Bills Digest no. 5 2009–10
Tax Laws Amendment (2009 Measures No. 4) Bill
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
Contact officer & copyright details
introduced: 25 June
House: House of Representatives
Royal Assent for Schedules
1, 3, 4 and the majority of Schedule 5.
For Parts 1 & 3 of
Schedule 2, 1 October 2009.
For Part 2 of Schedule
2, 1 January 2010.
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
The amendments made in this Bill cover a number of unrelated
matters. Accordingly, each schedule will be treated as separate
matter in this particular digest.
Schedule 1 - Research
Schedule 1 amends the Income Tax Assessment
Act 1936 (ITAA 1936) to increase the limit on research and
development (R&D) expenditure for eligibility for the R&D
tax offset from $1 million to $2 million.
During 2008 the Rudd Government formally reviewed the
national innovation system. The report of that review (known as the
Cutler Review) recommended that the current tax offset scheme be
replaced by a simpler tax credit system.
In the 2009 2010 Budget, the Government announced that it will
replace the existing R&D Tax Concession with a simplified
R&D Tax Credit (offset) starting from the 2010 2011
year. This new tax
credit will not be refundable, as the existing tax offset is.
As a transitional measure for 2009 2010, the R&D expenditure
limit for the existing R&D Tax Offset will be increased from $1
to $2 million. The Government has stated that this limit will not
apply from the 2010 2011 year; however no sunset clause is in this
transitional measure is the subject of this particular
Certain small companies can choose to claim a refundable tax
offset instead of an R&D deduction. The choice must be made in
the company s tax return for the year or by written notice to the
Commissioner within the normal time for the amendment of tax
Companies with an annual R&D group turnover of less than $5m
who spend between $20 000 and $1m a year on R&D are
eligible to claim this offset. Companies in a tax loss situation will derive an
immediate benefit from claiming the tax offset, whereas a deduction
would have to be carried forward to later years.
Where a tax offset is subject to the refundable tax offset
rules, the amount by which it exceeds the amount of a relevant
income tax liability may be refunded to the taxpayer.
In his secondreading speech the Minister Assisting the Finance
Minister on Deregulation, Craig Emerson MP, noted that:
One of the requirements for the R&D tax
offset is that the company has no more than $1 million of eligible
R&D expenditure, subject to grouping rules. If the
company s expenditure exceeds $1 million, they are not eligible to
claim the offset. The $1 million cap means that some
companies keep their expenditure below this level in order to claim
the R&D tax offset a perverse outcome, given that the purpose
of the tax concession is to encourage R&D.
This measure lifts the expenditure cap from $1
million to $2 million. This will provide a further boost to
small pre-profit companies in research intensive industries, ahead
of the introduction of the new R&D tax incentive in
2010-11. It also mitigates the incentive for firms to keep
their R&D spending below the current expenditure cap.
This measure was announced jointly by the Treasurer and the
Minister for Innovation, Industry, Science and Research on 12 May
The Australian Computer Society had called for the $1 million
threshold for the current R&D tax offset to be doubled. This position was also
taken by AusBiotech, a body representing Australian Bio-Technology
doubt these organisations would support this particular
Press reporting has ignored this particular amendment, though it
has been critical of the proposed changes for 2010 2011for not
being exactly in line with the recommendations of the Cutler
The Opposition and minor parties have not addressed this
particular issue as at the date of writing.
The following table sets out the financial implications of the
Table 1: Financial
implications of increased expenditure limit for R&D Tax
Item 1 amends paragraph 73J(1)(c) of the ITAA
1936 so that the expenditure limit for accessing the current
R&D tax offset is raised from $1m to $2m per annum.
Item 2 applies this amendment for the 2009 2010
tax year and later years.
