Commonwealth Consolidated Acts

TAXATION LAWS AMENDMENT ACT (NO. 2) 2004 - SCHEDULE 3

Part   1 -- Amendments

Fringe Benefits Tax Assessment Act 1986

1   After section   61F

Insert:

61G   Reduction of taxable value of fringe benefits if certain deductions relating to payments to associates are not allowed

    If:

  (a)   a fringe benefit is provided in the year of tax in respect of the employment of a current employee; and

  (b)   the person providing the benefit cannot deduct an amount under the Income Tax Assessment Act 1997 for providing the benefit because of section   85 - 15, 85 - 20 or 86 - 60 of that Act;

the amount that, but for this section, would be the taxable value of the fringe benefit in relation to the year of tax is reduced by the amount mentioned in paragraph   (b).

Note:   Sections   85 - 15, 85 - 20 and 86 - 60 of the Income Tax Assessment Act 1997 limit the extent to which a person can deduct payments to associates that relate to personal services income.

Income Tax Assessment Act 1997

2   Subsection 86 - 20(1) (note 2)

Repeal the note, substitute:

Note 2:   If the amount of the deductions exceeds the amount of the personal services income, a deduction for the excess is available to you under section   86 - 27. The personal services entity cannot deduct the amount of the excess: see section   86 - 87.

3   After section   86 - 25

Insert:

86 - 27   Deduction for net personal services income loss

    If your personal services deduction amount exceeds your unreduced personal services income, then you can deduct the excess amount. For this purpose:

  (a)   your personal services deduction amount is the amount of deductions relating to your * personal services income worked out under step 1 of the method statement in section   86 - 20, increased by the amount (if greater than zero) worked out under step 4 of the method statement; and

  (b)   your unreduced personal services income is the personal services income that would have been included in your assessable income for the income year if there had not been any reduction under section   86 - 20.

4   After section   86 - 85

Insert:

86 - 87   Personal services entity cannot deduct net personal services income loss

    The total amount of the deductions to which a * personal services entity is entitled for an income year is reduced by the amount of any deduction that an individual, whose * personal services income is ordinary or statutory income of the entity for that income year, is entitled to under section   86 - 27.

Part   2 -- Application of amendments

5   Application of amendment in item   1

The amendment made by item   1 of this Schedule applies to fringe benefits provided after 30   June 2000.

6   Application of amendments in items   2, 3 and 4

The amendments made by items   2, 3 and 4 of this Schedule apply to assessments for the 2000 - 2001 income year and each subsequent income year.