Treasury
Capital gains tax — automatic roll-over of Public Sector Superannuation Fund
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | - | - | - |
The Government has provided an automatic capital gains tax (CGT) roll-over for the transfer of CGT assets from the Public Sector Superannuation Board to the trustee of the PSS Investments Trust, with effect from 1 July 2005. This will help to establish the Public Sector Superannuation Accumulation Plan as a separate scheme from the Public Sector Superannuation Scheme.
Capital gains tax — treatment of options
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | * | * | * | * |
The Government will amend the capital gains tax (CGT) provisions relating to options and the related capital proceeds rules to allow amounts payable in respect of options over created assets to be included in the CGT cost base of those assets, with effect to options exercised on or after 27 May 2005.
The amendments will ensure that the CGT provisions apply to the renewing or extending of options in the same way as they apply to the granting of options.
Further information can be found in the press release of 27 May 2005 issued by the Minister for Revenue and Assistant Treasurer.
Changes to Prescribed Private Funds
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | -26.5 | -12.9 | -11.6 | -12.3 |
Since the 2005-06 Budget there have been 74 funds approved for prescription as Prescribed Private Funds (PPF), and one declaration that a fund is no longer a PPF. Prescribed private funds allow businesses, families and individuals to establish and donate to a charitable trust of their own, for the purposes of disbursing funds to a range of other deductible gift recipients.
Company loss recoupment rules — modified continuity of ownership test
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | * | * | * | * |
The Government will alter the modified continuity of ownership test that is available to listed public companies to remove the proposed ‘known change of ownership’ test, to introduce specific testing times and to introduce a same-share/same-interest rule, with effect from 1 July 2002.
A company can deduct losses incurred in earlier income years if it satisfies the continuity of ownership test or the same business test. The continuity of ownership test is being modified to make it easier for listed public companies to apply the test.
Further information can be found in the press release of 14 September 2005 issued by the Minister for Revenue and Assistant Treasurer.
Consolidation — clarifying the interaction with the demerger rules
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | -20.0 | -5.0 | -5.0 |
The Government will modify the consolidation tax cost setting rules to ensure they apply appropriately where a joining entity has been demerged prior to consolidating, with effect from 1 July 2002.
The measure will ensure that the tax cost setting integrity measure that causes certain CGT roll-overs to be ignored for tax cost setting purposes does not apply to a consolidated group or multiple entry consolidated (MEC) group that forms after a demerger, provided that the company with the rolled-over asset does not join the same consolidated group or MEC group as the company that originally held the asset.
Further information can be found in the press release of 1 December 2005 issued by the Minister for Revenue and Assistant Treasurer.
Consolidation — treatment of pre-capital gains tax membership interests and improvements to clarify the operation of the consolidation regime
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | * | * | * | * |
The Government will ensure that the pre-capital gains tax (CGT) status of membership interests in subsidiary members is maintained post-consolidation and make other improvements to clarify the operation of the consolidation regime, with effect from 1 July 2002.
This measure will assist small to medium sized groups that wish to consolidate by ensuring that the pre-CGT status of membership interests in subsidiary members is maintained post-consolidation. The measure will also clarify the operation of various aspects of the consolidation regime and improve interactions with other parts of the income tax law.
Further information can be found in the press release of 1 December 2005 issued by the Minister for Revenue and Assistant Treasurer.
Deductibility of certain gifts
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | -0.4 | -3.5 | -2.1 | -1.3 |
Since the 2005-06 Budget, the Government has extended gift deductibility for gifts of $2 and more to the following organisations:
- International Specialised Skills Institute;
- Yachad Accelerated Learning Project;
- Chifley Research Centre Limited;
- Rotary Club of Katoomba Inc — Convict Roadbuilders and Pioneer Memorial Wall Fund;
- Xanana Vocational Education Trust (for a period of two years);
- Australian Red Cross US 2005 Hurricane Relief Appeal;
- Salvation Army Australia Hurricane Katrina Relief Appeal;
- City of Onkaparinga Memorial Gardens Association (extension for two months); and
- C E W Bean Foundation (for a period of two years).
In addition, since the 2005-06 Budget there have been:
- 48 additions to the Register of Cultural Organisations and 26 deletions;
- 36 additions to the Register of Environmental Organisations and 14 deletions; and
- three funds declared relief funds for people in developing countries (overseas aid funds).