Schedule 2 - Private
The proposed amendments in Schedule 2 to this
Bill amend the:
- ITAA 1936
- Income Tax Assessment Act 1997 (ITAA 1997), and
- Taxation Administration Act 1953 (TAA 1953)
to improve the administrative integrity of prescribed private
- concentrating administration and decision making in the
Australian Taxation Office, and
- renaming them, for administrative purposes as private ancillary
As explained by the Australian Taxation Office a prescribed
private fund is a trust to which businesses, families and
individuals can make tax deductible donations. Such funds may make
distributions only to other deductible gift recipients for taxation
purposes that have been either endorsed by the Australian Taxation
Office or are listed by name in the income tax law. Donations to such
funds are tax deductible.
The term prescribed private fund is defined in subsection
995-1(1) of the ITAA 1997 to be a fund that is prescribed by the
Income Tax Assessment Regulations 1997 for the purposes of this
definition, other than a fund declared by the Treasurer in writing
not to be a prescribed private fund.
These vehicles were set up as part of the
then Government s response to the report on philanthropy in
Australia by the Business and Community Partnerships Working Group
on Taxation Reform dated 26 March 1999.
As at 2 December 2008 there were 775
prescribed private funds listed in Schedule 3 of the Income Tax
Assessment Regulations 1997. One estimate suggests that there are
currently about 800 prescribed private funds with total
contributions of $1.2 billion.
A deductible gift recipient (DGR) is
defined in section 30-227 of the ITAA 1997 as:
- an entity that is described in section 30-15 of the ITAA
- mentioned by specific name in Subdivisions 30-BA or 30-B of the
ITAA 1997 as a DGR
- endorsed as a DGR by the Commissioner for Taxation, or
- a prescribed private fund.
Under current arrangements the Governor-General is formally
responsible for legally classifying a charitable trust as a
prescribed private fund. The Treasurer is responsible for removing
a trust or foundation from the list of prescribed private funds.
The guidelines used to make these decisions are not binding, but
they do form the basis on which most decisions about prescribing a
trust are made. The only penalty available is the complete removal
of an offending fund from the list of prescribed private funds with
the subsequent loss of tax concessional status. This is an all or nothing
penalty and may impose a sanction on an innocent donor. These
guidelines are not subject to Parliamentary review. Further, the
trustees of these vehicles may be either a corporate trustee or an
individual and this is not considered desirable for constitutional
Further, prescribed private funds have minimal reporting
requirements and very little is known about their operation. A
strong argument can be made that this particular sector s
operations should be transparent. Apparently, similar organisations
in the United States are required to publicly report on their
By any measure the tax administration of prescribed private
funds is fragmented, and for what should be a set of routine
decisions, formal responsibility appears to be set at too high a
level (i.e. the Governor-General and the Treasurer). The penalties
that may be incurred by offending funds are too severe, especially
where an unintended breach of the law occurs. The loss of tax
exempt status may also impose a tax penalty on a donor who makes a
contribution to a fund that loses its tax exempt status at the
The Government released a discussion paper on improving the
integrity of prescribed private funds in November 2008. One hundred and thirty
eight submissions were received in response to this paper.
On 14 May 2009, the Government released an exposure draft of the
proposed amendments and received 14 submissions in
proposed amendments in this Schedule are based on this exposure
At the same time this Bill was introduced (25 June 2009), the
Government released draft guidelines for Private Ancillary Fund
Guidelines (as prescribed private funds will be known should these
amendments pass through Parliament) and has invited comment on
The proposed amendments were announced in the 2008 2009 Budget
by the Treasurer.
Responses to the exposure draft legislation mentioned above
generally supported the overhaul of the regulatory arrangements
applying to prescribed private funds. Further, these submissions
endorsed the move to establish a single regulator of these bodies,
though there was less agreement on whether this regulator should be
the Commissioner for Taxation. There was, of course, substantial technical
comment on the provisions of the exposure draft legislation.
