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Income Tax Assessment Amendment Act (No. 4) 1978

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INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172, 1978
INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 1. Short title.
INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 An Act to amend the law relating to income tax. BE IT ENACTED by the Queen, and the Senate and House of Representatives of the Commonwealth of Australia, as follows: Short title, &c. 1. (1) This Act may be cited as the Income Tax Assessment Amendment Act (No. 4) 1978.*1* (2) The Income Tax Assessment Act 1936*2* is in this Act referred to as the Principal Act. INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 2. Commencement
2. This Act shall come into operation on the day on which it receives the Royal Assent.*1* INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 3. Interpretation
3. Section 6 of the Principal Act is amended by omitting from sub-section (1) the definition of ''taxable income'' and substituting the following definition: '' 'taxable income' means- (a) in a case to which paragraph (b) does not apply-the amount remaining after deducting from the assessable income all allowable deductions; and (b) in a case to which Subdivision B of Division 2A of Part III applies-the amount calculated in accordance with section 50C;''. INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 4. Rebate on dividends
4. Section 46 of the Principal Act is amended by inserting after sub-section (6) the following sub-section: ''(6A) For the purposes of the application of this section in relation to a shareholder in relation to a year of income, being a shareholder that is a company to which Subdivision B of Division 2A applies in relation to the year of income, a reference in sub-section (2) or (3) to the part of any dividends that is included in the taxable income of the shareholder of the year of income or to the part of any private company dividends that is included in that taxable income shall, notwithstanding sub-section (7), be read as a reference to so much of any dividends, or private company dividends, as the case may be, as is deemed to be included in the taxable income of the shareholder of the year of income by reason of the operation of section 50N.''. INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 5. Rebate on dividends paid as part of dividend stripping operation
5. (1) Section 46A of the Principal Act is amended- (a) by omitting sub-sections (2) and (3) and substituting the following sub-sections: ''(2) A dividend paid in respect of shares in a company (in this section referred to as the 'relevant company') shall not be taken to be a dividend in relation to which this section applies unless the shareholder acquired (whether alone or jointly with another person or other persons) property, being- (a) those shares; (b) other shares in the relevant company; (c) shares in another company that, at the time of acquisition of the shares in that other company or at any time after the time of acquisition of the shares in that other company and before the time when the dividend was paid, was related to the relevant company; or (d) a beneficial interest in a trust estate, being a trust estate that, at the time of acquisition of the beneficial interest or at any time after the time of acquisition of the beneficial interest and before the time when the dividend was paid, was related to the relevant company, as trading stock or in such circumstances that any profit that would arise from a disposal of the property would, in whole or in part, be included in the assessable income of the shareholder or any loss that would arise from a disposal of the property would, in whole or in part, be allowable as a deduction to the shareholder.
