Income Tax Assessment Act 1936

A reference in this Act to foreign income is a reference to income (including superannuation lump sums and employment termination payments) derived from sources in a foreign country or foreign countries, and includes a reference to an amount included in assessable income under section 102AAZD, 456, 457 or 459A of this Act, or section 305‑70 of the Income Tax Assessment Act 1997.

A reference in this Act to foreign income includes a reference to an amount included in assessable income under:

Division 301 of the Income Tax Assessment Act 1997 in its application under section 301‑5 of the Income Tax (Transitional Provisions) Act 1997; or

Division 302 of the Income Tax Assessment Act 1997 in its application under section 302‑5 of the Income Tax (Transitional Provisions) Act 1997.

A reference in this Act to foreign tax is a reference to tax imposed by a law of a foreign country, being:

tax upon income; or

tax upon profits or gains, whether of an income or capital nature; or

any other tax, being a tax that is subject to an agreement having the force of law under the International Tax Agreements Act 1953;

This section applies to a non‑share dividend in the same way as it applies to a dividend.

In this section:

if such an associated company is a resident for the purposes of that law; or

for the purposes of granting any form of relief in relation to tax imposed on dividends received by one company from another company.

For the purposes of this Act, an amount of income derived by a person, not being a dividend paid by a company to the person as a shareholder in the company, shall be deemed to be attributable to a dividend:

if the person derived the amount of income by reason of being the beneficial owner of the share in respect of which the dividend was paid; or

if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to the dividend or to an amount that is deemed, by any application or successive applications of this subsection, to be an amount of income attributable to the dividend.

For the purposes of this Act, an amount of income derived by a person, being income other than passive income, is to be taken to be income attributable to passive income:

if the person derived the amount of income by reason of being beneficially entitled to an amount representing passive income; or

if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to passive income or to an amount that is taken, by any application or successive applications of this subsection, to be an amount of income attributable to passive income.

For the purposes of this Act, an amount of income derived by a person, being income other than interest income, shall be deemed to be income attributable to interest income:

if the person derived the amount of income by reason of being beneficially entitled to an amount representing interest income; or

if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to interest income or to an amount that is deemed, by any application or successive applications of this subsection, to be an amount of income attributable to interest income.

For the purposes of this Act, an amount of income derived by a person shall be deemed to be income derived from a particular source:

except where paragraph (b) applies:

if the person derived the amount of income by reason of being beneficially entitled to an amount that is derived from that source; or

if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to income derived from that source or to an amount that is deemed, by any other application or applications of this subsection, to be an amount that is income derived from that source; or

if the income so derived is, by virtue of subsection (1), (1A) or (2), attributable to a dividend, passive income or interest income derived from that source.

Where a beneficiary in a trust estate is presently entitled to income of the trust estate, that income shall, for the purposes of this section, be deemed to be an amount of income derived by the person.

This section:

applies to a non‑share equity interest in the same way as it applies to a share; and

applies to an equity holder in the same way as it applies to a shareholder; and

applies to a non‑share dividend in the same way as it applies to a dividend.

This section applies if a shareholder holds shares in a company (the original shares) and the company issues other shares (the bonus shares) in respect of the original shares.

If the bonus shares are a dividend, or taken to be a dividend (including as a result of section 45C), the consideration for the acquisition of the shares for the purposes of this Act is so much of the dividend as is:

included in the taxpayer’s assessable income; and

is not rebatable under section 46A.

If the bonus shares are issued for no consideration and are not a dividend or taken to be a dividend, then for the purposes of this Act, in determining:

the value of such of the original shares and bonus shares as the taxpayer elects under section 70‑45 of the Income Tax Assessment Act 1997 to value at cost; and

where any of the original shares or any of the bonus shares are not articles of trading stock of the taxpayer:

the amount or value of the consideration paid in respect of the acquisition of any of those shares for the purposes of Part 3‑1 or 3‑3 of the Income Tax Assessment Act 1997; or

the amount of any profit or loss arising on the sale or disposal of any of those shares;

A company issues shares for no consideration if:

it credits its capital account with profits in connection with the issue of the shares; or

it credits its capital account with the amount of any dividend to a shareholder and the shareholder does not have a choice whether to be paid the dividend or to be issued with the shares.

A company that makes a credit covered by paragraph (a) or (b) will have a tainted share capital account.

Subject to subsection (6), if a shareholder has a choice whether to be paid a dividend or to be issued shares and the shareholder chooses to be issued with shares:

the dividend is taken to be credited to the shareholder; and

the dividend is taken to have been paid out of profits; and

subsections (2) and (3) apply in working out the consideration for the acquisition of the shares for the purposes of this Act.

