Income Tax Assessment Act 1936 - legislation.gov.au

Income Tax Assessment Act 1936

Act No. 27 of 1936 as amended

This compilation was prepared on 23 December 2005

taking into account amendments up to Act No. 162 of 2005

Volume 6 includes: Table of Contents

Sections 117 – 124KA

The text of any of those amendments not in force

on that date is appended in the Notes section

The operation of amendments that have been incorporated may be

affected by application provisions that are set out in the Notes section

Part III—Liability to taxation

Income Tax Assessment Act 1936 iii

Contents

Part III—Liability to taxation i

Division 9—Co-operative and mutual companies 1 117 Co-operative companies .................................................................... 1 118 Company not co-operative if less than 90% of business with

members ............................................................................................ 2 119 Sums received to be taxed ................................................................. 2 120 Deductions allowable to co-operative company ................................ 2 121 Mutual insurance associations ........................................................... 4

Division 9AA—Demutualisation of insurance companies and

affiliates 5

Subdivision A—What this Division is about 5 121AA What this Division is about ............................................................... 5

Subdivision B—Key concepts and related definitions 5 121AB Insurance company definitions .......................................................... 5 121AC Mutual affiliate company ................................................................... 6 121AD Demutualisation and demutualisation resolution day ........................ 6 121AE Demutualisation methods, the policyholder/member group

and the listing period ......................................................................... 7 121AEA Replacement of policyholders by persons exercising certain

rights ................................................................................................ 10 121AF Demutualisation method 1 ............................................................... 10 121AG Demutualisation method 2 ............................................................... 11 121AH Demutualisation method 3 ............................................................... 14 121AI Demutualisation method 4 ............................................................... 16 121AJ Demutualisation method 5 ............................................................... 17 121AK Demutualisation method 6 ............................................................... 20 121AL Demutualisation method 7 ............................................................... 22 121AM Embedded value of a mutual life insurance company ..................... 24 121AN Net tangible asset value of a general insurance company or

mutual affiliate company ................................................................. 26 121AO Treasury bond rate, capital reserve adequacy level, eligible

actuary and security ......................................................................... 28 121AP Subsidiary and wholly-owned subsidiary ........................................ 29 121AQ Other definitions .............................................................................. 29 121AR List of definitions ............................................................................ 30

Subdivision C—Tax consequences of demutualisation 31 121AS Part IIIA consequences of demutualisation ..................................... 31 121AT Other tax consequences of demutualisation ..................................... 48

iv Income Tax Assessment Act 1936

Division 9A—Offshore banking units 58

Subdivision A—Object and simplified outline 58 121A Object .............................................................................................. 58 121B Simplified outline ............................................................................ 58

Subdivision B—Interpretation 59 121C Interpretation ................................................................................... 59 121D Meaning of OB activity.................................................................... 61 121DA Meaning of expressions relevant to investment activity ................... 66 121E Meaning of offshore person ............................................................. 67 121EA OBU requirement ............................................................................ 67 121EB Internal financial dealings of an OBU ............................................. 68 121EC Meaning of OBU resident-owner money ......................................... 68 121ED Meaning of trade with a person ....................................................... 68 121EE Definitions relating to assessable income of an OBU ...................... 69 121EF Definitions relating to allowable deductions of an OBU ................. 70

Subdivision C—Operative provisions 71 121EG Reduction of assessable OB income and allowable OB

deductions ........................................................................................ 71 121EH Loss of special treatment where excessive use of non-OB

money .............................................................................................. 72 121EI Deduction for foreign tax on amounts included in assessable

OB income ....................................................................................... 73 121EJ Source of income derived from OB activities .................................. 73 121EK Deemed interest on 90% of certain OBU resident-owner

money .............................................................................................. 73 121EL Exemption of income etc. of OBU offshore investment trusts ........ 74 121ELA Exemption of income etc. of overseas charitable institutions .......... 75 121ELB Adjustment of capital gains and losses from disposal of units

in OBU offshore investment trusts .................................................. 76

Division 9B—State Bank of NSW 78 121EM Interpretation ................................................................................... 78 121EN Deemed disposal and re-acquisition of assets .................................. 78 121EO Deemed cessation and re-assumption of liabilities .......................... 79 121EP Effect of unfunded pre-first taxing time superannuation

liabilities .......................................................................................... 79 121EQ Effect of pre-first taxing time provision for bad debts ..................... 80

Division 9C—Assessable income diverted under certain tax

avoidance schemes 82 121F Interpretation ................................................................................... 82 121G Diverted income and diverted trust income ..................................... 84 121H Assessment of diverted income and diverted trust income .............. 91 121J Ascertainment of diverted income or diverted trust income

deemed to be an assessment ............................................................ 91

Income Tax Assessment Act 1936 v

121K Application of International Tax Agreements Act ........................... 92 121L Division applies notwithstanding exemption under other

laws ................................................................................................. 92

Division 10—Mining and quarrying 93

Subdivision A—General mining 93 122 Interpretation ................................................................................... 93 122AA Division applies subject to provisions terminating gold

mining exemptions .......................................................................... 96 122AB Subdivision applies subject to Division 245 of Schedule 2C ........... 96 122A Allowable capital expenditure ......................................................... 96 122B Purchase of mining or prospecting right or information .................. 98 122BA Allowable capital expenditure in respect of cash bidding

payments to acquire exploration or prospecting authorities or

mining authorities .......................................................................... 101 122C Residual previous capital expenditure ........................................... 106 122D Deduction of residual previous capital expenditure ....................... 108 122DA Residual capital expenditure .......................................................... 109 122DB Deduction of residual capital expenditure ..................................... 110 122DC Residual (1 May 1981 to 18 August 1981) capital

expenditure .................................................................................... 112 122DD Deduction of residual (1 May 1981 to 18 August 1981)

capital expenditure......................................................................... 113 122DE Residual (19 August 1981 to 19 July 1982) capital

expenditure .................................................................................... 114 122DF Deduction of residual (19 August 1981 to 19 July 1982)

capital expenditure......................................................................... 116 122DG Deduction of allowable (post 19 July 1982) capital

expenditure .................................................................................... 117 122H Election that Subdivision not apply to plant .................................. 121 122J Exploration and prospecting expenditure ...................................... 122 122JA Deductions where exempt income derived .................................... 128 122JAA Roll-over relief where CGT roll-over relief allowed under

section 160ZZM, 160ZZMA, 160ZZN, 160ZZNA or

160ZZO or where election for roll-over relief made under

section 122R .................................................................................. 129

Subdivision B—Quarrying 138 122JB Interpretation ................................................................................. 138 122JBA Subdivision subject to Division 245 of Schedule 2C ..................... 140 122JC Allowable capital expenditure ....................................................... 141 122JD Purchase of quarrying or prospecting right or information ............ 142 122JE Deduction of allowable capital expenditure................................... 144 122JF Exploration and prospecting expenditure ...................................... 148

vi Income Tax Assessment Act 1936

122JG Roll-over relief where CGT roll-over relief allowed under



section 122R .................................................................................. 152

Subdivision C—General provisions 158 122KAA Subdivision subject to Division 245 of Schedule 2C ..................... 158 122K Disposal, loss, destruction or termination of use of property ......... 158 122KA Application of section 122K before 1 July 1991—subsequent

use of property for rehabilitation ................................................... 160 122L Transactions between persons not at arm’s length ......................... 164 122M Elections ........................................................................................ 165 122N Deductions not allowable under other provisions .......................... 165 122NB Apportionment of expenditure deductible under both

Subdivision A and Subdivision B .................................................. 166 122R Change in interests in property ...................................................... 167 122S Commissioner to determine deductions attributable to

particular expenditure .................................................................... 168 122T Recoupment of expenditure ........................................................... 169 122U Modification of section 51AD and Division 16D—lessee of

property deemed to be owner etc. .................................................. 169

Division 10AAA—Transport of minerals and quarry materials 171

Subdivision A—Transport of certain minerals 171 123 Interpretation ................................................................................. 171 123AAA Subdivision subject to Division 245 of Schedule 2C ..................... 172 123A Application of Subdivision ............................................................ 172 123AA Division applies subject to provisions terminating gold

mining exemptions ........................................................................ 175 123B Deduction of expenditure .............................................................. 176 123BA Election in relation to certain expenditure ..................................... 177 123BB Election in relation to expenditure incurred after 17 August

1976 ............................................................................................... 178 123BBA Roll-over relief where CGT roll-over relief allowed under



section 123F .................................................................................. 179

Subdivision B—Transport of quarry materials 184 123BC Interpretation ................................................................................. 184 123BCA Subdivision subject to Division 245 of Schedule 2C ..................... 185 123BD Application of Subdivision ............................................................ 185 123BE Deduction of expenditure .............................................................. 187 123BF Roll-over relief where CGT roll-over relief allowed under



section 123F .................................................................................. 188

Income Tax Assessment Act 1936 vii

Subdivision C—General provisions 191 123CA Subdivision subject to Division 245 of Schedule 2C ..................... 191 123C Disposal, loss, destruction or termination of use of property ......... 191 123D Transactions between parties not at arm’s length .......................... 193 123E Deductions not allowable under other provisions .......................... 194 123EA Apportionment of expenditure deductible under both

Subdivision A and Subdivision B .................................................. 194 123F Change in interests in property ...................................................... 195 123G Modification of section 51AD and Division 16D—lessee of


Division 10AA—Prospecting and mining for petroleum 198 124 Interpretation ................................................................................. 198 124AAA Division subject to Division 245 of Schedule 2C .......................... 199 124AA Allowable capital expenditure ....................................................... 199 124AB Purchase of prospecting or mining rights or information .............. 202 124ABA Allowable capital expenditure in respect of cash bidding

payments for exploration permits and production licences ............ 204 124AC Residual previous capital expenditure ........................................... 211 124AD Deduction of residual previous capital expenditure ....................... 213 124ADA Residual capital expenditure .......................................................... 214 124ADB Deduction of residual capital expenditure ..................................... 216 124ADC Residual (1 May 1981 to 18 August 1981) capital

expenditure .................................................................................... 217 124ADD Deduction of residual (1 May 1981 to 18 August 1981)

capital expenditure......................................................................... 219 124ADE Residual (19 August 1981 to 19 July 1982) capital

expenditure .................................................................................... 220 124ADF Deduction of residual (19 August 1981 to 19 July 1982)

capital expenditure......................................................................... 222 124ADG Deduction of allowable (post 19 July 1982) capital

expenditure .................................................................................... 223 124ADH Election in relation to limit on certain deductions ......................... 227 124AE Unrecouped previous capital expenditure ...................................... 228 124AF Deductions of unrecouped previous capital expenditure ............... 230 124AG Election that Division not to apply to plant ................................... 231 124AH Exploration and prospecting expenditure ...................................... 232 124AJ Prospecting or mining by contractors, profit-sharing

arrangements etc. ........................................................................... 236 124AK Transactions between persons not at arm’s length ......................... 237 124AL Petroleum or petroleum products used in manufacturing

other goods .................................................................................... 238 124AM Disposal, loss, destruction or termination of use of property ......... 238

viii Income Tax Assessment Act 1936

124AMAARoll-over relief where CGT roll-over relief allowed under



section 124AO ............................................................................... 241 124AMAApplication of section 124AM before 1 July 1991—

subsequent use of property for rehabilitation ................................. 250 124AN Double deductions ......................................................................... 254 124AO Change in interests in property ...................................................... 255 124AP Commissioner to determine deductions attributable to

particular expenditure .................................................................... 256 124AQ Recoupment of expenditure ........................................................... 256 124AR Modification of section 51AD and Division 16D—lessee of


Division 10AB—Rehabilitation and restoration of mining,

quarrying and petroleum sites 258 124B Interpretation ................................................................................. 258 124BA Deduction of expenditure on rehabilitation-related activities ........ 261 124BB Rehabilitation-related activity ....................................................... 261 124BC No deduction for certain expenditure ............................................ 262 124BD No deduction where expenditure is recouped ................................ 262 124BE Transactions between persons not at arm’s length ......................... 262 124BF Property used for rehabilitation-related activities taken to be

used for the purpose of producing assessable income ................... 263

Division 10A—Timber operations and timber mill buildings 264

Subdivision AA—Application of this Division 264 124EAA This Division does not apply after 1996-97 year of income .......... 264

Subdivision A—Timber operations 264 124E Interpretation ................................................................................. 264 124EA Subdivision subject to Division 245 of Schedule 2C ..................... 265 124F Deduction of expenditure .............................................................. 265 124G Disposal, destruction or termination of use of property ................. 266 124GA Roll-over relief where CGT roll-over relief allowed under


160ZZO ......................................................................................... 267 124H Acquisition of property .................................................................. 269 124J Timber felled upon acquired land or under right ........................... 269

Subdivision B—Timber mill buildings 270 124JAA Subdivision subject to Division 245 of Schedule 2C ..................... 270 124JA Deduction of expenditure .............................................................. 270 124JB Disposal, destruction or termination of use of building ................. 272 124JC Acquisition of building .................................................................. 273

Income Tax Assessment Act 1936 ix

124JD Roll-over relief where CGT roll-over relief allowed under


160ZZO ......................................................................................... 274

Subdivision C—General provisions 276 124JE Transactions between persons not at arm’s length ......................... 276 124JF Modification of section 51AD and Division 16D—lessee of


Division 10B—Industrial property 278 124K Interpretation ................................................................................. 278 124KAA Division subject to Division 245 of Schedule 2C .......................... 281 124KA Application of Division where deduction allowable under

section 124ZAF or 124ZAFA ........................................................ 281

Liability to taxation Part III

Co-operative and mutual companies Division 9

Section 117

Income Tax Assessment Act 1936 1

Division 9—Co-operative and mutual companies

117 Co-operative companies

(1) In this Division, co-operative company means a company, not

being a friendly society dispensary, the rules of which limit the

number of shares which may be held by, or by and on behalf of,

any one shareholder, and prohibit the quotation of the shares for

sale or purchase at any stock exchange or in any other public

manner whatever, and includes a company, not being a friendly

society dispensary, which has no share capital, and which in either

case is established for the purpose of carrying on any business

having as its primary object or objects one or more of the

following:

(a) the acquisition of commodities or animals for disposal or

distribution among its shareholders;

(b) the acquisition of commodities or animals from its

shareholders for disposal or distribution;

(c) the storage, marketing, packing or processing of commodities

of its shareholders;

(d) the rendering of services to its shareholders;

(e) the obtaining of funds from its shareholders for the purpose

of making loans to its shareholders to enable them to acquire

land or buildings to be used for the purpose of residence or of

residence and business.

(2) A company is not a co-operative company within the meaning of

this Division in relation to a year of income if the company is, for

the purposes of section 23G, an approved credit union in relation to

that year of income.

(3) Subsection (2) does not apply to a credit union in relation to a year

of income if:

(a) the credit union is a recognised medium credit union in

relation to the year of income; or

(b) the credit union is a recognised large credit union in relation

to the year of income.

Part III Liability to taxation

Division 9 Co-operative and mutual companies

Section 118

2 Income Tax Assessment Act 1936

118 Company not co-operative if less than 90% of business with

members

If, in the ordinary course of business of a company in the year of

income, the value of commodities and animals disposed of to, or

acquired from, its shareholders by the company, or the amount of

its receipts from the storage, marketing, packing and processing of

commodities of its shareholders, or from the rendering of services

to them, or the amount lent by it to them, is less respectively than

90% of the total value of commodities and animals disposed of or

acquired by the company, or of its receipts from the storage,

marketing, packing and processing of commodities, or from the

rendering of services, or of the total amount lent by it, that

company shall in respect of that year be deemed not to be a

co-operative company.

119 Sums received to be taxed

(1) The assessable income of a co-operative company shall include all

sums received by it, whether from shareholders or from other

persons, for the storage, marketing, packing or processing of

commodities, or for the rendering of services, or in payment for

commodities or animals or land sold, whether on account of the

company or on account of its shareholders.

(2) For the purposes of subsection (1), if a credit union (within the

meaning of section 23G) receives a payment of, or in the nature of,

interest, the payment is taken to be for the rendering of services.

(3) Subsection (2) does not limit the generality of subsection (1).

120 Deductions allowable to co-operative company

(1) So much of the assessable income of a co-operative company as:

(a) is distributed among its shareholders as rebates or bonuses

based on business done by shareholders with the company;

(b) is distributed among its shareholders as interest or dividends

on shares; or

(c) in the case of a company having as its primary object that

specified in paragraph 117(1)(b)—is applied by the company

for or towards the repayment of any moneys loaned to the

company by a government of the Commonwealth or a State


Co-operative and mutual companies Division 9

Section 120


to enable the company to acquire assets which are required

for the purpose of carrying on the business of the company or

to pay that government for assets so required which the

company has taken over from that government;

shall be an allowable deduction:

Provided that the deduction under paragraph (c) shall not be

allowed unless shares representing not less than 90% of the value of

the company are held by persons who supply the company with the

commodities or animals which the company requires for the

purposes of its business.

(2) No such rebate or bonus based on purchases made by a shareholder

from the company shall be included in his assessable income

except where the amount of such purchases is allowable as a

deduction in ascertaining his taxable income of any year.

(3) It is hereby declared to be the intention of the Parliament that

paragraph (1)(c) applies to loans taken out for the purpose of

acquiring assets from:

(a) government sources; or

(b) non-government sources.

(4) No deduction is allowable under subsection (1) to the extent that

the assessable income of a co-operative company is distributed as

the franked part of a franked distribution.

(5) For the purposes of this section, in determining whether the

assessable income of a co-operative company is distributed as the

franked part of a franked distribution, if:

(a) an amount is distributed by the co-operative company as a

franked distribution; and

(b) the franking percentage (within the meaning of the Income

Tax Assessment Act 1997) for the distribution is less than

100%; and

(c) a part of the distribution is attributable to sources other than

the assessable income of the co-operative company;

it is to be assumed that the franked part of the distribution is

attributable, to the greatest extent possible, to those other sources.

(6) If a co-operative company distributes assessable income among its

shareholders within the period of 3 months (or such longer period

as the Commissioner decides) starting at the end of a year of


Division 9 Co-operative and mutual companies

Section 121


income, the co-operative company may elect that the distribution is

to be taken, for the purposes of this section only, to have been

made on the last day of the year of income.

(7) In this section:

franked distribution has the same meaning as in the Income Tax

Assessment Act 1997.

121 Mutual insurance associations

(1) An association of persons formed for the purpose of insuring those

persons against loss, damage or risk of any kind is taken, for the

purposes of this Act, to be a company carrying on the business of

insurance.

(2) The assessable income of such a company includes all premiums

derived by it, whether from its members or not.


Demutualisation of insurance companies and affiliates Division 9AA

Section 121AA


Division 9AA—Demutualisation of insurance companies

and affiliates

Subdivision A—What this Division is about

121AA What this Division is about

Basically, if an insurance company demutualises and its

policyholders or members dispose of their listed shares in the

company, for tax purposes the acquisition cost of the shares is

based on the lesser of:

(a) the embedded value or net tangible asset value of the

company; and

(b) the value of the company based on the total first

trading day price of all shares in the company.

Other tax consequences result from disposals of other interests and

from other events in connection with the demutualisation.

Subdivision B—Key concepts and related definitions

121AB Insurance company definitions

(1) A mutual insurance company is an insurance company:

(a) whose profits are divisible only among its policyholders; or

(b) that satisfies all of the following conditions:

(i) it is limited by guarantee;

(ii) it did not divide its profits among its members during

the 10 years ending on 9 May 1995;

(iii) on a winding-up, its profits are not divisible among its

members; or

(c) that satisfies all of the following conditions:

(i) at 7.30 pm, by legal time in the Australian Capital

Territory, on 9 May 1995, it was a friendly society

(within the meaning of this Act as in force at that time);


Division 9AA Demutualisation of insurance companies and affiliates

Section 121AC


(ii) it was an insurance company on 1 July 1999;

(iii) it does not have capital divided into shares held by its

members.

(2) An insurance company is a life insurance company or a general

insurance company.

(3) A life insurance company is a company registered under the Life

Insurance Act 1995.

(4) A general insurance company is a company whose sole or

principal business is insurance business within the meaning of

subsection 3(1) of the Insurance Act 1973, but does not include a

life insurance company.

121AC Mutual affiliate company

A mutual affiliate company is a company that satisfies the

following conditions:

(a) it is limited by guarantee;

(b) it is not an insurance company;

(c) at least 75% of the policyholders of a mutual insurance

company are members of it;

(d) it did not divide its profits among its members during the 10

years ending on 9 May 1995;

(e) on a winding-up, its profits are not divisible among its

members in their capacity as such.

121AD Demutualisation and demutualisation resolution day

(1) A mutual insurance company demutualises if it ceases to be a

mutual insurance company:

(a) in any case—other than by ceasing to be an insurance

company; or

(b) if it is a life insurance company—because the whole of its

life insurance business is transferred to another company

under a scheme confirmed by the Federal Court of Australia.

(2) A mutual affiliate company demutualises if it ceases to be a

mutual affiliate company other than by ceasing to be a company.



Section 121AE


(3) The demutualisation resolution day, in relation to the

demutualisation of a company, is:

(a) if paragraph (b) does not apply—the day on which the

resolution to proceed with the demutualisation is passed; or

(b) if paragraph (1)(b) applies to the demutualisation—the day

on which the transfer of the whole of the company’s life

insurance business takes place.

121AE Demutualisation methods, the policyholder/member group

and the listing period

Demutualisation methods 1 to 6

(1) There are 6 methods by which the demutualisation of a mutual

insurance company, where a mutual affiliate company is not also

demutualised, may be implemented that are relevant for the

purposes of this Division. They are described in sections 121AF to

121AK as demutualisation methods 1 to 6.

Demutualisation method 7

(2) There is one method by which the demutualisation of both a

mutual insurance company and a mutual affiliate company may be

implemented that is relevant for the purposes of this Division. It is

described in section 121AL as demutualisation method 7.

Demutualisation methods

(3) Each of the methods described in sections 121AF to 121AL is a

demutualisation method.

Policyholder/member group

(4) The policyholder/member group, in relation to the demutualisation

of a mutual insurance company under any of demutualisation

methods 1 to 6, consists of the following persons:

(a) in the case of a mutual insurance company covered by

paragraph 121AB(1)(a)—policyholders (other than trustees

covered by paragraph (d) or (e)) in the company immediately

before the demutualisation;



Section 121AE


(b) in the case of any other mutual insurance company—

members (other than trustees covered by paragraph (d) or (e))

of the company immediately before the demutualisation;

(c) in any case—any of the following who, in connection with

the demutualisation, are entitled to the same rights to shares

or the proceeds of the sale of shares as the policyholders (in a

paragraph (a) case) or the members (in a paragraph (b) case):

(i) employees of the company or a wholly-owned

subsidiary of the company;

(ii) persons who ceased to be such policyholders or

members before the demutualisation;

(iii) charities;

(iv) persons who are entitled to the rights because of the

death of the policyholders or members;

(d) in any case—each person who satisfies the following

requirements:

(i) the person is a member of a regulated superannuation

fund (as defined by section 19 of the Superannuation

Industry (Supervision) Act 1993), other than a standard

employer-sponsored member (as defined by subsection

16(5) of that Act);

(ii) the trustee of the fund holds a policy or policies in the

mutual insurance company;

(iii) the trustee of the fund is a company that is a

wholly-owned subsidiary of the mutual insurance

company;

(iv) the person’s benefits in the fund consist solely of the

proceeds of the policy or policies;

(v) in connection with the demutualisation, the person,

rather than the trustee, has the right to shares or the

proceeds of the sale of shares in respect of the policy or

policies held by the trustee;

(e) in any case—each person who satisfies the following

requirements:

(i) the person is the member of a single-member

superannuation fund;



(iii) in connection with the demutualisation, the person,




Section 121AE



policies held by the trustee.

(5) The policyholder/member group, in relation to the demutualisation

of a mutual insurance company and a mutual affiliate company

under demutualisation method 7, consists of the following persons:

(a) if the mutual insurance company is covered by paragraph

121AB(1)(a)—policyholders (other than trustees covered by

paragraph (e) or (f)) in the mutual insurance company

immediately before the demutualisation;

(b) in the case of any other mutual insurance company—

members (other than trustees covered by paragraph (e) or (f))

of the company immediately before the demutualisation;

(c) members (other than trustees covered by paragraph (e) or (f))

of the mutual affiliate company immediately before the

demutualisation;

(d) any of the following who, in connection with the

demutualisation, are entitled to the same rights to shares or

the proceeds of the sale of shares as the members:

(i) employees of the mutual insurance company, the mutual

affiliate company or a wholly-owned subsidiary of

either company;

(ii) persons who ceased to be such members before the

demutualisation;

(iii) charities;

(iv) persons who are entitled to the rights because of the

death of members;

(e) in any case—each person who satisfies the following

requirements:

(i) the person is a member of a regulated superannuation

fund (as defined by section 19 of the Superannuation

Industry (Supervision) Act 1993), other than a standard

employer-sponsored member (as defined by subsection

16(5) of that Act);



(iii) the trustee of the fund is a company that is a

wholly-owned subsidiary of the mutual insurance

company;



Section 121AEA


(iv) the person’s benefits in the fund consist of the proceeds

of the policy or policies;

(v) in connection with the demutualisation, the person,



policies held by the trustee;

(f) in any case—each person who satisfies the following

requirements:

(i) the person is the member of a single-member

superannuation fund;



(iii) in connection with the demutualisation, the person,



policies held by the trustee.

(6) The listing period is the period ending 2 years after the

demutualisation resolution day, or at such later time as the

Commissioner, before the end of the 2 years, allows.

121AEA Replacement of policyholders by persons exercising certain

rights

If, as a result of the exercise of any power under the articles of

association of an insurance company, persons are entitled to

exercise rights in place of policyholders, then, to the extent that the

Commissioner considers it appropriate, the persons are treated for

the purposes of this Division as replacing the policyholders.

121AF Demutualisation method 1

(1) Under demutualisation method 1, in connection with the

implementation of the demutualisation:

(a) all membership rights in the mutual insurance company are

extinguished; and

(b) shares (the ordinary shares) of only one class in the mutual

insurance company are issued to each person in the

policyholder/member group; and

(c) the ordinary shares are listed within the listing period.

Note: Other things may also happen in connection with the implementation of the demutualisation.



Section 121AG


(2) The following diagram shows, where this demutualisation method

is used, the issue of the shares to the policyholder/member group.

Mutual insurance company



Ordinary shares

121AG Demutualisation method 2




extinguished; and

(b) not more than 10 shares (the special shares) in the mutual

insurance company are issued to a trustee to hold for the

benefit of the policyholder/member group, where:

(i) the issue takes place before the issue of the ordinary

shares mentioned in paragraph (c); and

(ii) on the issue of all the ordinary shares, the rights

attaching to the special shares become the same as those

attaching to the ordinary shares; and



Section 121AG


(c) a greater number of shares (the ordinary shares) of only one

class in the mutual insurance company are either:

(i) issued, at the election of each person in the

policyholder/member group, to the person or to a trustee

to sell on behalf of the person; or

(ii) issued to a trustee, at the election of each person in the

policyholder/member group, to distribute to the person

or to sell on behalf of the person; and

(d) the trustee sells the ordinary shares and distributes the

proceeds to the person, or distributes the ordinary shares to

the person; and

(e) the ordinary shares are listed within the listing period.