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''(3) In considering whether the payment of a dividend (in this sub-section referred to as the 'relevant dividend') by the relevant company arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement by way of dividend stripping, the Commissioner shall take into consideration- (a) whether the effect of the payment of the relevant dividend by the relevant company to the shareholder, or the effect of that payment and of the payments of any other dividends that have been or are likely to be made by the relevant company to the shareholder has been, or would be, to reimburse the shareholder wholly or substantially for the amount or amounts paid by him in respect of the acquisition of any relevant property; (b) whether the value of any relevant property immediately after the time when the relevant dividend was paid was substantially less than the value of that relevant property at the time when it was acquired by the shareholder and, if so, whether the reduction in value was wholly or mainly attributable to the payment of a dividend to the shareholder by the relevant company; (c) whether the right to receive dividends in respect of any relevant property consisting of shares in the relevant company is, by reason of any provision in the constituent document of the company or of any agreement, limited as to the total of the amounts that may be paid as dividends in respect of the shares or as to the source of the profits from which, or the period during which, dividends may be paid in respect of the shares; and (d) any other relevant matters.''; (b) by inserting after sub-section (8) the following sub-sections: ''(8A) For the purposes of the application of this section in relation to a shareholder in relation to a year of income, being a shareholder that is a company to which Subdivision B of Division 2A applies in relation to the year of income- (a) a reference in sub-section (5) to the net income derived from dividends by the shareholder shall be read as a reference to an amount equal to the sum of- (i) the amount of income from private company dividends that is deemed to be included in the taxable income of the shareholder of the year of income by the operation of section 50N; and (ii) the amount of income from dividends other than private company dividends that is deemed to be included in the taxable income of the shareholder of the year of income by the operation of section 50N, reduced by so much of any deductions (including deductions, whether in respect of losses, outgoings or otherwise, that are not specifically related to particular income or to income included in a particular class of income) that have been allowed or are allowable to the shareholder under this Act in relation to the year of income or any other year of income as- (iii) has not, in the application of section 50N in relation to the shareholder in relation to the year of income, been deducted from income from private company dividends or from income from dividends other than private company dividends; and (iv) the Commissioner is satisfied it is reasonable to attribute to dividends included in the assessable income of the shareholder of the year of income; (b) a reference in sub-section (5) or (6) to the net income derived from private company dividends by the shareholder shall be read as a reference to the amount of income from private company dividends that is deemed to be included in the taxable income of the shareholder of the year of income by the operation of section 50N reduced by so much of any deductions (including deductions, whether in respect of losses, outgoings or otherwise, that are not specifically related to particular income or to income included in a particular class of income) that have been allowed or are allowable to the shareholder under this Act in relation to the year of income or any other year of income as- (i) has not, in the application of section 50N in relation to the shareholder in relation to the year of income, been deducted from income from private company dividends; and (ii) the Commissioner is satisfied it is reasonable to attribute to private company dividends included in the assessable income of the shareholder
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of the year of income; and (c) a reference in sub-section (5) to the net income derived by the shareholder from dividends other than private company dividends shall be read as a reference to the amount of income from dividends other than private company dividends that is deemed to be included in the taxable income of the shareholder of the year of income by the operation of section 50N, reduced by so much of any deductions (including deductions, whether in respect of losses, outgoings or otherwise, that are not specifically related to particular income or to income included in a particular class of income) that have been allowed or are allowable to the shareholder under this Act in relation to the year of income or any other year of income as- (i) has not, in the application of section 50N in relation to the shareholder in relation to the year of income, been deducted from income from dividends other than private company dividends; and (ii) the Commissioner is satisfied it is reasonable to attribute to dividends (other than private company dividends) included in the assessable income of the shareholder of the year of income. ''(8B) A reference in this section to deductions that have been allowed or are allowable to a shareholder under this Act in relation to a