Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1997
1 Subsection 4 - 10(3A) (first sentence)
Repeal the sentence, substitute "If you have * tax offsets that are subject to the refundable tax offset rules and the total of those offsets exceeds your basic income tax liability, you can, after allowing certain other tax offsets, get a refund of the excess under section 67 - 30.".
2 Subsection 4 - 10(3A) (note)
Omit "Note", substitute "Note 1".
3 At the end of subsection 4 - 10(3A)
Add:
Note 2: Division 67 sets out the refundable tax offset rules.
4 Subsection 61 - 335(6)
Repeal the subsection.
5 Section 61 - 335 (note)
Repeal the note, substitute:
Note: In certain circumstances you can get a refund of the tax offset under Division 67.
6 Division 67
Repeal the Division, substitute:
Division 67 -- Refundable tax offset rules
67 - 10 What this Division is about
This Division sets out the rules about refunds of tax offsets.
Table of sections
Operative provisions
67 - 20 Which tax offsets this Division applies to
67 - 25 Tax offsets that are subject to the refundable tax offset rules
67 - 30 When you can get a refund of a tax offset
67 - 35 Amount of refund
[This is the end of the Guide]
67 - 20 Which tax offsets this Division applies to
This Division only applies to a * tax offset if it is stated to be subject to the refundable tax offset rules.
67 - 25 Tax offsets that are subject to the refundable tax offset rules
Franked dividends
(1) * Tax offsets available under any of the following provisions of Part IIIAA of the Income Tax Assessment Act 1936 are subject to the refundable tax offset rules:
(a) section 160AQU (general);
(b) section 160AQX (beneficiaries of a trust);
(c) section 160AQY (trustees);
(d) section 160AQYA (superannuation funds, approved deposit funds (ADFs) and pooled superannuation trusts (PSTs));
(e) section 160AQZ (partners);
(f) section 160AQZA (life assurance companies);
(g) section 160ASEP (venture capital).
The tax offset referred to in paragraph ( c) is subject to the refundable tax offset rules only if the trustee entitled to the rebate is liable to be assessed under section 98 or 99 of the Income Tax Assessment Act 1936 .
Private health insurance
(2) Private health insurance tax offsets under Subdivision 61 - H are subject to the refundable tax offset rules.
67 - 30 When you can get a refund of a tax offset
You can get a refund of * tax offsets that are subject to the refundable tax offset rules if the total of those offsets exceeds the amount of income tax that you would have to pay if you had not got those tax offsets (but had got all your other tax offsets).
The amount of the refund of * tax offsets is the amount of the excess referred to in section 67 - 30.
Income Tax Assessment Act 1936
6A Section 160APA
Insert:
"entity" has the same meaning as in the Income Tax Assessment Act 1997 .
6B Section 160APA
Insert:
"exempt institution" means an entity whose ordinary and statutory income (within the meaning of the Income Tax Assessment Act 1997 ) are exempt from income tax because of Division 50 of that Act.
6C Subparagraph 160AQT(1AB)(b)(iv)
Repeal the subparagraph, substitute:
(iv) a registered organisation; or
(v) an exempt institution whose exempt status is disregarded in relation to the dividend under section 160ARDAB; and
6D After subsection 160AQT(4)
Insert:
(4A) Disregard section 50 - 1 of the Income Tax Assessment Act 1997 in determining, for the purposes of this section, whether a dividend is exempt income of an exempt institution whose exempt status is disregarded in relation to the dividend under section 160ARDAB.
6E Subparagraph 160AQU(1)(b)(ii)
Repeal the subparagraph, substitute:
(ii) a trustee (other than the trustee of an eligible entity within the meaning of Part IX or of an exempt institution whose exempt status is disregarded in relation to the dividend under section 160ARDAB);
6F At the end of section 160AQU
Add:
(3) Disregard section 50 - 1 of the Income Tax Assessment Act 1997 in determining, for the purposes of subsection ( 1), the amount included under section 160AQT in the assessable income of an exempt institution whose exempt status is disregarded in relation to the dividend concerned under section 160ARDAB.
6G Subsection 160AQW(1)
After "section 128D", insert "of this Act or section 50 - 1 of the Income Tax Assessment Act 1997 ".
6H At the end of section 160AQWA
Add:
(2) In determining the entitlement to a rebate under section 160AQX of an exempt institution whose exempt status is disregarded in relation to the trust amount concerned under section 160ARDAB, assume that section 50 - 1 of the Income Tax Assessment Act 1997 had not been enacted.