The Register of Cultural Organisations can be found on the Department of Communications, Information and Technology and the Arts website at www.dcita.gov.au. The Register of Environmental Organisations can be found on the Department of Environment and Heritage website at www.ea.gov.au. The list of overseas aid funds can be found on the AusAid website at www.ausaid.gov.au. No changes have been made to the Register of Harm Prevention Charities since the 2005-06 Budget. The list of harm prevention charities can be found on the Department of Family and Community Services website at www.facs.gov.au.
Employee share schemes — further relief for employee share scheme participants in the event of a corporate restructure
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | * | * | * | * |
The Government will provide further relief in the event of a corporate restructure for employees who participate in employee share schemes, with effect from 1 July 2004.
Under this measure, when an employee is issued new shares or rights as the result of a corporate restructure, the employee will be able treat their new shares or rights as a continuation of their old shares or rights.
This measure ensures that a taxing point does not arise for the employee, regardless of whether they have paid tax upfront or deferred their tax liability under section 26AAC or Division 13A of the Income Tax Assessment Act 1936.
Further information can be found in the press release of 14 September 2005 issued by the Minister for Revenue and Assistant Treasurer.
Excise and customs duty — no increase in rates
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | -6.0 | -12.0 | -6.0 | - |
The Government will not go ahead with planned increases in petrol excise and customs duty rates as announced in the 2003-04 Budget. These increases were intended to apply between 1 January 2006 and 31 December 2007 to fund a grant of 1.1 cents per litre to encourage the early introduction of premium unleaded petrol with 50 parts per million or less sulphur content for supply into the domestic market. This grant will proceed without any increase in excise or customs duty on unleaded petrol.
Further information can be found in the press release of 20 September 2005, issued by the Treasurer and Minister for the Environment and Heritage, and the Government’s announcement of the measure entitled Measures for a Better Environment — Cleaner Fuels (see Budget Measures 2003-04 Budget Paper No. 2, pages 41 and 223).
Exemption from foreign currency provisions for securitisation vehicles
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | .. | .. | .. | .. |
The Government will extend the exemption from foreign currency rules introduced in 2003 to include securitisation vehicles, with effect from 1 July 2003.
This exemption currently applies to Authorised Deposit-taking Institutions (ADIs) and non-ADI financial institutions. The exemption will apply until the commencement of the proposed retranslation and hedging regimes in the income tax law. These regimes are to be introduced as part of Stages 3 and 4 of the Taxation of Financial Arrangements reforms.
Expanded taxation treatment of business ‘blackhole’ expenditures
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | -2.0 | -3.0 | -9.0 |
The Government will increase the range of deductions available to business under the systematic tax treatment for business ‘blackhole’ expenditures announced in the 2005-06 Budget. The measure will apply to expenditures incurred on or after 1 July 2005.
The measure broadens the scope of the Budget measure in response to issues raised in consultations.
- A deduction over five years for certain business-related payments to terminate an operating lease or license will be provided.
- An original proposal to limit access to the blackholes measure for certain pre-business expenditure will no longer proceed ensuring that all businesses are treated consistently.
- The Uniform Capital Allowances regime will be amended to ensure certain blackhole expenditures incurred to hold or dispose of a depreciating asset will be included in the cost of those depreciating assets.
Foreign Investment Fund rules — listing of the Bermuda Stock Exchange as an approved stock exchange
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | .. | .. | .. | .. |
The Government has included the Bermuda Stock Exchange on the list of approved stock exchanges for the purposes of Australia’s Foreign Investment Fund (FIF) rules, with effect from 1 September 2005. This will reduce the costs of complying with the FIF rules for Australian taxpayers who invest in foreign companies or trusts listed on the Bermuda Stock Exchange.
This measure is an outcome of the recent conclusion of a tax information exchange agreement between Australia and Bermuda.
Foreign residents’ income with an underlying foreign source — conduit foreign income
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | -10.0 | -10.0 | -25.0 |
The Government will extend the circumstances under which foreign income can be distributed by an Australian corporate tax entity to its foreign owners free of Australian tax. These circumstances include allowing a greater range of entities to access the benefits of the measure and permitting foreign income to flow through on-shore companies to foreign owners free of Australian tax.
This measure builds on the foreign income account measure announced in the 2003-04 Budget to extend the existing exemption for foreign non-portfolio dividends. The measure will have effect from 1 July 2005, although amounts can only be declared to be conduit foreign income on or after the date of Royal Assent.
Fringe benefits tax — exclusion from reporting for certain personal security services
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | .. | .. | .. |
The Government will ensure that employers who provide certain personal security services to employees who have received threats as a result of their work will not have to report these as fringe benefits on the employees’ payment summaries. This exclusion will apply retrospectively from 1 April 2004.
