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INCOME TAX ASSESSMENT ACT 1997 - SECT 36.55

Converting excess franking offsets into tax loss

Excess franking offsets

             (1)  An entity that is a * corporate tax entity at any time during an income year has an amount of excess franking offsets for that year if:

                     (a)  the total amount of * tax offsets to which the entity is entitled for that year under Division 207 and Subdivision 210-H (except those that are subject to the refundable tax offset rules because of section 67- 25);

exceeds:

                     (b)  the amount of income tax that the entity would have to pay on its taxable income for that year if:

                              (i)  it did not have those tax offsets; and

                             (ii)  it did not have any tax offsets that are subject to the tax offset carry forward rules or the refundable tax offset rules; and

                            (iii)  it did not have any tax offset under section 205-70;

                            but had all its other tax offsets.

The excess is the amount of excess franking offsets .

Note:          Division 65 sets out the tax offset carry forward rules. Division 67 sets out which tax offsets are subject to the refundable tax offset rules.

Example:    For the 2017-18 income year, Company E (which is not a base rate entity) has:

*       assessable income of $200 (franked distribution of $140 and franking credit of $60); and

*       $100 of deductions that are allowable.

                   The tax offset of $60 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Disregarding the tax offset of $60 from the franking credit, the amount of income tax that Company E would have to pay is $30:

                  

                   This amount is $30 less than the tax offset of $60. Company E therefore has an amount of excess franking offsets of $30 for that year.

How to work out the amount of the tax loss

             (2)  For the purposes of this Act, if:

                     (a)  an entity has an amount of * excess franking offsets for an income year; and

                     (b)  the result of applying the following method statement is a positive amount;

then:

                     (c)  the entity is taken to have a * tax loss for that year equal to that positive amount (instead of an amount of tax loss worked out under section 36-10, 165-70, 175- 35 or 701-30); and

                     (d)  that year is taken to be a * loss year for the entity if the entity would not otherwise have a tax loss for that year.

Method statement

Step 1.    Work out the amount (if any) that would have been the entity's * tax loss for that year under section 36-10, 165-70, 175- 35 or 701-30 if the entity's * net exempt income for that year (if any) were disregarded.

                   Note:             See section 36-20 for the calculation of net exempt income.

Step 2.    Divide the amount of * excess franking offsets by the entity's * corporate tax rate for imputation purposes for that year.

Step 3.    Add the results of steps 1 and 2.

Step 4.    Reduce the result of step 3 by the entity's * net exempt income for that year (if any).

              The result of this step is taken to be the entity's * tax loss for that year. However, if the result of this step is nil or a negative amount, the company does not have any tax loss for that year.

Example:    Assume that company E did not derive any exempt income for the 2017-2018 income year and that it would not otherwise have any tax loss for that year under section 36-10, 165-70, 175- 35 or 701-30.

                   Applying the method statement, the amount of excess franking offsets of $30 generates a tax loss of $100 for that year, which can be deducted in a later income year under section 36-15 or 36- 17.


 

Contents

Chapter 2--Liability rules of general application                       1

Part 2-10--Capital allowances: rules about deductibility of capital expenditure                1

Division 40--Capital allowances                                                                             1

Guide to Division 40                                                                                                  2

40-1....................... What this Division is about................................................. 2

40-10..................... Simplified outline of this Division...................................... 2

Subdivision 40-A--Objects of Division                                                                  5

40-15..................... Objects of Division............................................................. 5

Subdivision 40-B--Core provisions                                                                       6

Guide to Subdivision 40-B                                                                                         6

40-20..................... What this Subdivision is about........................................... 6

Operative provisions                                                                                                  7

40-25..................... Deducting amounts for depreciating assets......................... 7

40-27..................... Further reduction of deduction for second-hand assets in residential property         9

40-30..................... What a depreciating asset is............................................. 11

40-35..................... Jointly held depreciating assets......................................... 13

40-40..................... Meaning of hold a depreciating asset................................ 13

40-45..................... Assets to which this Division does not apply................... 16

40-50..................... Assets for which you deduct under another Subdivision.. 17

40-53..................... Alterations etc. to certain depreciating assets.................... 17

40-55..................... Use of the "cents per kilometre" car expense deduction method              18

40-60..................... When a depreciating asset starts to decline in value.......... 18

40-65..................... Choice of methods to work out the decline in value.......... 19

40-70..................... Diminishing value method................................................ 21

40-72..................... Diminishing value method for post-9 May 2006 assets.... 22

40-75..................... Prime cost method............................................................ 23

40-80..................... When you can deduct the asset's cost............................... 25

40-85..................... Meaning of adjustable value and opening adjustable value of a depreciating asset 28

40-90..................... Debt forgiveness............................................................... 29