6I Subparagraph 160AQX(1)(b)(ii)
Repeal the subparagraph, substitute:
(ii) a registered organisation (other than a trustee); or
(iii) an exempt institution (other than a trustee) whose exempt status is disregarded in relation to the trust amount under section 160ARDAB; and
6J After Division 7 of Part IIIAA
Insert:
Division 7AA--Franking rebates for certain exempt institutions
(1) In this Division:
"ABN" has the meaning given by the A New Tax System (Australian Business Number) Act 1999 .
"arrangement" has the same meaning as in the Income Tax Assessment Act 1997 .
"associate" has the same meaning as in section 318.
"controller" , in relation to an exempt institution, has the meaning given by subsections ( 2) to (6) (inclusive).
"notional trust amount" , in relation to an exempt institution, is an amount that would be a trust amount of the institution if section 50 - 1 of the Income Tax Assessment Act 1997 had not been enacted.
"related transaction" , in relation to a dividend or notional trust amount, means an act, transaction or circumstance that has occurred, will occur, or may reasonably be expected to occur as part of, in connection with or as a result of:
(a) the payment or receipt of the dividend; or
(b) the arising of the entitlement to, or the distribution or receipt of, the notional trust amount; or
(c) any arrangement entered into in association with:
(i) the payment or receipt of the dividend; or
(ii) the arising of the entitlement to, or the distribution or receipt of, the notional trust amount.
Controller of exempt institution that is a company
(2) An entity is a controller of an exempt institution that is a company if the entity is a controller of the company (for CGT purposes) within the meaning of section 140 - 20 of the Income Tax Assessment Act 1997 .
Controller of exempt institution other than a company--basic meaning
(3) Subject to subsections ( 5) and (6), an entity is a controller of an exempt institution that is not a company if:
(a) a group in relation to the entity has the power, by means of the exercise of a power of appointment or revocation or otherwise, to obtain beneficial enjoyment (directly or indirectly) of the capital or income of the institution; or
(b) a group in relation to the entity is able (directly or indirectly) to control the application of the capital or income of the institution; or
(c) a group in relation to the entity is capable, under a scheme, of gaining the beneficial enjoyment referred to in paragraph ( a) or the control referred to in paragraph ( b); or
(d) the institution or, if the institution is a trust, the trustee of the trust:
(i) is accustomed; or
(ii) is under an obligation; or
(iii) might reasonably be expected;
to act in accordance with the directions, instructions or wishes of a group in relation to the entity; or
(e) a group in relation to the entity is able (directly or indirectly) to remove or appoint the trustee of the trust if the institution is a trust; or
(f) a group in relation to the entity has more than a 50% stake in the income or capital of the institution; or
(g) entities in a group in relation to the entity are the only entities that, under the terms of:
(i) the constitution of the institution or the terms on which the institution is established; or
(ii) the terms of the trust if the institution is a trust;
can obtain the beneficial enjoyment of the income or capital of the institution.
(4) For the purposes of subsection ( 3), each of the following constitute a group in relation to an entity:
(a) the entity acting alone;
(b) an associate of the entity acting alone;
(c) the entity and one or more associates of the entity acting together;
(d) 2 or more associates of the entity acting together.
Controller of exempt institution that is not a company--deemed absence of control
(5) If:
(a) at a particular time, an entity is a controller of an exempt institution that is not a company; and
(b) the Commissioner, having regard to all relevant circumstances, considers that it is reasonable that the entity be taken not to be a controller of the institution at the particular time;
the entity is taken not to be a controller of the institution at the particular time.
(6) Without limiting paragraph ( 5)(b), the Commissioner may have regard under that paragraph to the identity of the beneficiaries of the trust at any time before and at any time after the entity began to be a controller of the institution if the institution is a trust.
160ARDAB Certain exempt institutions eligible for rebates in relation to franking credits
(1) The exempt status of an exempt institution is disregarded for the purposes of determining its entitlement to a rebate under Division 6, 6A or 7 of this Part in relation to a dividend or notional trust amount if:
(a) it satisfies subsection ( 2), (3), (4), (5) or (6); and
(b) section 160ARDAC (anti - avoidance provision) does not apply to the dividend or notional trust amount; and
(c) subsection ( 8) (chains of exempt institutions) does not apply to the notional trust amount.