Subsection (5) does not apply if:

a shareholder in a listed public company has a choice whether to be paid a dividend (other than a minimally franked dividend within the meaning of subsection 45(3)) or to be issued shares and the shareholder chooses to be issued with shares; and

the company does not credit the share capital account in connection with the issue of those shares.

If subsection (5) does not apply because of this subsection, subsection (3) will apply.

This section (other than subsection (6)):

applies to a non‑share equity interest in the same way as it applies to a share; and

applies to an equity holder in the same way as it applies to a shareholder; and

applies to a non‑share dividend in the same way as it applies to a dividend.

This section applies to income that is derived on or after 1 July 1968 by a non‑resident and consists of royalty that:

is paid or credited to the non‑resident by the Commonwealth, by a State, by an authority of the Commonwealth or of a State or by a person who is, or by persons at least one of whom is, a resident and is not an outgoing wholly incurred by the Commonwealth, the State, the authority or that person or those persons in carrying on business in a country outside Australia at or through a permanent establishment of the Commonwealth, the State, the authority or that person or those persons in that country; or

is paid or credited to the non‑resident by a person who is, or by persons each of whom is, a non‑resident and is, or is in part, an outgoing incurred by that person or those persons in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia.

For the purposes of Division 5 and Division 6 of Part III, but subject to subsections (3) and (4), income to which this section applies shall be deemed to be attributable to sources in Australia.

For the purposes of sections 6‑5 and 6‑10 of the Income Tax Assessment Act 1997, but subject to subsections (3) and (4), income to which this section applies shall be deemed to have been derived from a source in Australia.

Where:

income to which this section applies is paid or credited to the non‑resident by whom it is derived by the Commonwealth, by a State, by an authority of the Commonwealth or of a State or by a person who is, or by persons at least one of whom is, a resident; and

the royalty of which the income consists is, in part, an outgoing incurred by the Commonwealth, the State, the authority or that person or those persons in carrying on business in a country outside Australia at or through a permanent establishment of the Commonwealth, the State, the authority or that person or those persons in that country;

Where:

income to which this section applies is paid or credited to the non‑resident by whom it is derived by a person who, or by persons each of whom, is a non‑resident; and

the royalty of which the income consists is, in part only, an outgoing incurred by the person or persons by whom it is paid or credited in carrying on business in Australia at or through a permanent establishment of that person or those persons in Australia;

In subsection (6), a reference to a relevant person is a reference to the Commonwealth, a State, an authority of the Commonwealth or of a State or a person who is, or persons at least 1 of whom is, a resident.

For the purposes of paragraphs (1)(a) and (3)(b), where:

royalty is paid or credited, after the commencement of this subsection, to a non‑resident by a relevant person carrying on business in a country outside Australia; and

the royalty or a part of the royalty:

is incurred by the relevant person in gaining or producing income that is derived by the relevant person otherwise than in carrying on business in a country outside Australia at or through a permanent establishment of the relevant person in that country or is incurred by the relevant person for the purpose of gaining or producing income to be so derived; or

is incurred by the relevant person in carrying on business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the relevant person otherwise than in so carrying on business at or through a permanent establishment of the relevant person in a country outside Australia;

For the purposes of paragraphs (1)(b) and (4)(b), where:

royalty is paid or credited, after the commencement of this subsection, to a non‑resident by another person or other persons (in this subsection referred to as the payer), being:

another person who is carrying on business in Australia and is a non‑resident; or

other persons who are carrying on business in Australia and each of whom is a non‑resident; and

the royalty or a part of the royalty:

is incurred by the payer in gaining or producing income that is derived by the payer in carrying on business in Australia at or through a permanent establishment of the payer in Australia or is incurred by the payer for the purpose of gaining or producing income to be so derived; or

is incurred by the payer in carrying on a business for the purpose of gaining or producing income and is reasonably attributable to income that is derived, or may be derived, by the payer in so carrying on business at or through a permanent establishment of the payer in Australia;

In this section:

is derived by a non‑resident; and

is calculated, in whole or in part, by reference to the value or quantity of natural resources produced, recovered or produced and recovered, in Australia after 7 April 1986;

income that consists of royalty; or

income where:

on 7 April 1986, the non‑resident had a continuing entitlement to receive the income;

the income was derived by the non‑resident pursuant to that continuing entitlement;

the non‑resident was, at 5 o’clock in the afternoon, by standard time in the Australian Capital Territory on 7 April 1986, a resident, within the meaning of a double tax agreement, of a foreign country in respect of which the double tax agreement was in force;

before 8 April 1986, the Commissioner had given a statement in writing to the effect that income tax would be levied on 50% of income included in a specified class of income; and

the income is included in that class of income.