year of income or to amounts that have been or are included in the assessable income of a shareholder of a year of income shall, if Subdivision B of Division 2A applies or applied in relation to the shareholder in relation to the year of income, be read as a reference to deductions that would have been allowable or would be allowable to the shareholder under this Act or to amounts that would have been included in the assessable income of the shareholder, as the case may be, if the taxable income of the shareholder of the year of income concerned were ascertained in accordance with section 48.''; (c) by omitting sub-sections (11), (12), (12A) and (12B) and substituting the following sub-sections: ''(10A) For the purposes of sub-sections (8A) and (10), the Commissioner may be satisfied that it is reasonable to attribute to dividends paid to a shareholder in respect of shares in a company deductions that have been allowed or are allowable to the shareholder under this Act in relation to a year of income notwithstanding that those deductions relate to the acquisition of relevant property other than relevant property consisting of the shares in the relevant company in respect of which the dividends were paid. ''(11) For the purposes of the application of sub-section (8A) or sub-sections (10) and (10A) in determining the deductions that have been allowed or are allowable to a shareholder under this Act in respect of any dividends included in the assessable income of the shareholder of a year of income, where any profit arising from a transaction, undertaking or scheme that involved the acquisition by the shareholder (whether alone or jointly with another person or other persons) of relevant property, has been or is included in the assessable income of the shareholder of a year of income (in this sub-section referred to as the 'relevant year of income')- (a) any expenditure incurred by the shareholder in respect of the acquisition of that relevant property; and (b) any other expenditure incurred by the shareholder in connection with the transaction, undertaking or scheme, being expenditure that was, or is to be, taken into account in ascertaining the amount of that profit, shall be deemed to have been a deduction allowed, or to be a deduction allowable, as the case may be, to the shareholder under this Act in relation to the relevant year of income. ''(12) For the purposes of the application of sub-section (8A) or sub-sections (10) and (10A) in determining the deductions that have been allowed or are allowable to a shareholder under this Act in respect of any dividends included in the assessable income of the shareholder of a year of income, where any loss incurred in respect of a transaction, undertaking or scheme that involved the acquisition by the shareholder (whether alone or jointly with another person or other persons) of relevant property, has been allowed or is allowable as a deduction to the shareholder under this Act in relation to a year of income (in this sub-section referred to as the 'relevant year of income')- (a) any expenditure incurred by the shareholder in respect of the acquisition of that relevant property; and (b) any other expenditure incurred by the shareholder in connection with the transaction, undertaking or scheme, being expenditure that was, or is to
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be, taken into account in ascertaining the amount of that loss, shall be deemed to have been a deduction allowed, or to be a deduction allowable, as the case may be, to the shareholder under this Act in relation to the relevant year of income, but the amount of the loss shall, for the purposes of those sub-sections, be deemed not to have been a deduction allowed, or not to be a deduction allowable, as the case may be, to the shareholder under this Act in relation to the relevant year of income.''; (d) by inserting in sub-section (13) ''in sub-section (8A) or'' after ''deduction referred to''; (e) by inserting after sub-section (13) the following sub-sections: ''(13A) For the purposes of this section- (a) a company shall be taken to be related to the relevant company at any time if, and only if, at that time, a reduction in the value of any shares in the relevant company could reasonably be expected to result in a reduction in the value of any shares in the first-mentioned company; and (b) a trust estate shall be taken to be related to the relevant company at any time if, and only if, at that time, a reduction in the value of any shares in the relevant company could reasonably be expected to result in a reduction in the value of any of the property of the trust estate. ''(13B) Unless the contrary intention appears- (a) a reference in this section to a share shall be read as including a reference to- (i) an interest in a share; and (ii) a right or option (including a contingent right or option) to acquire a share or an interest in a share; and (b) a reference in this section to a beneficial interest in a trust estate shall be read as including a reference to a right or option (including a contingent right or option) to acquire a beneficial interest in a trust estate. ''(13C) For the purposes of this section, a person who acquires shares or a beneficial interest in a trust estate in pursuance of an agreement shall be taken to have acquired the shares, or the beneficial interest, as the case may be, at the time when the agreement was entered into. ''(13D) For the purposes of the application of this section in relation to a dividend paid to a shareholder in respect