The initial proposals for the enhanced regulation of prescribed
private funds caused some concern, particularly a proposal to
require such funds to distribute 15 per cent of their assets
annually. If this particular proposal had gone ahead most
prescribed private funds would have had to cease operations in the
near future through lack of funds. However, this aspect of the proposed
changes has been revised in the current proposals, much to the
relief of operators of these funds. Though this change is welcome, there
are other outstanding technical issues still to be resolved.
The proposed amendments would resolve many of the administrative
difficulties noted above.
While the proposed changes and the draft guidelines require
private ancillary funds to provide a greater range of information
to the Commissioner for Taxation than presently required, there is
no requirement for this information to be publicly available. Thus,
the above mentioned transparency issue remains unresolved.
To date, little if any, comment on these proposed amendments has
been made by either the Opposition or other political parties.
As the proposed changes are largely administrative in nature
there are no financial implications arising from the proposed
amendments in this schedule.
Item 2 inserts references to private ancillary
fund into the ITAA 1936.
Item 3 amends section 16 of the ITAA 1936 to
enable Australian Taxation Office staff to give information to
State and Territory Attorneys-General on the non-compliance of
private ancillary funds with Commonwealth, State or Territory laws.
Similar amendments are made to section 3C of the TAA 1953 by
Item 4 amends subsection 30-15(2) of the ITAA
1997 so that contributions to private ancillary funds (being the
new way of referring to prescribed private funds ) are tax
Item 7 repeals existing subsection 30-125(1)
ITAA 1997 and replaces it with new text so that any fund that meets
the definition of a private ancillary fund (see item
13 below) is entitled to be endorsed as a DGR for taxation
Item 9 inserts new subsection
30-229(2A) into the ITAA 1997 with the effect that a
private ancillary fund s entry in the Australian Business Register
may show that it is a DGR. This requirement extends only
up to 1 January 2010 (see Part 2 following).
Item 13 repeals the current definition of a
prescribed private fund in subsection 995-1(1) of the ITAA 1997
while item 14 defines the term private ancillary
fund in this subsection by reference to section 426-105 in Schedule
1 to the TAA 1953 (see item 22 following).
Item 22 inserts new subdivision
426-D into Schedule 1 to the TAA 1953. This new
subdivision contains the administrative provisions relating to
private ancillary funds.
As noted above proposed section 426-105 of
Schedule 1 to the TAA 1953 defines what a private ancillary fund
is. Of particular note is the requirement that the trustee of these
funds must be a constitutional corporation. The Explanatory
Memorandum suggests this is necessary to impose this requirement
- provide the sole regulator of these funds, the Commissioner for
Taxation, with the necessary powers to undertake this role,
- to impose upon the trustees the behavioural standards required
of company directors under the Corporations Act
Several comments on the exposure draft legislation noted above
disputed that this requirement was necessary and it remains a point
of contention between some trustees of such funds and the
Another requirement of this new section is that each trustee of
a private ancillary fund must agree to comply with the private
ancillary fund guidelines as in force from time to time. This makes
these guidelines binding on the trustees of such funds. New
section 426-110 of Schedule 1 to the TAA 1953 requires the
relevant Minister to formulate these guidelines by legislative
instrument, which means that they would be subject to Parliamentary
disallowance procedures in the Legislative Instruments Act
2003. As noted above, a draft of these guidelines is currently
New section 426-115 of Schedule 1 to the TAA
1953 notes that if a private ancillary fund has an Australian
Business Number, it may be noted as such a fund in the
Australian Business Register. This requirement lasts until 1
January 2010 (see item 24 below).
Note: the proposed section heading does not match the text of
the section ( must not may ).
New section 426-120 allows for the imposition
of administrative penalties on trustees of private ancillary fund,
or the directors of a corporation that is a trustee of the fund.
The penalty may apply if a trustee holds out that the fund is
endorsed, or entitled to be endorsed as DGR for tax purposes, when
is not so endorsed or entitled.