For the purposes of Divisions 5 and 6 of Part III, natural resource income shall be deemed to be attributable to sources in Australia.

For the purposes of section 255 of this Act and sections 6‑5 and 6‑10 of the Income Tax Assessment Act 1997, natural resource income shall be deemed to have been derived from a source in Australia.

All other tax offsets under the Income Tax Assessment Act 1997 are treated as rebates: see section 160ADA.

For the purposes of this Act, a company (other than a company in the capacity of trustee) is a dual resident investment company in relation to a year of income if:

at any time during the year of income the company is a resident of Australia; and

the company is liable to tax in a foreign country in respect of some or all of the income or profits of the company of the year of income (or would be so liable if the company derived income or profits) because:

the company is treated as a resident of that country for the purposes of the relevant law of that country; or

the company is treated as domiciled in that country for the purposes of the relevant law of that country; or

the company’s management and control is treated as being located in that country for the purposes of the relevant law of that country; and

at any time during the year of income when the company was in existence:

the company was not carrying on business with a reasonable view to profit; or

a substantial purpose of the company (whether or not stated in its constituent document) was to acquire or hold shares, securities or other investments in related companies (whether directly or indirectly through one or more companies, partnerships or trusts).

For the purposes of this section, companies are related to each other if they are controlled (as defined by subsection (3)) by the same person, either alone or together with associates (whether or not the same associates are involved in relation to each company).

For the purposes of this section, a person, either alone or together with associates, controls a company if:

the person, either alone or together with associates:

controls or is capable of controlling, either directly or through one or more interposed companies, partnerships or trusts, at least 50% of the maximum number of votes that might be cast at a general meeting of the company; or

is beneficially entitled to receive, directly or indirectly, at least 50% of any dividends that are or might be paid, or of any distribution of capital that is or may be made, by the company; or

is capable, under a scheme, of gaining such control or such an entitlement; or

the company or its directors are accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the person, either alone or together with associates.

Section 159GZH applies for the purposes of this section in determining the beneficial entitlement of a person to receive indirectly the whole or a particular fraction of a dividend that is, or might be, paid by a company or of a distribution of capital of a company.

In this section:

any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and

any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved.

For the purposes of this Act, a credit union is a recognised small credit union in relation to a year of income if:

both:

the year of income is the 1994‑95 year of income; and

either:

the credit union is not a designated credit union; or

the credit union’s notional taxable income of the year of income is less than $50,000; or

both:

the year of income is the 1995‑96 year of income or a later year of income; and

the credit union’s notional taxable income of the year of income is less than $50,000.

For the purposes of this Act, a credit union is a recognised medium credit union in relation to a year of income if:

the year of income is the 1994‑95 year of income or a later year of income; and

the credit union is not a recognised small credit union in relation to the year of income; and

the credit union’s notional taxable income of the year of income is less than $150,000.

For the purposes of this Act, a credit union is a recognised large credit union in relation to a year of income if:

the year of income is the 1994‑95 year of income or a later year of income; and

the credit union is neither:

a recognised small credit union in relation to the year of income; nor

a recognised medium credit union in relation to the year of income.

For the purposes of this section, a credit union is a designated credit union if:

it was in existence on 1 July 1993; and

assuming that its accounts for the last accounting period that ended before 1 July 1993 had been prepared in accordance with generally accepted accounting principles—the amount that would have been shown in those accounts as the gross value of its assets as at the end of that accounting period is more than $30 million.

For the purposes of this section, the notional taxable income of a credit union of a year of income is the amount that would be its taxable income of the year of income if:

section 23G did not apply to income derived by it in the 1994‑95 year of income or any later year of income; and

Division 9 of Part III had not been enacted.

In this section:

Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

An effect of this provision is that people who acquire information under this Act are subject to the confidentiality obligations and exceptions in Division 355 in Schedule 1 to the Taxation Administration Act 1953.

The Commissioner shall, as soon as practicable after 30 June in each year, prepare and furnish to the Minister a report on the working of this Act, including any breaches or evasions of this Act of which the Commissioner has notice.

The Minister shall cause a copy of a report furnished to him or her under subsection (1) to be laid before each House of the Parliament within 15 sitting days of that House after the day on which he or she receives the report.

For the purposes of section 34C of the Acts Interpretation Act 1901, a report that is required by subsection (1) to be furnished as soon as practicable after 30 June in a year shall be taken to be a periodic report relating to the working of this Act during the year ending on that 30 June.