Further information can be found in the press release of 8 September 2005 issued by the Minister for Revenue and Assistant Treasurer.
Fringe benefits tax — extension of transitional arrangements for payments to worker entitlement funds
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | - | - | - |
The Government has extended the fringe benefits tax (FBT) exemption for certain contributions made to existing worker entitlement funds during the FBT year beginning on 1 April 2005.
The purpose of the extension of the transitional arrangements is to provide certainty to employers making contributions to existing worker entitlement funds while they put in place new arrangements to comply with the requirements of the FBT exemption.
The FBT exemption for contributions to worker entitlement funds ensures that the contributions will not be taxed twice (once as a fringe benefit when paid into the fund and again as income when paid out of the fund).
Fringe benefits tax — rebatable employer status of certain government institutions
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | - | - | - |
The Government has amended the fringe benefits tax (FBT) law to ensure that government institutions that are charitable institutions at law will not be treated as FBT rebatable employers, with effect from 1 July 2005.
FBT rebatable employers are certain non-government, non-profit organisations, which may include religious, educational, charitable or scientific institutions. FBT rebatable employers are eligible for a rebate of 48 per cent of the FBT amount that would otherwise be payable.
As a result of this measure, institutions of the Australian Government and the State and Territory Governments that are charitable institutions at law, will not be treated as FBT rebatable employers.
Income tax — extension of mutuality principle
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | .. | .. | .. | .. |
The Government will amend the income tax law to restore the benefits of the mutuality principle for certain not-for-profit organisations, with effect from 1 July 2000.
This amendment will ensure that following the decision of the Full Federal Court in the case of Coleambally Irrigation Mutual Cooperative v the Commissioner of Taxation not-for-profit organisations will not be precluded from accessing the mutuality principle solely because they are precluded from distributing any surplus to members.
Further information can be found in the press release of 30 May 2005 issued by the Minister for Revenue and Assistant Treasurer.
Income tax — taxation status of Operation AZURE
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | .. | - | - |
The Government has provided Operation AZURE with ‘non-warlike’ status for taxation purposes for a period of 12 months, with effect from 10 April 2005. This entitles Australian Defence Force members serving on this operation to access the Overseas Forces Tax Offset.
Operation AZURE is Australia’s contribution to the United Nations peacekeeping operation in Sudan known as the United Nations Mission in Sudan (UNMIS). ‘Non-warlike’ overseas localities are those that are deemed to be uncongenial or isolated.
Indirect tax concession scheme — extension
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | .. | .. | .. | .. |
The Government has provided or upgraded refunds and exemptions for indirect taxes to certain countries’ diplomatic and consular representation under the Indirect Tax Concession Scheme.
Twelve countries’ missions and consulates are entitled to new or upgraded benefits as a result of this decision.
These enhanced concessions took effect from the time provided in the implementing instruments issued by the Minister for Foreign Affairs.
Personal income tax — amendments to preserve eligibility for the 30 per cent child care tax rebate
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | - | - | - |
The Government will ensure that parents who work less than fifteen hours a week will remain eligible for the child care tax rebate (CCTR) following changes to the Child Care Benefit (CCB) work/training/study test that are due to take effect from 1 July 2006.
For the purposes of the CCTR, both partners will be required to work/train/study at some time in the week.
Further information can be found in the press release of 24 June 2005 issued by the Treasurer.
Personal income tax — modifying the foreign employment exemption
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | .. | .. | .. | .. |
The Government will extend the exemption that applies (subject to certain conditions) to the foreign employment income of Australian residents who are engaged in foreign service for a period of 91 days or more. The extension will mean that the exemption will also apply where a taxpayer dies during a period of foreign service, where the death occurred on or after 1 July 2004.
This measure will allow the exemption to apply where an individual dies in foreign service before reaching the requisite 91 days if they would have otherwise continued to be engaged in foreign service for at least 91 continuous days.
Further information can be found in the press release of 18 August 2005 issued by the Minister for Revenue and Assistant Treasurer.
Personal income tax — tax exemption for lump sum payments to F-111 personnel
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | -6.0 | - | - | - |
The Government will exempt from income tax certain lump sum payments made to F-111 service personnel, effective for the 2005-06 income year.
On 19 August 2005 the Minister for Defence and the Minister for Veterans’ Affairs announced that the Government would provide a $21 million lump sum payment package to personnel who participated in F-111 Deseal/Reseal work for the Australian Defence Force.
This measure ensures that the recipients of the lump sum payments will benefit from the full value of the payment.