40-95..................... Choice of determining effective life.................................. 29

40-100................... Commissioner's determination of effective life................. 37

40-102................... Capped life of certain depreciating assets.......................... 38

40-103................... Effective life and remaining effective life of certain vessels 41

40-105................... Self-assessing effective life............................................... 42

40-110................... Recalculating effective life................................................ 44

40-115................... Splitting a depreciating asset............................................. 46

40-120................... Replacement spectrum licences......................................... 46

40-125................... Merging depreciating assets.............................................. 47

40-130................... Choices............................................................................. 48

40-135................... Certain anti-avoidance provisions..................................... 48

40-140................... Getting tax information from associates............................ 48

Subdivision 40-C--Cost                                                                                           50

Guide to Subdivision 40-C                                                                                       50

40-170................... What this Subdivision is about......................................... 50

Operative provisions                                                                                                50

40-175................... Cost.................................................................................. 50

40-180................... First element of cost.......................................................... 51

40-185................... Amount you are taken to have paid to hold a depreciating asset or to receive a benefit            54

40-190................... Second element of cost..................................................... 56

40-195................... Apportionment of cost...................................................... 57

40-200................... Exclusion from cost.......................................................... 57

40-205................... Cost of a split depreciating asset....................................... 58

40-210................... Cost of merged depreciating assets................................... 58

40-215................... Adjustment: double deduction.......................................... 58

40-220................... Cost reduced by amounts not of a capital nature............... 59

40-222................... Cost reduced by water infrastructure improvement expenditure               59

40-225................... Adjustment: acquiring a car at a discount.......................... 59

40-230................... Adjustment: car limit......................................................... 60

40-235................... Adjustment: National Disability Insurance Scheme costs. 60

Subdivision 40-D--Balancing adjustments                                                         61

Guide to Subdivision 40-D                                                                                       61

40-280................... What this Subdivision is about......................................... 61

Operative provisions                                                                                                62

40-285................... Balancing adjustments...................................................... 62

40-290................... Reduction for non-taxable use.......................................... 64

40-291................... Reduction for second-hand assets used in residential property                65

40-292................... Adjustments--assets used for both general tax purposes and R&D activities         66

40-293................... Adjustments--partnership assets used for both general tax purposes and R&D activities       68

40-295................... Meaning of balancing adjustment event ........................... 70

40-300................... Meaning of termination value ........................................... 71

40-305................... Amount you are taken to have received under a balancing adjustment event            74

40-310................... Apportionment of termination value................................. 75

40-320................... Car to which section 40- 225 applies................................. 75

40-325................... Adjustment: car limit......................................................... 76

40-335................... Deduction for in-house software where you will never use it  76

40-340................... Roll-over relief.................................................................. 77

40-345................... What the roll-over relief is................................................ 80

40-350................... Additional consequences.................................................. 80

40-360................... Notice to allow transferee to work out how this Division applies            81

40-362................... Roll-over relief for holders of vessels covered by certificates under the Shipping Reform (Tax Incentives) Act 2012 .................................................................................. 81

40-363................... Roll-over relief for interest realignment arrangements...... 83

40-364................... Interest realignment adjustments....................................... 86

40-365................... Involuntary disposals........................................................ 87

40-370................... Balancing adjustments where there has been use of different car expense methods 90

Subdivision 40-E--Low-value and software development pools                  91

Guide to Subdivision 40-E                                                                                       91

40-420................... What this Subdivision is about......................................... 91

Operative provisions                                                                                                92

40-425................... Allocating assets to a low-value pool................................ 92

40-430................... Rules for assets in low-value pools.................................. 93

40-435................... Private or exempt use of assets......................................... 94

40-440................... How you work out the decline in value of assets in low-value pools       94

40-445................... Balancing adjustment events............................................. 96

40-450................... Software development pools............................................. 96

40-455................... How to work out your deduction...................................... 97

40-460................... Your assessable income includes consideration for pooled software       97

Subdivision 40-F--Primary production depreciating assets                         98

Guide to Subdivision 40-F                                                                                       98

40-510................... What this Subdivision is about......................................... 98

Operative provisions                                                                                                99

40-515................... Water facilities, horticultural plants, fodder storage assets and fencing assets          99

40-520................... Meaning of water facility , horticultural plant , fodder storage asset and fencing asset             100

40-525................... Conditions...................................................................... 101

40-530................... When declines in value start............................................ 103

40-535................... Meaning of horticulture and commercial horticulture .... 103

40-540................... How you work out the decline in value for water facilities 104

40-545................... How you work out the decline in value for horticultural plants                104

40-548................... How you work out the decline in value for fodder storage assets            106

40-551................... How you work out the decline in value for fencing assets 106

40-555................... Amounts you cannot deduct........................................... 106