(2) The following diagram shows the main events, where this

demutualisation method is used involving an election covered by

subparagraph (1)(c)(ii).



Section 121AG




Ordinary shares


Trustee

Ordinary shares

Proceeds of sale

Special shares

Trustee



Section 121AH


121AH Demutualisation method 3




extinguished; and

(b) shares in the mutual insurance company are issued to another

company (the holding company); and

(c) shares (the ordinary shares) of only one class in:

(i) the holding company; or

(ii) another company (the ultimate holding company) of

which the holding company is a wholly-owned

subsidiary, either directly or through one or more other

wholly-owned subsidiaries (each of which is an

interposed holding company);

are issued to each person in the policyholder/member group;

and

(d) the ordinary shares are listed within the listing period.



demutualisation method is used.



Section 121AH




Shares


Holding company

Shares



Section 121AI


121AI Demutualisation method 4




extinguished; and



(c) not more than 10 shares (the special shares) in:







are issued to a trustee to hold for the benefit of the

policyholder/member group; and

(d) the issue of the special shares takes place before the issue of

the ordinary shares mentioned in paragraph (e), and on the

issue of all the ordinary shares, the rights attaching to the

special shares become the same as those attaching to the

ordinary shares; and

(e) a greater number of shares (the ordinary shares) of only one

class in the holding company or ultimate holding company

are either:







(f) the trustee sells the ordinary shares and distributes the

proceeds of sale to the person, or distributes the ordinary

shares to the person; and

(g) the ordinary shares are listed within the listing period.



demutualisation method is used involving 2 trustees and an

election covered by subparagraph (1)(e)(ii).



Section 121AJ




Ordinary shares


Holding company

Trustee

Ordinary shares

Proceeds of sale

Special shares

Trustee

121AJ Demutualisation method 5





Section 121AJ



extinguished; and










are either:

(iii) issued, at the election of each person in the

policyholder/ member group, to the person or to a

trustee to sell on behalf of the person; or

(iv) issued to a trustee, at the election of each person in the




proceeds of sale to the person, or distributes the ordinary






subparagraph (1)(c)(iv).



Section 121AJ




Ordinary shares


Holding company

Shares

Trustee

Ordinary shares



Section 121AK


121AK Demutualisation method 6


implementation of the demutualisation of a life insurance

company:

(a) all membership rights in the company are extinguished; and

(b) the whole of the life insurance business of the company is,

under a scheme confirmed by the Federal Court of Australia,

transferred to another company formed for the purpose; and

(c) shares (the ordinary shares) of only one class in the other

company are:








proceeds of sale to the person or distributes the ordinary





demutualisation method is used.



Section 121AK


Life insurance company


Ordinary shares


Other company

Transfer of life insurance

business

Trustee

Ordinary shares

Proceeds of sale



Section 121AL


121AL Demutualisation method 7


implementation of the demutualisation of both a mutual insurance

company and a mutual affiliate company:

(a) all membership rights in both companies are extinguished;

and

(b) shares in the mutual insurance company and the mutual

affiliate company are issued to another company (the holding

company); and








are either:

(iii) issued, at the election of each person in the

policyholder/member group to the person or to a trustee


(iv) issued to a trustee, at the election of each person in the




proceeds of the sale to the person, or distributes the ordinary






subparagraph (1)(c)(iv).



Section 121AL




Holding company

Trustee

Mutual insurance

company

Mutual affiliate

company

Ordinary shares

Ordinary shares Proceeds of sale

Shares Shares



Section 121AM


121AM Embedded value of a mutual life insurance company

(1) The embedded value of a mutual life insurance company that

demutualises using a demutualisation method is, in accordance

with this section, the sum of its existing business value and its

adjusted net worth on the applicable accounting day (see

subsection (3)).

Eligible actuary and Australian actuarial practice

(2) The sum is to be worked out by an eligible actuary (see subsection

121AO(3)) according to Australian actuarial practice.

Applicable accounting day

(3) The applicable accounting day is:

(a) if an accounting period of the company ends on the

demutualisation resolution day—that day; or

(b) in any other case—the last day of the most recent accounting

period of the company ending before the demutualisation

resolution day.

Adjustment for changes after applicable accounting day

(4) In a case covered by paragraph (3)(b), if any significant change in

the amount of the existing business value or adjusted net worth

occurs between the applicable accounting day and the

demutualisation resolution day, the amount is to be adjusted to take

account of the change.

Continued business assumption

(5) In working out the existing business value or the adjusted net

worth, it is to be assumed:

(a) that after the applicable accounting day the company will

continue to conduct its life insurance business and any other

activity in the same way as it did before that day, and that it

will not conduct any different business or other activity; and

(b) that the demutualisation will not occur.



Section 121AM


Discount rate assumption

(6) In working out the existing business value or adjusted net worth,

the annual discount rate to be used in respect of each future

accounting period is worked out using the formula:

Capital reserve adequacy10 year Treasury bond rate + 4.5% + shortfall percentage

where:

10 year Treasury bond rate means the Treasury bond rate (see

subsection 121AO(1)) for the applicable accounting day in respect

of bonds with a 10 year term.

Capital reserve adequacy shortfall percentage means:

(a) if, for any future accounting period, the capital reserves of

the company are projected to fall below the capital reserve

adequacy level (see subsection 121AO(2)) by 1% or more at

both the beginning and end of the accounting period—the

percentage worked out by averaging the percentages worked

out under each of the following subparagraphs:

(i) 0.2% for each 1% by which the capital reserves are

projected to fall below the level at the beginning of the

period;

(ii) 0.2% for each 1% by which the capital reserves are

projected to fall below the level at the end of the period;

or

(b) in any other case—nil.

Annual inflation rate assumption

(7) In working out the existing business value, the annual inflation rate

to be applied is worked out using the formula:

10 year Treasury bond rate 4%(see subsection (6))

Expenditure assumption

(8) In working out the existing business value, it is to be assumed that

expenditure that the company will incur, in conducting its life

insurance business, on recurring items after the demutualisation

resolution day will be of the same kinds and amounts (increased to

take account of any inflation, using the annual inflation rate in

subsection (7)) as the company incurred in the accounting period,



Section 121AN


or part of an accounting period, ending on the demutualisation

resolution day.

Investment return assumption


worth, it is to be assumed that the annual rate of return on each

investment of the company is:

(a) if the investment is a security with a term less than 2 years or

is cash—the Treasury bond rate (see subsection 121AO(1))

for the applicable accounting day in respect of bonds with a

26 week term; or

(b) if the investment is any other kind of security—the Treasury

bond rate for the applicable accounting day in respect of

bonds with a 10 year term; or

(c) in any other case—the rate mentioned in paragraph (b), plus

3%.

Future distributable profits assumption


worth, the future distributable profits are to be determined on the

assumption that the company:

(a) will not distribute its profits so as to cause its capital reserves

to fall below the capital reserve adequacy level (see

subsection 121AO(2)) applicable to the company; and

(b) will distribute all of its profits except to the extent necessary

for its capital reserves not to fall below the capital reserve

adequacy level.

121AN Net tangible asset value of a general insurance company or

mutual affiliate company

(1) The net tangible asset value of a general insurance company, or a

mutual affiliate company, that demutualises using a

demutualisation method is, in accordance with this section:

(a) the amount of its assets on the applicable accounting day (see

subsection (4));

reduced by:

(b) the amount of its liabilities (including future liabilities)

arising from its business conducted before that day.



Section 121AN


Australian accounting practice

(2) The amount of the company’s assets and liabilities (other than

future liabilities) is to be worked out according to Australian

accounting practice.

Eligible actuary and Australian actuarial practice

(3) The amount of the company’s future liabilities is to be worked out

by an eligible actuary (see subsection 121AO(3)) according to

Australian actuarial practice.

Applicable accounting day

(4) The applicable accounting day is:

(a) if an accounting period of the company ends on the

demutualisation resolution day—that day; or

(b) in any other case—the last day of the most recent accounting

period of the company ending before the demutualisation

resolution day.

Adjustment for changes after applicable accounting day

(5) In a case covered by paragraph (4)(b), if any significant change in

the amount of the company’s assets or liabilities occurs between

the applicable accounting day and the demutualisation resolution

day, that amount is to be adjusted to take account of the change.

Continued business assumption

(6) In working out the net tangible asset value, it is to be assumed:

(a) that after the applicable accounting day the company will

continue to conduct its business and any other activity in the

same way as it did before that day, and that it will not

conduct any different business or other activity; and

(b) that the demutualisation will not occur.



Section 121AO


121AO Treasury bond rate, capital reserve adequacy level, eligible

actuary and security

Treasury bond rate

(1) The Treasury bond rate for the applicable accounting day in

respect of bonds with a particular term is:

(a) if any Treasury bonds with that term were issued on the

applicable accounting day—the annual yield on those bonds;

or

(b) in any other case—the annual yield on Treasury bonds with

that term, as published by the Reserve Bank of Australia and

applicable to the accounting day.

Capital reserve adequacy level

(2) The capital reserve adequacy level for a life insurance company

that demutualises is:

(a) if, after 1 July 1995 and before the applicable accounting day

mentioned in subsection 121AM(3) or 121AN(4), the Life

Insurance Actuarial Standards Board established under the

Life Insurance Act 1995 issued a capital reserve adequacy

standard applicable to the company—the level of capital

reserves required by that standard; or

(b) in any other case—the level of capital reserves required to

provide adequate capital for the conduct of the life insurance

business and other activities of the company.

Eligible actuary

(3) An eligible actuary is a Fellow or Accredited Member of the

Institute of Actuaries of Australia who is not an employee of:

(a) the mutual insurance company or, where demutualisation

method 7 applies, the mutual insurance company or the

mutual affiliate company; or

(b) a subsidiary of that company or, where demutualisation

method 7 applies, of either company.



Section 121AP


Security

(4) A security is:

(a) a bond, debenture, certificate of entitlement, bill of exchange

or promissory note; or

(b) a deposit with a bank or other financial institution; or

(c) a secured or unsecured loan.

121AP Subsidiary and wholly-owned subsidiary

Subsidiary

(1) A company (the test company) is a subsidiary of another company

(the holding company) if at least half of the shares in the test

company are beneficially owned by:

(a) the holding company; or

(b) a company that is, or 2 or more companies each of which is,

a subsidiary of the holding company; or

(c) the holding company and a company that is, or 2 or more

companies each of which is, a subsidiary of the holding

company.

(2) If a company is a subsidiary of another company (including

because of this subsection), every company that is a subsidiary of

the first-mentioned company is a subsidiary of the other company.

Wholly-owned subsidiary

(3) A company is a wholly-owned subsidiary of another company if it

would, under subsection (1) or (2), be a subsidiary of the other

company assuming that the reference in subsection (1) to at least

half of the shares were instead a reference to all of the shares.

121AQ Other definitions

In this Division:

annuity has the same meaning as in section 27A.

ETP means an eligible termination payment within the meaning of

section 27A.



Section 121AR


first trading day price, in relation to a listed share, means the price

on the Australian stock exchange, as published by that exchange, at

which the share was last traded on the trading day on which it was

listed.

general insurance business means insurance business (within the

meaning of the Insurance Act 1973) other than life insurance

business.

life insurance business has the same meaning as in the Life

Insurance Act 1995.

listed means listed for quotation in the official list of the Australian

stock exchange.

superannuation pension means a pension payable from a

superannuation fund within the meaning of section 27A.

undeducted contributions has the same meaning as in section 27A.

undeducted purchase price has the same meaning as in

section 27A.

121AR List of definitions

The following table lists the expressions defined in this Division

and shows the provisions in which they are defined:

Definition Provision

annuity 121AQ

applicable accounting day 121AM(3) and 121AN(4)

capital reserve adequacy level 121AO(2)

eligible actuary 121AO(3)

embedded value 121AM(1)

ETP 121AQ

demutualise 121AD(1) and (2)

demutualisation method 121AE(3)

demutualisation method 1 to 121AF to 121AL

demutualisation method 7

demutualisation resolution day 121AD(3)

first trading day price 121AQ

general insurance business 121AQ

general insurance company 121AB(4)

insurance company 121AB(2)

life insurance business 121AQ



Section 121AS


Definition Provision

life insurance company 121AB(3)

listed 121AQ

listing period 121AE(6)

mutual affiliate company 121AC

mutual insurance company 121AB(1)

net tangible asset value 121AN(1)

policyholder/member group 121AE(4) and (5)

security 121AO(4)

subsidiary 121AP(1) and (2)

superannuation pension 121AQ

Treasury bond rate 121AO(1)

undeducted contributions 121AQ

undeducted purchase price 121AQ

wholly-owned subsidiary 121AP(3)

Subdivision C—Tax consequences of demutualisation

121AS Part IIIA consequences of demutualisation

The table below sets out modifications of the application of

Parts 3-1 and 3-3 (about CGT) of the Income Tax Assessment Act

1997 in respect of events that are described in, or relate to events

that are described in, particular demutualisation methods.



Section 121AS


TABLE 1—MODIFICATIONS OF CGT RULES

Item Event Modifications

1 Any demutualisation method:

Extinguishment of membership rights as mentioned in

paragraph (1)(a) of sections 121AF to 121AL.

A capital gain or capital loss arising from a CGT event constituted by the

extinguishment is disregarded.

2 Demutualisation method 6:

The whole of the life insurance business of the life insurance

company is transferred to the other company as mentioned

in paragraph 121AK(1)(b).

Subdivision 126-B of the Income Tax Assessment Act 1997 as in force

immediately before 21 October 1999 (about roll-overs for transfers) applies

as if the life insurance company and the other company were members of the

same wholly-owned group within the meaning of that Act.


A person (the disposer) in the policyholder/member group

disposes of a right to have ordinary shares issued or

distributed to the person, or the proceeds of sale of ordinary

shares distributed to the person, as mentioned in paragraph

121AF(1)(b), 121AG(1)(c) or (d), 121AH(1)(c), 121AI(1)(e)

or (f), 121AJ(1)(c) or (d), 121AK(1)(c) or (d) or

121AL(1)(c) or (d).

1. A capital loss that the disposer makes from the disposal is disregarded if the

disposal takes place before the demutualisation listing day (see note 4 to this

table).

2. For the purpose of working out whether the disposer made a capital gain, or

made a capital loss (where modification 1 does not apply), from the

disposal, he or she is taken:

(a) to have paid, as consideration for the acquisition of the right disposed



Section 121AS




of, an amount worked out using the following formula:

Applicable company valuationRight disposed of amount

Total of all rights of the (see note 1 to this Table) same kind

; and

(b) to have paid the amount in paragraph (a), and to have acquired the

right disposed of, on the demutualisation resolution day.

4 Demutualisation method 2, 4, 5, 6 or 7:


disposes of an asset consisting of all or part of the person’s

interest in the trust property of the trustee mentioned in

paragraph 121AG(1)(b) or (c), 121AI(1)(c) or (e),

121AJ(1)(c), 121AK(1)(c) or 121AL(1)(c).

1. A capital loss that the disposer makes from the disposal is disregarded if the


table).

2. For the purpose of working out whether the disposer made a capital gain, or

made a capital loss (where modification 1 does not apply), from the

disposal, he or she is taken:

(a) to have paid, as consideration for the acquisition of the interest

disposed of, an amount worked out using the following formula:



Section 121AS




Amount of interest

disposed of

Total amount of all interestsin the trust property

Applicable company valuation amount

(see note 1 to this Table) ; and

(b) to have paid the amount in paragraph (a), and to have acquired the

interest disposed of, on the demutualisation resolution day.

5 Demutualisation method 3, 4 or 5

After the issue of the shares (each of which is a

demutualisation share) in the mutual insurance company as

mentioned in paragraph 121AH(1)(b), 121AI(1)(b) or

121AJ(1)(b), the holding company (the disposer) disposes of

an asset consisting of:

(a) a demutualisation share, or an interest in such a share;

or

(b) another share (a non-demutualisation bonus share) in

the mutual insurance company, or an interest in such a

share, where the share is a bonus share mentioned in

Division 8 of Part IIIA and any of the demutualisation

shares are the original shares mentioned in that

1. A capital loss that the disposer makes from the disposal of the

demutualisation share or interest in such a share is disregarded if the


table).

2. If the disposal is of a demutualisation share (other than a demutualisation

original share) or an interest in such a share then, for the purpose of

working out whether the disposer made a capital gain, or made a capital loss

(where modification 1 does not apply), from the disposal, the disposer is

taken:

(a) to have paid as consideration for the acquisition of the share or interest

both:



Section 121AS




Division.

(For the purposes of the modifications relating to this item,

if any of the original shares mentioned in Division 8 of

Part IIIA is a demutualisation share, it is called a

demutualisation original share.)

(i) the amount worked out using the formula:

Share or amount ofApplicable company valuationinterest disposed of

amountTotal demutualisation shares (see note 1 to this Table)or amount of interests in such

shares

; and

(ii) any consideration actually paid or given for the acquisition; and

(b) to have paid the amount in subparagraph (a)(i) on the demutualisation

resolution day and the amount in subparagraph (a)(ii) when it was

actually paid; and

(c) to have acquired the share or interest on the demutualisation resolution

day.

3. If the disposal is of either:

(a) a demutualisation original share, or an interest in such a share; or

(b) a non-demutualisation bonus share, or an interest in such a share;

then, for the purpose of working out whether the disposer made a capital

gain, or made a capital loss (where modification 1 does not apply), from the

disposal:



Section 121AS




(c) for the purposes of applying section 130-20 (about bonus shares) of

the Income Tax Assessment Act 1997, the consideration for the

acquisition of all of the demutualisation original shares to be taken into

account under that section is taken to consist of both:

(i) if the disposal and all previous disposals of the demutualisation

original shares and the non-demutualisation bonus shares, or

interests in them, take place after the demutualisation listing

day—the amount worked out using the formula:

Number of demutualisationListing day companyoriginal shares

× valuation amountNumber of (see note 3 to this table)

demutualisation shares

; and

(ii) if subparagraph (i) does not apply—the amount worked out using

the formula:

Number of demutualisationPre - listing day companyoriginal shares

× valuation amountNumber of (see note 2 to this table)

demutualisation shares



Section 121AS




; and

(iii) any consideration actually paid or given for the acquisition of the

share or interest disposed of; and

(d) if the disposal is of a demutualisation original share or an interest in

such a share, the disposer is taken:

(i) to have paid the amount in subparagraph (c)(i) or (ii) on the

demutualisation resolution day and the amount in

subparagraph (c)(iii) when it was actually paid; and

(ii) to have acquired the share or interest on the demutualisation

resolution day.

6 Demutualisation method 7:

After the issue of the shares (each of which is a

demutualisation share) in the mutual insurance company

and the mutual affiliate company as mentioned in paragraph

121AL(1)(b), the holding company (the disposer) disposes

of an asset consisting of:

(a) a demutualisation share, or an interest in such a share;

or

1. A capital loss that the disposer makes from the disposal of the

demutualisation share or interest in such a share is disregarded if the


table).

2. If the disposal is of a demutualisation share (other than a demutualisation

original share) or an interest in such a share then, for the purpose of

working out whether the disposer made a capital gain, or made a capital loss



Section 121AS





the mutual insurance company or the mutual affiliate

company, or an interest in such a share, where the

share is a bonus share mentioned in section 130-20

(about bonus shares) of the Income Tax Assessment Act

1997 and any of the demutualisation shares are the

original shares mentioned in that section.


if any of the original shares mentioned in that section is a

demutualisation share, it is called a demutualisation

original share.)

(where modification 1 does not apply), from the disposal, the disposer is

taken:

(a) to have paid as consideration for the acquisition of the share or interest

both:


Share or amount ofinterest disposed of Net tangible asset value of

the company concernedTotal demutualisation shares or amount of

interests in such shares inthe company concerned

; and

(ii) any consideration actually paid or given for the acquisition; and

(b) to have paid the amount in subparagraph (a)(i) on the demutualisation

resolution day and the amount in subparagraph (a)(ii) when it was

actually paid; and

(c) to have acquired the share or interest on the demutualisation resolution

day.



Section 121AS







then, for the purpose of working out whether the disposer made a capital

gain, or made a capital loss (where modification 1 does not apply), from the

disposal:

(c) for the purposes of applying section 130-20 (about bonus shares) of

the Income Tax Assessment Act 1997, the consideration for the

acquisition of all of the demutualisation original shares to be taken into

account under that section is taken to consist of both:


Number of demutualisationoriginal shares Pre-listing day company

valuation amountNumber of demutualisation shares

; and

(ii) any consideration actually paid or given for the acquisition of the

share or interest disposed of; and

(d) if the disposal is of a share connected with the demutualisation or



Section 121AS




interest in such a share, the disposer is taken:

(i) to have paid the amount in subparagraph (c)(i) on the

demutualisation resolution day and the amount in

subparagraph (c)(ii) when it was actually paid; and

(ii) to have acquired the share or interest on the demutualisation

resolution day.

7 Demutualisation method 3, 4, 5 or 7:

After the issue of the shares in the mutual insurance

company to the holding company as mentioned in paragraph

121AH(1)(b), 121AI(1)(b), 121AJ(1)(b), or in the mutual

insurance company and the mutual affiliate company as

mentioned in paragraph 121AL(1)(b):

(a) the ultimate holding company (the disposer) disposes

of an asset consisting of either of the following shares

in the holding company or an interposed holding

company:

(i) a share (a demutualisation share) acquired before

the issue of the shares in the mutual insurance

The same modifications apply as for item 5.



Section 121AS




company, or an interest in such a share; or

(ii) another share (a non-demutualisation bonus

share), or an interest in such a share, where the

share is a bonus share mentioned in

section 130-20 (about bonus shares) of the

Income Tax Assessment Act 1997 and any of the

demutualisation shares (whether or not disposed

of at the time) are the original shares mentioned

in that section; or

(b) the interposed holding company, or any of the

interposed holding companies, (the disposer) disposes

of an asset consisting of either of the following shares

in the holding company or an interposed holding

company:

(i) a share (a demutualisation share) acquired before

the issue of the shares in the mutual insurance

company, or an interest in such a share; or

(ii) another share (a non-demutualisation bonus

share), or an interest in such a share, where the



Section 121AS




share is a bonus share mentioned in

section 130-20 (about bonus shares) of the

Income Tax Assessment Act 1997 and any of the

demutualisation shares (whether or not disposed

of at the time) are the original shares mentioned

in that section.




original share.)

(The ultimate holding company and interposed holding

company are those mentioned in paragraph 121AH(1)(c),

121AI(1)(c), 121AJ(1)(c) or 121AL(1)(c)).



Section 121AS




8 Demutualisation method 2 or 4:

The rights attaching to the special shares held by the trustee

become the same as those attaching to the ordinary shares as

mentioned in subparagraph 121AG(1)(b)(ii) or paragraph

121AI(1)(d).


change in the rights is disregarded.


The trustee (the disposer):

(a) sells an ordinary share (a demutualisation share) in the

company as mentioned in paragraph 121AG(1)(d),

121AI(1)(f), 121AJ(1)(d), 121AK(1)(d) or

121AL(1)(d); or

(b) sells another share (a non-demutualisation bonus

share), where the share is a bonus share mentioned in

section 130-20 (about bonus shares) of the Income Tax

Assessment Act 1997 and any of the demutualisation

shares (whether or not sold at the time) are the original

shares mentioned in that section.


1. The person in the policyholder/member group, instead of the trustee, is

taken:

(a) to have sold the demutualisation share or non-demutualisation bonus

share; and

(b) to have paid, given and received any consideration that was paid,

given or received by the trustee in respect of either share; and

(c) to have done any other act in relation to either share that was done by

the trustee.

2. The modifications in item 5 apply to the sale of the demutualisation share or

non-demutualisation bonus share in the same way as they do to the disposal

of such shares covered by that item.



Section 121AS






original share.)


The trustee distributes an ordinary share as mentioned in

paragraph 121AG(1)(d), 121AI(1)(f), 121AJ(1)(d),

121AK(1)(d) or 121AL(1)(d).


distribution is disregarded.



disposes of an asset consisting of:

(a) a share (a demutualisation share), or an interest in

such a share, issued or distributed to the person as

mentioned in paragraph 121AF(1)(b), 121AG(1)(c) or

(d), 121AH(1)(c), 121AI(1)(e) or (f), 121AJ(1)(c) or

(d), 121AK(1)(c) or (d) or 121AL(1)(c) or (d); or


the same company, or an interest in such a share, where

the share is a bonus share mentioned in section 130-20

The same modifications apply as for item 5.



Section 121AS




(about bonus shares) of the Income Tax Assessment Act

1997 and any of the demutualisation shares (whether or

not disposed of at the time) are the original shares

mentioned in that section.




original share.)

12 Various demutualisation methods

A disposal of an asset takes place before the demutualisation

listing day, where:

(a) modification 1 of item 3, 4, 5, 6, 7 or 11 of this table

applies to the disposal; and

(b) a roll-over provision (see note 5 to this table) applies to

the disposal.

1. If the person who is taken to acquire the asset under the roll-over provision

disposes of it before the demutualisation listing day, a capital loss that the

person makes from the disposal is disregarded.

2. If the person disposes of the asset on or after the demutualisation listing

day, then for the purposes of applying the roll-over provision to that

disposal, the modifications in the item in this table apply as if modification

1 were not made.

Notes:



Section 121AS


1. For the purposes of the table, the applicable company valuation amount, in relation to the disposal of an asset or the allocation of an amount to a member in

the records of a superannuation fund, is:

(a) if the asset is disposed of, or the amount is allocated, before the demutualisation listing day—the pre-listing day company valuation amount; or

(b) in any other case—the listing day company valuation amount.

2. The pre-listing day company valuation amount is:

(a) in relation to demutualisation methods 1 to 6, where the mutual insurance company is a life insurance company—the embedded value of the company; or

(b) in relation to demutualisation methods 1 to 6, where the mutual insurance company is a general insurance company—the net tangible asset value of the

company; or

(c) in relation to demutualisation method 7—the sum of the net tangible asset values of the general insurance company and the mutual affiliate company.

3. The listing day company valuation amount is the lesser of:

(a) the pre-listing day company valuation amount; and

(b) the amount worked out using the formula:

Total number of ordinary sharesFirst trading day price of a listed

issued or distributed to, or to be soldordinary share mentioned in the on behalf of, perso

demutualisation method concerned ns in the

policyholder/member group

4. The demutualisation listing day is the day on which the ordinary shares mentioned in the demutualisation method concerned are listed.

5. A roll-over provision is:

any of these Subdivisions of the Income Tax Assessment Act 1997: 122-A, 122-B, 124-B, 124-C, 124-D, 124-E, 124-F, 124-G, 124-H, 124-I, 126-A,

126-B; or

section 128-10 or 128-15 of that Act.



Section 121AS


6. A trustee who gets a roll-over under Subdivision 124-M of the Income Tax Assessment Act 1997 for an original interest consisting of shares issued as part of a

demutualisation may be eligible for a further roll-over under Subdivision 126-D of that Act when a beneficiary becomes absolutely entitled to the replacement

shares.