Political Donations — raising the tax deductible threshold
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | - | -4.9 | -6.5 |
The Government will increase the tax deductible threshold for gifts and contributions to political parties and independents from $100 to $1,500 in an income year, with effect from the date of Royal Assent.
The Government will also allow donations from companies to either political parties or independents to be tax deductible, subject to the same $1,500 threshold.
Related party at-call loans — deemed debt treatment for small companies
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | -11.0 | -12.0 | -13.0 | -13.0 |
The Government will allow the related party at-call loans of companies with an annual turnover of less than $20 million at the end of an income year to be treated as debt for income tax purposes, with effect from 1 July 2005.
The Government will also allow companies that fail the turnover test at the end of an income year, and subsequently change their related party at-call loans into debt interests before lodgement of their tax return for that year, to elect debt treatment from the start of that income year. This will also have effect from 1 July 2005.
These measures will reduce the compliance costs of small business taxpayers as those businesses will not be required to keep special tax accounts in respect of such loans.
Further information can be found in the press release of 15 July 2005 issued by the Minister for Revenue and Assistant Treasurer.
Superannuation — extension of transitional relief for small funds
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | * | * | * | * |
The Government has extended the transitional relief for small funds providing defined benefit pensions before 1 January 2006.
Previously, the transitional relief allowed people who were members of a small fund on 11 May 2004 and who retired before 1 July 2005 to commence a defined benefit pension. This measure now makes the relief available to persons who were members of a small fund on 11 May 2004, and who retire on or after age 55, or reach age 65, prior to 1 January 2006. The member must become entitled to the pension prior to 1 January 2006 with payments commencing within 12 months of the entitlement date.
The extension of the transitional relief gives retirees greater certainty about the range of income stream choices available to them. For details, see the related measures entitled Superannuation — modification of allocated pension drawdown factors and Superannuation — modification of market linked and other life expectancy income streams.
Further information can be found in the press release of 6 June 2005 issued by the Minister for Revenue and Assistant Treasurer.
Superannuation — modification of allocated pension drawdown factors
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | -1.5 | -5.0 | -8.5 | -12.0 |
| Related expense ($m) | ||||
| Department of Family and Community Services | 1.0 | 2.1 | 3.2 | 4.5 |
| Centrelink | 0.8 | 0.1 | 0.1 | 0.1 |
| Department of Veterans’ Affairs | 0.1 | 0.1 | 0.1 | 0.2 |
| Total | 1.9 | 2.3 | 3.4 | 4.8 |
| Related capital ($m) | ||||
| Department of Veterans’ Affairs | .. | - | - | - |
The Government will update the allocated pension drawdown factors in line with current life expectancy. The changes will apply to new allocated pensions from 1 January 2006.
The annual drawdown for an allocated pension or annuity must be within the range of specified minimum and maximum payment factors. These factors have not been updated since the product commenced in 1992. The updated factors will better enable retirees to draw down their capital over a longer period. Transitional provisions will enable income stream providers to use the old factors whilst they are still updating systems to cater for the new factors.
The Government will provide a total of $12.4 million over four years to the Department of Family and Community Services, the Department of Veterans’ Affairs and Centrelink to implement the changes.
Further information can be found in the press release of 27 September 2005 issued by the Minister for Revenue and Assistant Treasurer.
Superannuation — modification of market linked and other life expectancy income streams
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | -3.5 | -11.0 | -18.5 | -26.0 |
| Related expense ($m) | ||||
| Centrelink | 1.7 | 0.1 | 0.1 | 0.1 |
| Department of Family and Community Services | 0.3 | 0.4 | 0.6 | 0.9 |
| Department of Veterans’ Affairs | 0.2 | 0.2 | 0.3 | 0.4 |
| Total | 2.2 | 0.7 | 1.0 | 1.4 |
| Related capital ($m) | ||||
| Department of Veterans’ Affairs | .. | - | - | - |
The Government will provide more flexibility to the market linked income stream by:
- extending the maximum term for new income streams so that payments may continue until the recipient reaches age 100 (or until a person’s spouse reaches age 100); and
- allowing annual payments of the market linked income stream to vary between plus or minus 10 per cent of what would otherwise be calculated under the usual payment rules.
The extended term and smoothing mechanism will apply to market linked income streams from 1 January 2006.
This will provide retirees with smoother and more stable income payments and a greater degree of certainty with respect to pension planning.
Similarly, the Government will extend the maximum term applying to other life expectancy income streams products from 1 January 2006.
The Government will provide a total of $5.2 million over four years to the Department of Family and Community Services, the Department of Veterans’ Affairs and Centrelink to implement the changes.