Such persons are jointly and severally liable for a penalty that
is, there are potentially liable even if another trustee was
responsible for the incorrect holding out regarding the funds DGR
status. Directors can available themselves of a defence of
reasonableness see new subsection 426-120(5). A
penalty imposed cannot be reimbursed by the fund: new
The Commissioner for Taxation will be able to suspend or remove
trustees of private ancillary funds if they breach the
abovementioned guidelines or any other Australian law under
new section 426-125 of Schedule 1 to the TAA 1953.
Under new section 426-130 of that Schedule, the
Commissioner may appoint an acting trustee in these
Other new provisions of this Schedule 2 to the
Bill allow the Commissioner for Taxation to:
- determine the terms and conditions of the appointment of an
- terminate the appointment of an acting trustee at any time
- vest the property of the fund in the acting trustee, and
- give directions to the acting trustee.
These may be seen as conferring extremely wide powers over the
property of a private ancillary fund on an acting trustee.
Item 23 amends new subsection
30-229(2A) (see item 9 above) so that,
from 1 January 2010, an entry for a private ancillary fund in the
Australian Business Register must show that it is a DGR.
Until that date, it is not mandatory for the register to show this
Item 24 amends new subsection
426-115(1) of Schedule 1 to the TAA 1953 from 1 January
2010 so that an entry for an entity that has an Australian Business
Number in the Australian Business Register must show whether the
entity is a private ancillary fund (see item 22
No doubt the provisions in items 9,
22, 23 and 24
allow time for the Australian Business Register to be amended as
Schedule 3 -
Demutualisation of friendly society health insurers, or friendly
society life insurers
Schedule 3 amends the ITAA 1936, the ITAA 1997
and the Income Tax (Transitional Provisions) Act 1997
(Transitional Act 1997) to provide relief from Capital Gains Tax
(CGT) where friendly society health, or friendly society life,
insurance entities (that is mutual or cooperative associations)
demutualise to become a for-profit entity (i.e. a public
Demutualisation is the process of changing a mutual or
cooperative association into a public
company by converting the
interests of members into shareholdings, which can then be
traded through a
stock exchange. Examples of mutuals in Australia are
credit unions, friendly societies and some large
insurance institutions. A prominent example of demutualisation
in Australia was the conversion of the Australian Mutual Provident
Society into AMP Limited in January 1998.
It is normally argued that a mutual or cooperative structure
limits their activities to servicing their members and inhibits
their ability to pursue
profits and diversification as freely as companies. In effect this process
involves the participants in the mutual association giving up the
right to benefit in the future from any accumulated mutual surplus
in exchange for tradable share of the capital of the new
There are currently about 70 friendly societies operating in
Australia with about 1.6 million members. About 24 friendly
societies conduct life insurance business (either solely or in
conjunction with other businesses), but only one of these societies
was proposing to demutualise as at December 2008. There are about 5
friendly societies that conduct health insurance business (either
solely or in conjunction with other businesses), only one of which
was proposing to demutualise as at December 2008.
Demutualisation of private health funds has been a growing trend
in Australia. NIB demutualised on 1 October 2007, followed by MBF
which demutualised on 16 June 2008. The large friendly society,
Manchester Unity, was undergoing demutualisation as at December
2008. It is not
clear whether this particular demutualisation is currently
proceeding, particularly in the light of Manchester Unity s recent
merger with health insurer, HCF.
For taxation purposes a friendly society is defined in
subsection 955-1(1) of the ITAA 1997 as:
- a body that is a
friendly society for the purposes of the
Life Insurance Act 1995; or
- a body that is registered or incorporated as a
friendly society under a
law or a
Territory law; or
- a body that is permitted, by a
State law or a
Territory law, to assume or use the expression
friendly society; or
- a body that, immediately before the date that is the transfer
date for the purposes of the
Reform (Amendments and Transitional Provisions) Act
(No. 1) 1999 (see section 3 of this Act for the
various transfer dates), was registered or incorporated as a
friendly society under a
State law or a
The Explanatory Memorandum notes that Division 9AA of the ITAA
1936 allows for capital gains or losses that arise from this
transaction to be disregarded for members and policy holders of
both life and general insurance entities. Division 315 of the ITAA
1997 has a similar impact in respect of members and policy holders
of private health insurers.
