Tax Laws Amendment (2004 Measures No. 7) Act 2005 (Cth)

Tax Laws Amendment (2004 Measures No. 7) Act 2005 Act No. 41 of 2005 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—25% entrepreneurs' tax offset Income Tax Assessment Act 1997 Taxation Administration Act 1953 Schedule 2—STS accounting method Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Schedule 3—Employee share schemes Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Schedule 4—FBT exemption thresholds for long service award benefits Fringe Benefits Tax Assessment Act 1986 Schedule 5—Petroleum exploration incentives Petroleum Resource Rent Tax Assessment Act 1987 Schedule 6—Consolidation Part 1—Application Part 2—Amount of certain liabilities for purpose of calculating allocable cost amount on exit Income Tax Assessment Act 1997 Part 3—Ensuring no double reduction in working out step 3 of allocable cost amount on entry Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 4—Bad debts Division 1—Main amendment Income Tax Assessment Act 1997 Division 2—Consequential amendments Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 5—Insurance companies Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Schedule 7—STS roll‑over Income Tax Assessment Act 1997 Schedule 8—Family trust elections Income Tax Assessment Act 1936 Schedule 9—Non‑commercial loans Part 1—Amendment commencing on 29 June 2004 Income Tax Assessment Act 1936 Part 2—Amendments commencing on Royal Assent Income Tax Assessment Act 1936 Schedule 10—Technical corrections and amendments Part 1—Technical corrections and amendments commencing on Royal Assent A New Tax System (Goods and Services Tax) Act 1999 A New Tax System (Wine Equalisation Tax) Act 1999 Fringe Benefits Tax Assessment Act 1986 Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 New Business Tax System (Consolidation and Other Measures) Act 2003 Petroleum Resource Rent Tax Assessment Act 1987 Product Grants and Benefits Administration Act 2000 Superannuation Guarantee (Administration) Act 1992 Taxation Administration Act 1953 Taxation Laws Amendment Act (No. 5) 2002 Venture Capital Act 2002 Part 2—Technical corrections and amendments commencing otherwise than on Royal Assent A New Tax System (Pay As You Go) Act 1999 Energy Grants (Credits) Scheme (Consequential Amendments) Act 2003 Fringe Benefits Tax Assessment Act 1986 Income Tax Assessment Act 1997 New Business Tax System (Consolidation) Act (No. 1) 2002 New Business Tax System (Consolidation and Other Measures) Act 2003 Taxation Laws Amendment (Company Law Review) Act 1998 Taxation Laws Amendment (Research and Development) Act 2001 Tax Laws Amendment (2004 Measures No. 2) Act 2004 Part 3—Removal of link notes Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Taxation Administration Act 1953 Venture Capital Act 2002 Schedule 11—Film tax offset amendments Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Notes An Act to amend the law relating to taxation, and for related purposes 1 Short title [see Note 1] This Act may be cited as the Tax Laws Amendment (2004 Measures No. 7) Act 2005. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provision(s) Commencement Date/Details 1. Sections 1 to 4 and anything in this Act not elsewhere covered by this table The day on which this Act receives the Royal Assent. 1 April 2005 2. Schedules 1 to 8 The day on which this Act receives the Royal Assent. 1 April 2005 3. Schedule 9, Part 1 Immediately after the commencement of item 3 of Schedule 8 to the Tax Laws Amendment (2004 Measures No. 1) Act 2004. 29 June 2004 4. Schedule 9, Part 2 The day on which this Act receives the Royal Assent. 1 April 2005 5. Schedule 10, Part 1 The day on which this Act receives the Royal Assent. 1 April 2005 6. Schedule 10, item 244 Immediately after the commencement of Schedule 2 to the A New Tax System (Pay As You Go) Act 1999. 22 December 1999 7. Schedule 10, item 245 Immediately after the commencement of the Energy Grants (Credits) Scheme (Consequential Amendments) Act 2003. 1 July 2003 8. Schedule 10, item 246 1 April 2001. 1 April 2001 9. Schedule 10, item 247 Immediately after the commencement of the Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Act 2001. 28 December 2002 10. Schedule 10, item 248 Immediately after the commencement of Schedule 7 to the New Business Tax System (Consolidation and Other Measures) Act 2003. 