Section 121AT


121AT Other tax consequences of demutualisation

The table below sets out modifications of the application of this

Act (except Parts 3-1 and 3-3 (about CGT) of the Income Tax

Assessment Act 1997) in respect of events that are described in, or

relate to events that are described in, particular demutualisation

methods.



Section 121AT


TABLE 2—MODIFICATIONS OF THIS ACT (EXCEPT CGT RULES)


1 Event described in item 1 of Table 1. No amount is included in, or allowable as a deduction from, assessable income

in respect of the extinguishment.

2 Event described in item 3 or 4 of Table 1. 1. If the disposal takes place before the demutualisation listing day (see

note 4 to Table 1):

(a) no loss is allowable as a deduction from the disposer’s assessable

income in respect of the disposal; and

(b) any deduction allowable from the disposer’s assessable income in

respect of the acquisition of the right or interest does not exceed

the amount included in the disposer’s assessable income in respect

of the disposal.

2. Paragraphs 2(a) and (b) of the modifications column for item 3 or 4 in

Table 1 apply for the purposes of working out:

(a) the amount of any profit included in the disposer’s assessable

income in respect of the disposal; or

(b) the amount of any deduction allowable from the disposer’s

assessable income in respect of the acquisition of the right or

interest.

3 Event that would be described in item 5 of Table 1 if the

references in that item to bonus shares and original shares

1. If the disposal is of a demutualisation share, or interest in such a share,



Section 121AT




mentioned in section 130-20 (about bonus shares) of the

Income Tax Assessment Act 1997 were instead references to

bonus shares and original shares mentioned in section 6BA.

and the disposal takes place before the demutualisation listing day:




respect of the acquisition of the share or interest does not exceed


of the disposal.

2. If the disposal is of a demutualisation share (other than a

demutualisation original share), or an interest in such a share, then

paragraphs 2(a) to (c) of the modifications column for item 5 in Table 1

apply for the purposes of working out:

(a) the amount of any profit included in, or loss (where modification 1

does not apply) allowable as a deduction from, the disposer’s

assessable income in respect of the disposal; or

(b) the amount of any deduction allowable (where modification 1 does

not apply) from the disposer’s assessable income in respect of the



Section 121AT




acquisition of the share or interest




then paragraphs 3(c) and (d) of the modifications column for item 5 in

Table 1 apply for the purpose of working out:

(c) the amount of any profit included in, or loss (where modification 1



(d) the amount of any deduction allowable (where modification 1 does


acquisition of the share or interest.

In applying paragraph 3(c) of the modifications column for item 5 in

Table 1, the reference to section 130-20 (about bonus shares) of the

Income Tax Assessment Act 1997 is taken instead to be a reference to

section 6BA.



Section 121AT









1. If the disposal is of a demutualisation share, or interest in such a share,

and the disposal takes place before the demutualisation listing day:




respect of the acquisition of the share or interest does not exceed


of the disposal

2. If the disposal is of a demutualisation share (other than a

demutualisation original share), or an interest in such a share, then

paragraphs 2(a) to (c) of the modifications column for item 6 in Table 1

apply for the purposes of working out:

(a) the amount of any profit included in, or loss (where modification 1



(b) the amount of any deduction allowable (where modification 1 does




Section 121AT






(a) a demutualisation original share, or interest in such a share; or


then paragraphs 3(c) and (d) of the modifications column for item 6 in

Table 1 apply for the purpose of working out:

(c) the amount of any profit included in, or loss (where modification 1



(d) the amount of any deduction allowable (where modification 1 does



In applying paragraph 3(c) of the modifications column for item 6 in Table 1,

the reference to section 130-20 (about bonus shares) of the Income Tax

Assessment Act 1997 is taken instead to be a reference to section 6BA.





The same modifications as for item 3 of this table apply.



Section 121AT





6 Event described in item 8 of Table 1. No amount is included in, or allowable as a deduction from, assessable income

in respect of the change in the rights.






1. The person in the policyholder/member group, instead of the trustee is

taken:

(a) to have sold the demutualisation share or non-demutualisation

bonus share; and

(b) to have paid, given and received any consideration that was paid,

given or received by the trustee in respect of either share; and

(c) to have done any other act in relation to either share that was done

by the trustee.

2. The modifications in item 3 of this table apply to the sale of the

demutualisation share or non-demutualisation bonus share in the same

way as they do to the disposal of such shares covered by that item.





The same modifications as for item 3 of this table apply.



Section 121AT





9 Under demutualisation method 6, the whole of the life

insurance business of a life insurance company is transferred

to another company as mentioned in paragraph

121AK(1)(b).

The other company is taken to continue to carry on the transferred life

insurance business of the mutual life insurance company.

10 An ordinary share is issued or distributed to a person in the

policyholder/member group as mentioned in paragraph

121AF(1)(b), 121AG(1)(c) or (d), 121AH(1)(c), 121AI(1)(e)

or (f), 121AJ(1)(c) or (d), 121AK(1)(c) or (d) or

121AL(1)(c) or (d).

No amount is included in, or allowable as a deduction from, assessable income

of the person in respect of the issue or distribution of the share, except where

the share is issued in consideration for services provided, or to be provided, by

the person.

11 Ordinary shares in the company are issued or distributed as

mentioned in paragraph 121AF(1)(b), 121AG(1)(c) or (d),

121AH(1)(c), 121AI(1)(e) or (f), 121AJ(1)(c) or (d),

121AK(1)(c) or (d) or 121AL(1)(c) or (d) to a person in the

policyholder/member group who is the trustee of a

superannuation fund to hold on behalf of a member of the

fund. The trustee within 30 days allocates to the member, in

the records of the fund, an amount representing the

member’s contributions in respect of the shares (the

If the trustee pays an ETP, a superannuation pension or an annuity to the

member, the undeducted contributions in relation to the ETP, or undeducted

purchase price of the pension or annuity, is increased by the amount worked

out using the formula:

Applicable companyNumber of allocation shares valuation amount

Total number of ordinary shares (see note 1 to Tabissued or distributed to, or to be

sold on behalf of, thepolicyholder/member group

le 1)



Section 121AT




allocation shares).

12 A resolution is passed to proceed, in accordance with one of

the demutualisation methods, with the demutualisation of:

(a) a mutual insurance company that is a general insurance

company; or

(b) both such a mutual insurance company and a mutual

affiliate company.

Immediately before the demutualisation resolution day:

(a) in the case of any demutualisation method—the general

insurance company or any wholly-owned subsidiary of

the general insurance company; or

(b) in the case of demutualisation method 7—the mutual

affiliate company, a wholly-owned subsidiary of the

mutual affiliate company, or a company all of whose

shares are beneficially owned by the general insurance

company and the mutual affiliate company;

has a franking surplus.

The franking surplus is reduced to nil at the beginning of the demutualisation

resolution day.

13 A resolution is passed to proceed with the demutualisation No franking credit arises for the company or the subsidiary in relation to the



Section 121AT




of a mutual insurance company or both a mutual insurance

company and a mutual affiliate company. A dividend that

was declared before the demutualisation resolution day is

paid on or after the demutualisation resolution day to:

(a) in the case of any demutualisation method—the mutual

insurance company or any wholly-owned subsidiary of

the mutual insurance company; or

(b) in the case of demutualisation method 7—the mutual

affiliate company, a wholly-owned subsidiary of the

mutual affiliate company, or a company all of whose

shares are beneficially owned by the general insurance

company and the mutual affiliate company.

payment of the dividend on or after the demutualisation resolution day.


Division 9A Offshore banking units

Section 121A


Division 9A—Offshore banking units

Subdivision A—Object and simplified outline

121A Object

The object of this Division is to provide for concessional taxing, at

the rate of 10%, of the offshore banking (OB) income of an

offshore banking unit (OBU).

121B Simplified outline

Scope of section

(1) The following is a simplified outline of the Division.

Main concepts

(2) Subdivision B sets out the concepts used in the Division, the most

important being:

(a) OB activity (section 121D) together with the related

definition of offshore person (section 121E) and the OBU

requirement in section 121EA; and

(b) special assessable income and allowable deduction

definitions relating to OB activities (sections 121EE and

121EF).

Operative provisions

(3) Subdivision C contains the operative provisions. Basically, they

provide as follows:

(a) an OBU’s income from OB activities is taxed at only 10%;

(b) there is a loss of the concession where there is excessive use

of non-OB money;

(c) a deduction is allowable for foreign tax on amounts derived

from OB activities (unless a foreign tax credit under

Division 18 is obtained);

(d) income from OB activities is taken to be Australian sourced

unless it is taken to have a foreign source because it has been

subject to foreign tax;


Offshore banking units Division 9A

Section 121C


(e) a deemed interest penalty applies to equity provided by an

OBU’s resident owner;

(f) income of OBU offshore investment trusts is exempt from

tax;

(g) income derived by overseas charitable institutions from

OBUs is exempt from tax;

(h) certain adjustments are made to the capital gains and losses

that flow from disposals of certain interests in trusts of which

an OBU is the trustee.

Subdivision B—Interpretation

121C Interpretation

In this Division:

adjusted assessable OB income has the meaning given by

subsection 121EE(4).

adjusted total assessable income has the meaning given by

subsection 121EE(5).

allowable OB deduction has the meaning given by subsection

121EF(2).

apportionable OB deduction has the meaning given by subsection

121EF(5).

assessable OB income has the meaning given by subsections

121EE(2) and (3A).

associate has the meaning given by section 318.

Australian thing has the meaning given by subsection 121DA(5).

average Australian asset percentage has the meaning given by

subsection 121DA(2).

borrow includes raise finance by the issue of a security.

eligible contract means a futures contract, a forward contract, an

options contract, a swap contract, a cap, collar, floor or similar

contract or a loan contract.



Section 121C


exclusive non-OB deduction has the meaning given by subsection

121EF(6).

exclusive OB deduction has the meaning given by subsection

121EF(3).

general OB deduction has the meaning given by subsection

121EF(4).

lend includes provide finance by the purchase of a security.

loss deduction has the meaning given by subsection 121EF(7).

monthly Australian asset percentage has the meaning given by

subsection 121DA(3).

non-OB money, in relation to an OBU, means money of the OBU

other than:

(a) money received by the OBU in carrying on an OB activity;

or

(b) OBU resident-owner money of the OBU; or

(c) money paid to the OBU by a non-resident (other than in

carrying on business in Australia at or through a permanent

establishment of the non-resident) by way of subscription for,

or a call on, shares in the OBU;

(an example of non-OB money being money borrowed from a

resident whose lending of the money does not occur in carrying on

business in a country outside Australia at or through a permanent

establishment of the resident).

non-resident trust means a unit trust that is not a resident unit trust

within the meaning of section 102Q.

OB activity has the meaning given by section 121D.

OBU (offshore banking unit) means an offshore banking unit

within the meaning of Division 11A of Part III.

Note: In this Division, the head company of a consolidated group or MEC group may be treated for certain purposes as an OBU at a time when a subsidiary member of the group is an OBU (see Subdivision 717-O of the Income Tax Assessment Act 1997).

OBU resident-owner money has the meaning given by

section 121EC.



Section 121D


offshore person has the meaning given by section 121E.

overseas charitable institution means a non-resident institution the

income of which:

(a) would be exempt from tax under item 1.1 of section 50-5 of

the Income Tax Assessment Act 1997 (and not under any

other item of that section) if the institution had a physical

presence in Australia and incurred its expenditure and

pursued its objectives principally in Australia; and

(b) is exempt in the country in which it is resident.

owner, in relation to a company, means a person who, alone or

together with an associate or associates, is the beneficial owner of

all of the shares in the company.

portfolio investment has the meaning given by subsection

121DA(1).

related person, in relation to an OBU, means:

(a) an associate of the OBU; or

(b) a permanent establishment referred to in paragraph

121EB(1)(b) in relation to the OBU.

security means a bond, debenture, debt interest, bill of exchange,

promissory note or other security or similar instrument.

trade with a person has the meaning given by section 121ED.

90-day bank bill rate, at a particular time, means:

(a) if the Reserve Bank of Australia has published a rate

described as the 90-day bank accepted bill rate in respect of a

period in which the particular time occurs—that rate; or

(b) in any other case—the rate declared by regulations for the

purposes of this definition to be the 90-day bank accepted bill

rate in respect of a period in which the particular time occurs.

121D Meaning of OB activity

Kinds of OB activity

(1) Each of the following things done by an OBU is an OB activity

(offshore banking activity) of the OBU, provided that the

requirement relating to the OBU in section 121EA is met:



Section 121D


(a) a borrowing or lending activity described in subsection (2);

or

(b) a guarantee-type activity described in subsection (3); or

(c) a trading activity described in subsection (4); or

(d) an eligible contract activity described in subsection (5); or

(e) an investment activity described in subsection (6), (6A) or

(6B); or

(f) an advisory activity described in subsection (7); or

(g) a hedging activity described in subsection (8); or

(h) any other activity involving an offshore person, being an

activity declared by regulations for the purposes of this

paragraph to be an OB activity.

Borrowing or lending activity

(2) For the purposes of paragraph (1)(a), a borrowing or lending

activity is:

(a) borrowing money from an offshore person where, if that

person is a related person or a person to whom paragraph

121E(b) applies and is not an OBU, the money is not

Australian currency; or

(b) lending money to an offshore person where, if that person is

a person to whom paragraph 121E(b) applies and is not an

OBU, the money is not Australian currency; or

(c) borrowing gold from an offshore person; or

(d) lending gold to an offshore person.

Guarantee-type activity

(3) For the purposes of paragraph (1)(b), a guarantee-type activity is:

(a) providing a guarantee or letter of credit to an offshore person

in relation to activities that are, or will be, conducted wholly

outside Australia; or

(b) underwriting a risk for an offshore person in respect of

property outside Australia or an event that can only happen

outside Australia; or

(c) syndicating a loan for an offshore person; or

(d) issuing a performance bond to an offshore person in relation

to activities that are, or will be, conducted wholly outside

Australia;



Section 121D


where, if the offshore person is a related person, any money

payable under the guarantee, letter, underwriting, loan or bond is

not Australian currency.

Trading activity

(4) For the purposes of paragraph (1)(c), a trading activity is:

(a) trading with an offshore person in:

(i) securities issued by non-residents; or

(ii) eligible contracts, under which any amounts payable are

payable by non-residents; or

(b) trading with an offshore person in:

(i) shares in non-resident companies; or

(ii) units in non-resident trusts; or

(c) trading with an offshore person in options or rights in respect

of securities, eligible contracts, shares or units referred to in

paragraph (a) or (b); or

(d) trading (including on behalf of an offshore person) on the

Sydney Futures Exchange in futures contracts, or options

contracts, under which any money payable is not Australian

currency; or

(e) trading in currency, or options or rights in respect of

currency, with any person, where the currency is not

Australian currency; or

(ea) trading in currency, or options or rights in respect of

currency, with an offshore person; or

(f) trading in gold bullion, or in options or rights in respect of

such bullion:

(i) with an offshore person where the money or moneys

payable or receivable is or are in any currency; or

(ii) a person other than an offshore person where the money

or moneys payable or receivable is or are in a currency

other than Australian currency; or

(g) trading with an offshore person in silver, platinum or

palladium bullion, or in options or rights in respect of such

bullion; or

(h) trading with an offshore person in base metals.



Section 121D


(5) For the purposes of paragraph (1)(d), an eligible contract activity is

entering into an eligible contract (other than a loan contract) with

an offshore person.

Investment activity

(6) For the purposes of paragraph (1)(e), an investment activity is

making (but not managing), as broker or agent for, or trustee for

the benefit of, an offshore person to whom paragraph 121E(a)

applies, an investment with an offshore person to whom that

paragraph applies, where:

(a) the currency in which the investment is made is not

Australian currency; and

(b) if the investment involves the purchase of any thing:

(i) if the thing is a share in a company—the company is a

non-resident company; or

(ii) if the thing is a unit in a unit trust—the unit trust is a

non-resident trust; or

(iii) if the thing is land or a building—the land or building is

not in Australia; or

(iv) in any other case—the thing is located outside Australia.

Investment activity—portfolio investment

(6A) For the purposes of paragraph (1)(e), an investment activity is also

the managing by an OBU of a portfolio investment (see subsection

121DA(1)) for the whole or part (the investment management

period) of a year of income, where:

(a) the portfolio investment is managed as broker, agent or

custodian for, or trustee for the benefit of, a non-resident; and

(b) the portfolio investment was made by the OBU or the

non-resident; and

(c) the portfolio investment was made with a non-resident

(except to the extent that making the investment consisted of

making a loan or purchasing an Australian thing); and

(d) the currency in which the portfolio investment was made was

not Australian currency; and

(e) if the portfolio investment consists of only a single thing—

the thing is not an Australian thing (see subsection

121DA(5)); and



Section 121D


(f) if paragraph (e) does not apply—the average Australian asset

percentage (see subsection 121DA(2)) of the portfolio

investment is not more than 10%.

Investment activity—portfolio investment for overseas charitable

institutions

(6B) For the purposes of paragraph (1)(e), an investment activity is also

the managing by an OBU of a portfolio investment (see subsection

121DA(1)) for the whole or part (the investment management

period) of a year of income, where:

(a) the portfolio investment is managed as broker, agent or

custodian for, or trustee for the benefit of, an overseas

charitable institution; and

(b) the portfolio investment was made by the OBU or the

overseas charitable institution.

Advisory activity

(7) For the purposes of paragraph (1)(f), an advisory activity is giving

investment or other financial advice to an offshore person where, if

the advice is about the making of a particular investment, the

investment is of a kind referred to in subsection (6). This does not

exclude giving advice about a particular investment of a different

kind if doing so is incidental to advising on an investment of a kind

referred to in subsection (6), for example for the purpose of

comparison or because the investments are commercially related.

Hedging activities

(8) For the purposes of paragraph (1)(g), a hedging activity is entering

into a contract with an offshore person for the sole purpose of

eliminating or reducing the risk of adverse financial consequences

that might result to the OBU from:

(a) interest rate exposure of the OBU in respect of borrowing or

lending activities (described in subsection (2)) of the OBU;

or

(b) currency exposure of the OBU in respect of borrowing or

lending activities (described in subsection (2)) of the OBU.



Section 121DA


Effect of subsection (8)

(9) Subsection (8) does not limit the scope of any other OB activity of

the OBU (for example the trading activity mentioned in

paragraph (4)(e)).

121DA Meaning of expressions relevant to investment activity

Portfolio investment

(1) If, under a contract or trust instrument, an OBU manages one or

more investments as broker an agent or custodian for, or trustee for

the benefit of, a non-resident, the investment, or all of the

investments, constitute a portfolio investment.

Average Australian asset percentage

(2) The average Australian asset percentage of a portfolio investment

is the average, for all months that wholly or partly fall within the

investment management period (see subsection 121D(6A) or (6B)),

of the monthly Australian asset percentages (see subsection (3)) of

all of the things comprising the portfolio investment.

Monthly Australian asset percentage

(3) For the purposes of subsection (2), the monthly Australian asset

percentage of the things for a month is the percentage of the total

value of all of the things comprising the portfolio investment, for

the month, that is represented by the value of Australian things.

Basis for working out percentage

(4) The percentage in subsection (3) must be worked out according to

reasonable accounting practice that applies on the same basis for

all months falling wholly or partly within the investment

management period.

Australian thing

(5) A thing is an Australian thing at a particular time if:

(a) where the thing is a share in a company—the company is a

resident company at the time; or



Section 121E


(b) where the thing is a unit in a unit trust—the unit trust is a

resident trust (within the meaning of section 102Q) in

relation to the year of income in which the time occurs; or

(c) where the thing is land or a building—the land or building is

in Australia; or

(d) where the thing is a loan—the loan was made to an

Australian resident; or

(e) in any other case—the thing is located in Australia at the

time.

121E Meaning of offshore person

For the purposes of section 121D, a reference in that section to an

offshore person, in relation to the doing of any thing by an OBU

(the first OBU), is a reference to:

(a) a non-resident whose involvement in the doing of the thing

does not occur in carrying on business in Australia at or

through a permanent establishment of that person; or

(b) a resident whose involvement in the doing of the thing occurs

in carrying on business in a country outside Australia at or

through a permanent establishment of the person; or

(c) another OBU (the second OBU), where, if the doing of the

thing involves the payment of any money (for example a loan

of money) by the second OBU to the first OBU, the second

OBU gives, at or before the time of the payment, a statement

in writing to the first OBU to the effect that none of the

money is non-OB money of the second OBU.

121EA OBU requirement

For a thing done by an OBU to be an OB activity, it is necessary

that, when the thing is done:

(a) the OBU is a resident and the thing is not done in carrying on

business in a country outside Australia at or through a

permanent establishment of the OBU; or

(b) the OBU is a non-resident and the thing is done in carrying

on business in Australia at or through a permanent

establishment of the OBU.



Section 121EB


121EB Internal financial dealings of an OBU

Permanent establishments treated as separate persons

(1) If an OBU consists of:

(a) one or more permanent establishments in Australia at or

through which the OBU carries on what are OB activities

apart from this section; and

(b) one or more other permanent establishments either in

Australia or outside Australia;

then sections 121D to 121EA (inclusive) apply as if:

(c) the OBU consisted only of the permanent establishments

referred to in paragraph (a); and

(d) the permanent establishments referred to in paragraph (b)

were separate persons.

Head office can be permanent establishment

(2) For the purpose of determining under subsection (1) whether

something is a permanent establishment, it does not matter whether

it is a head office or not.

121EC Meaning of OBU resident-owner money

Money is OBU resident-owner money of an OBU if it is paid to

the OBU by a resident owner of the OBU by way of a subscription

for, or a call on, shares in the OBU, except if the shares are

redeemable preference shares.

121ED Meaning of trade with a person

A person (the trader) is said to trade with another person in a

thing if:

(a) the trader, for the purpose of trading in the thing, acquires it

on issue from the other person; or

(b) the trader, for the purpose of trading in the thing, buys it from

the other person; or

(c) the trader, in trading in the thing, sells it to the other person.



Section 121EE


121EE Definitions relating to assessable income of an OBU

Purpose of section

(1) This section sets out certain definitions used in this Division that

relate to the assessable income of an OBU of a year of income.

Assessable OB income

(2) Subject to subsection (3A), the assessable OB income of an OBU

is so much of the OBU’s assessable income (other than amounts

included under Part 3-1 of the Income Tax Assessment Act 1997) of

the year of income as is:

(a) derived from OB activities of the OBU or the part of the

OBU to which paragraph 121EB(1)(c) applies; or

(b) included in the assessable income because of such activities;

except to the extent that the money lent, invested or otherwise used

in carrying on the activities is non-OB money of the OBU.

Typical example of amount excluded from assessable OB income

(3) A typical example of an amount covered by the exception in

subsection (2) is interest derived from the OB activity of lending

money to an offshore person, where the money lent is non-OB

money.

Reduction of assessable OB income because of certain investment

activities

(3A) If OB activities of the OBU or the part of the OBU to which

paragraph 121EB(1)(c) applies include an investment activity

within the meaning of subsection 121D(6A) or (6B), any

assessable income derived from the investment activity that would

otherwise be taken into account under subsection (2) is reduced by

the average Australian asset percentage (within the meaning of

subsection 121DA(2)) of the portfolio investment concerned.

Adjusted assessable OB income

(4) The adjusted assessable OB income of an OBU is the OBU’s

assessable OB income of the year of income reduced by the sum of

the OBU’s exclusive OB deductions for interest (including a

discount in the nature of interest).



Section 121EF


Adjusted total assessable income

(5) The adjusted total assessable income of an OBU is the OBU’s

assessable income of the year of income reduced by the sum of the

OBU’s exclusive OB deductions, and exclusive non-OB

deductions, for interest (including a discount in the nature of

interest).

121EF Definitions relating to allowable deductions of an OBU

Purpose of section

(1) This section sets out certain definitions used in this Division

relating to allowable deductions of an OBU in relation to a year of

income.

Allowable OB deduction

(2) An allowable OB deduction is any of the following 3 kinds of

allowable deduction:

(a) an exclusive OB deduction;

(b) a general OB deduction;

(c) an apportionable OB deduction.

Exclusive OB deduction

(3) An exclusive OB deduction is any deduction (other than a loss

deduction) allowable from the OBU’s assessable income of the

year of income that relates exclusively to assessable OB income.

General OB deduction

(4) A general OB deduction is so much of any deduction (other than a

loss deduction, an apportionable deduction, an exclusive OB

deduction or an exclusive non-OB deduction) allowable from the

OBU’s assessable income of the year of income as is calculated

using the formula:

Adjusted assessable OB incomeDeduction

Adjusted total assessable income.



Section 121EG


Apportionable OB deduction

(5) An apportionable OB deduction is so much of any apportionable

deduction allowable from the OBU’s assessable income of the year

of income as is calculated by multiplying the deduction by the

following fraction:

OBU’s exclusive OB deductions +OBU’s assessable OB income – OBU’s general OB deductions

OBU’s taxable income + OBU’s apportionable deductions.

Exclusive non-OB deduction

(6) An exclusive non-OB deduction is any deduction (other than a loss

deduction) allowable from the OBU’s assessable income of the

year of income that relates exclusively to assessable income that is

not assessable OB income.

Loss deduction

(7) A loss deduction is any allowable deduction under Division 36 of

the Income Tax Assessment Act 1997.

Subdivision C—Operative provisions

121EG Reduction of assessable OB income and allowable OB

deductions

Only eligible fraction of assessable OB income is assessable

(1) Subject to section 121EH, the assessable income of an OBU

includes only the eligible fraction of each amount of assessable OB

income derived by the OBU.

Only eligible fraction of allowable OB deductions is allowable

(2) Subject to section 121EH, only the eligible fraction of each

allowable OB deduction of an OBU is an allowable deduction of

the OBU.

Remaining amounts not exempt income etc.

(3) For the purposes of this Act:



Section 121EH


(a) any amount of assessable OB income of an OBU that,

because of subsection (1), is not included in its assessable

income is taken not to be exempt income of the OBU; and

(b) any part of an allowable OB deduction of an OBU that,

because of subsection (2), is not an allowable deduction of

the OBU is taken not to be an expense or outgoing incurred

in deriving exempt income of the OBU.

Meaning of eligible fraction


eligible fraction means 10 divided by the number of percent in the

corporate tax rate.

121EH Loss of special treatment where excessive use of non-OB

money

If:

(a) the subsection 121EE(2) exception in respect of the lending,

investing or other use of non-OB money of an OBU in

carrying on activities did not apply to exclude amounts from

its assessable OB income; and

(b) as a result, more than 10% of what would then be the OBU’s

assessable OB income of any year of income would be

attributable to that lending, investing or other use of non-OB

money;

then:

(c) subsection 121EG(1) (which limits the OBU’s assessable

income) does not apply to the OBU’s assessable OB income

of the year of income; and

(d) subsection 121EG(2) (which limits the OBU’s allowable

deductions) does not apply to so much of each allowable OB

deduction of the OBU for the year of income as is calculated

using the formula:

Assessable OB incomeAllowable OB deduction

Sum of allowable OB deductions

(where each amount is worked out ignoring the assumption

in paragraph (a)).