(2) The institution's exempt status is disregarded if the institution:
(a) is covered by item 1.1, 1.5, 1.5A or 1.5B of the table in section 50 - 5 of the Income Tax Assessment Act 1997 ; and
(b) is endorsed as exempt from income tax under Subdivision 50 - B of the Income Tax Assessment Act 1997 ; and
(c) is a resident.
Note: Paragraph ( c)--see subsection ( 7).
(3) The institution's exempt status is disregarded if the institution:
(a) is endorsed under paragraph 30 - 120(a) of the Income Tax Assessment Act 1997 ; and
(b) is a resident.
Note: Paragraph ( b)--see subsection ( 7).
(4) The institution's exempt status is disregarded if:
(a) the institution's name is specified in a table in a section in Subdivision 30 - B of the Income Tax Assessment Act 1997 ; and
(b) the institution has an ABN; and
(c) the institution is a resident.
Note: Paragraph ( c)--see subsection ( 7).
(5) The institution's exempt status is disregarded if:
(a) a declaration by the Treasurer is in force in relation to the institution under subsection 30 - 85(2) of the Income Tax Assessment Act 1997 ; and
(b) the regulations do not provide that the institution's exempt status is not to be disregarded for the purposes of this Division.
(6) The institution's exempt status is disregarded if the institution is prescribed by the regulations as an institution whose exempt status is to be disregarded for the purposes of this Division.
(7) For the purposes of this section, the institution is a resident if the institution has a physical presence in Australia and, to that extent, incurs its expenditure and pursues its objectives principally in Australia at all times during the year of income in which the dividend is paid or the entitlement to the notional trust amount arises.
(8) The institution's exempt status is not disregarded in relation to a notional trust amount if the notional trust amount arises because of a dividend paid to, or a notional trust amount of, another exempt institution.
160ARDAC Franking rebates denied in certain circumstances
(1) The exempt institution's exempt status is not disregarded in relation to a dividend or notional trust amount if subsection ( 2), (4), (5), (6), (7), (9) or (10) is satisfied. None of those subsections limits any of the others.
(2) The institution's exempt status is not disregarded if:
(a) there is a related transaction in relation to the dividend or notional trust amount; and
(b) because of the related transaction:
(i) the amount or value of the benefit derived by the institution because of the dividend is, will be, or may reasonably be expected to be, less than the amount or value of the dividend at the time when the dividend was paid; or
(ii) the amount or value of the benefit derived by the institution because of the notional trust amount is, will be, or may reasonably be expected to be, less than the amount or value of the notional trust amount at the time when the notional trust amount arose.
The amount or value of the dividend or notional trust amount is to be increased to include the value of any franking rebate to which the institution would be entitled if this section did not apply to the dividend or notional trust amount.
(3) Subsection ( 2) does not apply to the dividend or notional trust amount if:
(a) the only reason why paragraph ( 2)(b) is satisfied is that the institution has incurred, will incur, or may reasonably be expected to incur, expenses for the purpose of obtaining the dividend or notional trust amount (and the associated franking rebate); and
(b) the expenses are, in the Commissioner's opinion, reasonable in relation to the value of the dividend or notional trust amount.
(4) Subject to subsection ( 11), the institution's exempt status is not disregarded if:
(a) there is a related transaction in relation to the dividend or notional trust amount; and
(b) because of the related transaction, the institution or another entity:
(i) makes, becomes liable to make, or may reasonably be expected to make or to become liable to make, a payment to any entity; or
(ii) transfers, becomes liable to transfer, or may reasonably be expected to transfer or to become liable to transfer, any property to any entity; or
(iii) incurs, becomes liable to incur, or may reasonably be expected to incur or to become liable to incur, any other detriment, disadvantage, liability or obligation.
(5) Subject to subsection ( 11), the institution's exempt status is not disregarded if:
(a) there is a related transaction in relation to the dividend or notional trust amount; and
(b) because of the related transaction:
(i) the company that paid the dividend or an associate of that company; or
(ii) the trustee of the trust in relation to which the notional trust amount arises or an associate of that trustee;
has obtained, will obtain or may reasonably be expected to obtain a benefit, advantage, right or privilege.
Note: Section 160ARDAE makes special provision in relation to benefits provided by an exempt institution to its controller.
(6) The institution's exempt status is not disregarded in relation to a dividend if:
(a) the dividend to any extent takes the form of property other than money; and
(b) the terms and conditions on which the dividend is paid are such that the institution:
(i) does not receive immediate custody and control of the property; or
(ii) does not have the unconditional right to retain custody and control of the property in perpetuity to the exclusion of the company or an associate of the company; or
(iii) does not obtain an immediate, indefeasible and unencumbered legal and equitable title to the property.