40-560................... Non-arm's length transactions........................................ 108

40-565................... Extra deduction for destruction of a horticultural plant... 108

40-570................... How this Subdivision applies to partners and partnerships 109

40-575................... Getting tax information if you acquire a horticultural plant 109

Subdivision 40-G--Capital expenditure of primary producers and other landholders                111

Guide to Subdivision 40-G                                                                                    111

40-625................... What this Subdivision is about....................................... 111

Operative provisions                                                                                              111

40-630................... Landcare operations........................................................ 111

40-635................... Meaning of landcare operation ...................................... 114

40-640................... Meaning of approved management plan ........................ 115

40-645................... Electricity and telephone lines......................................... 115

40-650................... Amounts you cannot deduct under this Subdivision....... 116

40-655................... Meaning of connecting power to land or upgrading the connection and metering point          118

40-660................... Non-arm's length transactions........................................ 119

40-665................... How this Subdivision applies to partners and partnerships 119

40-670................... Approval of persons as farm consultants........................ 120

40-675................... Review of decisions relating to approvals....................... 120

Subdivision 40-H--Capital expenditure that is immediately deductible 121

Guide to Subdivision 40-H                                                                                    121

40-725................... What this Subdivision is about....................................... 121

Operative provisions                                                                                              121

40-730................... Deduction for expenditure on exploration or prospecting 121

40-735................... Deduction for expenditure on mining site rehabilitation.. 124

40-740................... Meaning of ancillary mining activities and mining building site               125

40-745................... No deduction for certain expenditure.............................. 125

40-750................... Deduction for payments of petroleum resource rent tax.. 126

40-755................... Environmental protection activities................................. 126

40-760................... Limits on deductions from environmental protection activities 128

40-765................... Non-arm's length transactions........................................ 128

Subdivision 40-I--Capital expenditure that is deductible over time          129

Guide to Subdivision 40-I                                                                                      129

40-825................... What this Subdivision is about....................................... 129

Operative provisions                                                                                              130

40-830................... Project pools................................................................... 130

40-832................... Project pools for post-9 May 2006 projects.................... 131

40-835................... Reduction of deduction................................................... 132

40-840................... Meaning of project amount ............................................ 132

40-845................... Project life....................................................................... 134

40-855................... When you start to deduct amounts for a project pool...... 134

40-860................... Meaning of mining capital expenditure .......................... 134

40-865................... Meaning of transport capital expenditure ...................... 136

40-870................... Meaning of transport facility .......................................... 137

40-875................... Meaning of processed minerals and minerals treatment 137

40-880................... Business related costs..................................................... 138

40-885................... Non-arm's length transactions........................................ 141

Subdivision 40-J--Capital expenditure for the establishment of trees in carbon sink forests    142

Guide to Subdivision 40-J                                                                                     142

40-1000................. What this Subdivision is about....................................... 142

Operative provisions                                                                                              142

40-1005................. Deduction for expenditure for establishing trees in carbon sink forests   142

40-1010................. Expenditure for establishing trees in carbon sink forests 144

40-1015................. Carbon sequestration by trees........................................ 146

40-1020................. Certain expenditure disregarded...................................... 146

40-1025................. Non-arm's length transactions........................................ 147

40-1030................. Extra deduction for destruction of trees in carbon sink forest  147

40-1035................. Getting information if you acquire a carbon sink forest.. 148

Subdivision 40-K--Farm-in farm-out arrangements                                    150

Guide to Subdivision 40-K                                                                                    150

40-1095................. What this Subdivision is about....................................... 150

Farm-in farm-out arrangements and exploration benefits                          150

40-1100................. Meaning of farm-in farm-out arrangement and exploration benefit         150

Consequences for transferors                                                                              152

40-1105................. Treatment of certain exploration benefits received under farm-in farm-out arrangements        152

40-1110................. Cost of split interests resulting from farm-in farm-out arrangements       153

40-1115................. Deductions relating to receipt of exploration benefits..... 153

40-1120................. Cost base and reduced cost base of exploration benefits etc. 154

40-1125................. Effect of exploration benefits on the cost of mining, quarrying or prospecting information     154

Consequences for transferees                                                                               155

40-1130................. Consequences of certain exploration benefits provided under farm-in farm-out arrangements                155

Division 41--Additional deduction for certain new business investment               156

Guide to Division 41                                                                                              156

41-1....................... What this Division is about............................................. 156

Operative provisions                                                                                              157

41-5....................... Object of Division.......................................................... 157

41-10..................... Entitlement to deduction for investment.......................... 157

41-15..................... Amount of deduction...................................................... 158

41-20..................... Recognised new investment amount............................... 160

41-25..................... Investment commitment time.......................................... 161