Section 121EI


121EI Deduction for foreign tax on amounts included in assessable

OB income

Deduction for foreign tax

(1) Foreign tax paid during a year of income by an OBU on amounts

included in the OBU’s assessable OB income of any year of

income is an allowable deduction for the year of income in which it

is paid.

No deduction if foreign tax credit is available

(2) However, foreign tax paid by the OBU on those amounts is not an

allowable deduction if the OBU is entitled to a credit under

Division 18 in respect of the foreign tax.

121EJ Source of income derived from OB activities

(1) For the purposes of this Act, income of an OBU that is derived

from OB activites of the OBU is taken to be derived from a source

in Australia.

(2) However, for the purposes of Division 18, if income has been

subject to foreign tax it is taken to have a foreign source.

121EK Deemed interest on 90% of certain OBU resident-owner

money

Deemed interest

(1) If:

(a) an owner of an OBU pays an amount of money to the OBU

and, because of section 121EC, the amount becomes OBU

resident-owner money of the OBU; and

(b) the OBU uses, or holds ready for use, the whole or part of the

amount (which whole or part is called the OB use amount)

in carrying on any of its OB activities during the whole or

part of any year of income (which whole or part is called the

OB use period);

then the assessable income of the owner of the year of income

includes deemed interest as described in subsection (2).



Section 121EL


Amount of deemed interest

(2) The deemed interest is:

(a) applied to 90% of the OB use amount; and

(b) applied on a daily-rests basis for the OB use period at a rate

that is 2% above the 90-day bank bill rate from time to time

during that period.

Deduction for deemed interest

(3) A deduction is allowable from the OBU’s assessable income, equal

to the amount included in the owner’s assessable income, for the

year of income. The deduction is taken to be an exclusive OB

deduction for interest.

121EL Exemption of income etc. of OBU offshore investment trusts

(1) If:

(a) an OBU is a trustee, or is the central manager and controller,

of a trust estate; and

(b) the only persons who benefit, or are capable (whether by the

exercise of a power of appointment or otherwise) of

benefiting, under the trust are non-residents; and

(c) the terms of the trust are to the effect that income, profits or

capital gains of the trust estate may only come from

investment activities covered by subsection 121D(6) or (6A);

then:

(d) any income of the trust estate derived from an investment

activity covered by subsection 121D(6) is exempt from

income tax; and

(e) any capital gain or capital loss made by the trust estate from a

CGT event happening in relation to a CGT asset of the trust

estate in the course of, or in connection with, an investment

activity covered by subsection 121D(6) is disregarded; and

(f) any income of the trust estate derived from an investment

activity covered by subsection 121D(6A) is exempt from

income tax, in so far as the income exceeds the average

Australian asset percentage (within the meaning of

subsection 121DA(2)) for the portfolio investment

concerned; and



Section 121ELA


(g) if, apart from this section, the trust estate would make a

capital gain or capital loss from a CGT event happening in

relation to a CGT asset of the trust estate in the course of, or

in connection with, an investment activity covered by

subsection 121D(6A)—the trust estate makes only the

average Australian asset percentage (for the portfolio

investment concerned) of the gain or loss.

(2) If:


of a trust estate; and

(b) the only person who benefits, or is capable (whether by the


benefiting, under the trust is an overseas charitable

institution; and



investment activities covered by subsection 121D(6B);

then:

(d) any income of the trust estate derived from an investment

activity covered by subsection 121D(6B) is exempt from

income tax; and

(e) any capital gain or capital loss made by the trust estate from a

CGT event happening in relation to a CGT asset of the trust

estate in the course of, or in connection with, an investment

activity covered by subsection 121D(6B) is disregarded.

121ELA Exemption of income etc. of overseas charitable institutions

Investment with OBU

(1) Income, derived by an overseas charitable institution, is exempt to

the extent that it is:

(a) a payment or outgoing from an OBU as part of the OB

activities of the OBU; or

(b) a distribution of income that is exempt under subsection

121EL(2).

Capital gains and losses

(2) If:



Section 121ELB



of a unit trust estate; and

(b) the only person who benefits, or is capable (whether by the


benefiting, under the trust is an overseas charitable

institution; and



investment activities covered by subsection 121D(6B); and

(d) the overseas charitable institution disposes of its interest in

the trust;

then the overseas charitable institution makes no capital gain or

capital loss from a CGT event happening in relation to the disposal.

121ELB Adjustment of capital gains and losses from disposal of

units in OBU offshore investment trusts

Trust with subsection 121D(6) investment activities

(1) If:






(c) all units in the trust are held by non-residents; and

(d) the terms of the trust are to the effect that income, profits or


investment activities covered by subsection 121D(6); and

(e) a non-resident disposes of a unit in the trust;

then the non-resident makes no capital gain or capital loss from a

CGT event happening in relation to the disposal.

Trust with subsection 121D(6A) investment activities

(2) If:





Section 121ELB





(c) all units in the trust are held by non-residents; and

(d) the terms of the trust are to the effect that income, profits or


investment activities covered by subsection 121D(6A); and

(e) a non-resident disposes of a unit in the trust; and

(f) the average Australian asset percentage for the portfolio

investment concerned was 10% or less;

then if, apart from this section, the non-resident would make a

capital gain or capital loss from a CGT event happening in relation

to the disposal, the non-resident makes only the average Australian

asset percentage of the gain or loss.

(3) In working out the average Australian asset percentage for the

purposes of subsection (2), the investment management period is

taken to be the period during the 12 months before the disposal

during which the non-resident held the unit.


Division 9B State Bank of NSW

Section 121EM


Division 9B—State Bank of NSW

121EM Interpretation

In this Division:

asset means property, or a right, of any kind, and includes:

(a) any legal or equitable estate or interest (whether present or

future, vested or contingent, tangible or intangible, in real or

personal property) of any kind; and

(b) any chose in action; and

(c) any right, interest or claim of any kind including rights,

interests or claims in or in relation to property (whether

arising under an instrument or otherwise, and whether

liquidated or unliquidated, certain or contingent, accrued or

accruing); and

(d) a CGT asset, and a car, motor cycle or similar vehicle.

authorised actuary means a Fellow or an Accredited Member of

the Institute of Actuaries of Australia.

first taxing time means the time when the NSW State Bank ceases

to be a public authority within the meaning of paragraph 23(d).

liability includes a duty or obligation of any kind (whether arising

under an instrument or otherwise, and whether actual, contingent

or prospective).

NSW State Bank means the State Bank of New South Wales

Limited.

121EN Deemed disposal and re-acquisition of assets

(1) Subject to subsection (2), for the purposes of the application of this

Act (other than the excluded provisions mentioned in

subsection (2)) to the NSW State Bank, the Bank is taken to have

sold, immediately before the first taxing time, all of its assets and

to have purchased each of the assets at the first taxing time for

consideration equal to its market value at that time.

(2) For the purposes of subsection (1), the excluded provisions are

sections 54 to 62AAV and Divisions 10 to 10D.


State Bank of NSW Division 9B

Section 121EO


(3) To avoid doubt, an effect of subsection (1) is that the sum of all

allowable deductions (if any) in respect of the writing off as bad of

the whole or any part or parts of a debt to which that subsection

applies will not exceed the market value of the debt at the first

taxing time.

121EO Deemed cessation and re-assumption of liabilities

(1) For the purposes of the application of this Act to the NSW State

Bank, the Bank is taken to have ceased immediately before the first

taxing time to have any liabilities, and to have assumed each of the

liabilities again at the first taxing time in return for consideration

equal to the market value at that time of the right or other asset,

corresponding to the liability, that is held by the person to whom

the liability is owed.

(2) An example for the purposes of subsection (1) is a liability under a

security, issued by the NSW State Bank before the first taxing

time, to pay an amount of $1,000 after that time. If the market

value of the holders’ right to receive the $1,000 under the security

was $950 at the first taxing time, the NSW State Bank is taken to

have received, at the first taxing time, $950 by way of

consideration for assuming the liability under the security to pay

the $1,000.

121EP Effect of unfunded pre-first taxing time superannuation

liabilities

(1) This section applies to a deduction under section 82AAC in respect

of a contribution made in relation to a person who was an

employee of the NSW State Bank at the first taxing time.

(2) A deduction to which this section applies is not allowable to the

NSW State Bank for any year of income unless the requirements of

subsections (3) and (4) are complied with.

(3) For the deduction to be allowable, the NSW State Bank must

obtain a certificate by an authorised actuary stating the actuarial

value, as at the first taxing time, of liabilities of the NSW State

Bank to provide superannuation benefits for, or for dependants of,

employees of the Bank, where the liabilities:

(a) had accrued as at the first taxing time; and

(b) were, according to actuarial principles, unfunded at that time.


Division 9B State Bank of NSW

Section 121EQ


(4) The certificate must be in a form approved in writing by the

Commissioner. The NSW State Bank must obtain the certificate:

(a) before the date of lodgment of its return of income of the

year of income in which the first taxing time occurs; or

(b) within such further time as the Commissioner allows.

(5) If the NSW State Bank obtains the certificate, a deduction to which

this section applies is nevertheless not allowable for a year of

income if the sum of all deductions to which this section applies

for the year of income is less than or equal to the unfunded liability

limit (see subsection (7)) for the year of income.

(6) If the sum is greater than that limit, so much of the deduction as is

worked out using the following formula is not allowable:

Unfunded liabilityAmount of deduction limit for the year of

Sum of all deductions to which this income.section applies for the year of income

(7) The unfunded liability limit for a year of income is:

(a) if the year of income is the one in which the first taxing time

occurs—the actuarial value of the liabilities set out in the

actuary’s certificate; or

(b) in any other case—that actuarial value as reduced by the total

amount of deductions to which this section applies that,

because of subsection (5), have not been allowable to the

NSW State Bank for all previous years of income.

(8) Expressions used in this Division that are also used in

section 82AAC have the same respective meanings as in that

section.

121EQ Effect of pre-first taxing time provision for bad debts

(1) This section applies to a debt owing to the NSW State Bank that

existed immediately before the first taxing time if at that time there

was, in the accounting records of the Bank, a doubtful debt

provision in respect of the debt described as a specific provision.

(2) If this section applies to a debt, a deduction under this Act that,

apart from this subsection, would be allowable to the NSW State

Bank for the writing off of the whole or part of the debt as bad is

not allowable to the extent that the amount written off equals the


State Bank of NSW Division 9B

Section 121EQ


doubtful debt provision limit (see subsection (3)) in respect of the

debt immediately before the writing off occurs.

(3) The doubtful debt provision limit, in respect of a debt at a

particular time, is:

(a) if subsection (2) has not applied in relation to any previous

writing off of part of the debt—the amount of the specific

provision in respect of the debt mentioned in subsection (1);

or

(b) in any other case—the amount of the specific provision in

respect of the debt mentioned in subsection (1), reduced by

the sum of the amounts of deductions that, because of a

previous application of subsection (2) in respect of the

writing off of one or more parts of the debt as bad, have not

been allowable to the Bank.

(4) If:

(a) this section does not apply to a debt that existed immediately

before the first taxing time; and

(b) the debt is included in a class of debts existing immediately

before that time where, at that time, there was, in the

accounting records of the NSW State Bank, a doubtful debt

provision in respect of the class described as a specific

provision;

this section applies to the debt as if there were a specific provision

in respect of the debt of the kind mentioned in subsection (1) of an

amount worked out using the formula:

Amount of the debtAmount of specific provision for the class Sum of the amounts of debts

included in the class.


Division 9C Assessable income diverted under certain tax avoidance schemes

Section 121F


Division 9C—Assessable income diverted under certain tax

avoidance schemes

121F Interpretation

(1) In this Division, unless the contrary intention appears:

agreement means any agreement, arrangement or understanding,

whether formal or informal, whether express or implied and

whether or not enforceable, or intended to be enforceable, by legal

proceedings.

consideration includes a benefit of any kind.

diverted income, in relation to a taxpayer, means all the amounts

that are included under this Division in the diverted income of the

taxpayer.

diverted trust income, in relation to a trustee of a trust estate,

means all the amounts that are included under this Division in the

diverted trust income of the trust estate.

income includes all amounts that, apart from the operation of the

relevant exempting provisions, would be assessable income.

property includes:

(a) a chose in action;

(b) any estate, interest, right or power, whether at law or in

equity, in or over property; and

(c) any right to receive income.

public company rate means the rate of tax payable in respect of the

taxable income of a company that is not a private company.

relevant exempting provision means any of the following

provisions:

(a) paragraph 23(jb) of this Act;

(aa) section 50-5, 50-10, 50-15, 50-20, 50-25, 50-30, 50-40 or

50-45 of the Income Tax Assessment Act 1997;

(b) paragraph 23(ja) as in force at any time before the

commencement of section 1 of the Taxation Laws

Amendment Act (No. 4) 1987;


Assessable income diverted under certain tax avoidance schemes Division 9C

Section 121F


(baa) paragraph 23(x) as in force at any time before the



(ba) section 23F, 23FA or 23FB, as in force at any time before the



(bb) paragraph 23(jaa) or section 23FC or 23FD, as in force at any

time before the commencement of section 1 of the Taxation

Laws Amendment Act (No. 2) 1989;

(bc) section 24AM;

(c) paragraph 320-37(1)(a) of the Income Tax Assessment Act

1997;

(cb) regulations under the International Organisations (Privileges

and Immunities) Act 1963, insofar as those regulations

provide that an organisation is not liable to income tax; and

(d) any provision of an Act other than this Act to the effect that

income of a particular person or body is not subject to

taxation under any law of the Commonwealth or to the effect

that a particular person or body is not subject to taxation

under any law of the Commonwealth.

right to receive income, in relation to a person, means a right of

the person to have income that will or may be derived (whether

from property or otherwise) paid to, or applied or accumulated for

the benefit of, the person.

tax avoidance agreement means an agreement that was entered

into after 24 June 1980 and was entered into or carried out for the

purpose, or for purposes that included the purpose, of securing that

a person who, if the agreement had not been entered into or carried

out, would have been liable to pay income tax in respect of a year

of income would not be liable to pay income tax in respect of that

year of income or would be liable to pay less income tax in respect

of that year of income than that person would have been liable to

pay if the agreement had not been entered into or carried out.

taxpayer does not include a partnership.

(2) In determining for the purposes of this Division whether an

agreement is a tax avoidance agreement, no regard shall be had to a

purpose that is a merely incidental purpose.



Section 121G


(3) For the purposes of this Division, an agreement shall be taken to

have been entered into or carried out for a particular purpose, or for

purposes that included a particular purpose, if any of the parties to

the agreement entered into or carried out the agreement for that

purpose, or for purposes that included that purpose, as the case

may be.

(4) A reference in this Division to a person shall be read as including a

reference to a person in the capacity of a trustee.

(5) For the purposes of the application of this Division in relation to

property acquired under a tax avoidance agreement, a reference to

income that is derived from that property shall be read as including

a reference to income that is derived from the disposal of that

property, of any part of that property or of any interest in that

property.

121G Diverted income and diverted trust income

(1) Where:

(a) a taxpayer, not being a taxpayer in the capacity of a trustee,

has acquired property (in this subsection referred to as the

relevant property) under a tax avoidance agreement or by

reason of an act, transaction or circumstance occurring as

part of, in connection with or as a result of a tax avoidance

agreement;

(b) by reason that the taxpayer derives any income from the

relevant property, an amount (in this subsection referred to as

the relevant amount) would, apart from the operation of the

relevant exempting provisions, be included in the assessable

income of the taxpayer of a year of income otherwise than

under Division 5, section 97, section 99B or section 100;

(c) apart from this Division, the relevant amount would not be

included in the assessable income of the taxpayer of the year

of income; and

(d) so much of the amount or value of the consideration provided

by the taxpayer under or in connection with the tax avoidance

agreement as the Commissioner is satisfied was provided in

respect of the acquisition by the taxpayer of the relevant

property substantially exceeds the amount or value of the

consideration that might reasonably be expected to have been

provided by the taxpayer in respect of the acquisition of the



Section 121G


relevant property if the taxpayer were liable to pay tax, in

respect of any income derived by the taxpayer from the

relevant property, at the public company rate applicable for

the financial year in which the taxpayer acquired the relevant

property;

the diverted income of the taxpayer of the year of income shall

include the relevant amount.

(2) Where:



relevant property), being an interest in a partnership, under a

tax avoidance agreement or by reason of an act, transaction

or circumstance occurring as part of, in connection with or as

a result of a tax avoidance agreement;

(b) by reason of the ownership by the taxpayer of the relevant

property, an amount (in this subsection referred to as the

relevant amount) would, apart from the operation of the

relevant exempting provisions, be included, under Division 5,

in the assessable income of the taxpayer of a year of income

(in this subsection referred to as the relevant year of

income);


included in the assessable income of the taxpayer of the

relevant year of income; and












property;

the diverted income of the taxpayer of the relevant year of income

shall include the relevant amount.

(3) Where:



Section 121G




relevant property), being a beneficial interest in a trust estate,

under a tax avoidance agreement or by reason of an act,

transaction or circumstance occurring as part of, in

connection with or as a result of a tax avoidance agreement;





in the assessable income of the taxpayer of a year of income

(in this subsection referred to as the relevant year of

income);


included in the assessable income of the taxpayer of the













property;

the diverted income of the taxpayer of the relevant year of income


(4) Where:

(a) a taxpayer, being a taxpayer in the capacity of a trustee of a

trust estate, has acquired property (in this subsection referred

to as the relevant property) under a tax avoidance agreement

or by reason of an act, transaction or circumstance occurring

as part of, in connection with or as a result of a tax avoidance

agreement;

(b) by reason that the taxpayer derives any income from the

relevant property, an amount (in this subsection referred to as

the relevant amount) would, apart from the operation of the



Section 121G


relevant exempting provisions, be included in the assessable

income of the trust estate of a year of income otherwise than

under Division 5, section 97, section 99B or section 100;


included in the assessable income of the trust estate of the

year of income; and

(e) so much of the amount or value of the consideration provided











property;

the diverted trust income of the trust estate of the year of income


(5) Where:


trust estate, has acquired property (in this subsection referred

to as the relevant property), being an interest in a

partnership, under a tax avoidance agreement or by reason of

an act, transaction or circumstance occurring as part of, in

connection with or as a result of a tax avoidance agreement;





in the assessable income of the trust estate of a year of

income (in this subsection referred to as the relevant year of

income);


included in the assessable income of the trust estate of the







Section 121G










property;

the diverted trust income of the trust estate of the relevant year of

income shall include the relevant amount.

(6) Where:


trust estate (in this subsection referred to as the relevant trust

estate), has acquired property (in this subsection referred to

as the relevant property), being a beneficial interest in

another trust estate, under a tax avoidance agreement or by

reason of an act, transaction or circumstance occurring as

part of, in connection with or as a result of a tax avoidance

agreement;




relevant exempting provisions, be included, under section 97,

99B or 100, in the assessable income of the relevant trust

estate of a year of income (in this subsection referred to as

the relevant year of income);


included in the assessable income of the relevant trust estate

of the relevant year of income; and













Section 121G



property;

the diverted trust income of the relevant trust estate of the relevant

year of income shall include the relevant amount.

(8) Where:

(a) a deduction is allowable or deductions are allowable, in

calculating the net income of a partnership or trust estate of a

year of income, in respect of losses or outgoings (in this

subsection referred to as the relevant losses or outgoings)

incurred under or in connection with a tax avoidance

agreement;

(b) if no deduction were allowable, in calculating that net

income, in respect of the relevant losses or outgoings and no

relevant exempting provisions were applicable in relation to a

taxpayer, an amount would be included in the assessable

income of the taxpayer of a year of income by reason that the

taxpayer owned an interest in the partnership or a beneficial

interest in the trust estate or owned an interest in any other

partnership or a beneficial interest in any other trust estate;

and

(c) if the deduction or deductions were allowed, in calculating

that net income, in respect of the relevant losses or outgoings

and no relevant exempting provision were applicable in

relation to the taxpayer:

(i) no amount would be included in the assessable income

of the taxpayer of the year of income by reason that the

taxpayer owned an interest in a partnership or a

beneficial interest in a trust estate as mentioned in

paragraph (b); or

(ii) an amount would be included in the assessable income

of the taxpayer of the year of income by reason that the

taxpayer owned an interest in a partnership or a

beneficial interest in a trust estate as mentioned in

paragraph (b) but the amount that would be so included

in that assessable income would be less than the amount

referred to in paragraph (b);

then, for the purposes of the application of subsections (2), (3), (5)

and (6) in relation to the taxpayer in relation to the tax avoidance

agreement, no deduction shall be allowed in respect of the relevant



Section 121G


losses or outgoings in calculating the net income of the partnership

or trust estate referred to in paragraph (a).

(10) For the purposes of the application of subsection (8), a reference to

a deduction that is allowable in calculating the net income of a

partnership shall be read as not including a reference to a deduction

allowable to the partnership in respect of expenditure:

(a) taken under sections 36 and 36A of this Act to have been

incurred in the acquisition of trading stock by the

partnership; or

(b) taken under sections 70-90 and 70-95 and subsection

70-100(3) of the Income Tax Assessment Act 1997 to have

been incurred in the acquisition of trading stock by the

partnership.

(11) In determining for the purposes of this section the amount or value

of the consideration that might reasonably be expected to have

been provided by a taxpayer in respect of the acquisition of

property by the taxpayer if the taxpayer were liable to pay tax in

respect of any income derived by the taxpayer from the property at

the public company rate applicable for the financial year in which

the taxpayer acquired the property, the possibility that the taxpayer

would be entitled to a rebate of tax in respect of any of that income

shall be disregarded.

(12) In determining for the purposes of this section whether an amount

would, apart from the operation of the relevant exempting

provisions, be included in the assessable income of a taxpayer or a

trust estate of a year of income, section 128D of this Act and

section 802-15 of the Income Tax Assessment Act 1997 shall be

disregarded.

(13) For the purposes of this section, where:

(a) a taxpayer acquired property, being an interest in a trust

estate or partnership, before the time when a tax avoidance

agreement was entered into; and

(b) under the tax avoidance agreement, or by reason of an act,

transaction or circumstance occurring as part of, in

connection with or as a result of the tax avoidance

agreement, the amount of the share (in this subsection

referred to as the relevant share) of the taxpayer of the



Section 121H


income of the trust estate or partnership of any year of

income was or is increased;

the following provisions apply:

(c) the property referred to in paragraph (a) shall be taken to

have been acquired by the taxpayer under the tax avoidance

agreement; and

(d) any consideration provided by the taxpayer in respect of the

increase in the amount of the relevant share shall be taken to

be consideration provided by the taxpayer in respect of the

acquisition of the property referred to in paragraph (a).

(14) For the purposes of the application of this section in relation to the

acquisition of property by a person under a tax avoidance

agreement, the Commissioner may be satisfied that consideration

provided by the person under or in connection with the tax

avoidance agreement was provided by the person in respect of the

acquisition of the property notwithstanding, in a case where the

person acquired property from another person, that the

consideration was not provided to that other person.

121H Assessment of diverted income and diverted trust income

(1) A taxpayer, not being a taxpayer in the capacity of a trustee of a

trust estate, shall be assessed and is liable to pay tax, at the rate

declared by the Parliament for the purposes of this Division, upon

the diverted income of the taxpayer of the year of income.

(2) A taxpayer in the capacity of a trustee of a trust estate shall be

assessed and is liable to pay tax, at the rate declared by the

Parliament for the purposes of this Division, upon the diverted trust

income of the trust estate of the year of income.

121J Ascertainment of diverted income or diverted trust income

deemed to be an assessment

The ascertainment of the amount of the diverted income or diverted

trust income and of the tax payable thereon shall, for all purposes

of this Act be deemed to be an assessment.



Section 121K


121K Application of International Tax Agreements Act

For the purposes of subsection 3(6) and sections 15 and 16 of the

International Tax Agreements Act 1953, any amount that is

included in the diverted income or diverted trust income of a

taxpayer of a year of income shall be deemed to be included in the

assessable income of the taxpayer of the year of income.

121L Division applies notwithstanding exemption under other laws

This Division has effect notwithstanding anything contained in any

law of the Commonwealth other than this Act.


Mining and quarrying Division 10

Section 122


Division 10—Mining and quarrying

Subdivision A—General mining

122 Interpretation

(1) In this Subdivision:

allowable capital expenditure has the meaning given by

section 122A.

concentration means concentration by a gravity, magnetic,

electrostatic or flotation process.

housing and welfare, in relation to a taxpayer, means:

(a) residential accommodation provided by the taxpayer at, or at

a place adjacent to, the site of prescribed mining operations

carried on by the taxpayer, being accommodation provided

for the use of employees of the taxpayer employed for the

purposes of the operations of the taxpayer on that site or

operations of the taxpayer connected with those operations,

or for the use of dependants of such employees; and

(b) health, education, recreational or other similar facilities, or

facilities for the provision of meals, provided by the taxpayer

at, or at a place adjacent to, the site of prescribed mining

operations carried on by the taxpayer, being facilities that:

(i) are provided principally for the welfare of such

employees or of dependants of such employees; and

(ii) are not conducted for the purpose of profit-making by

the taxpayer or any other person;

and includes works carried out directly in connexion with such

accommodation or facilities, including works for the provision of

water, light, power, access or communications.

mining or prospecting information means geological, geophysical

or technical information, being information that relates to the

presence, absence or extent of deposits of minerals, other than

petroleum, in an area or is likely to be of assistance in determining

the presence, absence or extent of such deposits in an area, and has

been obtained from exploration or prospecting, or mining, for

minerals.


Division 10 Mining and quarrying

Section 122


mining or prospecting right means an authority, licence, permit or

right to mine or prospect for minerals in a particular area, or a lease

of land by virtue of which the lessee is entitled to mine or prospect

for minerals on the land, and includes an interest in such an

authority, licence, permit, right or lease and, for the purposes of

provisions relating to the acquisition by a person of a mining or

prospecting right from another person, also includes any rights in

respect of buildings or other improvements (including housing and

welfare) on the land concerned, or used in connexion with

operations on the land concerned, that are acquired with the mining

or prospecting right.

prescribed mining operations means mining operations on a

mining property for the extraction of minerals, other than

petroleum, from their natural site, being operations carried on for

the purpose of gaining or producing assessable income.

prescribed purposes means the purposes for which allowable

capital expenditure may be incurred or the purposes referred to in

section 122J, and, in relation to property in respect of which the

taxpayer incurred expenditure of a capital nature:

(a) on or before 9 May 1968; or

(b) after that date, in accordance with a contract made on or

before that date;

includes the purposes for which expenditure referred to in

subsection 122(1) of the Income Tax Assessment Act 1936-1967

could be incurred or purposes that were referred to in

section 123AA.

property includes a mining or prospecting right.

the Income Tax Assessment Act 1936-1967 includes the Income

Tax Assessment Act 1936 as amended by any Act up to and

including the Income Tax Assessment Act (No. 4) 1967.

treatment means:

(a) cleaning, leaching, crushing, grinding, breaking, screening,

grading or sizing;

(b) concentration; or

(c) any other treatment applied to a mineral, being a treatment

that is applied before concentration or, in the case of a

mineral not requiring concentration, that would, if the



Section 122


mineral had required concentration, have been applied before

the concentration;

and, without extending, by implication, the processes that are

included in this definition, is declared not to include:

(d) sintering or calcining; or

(e) the production of, or processes carried on in connexion with

the production of, alumina, or pellets or other agglomerated

forms of iron.