24 October 2002 11. Schedule 10, items 249 and 250 Immediately after the commencement of the New Business Tax System (Imputation) Act 2002. 29 June 2002 12. Schedule 10, items 251 to 257 Immediately after the commencement of Schedule 13 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002. 29 June 2002 13. Schedule 10, item 258 Immediately after the commencement of item 84 of Schedule 2 to the New Business Tax System (Miscellaneous) Act (No. 2) 2000. 30 June 2000 14. Schedule 10, item 259 Immediately after the start of the day on which the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 received the Royal Assent. 24 October 2002 15. Schedule 10, item 260 Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002. 24 October 2002 16. Schedule 10, items 261 and 262 Immediately after the commencement of the A New Tax System (Goods and Services Tax) Act 1999. 1 July 2000 17. Schedule 10, items 263 and 264 Immediately after the commencement of the New Business Tax System (Imputation) Act 2002. 29 June 2002 18. Schedule 10, item 265 Immediately after the commencement of the New Business Tax System (Consolidation) Act (No. 1) 2002. 24 October 2002 19. Schedule 10, item 266 Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002. 24 October 2002 20. Schedule 10, item 267 Immediately after the start of the day on which the Taxation Laws Amendment (Company Law Review) Act 1998 received the Royal Assent. 29 June 1998 21. Schedule 10, item 268 Immediately after the commencement of Schedule 4 to the Taxation Laws Amendment (Research and Development) Act 2001. 1 October 2001 22. Schedule 10, item 269 Immediately after the commencement of section 2 of the Tax Laws Amendment (2004 Measures No. 2) Act 2004. 25 June 2004 23. Schedule 10, Part 3 The later of: 1 April 2005 (a) the start of the day on which this Act receives the Royal Assent; and (paragraph (a) applies) (b) immediately after the commencement of Schedule 1 to the Tax Laws Amendment (2004 Measures No. 6) Act 2005. However, the provision(s) do not commence at all if the event mentioned in paragraph (b) does not occur. 24. Schedule 11 The day on which this Act receives the Royal Assent. 1 April 2005 Note: This table relates only to the provisions of this Act as originally passed by the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent. (2) Column 3 of the table contains additional information that is not part of this Act. Information in this column may be added to or edited in any published version of this Act. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—25% entrepreneurs' tax offset Income Tax Assessment Act 1997 1 Section 13‑1 (after table item headed "eligible termination payments (ETPs)") Insert: entrepreneurs' tax offset see simplified tax system 2 Section 13‑1 (table item headed "partnerships") After "dividends", insert "and simplified tax system". 3 Section 13‑1 (after table item headed "sickness benefits") Insert: simplified tax system 25% entrepreneurs' tax offset...................... Subdivision 61‑J 4 Section 13‑1 (table item headed "trusts") After "dividends", insert "and simplified tax system". 5 After Subdivision 61‑I Insert: Subdivision 61‑J—25% entrepreneurs' tax offset Guide to Subdivision 61‑J 61‑500 What this Subdivision is about This Subdivision provides a 25% tax offset on your income tax liability related to the business income of a business in the simplified tax system with annual group turnover of less than $75,000. Your entitlement to the offset varies depending on what kind of entity you are. The amount of your offset varies depending on whether the annual group turnover is $50,000 or less or is more than $50,000. You may be entitled to more than 1 tax offset. For example, if you are an individual STS taxpayer running your own business, you may be entitled to a tax offset under section 61‑505. If you are also a beneficiary of a trust that is an STS taxpayer, you may be entitled to a tax offset under section 61‑520. Table of sections Operative provisions 61‑505 25% entrepreneurs' tax offset: individual or company 61‑510 25% entrepreneurs' tax offset: partner in a partnership 61‑515 25% entrepreneurs' tax offset: trustee of a trust 61‑520 25% entrepreneurs' tax offset: beneficiary of a trust 61‑525 Meaning of net STS income and STS annual turnover Operative provisions 61‑505 25% entrepreneurs' tax offset: individual or company