of shares in the relevant company, 'relevant property' means- (a) the shares in respect of which the dividend was paid; (b) other shares in the relevant company that were acquired by the shareholder (whether alone or jointly with another person or other persons) at any time before the time when the dividend was paid; (c) shares in another company that were acquired by the shareholder (whether alone or jointly with another person or other persons) at any time before the time when the dividend was paid, being another company that was, at the time of acquisition of the shares in that other company or at any time after the time of acquisition of the shares in that other company and before the time when the dividend was paid, related to the relevant company; or (d) a beneficial interest in a trust estate that was acquired by the shareholder (whether alone or jointly with another person or other persons) at any time before the time when the dividend was paid, being a trust estate that was, at the time of acquisition of the beneficial interest or at any time after the time of acquisition of the beneficial interest and before the time when the dividend was paid, related to the relevant company. ''(13E) A reference in this section to an agreement shall be read as including a reference to an agreement that is not enforceable by legal proceedings, whether or not it was intended to be so enforceable. ''(13F) For the purposes of this section, an arrangement or understanding, whether formal or informal and whether express or implied, shall be deemed to be an agreement.''; (f) by omitting ''and'' from the end of paragraph (a) of sub-section (14);
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(g) by omitting from paragraph (b) of sub-section (14) ''sub-sections (9) and (10)'' and substituting ''sub-section (8A), or sub-sections (9) and (10),''; and (h) by inserting after paragraph (b) of sub-section (14) the following word and paragraph: ''; and (c) the Commissioner may amend an assessment at any time for the purpose of taking into account an acquisition of shares or a beneficial interest in a trust estate by a person that, by virtue of sub-section (13C), is deemed to have taken place before the end of the year of income to which the assessment relates,''. (2) The amendments made by sub-section (1) (other than paragraphs (1) (b), (d) and (g)) apply in relation to dividends paid after 7 May 1978 other than dividends declared on or before that date. (3) For the purposes of the application of section 46A of the Income Tax Assessment Act 1936 in relation to dividends paid to a company on or before 7 May 1978 or dividends declared on or before that date that are paid to a company after that date, being a company to which Sub-division B of Division 2A applies in relation to the year of income of the company during which the dividends are paid- (a) sub-section (11) of that section shall be read as if ''the last preceding sub-section'' were omitted and ''sub-section (8A) or (10)'' were substituted; and (b) sub-section (12) of that section shall be read as if ''sub-section (10) of this section'' were omitted and ''sub-section (8A) or (10)'' were substituted. (4) For the purposes of the application of section 46A of the Income Tax Assessment Act 1936 in relation to- (a) dividends paid to a company on or before 7 May 1978 and after 7 April 1978 (not being dividends declared on or before 7 April 1978); or (b) dividends paid to a company after 7 May 1978, being dividends declared after 7 April 1978 and on or before 7 May 1978, being in either case a company to which Subdivision B of Division 2A applies in relation to the year of income of the company during which the dividends are paid, sub-section (12A) of that section shall be read as if ''sub-section (10)'' were omitted and ''sub-section (8A) and (10)'' were substituted. (5) For the purposes of sub-section (2)- (a) where an amount that is paid or credited is, or any assets that are distributed are, for the purposes of the Income Tax Assessment Act 1936, deemed to be a dividend paid by a company, that dividend shall be taken to have been declared at the time when the amount was in fact paid or credited, or the assets were in fact distributed, as the case may be; and (b) where, by virtue of a provision of the constituent document of a company, a dividend may become payable by the company without having been declared, any such dividend that has become payable shall be taken to have been declared at the time when it became payable. INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 6. Rebate not allowable in certain circumstances
6. (1) Section 46B of the Principal Act is amended- (a) by omitting paragraphs (b) and (c) of sub-section (1) and substituting the following paragraphs: ''(b) before the time when the relevant dividend was paid, another person (in this section referred to as the 'associated person') acquired property (in this section referred to as the 'associated property'), being- (i) shares in the relevant company; (ii) shares in another company that, at the time of acquisition of the shares in that other company or at any time after the time of acquisition of the shares in that other company and before the time when the relevant dividend was paid, was related to the relevant company; or (iii) a beneficial interest in a trust estate, being a trust estate that, at the time of acquisition of the beneficial interest or at any time after the time of acquisition of the beneficial interest and before the time when the relevant dividend was paid, was related to the relevant company; (c) the associated property was acquired by the associated person as trading stock or in such circumstances that any profit that would arise on a disposal of the associated property would, in whole or in part, be included in the assessable income of the associated person or any loss that would arise