(7) The institution's exempt status is not disregarded in relation to a notional trust amount that arises in a year of income if the total value of the payments of money, and transfers of property, by the trustee to the institution from the trust that:
(a) occur during the year of income; and
(b) are attributable to notional trust amounts that arose during the year of income;
are less than the total amount of those notional trust amounts.
(8) Subsection ( 7) does not apply to a notional trust amount if the Commissioner is satisfied, having regard to all the circumstances, that it would be reasonable to treat the notional trust amount as having been distributed to the institution during the year of income.
(9) The institution's exempt status is not disregarded in relation to a notional trust amount if:
(a) the trustee of the trust in relation to which the notional trust amount arises makes a distribution to the institution in relation to the notional trust amount; and
(b) the distribution to any extent takes the form of property other than money; and
(c) the terms and conditions on which the distribution is made are such that the institution:
(i) does not receive immediate custody and control of the property; or
(ii) does not have the unconditional right to retain custody and control of the property in perpetuity to the exclusion of the trustee or an associate of the trustee; or
(iii) does not obtain an immediate, indefeasible and unencumbered legal and equitable title to the property.
(10) Subject to subsection ( 11), the institution's exempt status is not disregarded if:
(a) an arrangement is entered into as part of, or in association with, the payment of the dividend or the arising of the entitlement to, or the distribution of, the notional trust amount; and
(b) because of the arrangement the institution or another entity has acquired or will acquire (whether directly or indirectly) property, other than property comprising the dividend or notional trust amount, from:
(i) the company or an associate of the company; or
(ii) the trustee of the trust in relation to which the notional trust amount arises or an associate of the trustee.
(11) Subsection ( 4), (5) or (10) does not apply to the dividend or notional trust amount if:
(a) the institution has the choice of:
(i) receiving payment of the dividend or notional trust amount; or
(ii) being issued with shares in the company that paid the dividend or fixed interests in the trust estate in relation to which the notional trust amount arises; and
(b) the institution is under no obligation (whether express or implied and whether legally enforceable or not) either to choose to take, or to choose not to take, the shares or interests rather than receiving payment of the dividend or notional trust amount; and
(c) the institution chooses to be issued with the shares or fixed interests; and
(d) subsection ( 4), (5) or (10) would, but for this subsection, apply to the dividend or notional trust amount because the institution makes that choice; and
(e) making that choice furthers the purpose for which the institution was established; and
(f) the institution does not make that choice for the purpose, or purposes that include the purpose, of benefiting:
(i) the company that paid the dividend; or
(ii) the trustee of the trust in relation to which the notional trust amount arises; or
(iii) an associate of that company or trustee (other than the institution); and
(g) any benefit obtained by the company, trustee or associate because the institution makes that choice is an ordinary incident of issuing the shares or interests to the institution or of the institution's holding of those shares or interests; and
(h) the following deal with one another on an arm's length basis in relation to any related transaction or arrangement in relation to the dividend or notional trust amount that, but for this subsection, would have prevented the institution's exempt status from being disregarded in relation to the dividend or notional trust amount:
(i) the institution;
(ii) the company that paid the dividend or the trustee of the trust in relation to which the notional trust amount arises;
(iii) any other entity involved in, connected with or party to the related transaction or arrangement.
Note: Subparagraph ( 11)(a)(ii)--for fixed interest see subsections ( 12) to (15).
A vested and indefeasible interest constitutes a fixed interest
(12) For the purposes of subsection ( 11), a taxpayer's interest in a trust estate is a fixed interest if it is a vested and indefeasible interest in the corpus of the trust estate.
Case where interest not defeasible
(13) If:
(a) the trust is a unit trust and the taxpayer holds units in the unit trust; and
(b) the units are redeemable or further units are able to be issued; and
(c) where units in the unit trust are listed for quotation in the official list of an approved stock exchange (within the meaning of section 470)--the units held by the taxpayer will be redeemed, or any further units will be issued, for the price at which other units of the same kind in the unit trust are offered for sale on the approved stock exchange at the time of the redemption or issue; and
(d) where the units are not listed as mentioned in paragraph ( c)--the units held by the taxpayer will be redeemed, or any further units will be issued, for their market value at the time of the redemption or issue;
then the mere fact that the units are redeemable, or that the further units are able to be issued, does not mean that the taxpayer's interest, as a unit holder, in the corpus of the trust estate is defeasible.