(2) A reference in this Subdivision to a deduction or deductions

allowed or allowable under this Subdivision (not including a

reference to a deduction or deductions allowed or allowable under

a specified provision of this Subdivision) shall, unless the contrary

intention appears, be read as including a reference to a deduction or

deductions allowed or allowable under the Division for which this

Subdivision was substituted.

(3) Where a taxpayer carries on prescribed mining operations on 2 or

more mining properties, this Subdivision (other than section 122J)

shall, except to the extent to which a contrary intention appears, be

construed as applying in relation to the operations of that taxpayer

on and in connexion with each of those mining properties as if it

were the only mining property on which the taxpayer carried on

prescribed mining operations, and, for the purposes of the

application of this Subdivision (other than section 122J) in relation

to a taxpayer in relation to a mining property:

(a) any matters or things relating exclusively to any other mining

property on which the taxpayer carried on prescribed mining

operations shall be disregarded; and

(b) amounts of expenditure (including expenditure on treatment

plant or other plant for use in connexion with operations on 2

or more of the properties on which the taxpayer carried on

prescribed mining operations), or other amounts, to which

paragraph (a) does not apply shall be apportioned in such

manner as the Commissioner considers reasonable.

(4) A reference in a provision of this Subdivision to an amount

specified in a notice shall, if another amount is deemed to be

specified in that notice in lieu of the amount in fact so specified by

virtue of another provision of this Division, be read as a reference

to that other amount.



Section 122AA


(5) For the purposes of this Subdivision, any amount specified in a

notice given to the Commissioner under section 122B in relation to

the acquisition from a taxpayer of a mining or prospecting right or

mining or prospecting information shall be deemed to be wholly

attributable to expenditure incurred by the taxpayer, and the extent

to which such an amount is attributable to particular expenditure,

to expenditure of a particular class or to expenditure incurred at a

particular time or during a particular period shall be as determined

by the Commissioner.

122AA Division applies subject to provisions terminating gold

mining exemptions

The application of this Division is subject to Division 16H.

122AB Subdivision applies subject to Division 245 of Schedule 2C

The application of this Subdivision is subject to Division 245 of

Schedule 2C.

122A Allowable capital expenditure

(1) For the purposes of this Subdivision, allowable capital expenditure

of a taxpayer is expenditure of a capital nature incurred by the

taxpayer, being:

(a) expenditure in carrying on prescribed mining operations,

including expenditure:

(i) in preparing a site for such operations;

(ii) on buildings, other improvements or plant necessary for

the carrying on by the taxpayer of such operations;

(iii) in providing, or by way of contribution to the cost of

providing, water, light or power for use on, or access to

or communications with, the site of prescribed mining

operations carried on, or to be carried on, by the

taxpayer; or

(iv) on housing and welfare; or

(b) expenditure on plant for use primarily and principally in the

treatment of minerals obtained from the carrying on by the

taxpayer of prescribed mining operations; or

(c) expenditure on buildings or plant for use directly in

connexion with the operation or maintenance of plant



Section 122A


referred to in paragraph (b), or buildings or other

improvements for use directly in connexion with the storage

(whether before or after treatment) of minerals in relation to

the operation of such plant; or

(d) expenditure on acquiring a mining or prospecting right or

mining or prospecting information from another person, to

the extent only of the amount of the expenditure that is

specified in a notice under section 122B duly given to the

Commissioner by the taxpayer and that other person; or

(da) expenditure that the taxpayer is taken to have incurred by

section 122BA; or

(e) where the taxpayer is a company the sole or principal

business, or proposed business, of which is the carrying on of

prescribed mining operations or the providing of capital

(whether by investment in shares or otherwise) to companies

the sole or principal business, or proposed business, of which

is the carrying on of prescribed mining operations:

(i) expenditure of the company in respect of the formation

and incorporation of the company; and

(ii) so much of the expenditure incurred by the company in

issuing, or making calls on, shares in the company as

the Commissioner thinks reasonable having regard to

the extent to which the moneys received by the

company in relation to the issue of the shares, or the

making of the calls, has been or, in the opinion of the

Commissioner, will be, expended on mining or

prospecting outgoings as defined in section 77D as in

force immediately before its repeal by the Taxation

Laws Amendment Act (No. 3) 1989.

(1A) Paragraph (1)(e):

(a) does not apply in relation to expenditure incurred after

17 September 1974 unless the expenditure was incurred in

pursuance of a contract made on or before 17 September

1974; and

(b) does not apply in relation to expenditure incurred after

30 June 1976.

(1B) Subsection (1) does not apply to expenditure on property (being

plant or articles for the purposes of section 54) unless:

(a) either of the following conditions is satisfied:



Section 122B


(i) the property was acquired by the taxpayer under a

contract entered into on or before 25 May 1988;

(ii) the property was constructed by the taxpayer and:

(A) the construction commenced on or before

25 May 1988; or

(B) the construction was under a contract entered

into on or before 25 May 1988, or under 2 or

more contracts any of which was entered into

on or before that date; and

(b) before 1 July 1991, the property:

(i) was used by the taxpayer for the purpose of producing

assessable income; or

(ii) was installed ready for use for that purpose and held in

reserve by the taxpayer.

(1C) Notwithstanding section 170, the Commissioner may at any time

amend an assessment for the purpose of giving effect to

subsection (1B) of this section.

(2) Without extending, by implication, the operation of subsection (1),

it is declared that the expenditure referred to in that subsection

does not include expenditure incurred by the taxpayer on or in

relation to:

(a) ships, railway rolling-stock or road vehicles, or railway lines,

roads, pipelines or other facilities, for use wholly or partly for

the purpose of the transport of minerals or products of

minerals, other than transport wholly within the site of

prescribed mining operations carried on by the taxpayer;

(b) works carried out in connexion with, or buildings or other

improvements or plant constructed or acquired for use in

connexion with, the establishment, operation or use of a port

or other facilities for ships; or

(c) an office building that is not situated at or adjacent to the site

of prescribed mining operations carried on by the taxpayer.

122B Purchase of mining or prospecting right or information

(1) Where a person (in this section referred to as the purchaser) has

incurred expenditure in acquiring from another person (in this

section referred to as the vendor) for the purpose of carrying on

prescribed mining operations, or exploration or prospecting for



Section 122B


minerals obtainable by prescribed mining operations, a mining or

prospecting right or mining or prospecting information, the

purchaser and the vendor may agree to include in the allowable

capital expenditure of the purchaser a specified amount

representing all or part of the expenditure incurred in the

acquisition that has not been the subject of an agreement made

under subsection 122BA(5).

(2) If the amount specified in an agreement made under this section in

respect of a transaction exceeds the sum of:

(a) so much of the capital expenditure (other than expenditure on

plant or expenditure of a kind referred to in section 122J or in

section 123AA of the Income Tax Assessment Act

1936-1967) incurred by the vendor before the date of the

transaction in relation to the area that is the subject of the

right or to which the information relates as:

(i) to the extent to which that expenditure is not allowable

(post 19 July 1982) capital expenditure within the

meaning of section 122DG—would have been included

in the residual previous capital expenditure, the residual

capital expenditure, the residual (1 May 1981 to

18 August 1981) capital expenditure or the residual

(19 August 1981 to 19 July 1982) capital expenditure of

the vendor as at the end of the year of income of the

vendor during which the transaction occurred but for the

transaction and any later transaction in relation to that

area; and

(ii) to the extent to which that expenditure is allowable


meaning of section 122DG:

(A) has not been allowed and is not allowable as a

deduction to the vendor under subsection

122DG(2) in respect of a year of income of the

vendor preceding the year of income during

which the transaction occurred; and

(B) is attributable to an amount of expenditure

incurred in relation to that area that has not

been taken into account in determining an

amount to be included in the allowable capital

expenditure of a person under paragraph



Section 122B


122A(1)(d) in respect of a transaction entered

into before the first-mentioned transaction;

(b) any expenditure of the vendor (other than expenditure on

plant in use by the vendor at the date of the transaction) of a

kind referred to in section 122J or in section 123AA of the

Income Tax Assessment Act 1936-1967 incurred by the

vendor before the date of the transaction that has not been

allowed and is not allowable as a deduction to the vendor in

the year of income in which the transaction takes place or in

any prior year of income; and

(d) the amount included in the vendor’s assessable income under

section 122K in relation to property acquired by the

purchaser from the vendor in connexion with the transaction;

the amount specified in the agreement shall, for all purposes of this

Subdivision, be deemed to be the amount in fact so specified less

the amount of the excess.

(3) For the purposes of paragraph (2)(a), the capital expenditure

incurred by the vendor in relation to an area the subject of a mining

or prospecting right shall be deemed not to include capital

expenditure on buildings or other improvements unless rights in

respect of them are acquired by the purchaser with the mining or

prospecting right.

(4) If:

(a) expenditure referred to in subsection (1) relates to a lease;

and

(b) the grant, assignment or surrender of that lease is the subject

of an election under subsection 88B(5) (whether made before

or after an agreement under subsection (1) is made);

any agreement made under subsection (1) in respect of that

expenditure is of no effect for the purposes of this section.

(5) An agreement made under subsection (1) must:

(a) be in writing and signed by or on behalf of each party to the

agreement; and

(b) be made not later than 2 months after the end of the year of

income of the purchaser in which the right or information

was acquired, or within such further time as the

Commissioner allows.



Section 122BA


122BA Allowable capital expenditure in respect of cash bidding

payments to acquire exploration or prospecting

authorities or mining authorities

Summary of section

(1) This section provides for certain exploration or prospecting cash

bidding payments and mining cash bidding payments to be capital

expenditure incurred by a taxpayer for the purposes of this

Division.

Mining cash bidding payments

(2) Each mining cash bidding payment paid by a taxpayer is, for the

purposes of this Division, expenditure of a capital nature incurred

by the taxpayer:

(a) if the amount is paid before the grant of the mining authority

concerned—at the time of the grant; and

(b) in any other case—at the time the payment is made.

Exploration or prospecting cash bidding payments made when

mining authority has been granted

(3) If:

(a) a taxpayer makes an exploration or prospecting cash bidding

payment in relation to the grant of an exploration or

prospecting authority; and

(b) the payment is made at or after the time of the grant of a

mining authority that is related to the exploration or

prospecting authority;

the amount of the payment is, for the purposes of this Division,

expenditure of a capital nature incurred by the taxpayer at the time

of payment.

Exploration or prospecting cash bidding payments made before

mining authority has been granted

(4) If:

(a) a mining authority is granted; and

(b) it is the first or only mining authority that is related to a

particular cash bidding exploration or prospecting authority;

and



Section 122BA


(c) immediately before the grant of the mining authority a

taxpayer who has a qualifying interest or qualifying interests

in relation to the exploration or prospecting authority also has

an entitlement to an eligible cash bidding amount in relation

to the exploration or prospecting authority;

the taxpayer is taken for the purposes of this Division to have

incurred, at the time the mining authority is granted, expenditure of

a capital nature in relation to the qualifying interest or qualifying

interests of an amount equal to the eligible cash bidding amount.

Transfer of entitlement to an eligible cash bidding amount

(5) If:

(a) at any time before the grant of the first or only mining

authority that is related to a cash bidding exploration or

prospecting authority, a person (the purchaser) incurs

expenditure in acquiring a qualifying interest in relation to

the exploration or prospecting authority from another person

(the vendor); and

(b) the vendor has an entitlement to an eligible cash bidding

amount in relation to the exploration or prospecting

authority;

the purchaser and vendor may agree to transfer to the purchaser so

much of the vendor’s entitlement to the eligible cash bidding

amount as is specified in the agreement.

Form and content of agreement

(6) An agreement under subsection (5) must:

(a) be in writing signed by or on behalf of the vendor and the

purchaser; and

(b) specify as the amount of the entitlement that is to be

transferred to the purchaser an amount that does not exceed:

(i) the expenditure incurred by the purchaser in acquiring

the qualifying interest in relation to the exploration or

prospecting authority;

reduced by:

(ii) any amount of that expenditure specified in an

agreement previously made under subsection 122B(1) in

relation to the acquisition; and



Section 122BA


(c) be made not later than 2 months after the end of the year of

income of the purchaser in which the acquisition occurred, or

within such further time as the Commissioner allows.

Definition of entitlement to an eligible cash bidding amount

(7) If at a particular time (the test time):

(a) a person is the holder of a qualifying interest or qualifying

interests in relation to a cash bidding exploration or

prospecting authority; and

(b) the sum of:

(i) if the exploration or prospecting authority was granted

to the person (whether or not the person holds the

authority at the test time)—the exploration or

prospecting cash bidding payment, or the sum of the

exploration or prospecting cash bidding payments, paid

before the test time in relation to the grant of the

authority; and

(ii) in any case—all amounts (if any) specified in

agreements made (including at a time after the test time)

under subsection (5) in relation to the acquisition by the

person of qualifying interests in relation to the authority

before the test time;

exceeds:

(iii) the sum of all amounts (if any) specified in agreements

made (including at a time after the test time) under

subsection (5) in relation to the acquisition from the

person of qualifying interests in relation to the authority

before the test time;

the person is taken to have at the test time in relation to the

authority an entitlement to an eligible cash bidding amount equal

to the amount of the excess referred to in paragraph (b).

When a mining authority is related to an exploration or

prospecting authority

(8) A mining authority is related to an exploration or prospecting

authority if:

(a) because of the grant of the mining authority, the exploration

or prospecting authority ceases to be in force in respect of the



Section 122BA


whole or part of the area in respect of which the mining

authority is granted; or

(b) because of the grant of the mining authority, a retention

authority that is related to the exploration or prospecting

authority ceases to be in force in respect of the whole or part

of the area in respect of which the mining authority is

granted.

When a retention authority is related to an exploration or

prospecting authority

(9) A retention authority is related to an exploration or prospecting

authority if, because of the grant of the retention authority, the

exploration or prospecting authority ceases to be in force in respect

of the whole or part of the area in respect of which the retention

authority is granted.

Effect of renewal of authority

(10) If an exploration or prospecting authority (the original authority)

or a retention authority (also the original authority) is renewed, the

renewed authority is taken to be a continuation of the original

authority, even if the renewal is not granted in respect of all of the

area in respect of which the original authority was granted.

Definition of qualifying interest

(11) A person has a qualifying interest in relation to an exploration or

prospecting authority if the person is the holder of, or of an interest

in, the authority or a retention authority that is related to it.

Definitions


cash bidding exploration or prospecting authority means an

exploration or prospecting authority in respect of which an

exploration or prospecting cash bidding payment is or was made.

exploration or prospecting authority means any permit, licence,

lease or other authority (other than a mining authority) that:

(a) is granted under a law of the Commonwealth, a State, a

Territory or a foreign country; and



Section 122BA


(b) authorises exploration or prospecting for minerals other than

petroleum, whether or not it also authorises other things.

exploration or prospecting cash bidding payment means an

amount paid for the grant of an exploration or prospecting

authority, if:

(a) the authority was auctioned or tendered for, or was granted to

a person who responded to a public invitation to apply for it

within a specified period or by a specified day; and

(b) the amount is not an application fee or a deposit, except to

the extent that the amount is applied in payment for the grant

of the exploration or prospecting authority; and

(c) the amount is incurred in carrying on prescribed mining

operations or for the purpose of exploring or prospecting for

minerals obtainable by prescribed mining operations.

mining authority means any permit, licence, lease or other

authority that:



(b) authorises the carrying on of mining operations for the

extraction (other than merely by taking samples) of minerals

other than petroleum from their natural site, whether or not it

also authorises other things.

mining cash bidding payment means an amount paid for the grant

of a mining authority, where:

(a) the mining authority was auctioned or tendered for, or was

granted to a person who responded to a public invitation to

apply for it within a specified period or by a specified day;

and

(b) the amount is not an application fee or a deposit, except to

the extent that the amount is applied in payment for the grant

of the mining authority; and

(c) the amount is incurred in carrying on prescribed mining


minerals obtainable by prescribed mining operations.

retention authority means any permit, licence, lease or other

authority in relation to an area (other than a mining authority) that:





Section 122C


(b) is only permitted to be granted to a person who is the holder

of, or of an interest in, an exploration or prospecting

authority, or a retention authority, in relation to the area.

122C Residual previous capital expenditure

(1) For the purposes of this Subdivision, but subject to the succeeding

provisions of this section, the residual previous capital expenditure

of a taxpayer as at the end of a year of income (in this section

referred to as the year of income) shall be ascertained by deducting

from the sum of:

(a) so much of the amount which, for the purposes of section 122

of the Income Tax Assessment Act 1936-1967, was the

residual capital expenditure of the taxpayer in relation to the

mining property concerned at the end of the year of income

that ended on 30 June 1967 as remains after deducting from

that amount any part of that amount that has been allowed or

is allowable as a deduction under that section from the

assessable income of that year of income, less any part of that

remaining amount that is attributable to expenditure of a kind

referred to in section 123A of this Act;

(b) the amount of allowable capital expenditure (other than

allowable capital expenditure to which paragraph (ba)

applies) incurred by the taxpayer:

(i) after the year of income that ended on 30 June 1967;

(ii) on or before 17 August 1976; and

(iii) before the end of the year of income; and

(ba) any amount of allowable capital expenditure that is deemed

by subsection (2) to have been incurred by the taxpayer in the

year of income or in a preceding year of income;

the following amounts:

(c) any part of the expenditure included in that sum that:

(i) has been allowed or is allowable as a deduction under

section 122D from the assessable income of a year of

income preceding the year of income; or

(iv) was incurred on property (not being property in respect

of which a notice has been duly given to the

Commissioner under section 122B by the taxpayer and a

person who acquired the property from the taxpayer):



Section 122C


(A) that has, after the year of income that ended on

30 June 1967, been disposed of, lost or

destroyed; or

(B) the use of which by the taxpayer for prescribed

purposes has, after that last-mentioned year of

income, been otherwise terminated;

and has not been allowed and is not allowable as a

deduction from the assessable income of any year of

income that ended before the year of income in which

the disposal, loss, destruction or termination of use took

place; and

(d) the sum of so much of any amounts specified in notices duly

given to the Commissioner under section 122B in relation to

the acquisition from the taxpayer, during the year of income

or a preceding year of income, of a mining or prospecting

right or mining or prospecting information as is attributable

to expenditure that would, but for this paragraph, be included

in the residual previous capital expenditure of the taxpayer as

at the end of the year of income.

(2) Where:

(a) property referred to in sub-subparagraph (1)(c)(iv)(B); or

(b) property the use of which by the taxpayer for prescribed

purposes has, before the commencement of the year of

income that commenced on 1 July 1968, been terminated;

has, after the end of the year of income that ended on 30 June

1967, come into use for purposes for which allowable capital

expenditure may be incurred, so much of the capital expenditure

incurred on that property on or before 17 August 1976 and before

the termination of use as the Commissioner determines shall, for

the purposes of this section, be deemed to have been incurred by

the taxpayer, in the year of income in which the property so comes

into use, for the purposes for which the property so comes into use.

(3A) Where an amount of income derived by the taxpayer in a year of

income, being the year of income of the taxpayer in which

27 October 1977 occurred or a subsequent year of income, (in this

subsection referred to as the year of sale) from the sale, transfer or

assignment of rights to mine on any mining tenement is or has been

exempt from income tax by virtue of paragraph 23(pa) and, in

relation to that tenement:



Section 122D


(a) any excess amounts of expenditure referred to in subsection

123AA(3) of the Income Tax Assessment Act 1936-1967

have, under that subsection, been required to be deemed to be

expenditure in respect of which the taxpayer was entitled to a

deduction under section 122 of that Act; or

(b) any excess amounts of expenditure referred to in subsection

122J(3) of this Act have been or are required to be deemed to

be allowable capital expenditure incurred in the year of sale

or a prior year of income;

the residual previous capital expenditure of the taxpayer as at the

end of the year of sale shall be reduced by so much of those excess

amounts as has not been allowed, and is not allowable, as a

deduction under section 122 of the Income Tax Assessment Act

1936-1967 or under section 122D of this Act, but so that the total

amount of the reductions under this section shall not exceed the

amount of the exempt income.

122D Deduction of residual previous capital expenditure

(1) Where, as at the end of the year of income, there is, in relation to a

taxpayer, an amount of residual previous capital expenditure, an

amount ascertained in accordance with this section shall be an

allowable deduction.

(1A) A deduction is not allowable under subsection (1) for the 1997-98

year of income or any later year of income.

Note: Section 330-1 of the Income Tax (Transitional Provisions) Act 1997 converts any undeducted residual previous capital expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.

(2) Subject to subsection (3), the deduction allowable is the amount

ascertained by dividing the amount of residual previous capital

expenditure referred to in subsection (1) by:

(a) a number equal to the number of whole years in the estimated

life of the mine or proposed mine on the mining property, or,

if there is more than one such mine, of the mine that has the

longer or longest estimated life, as at the end of the year of

income; or

(b) 25;

whichever number is the less.



Section 122DA


(3) Unless the taxpayer makes an election under subsection (4) in

relation to the year of income, the amount, or the total of the

amounts, of the deduction or deductions allowable under this

section shall not exceed an amount equal to so much of the

assessable income of the year of income as remains after deducting

all allowable deductions, other than deductions allowable under

this section or under section 122DB, 122DD, 122DF, 122DG or

122J, and, where the total of the amounts of 2 or more deductions

that would be allowable under this section but for this subsection

exceeds the maximum amount determined in accordance with this

subsection, those deductions shall be reduced respectively by

amounts proportionate to those deductions and equal in total to the

excess.

(4) A taxpayer may elect, in relation to a year of income, that

subsection (3) shall not apply in respect of the taxpayer.

(5) Where, having regard to the information in his possession, the

Commissioner is not satisfied that the estimated life of a mine or

proposed mine as made by the taxpayer is a reasonable estimate,

the estimated life shall, for the purposes of subsection (2), be taken

to be such period as the Commissioner considers reasonable.

122DA Residual capital expenditure

(1) For the purposes of this Subdivision, but subject to subsection (2),

the residual capital expenditure of a taxpayer as at the end of a year

of income (in this section referred to as the relevant year of

income) shall be ascertained by deducting from the amount of

allowable capital expenditure incurred by the taxpayer after

17 August 1976 and before the end of the relevant year of income

being:

(a) expenditure incurred on or before 30 April 1981; or

(b) expenditure incurred after 30 April 1981:

(i) under a contract entered into on or before 30 April

1981; or

(ii) in respect of the construction of property by the

taxpayer where that construction commenced on or

before 30 April 1981;

the sum of:

(c) any part of that allowable capital expenditure that:



Section 122DB



section 122DB from the assessable income of a year of

income preceding the relevant year of income; or

(ii) was incurred on property (not being property in respect




(A) that has been disposed of, lost or destroyed; or


purposes has been otherwise terminated;





place; and

(d) so much of any amounts specified in notices duly given to

the Commissioner under section 122B in relation to the

acquisition from the taxpayer, during the relevant year of

income or a preceding year of income, of a mining or

prospecting right or mining or prospecting information as is

attributable to expenditure that would, but for this paragraph,

be included in the residual capital expenditure of the taxpayer

as at the end of the relevant year of income.

(2) Where property referred to in sub-subparagraph (1)(c)(ii)(B) has,

on or before 30 April 1981, come into use for purposes for which

allowable capital expenditure may be incurred, so much of the

capital expenditure incurred by the taxpayer on that property after

17 August 1976 and before the termination of use as the

Commissioner determines shall, for the purposes of this section, be

deemed to have been incurred, on the day on which the property so

came into use, for the purposes for which the property so came into

use.

122DB Deduction of residual capital expenditure

(1) Where, as at the end of the year of income there is, in relation to a

taxpayer, an amount of residual capital expenditure, an amount

ascertained in accordance with this section is an allowable

deduction.



Section 122DB




Note: Section 330-1 of the Income Tax (Transitional Provisions) Act 1997 converts any undeducted residual capital expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.


ascertained by dividing the amount of residual capital expenditure

referred to in subsection (1) by:





income; or

(b) 5;








this section or under section 122DD, 122DF, 122DG or 122J, and,

where the total of the amounts of 2 or more deductions that would

be allowable under this section but for this subsection exceeds the

maximum amount determined in accordance with this subsection,

those deductions shall be reduced respectively by amounts

proportionate to those deductions and equal in total to the excess.




Commissioner is not satisfied that the estimated life of a mine or a






Section 122DC


122DC Residual (1 May 1981 to 18 August 1981) capital expenditure


the residual (1 May 1981 to 18 August 1981) capital expenditure of

a taxpayer as at the end of a year of income (in this section referred

to as the relevant year of income) shall be ascertained by

deducting from the amount of allowable capital expenditure

incurred by the taxpayer after 30 April 1981 and before the end of

the relevant year of income, being:

(a) expenditure incurred on or before 18 August 1981; or

(b) expenditure incurred after 18 August 1981:

(i) under a contract entered into on or before 18 August

1981; or



before 18 August 1981;

but not being:

(c) expenditure incurred under a contract entered into on or

before 30 April 1981; or

(d) expenditure incurred in respect of the construction of

property by the taxpayer where that construction commenced

on or before 30 April 1981;

the sum of:

(e) any part of that allowable capital expenditure that:


section 122DD from the assessable income of a year of













place; and



Section 122DD


(f) so much of any amounts specified in notices duly given to






be included in the residual (1 May 1981 to 18 August 1981)

capital expenditure of the taxpayer as at the end of the

relevant year of income.

(2) Where property referred to in sub-subparagraph (1)(e)(ii)(B) has,

after 30 April 1981 and on or before 18 August 1981, come into

use for purposes for which allowable capital expenditure may be

incurred, so much of the capital expenditure incurred by the

taxpayer on that property after 17 August 1976 and before the

termination of use as the Commissioner determines shall, for the

purposes of this section, be deemed to have been incurred, on the

day on which the property so came into use, for the purposes for

which the property so came into use.

122DD Deduction of residual (1 May 1981 to 18 August 1981) capital

expenditure


taxpayer, an amount of residual (1 May 1981 to 18 August 1981)

capital expenditure, an amount ascertained in accordance with this

section is an allowable deduction.