41-30..................... First use time.................................................................. 163

41-35..................... New investment threshold.............................................. 163

Division 43--Deductions for capital works                                                   164

Guide to Division 43                                                                                              164

43-1....................... What this Division is about............................................. 164

43-2....................... Key concepts used in this Division................................. 164

Subdivision 43-A--Key operative provisions                                                  166

Guide to Subdivision 43-A                                                                                     166

43-5....................... What this Subdivision is about....................................... 166

Operative provisions                                                                                              166

43-10..................... Deductions for capital works.......................................... 166

43-15..................... Amount you can deduct.................................................. 167

43-20..................... Capital works to which this Division applies.................. 167

43-25..................... Rate of deduction............................................................ 169

43-30..................... No deduction until construction is complete................... 169

43-35..................... Requirement for registration under the Industry Research and Development Act    169

43-40..................... Deduction for destruction of capital works..................... 170

43-45..................... Certain anti-avoidance provisions................................... 170

43-50..................... Links and signposts to other parts of the Act.................. 171

43-55..................... Anti-avoidance--arrangement etc. with tax-exempt entity 172

Subdivision 43-B--Establishing the deduction base                                       173

Guide to Subdivision 43-B                                                                                     173

43-60..................... What this Subdivision is about....................................... 173

43-65..................... Explanatory material....................................................... 173

Operative provisions                                                                                              174

43-70..................... What is construction expenditure?.................................. 174

43-72..................... Meaning of forestry road , timber operation and timber mill building      176

43-75..................... Construction expenditure area......................................... 176

43-80..................... When capital works begin............................................... 178

43-85..................... Pools of construction expenditure................................... 179

43-90..................... Table of intended use at time of completion of construction 179

43-95..................... Meaning of hotel building and apartment building ......... 182

43-100................... Certificates by Innovation and Science Australia............ 183

Subdivision 43-C--Your area and your construction expenditure            183

Guide to Subdivision 43-C                                                                                     183

43-105................... What this Subdivision is about....................................... 183

43-110................... Explanatory material....................................................... 184

Operative provisions                                                                                              184

43-115................... Your area and your construction expenditure--owners.. 184

43-120................... Your area and your construction expenditure--lessees and quasi-ownership right holders     184

43-125................... Lessees' or right holders' pools can revert to owner...... 185

43-130................... Identifying your area on acquisition or disposal............. 186

Subdivision 43-D--Deductible uses of capital works                                     186

Guide to Subdivision 43-D                                                                                     186

43-135................... What this Subdivision is about....................................... 186

Operative provisions                                                                                              187

43-140................... Using your area in a deductible way............................... 187

43-145................... Using your area in the 4% manner.................................. 189

43-150................... Meaning of industrial activities ...................................... 193

Subdivision 43-E--Special rules about uses                                                     195

Guide to Subdivision 43-E                                                                                     195

43-155................... What this Subdivision is about....................................... 195

Operative provisions                                                                                              196

43-160................... Your area is used for a purpose if it is maintained ready for use for the purpose     196

43-165................... Temporary cessation of use............................................ 196

43-170................... Own use--capital works other than hotel and apartment buildings          197

43-175................... Own use--hotel and apartment buildings....................... 197

43-180................... Special rules for hotel and apartment buildings............... 198

43-185................... Residential or display use............................................... 199

43-190................... Use of facilities not commonly provided, and of certain buildings used to operate a hotel, motel or guest house........................................................................................ 200

43-195................... Use for R&D activities must be in connection with a business                201

Subdivision 43-F--Calculation of deduction                                                   201

Guide to Subdivision 43-F                                                                                     201

43-200................... What this Subdivision is about....................................... 201

43-205................... Explanatory material....................................................... 202

Operative provisions                                                                                              203

43-210................... Deduction for capital works begun after 26 February 1992 203

43-215................... Deduction for capital works begun before 27 February 1992  205

43-220................... Capital works taken to have begun earlier for certain purposes                206

Subdivision 43-G--Undeducted construction expenditure                           207

Guide to Subdivision 43-G                                                                                    207

43-225................... What this Subdivision is about....................................... 207

Operative provisions                                                                                              208

43-230................... Calculating undeducted construction expenditure--common step            208

43-235................... Post-26 February 1992 undeducted construction expenditure  208

43-240................... Pre-27 February 1992 undeducted construction expenditure 209

Subdivision 43-H--Balancing deduction on destruction of capital works 210

Guide to Subdivision 43-H                                                                                    210

43-245................... What this Subdivision is about....................................... 210

Operative provisions                                                                                              211

43-250................... The amount of the balancing deduction........................... 211

43-255................... Amounts received or receivable...................................... 211

43-260................... Apportioning amounts received for destruction.............. 212

