820‑300(3) Omit "*equity capital", substitute "*ADI equity capital". 2 Subsection 820‑300(3) Omit "equity capital" (second occurring), substitute "ADI equity capital". 3 Subsection 820‑330(2) Omit "*equity capital", substitute "*ADI equity capital". 4 Subsection 820‑330(2) Omit "equity capital" (second occurring), substitute "ADI equity capital". 5 Paragraph 820‑395(3)(a) Omit "*equity capital", substitute "*ADI equity capital". 6 Section 820‑589 Repeal the section, substitute: 820‑589 How Subdivision 820‑D applies to a MEC group (1) This section has effect for the purposes of working out the *adjusted average equity capital of the *head company of a *MEC group for a period (the test period) that is all or part of an income year if Subdivision 820‑D applies to the head company in relation to that period. Note: Section 820‑587 extends the application of Subdivision 820‑D. (2) The *head company's *ADI equity capital at a particular time during the test period is to be worked out: (a) taking into account an *equity interest or *debt interest in the head company only if it is held at that time by an entity that is not a member of the group; and (b) on the basis that an equity interest or debt interest in an *eligible tier‑1 company (other than the head company) that is a member of the group at that time is treated as an equity interest or debt interest (as appropriate) in the head company, but only if it is held at that time by an entity that is not a member of the group; and (c) on the basis of the information that would be contained in a set of consolidated accounts: (i) prepared, in accordance with the *accounting standard on consolidated accounts, as at that time; and (ii) covering the members of the group as at that time. 7 Subsection 820‑611(2) Omit all the words after "820‑617". 8 Subsections 820‑613(2) and (3) Repeal the subsections, substitute: Adjusted average equity capital (2) The *adjusted average equity capital of the *head company or single company for the test period is increased by the average value, for the period, of the amount worked out under subsection (3). Note 1: In the case of a choice under section 820‑599, paragraph 820‑603(4)(b) treats the single company and the relevant Australian permanent establishments as a consolidated group. Note 2: To calculate an average value for the purposes of this Division, see Subdivision 820‑G. (3) The amount worked out under this subsection as at a particular day is the total of the amounts worked out under the following paragraphs for each *Australian permanent establishment through which the *foreign bank carried on its banking business in Australia on that day: (a) the *ADI equity capital of the foreign bank, as at the end of that day, that: (i) is attributable to that Australian permanent establishment; but (ii) has not been allocated to the *OB activities of the foreign bank; and (b) the amounts that, as at the end of that day: (i) are made available by the foreign bank to the Australian permanent establishment as loans to the Australian permanent establishment; and (ii) do not give rise to any *debt deductions of the foreign bank for the income year or any other income year. Note: The amounts are to be worked out, so far as practicable, on the basis of the information that would be contained in a set of consolidated accounts. See section 820‑611. 9 Subsection 820‑615(2) Repeal the subsection, substitute: Average equity capital (2) The average equity capital of the *head company or single company for the test period is: (a) the average value, for that period, of all the *ADI equity capital of the company; plus (b) the average value, for that period, of the amount worked out under subsection 820‑613(3). Note 1: In the case of a choice under section 820‑599, paragraph 820‑603(4)(b) treats the single company and the relevant Australian permanent establishments as a consolidated group. Note 2: To calculate an average value for the purposes of this Division, see Subdivision 820‑G. 10 Subsection 995‑1(1) Insert: ADI equity capital of an entity at a particular time means the total of the following: (a) all the entity's *equity capital at that time; and (b) the total value of all the *debt interests *issued by the entity that satisfy all of the following: (i) at that time, the interests are *on issue and have been on issue for 90 days or more; (ii) none of the interests gives rise to any cost, at any time, that is covered by paragraph 820‑40(1)(a). A debt interest is treated as having satisfied subparagraph (b)(i) at that time if it was on issue at that time, and the total period for which it remains on issue is 90 days or more. 11 Subsection 995‑1(1) (definition of equity capital) Repeal the definition, substitute: equity capital of an entity at a particular time means the total of the following as at that time: (a) the issue price (however described) of each *equity interest in the entity that is still *on issue, reduced by so much (if any) of the issue price as remains unpaid; (b) the entity's general reserves and asset revaluation reserves; (c) the entity's retained earnings; (d) the entity's net earnings (if any) for the current year, reduced by: (i) the *tax the entity expects to pay in respect of those net earnings; and (ii) so much of each distribution to the entity's *members that has been made or declared as at that time as is attributable to the entity's earnings for the current year; (e) if the entity is a *corporate tax entity—provisions for *distributions of profit; (f) if paragraph (e) does not apply—provisions for distributions to the entity's *members; reduced by the total of the following as at that time: (g) the entity's negative retained earnings (if any); (h) the entity's net loss (if any) for the current year. 12 Subsection 995‑1(1) (definition of equity interest in an entity) Repeal the definition, substitute: equity interest in an entity has the meaning given by: (a) in the case of a company—Subdivision 974‑C; and (b) in the case of a trust or partnership—section 820‑930. 13 Subsection 995‑1(1) (definition of equity interest in a company) Repeal the definition. 14 Subsection 995‑1(1) (definition of worldwide equity) Repeal the definition, substitute: worldwide equity, of an entity and at a particular time, means the total of the following amounts: (a) all the *equity capital of the entity as at that time, but worked out disregarding *equity interests in the entity held at that time by *Australian controlled foreign entities (the controlled entities) of which the entity is an *Australian controller at that time; (b) all the equity capital of the controlled entities as at that time, but worked out disregarding equity interests in the controlled entities held at that time by: (i) the entity; or (ii) other controlled entities. 15 Application The amendments made by this Part apply in relation to an income year that begins on or after 1 July 2003. Part 2—Assets and liabilities Income Tax Assessment Act 1997 16 Subsection 820‑680(1) After "the *accounting standards", insert "in determining what are its assets and liabilities and". 17 After subsection 820‑680(1) Insert: (1A) In particular, for the purposes of this Division, the entity has an asset or liability at a particular time if, and only if, according to the *accounting standards, the asset or liability can or must be recognised at that time. Requirements for revaluation of assets 18 Application The amendments made by this Part apply in relation to an income year that begins on or after 1 July 2003, and are not intended to affect the interpretation of subsection 820‑680(1) as applying in relation to an income year that starts before that day. Schedule 4—Foreign dividend accounts Income Tax Assessment Act 19