Note: Section 330-1 of the Income Tax (Transitional Provisions) Act 1997 converts any undeducted residual (1 May 1981 to 18 August 1981) capital expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.


ascertained by dividing the amount of residual (1 May 1981 to

18 August 1981) capital expenditure referred to in subsection (1)

by:






Section 122DE



income; or

(b) 6;








this section or under section 122DF, 122DG or 122J, and, where

the total of the amounts of 2 or more deductions that would be

allowable under this section but for this subsection exceeds the











122DE Residual (19 August 1981 to 19 July 1982) capital

expenditure


the residual (19 August 1981 to 19 July 1982) capital expenditure


referred to as the relevant year of income) shall be ascertained by

deducting from the amount of allowable capital expenditure

incurred by the taxpayer after 18 August 1981 and before the end

of the relevant year of income, being:

(a) expenditure incurred on or before 19 July 1982; or

(b) expenditure incurred after 19 July 1982:

(i) under a contract entered into on or before 19 July 1982;

or



Section 122DE




before 19 July 1982;

but not being:

(c) expenditure incurred under a contract entered into on or

before 18 August 1981; or

(d) expenditure incurred in respect of the construction of

property by the taxpayer where that construction commenced

on or before 18 August 1981;

the sum of:

(e) any part of that allowable capital expenditure that:


section 122DF from the assessable income of a year of













place; and

(f) so much of any amounts specified in notices duly given to






be included in the residual (19 August 1981 to 19 July 1982)



(2) Where property referred to in sub-subparagraph (1)(e)(ii)(B) has,

after 18 August 1981 and on or before 19 July 1982, come into use

for purposes for which allowable capital expenditure may be

incurred, so much of the capital expenditure incurred by the

taxpayer on that property after 17 August 1976 and before the



Section 122DF


termination of use as the Commissioner determines shall, for the

purposes of this section, be deemed to have been incurred, on the

day on which the property so came into use, for the purposes for

which the property so came into use.

122DF Deduction of residual (19 August 1981 to 19 July 1982)

capital expenditure


taxpayer, an amount of residual (19 August 1981 to 19 July 1982)





Note: Section 330-1 of the Income Tax (Transitional Provisions) Act 1997 converts any undeducted residual (19 August 1981 to 19 July 1982) capital expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.


ascertained by dividing the amount of residual (19 August 1981 to

19 July 1982) capital expenditure referred to in subsection (1) by:





income; or

(b) 10;








this section or under section 122DG or 122J, and, where the total

of the amounts of 2 or more deductions that would be allowable

under this section but for this subsection exceeds the maximum

amount determined in accordance with this subsection, those



Section 122DG


deductions shall be reduced respectively by amounts proportionate

to those deductions and equal in total to the excess.








122DG Deduction of allowable (post 19 July 1982) capital

expenditure

(1) In this section, allowable (post 19 July 1982) capital expenditure,

in relation to a taxpayer, means allowable capital expenditure

incurred by the taxpayer after 19 July 1982 and before the 1997-98

year of income, not being expenditure incurred:

(a) under a contract entered into on or before 19 July 1982; or

(b) in respect of the construction of property by the taxpayer

where that construction commenced on or before 19 July

1982.

Note: Subdivision 330-C of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for allowable capital expenditure incurred in the 1997-98 year of income or a later year of income.

(2) Where, in a year of income, a taxpayer incurs allowable (post

19 July 1982) capital expenditure, an amount ascertained in

accordance with this section is an allowable deduction in respect of

that expenditure in respect of that year of income and in respect of

all subsequent years of income.



Note: Section 330-5 of the Income Tax (Transitional Provisions) Act 1997 converts the amount of unrecouped expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.

(3) Subject to subsection (6), the deduction allowable under

subsection (2) in respect of a year of income (in this subsection

referred to as the relevant year of income) in respect of an amount

of allowable (post 19 July 1982) capital expenditure incurred by a



Section 122DG


taxpayer is the amount ascertained by dividing the amount of that

expenditure that is unrecouped as at the end of the relevant year of

income by:

(a) a number equal to the difference between 10 and the number

of years of income (if any) preceding the relevant year of

income in respect of which a deduction has been allowed or

is allowable, or, but for the operation of subsection (6),

would have been allowed or would be allowable, under

subsection (2) in respect of that amount of expenditure; or

(b) a number equal to the number of whole years in the estimated



longer or longest estimated life, as at the end of the relevant

year of income;


(4) For the purposes of subsection (3), the amount of the allowable

(post 19 July 1982) capital expenditure incurred by a taxpayer that

is unrecouped as at the end of a year of income (in this subsection


deducting from the amount of that allowable (post 19 July 1982)

capital expenditure the sum of:

(a) any part of that allowable (post 19 July 1982) capital

expenditure that:

(i) has been allowed or is allowable, or, but for the

operation of subsection (6), would have been allowed or

would be allowable, as a deduction under subsection (2)

in respect of a year of income preceding the relevant

year of income; or









deduction under subsection (2) in respect of a year of

income preceding the relevant year of income; and

(b) so much of any amounts specified in notices duly given to




Section 122DG



income or a year of income preceding the relevant year of

income, of a mining or prospecting right or mining or

prospecting information as:

(i) is attributable to that allowable (post 19 July 1982)

capital expenditure; and

(ii) has not been allowed and is not allowable as a deduction

under subsection (2) in respect of a year of income

preceding the relevant year of income.

(5) For the purposes of subparagraphs (4)(a)(ii) and (4)(b)(ii), an

amount that would have been allowed or allowable as a deduction

under subsection (2) but for the operation of subsection (6) shall be

deemed to have been allowed or to be allowable as such a

deduction.

(6) Subject to subsection (6B), the amount, or the total of the amounts,

of the deduction or deductions allowable under subsection (2) in

respect of a year of income (including any amount that is deemed

to be a deduction so allowable by virtue of subsection (7)) shall not

exceed an amount equal to so much of the assessable income of the

year of income as remains after deducting all allowable deductions,

other than deductions allowable under this section, under

section 122J, under section 122JE or under section 122JF, and,

where the total of the amounts of 2 or more deductions that would

be allowable under this section but for this subsection exceeds the




(6A) A taxpayer may elect, in relation to a year of income, that

subsection (6B) shall apply in relation to all allowable (post

19 July 1982) capital expenditure in relation to the taxpayer

incurred after the end of the year of income that commenced on

1 July 1984.

(6B) Where:

(a) a taxpayer makes an election under subsection (6A) in

relation to expenditure of a kind referred to in that subsection

in relation to a year of income; and

(b) but for this subsection, subsection (6) would apply to limit or

reduce the amount of a deduction otherwise allowable under



Section 122DG


subsection (2) in relation to the year of income in relation to

an amount of expenditure of that kind;

subsection (6) does not apply to limit or reduce the amount of the

deduction.

(6C) Where, apart from subsection (6B), subsection (6) would apply to

limit or reduce the amount of a deduction otherwise allowable in

relation to a year of income in relation to an amount of expenditure

in respect of which a taxpayer has not made an election under this

section in relation to the year of income, nothing in subsection (6B)

affects the application of subsection (6) in relation to that year of

income in relation to that amount.

(7) Subject to subsections (8) and (9), where the whole or a part of a

deduction in respect of a year of income is disallowed under

subsection (6), that whole or part shall be deemed to be a deduction

that is allowable under subsection (2) in respect of the next

succeeding year of income.

Note: Subsection (2A) limits deductions allowable under subsection (2) to years of income before the 1997-98 year of income. Section 330-45 of the Income Tax (Transitional Provisions) Act 1997 converts the whole or a part of a deduction disallowed in the 1996-97 year of income into an amount a taxpayer can deduct in the 1997-98 year of income.

(8) Where:

(a) an amount of allowable (post 19 July 1982) capital

expenditure was incurred by a taxpayer on property (not

being property in respect of which a notice has been duly

given to the Commissioner under section 122B) that, during a

year of income, has been disposed of, lost or destroyed or the

use of which by the taxpayer for prescribed purposes has

been otherwise terminated; and

(b) the whole or a part of an amount (which whole or part is in

this subsection referred to as the relevant amount) in respect

of which a deduction would, but for this subsection, be

allowable to the taxpayer in that year of income or in a

succeeding year of income by virtue of the operation of

subsection (7) is attributable to the amount referred to in

paragraph (a);

a deduction is not allowable to the taxpayer in respect of the

relevant amount.

(9) Where:



Section 122H


(a) an amount is specified in a notice duly given to the

Commissioner under section 122B in relation to the

acquisition from a taxpayer, during a year of income, of a

mining or prospecting right or mining or prospecting

information; and







paragraph (a);


relevant amount.

(10) Where:

(a) after 17 August 1976, a taxpayer has incurred allowable

capital expenditure on property the use of which by the

taxpayer for prescribed purposes has been terminated; and

(b) the property has, after 19 July 1982, come into use by the

taxpayer for purposes for which allowable capital

expenditure may be incurred;

so much of that first-mentioned expenditure as the Commissioner

determines shall, for the purposes of this section, be deemed to

have been incurred by the taxpayer on that property, on the day on

which that property so came into use by the taxpayer, for the

purposes for which that property so came into use.




the estimated life shall, for the purposes of paragraph (3)(b), be

taken to be such period as the Commissioner considers reasonable.

122H Election that Subdivision not apply to plant

(1) A person may elect that this section shall apply in respect of

expenditure on a unit of plant incurred in the year of income, and

any further expenditure on that unit of plant incurred in a

subsequent year and, where such an election has been made,

expenditure to which the election applies shall be deemed not to be



Section 122J


allowable capital expenditure for the purposes of this Subdivision

or expenditure referred to in section 122J.

(2) The year of income to which an election under this section relates

shall be the first year of income in which the taxpayer incurs, in

relation to the unit of plant to which the election relates,

expenditure that, but for the election, would be allowable capital

expenditure or expenditure referred to in section 122J.

122J Exploration and prospecting expenditure

(1) Subject to this section, expenditure incurred by the taxpayer during

the year of income on exploration or prospecting for minerals

obtainable by prescribed mining operations shall be an allowable

deduction.



Note: Subdivision 330-A of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for expenditure incurred on exploration or prospecting for minerals obtainable by eligible mining operations in the 1997-98 year of income or a later year of income.

(2) A deduction is not allowable under this section in any year of

income in respect of expenditure incurred on or before 21 August

1984 (including expenditure incurred on or before that date that is

deemed, by virtue of subsection (4), to be incurred during the year

of income) unless, in the year of income, the taxpayer carried on a

mining business or mining businesses (other than a business of

mining for petroleum), and the amount of the deduction in respect

of that expenditure shall not exceed the amount remaining after

deducting from the assessable income derived from the carrying on

of that business or those businesses, and from the activities of the

taxpayer associated directly or indirectly with the carrying on by

the taxpayer of that business or those businesses, all other

allowable deductions (other than deductions under this section) that

directly relate to any such business or activities.

(3) Where, in the case of expenditure incurred during the year of

income that ended on 30 June 1974 or a preceding year of income,

the amount of the expenditure exceeds the amount of the deduction

allowable under this section, the excess shall, except for the

purposes of section 122DA, be deemed to be allowable capital

expenditure incurred by the taxpayer in the first subsequent year of



Section 122J


income in which the taxpayer carries on prescribed mining

operations.

Note: Section 330-10 of the Income Tax (Transitional Provisions) Act 1997 converts any excess amount at the end of the 1996-97 year of income into exploration or prospecting expenditure incurred by the taxpayer in the 1997-98 year of income.

(3A) Where:

(a) an amount of income derived by the taxpayer in a year of


27 October 1977 occurred or a subsequent year of income,

(in this subsection referred to as the year of sale) from the

sale, transfer or assignment of rights to mine on any mining

tenement is or has been exempt from income tax by virtue of

paragraph 23(pa); and

(b) in relation to that tenement, there are any excess amounts of

expenditure referred to in subsection (3) of this section that

have not been, and are not required to be, deemed to be

allowable capital expenditure incurred by the taxpayer in the

year of sale or a prior year of income;

subsection (3) of this section does not operate so as to require the

taxpayer to be deemed to have incurred, as allowable capital

expenditure, in any year of income after the year of sale, any part

of those excess amounts that does not exceed the amount that

remains after deducting from that exempt income the amount, if

any, by which, in relation to that tenement, the residual previous

capital expenditure of the taxpayer as at the end of the year of sale

has been reduced under subsection 122C(3A).

(4) Where the amount of the expenditure of the kind referred to in

subsection (1) that was incurred during the year of income, being

expenditure incurred after the year of income that ended on

30 June 1974 and on or before 21 August 1984 (including any

expenditure that is deemed to have been incurred during the

first-mentioned year of income by any previous application or

applications of this subsection), exceeds the amount of the

deduction allowable under this section in respect of that

expenditure in respect of the first-mentioned year of income, the

excess amount shall, for the purposes of subsection (1), be deemed

to have been incurred by the taxpayer during the first subsequent

year of income in which the taxpayer carries on prescribed mining

operations.



Section 122J



(4A) Where:

(a) an amount of income derived by the taxpayer in a year of


27 October 1977 occurred or a subsequent year of income,

(in this subsection referred to as the year of sale) from the

sale, transfer or assignment of rights to mine on any mining

tenement is or has been exempt from income tax by virtue of

paragraph 23(pa); and

(b) in relation to that tenement there are any excess amounts of

expenditure referred to in subsection (4) that have not been,

and are not required to be deemed, for the purposes of

subsection (1), to have been incurred by the taxpayer in the

year of sale or in a prior year of income;

subsection (4) does not operate so as to require the taxpayer to be

deemed to have incurred, in any year of income after the year of

sale, any part of those excess amounts that does not exceed so

much of the amount of the exempt income as has not been applied:

(c) under subsection 122C(3A) in reduction of the residual

previous capital expenditure of the taxpayer as at the end of

the year of sale; or

(d) under subsection (3A) of this section in reduction of the

amount of expenditure that, but for that subsection, would be

deemed to be allowable capital expenditure incurred by the

taxpayer in any year of income after the year of sale.

(4B) Subject to subsection (4BB), the amount of the deduction

allowable under this section in respect of expenditure incurred

during the year of income, being expenditure incurred after

21 August 1984, shall not exceed an amount equal to so much of

the assessable income of the year of income as remains after

deducting all allowable deductions, other than deductions

allowable under this section, or under section 122JF, in respect of

expenditure incurred after that date.

(4BA) A taxpayer may elect, in relation to a year of income, being the

year of income that commenced on 1 July 1985 or a subsequent

year of income, that the limit in subsection (4B) shall not apply in



Section 122J


relation to actual expenditure in relation to the taxpayer in relation


(4BB) Where:

(a) a taxpayer makes an election under subsection (4BA) in

relation to a year of income; and

(b) but for this subsection, subsection (4B) would apply to limit

the amount of the deduction otherwise allowable under this

section in relation to expenditure incurred by the taxpayer

during the year of income;

the following provisions have effect:

(c) subsection (4B) does not apply in relation to expenditure

incurred by the taxpayer during the year of income;

(d) the deduction allowable under this section in respect of any

deemed expenditure in relation to the taxpayer in relation to

the year of income is an amount ascertained in accordance

with the formula A C

A + B, where:

A is the number of whole dollars in the amount of the


the year of income.

B is the number of whole dollars in the amount of the actual

expenditure in relation to the taxpayer in relation to the year

of income; and

C is an amount equal to the assessable income of the

taxpayer of the year of income reduced by the sum of all

deductions allowable from that assessable income, other than

deductions allowable under this section in respect of

expenditure incurred after 21 August 1984.

(4BC) For the purposes of subsections (4BA) and (4BB):

(a) a reference to actual expenditure in relation to a taxpayer in

relation to a year of income is a reference to expenditure of a

kind referred to in subsection (1) incurred by the taxpayer

during the year of income, other than deemed expenditure in

relation to the taxpayer in relation to the year of income; and

(b) a reference to deemed expenditure in relation to a taxpayer in


kind referred to in subsection (1) that is deemed by

subsection (4C) to have been incurred by the taxpayer during

the year of income.



Section 122J


(4C) Where the amount of the expenditure of the kind referred to in


expenditure incurred after 21 August 1984 (including any

expenditure incurred after that date that is deemed to have been

incurred during the year of income by any previous application or



expenditure in respect of the year of income, the excess amount

shall, for the purposes of subsection (1), be deemed to have been

incurred by the taxpayer during the first subsequent year of income

in which the taxpayer derives assessable income.


(4D) A deduction is not allowable under this section in respect of

expenditure incurred during the year of income, being expenditure

incurred after 21 August 1984, unless:

(a) the Commissioner is satisfied that, during the year of income,

the taxpayer carried on, or proposed to carry on, prescribed

mining operations; or

(b) the Commissioner is satisfied that:

(i) during the year of income, the taxpayer carried on a

business of, or a business that included, exploration or

prospecting for minerals obtainable by prescribed

mining operations; and

(ii) the expenditure was necessarily incurred in carrying on

that business.

(4E) Where:

(a) an amount of income derived by the taxpayer after 21 August

1984 from the sale, transfer or assignment of rights to mine

on any mining tenement is or has been exempt from income

tax in a year of income (in this subsection referred to as the

year of sale) by virtue of paragraph 23(pa); and

(b) in relation to that tenement there are any excess amounts of

expenditure referred to in subsection (4C) that have not been,

and are not required to be, deemed, for the purposes of





Section 122J


subsection (4C) does not operate so as to require the taxpayer to be

deemed to have incurred, in any year of income after the year of

sale, any part of those excess amounts that does not exceed so

much of the amount of the exempt income as has not been applied:

(c) under subsection 122C(3A) in reduction of the residual


the year of sale;

(d) under subsection (3A) of this section in reduction of the


deemed to be allowable capital expenditure incurred by the

taxpayer in any year of income after the year of sale; or

(e) under subsection (4A) of this section in reduction of the


deemed to have been incurred by the taxpayer in any year of

income after the year of sale.

(5) Where an amount specified in a notice duly given to the

Commissioner under section 122B in relation to the acquisition

from the taxpayer of a mining or prospecting right or mining or

prospecting information is attributable to the whole or a part of an

excess amount of expenditure referred to in subsection (3), (4) or

(4C), the excess amount or the part of the excess amount, as the

case may be:

(a) shall not, under subsection (3), (4) or (4C), be deemed to

have been incurred by the vendor in the year of income in

which the transaction to which the notice relates occurred or

any subsequent year of income; and

(b) shall not be taken into account in calculating the amount to

be included in the allowable capital expenditure of a

purchaser by virtue of a notice given to the Commissioner

under section 122B in respect of a transaction entered into

after the first-mentioned transaction.

(6) In this section, exploration or prospecting means any one or more

of the following:

(a) geological mapping, geophysical surveys, systematic search

for areas containing minerals, and search by drilling or other

means for minerals within those areas; and

(b) search for ore within or in the vicinity of an ore-body by

drives, shafts, cross-cuts, winzes, rises and drilling;



Section 122JA


but does not include operations in the course of working a mining

property.

122JA Deductions where exempt income derived

Notwithstanding any other provision of this Act, where a taxpayer

derives from the working of a mining property income that is

exempt from income tax in pursuance of paragraph 23(o) and

income that is assessable income:

(a) allowable capital expenditure of the taxpayer does not

include expenditure related directly or indirectly to the

operations on that mining property, other than expenditure

(not being expenditure on housing and welfare) that was

incurred for the purposes of the recovery of pyrites from ore

mined on that property or the transport on that property of

ore mined on that property and would not have been incurred

if the assessable income derived from the working of that

property had not been derived; and

(b) a deduction from assessable income shall not be allowed in

respect of or in relation to:

(i) losses or outgoings, not being losses or outgoings of

capital or of a capital nature, incurred by the taxpayer in

the year of income in relation to the working of the

property, to the extent to which they would have been

incurred if the assessable income derived from the

working of that property had not been derived;

(ii) depreciation of a unit of plant used, or installed ready

for use, in connexion with the working of that property,

other than a unit of plant used in the recovery of pyrites

from ore mined on that property or in the transport on

that property of ore mined on that property and being a

unit of plant that would not have been required if the

assessable income derived from the working of that

property had not been derived;

(iii) an amount appropriated by the taxpayer for expenditure

for purposes that are, to any extent, related to gaining or

producing that exempt income;

(iv) so much of an amount otherwise allowable as a

deduction under subsection 122K(3) as, in the opinion

of the Commissioner, should, having regard to the



Section 122JAA


operation of the preceding provisions of this section, be

excluded from the allowable deductions; or

(v) a premium paid by the taxpayer in relation to a lease of

the mining property.

122JAA Roll-over relief where CGT roll-over relief allowed under



section 122R

Roll-over relief where CGT roll-over relief allowed

(1) This section applies to the disposal of property before the 1997-98

year of income by a taxpayer (in this section called the transferor)

to another taxpayer (in this section called the transferee) if:

(a) either:

(i) in a case where the transferor is not a partnership—

section 160ZZM, 160ZZMA, 160ZZN or 160ZZO

applies to the disposal of the property by the transferor;

or

(ii) if the transferor is a partnership—the property is

partnership property of the partnership and

section 160ZZNA applies to the corresponding disposal,

by all of the partners in the partnership, of their interests

in the property; and

(b) subject to subsection (22A), deductions have been allowed or

are allowable under this Subdivision to the transferor in

respect of the property.

Note: Common rule 1 in Subdivision 41-A of the Income Tax Assessment Act 1997 sets out when roll-over relief is available in relation to the disposal of property in the 1997-98 year of income or a later year of income.

Roll-over relief where joint election made under section 122R

(2) This section also applies if a joint election for roll-over relief is

made under subsection 122R(2) by both the transferor and the

transferee referred to in that subsection in relation to the disposal

of property before the 1997-98 year of income.

Note: Common rule 1 in Subdivision 41-A of the Income Tax Assessment Act 1997 sets out when a joint election for roll-over relief may be



Section 122JAA


made in relation to the disposal of property in the 1997-98 year of income or a later year of income.

No balancing charges or deductions

(3) Section 122K (which deals with balancing charges and deductions)

does not apply to the disposal of the property by the transferor.

Transferee to inherit certain characteristics from transferor

(4) This Subdivision and Subdivision C (to the extent to which it

relates to this Subdivision) apply as if:

(a) if any part of the expenditure of the transferor in respect of

the property is allowable capital expenditure of the

transferor—the transferee had acquired the property for a

consideration equal to the amount worked out using the

formula:

Transferor’s Transferor’s Undeducted– +expenditure deductions excess amounts

where:

Transferor’s expenditure means so much of the total

expenditure of a capital nature of the transferor in respect of

the property as is allowable capital expenditure of the

transferor.

Transferor’s deductions means the sum of the deductions

allowed or allowable to the transferor under this Subdivision

in respect of so much of the expenditure of a capital nature of

the transferor in respect of the property as is allowable capital

expenditure of the transferor.

Undeducted excess amounts means the sum of the excess

amounts referred to in subsection (5) in respect of the

property; and

(b) if no part of the expenditure of the transferor in respect of the

property is allowable capital expenditure of the transferor—

the transferee had acquired the property for nil consideration;

and

(c) if the property is a mining or prospecting right or mining or

prospecting information:

(i) a notice under section 122B in respect of the acquisition

of the property had been given to the Commissioner by

the transferor and the transferee; and



Section 122JAA


(ii) the amount specified in the notice were the amount

worked out under paragraph (a) of this subsection; and

(iii) subsections 122B(2), 122DG(9) and 122J(5) were not

applicable to that notice; and

(d) if the property is not a mining or prospecting right or mining

or prospecting information—subsection 122DG(8) were not

applicable to the disposal of the property; and

(da) if:

(i) the property is a qualifying interest in relation to a cash

bidding exploration permit (within the meaning of

section 122BA); and

(ii) immediately before the disposal, the transferor had an

entitlement to an eligible cash bidding amount (within

the meaning of that section) in relation to that permit;

the following were the case:

(iii) an agreement under section 122BA in respect of the

acquisition of the property had been made by the

transferor and the transferee; and

(iv) the amount specified in the agreement were equal to the

whole of the transferor’s entitlement to the eligible cash

bidding amount; and

(e) the reference in paragraph 122DG(3)(a) to a year of income

in respect of which a deduction has been allowed or is

allowable, or, apart from the operation of subsection

122DG(6), would have been allowed or would be allowable,

in respect of an amount of allowable capital expenditure of

the transferee in respect of the property included a reference

to a year of income in respect of which a deduction has been

allowed or is allowable, or, apart from the operation of

subsection 122DG(6), would have been allowed or would be

allowable, in respect of allowable capital expenditure of:

(i) the transferor in respect of the property; or

(ii) if there have been 2 or more prior successive

applications of this section—any of the prior successive

transferors in respect of the property.

Transfer of subsection 122DG(7) excess amounts

(5) If, apart from this subsection, the following conditions are satisfied

in relation to a deduction allowable to the transferor under

subsection 122DG(2) in respect of the property:



Section 122JAA


(a) the deduction is allowable because of the application of

subsection 122DG(7);

(b) the deduction is in respect of an amount (in this subsection

called the excess amount) of expenditure of a capital nature

in respect of the property;

(c) the deduction is allowable for the year of income in which

the disposal took place;

then:

(d) the excess amount is taken, under subsection 122DG(7), to

be a deduction that is allowable under subsection 122DG(2)

to the transferee for the year of income in which the disposal

took place; and

(e) a deduction is not allowable to the transferor under

subsection 122DG(2) in respect of the excess amount.

Transfer of subsection 122J(3) excess amounts

(6) If, apart from this subsection, the following conditions would have

been satisfied in relation to an amount (in this subsection called the

excess amount) of contingent allowable capital expenditure of the

transferor in respect of the property:

(a) the expenditure is taken to be contingent allowable capital

expenditure because of subsection 122J(3);

(b) the contingency is that the transferor carried on prescribed

mining operations in the year of income in which the disposal

took place or a subsequent year of income;

then:

(c) the excess amount is taken, under subsection 122J(3), to be

allowable capital expenditure incurred by the transferee in:

(i) if the transferee carried on prescribed mining operations

in the year of income in which the disposal took place—

that year of income; or

(ii) the first subsequent year of income in which the

transferee carried on prescribed mining operations; and

(d) subsection 122J(3) does not apply in relation to the excess

amount in relation to the transferor.



Section 122JAA


Transfer of subsection 122J(4) excess amounts


been satisfied in relation to a contingent deduction allowable to the

transferor under subsection 122J(1) in respect of the property:


subsection 122J(4);


called the excess amount) of expenditure in respect of the

property;

(c) the contingency is that the transferor had carried on

prescribed mining operations in the year of income in which

the disposal took place or a subsequent year of income;

then:

(d) the excess amount is taken, under subsection 122J(4), to be a

deduction that is allowable under subsection 122J(1) to the

transferee for:

(i) if the transferee carried on prescribed mining operations

in the year of income in which the disposal took place—



transferee carried on prescribed mining operations; and


subsection 122J(1) in respect of the excess amount.

Transfer of subsection 122J(4C) excess amounts



transferor under subsection 122J(1) in respect of the property:


subsection 122J(4C);




(c) the contingency is that the transferor had derived assessable

income in the year of income in which the disposal took

place or a subsequent year of income;

then:



Section 122JAA


(d) the excess amount is taken, under subsection 122J(4C), to be

a deduction that is allowable under subsection 122J(1) to the

transferee for:

(i) if the transferee derives assessable income in the year of

income in which the disposal took place—that year of

income; or


transferee derives assessable income; and


subsection 122J(1) in respect of the excess amount.