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from a disposal of the associated property would, in whole or in part, be allowable as a deduction to the associated person; and''; (b) by omitting from paragraph (d) of sub-section (1) ''shares by the associated shareholder'' and substituting ''property by the associated person''; (c) by omitting sub-sections (2), (3) and (4) and substituting the following sub-sections: ''(2) For the purposes of this section- (a) a company shall be taken to be related to the relevant company at any time if, and only if, at that time, a reduction in the value of any shares in the relevant company could reasonably be expected to result in a reduction in the value of any shares in the first-mentioned company; and (b) a trust estate shall be taken to be related to the relevant company at any time if, and only if, at that time, a reduction in the value of any shares in the relevant company could reasonably be expected to result in a reduction in the value of any of the property of the trust estate. ''(3) Unless the contrary intention appears- (a) a reference in this section to a share shall be read as including a reference to- (i) an interest in a share; and (ii) a right or option (including a contingent right or option) to acquire a share or an interest in a share; and (b) a reference in this section to a beneficial interest in a trust estate shall be read as including a reference to a right or option (including a contingent right or option) to acquire a beneficial interest in a trust estate. ''(4) For the purposes of this section, a person who acquires shares or a beneficial interest in a trust estate in pursuance of an agreement shall be taken to have acquired the shares or the beneficial interest, as the case may be, at the time when the agreement was entered into.''; and (d) by inserting in paragraph (b) of sub-section (9) ''or a beneficial interest in a trust estate'' after ''shares''. (2) The amendments made by sub-section (1) apply in relation to dividends paid after 7 May 1978 other than dividends declared on or before that date. (3) For the purposes of sub-section (2)- (a) where an amount that is paid or credited is, or any assets that are distributed are, for the purposes of the Income Tax Assessment Act 1936, deemed to be a dividend paid by a company, that dividend shall be taken to have been declared at the time when the amount was in fact paid or credited, or the assets were in fact distributed, as the case may be; and (b) where, by virtue of a provision of the constituent document of a company, a dividend may become payable by the company without having been declared, any such dividend that has become payable shall be taken to have been declared at the time when it became payable. INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 7. Heading
7. After section 47 of the Principal Act the following heading is inserted: ''Division 2A-Calculation of Taxable Income''. INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 8. Heading to Division 3 of Part III
8. The heading to Division 3 of Part III of the Principal Act is omitted. INCOME TAX ASSESSMENT AMENDMENT ACT (No. 4) 1978 No. 172 of 1978 - SECT. 9.
9. After section 50 of the Principal Act the following Subdivision and headings are inserted: ''Subdivision B-Calculation of Taxable Income where Disqualifying Event Occurs Application of Subdivision ''50A. (1) This Subdivision applies in relation to a taxpayer in relation to a year of income if, and only if, the taxpayer is a company and, by reason of section 50H, a disqualifying event is deemed to have occurred, or disqualifying events are deemed to have occurred, in relation to the company during the year of income. ''(2) Notwithstanding sub-section (1) of section 50H-
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(a) a disqualifying event shall not be deemed to have occurred in relation to a company on or before 7 April 1978; and (b) a disqualifying event shall not be deemed to have occurred in relation to a company at a time during a year of income if- (i) the company is not a private company in relation to the year of income; and (ii) the Commissioner considers that it is unreasonable that a disqualifying event should be deemed to have occurred in relation to the company at that time. Interpretation ''50B. (1) For the purposes of the application of this Subdivision in relation to a company in relation to a year of income- 'excepted amount' means an amount that is a full-year amount or a divisible amount in relation to the company in relation to the year of income; 'excepted deduction' means an allowable deduction that is a full-year deduction or a divisible deduction in relation to the company in relation to the year of income; 'full-year amount' means so much of any amount that is included in the assessable income of the company of the year of income under section 97 as is not a divisible amount in relation to the company in relation to the year of income; 'income period' means a relevant period in respect of which the company is deemed to have a notional taxable income; 'loss period' means a relevant period in respect of which the company is deemed to have a notional loss;