Technically, the capital gains tax relief in Division 9AA of the
ITAA 1936 may not apply to friendly societies that have a life
insurance business held in a wholly owned subsidiary. Further, the
capital gains tax relief is only available under this Division in
limited circumstances. The proposed amendments seek to supply
relief from CGT in a broader range of circumstances than allowed by
current tax law.
In November 2008 Treasury released a discussion paper on the
proposed changes. Four submissions were received in response to this
paper. On 17
April 2009 the Government released an exposure draft of the
proposed legislation. It has received 3 submissions on the proposed
The proposed amendments were announced by the then Assistant
Treasurer and Minister for Competition Policy and Consumer Affairs
on 24 October 2008.
Press or any other general comment on this particular proposal
is scarce. Submissions to Treasury on both the discussion paper and
the exposure draft legislation noted particular technical issues to
Should a friendly society choose to demutualise, its members
should be taxed in the same manner as members of former life,
health and general insurance entities that have gone through the
same process. The proposed amendments seek to achieve this end.
The proposed amendments are expected to have a small but
unquantifiable impact on revenue.
Item 1 amends the ITAA 1997 by inserting
new Division 316 into this Act. This new Division
deals with the demutualisation of friendly society health or life
Under new section 316-5 of the ITAA 1997 this
new Division applies only to a demutualisation of a friendly
- the society is, or its wholly-owned subsidiary is, either a
private health insurer as defined in the Private Health
Insurance Act 2007, or a company registered under section 21
of the Life Insurance Act 2007
- the society s capital is not divided into shares held by its
- the objective of the society post-demutualisaiton is to operate
to secure a profit or pecuniary gains for the society s
New section 316-55 allows capital gains and
losses to be disregarded where they arise as a result of a
demutualisation event. This only applies where a person does not
receive any money as a result of the demutualisation.
However, new section 316-60 requires that where
money is received as a result of a friendly society
demutualisation, the associated capital gains and losses are not
disregarded for taxation purposes.
New sections 316-65 to 316-115
contain provisions governing the calculation of capital gains and
losses arising as a result of a demutualisation to which
item 1 applies and which are otherwise tax
Item 1 also inserts new Subdivision
316-D into the ITAA 1997. This subdivision contains provisions
dealing with the tax treatment of capital gains and losses arising
from the demutualisation where the shares, rights to acquire shares
or money arising from this procedure are held in a trust. This
occurs where a member or a person entitled to these benefits cannot
be contacted (i.e. is a lost policy holder).
New Subdivision 316-E contains special rules
for the assessment of capital gains and losses that pass directly
to the beneficiaries of a deceased estate.
The treatment of these gains and losses where the shares etc are
transferred to a friendly society member s beneficiary is the same
as the treatment where the member has received these benefits
New subdivision 316-F contains provisions
dealing with the non CGT consequences of a demutualisation. A
system of franking credits and debits is available to ensure the
new company does not have a franking credit surplus as an immediate
result of the demutualisation. It also ensures the company does not
have access to CGT credits and debits for events that happened
The provisions contained in this part are mostly minor
amendments to tax law to ensure that the overall intent of the
amendments in Part 1 above are applied throughout
tax law. They are administrative in nature.
Item 2 adds new section 121AU
to the ITAA 1936 which clarifies that existing Subdivision C of
Division 9AA of Part III of that Act does not apply to
demutualisations to which new Division 316 of the
ITAA 1997 applies.
Item 4 ensures that amendments to the ITAA 1936
made by Part 2 of Schedule 3
apply to demutalisations occurring on or after 1 July 2008.