Division 45--Disposal of leases and leased plant                                        213

Guide to Division 45                                                                                              213

45-1....................... What this Division is about............................................. 213

Operative provisions                                                                                              214

45-5....................... Disposal of leased plant or lease..................................... 214

45-10..................... Disposal of interest in partnership.................................. 216

45-15..................... Disposal of shares in 100% subsidiary that leases plant. 218

45-20..................... Disposal of shares in 100% subsidiary that leases plant in partnership    219

45-25..................... Group members liable to pay outstanding tax................. 220

45-30..................... Reduction for certain plant acquired before 21.9.99........ 221

45-35..................... Limit on amount included for plant for which there is a CGT exemption 222

45-40..................... Meaning of plant and written down value ....................... 222

Part 2-15--Non-assessable income                                                                           225

Division 50--Exempt entities                                                                                 225

Subdivision 50-A--Various exempt entities                                                     225

50-1....................... Entities whose ordinary income and statutory income is exempt              226

50-5....................... Charity, education and science........................................ 226

50-10..................... Community service......................................................... 227

50-15..................... Employees and employers.............................................. 227

50-25..................... Government.................................................................... 228

50-30..................... Health............................................................................. 228

50-35..................... Mining............................................................................ 229

50-40..................... Primary and secondary resources, and tourism............... 229

50-45..................... Sports, culture and recreation.......................................... 231

50-47..................... Special condition for all items......................................... 231

50-50..................... Special conditions for item 1.1........................................ 232

50-52..................... Special condition for item 1.1......................................... 232

50-55..................... Special conditions for items 1.3, 1.4, 6.1 and 6.2........... 233

50-65..................... Special conditions for item 1.6........................................ 233

50-70..................... Special conditions for items 1.7, 2.1, 9.1 and 9.2........... 234

50-72..................... Special condition for item 4.1......................................... 234

50-75..................... Certain distributions may be made overseas................... 235

Subdivision 50-B--Endorsing charitable entities as exempt from income tax               236

Guide to Subdivision 50-B                                                                                     236

50-100................... What this Subdivision is about....................................... 236

Endorsing charitable entities as exempt from income tax                           236

50-105................... Endorsement by Commissioner...................................... 236

50-110................... Entitlement to endorsement............................................. 237

Division 51--Exempt amounts                                                                              238

51-1....................... Amounts of ordinary income and statutory income that are exempt         238

51-5....................... Defence........................................................................... 239

51-10..................... Education and training.................................................... 241

51-30..................... Welfare........................................................................... 244

51-32..................... Compensation payments for loss of tax exempt payments 245

51-33..................... Compensation payments for loss of pay and/or allowances as a Defence reservist  247

51-35..................... Payments to a full-time student at a school, college or university             248

51-40..................... Payments to a secondary student.................................... 248

51-42..................... Bonuses for early completion of an apprenticeship......... 249

51-43..................... Income collected or derived by copyright collecting society 249

51-45..................... Income collected or derived by resale royalty collecting society               250

51-50..................... Maintenance payments to a spouse or child.................... 250

51-52..................... Income derived from eligible venture capital investments by ESVCLPs  251

51-54..................... Gain or profit from disposal of eligible venture capital investments         253

51-55..................... Gain or profit from disposal of venture capital equity..... 254

51-57..................... Interest on judgment debt relating to personal injury...... 255

51-60..................... Prime Minister's Prizes.................................................. 256

51-100................... Shipping......................................................................... 256

51-105................... Shipping activities ........................................................... 257

51-110................... Core shipping activities .................................................. 257

51-115................... Incidental shipping activities ........................................... 259

51-120................... Interest on unclaimed money and property..................... 259

Division 52--Certain pensions, benefits and allowances are exempt from income tax 260

Guide to Division 52                                                                                              260

52-1....................... What this Division is about............................................. 260

Subdivision 52-A--Exempt payments under the Social Security Act 1991 261

Guide to Subdivision 52-A                                                                                     261

52-5....................... What this Subdivision is about....................................... 261

Operative provisions                                                                                              262

52-10..................... How much of a social security payment is exempt?........ 262

52-15..................... Supplementary amounts of payments............................. 278

52-20..................... Tax-free amount of an ordinary payment after the death of your partner  281

52-25..................... Tax-free amount of certain bereavement lump sum payments  283

52-30..................... Tax-free amount of certain other bereavement lump sum payments         285

52-35..................... Tax-free amount of a lump sum payment made because of the death of a person you are caring for       287

52-40..................... Provisions of the Social Security Act 1991 under which payments are made           288

Subdivision 52-B--Exempt payments under the Veterans' Entitlements Act 1986        292

Guide to Subdivision 52-B                                                                                     292

52-60..................... What this Subdivision is about....................................... 292