Entitlement (1) You are entitled to a *tax offset for an income year if: (a) you are an individual or a company; and (b) you are an *STS taxpayer for the year; and (c) your *STS group turnover for the year is less than $75,000; and (d) you have *net STS income for the year. Amount (2) The amount of your *tax offset is worked out in this way: Method statement Step 1. Work out your taxable income for the income year. Step 2. Work out 25% of your basic income tax liability for the year (as worked out in step 2 of the method statement in subsection 4‑10(3)). Step 3. Work out the percentage (the STS percentage) using the formula: If that percentage is more than 100%, the STS percentage is 100%. Step 4. If your *STS group turnover for the year is $50,000 or less, multiply the amount at step 2 by the STS percentage: the result is the amount of your *tax offset. Step 5. If your *STS group turnover for the year is more than $50,000, work out the fraction (the STS phase‑out fraction) using the formula: The amount of your *tax offset is worked out using the formula: Example: A company runs a local sports business. The company is an STS taxpayer for the year. The company's STS group turnover for the year is $50,000, the company's net STS income for the year is $40,000 and the company's taxable income for the year is $80,000. The company is entitled to a tax offset. The amount of the offset is worked out in this way: The step 1 amount is $80,000. The step 2 amount is $6,000: 25% of the company's basic income tax liability of $24,000 ($80,000 multiplied by the 30% company tax rate). The step 3 STS percentage is: The amount of the company's tax offset (step 4) is: 61‑510 25% entrepreneurs' tax offset: partner in a partnership Entitlement (1) You are entitled to a *tax offset for an income year if: (a) you are a partner in a partnership during the year; and (b) the partnership is an *STS taxpayer for the year; and (c) the partnership's *STS group turnover for the year is less than $75,000; and (d) the partnership has *net STS income for the year; and (e) your assessable income for the year includes a share (your net STS income share) of that net STS income. Amount (2) The amount of your *tax offset is worked out in this way: Method statement Step 1. Work out your taxable income for the income year. Step 2. Work out 25% of your basic income tax liability for the year (as worked out in step 2 of the method statement in subsection 4‑10(3)). Step 3. Work out the percentage (the STS percentage) using the formula: If that percentage is more than 100%, the STS percentage is 100%. Step 4. If the partnership's *STS group turnover for the year is $50,000 or less, multiply the amount at step 2 by the STS percentage: the result is the amount of your *tax offset. Step 5. If the partnership's *STS group turnover for the year is more than $50,000, work out the fraction (the STS phase‑out fraction) using the formula: The amount of your *tax offset is worked out using the formula: 61‑515 25% entrepreneurs' tax offset: trustee of a trust Entitlement (1) You are entitled to a *tax offset for an income year if: (a) you are a trustee of a trust during the year; and (b) the trust is an *STS taxpayer for the year; and (c) the trust's *STS group turnover for the year is less than $75,000; and (d) the trust has *net STS income for the year; and (e) you are liable to be assessed under section 98, 99 or 99A of the Income Tax Assessment Act 1936 on a share (your net STS income share) of that net STS income. Amount (2) The amount of your *tax offset is worked out in this way: Method statement Step 1. Work out the *net income of the trust for the income year. Step 2. Work out 25% of the amount of income tax you are liable to pay for the year on that *net income (apart from any *tax offsets). Step 3. Work out the percentage (the STS percentage) using the formula: If that percentage is more than 100%, the STS percentage is 100%. Step 4. If the trust's *STS group turnover for the year is $50,000 or less, multiply the amount at step 2 by the STS percentage: the result is the amount of your *tax offset. Step 5. If the trust's *STS group turnover for the year is more than $50,000, work out the fraction (the STS phase‑out fraction) using the formula: The amount of your *tax offset is worked out using the formula: 61‑520 25% entrepreneurs' tax offset: beneficiary of