Item 23 requires that the amendments to the
ITAA 1997 by Part 2 of Schedule 3
of this Bill apply to demutualisations occurring on or after 1 July
Item 24 inserts proposed Part
3-32 into the Transitional Act 1997 dealing with
co-operatives and applies the provisions of new Division
316 of the ITAA 1997 (see Part 1 above)
to demutualisations occurring on or after 1 July 2008.
Schedule 4 -
Consolidation: application of losses with nil available
The provisions of Schedule 4 amend the ITAA
1997 so that from 1 July 2002 losses attached to an insolvent
corporate entity, that joins a consolidated group or a multiple
entry consolidated group , can be used by the head company of those
groups in certain circumstances.
Consolidation for tax purposes refers to the grouping of wholly
owned subsidiaries of a company into one entity for taxation
purposes. The Howard Government introduced consolidation to reduce
compliance costs for business, remove impediments to the most
efficient business structures and improve the integrity of the tax
system. Consolidation allows wholly-owned corporate groups to
operate as a single entity for income tax purposes from 1 July
Australian-resident wholly-owned subsidiaries of a common
foreign holding company may be able to form a group that would
qualify as a consolidated group for Australian tax
arrangements are known as multiple entry consolidated groups (MEC
groups) and generally comprise two or more
wholly-owned first tier Australian-resident subsidiaries of a
foreign resident ultimate parent company, together with their
wholly-owned, lower tier, Australian-resident subsidiaries.
Where a company becomes part of a consolidated group, its
business losses may be used by that group to reduce its tax.
However, a consolidated group cannot use these losses at a faster
rate than the company originally generating these losses would have
been able to use them had it remained outside the consolidated
group. The rate
at which a bundle of losses can be used by the consolidated group
is determined by the available fraction . This determines the
amount of the transferred losses that can be used in each year. It
is basically the proportion that the joining entity's market value
(at the time of joining) bears to the value of the whole group
(including the joining entity) at that time. The formula for working out the
fraction is set out in section 707-320 of the ITAA 1997 as
modified market value of the real loss-maker at the initial
Transferee s adjusted market value at
the initial transfer time
A nil available fraction arises where the liabilities of the
company joining the consolidated group exceeds its assets. That is,
the joining company has no market value. In these circumstances,
under the formula in section 707-320 ITAA 1997 used for working out
the available fraction (see above) gives a nil result.
Concerns have been raised that in certain circumstances, these
rules give an inequitable result. That is, the consolidated group
is unfairly prevented from making use of the tax losses of the
joining company. These circumstances are:
- where a debt is forgiven after the joining time, resulting in
the head company being subject to the commercial debt forgiveness
rules (Division 245, Schedule 2C to the ITAA 1936)
- briefly, special rules apply to remedy the effective
duplication of tax deductions that would otherwise arise from the
forgiveness of commercial debt. Duplication could occur because,
while a creditor may be entitled to a tax deduction or a capital
loss when a debt is forgiven, the debtor, though relieved of the
liability to repay the debt, is not assessed on any gain and could
continue to claim deductions for accumulated revenue and capital
losses and other un-deducted expenditure
- a debt is terminated after the joining time, resulting in the
head company being subject to the limited recourse debt rules
(Division 243, Schedule 2C to the ITAA 1936
- briefly, special provisions operate to prevent taxpayers from
obtaining deductions for certain capital expenditure on property in
excess of the amounts actually outlaid if the property was acquired
under limited recourse finance, or
- a liability that is taken by an entity which leaves the
consolidated group, resulting in the head company making a capital
An exposure draft of the proposed changes in this Bill was
included in general draft legislation applying to the consolidation
regime released on 28 April 2009. Public consultation has taken place and only one
submission was received on the issue of amending the treatment of
tax losses with nil available fraction for consolidated
These measures were announced jointly by the Treasurer and the
then Assistant Treasurer and Minister for Competition Policy and
Consumer Affairs on 13 May 2008. They had previously been announced by the Howard
Government (see footnote 50).