Operative provisions                                                                                              292

52-65..................... How much of a veterans' affairs payment is exempt?..... 292

52-70..................... Supplementary amounts of payments............................. 298

52-75 ..................... Provisions of the Veterans' Entitlements Act 1986 under which payments are made               298

Subdivision 52-C--Exempt payments made because of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986                                 301

Guide to Subdivision 52-C                                                                                     301

52-100................... What this Subdivision is about....................................... 301

Operative provisions                                                                                              301

52-105................... Supplementary amount of a payment made under the Repatriation Act 1920 is exempt           301

52-110................... Other exempt payments.................................................. 303

Subdivision 52-CA--Exempt payments under the Military Rehabilitation and Compensation Act 2004                303

Guide to Subdivision 52-CA                                                                                  303

52-112................... What this Subdivision is about....................................... 303

Operative provisions                                                                                              304

52-114................... How much of a payment under the Military Rehabilitation and Compensation Act is exempt?               304

Subdivision 52-CB--Exempt payments under the Australian Participants in British Nuclear Tests and British Commonwealth Occupation Force (Treatment) Act 2006 307

52-117................... Payments of travelling expenses and pharmaceutical supplement are exempt          307

Subdivision 52-E--Exempt payments under the ABSTUDY scheme         308

Guide to Subdivision 52-E                                                                                     308

52-130................... What this Subdivision is about....................................... 308

Operative provisions                                                                                              309

52-131................... Payments under ABSTUDY scheme............................. 309

52-132................... Supplementary amount of payment................................. 311

52-133................... Tax-free amount of ordinary payment on death of partner if no bereavement payment payable               312

52-134................... Tax-free amount if you receive a bereavement lump sum payment          312

Subdivision 52-F--Exemption of Commonwealth education or training payments      313

52-140................... Supplementary amount of a Commonwealth education or training payment is exempt            313

52-145................... Meaning of Commonwealth education or training payment 315

Subdivision 52-G--Exempt payments under the A New Tax System (Family Assistance) (Administration) Act 1999                                                                                                        316

52-150................... Family assistance payments are exempt.......................... 316

Subdivision 52-H--Other exempt payments                                                    316

52-160................... Economic security strategy payments are exempt........... 316

52-162................... ETR payments are exempt.............................................. 316

52-165................... Household stimulus payments are exempt...................... 317

52-170................... Outer Regional and Remote payments under the Helping Children with Autism package are exempt     317

52-172................... Outer Regional and Remote payments under the Better Start for Children with Disability initiative are exempt........................................................................................ 317

52-175................... Continence aids payments are exempt............................. 317

52-180................... National Disability Insurance Scheme amounts are exempt 317

Division 53--Various exempt payments                                                          318

Guide to Division 53                                                                                              318

53-1....................... What this Division is about............................................. 318

Operative provisions                                                                                              318

53-10..................... Exemption of various types of payments........................ 318

53-20..................... Exemption of similar Australian and United Kingdom veterans' payments             320

Division 54--Exemption for certain payments made under structured settlements and structured orders                                                                                                                     321

Guide to Division 54                                                                                              321

54-1....................... What this Division is about............................................. 321

Subdivision 54-A--Definitions                                                                             321

Operative provisions                                                                                              322

54-5....................... Definitions...................................................................... 322

54-10..................... Meaning of structured settlement and structured order . 322

Subdivision 54-B--Tax exemption for personal injury annuities              325

Operative provisions                                                                                              325

54-15..................... Personal injury annuity exemption for injured person.... 325

54-20..................... Lump sum compensation etc. would not have been assessable                325

54-25..................... Requirements of the annuity instrument.......................... 326

54-30..................... Requirements for payments of the annuity...................... 326

54-35..................... Payments during the guarantee period on the death of the injured person                327

54-40..................... Requirement for minimum monthly level of support...... 329

Subdivision 54-C--Tax exemption for personal injury lump sums           331

Operative provisions                                                                                              331

54-45..................... Personal injury lump sum exemption for injured person 331

54-50..................... Lump sum compensation would not have been assessable 332

54-55..................... Requirements of the instrument under which the lump sum is paid         332

54-60..................... Requirements for payments of the lump sum.................. 332

Subdivision 54-D--Miscellaneous                                                                       333

Operative provisions                                                                                              334

54-65..................... Exemption for certain payments to reversionary beneficiaries  334

54-70..................... Special provisions about trusts....................................... 334

54-75..................... Minister to arrange for review and report....................... 335

Division 55--Payments that are not exempt from income tax            337

Guide to Division 55                                                                                              337

55-1....................... What this Division is about............................................. 337

Operative provisions                                                                                              337

55-5....................... Occupational superannuation payments.......................... 337