a trust Entitlement (1) You are entitled to a *tax offset for an income year if: (a) you are a beneficiary of a trust during the year; and (b) the trust is an *STS taxpayer for the year; and (c) the trust's *STS group turnover for the year is less than $75,000; and (d) the trust has *net STS income for the year; and (e) your assessable income for the year includes a share (your net STS income share) of that net STS income. Amount (2) The amount of your *tax offset is worked out in this way: Method statement Step 1. Work out your taxable income for the income year. Step 2. Work out 25% of your basic income tax liability for the year (as worked out in step 2 of the method statement in subsection 4‑10(3)). Step 3. Work out the percentage (the STS percentage) using the formula: If that percentage is more than 100%, the STS percentage is 100%. Step 4. If the trust's *STS group turnover for the year is $50,000 or less, multiply the amount at step 2 by the STS percentage: the result is the amount of your *tax offset. Step 5. If the trust's *STS group turnover for the year is more than $50,000, work out the fraction (the STS phase‑out fraction) using the formula: The amount of your *tax offset is worked out using the formula: 61‑525 Meaning of net STS income and STS annual turnover Net STS income (1) An entity's net STS income for an income year is the amount by which the entity's *STS annual turnover for the year is more than the sum of the entity's deductions attributable to that turnover. STS annual turnover (2) An entity's STS annual turnover for an income year is the sum of the *value of the business supplies the entity made in the year. (3) To the extent that the *taxable supplies an entity makes in an income year includes *gambling supplies, use an amount equal to 11 times the entity's *global GST amount for those supplies rather than the *value of the business supplies in working out the entity's *STS annual turnover. (4) In working out the *value of the business supplies made by an entity, disregard: (a) any *supply made to the extent that the consideration for the supply is a payment or a supply by an insurer in settlement of a claim under an insurance policy; and (b) to the extent that a supply is constituted by a loan—any repayment of principal, and any obligation to repay principal. 6 At the end of section 328‑5 Add: Note: If you choose to become an STS taxpayer, you may be entitled to the 25% entrepreneurs' tax offset: see Subdivision 61‑J. 7 Subsection 328‑365(1) (note) Omit "Note", substitute "Note 1". 8 At the end of subsection 328‑365(1) Add: Note 2: If you choose to become an STS taxpayer, you may be entitled to the 25% entrepreneurs' tax offset: see Subdivision 61‑J. 9 Subsection 995‑1(1) Insert: net STS income has the meaning given by section 61‑525. 10 Subsection 995‑1(1) Insert: STS annual turnover has the meaning given by section 61‑525. 11 Application The amendments made by items 1 to 10 apply to assessments for the first income year starting on or after 1 July 2005 and later income years. Taxation Administration Act 1953 12 Section 45‑340 in Schedule 1 (before paragraph (a) of step 1 of the method statement) Insert: (aaa) Subdivision 61‑J of the Income Tax Assessment Act 1997 (the 25% entrepreneurs' tax offset); or 13 Application The amendment made by item 12 applies in relation to the calculation of an entity's adjusted tax: (a) for a base year that is the first income year starting on or after 1 July 2005 or is a later income year; and (b) only for the purposes of a PAYG instalment period that includes, or starts after, the day on which this Act receives the Royal Assent. Schedule 2—STS accounting method Income Tax Assessment Act 1997 1 Subsection 6‑5(4) (note) Repeal the note. 2 Subsection 8‑1(3) (note 1) Omit "Note 1", substitute "Note". 3 Subsection 8‑1(3) (note 2) Repeal the note. 4 Subsection 70‑15(3) (note 1) Omit "Note 1", substitute "Note". 5 Subsection 70‑15(3) (note 2) Repeal the note. 6 Section 328‑5 Omit "3". 7 Section 328‑5 Omit: • you use a cash accounting system for ordinary income, general deductions and deductions for tax‑related expenses and repairs; and 8 Section 328‑10 Repeal the section. 