The Institute of Chartered Accounts in Australia and the
Taxation Institute jointly noted in their submission on the
exposure draft legislation, in relation to losses with nil
we are generally content with the form of the
legislative amendments to give effect to this measure, and in
particular welcome the extension of the sort of losses to which
this measure can apply to now include net capital losses in
addition to tax losses.
This submission did contain additional technical details on the
proposed changes in the Bill. This will be mentioned in the Main
The proposed changes will allow increased flexibility to a head
company of a consolidated group in dealing with tax losses arising
from an insolvent entity joining that group.
As at the date of writing, no comments on this particular
proposal had been made.
This measure will have an unquantifiable (but minimal) cost to
Item 4 of Schedule 4 inserts
new section 707-415 into the ITAA 1997. Briefly,
where a joining company has an available fraction of zero then the
head company may apply the loss to:
- reduce a total net forgiven amount under the abovementioned
commercial debt forgiveness rules
- reduce a capital allowance that is adjusted under the limited
recourse debt rules, or
- reduce a capital gain that arises when the joining company
subsequently leaves the group.
New subsection 707-415(3) requires that all the
loss in relation to an income year must be used in the same income
year, and only to the extent that they can be used in that year. If
the losses exceed the tax liability of the consolidated group the
unused portion of those losses cannot be saved for use in a later
The joint submission by the Institute of Chartered Accountants
and the Taxation Institute identified two particular problems with
- under current subsection 707-320(4), the nil available fraction
can never be exactly zero. It must be rounded up to the number of
decimal places that includes the first or only such digit (or
rounded up if the next decimal place is 5 or more).
- the proposed amendment calls for the available fraction to be
exactly 0 before these provisions can be made use of. This
submission suggests that this requirement be changed so that
new paragraph 707-415(1)(c) reads:
(c) that loss is included in a *bundle of
losses that but for the operation of subsection 707-320(4)(b) would
- as noted above, new subsection 707-415(3)
limits the extent to which companies may make use of the
transferred loss. This submission suggests that where the
consolidate group was unable to make use of the full losses arising
from the joining entity that they be allowed to save those losses
until such time that they can be used to offset the relevant tax
applies the amendments made by Schedule 4 to apply
on and after 1 July 2002, which means that they would operate
retrospectively from the start of the consolidation regime. It is
not clear what effect, if any, this would have on accounting and
taxation practices for companies affected by the new provisions,
particularly if they have already been assessed by the Australian
Taxation Office for the intervening income years. However, it may
mean that affected companies will be able to amend past year s tax
assessments to take account of the increased losses available. This
would be a beneficial outcome.
Schedule 5 - Minor
This Schedule makes a large number of minor amendments to
taxation law. As such, only a brief description of these changes
Part 1 deals exclusively to references to
Ministers, Departments and Departmental Secretaries and updates
taxation law to reflect contemporary naming practice.
Part 2 repeals Part IV of the TAA 1953. Part IV
deals with exchange controls and taxation certificates and is now
inoperative because foreign exchange controls no longer apply in
Australia. Amongst other things, the necessary consequential
amendments flowing from this repeal are also made by Part
Part 3 makes consequential amendments arising
from the new foreign tax offset rules in Division 770 of the ITAA
1997. These new rules were enacted by the Tax Laws Amendment
(2007 Measures No. 4) Act 2007.
Parts 4 and 5 make further
minor amendments (mainly of a typographical or stylistic nature) to
income tax legislation.
Further details of the amendments in Schedule 5
of this Bill are contained in the Explanatory Memorandum.
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Government, Treasury, Consolidation: Application of losses with
nil available fraction, summary of consultation process,
viewed 16 July 2009,
. Institute of Chartered Accountants in
Australia, Exposure Draft - Tax Laws Amendment (2009 Measures
No 4) Bill 2009: Consolidation (joint submissions to
Treasury), 18 June 2009, p. 42, viewed 16 July 2009,
28 July 2009
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