Further information can be found in the press release of 27 September 2005 issued by the Minister for Revenue and Assistant Treasurer.
Superannuation — removing restriction on portability of accounts
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | - | - | - |
The Government has removed the six-month restriction on portability of superannuation accounts, with effect from 1 July 2005.
Compulsory portability of superannuation accounts came into effect on 1 July 2004 but generally only applied in relation to ‘inactive’ accounts (broadly, accounts where no employer contributions have been made for six months). Since 1 July 2005, portability has not been restricted to ‘inactive’ superannuation accounts.
This measure gives people greater control over who manages their superannuation benefits. It also makes it easier for superannuation fund members to consolidate multiple accounts and so helps to reduce the impact of fees and charges.
Further information can be found in the press release of 16 June 2005 issued by the Minister for Revenue and Assistant Treasurer.
Superannuation — temporary residents working on the Melbourne 2006 Commonwealth Games
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | 0.3 | 0.1 | - | - |
Temporary residents working on the Melbourne 2006 Commonwealth Games under a special visa class will be able to access their superannuation on permanent departure from Australia. This is consistent with the treatment of most other temporary residents who accumulate superannuation in Australia.
Superannuation contributions splitting
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | -1.4 | -2.3 | -1.6 |
The Government has brought forward the commencement date for the splitting of superannuation contributions between couples. Contributions made on or after 1 January 2006 will now be eligible for splitting. The Government had previously announced a 1 July 2006 commencement date.
Eligible fund members will be able to split up to 85 per cent of taxable contributions with their spouse (compared with the 60 per cent cap imposed in earlier versions of this policy).
Superannuation guarantee — extension of lodgement date for superannuation guarantee statements
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | -0.1 | -0.1 | -0.1 | -0.1 |
The Government will extend the due date for lodgement of superannuation guarantee statements by employers, with effect from 1 January 2006. This measure will make the system easier for employers to understand and simplify administration of the late contribution offset rule announced in the 2005-06 Budget for the Australian Taxation Office.
Currently, superannuation guarantee statements are required to be lodged with the Australian Taxation Office no later than the 14th day of the second month after the end of the quarter. This measure will extend the due date to the 28th day of the second month after the end of the quarter and will align the statement due dates with the end of the offset period.
Tax exempt asset financing — changes to tax treatment
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | .. | .. | .. | .. |
The Government will apply a ‘lease, use or control of use of the asset’ test to determine arrangements that will fall within the scope of the tax exempt asset financing provisions, with effect from the date of Royal Assent of the enabling legislation.
The new test will determine which financing arrangements are subject to the tax exempt asset financing rules. Certain short-term and low-value arrangements will be specifically excluded in order to reduce compliance costs and provide greater certainty to the parties involved.
Further information can be found in the press release of 13 September 2005 issued by the Minister for Revenue and Assistant Treasurer.
Tax treatment of foreign governments and their investment bodies — clarification of tax exemption for certain investments
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | - | - | - |
The Government will clarify and codify the exemption currently provided to foreign governments and their investment bodies for dividend and interest income from passive investment in Australia. The measure will have effect from the date of Royal Assent of the enabling legislation.
Further information can be found in the press release of 4 November 2005 issued by the Treasurer.
Taxation of Financial Arrangements — extension of transitional arrangements for Upper Tier 2 instruments
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | * | * | * | * |
The Government will extend, until 1 July 2007, the debt/equity transitional provisions applying to certain capital raising hybrid instruments known as Upper Tier 2 instruments for prudential purposes. This will allow further time for consultation and development of an Upper Tier 2 regulation. Under this transitional provision, the pre-1 July 2001 law will continue to apply to these instruments.
When implemented, the regulation will apply to certain Upper Tier 2 and similar instruments issued by banks and non-mutual building societies (which are authorised deposit taking institutions) or their subsidiaries. It will also apply to entities that have undertaken to comply with the capital adequacy requirements issued by the Australian Prudential Regulation Authority.
Taxation of Financial Arrangements — treatment of term subordinated notes containing a solvency clause
| 2005-06 | 2006-07 | 2007-08 | 2008-09 | |
|---|---|---|---|---|
| Australian Taxation Office | - | - | - | - |
The Government will ensure that the presence of a solvency clause in certain term subordinated notes will not preclude the instrument qualifying as a debt interest for tax purposes, with effect from 1 July 2001.
Without this measure, the solvency clause may mean that the instrument would have constituted an equity interest for tax purposes. This would have meant that the issuer, such as a bank, would not have been able to claim a deduction for any distributions paid.