Section 122C, 122DA, 122DC and 122DE and subsection

122DG(1)—inheritance of threshold conditions

(9) If section 122C, 122DA, 122DC or 122DE or subsection

122DG(1) applied to the expenditure of a capital nature of the

transferor in respect of the property, that section or subsection has

effect, in relation to the transferee and in relation to the property, as

if the threshold conditions that were satisfied in relation to the

transferor were satisfied in relation to the transferee.

Subsection (9)—threshold conditions

(10) For the purposes of subsection (9), the following are taken to be

threshold conditions in relation to expenditure in respect of

property:

(a) a condition that the expenditure was incurred before, at or

after a particular time;

(b) if the expenditure was incurred under a contract—a condition

that the contract was, or was not, entered into before, at or


(c) if the expenditure was incurred in respect of the construction

of property—a condition that the construction commenced,

or did not commence, before, at or after a particular time.

Subsections 122J(3) and (4)—inheritance of threshold conditions

(11) If subsection 122J(3) or (4) applied to the expenditure of the

transferor in respect of the property, that subsection has effect, in

relation to the transferee and in relation to the property, as if the

threshold conditions that were satisfied in relation to the transferor

were satisfied in relation to the transferee.



Section 122JAA




threshold conditions in relation to expenditure in respect of the

property:



(b) a condition that the expenditure was incurred during a

particular year of income.

Inheritance of section 122H election

(13) If the transferor made an election under section 122H in respect of

expenditure on the property, the transferee is taken to have made

an election under section 122H in respect of expenditure on the

property.

Rule where no section 122H election made

(14) If the transferor did not make an election under section 122H in

respect of expenditure on the property, the transferee is not entitled

to make an election under section 122H in respect of expenditure

on the property.

Inheritance of subsection 122A(1B) threshold conditions

(15) If:

(a) the property is plant or articles for the purposes of section 54;

and

(b) the expenditure of a capital nature of the transferor in respect

of the property is allowable capital expenditure;

then, section 122A has effect in relation to the transferee and in

relation to the property, as if the conditions set out in subsection

122A(1B) that were satisfied in relation to the transferor were

satisfied in relation to the transferee.

Leases—subsection 88B(5) election to have no effect

(16) If the property is a lease, being a mining or prospecting right, an

election under subsection 88B(5) (whether made before or after the

disposal) has no effect in relation to the grant, assignment or

surrender of the lease.



Section 122JAA


Provisions of Subdivision B of Division 16H—inheritance of

threshold conditions

(17) If a provision of Subdivision B of Division 16H applied to the

expenditure of the transferor in respect of the property, that

provision has effect, in relation to the transferee and in relation to

the property, as if the threshold conditions that were satisfied in

relation to the transferor were satisfied in relation to the transferee.




property:





Recoupment of expenditure—consequential amendment of

assessments

(19) Section 170 does not prevent the amendment at any time of an

assessment of the transferee where section 122T has applied to:

(a) the transferor in respect of the property; or

(b) if there have been 2 or more prior successive applications of

this section—any of the prior successive transferors in


Disposal by transferee where no roll-over relief—inheritance of

deductions

(20) If:

(a) after the disposal of the property to the transferee:

(i) the property is lost or destroyed; or

(ii) the transferee disposes of the property; or

(iii) the use of the property by the transferee for prescribed

purposes or eligible purposes (within the meaning of

section 122K) is otherwise terminated; and

(b) in the case of a disposal by the transferee—this section does

not apply to the disposal;



Section 122JAA


then, for the purposes of the application of section 122K in relation

to the loss, destruction, disposal or termination, the total of:

(c) the deductions allowed or allowable to the transferor under

this Subdivision in relation to the property; and

(d) if there have been 2 or more prior successive applications of

this section—the deductions allowed or allowable to the prior

successive transferors under this Subdivision in relation to

the property;

are taken to have been deductions allowed or allowable to the

transferee under this Subdivision in relation to the property.


total expenditure of a capital nature

(21) In spite of subsection (4), if:










to the loss, destruction, disposal or termination, the total

expenditure of a capital nature of the transferee in respect of the

property is to be worked out as if the rule set out in subsection (22)

had been applicable to:

(c) the disposal of the property by the transferor to the

transferee; and


this section—each prior successive disposal.

Rule referred to in subsection (21)

(22) The rule referred to in subsection (21) is that the transferee had

acquired the property for a consideration equal to the total

expenditure of a capital nature of the transferor in respect of the

property.



Section 122JB


Second or subsequent application of section—paragraph (1)(b)

does not apply

(22A) If, apart from this subsection, this section has applied to the

disposal of the property to the transferee, then, in working out

whether this section applies to a subsequent disposal of the

property by:

(a) the transferee; or

(b) one or more subsequent successive transferees;

this section has effect as if paragraph (1)(b) (which deals with

deductions) had not been enacted.

CGT roll-over relief applies to motor vehicles

(23) For the purposes of this section, in addition to the effect that

sections 160ZZM, 160ZZMA, 160ZZN, 160ZZNA and 160ZZO

have apart from this subsection, those sections also have the effect

that they would have if a reference in those sections to an asset

included a reference to a motor vehicle of a kind covered by

paragraph 82AF(2)(a).

Subdivision B—Quarrying

122JB Interpretation


allowable capital expenditure has the meaning given by

section 122JC.

concentration means concentration by a gravity, magnetic,

electrostatic or flotation process.

eligible purposes means:

(a) the purposes for which allowable capital expenditure may be

incurred; or

(b) the purposes referred to in section 122JF.

eligible quarrying operations means quarrying operations on a

quarrying property for the extraction of quarry materials from their

natural site, being operations carried on for the purpose of gaining

or producing assessable income, but does not include prescribed

mining operations within the meaning of Subdivision A.



Section 122JB


housing and welfare means:

(a) residential accommodation; or

(b) health, educational, recreational or other similar facilities; or

(c) facilities for the provision of meals;

and includes works carried out directly in connection with such

accommodation or facilities (including works for the provision of

water, light, power, access or communications).

property includes a quarrying or prospecting right.

quarry materials means any materials obtained by quarrying.

quarrying or prospecting information means geological,

geophysical or technical information, being information that:

(a) relates to the presence, absence or extent of deposits of

quarry materials in an area or is likely to be of assistance in

determining the presence, absence or extent of such deposits

in an area; and

(b) has been obtained from exploration or prospecting, or

quarrying, for quarry materials.

quarrying or prospecting right means:

(a) an authority, licence, permit or right to quarry or prospect for

quarry materials in a particular area; or

(b) a lease of land by virtue of which the lessee is entitled to

quarry or prospect for quarry materials on the land;

and includes an interest in such an authority, licence, permit, right

or lease and, for the purposes of provisions relating to the

acquisition by a person of a quarrying or prospecting right from

another person, also includes any rights in respect of buildings or

other improvements on the land concerned, or used in connection

with operations on the land concerned, that are acquired with the

quarrying or prospecting right, but does not include rights in

respect of housing and welfare.

treatment means:

(a) cleaning, leaching, crushing, grinding, breaking, screening,

grading or sizing; or

(b) concentration; or

(c) any other treatment applied to quarry materials, being a

treatment that is applied before concentration or, in the case

of quarry materials not requiring concentration, that would, if



Section 122JBA


the quarry materials had required concentration, have been

applied before the concentration;

and, without extending, by implication, the processes that are

included in this definition, does not include sintering or calcining.

(2) Where a taxpayer carries on eligible quarrying operations on 2 or

more quarrying properties, this Subdivision (other than

section 122JF), except to the extent to which the contrary intention

appears, is to be construed as applying in relation to the operations

of that taxpayer on and in connection with each of those quarrying

properties as if it were the only quarrying property on which the

taxpayer carried on eligible quarrying operations, and, for the

purposes of the application of this Subdivision (other than

section 122JF) in relation to a taxpayer in relation to a quarrying

property:

(a) any matters or things relating exclusively to any other

quarrying property on which the taxpayer carried on eligible

quarrying operations are to be disregarded; and

(b) amounts of expenditure or other amounts to which

paragraph (a) does not apply are to be apportioned in such

manner as the Commissioner considers reasonable.

(3) If, by virtue of a provision of this Subdivision, an amount is taken

to be specified in a notice in lieu of another amount, a reference in

this Subdivision to an amount specified in the notice is to be read

as a reference to that first-mentioned amount.

(4) For the purposes of this Subdivision:

(a) any amount specified in a notice given to the Commissioner

under section 122JD in relation to the acquisition from a

taxpayer of a quarrying or prospecting right or quarrying or

prospecting information is to be taken to be wholly

attributable to expenditure incurred by the taxpayer; and

(b) the extent to which such an amount is attributable to

particular expenditure, to expenditure of a particular class or

to expenditure incurred at a particular time or during a

particular period is to be determined by the Commissioner.

122JBA Subdivision subject to Division 245 of Schedule 2C

This Subdivision has effect subject to Division 245 of

Schedule 2C.



Section 122JC


122JC Allowable capital expenditure

(1) For the purposes of this Subdivision, allowable capital expenditure

of a taxpayer is expenditure of a capital nature incurred by the

taxpayer, being:

(a) expenditure in carrying on eligible quarrying operations,

including expenditure:

(i) in preparing a site for such operations; or

(ii) on buildings or other improvements necessary for the

carrying on by the taxpayer of such operations; or

(iii) in providing, or by way of contribution to the cost of

providing, water, light or power for use on, or access to

or communications with, the site of eligible quarrying

operations carried on, or to be carried on, by the

taxpayer; or

(b) expenditure on:

(i) buildings for use directly in connection with the

operation or maintenance of plant, being plant for use

primarily and principally in the treatment of quarry

materials obtained from the carrying on by the taxpayer

of eligible quarrying operations; or

(ii) buildings or other improvements for use directly in

connection with the storage (whether before or after

treatment) of quarry materials in relation to the

operation of plant of the kind mentioned in

subparagraph (i); or

(c) expenditure on acquiring:

(i) a quarrying or prospecting right from another person; or

(ii) quarrying or prospecting information from another

person;

to the extent only of the amount of the expenditure that is

specified in a notice under section 122JD given to the

Commissioner by the taxpayer and that other person.

(2) Subsection (1) does not apply to expenditure on property, being

plant or articles for the purposes of section 54.

(3) Subsection (1) does not apply to expenditure on housing and

welfare.



Section 122JD


(4) Without extending, by implication, the operation of subsection (1),

the expenditure referred to in that subsection does not include

expenditure incurred by the taxpayer on or in relation to:

(a) ships, railway rolling-stock or road vehicles, or railway lines,

roads, pipelines or other facilities, for use wholly or partly for

the purpose of the transport of quarry materials or products of

quarry materials, other than transport wholly within the site

of eligible quarrying operations carried on by the taxpayer; or

(b) works carried out in connection with, or buildings or other

improvements or plant constructed or acquired for use in

connection with, the establishment, operation or use of a port

or other facilities for ships; or

(c) an office building that is not situated at or adjacent to the site

of eligible quarrying operations carried on by the taxpayer.

122JD Purchase of quarrying or prospecting right or information

(1) Where a person (in this section called the purchaser) has incurred

expenditure in acquiring from another person (in this section called

the vendor), for the purpose of carrying on:

(a) eligible quarrying operations; or

(b) exploration or prospecting for quarry materials obtainable by

eligible quarrying operations;

a quarrying or prospecting right or quarrying or prospecting

information, the purchaser and the vendor may give notice to the

Commissioner that they have agreed to the inclusion in the

allowable capital expenditure of the purchaser of an amount

specified in the notice, being the whole or a part of that

expenditure.

(2) If the amount specified in a notice given under this section in


(a) so much of the capital expenditure (other than expenditure on

plant or expenditure of a kind referred to in section 122JF)

incurred by the vendor after 15 August 1989 and before the

date of the transaction in relation to the area that is the

subject of the right or to which the information relates as:

(i) has not been allowed and is not allowable as a deduction

to the vendor under subsection 122JE(1) in respect of a

year of income of the vendor preceding the year of

income during which the transaction occurred; and



Section 122JD


(ii) is attributable to an amount of expenditure incurred in

relation to that area that has not been taken into account

in determining an amount to be included in the

allowable capital expenditure of a person under

paragraph 122JC(1)(c) in respect of a transaction

entered into before the first-mentioned transaction; and

(b) any expenditure of the vendor (other than expenditure on

plant in use by the vendor at the date of the transaction) of a

kind referred to in section 122JF incurred by the vendor after

15 August 1989 and before the date of the transaction that

has not been allowed and is not allowable as a deduction to

the vendor in the year of income in which the transaction

takes place or in any prior year of income; and

(c) the amount included in the vendor’s assessable income under

section 122K in relation to property acquired by the

purchaser from the vendor in connection with the transaction;

the amount specified in the notice is to be taken, for all purposes of

this Subdivision, to be the amount in fact so specified less the

amount of the excess.

(3) For the purposes of paragraph (2)(a), the capital expenditure

incurred by the vendor in relation to an area the subject of a

quarrying or prospecting right is to be taken not to include capital

expenditure on buildings or other improvements unless rights in

respect of them are acquired by the purchaser with the quarrying or

prospecting right.

(4) A notice under this section is not to be taken to have been given

where the notice relates to a lease in relation to the grant,

assignment or surrender of which the persons giving the notice

have (whether before or after the lodging of the notice with the

Commissioner) made an election under subsection 88B(5) that has

effect in relation to the grant, assignment or surrender.

(5) A notice under this section:

(a) must be in writing signed by or on behalf of the persons

giving the notice; and

(b) must be lodged with the Commissioner not later than 2

months after the end of the year of income of the purchaser in

which the right or information was acquired, or within such

further time as the Commissioner allows.



Section 122JE


122JE Deduction of allowable capital expenditure

(1) If, after 15 August 1989 and before the 1997-98 year of income, a

taxpayer incurs allowable capital expenditure, an amount worked

out in accordance with this section is an allowable deduction in

respect of that expenditure in the year of income the expenditure

was incurred and in all later years of income.







called the current year of income) in respect of an amount of

allowable capital expenditure incurred by the taxpayer is the

amount calculated using the following formula:

Unrecouped expenditure

Statutory factor

where:

Unrecouped expenditure means so much of that expenditure as is

unrecouped as at the end of the current year of income.

Statutory factor means whichever is the lesser of the following

numbers:

(a) a number equal to the difference between:

(i) 20; and

(ii) the number of years of income (if any) preceding the

current year of income in respect of which a deduction

has been allowed or is allowable, or, but for the


would be allowable, under subsection (1) in respect of

that amount of expenditure;


life of the quarry or proposed quarry on the quarrying



Section 122JE


property, or, if there is more than one such quarry, of the

quarry that has the longer or longest estimated life, as at the

end of the current year of income.


capital expenditure incurred by a taxpayer that is unrecouped as at

the end of a year of income (in this subsection called the current

year of income) is the amount calculated by deducting from the

amount of that allowable capital expenditure the sum of:

(a) any part of that allowable capital expenditure that:




in respect of a year of income preceding the current year

of income; or


of which a notice has been given to the Commissioner

under section 122JD by the taxpayer and a person who

acquired the property from the taxpayer):


(B) the use of which by the taxpayer for eligible




income preceding the current year of income; and

(b) so much of any amounts specified in notices given to the

Commissioner under section 122JD in relation to the

acquisition from the taxpayer, during the current year of

income or a year of income preceding the current year of

income, of a quarrying or prospecting right or quarrying or

prospecting information as:

(i) is attributable to that allowable capital expenditure; and



preceding the current year of income.



under subsection (1) but for the operation of subsection (5) is to be

taken to have been allowed or to be allowable as such a deduction.



Section 122JE


(5) Subject to subsection (6):

(a) the amount, or the total of the amounts, of the deduction or

deductions allowable under subsection (1) in respect of a

year of income (including any amount that is taken to be a

deduction so allowable because of subsection (9)) must not

exceed an amount equal to so much of the assessable income

of the year of income as remains after deducting all allowable

deductions (other than deductions allowable under this

section, under section 122DG, under section 122J or under

section 122JF); and

(b) where the total of the amounts of 2 or more deductions that

would be allowable under this section but for this subsection

exceeds the maximum amount determined in accordance

with this subsection, those deductions are to be reduced

respectively by amounts proportionate to those deductions

and equal in total to the excess.


subsection (7) is to apply in relation to all allowable capital

expenditure in relation to the taxpayer.

(7) Where:

(a) a taxpayer makes an election under subsection (6) in relation

to expenditure of a kind referred to in that subsection in


(b) but for this subsection, subsection (5) would apply to limit or

reduce the amount of a deduction otherwise allowable under

subsection (1) in relation to the year of income in relation to

an amount of expenditure of that kind;

subsection (5) does not apply to limit or reduce the amount of the

deduction.

(8) Where, apart from subsection (7), subsection (5) would apply to

limit or reduce the amount of a deduction otherwise allowable in

relation to a year of income in relation to an amount of expenditure

in respect of which a taxpayer has not made an election under this

section in relation to the year of income, nothing in subsection (7)

affects the application of subsection (5) in relation to that year of

income in relation to that amount.





Section 122JE


subsection (5), that whole or part is taken to be a deduction that is

allowable under subsection (1) in respect of the next succeeding

year of income.


(10) Where:

(a) an amount of allowable capital expenditure was incurred by a

taxpayer on property (not being property in respect of which

a notice has been given to the Commissioner under

section 122JD) that, during a year of income, has been

disposed of, lost or destroyed or the use of which by the

taxpayer for eligible purposes has been otherwise terminated;

and


this subsection called the attributable amount) in respect of

which a deduction would, but for this subsection, be


succeeding year of income because of the operation of


paragraph (a) of this subsection;


attributable amount.

(11) Where:

(a) an amount is specified in a notice given to the Commissioner

under section 122JD in relation to the acquisition from a

taxpayer, during a year of income, of a quarrying or

prospecting right or quarrying or prospecting information;

and


this subsection called the attributable amount) in respect of

which a deduction would, but for this subsection, be


succeeding year of income because of the operation of


paragraph (a) of this subsection;


attributable amount.



Section 122JF


(12) Where:

(a) a taxpayer has incurred allowable capital expenditure on

property the use of which by the taxpayer for eligible

purposes has been terminated; and

(b) the property has come into use by the taxpayer for purposes

for which allowable capital expenditure may be incurred;

so much of the first-mentioned expenditure as the Commissioner

determines is to be taken, for the purposes of this section, to have

been incurred by the taxpayer on that property, on the day on

which that property so came into use by the taxpayer, for the

purposes for which that property so came into use.

(13) Where, having regard to the information in the Commissioner’s

possession, the Commissioner is not satisfied that the estimated life

of a quarry or a proposed quarry as made by the taxpayer is a

reasonable estimate, the estimated life is to be taken, for the

purposes of paragraph (2)(b), to be such period as the

Commissioner considers reasonable.

122JF Exploration and prospecting expenditure

(1) Subject to this section, expenditure incurred by the taxpayer after

15 August 1989 and before the 1997-98 year of income on

exploration or prospecting for materials obtainable by eligible

quarrying operations is an allowable deduction in the year of

income the expenditure was incurred.

Note: Subdivision 330-A of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for expenditure incurred on exploration or prospecting for quarry materials obtainable by eligible quarrying operations in the 1997-98 year of income or a later year of income.

(2) Subject to subsection (4), the amount of the deduction allowable

under this section in respect of expenditure incurred during the

year of income is not to exceed an amount equal to so much of the



this section or under section 122J.

(3) A taxpayer may elect, in relation to a year of income, that the limit

in subsection (2) is not to apply in relation to actual expenditure in

relation to the taxpayer in relation to the year of income.

(4) Where:



Section 122JF



to a year of income; and

(b) but for this subsection, subsection (2) would apply to limit





(c) subsection (2) does not apply in relation to expenditure




the year of income is an amount calculated using the

following formula:

Reduced assessable income Deemed expenditure

Deemed expenditure + Actual expenditure

where:

Reduced assessable income means an amount equal to the

assessable income of the taxpayer of the year of income, reduced

by the sum of all deductions allowable from that assessable

income, other than deductions allowable under this section.

Deemed expenditure means the number of whole dollars in the

amount of the deemed expenditure in relation to the taxpayer in

relation to the year of income.

Actual expenditure means the number of whole dollars in the

amount of the actual expenditure in relation to the taxpayer in

relation to the year of income.

(5) For the purposes of subsections (3) and (4):








kind referred to in subsection (1) that is taken by

subsection (6) to have been incurred by the taxpayer during

the year of income.



Section 122JF



subsection (1) that was incurred during the year of income

(including any expenditure that is taken to have been incurred

during the year of income by any previous application or

applications of this subsection) exceeds the amount of the


expenditure in respect of the year of income, the excess amount is

to be taken, for the purposes of subsection (1), to have been




(7) A deduction is not allowable under this section in respect of

expenditure incurred during the year of income unless:


the taxpayer carried on, or proposed to carry on, eligible

quarrying operations; or




prospecting for materials obtainable by eligible

quarrying operations; and


that business.

(8) Where:

(a) an amount of income derived by the taxpayer from the sale,

transfer or assignment of rights to mine in a particular area in

Australia is or has been exempt from income tax in a year of

income (in this subsection called the year of sale) by virtue

of paragraph 23(pa); and

(b) in relation to that area there are any excess amounts of

expenditure referred to in subsection (6) that have not been,

and are not required to be, taken, for the purposes of



subsection (6) does not operate so as to require the taxpayer to be

taken to have incurred, in any year of income after the year of sale,



Section 122JF


any part of those excess amounts that does not exceed the amount

of the exempt income.

(9) Where an amount specified in a notice given to the Commissioner

under section 122JD in relation to the acquisition from the taxpayer

of a quarrying or prospecting right or quarrying or prospecting

information is attributable to the whole or a part of an excess

amount of expenditure referred to in subsection (6), the excess

amount or the part of the excess amount, as the case may be:

(a) is not, under subsection (6), to be taken to have been incurred

by the vendor in the year of income in which the transaction

to which the notice relates occurred or in any subsequent year

of income; and

(b) is not to be taken into account in calculating the amount to be

included in the allowable capital expenditure of a purchaser

by virtue of a notice given to the Commissioner under

section 122JD in respect of a transaction entered into after

the first-mentioned transaction.

(10) A person may elect that this subsection is to apply in respect of

expenditure on a unit of plant referred to in the election, being

expenditure incurred in the year of income specified in the

election, and any further expenditure on that unit of plant incurred

in a subsequent year and, where such an election has been made,

expenditure to which the election applies is not to be taken to be

expenditure referred to in subsection (1).

(11) The year of income specified in an election under subsection (10)

must be the first year of income in which the taxpayer incurs, in

relation to the unit of plant referred to in the election, expenditure,

that, but for the election would be expenditure referred to in

subsection (1).


exploration or prospecting means any one or more of the

following:

(a) geological mapping, geophysical surveys, systematic search

for areas containing quarry materials, and search by drilling

or other means for quarry materials within those areas;

(b) search for quarry materials by drives, shafts, cross-cuts,

winzes, rises and drilling;



Section 122JG


but does not include operations in the course of working a

quarrying property.

122JG Roll-over relief where CGT roll-over relief allowed under



section 122R





(a) either:




or









Note: Common rule 1 in Subdivision 41-A of the Income Tax Assessment Act 1997 sets out when roll-over relief is available in relation to the disposal of property in the 1997-98 year of income or a later year of income by a taxpayer to another taxpayer.

Roll-over relief where joint election made under section 122R


made under subsection 122R(2A) by both the transferor and the



Note: Common rule 1 in Subdivision 41-A of the Income Tax Assessment Act 1997 sets out when a joint election for roll-over relief may be made in relation to the disposal of property in the 1997-98 year of income or a later year of income.



Section 122JG



(3) Section 122K (which deals with balancing charges and

deductions) does not apply to the disposal of the property by the

transferor.





the property is allowable capital expenditure of the

transferor—the transferee had acquired the property for a


formula:


where:




transferor.


allowed or allowable to the transferor under this Subdivision

in respect of so much of the expenditure of a capital nature of





property; and


property is allowable capital expenditure of the transferor—


and

(c) if the property is a quarrying or prospecting right or

quarrying or prospecting information:

(i) a notice under section 122JD in respect of the

acquisition of the property had been given to the

Commissioner by the transferor and the transferee; and


worked out under paragraph (a) of this subsection; and



Section 122JG


(iii) subsections 122JD(2), 122JE(11) and 122JF(9) were not

applicable to that notice; and

(d) if the property is not a quarrying or prospecting right or

quarrying or prospecting information—subsection 122JE(10)

were not applicable to the disposal of the property; and

(e) the reference in subparagraph 122JE(2)(a)(ii) to a year of


is allowable, or, apart from the operation of subsection

122JE(5), would have been allowed or would be allowable,

in respect of an amount of allowable capital expenditure of

the transferee in respect of the property included a reference

to a year of income in respect of which a deduction has been

allowed or is allowable, or, apart from the operation of

subsection 122JE(5), would have been allowed or would be

allowable, in respect of allowable capital expenditure of:





Transfer of subsection 122JE(9) excess amounts



subsection 122JE(1) in respect of the property:


subsection 122JE(9);






then:

(d) the excess amount is taken, under subsection 122JE(9), to be

a deduction that is allowable under subsection 122JE(1) to

the transferee for the year of income in which the disposal

took place; and


subsection 122JE(1) in respect of the excess amount.



Section 122JG


Transfer of subsection 122JF(6) excess amounts



transferor under subsection 122JF(1) in respect of the property:


subsection 122JF(6);







then:

(d) the excess amount is taken, under subsection 122JF(6), to be

a deduction that is allowable under subsection 122JF(1) to

the transferee for:



income; or




subsection 122JF(1) in respect of the excess amount.

Inheritance of section 122JF election

(7) If the transferor made an election under subsection 122JF(10) in

respect of expenditure on the property, the transferee is taken to

have made an election under subsection 122JF(10) in respect of

expenditure on the property.

Rule where no section 122JF election made

(8) If the transferor did not make an election under subsection

122JF(10) in respect of expenditure on the property, the transferee

is not entitled to make an election under subsection 122JF(10) in

respect of expenditure on the property.



Section 122JG



assessments


assessment of the transferee where section 122T has applied to:






deductions

(10) If:
















the property;











Section 122JG













transferee; and







property.


does not apply




property by:








have apart from this subsection, these sections also have the effect






Section 122KAA


Subdivision C—General provisions

122KAA Subdivision subject to Division 245 of Schedule 2C


Schedule 2C.

122K Disposal, loss, destruction or termination of use of property

(1) This section applies where deductions have been allowed or are

allowable, under this Division or under provisions of a previous

law of the Commonwealth relating to the taxation of income

derived from mining operations, in respect of expenditure of a

capital nature by the taxpayer in respect of property of the taxpayer

which, in the year of income, has been disposed of, lost or

destroyed, or the use of which by the taxpayer for prescribed

purposes or eligible purposes has, in the year of income, been

otherwise terminated.

(1A) The disposal, loss or destruction of the property, or the termination

of use of the property by the taxpayer for prescribed purposes or

eligible purposes, must have occurred in the 1996-97 year of

income or an earlier year of income.

Note: Subdivision 330-J of the Income Tax Assessment Act 1997 deals with balancing adjustments for the 1997-98 year of income and later years of income.