55-10..................... Education entry payments............................................... 338

Division 58--Capital allowances for depreciating assets previously owned by an exempt entity            339

Guide to Division 58                                                                                              339

58-1....................... What this Division is about............................................. 339

Subdivision 58-A--Application                                                                           340

58-5....................... Application of Division.................................................. 340

58-10..................... When an asset is acquired in connection with the acquisition of a business             341

Subdivision 58-B--Calculating decline in value of privatised assets under Division 40              343

58-60..................... Purpose of rules in this Subdivision............................... 343

58-65..................... Choice of method to work out cost of privatised asset.... 343

58-70..................... Application of Division 40............................................. 344

58-75..................... Meaning of notional written down value ........................ 345

58-80..................... Meaning of undeducted pre-existing audited book value 347

58-85..................... Pre-existing audited book value of depreciating asset..... 348

58-90..................... Method and effective life for transition entity................. 349

Division 59--Particular amounts of non-assessable non-exempt income              350

Guide to Division 59                                                                                              350

59-1....................... What this Division is about............................................. 350

Operative provisions                                                                                              351

59-10..................... Compensation under firearms surrender arrangements... 351

59-15..................... Mining payments............................................................ 351

59-20..................... Taxable amounts relating to franchise fees windfall tax.. 352

59-25..................... Taxable amounts relating to Commonwealth places windfall tax             352

59-30..................... Amounts you must repay................................................ 352

59-35..................... Amounts that would be mutual receipts but for prohibition on distributions to members        352

59-40..................... Issue of rights................................................................. 353

59-50..................... Native title benefits......................................................... 353

59-65..................... Water infrastructure improvement payments................... 355

59-67..................... Meaning of SRWUIP program , SRWUIP payment , direct SRWUIP payment and indirect SRWUIP payment ........................................................................................ 357

59-70..................... List of SRWUIP programs............................................. 358

59-75..................... Commissioner to be kept informed................................. 359

59-80..................... Amending assessments................................................... 359

Part 2-20--Tax offsets                                                                                                     361

Division 61--Generally applicable tax offsets                                             361

Subdivision 61-A--Dependant (invalid and carer) tax offset                      361

Guide to Subdivision 61-A                                                                                     361

61-1....................... What this Subdivision is about....................................... 361

Object of this Subdivision                                                                                      362

61-5....................... Object of this Subdivision.............................................. 362

Entitlement to the dependant (invalid and carer) tax offset                         362

61-10..................... Who is entitled to the tax offset....................................... 362

61-15..................... Cases involving more than one spouse........................... 364

61-20..................... Exceeding the income limit for family tax benefit (Part B) 364

61-25..................... Eligibility for family tax benefit (Part B) without shared care  365

Amount of the dependant (invalid and carer) tax offset                                366

61-30..................... Amount of the dependant (invalid and carer) tax offset.. 366

61-35..................... Families with shared care percentages............................ 366

61-40..................... Reduced amounts of dependant (invalid and carer) tax offset  367

61-45..................... Reductions to take account of the other individual's income 368

Subdivision 61-D--Low and Middle Income tax offset and Low Income tax offset      369

Guide to Subdivision 61-D                                                                                     369

61-100................... What this Subdivision is about....................................... 369

Operative provisions                                                                                              369

61-105................... Entitlement to the Low and Middle Income tax offset..... 369

61-107................... Amount of the Low and Middle Income tax offset......... 370

61-110................... Entitlement to the Low Income tax offset........................ 372

61-115................... Amount of the Low Income tax offset............................ 373

Subdivision 61-G--Private health insurance offset complementary to Part 2-2 of the Private Health Insurance Act 2007                                                                                               375

Guide to Subdivision 61-G                                                                                    375

61-200................... What this Subdivision is about....................................... 375

Operative provisions                                                                                              375

61-205................... Entitlement to the private health insurance tax offset....... 375

61-210................... Amount of the private health insurance tax offset........... 376

61-215................... Reallocation of the private health insurance tax offset between spouses  377

Subdivision 61-I--First child tax offset (baby bonus)                                    378

Guide to Subdivision 61-I                                                                                      378

61-350................... What this Subdivision is about....................................... 378

Entitlement to a first child tax offset                                                                  379

61-355................... Who is entitled to a tax offset under this section............. 379

61-360................... What is a child event?..................................................... 380

61-365................... First child only................................................................ 381

61-370................... Another carer with entitlement for another child............. 381

61-375................... Selection rules................................................................. 381

61-380................... Special rules for death of first child................................ 382

Transferring an entitlement                                                                                 382

61-385................... You may transfer your entitlement to a tax offset........... 382

61-390................... Transfer is irrevocable.................................................... 383

61-395................... Transferor is not entitled to tax offset............................. 383