9 Subdivision 328‑C Repeal the Subdivision. Income Tax (Transitional Provisions) Act 1997 10 Before Division 330 Insert: Division 328—STS taxpayers Table of sections 328‑115 When you stop using the STS accounting method 328‑120 Continuing to use the STS accounting method 328‑125 Meaning of STS accounting method 328‑440 Becoming an STS taxpayer after stopping to be one 328‑115 When you stop using the STS accounting method (1) This section sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (a) you are an STS taxpayer for an income year and for the following income year (the changeover year); and (b) you were using the STS accounting method for the income year before the changeover year; and (c) you change to an accruals accounting method for the changeover year. (2) This section also sets out what happens to your ordinary income and general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, if: (a) you stop being an STS taxpayer for an income year (also the changeover year); and (b) you were using the STS accounting method for the income year before the changeover year; and (c) you change to an accruals accounting method for the changeover year. (3) Any ordinary income that, apart from paragraph 328‑105(1)(a) of the Income Tax Assessment Act 1997, you would have derived before the changeover year (while you were an STS taxpayer) and you have not included in your assessable income because you have not received it is included in your assessable income for the changeover year. (4) Any general deductions, and deductions under section 25‑5 or 25‑10 of the Income Tax Assessment Act 1997, that, apart from paragraph 328‑105(1)(b) of that Act, you would have incurred before the changeover year (while you were an STS taxpayer) and that you have not deducted because you have not paid them can be deducted for the changeover year. 328‑120 Continuing to use the STS accounting method If you were an STS taxpayer for your first income year that started before 1 July 2005, you can continue to use the STS accounting method for your first income year starting on or after 1 July 2005 and later income years while you continue to be an STS taxpayer. 328‑125 Meaning of STS accounting method In sections 328‑115 and 328‑120, STS accounting method means the accounting method that was required by the Income Tax Assessment Act 1997 to be used by STS taxpayers for the 2004‑05 income year. 328‑440 Becoming an STS taxpayer after stopping to be one Subsection 328‑440(3) of the Income Tax Assessment Act 1997 does not apply to you, during the period of 5 years starting on 1 July 2005, if you chose to stop being an STS taxpayer for an income year before your first income year starting on or after 1 July 2005. 11 Application The amendments made by this Schedule apply to assessments for the first income year starting on or after 1 July 2005 and later income years. Schedule 3—Employee share schemes Income Tax Assessment Act 1936 1 Section 139A (after table item dealing with Subdivision D) Insert: DA Takeovers and restructures 2 Subsection 139C(4) After "The taxpayer does not", insert "(except for the purposes of Subdivision DA)". 3 Paragraph 139CA(2)(b) Before "the later of", insert "subject to subsection (4),". 4 At the end of section 139CA Add: (4) Paragraph (2)(b) does not apply in relation to a share that, because of section 139DQ, is treated, for the purposes of this Division, as if it were a continuation of a share acquired under an employee share scheme. Note: Subdivision DA can affect whether the taxpayer is treated as having disposed of a share or ceased employment. 5 Paragraphs 139CB(1)(c) and (d) Before "if the right is exercised", insert "subject to subsection (3),". 6 After paragraph 139CB(1)(d) Insert: (da) if subsection (3) applies—the time when the taxpayer disposes of the share referred to in paragraph (3)(b); 7 At the end of section 139CB Add: Note: Subdivision DA can affect whether the taxpayer is treated as having disposed of a right or ceased employment. (3) Paragraphs (1)(c) and (d) do not apply in relation to a right if: (a) a share has been or is acquired as a result of the exercise of the right; and (b) because of section 139DQ, another share is treated, for the purposes of this Division, as if it were a continuation of that share. 8 At the end of section 139CC Add: Note: Section 139DS can affect the amount of consideration that the taxpayer is treated as having paid or given. 9 After subsection 139DD(2) Insert: (2A) To avoid doubt, the taxpayer does not lose the right if, because of section 139DQ, another right is treated, for the purposes of this Division, as if it were a continuation of that right. 