Bills Digest No. 119  1999-2000


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New Business Tax System (Venture Capital Deficit Tax) Bill 1999

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Contact Officer and Copyright Details

Passage History

New Business Tax System (Venture Capital Deficit Tax) Bill 1999

Date Introduced: 9 December 1999

House: House of Representatives

Portfolio: Treasury

Commencement: At the same time as Schedule 3 of the New Business Tax System (Capital Gains Tax) Act 1999 commenced (ie10 December 1999)

Purpose

To impose formally a tax on a deficit in a Pooled Development Fund's venture capital franking sub-account and to provide for the calculation of the amount of tax payable.

Background

The New Business Tax System (Miscellaneous) Bill 1999 extends to resident superannuation funds and similar bodies the exemption from tax currently available for similar non-resident entities for unfranked dividends paid by Pooled Development Funds. (PDF). To achieve this, a PDF may establish a venture capital franking sub-account in its class C franking account and credit amounts to this account (principally through the payment of certain capital gains tax). The account will also be subject to debits, principally through the payment of dividends. If, at the end of a year the account is in deficit, the tax imposed by this Bill is payable.

For further information on this area, refer to the Digest for the New Business Tax System (Miscellaneous) Bill 1999 (No.118 of 1999-2000).

Main Provisions

Subclause 4(1) will impose formally the tax on a PDFs venture capital sub-account in deficit at the end of a franking year.

If a refund of tax imposed by this Bill is received within 6 months of the end of a franking year, then for the purposes of calculating if there is a deficit, the refund will be taken to have been received on the last day of the franking year (subclause 4(2)). (This will mean that there will have to be a re-calculation of whether there is a deficit at the end of that year and may result in further tax being payable as a result of receiving the refund.)

The amount of tax payable is to be calculated in accordance with the formulas contained in clause 5. If the deficit is 10% or less of the total venture capital credits arising during the franking year, the amount of tax payable will be the amount of the deficit multiplied by: the company tax rate divided by 1 minus the company tax rate (the company tax rate will be 34% for 2000-01 and 30% for later years). If the deficit is more than 10%, the amount of tax payable will be increased by 30%.

Contact Officer and Copyright Details

Chris Field
11 February 2000
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 2000

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 2000.

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