Commissioner may determine an interest to be vested and indefeasible
(14) If:
(a) a taxpayer has an interest in the corpus of a trust estate; and
(b) apart from this subsection, the interest would not be a vested or indefeasible interest; and
(c) the Commissioner considers that the interest should be treated as being vested and indefeasible, having regard to:
(i) the circumstances in which the interest is capable of not vesting or the defeasance can happen; and
(ii) the likelihood of the interest not vesting or the defeasance happening; and
(iii) the nature of the trust; and
(iv) any other matter the Commissioner thinks relevant;
the Commissioner may determine that the interest is to be taken to be vested and indefeasible.
Effect of determination
(15) A determination made under subsection ( 14) has effect according to its terms.
160ARDAD Controller liable to pay amount in respect of refund in some cases
(1) A controller of an exempt institution is liable to pay an amount in respect of a refund paid to the institution under Division 67 of the Income Tax Assessment Act 1997 if:
(a) the institution claimed the refund on the basis of an entitlement to a rebate under Division 6, 6A or 7 of this Part; and
(b) the institution was not entitled to the rebate because of the operation of section 160ARDAC in relation to a related transaction or arrangement; and
(c) the controller or an associate of the controller benefited from the related transaction or arrangement; and
(d) some or all of the amount that the institution is liable to pay in respect of the refund remains unpaid after the day on which the amount becomes due and payable; and
(e) the Commissioner gives the controller written notice:
(i) stating that the controller is liable to pay an amount under this section; and
(ii) specifying the amount that the controller is liable to pay.
Except as provided for in subsection ( 5), this subsection does not affect any liability the institution has in relation to the refund.
Note: Section 160ARDAF also provides that the exempt institution's present entitlement to a notional trust amount is disregarded for the purposes of Division 6 of Part III.
(2) An entity that is dissatisfied with a decision of the Commissioner under subsection ( 1) in relation to the entity may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953 .
(3) The amount the controller is liable to pay under subsection ( 1):
(a) is the amount specified under subparagraph ( 1)(e)(ii); and
(b) becomes due and payable at the end of the period of 14 days that starts on the day on which the notice referred to in paragraph ( 1)(e) is given.
(4) The amount the controller is liable to pay under subsection ( 1) must not exceed the amount or value of the benefit that the controller or associate obtained from the related transaction or arrangement.
(5) The total of:
(a) the amounts that the Commissioner recovers in relation to the refund from controllers under subsection ( 1); and
(b) the amounts the Commissioner recovers in relation to the refund from the exempt institution;
must not exceed the amount of the refund.
160ARDAE Treatment of benefits provided by an exempt institution to a controller
(1) A benefit given by an exempt institution to a controller of the institution, or an associate of a controller of the institution, is dealt with under this section if:
(a) the controller or associate:
(i) pays a dividend to the institution; or
(ii) is trustee of the trust in relation to which a notional trust amount of the institution arises; and
(b) the benefit is, or was, given to the controller or associate at any time during the period that starts 3 years before, and ends 3 years after, the dividend is paid or the notional trust amount arises.
(2) The controller or associate is taken, for the purposes of subsection 160ARDAC(5), to have obtained the benefit because of a related transaction in relation to the dividend or notional trust amount.
(3) The controller or associate is taken, for the purposes of section 160ARDAD, to have benefited from a related transaction or arrangement that caused section 160ARDAC to apply to the dividend or notional trust amount at least to the extent of the benefit given to the controller or associate by the exempt institution.
(4) Subsection ( 2) or (3) does not apply to a benefit if the Commissioner is satisfied, having regard to all the circumstances, that it would be unreasonable to apply that subsection.
160ARDAF Present entitlement of exempt institution disregarded in certain circumstances
The present entitlement of an exempt institution to a share of trust income is disregarded for the purposes of Division 6 of Part III if:
(a) the institution claims a refund under Division 67 of the Income Tax Assessment Act 1997 on the basis of a rebate under Division 6, 6A or 7 of this Part in relation to a notional trust amount that related to that share of trust income; and
(b) the institution was not entitled to the rebate because of the operation of section 160ARDAC in relation to a related transaction or arrangement.
7 Application of amendments
The amendments made by this Schedule that relate to tax offsets under Part IIIAA of the Income Tax Assessment Act 1936 apply to offsets that relate to dividends paid on or after 1 July 2000.