10 After subsection 139DD(3) Insert: (3A) To avoid doubt, the company does not cease to be the employer of the taxpayer or a holding company of the employer of the taxpayer if, because of section 139DQ, the taxpayer's employment by another company is treated, for the purposes of this Division, as if it were a continuation of that employment. 11 After Subdivision D of Division 13A of Part III Insert: Subdivision DA—Takeovers and restructures 139DP Object of this Subdivision The object of this Subdivision is to allow this Division to continue to apply, in appropriate circumstances, to 100% takeovers or restructures of companies that have employee share schemes. 139DQ The effect of 100% takeovers and restructures on employee share schemes Treating acquisitions as continuations of existing shares etc. (1) To the extent that: (a) a taxpayer acquires: (i) shares in a company (the new company) that can reasonably be regarded as matching shares in another company (the old company) that the taxpayer had acquired under an employee share scheme; or (ii) rights in a company (the new company) that can reasonably be regarded as matching rights in another company (the old company) that the taxpayer had acquired under an employee share scheme; and (b) the acquisition occurs in connection with a 100% takeover, or a restructure, of the old company; and (c) as a result of the takeover or restructure, the taxpayer ceased to hold the shares or rights in the old company; then, if the conditions in section 139DR are met, the matching shares or rights are treated, for the purposes of this Division, as if they were a continuation of the shares or rights in the old company. Note: In determining to what extent something can reasonably be regarded as matching shares or rights in the old company, one of the factors to consider is the respective market values of that thing and of those shares or rights. Treating acquisitions as disposals of existing shares etc. (2) However, to the extent that, in connection with the takeover or restructure, the taxpayer acquires anything that: (a) can reasonably be regarded as matching shares or rights in the old company that the taxpayer had acquired under an employee share scheme; but (b) is not a matching share or right to which subsection (1) applies; the taxpayer is treated, for the purposes of this Division, as having disposed of shares, or disposed of rights (other than by exercising them), that the taxpayer held, under an employee share scheme, in the old company immediately before the takeover or restructure. Treating new employment as continuation of existing employment (3) If subsection (1) applies, any employment of the taxpayer in: (a) the new company; or (b) a holding company of the new company; or (c) a subsidiary of the new company or of a holding company of the new company; is treated, for the purposes of this Division, as a continuation of the employment in respect of which he or she acquired the shares or rights in the old company or in a subsidiary of the old company. 139DR Conditions for the continuation of shares or rights (1) The first condition is that, immediately before the takeover or restructure, the taxpayer held shares or rights in the old company under an employee share scheme. (2) The second condition is that, at or about the time the taxpayer acquires the matching shares or rights, the taxpayer is an employee of: (a) the new company; or (b) a holding company of the new company; or (c) a subsidiary of the new company or of a holding company of the new company. (3) The third condition is that: (a) to the extent that the matching shares or rights are shares, they are ordinary shares; or (b) to the extent that the matching shares or rights are rights, they are rights to acquire ordinary shares. (4) The fourth condition is that, if subsection 139DQ(1) did not apply, the cessation time, for the shares or rights in the old company to which the matching shares or rights relate, would occur as a result of the takeover or restructure. (5) The fifth condition is that, at the time the taxpayer acquires the matching shares or rights, the taxpayer does not hold a legal or beneficial interest in more than 5% of the shares of the new company. (6) The sixth condition is that, at that time, the t