61-400................... Transferee is entitled to tax offset................................... 383

Claiming a first child tax offset                                                                           383

61-405................... How to claim a tax offset for a child............................... 383

61-410................... Claim is irrevocable........................................................ 384

Amount of a first child tax offset                                                                        384

61-415................... Formula for working out amount of tax offset................ 384

61-420................... Component of formula--entitlement amount.................. 384

61-425................... Component of formula--total of the entitlement days..... 385

61-430................... What is your base year?.................................................. 386

Additional tax offset if a child is in your care before you legally adopt the child          387

61-440................... Additional tax offset if a child is in your care before you legally adopt the child     387

61-445................... When a child is first in your care.................................... 387

61-450................... What is your base year if a child is in your care before you legally adopt the child?                388

61-455................... Old Subdivision applies if you would be worse off....... 389

Subdivision 61-IA--Child care tax offset                                                         389

Guide to Subdivision 61-IA                                                                                   389

61-460................... What this Subdivision is about....................................... 389

Operative provisions                                                                                              390

61-465................... Object of this Subdivision.............................................. 390

Entitlement to the child care tax offset                                                              391

61-470................... Who is entitled to the tax offset....................................... 391

61-475................... Meaning of approved child care ..................................... 392

61-480................... Meaning of entitled to child care benefit and entitlement to child care benefit           392

Amount of the child care tax offset                                                                     394

61-485................... Amount of the child care tax offset................................. 394

61-490................... Component of formula-- approved child care fees ......... 396

61-495................... Component of formula-- child care offset limit ............... 396

Transfer of entitlement to unused balance of child care tax offset            397

61-496................... Entitlement to transfer..................................................... 397

61-497................... Form of transfer.............................................................. 397

Subdivision 61-L--Tax offset for Medicare levy surcharge (lump sum payments in arrears) 398

Guide to Subdivision 61-L                                                                                     398

61-575................... What this Subdivision is about....................................... 398

Operative provisions                                                                                              399

61-580................... Entitlement to a tax offset................................................ 399

61-585................... The amount of a tax offset.............................................. 401

61-590................... Definition of MLS lump sums ........................................ 402

Subdivision 61-N--Seafarer tax offset                                                              402

Guide to Subdivision 61-N                                                                                     402

61-695................... What this Subdivision is about....................................... 402

Operative provisions                                                                                              403

61-700................... Object of this Subdivision.............................................. 403

61-705................... Who is entitled to the seafarer tax offset......................... 403

61-710................... Amount of the seafarer tax offset.................................... 405

Subdivision 61-P--ESVCLP tax offset                                                              406

Guide to Subdivision 61-P                                                                                     406

61-750................... What this Subdivision is about....................................... 406

Operative provisions                                                                                              406

61-755................... Object of this Subdivision.............................................. 406

61-760................... Who is entitled to the ESVCLP tax offset....................... 406

61-765................... Amount of the ESVCLP tax offset--general case.......... 407

61-770................... Amount of the ESVCLP tax offset--members of trusts or partnerships 409

61-775................... Amount of the ESVCLP tax offset--trustees................. 410

Division 63--Common rules for tax offsets                                                   411

Guide to Division 63                                                                                              411

63-1....................... What this Division is about............................................. 411

63-10..................... Priority rules................................................................... 411

Division 65--Tax offset carry forward rules                                               414

Guide to Division 65                                                                                              414

65-10..................... What this Division is about............................................. 414

Operative provisions                                                                                              414

65-30..................... Amount carried forward................................................. 414

65-35..................... How to apply carried forward tax offsets....................... 415

65-40..................... When a company cannot apply a tax offset..................... 416

65-50..................... Effect of bankruptcy....................................................... 416

65-55..................... Deduction for amounts paid for debts incurred before bankruptcy          417

Division 67--Refundable tax offset rules                                                        419

Guide to Division 67                                                                                              419

67-10..................... What this Division is about............................................. 419

Operative provisions                                                                                              419

67-20..................... Which tax offsets this Division applies to....................... 419

67-23..................... Refundable tax offsets.................................................... 419

67-25..................... Refundable tax offsets--franked distributions................ 421

67-30..................... Refundable tax offsets--R&D........................................ 423


Table of Subdivisions

             Guide to Division 40

40-A     Objects of Division

40-B      Core provisions

40-C      Cost

40-D     Balancing adjustments

40-E      Low-value and software development pools

40-F      Primary production depreciating assets

40-G     Capital expenditure of primary producers and other landholders

40-H     Capital expenditure that is immediately deductible

40-I       Capital expenditure that is deductible over time

40-J       Capital expenditure for the establishment of trees in carbon sink forests

40-K     Farm-in farm-out arrangements


Guide to Division 40



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