(2) Where the aggregate of:

(a) the sum of the deductions so allowed or allowable; and

(b) the consideration receivable in respect of the disposal, loss or

destruction or, in the case of other termination of the use of

property, the value of the property at the date of termination

of use;

exceeds the total expenditure of a capital nature of the taxpayer in

respect of that property, so much of the amount of the excess as

does not exceed the sum of those deductions shall be included in

the assessable income.

(3) Where the total expenditure exceeds that aggregate, the excess

shall be an allowable deduction.



Section 122K



eligible purposes has the same meaning as in Subdivision B.

expenditure does not include expenditure in connexion with coal

mining operations incurred before the year of income that

commenced on 1 July 1951.

mining or prospecting right has the same meaning as in

Sub-division A.

prescribed purposes has the same meaning as in Subdivision A.

property includes:

(a) a mining or prospecting right; or

(b) a quarrying or prospecting right.

quarrying or prospecting right has the same meaning as in

Subdivision B.

rehabilitation-related activities has the same meaning as in

Division 10AB.

the consideration receivable in respect of the disposal, loss or

destruction means:

(a) where the property is sold (whether with or without other

property) for a specified price—the sale price of the property,

less the expenses of the sale of the property, or such part of

the expenses of the sale of the property together with the

other property as the Commissioner determines;

(b) where the property is sold with other property and a specified

price is not allocated to the property—such part of the total

sale price, less the expenses of the sale, as the Commissioner

determines;

(c) where the property is disposed of otherwise than by sale—the

value, if any, of the property at the date of disposal; or

(d) where the property is lost or destroyed—the amount or value

received or receivable under a policy of insurance or

otherwise in respect of the loss or destruction;

but does not include an amount that is included, or will, when

received, be included, in the assessable income of any year of

income under section 26AB or Division 4.



Section 122KA


(5) For the purposes of subsection (1), use of property by a taxpayer is

taken to be use for prescribed purposes if:

(a) the use is on or after 1 July 1991; and

(b) the use is for rehabilitation-related activities in relation to a

site on which the taxpayer conducted:

(i) prescribed mining operations within the meaning of

Subdivision A; or

(ii) activities in respect of which a deduction is allowable,

or has been allowed, under section 122J; and

(c) either of the following conditions is satisfied:

(i) the property is plant or articles for the purposes of

section 54;

(ii) the property is housing and welfare within the meaning

of Subdivision A.


taken to be use for eligible purposes if:



site on which the taxpayer conducted activities in respect of

which a deduction is allowable, or has been allowed, under

section 122JF; and

(c) the property is plant or articles for the purposes of section 54.

(7) A reference in subsection (5) or (6) to use of property by a

taxpayer for a particular purpose includes a reference to the

holding in reserve of property owned by the taxpayer which has

been installed ready for use for that purpose.

122KA Application of section 122K before 1 July 1991—subsequent

use of property for rehabilitation

(1) This section applies to property if:



section 54;

(ii) the property is housing and welfare within the meaning

of Subdivision A; and

(b) section 122K has applied in respect of the termination of use

of the property; and



Section 122KA


(c) the date of the termination (in this section called the

section 122K termination date) was before 1 July 1991; and

(d) no deduction is allowable, or has been allowed, in respect of

the use of the property that occurred in the period

commencing on the section 122K termination date and

ending on 30 June 1991; and

(e) the taxpayer commences to use the property for

rehabilitation-related activities on the day after the

section 122K termination date; and

(f) the taxpayer has not ceased to use the property for

rehabilitation-related activities before 1 July 1991.

(2) For the purposes of this section, the estimated eligible

rehabilitation period is the period:

(a) commencing on 1 July 1991; and

(b) ending on the day on which, as at 1 July 1991, it is estimated

that the property will cease to be used by the taxpayer for

rehabilitation-related activities.

(3) If, having regard to information in the Commissioner’s possession,

the Commissioner is not satisfied that the estimate is a reasonable

estimate, the estimated eligible rehabilitation period is taken to end

on such day as the Commissioner considers reasonable.

(4) For the purposes of this section, the estimated total rehabilitation

period is the period:

(a) commencing on the day after the section 122K termination

date; and

(b) ending at the end of the estimated eligible rehabilitation

period.

(5) For the purposes of this section, the actual eligible rehabilitation



(b) ending on the day on which the property is disposed of, lost

or destroyed, or the use of which by the taxpayer for

rehabilitation-related activities has been otherwise

terminated.

(6) For the purposes of this section, the actual total rehabilitation




Section 122KA


(a) commencing on the day after the section 122K termination

date; and

(b) ending at the end of the actual eligible rehabilitation period.

(7) An amount calculated using the following formula is allowable as a

deduction to the taxpayer for each year of income any part of

which occurs during both the actual eligible rehabilitation period

and the estimated eligible rehabilitation period:

Eligible rehabilitation days

in yearCapital amount

Days in estimated total

rehabilitation period

where:

Capital amount means the capital amount in relation to the

property.

Eligible rehabilitation days in year means the number of days in

so much of the year of income as occurs during both of the actual

eligible rehabilitation period and the estimated eligible

rehabilitation period.

Days in estimated total rehabilitation period means the number of

days in the estimated total rehabilitation period.

(8) Subsections (9) and (10) apply in relation to a year of income if:

(a) deductions are allowable, or have been allowed, under

subsection (7) in respect of the property; and

(b) the actual eligible rehabilitation period ends in the year of

income.

(9) The amount (if any) calculated using the following formula is an

allowable deduction to the taxpayer for the year of income:

DeductionsActual eligible rehabilitation daysCapital – previouslyamount Days in actual total allowed


where:


property.



Section 122KA


Actual eligible rehabilitation days means the number of days in

the actual eligible rehabilitation period.

Days in actual total rehabilitation period means the number of

days in the actual total rehabilitation period.

Deductions previously allowed means the total deductions that are

allowable, or have been allowed, under subsection (7) in respect of

the property.

(10) The amount (if any) calculated using the following formula is

included in the assessable income of the taxpayer of the year of

income:

Actual eligible rehabilitation daysFinal value

Days in actual total


where:

Final value means whichever of the following amounts is

applicable in relation to the property:

(a) in the case of the disposal, loss or destruction of the

property—the consideration receivable in respect of the

disposal, loss or destruction; or

(b) in the case of other termination of the use of the property—

the value of the property at the end of the actual eligible






(11) A reference in this section to use of property by a taxpayer for a

particular purpose includes a reference to the holding in reserve of

property owned by the taxpayer which has been installed ready for

use for that purpose.


actual eligible rehabilitation period has the meaning given by

subsection (5).



Section 122L


actual total rehabilitation period has the meaning given by

subsection (6).

capital amount, in relation to property, means the lesser of:

(a) the total expenditure of a capital nature of the taxpayer in

respect of the property; and

(b) the value of the property as at the section 122K termination

date.

estimated eligible rehabilitation period has the meaning given by

subsection (2).

estimated total rehabilitation period has the meaning given by

subsection (4).


Division 10AB.

section 122K termination date has the meaning given by

subsection (1).

122L Transactions between persons not at arm’s length

(1) Where:

(a) a person has purchased from another person a unit of

property (other than a mining or prospecting right or a

quarrying or prospecting right):

(i) in respect of which the vendor had incurred capital

expenditure of a kind in respect of which deductions are

or have been allowable under this Division; or

(ii) the expenditure of the purchaser in acquiring which is

expenditure of such a kind;

(b) the Commissioner is satisfied that, having regard to any

connexion between the vendor and the purchaser or to any

other relevant circumstances, those persons were not dealing

with each other at arm’s length; and

(c) the purchase price is greater or less than the amount that, in

the opinion of the Commissioner, was the value of the unit at

the time of the purchase;

the purchase price shall, for all purposes of the application of this

Act in relation to the vendor or the purchaser, be deemed to have

been that amount.



Section 122M




Subdivision A.


Subdivision B.

122M Elections

An election under any of the provisions of this Division must be

made on or before the last day for the lodgment of the return of

income of the year of income to which the election relates, or


122N Deductions not allowable under other provisions

(1) Where the whole or a part of expenditure of a capital nature

incurred by a taxpayer has been allowed or is or may become

allowable as a deduction under this Division, or under provisions

of a previous law of the Commonwealth relating to the taxation of

income derived from mining operations, that expenditure shall not

be an allowable deduction, and shall not be taken into account in

ascertaining the amount of an allowable deduction, from the

assessable income of the taxpayer of any year of income under any

provision of this Act other than a provision of this Division.

(2) Subsection (1) does not prevent a deduction for depreciation being

allowed to a taxpayer in respect of a unit of property the use of

which for prescribed purposes or for the purposes referred to in

section 122JF has been terminated, and where, by reason of the

subsequent use of such a unit of property for a purpose other than a

prescribed purpose or a purpose referred to in section 122JF, such a

deduction becomes allowable, then, in the application of section 56

or 62 in relation to that deduction:

(a) the unit shall be deemed to have been acquired by the

taxpayer at a cost equal to the amount that, in the opinion of

the Commissioner, was the value of the unit at the date on

which it commenced to be used for that purpose; and

(b) no part of the cost of the unit shall be taken to have been

allowed or to be allowable under this Division as a deduction

from the assessable income of the taxpayer of any year of

income.



Section 122NB


(2A) A reference in subsection (2) to a prescribed purpose is a reference

to a prescribed purpose within the meaning of Subdivision A.

(3) For the purposes of subsection (1), an amount that would have

been allowed or allowable as a deduction under this Division but

for the operation of subsection 122D(3), 122DB(3), 122DD(3),

122DF(3), 122DG(6), 122J(2) or (4B), 122JE(5) or 122JF(2), shall

be deemed to have been allowed or to be allowable as such a

deduction.

122NB Apportionment of expenditure deductible under both

Subdivision A and Subdivision B

(1) Where a particular amount of expenditure (in this subsection called

the allowable amount) is covered by both of the following

categories:

(a) a particular kind of allowable capital expenditure (within the

meaning of Subdivision A);

(b) the corresponding kind of allowable capital expenditure

(within the meaning of Subdivision B);

the Commissioner may apportion the allowable amount between

those categories in such manner as the Commissioner considers

reasonable.

(2) Where a particular amount (in this subsection called the allowable

amount) is covered by both of the following categories:

(a) an amount to which a particular paragraph of subsection

122B(2) applies;

(b) an amount to which the corresponding paragraph of

subsection 122JD(2) applies;



reasonable.

(3) Where a particular amount (in this subsection called the allowable


(a) expenditure of the kind referred to in subsection 122J(1);

(b) expenditure of the kind referred to in subsection 122JF(1);



reasonable.



Section 122R


122R Change in interests in property

(1) If, for any reason, including:

(a) the formation or dissolution of a partnership; or

(b) a variation in the constitution of a partnership or in the

interests of partners;

a change has occurred in the ownership of, or in the interests of

persons in, property in respect of which deductions have been

allowed or are allowable under this Division, and the person, or

one or more of the persons, who owned the property before the

change has or have an interest in the property after the change, the

provisions of this Division apply as if the person or persons who

owned the property before the change (in this section called the

transferor) had, on the day on which the change occurred,

disposed of the whole of the property to the person, or all the

persons, by whom the property is owned after the change (in this

section called the transferee).

(2) If deductions have been allowed or are allowable under

Subdivision A in respect of the property:

(a) unless a joint election for roll-over relief is made by both the

transferor and the transferee—this Division applies as if the

consideration for the disposal were equal to the market value

of the property immediately before the time when the change

occurred; or

(b) if a joint election for roll-over relief is made by both the

transferor and the transferee—section 122JAA applies to the

disposal.

(2A) If deductions have been allowed or are allowable under

Subdivision B in respect of the property:





occurred; or


transferor and the transferee—section 122JG applies to the

disposal.

(2B) A joint election for roll-over relief has no effect unless it:

(a) is in writing; and



Section 122S


(b) is made:

(i) within 6 months after the later of the following:

(A) the end of the year of income of the transferee

in which the disposal occurred;

(B) the commencement of this subsection; or

(ii) within such further period as the Commissioner allows;

and

(c) contains such information about the transferor’s holding of

the property as will enable the transferee to work out how

section 122JAA or 122JG, as the case may be, will apply to

the transferee’s holding of the property.

(2C) If a person dies before the end of the period allowed for making a

joint election for roll-over relief, the trustee of the deceased

person’s estate may be a party to the election on the deceased

person’s behalf.

(3) A reference in subsection (2) or (2A) to the market value of

property at a particular time shall, if there is insufficient evidence

of the market value of the property at that time, be read as a

reference to such amount as, in the opinion of the Commissioner, is

fair and reasonable.



Subdivision A.

property includes:

(a) a mining or prospecting right; and

(b) a quarrying or prospecting right.


Subdivision B.

122S Commissioner to determine deductions attributable to

particular expenditure

For any purpose of this Act, the Commissioner may determine the

extent to which a deduction allowed or allowable under this

Division is to be treated as attributable to particular expenditure

that has been taken into account in the calculations by which the

entitlement of the taxpayer to the deduction has been ascertained.



Section 122T


122T Recoupment of expenditure

(1A) This section does not apply to an amount received in the 1997-98

year of income or a later year of income if the amount is received

as recoupment as defined by section 20-25 of the Income Tax


Note: Subdivision 20-A of the Income Tax Assessment Act 1997 applies instead.

(1) This Division does not apply, and shall be deemed never to have

applied, in relation to a taxpayer, to expenditure of a capital nature

in respect of which the taxpayer is recouped, or becomes entitled to

be recouped, by the Commonwealth, by a State, by the

Administration of a Territory, by an authority constituted by or

under a law of the Commonwealth, of a State or of a Territory or

by any other person where the amount of the recoupment is not,

and will not be, included in the assessable income of the taxpayer

of any year of income.

(2) Where a taxpayer receives, or becomes entitled to receive, an

amount that constitutes to an unspecified extent a recoupment of

expenditure of a capital nature, the Commissioner may, for the

purposes of subsection (1), determine the extent to which that

amount constitutes a recoupment of that expenditure.

122U Modification of section 51AD and Division 16D—lessee of

property deemed to be owner etc.

(1) This section applies if:

(a) deductions have been allowed or are allowable under this

Division to a taxpayer in respect of property; and

(b) the taxpayer is not the owner of the property for the purposes

of an eligible anti-avoidance provision.

(2) The eligible anti-avoidance provision, to the extent to which that

provision relates to deductions under this Division, applies as if the

taxpayer were the owner of the property instead of any other

person.



Section 122U



eligible anti-avoidance provision means:

(a) section 51AD; or

(b) Division 16D.


Transport of minerals and quarry materials Division 10AAA

Section 123


Division 10AAA—Transport of minerals and quarry

materials

Subdivision A—Transport of certain minerals

123 Interpretation


housing and welfare facilities means:

(a) residential accommodation;

(b) health, education, recreational or other similar facilities;

(c) facilities for the provision of meals; and

(d) works carried out directly in connexion with residential

accommodation or in connexion with facilities of a kind

mentioned in paragraph (b) or (c), including works for the

provision of water, light, power, access or communications.

petroleum does not include petroleum that has been treated at a

refinery.

prescribed body means:

(a) the Commonwealth, a State or the Administration of a

Territory; or

(b) a public authority:

(i) that is constituted by or under a law of the

Commonwealth, of a State or of a Territory; and

(ii) the income of which is wholly exempt from income tax.

prescribed mining operations has the same meaning as it has in

Subdivision A of Division 10.

processed materials means:

(a) materials resulting from the treatment of minerals;

(b) materials resulting from sintering or calcining;

(c) pellets or other agglomerated forms of iron;

(d) alumina and blister copper; and

(e) such other materials, or materials resulting from such other

processes, as are prescribed.


Division 10AAA Transport of minerals and quarry materials

Section 123AAA


treatment has the same meaning as it has in Subdivision A of

Division 10.

(1A) In this Subdivision, a reference to a railway, road, pipe-line or

other facility shall be read as including a reference to a port facility

or other facility for ships.

(2) In this Subdivision, a reference to capital expenditure on a railway,

road, pipe-line or other facility shall be read as including a

reference to capital expenditure incurred by a person:

(a) in obtaining a right, whether by means of a licence, permit or

otherwise, to construct or install a railway, road, pipe-line or

other facility, or a part of a railway, road, pipe-line or other

facility, on land owned or leased by another person or in an

adjacent area within the meaning of section 6AA;

(b) in paying compensation in respect of any damage or loss

caused by the construction or installation of a railway, road,

pipe-line or other facility or of a part of a railway, road,

pipe-line or other facility;

(c) on earthworks, bridges, tunnels and cuttings that are

necessary for a railway, road, pipe-line or other facility; or

(ca) where the person is a prescribed body—on railway

rolling-stock;

but as not including a reference to expenditure in respect of:

(d) road vehicles or ships;

(da) except as mentioned in paragraph (ca)—railway

rolling-stock; or

(e) housing and welfare facilities, or works for the provision of

water, light or power, in connexion with a port facility or

other facility for ships.

123AAA Subdivision subject to Division 245 of Schedule 2C


Schedule 2C.

123A Application of Subdivision

(1) Subject to this section, this Subdivision applies to capital

expenditure incurred by a taxpayer on or after 1 July 1961 and

before the 1997-98 year of income on, or by way of contribution to



Section 123A


capital expenditure of another person on, a railway, road, pipe-line

or other facility constructed or acquired for use, in the carrying on

of a business for the purpose of gaining or producing assessable

income, primarily and principally for the transport of minerals

obtained from the carrying on by any person or persons of

prescribed mining operations, or of processed materials produced

from such minerals, other than transport wholly within the site of

prescribed mining operations, as reduced by:

(a) so much of that expenditure of the taxpayer as has been

allowed or is allowable as a deduction in an assessment in

respect of the year of income that ended on 30 June 1967 or

an earlier year of income; and

(b) where a deduction has been allowed or is allowable, in the

assessment of the taxpayer in respect of a year of income

earlier than the year of income that ended on 30 June 1967,

in respect of an amount appropriated by the taxpayer for

expenditure in respect of those facilities—the amount of that

deduction, as reduced by so much (if any) of the amount so

appropriated that was not expended in respect of those

facilities in the year of income next succeeding that earlier

year of income.

Note: Subdivision 330-H of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for transport capital expenditure incurred in the 1997-98 year of income or a later year of income.

(1A) Subject to this section, this Subdivision also applies to capital

expenditure incurred by a taxpayer before the 1997-98 year of

income on, or by way of contribution to capital expenditure of

another person on, a railway, road, pipe-line or other facility

constructed or acquired for use, in the carrying on of a business for

the purpose of gaining or producing assessable income, primarily

and principally for the transport of petroleum obtained from

mining operations carried on other than transport that forms part of

those mining operations or transport that forms part of a system of

reticulation to consumers or is provided for the purposes of a

particular consumer or consumers.


(1B) This Subdivision does not apply, in relation to a taxpayer, to

capital expenditure incurred by the taxpayer on, or by way of

contribution to capital expenditure of another person on, a pipe-line



Section 123A


referred to in subsection (1A) where the construction of the

pipe-line was commenced on or before 30 June 1968 and was or is

completed on or before 31 December 1969.

(1C) This Subdivision does not apply, in relation to a taxpayer, to


contribution to capital expenditure of another person on, a port

facility or other facility for ships unless:

(a) the expenditure was or is incurred after 17 August 1976 and

before the 1997-98 year of income; and

(b) the expenditure has not been allowed, and will not be

allowable, as a deduction, and has not been, and will not be,

taken into account in ascertaining the amount of an allowable

deduction, from the assessable income of the taxpayer of any

year of income under any provision of this Act other than a

provision of this Subdivision.


(1D) In determining whether paragraph (1C)(b) applies in relation to

capital expenditure incurred by a taxpayer, the provisions of

subsection 123E(1) shall be disregarded.

(1E) This Subdivision does not apply, in relation to a taxpayer, to

capital expenditure incurred by the taxpayer by way of contribution

to capital expenditure of a prescribed body on railway rolling-stock

unless the capital expenditure is incurred by the taxpayer after

9 March 1984 and before the 1997-98 year of income.


(1F) Where:

(a) on or before 9 March 1984, a person incurred an amount of

capital expenditure (in this subsection referred to as the

original expenditure) by way of contribution to the capital

expenditure or proposed capital expenditure of a prescribed

body on railway rolling-stock;

(b) after that date a taxpayer (whether or not the person referred

to in paragraph (a)) incurred or incurs an amount of capital

expenditure (in this subsection referred to as the substituted

expenditure) by way of contribution to the capital



Section 123AA


expenditure of a prescribed body on railway rolling-stock;

and

(c) the Commissioner is of the opinion that:

(i) the substituted expenditure was incurred by the taxpayer

in lieu of the original expenditure; and

(ii) the taxpayer incurred the substituted expenditure for the

purpose, or for purposes that included the purpose, of

obtaining a deduction under this Subdivision;

the Commissioner may refuse to allow a deduction under this

Subdivision in respect of the substituted expenditure.

(1G) A reference in subsection (1F) to an amount of capital expenditure

shall be read as including a reference to a part of an amount of

capital expenditure.

(1H) Subsections (2) and (3) do not apply to an amount received in the

1997-98 year of income or a later year of income if the amount is

received as recoupment as defined by section 20-25 of the Income

Tax Assessment Act 1997.


(2) This Subdivision does not apply, and shall be deemed never to

have applied, in relation to a taxpayer, to capital expenditure in

respect of which the taxpayer is recouped, or becomes entitled to




by any other person where the amount of the recoupment is not,

and will not be, included in the assessable income of the taxpayer

of any year of income.



capital expenditure, the Commissioner may, for the purposes of

subsection (2), determine the extent to which that amount

constitutes a recoupment of that expenditure.

123AA Division applies subject to provisions terminating gold

mining exemptions

The application of this Division is subject to Division 16H.



Section 123B


123B Deduction of expenditure

(1) Subject to sections 123BA and 123BB, where a taxpayer has

incurred or incurs capital expenditure to which this Subdivision

applies, then:

(a) in relation to so much of the expenditure as:

(i) was incurred on or before 17 September 1974;

(ii) was or is incurred after that date and before 1 July 1976

in pursuance of a contract made on or before

17 September 1974, being a contract under which

property was to be acquired by, or work was to be

performed for, the taxpayer; or

(iii) was or is incurred after 17 August 1976;

one-tenth of that expenditure is an allowable deduction from

the assessable income of the first year of income after the

year of income that ended on 30 June 1967 in which the

facility in respect of which the expenditure was incurred was,

after the incurring of the expenditure, used primarily and

principally for a purpose referred to in section 123A, and

from the assessable income of each of the next 9 succeeding

years of income; and

(b) in relation to so much of the expenditure as was or is incurred

after 17 September 1974 and on or before 17 August 1976

(not being expenditure to which subparagraph (a)(ii)

applies)—one-twentieth of that expenditure is an allowable

deduction from the assessable income of the first year of

income in which the facility in respect of which the

expenditure was or is incurred was, after the incurring of the

expenditure, used primarily and principally for a purpose

referred to in section 123A, and from the assessable income

of each of the next 19 succeeding years of income.



Note: Section 330-60 of the Income Tax (Transitional Provisions) Act 1997 converts any capital expenditure to which this Subdivision applies that is undeducted at the end of the 1996-97 year of income into transport capital expenditure incurred by a taxpayer in the 1997-98 year of income.

(2) Where capital expenditure to which this Subdivision applies was

incurred on:



Section 123BA


(a) property that is disposed of, lost or destroyed; or

(b) property the use of which by the taxpayer primarily and

principally for a purpose referred to in section 123A is

otherwise terminated;

a deduction in respect of that expenditure is not allowable under

this section from the assessable income of the year of income in

which the disposal, loss, destruction or termination of use takes

place or from the assessable income of any subsequent year of

income.

123BA Election in relation to certain expenditure

(1) Where a taxpayer has incurred or incurs capital expenditure

referred to in subparagraph 123B(1)(a)(i) or (ii), the taxpayer may,

subject to this section, elect that this section shall apply in respect

of that expenditure.

(2) An election under this section shall be made in writing signed by or

on behalf of the taxpayer and shall be delivered to the

Commissioner:

(a) where the election relates to expenditure that has been or is

incurred before the end of the year of income of the taxpayer

in which 17 September 1974 occurred—on or before the last

day for the furnishing of the taxpayer’s return of income of


(b) in any other case—on or before the last day for the furnishing

of the taxpayer’s return of income of the year of income in

which the expenditure is incurred;

or within such further time as the Commissioner allows.

(3) Where an election is made under this section in relation to any

expenditure:

(a) if any of that expenditure has been allowed or is allowable as

a deduction or deductions from the assessable income of the

taxpayer of a year or years of income preceding the year of

income of the taxpayer in which 17 September 1974

occurred—paragraph 123B(1)(a) does not apply in relation to

the remainder of that expenditure but the prescribed fraction

of the remainder of that expenditure is an allowable

deduction from the assessable income of the taxpayer of the

year of income of the taxpayer in which 17 September 1974

occurred and from the assessable income of each of the



Section 123BB


prescribed number of years of income immediately

succeeding that year of income; and

(b) in any other case—paragraph 123B(1)(a) does not apply in

relation to that expenditure but paragraph 123B(1)(b) applies

in relation to that expenditure.

(4) For the purposes of paragraph (3)(a):

(a) the prescribed fraction is 1

A + 1 where A is the prescribed

number; and

(b) the prescribed number is the number by which 19 exceeds the

number of years of income before the year of income of the

taxpayer in which 17 September 1974 occurred in each of

which a deduction has been allowed or is allowable in respect

of the expenditure concerned.

(5) Subsection 123B(2) applies in relation to deductions under this

section in like manner as it applies in relation to deductions under

section 123B.

123BB Election in relation to expenditure incurred after 17 August

1976

(1) Where, after 17 August 1976, a taxpayer has incurred or incurs

capital expenditure to which this Subdivision applies, the taxpayer

may, subject to this section, elect that this section shall apply in

respect of that expenditure.

(2) An election under this section must be made on or before the last

day for the furnishing of the taxpayer’s return of income of the first

year of income in which the facility in respect of which the

expenditure was or is incurred was, after the incurring of the

expenditure, used primarily and principally for a purpose referred

to in section 123A, or within such further time as the

Commissioner allows.

(3) Where an election is made under this section in relation to any

expenditure, paragraph 123B(1)(a) does not apply in relation to

that expenditure but, subject to subsection 123B(2), that

expenditure shall be deemed to be expenditure to which paragraph

123B(1)(b) applies.



Section 123BBA


123BBA Roll-over relief where CGT roll-over relief allowed under



section 123F





(a) either:




or






(b) subject to subsection (16), deductions have been allowed or




Roll-over relief where joint election made under section 123F


made under subsection 123F(2) by both the transferor and the





(3) Section 123C (which deals with balancing charges and deductions)




Section 123BBA





(a) the transferee had acquired the property for a consideration

equal to so much of the capital expenditure of the transferor

in respect of the property as is expenditure to which this

Subdivision applies; and

(b) deductions were not allowable to the transferee under this

Subdivision in respect of:

(i) so much of the capital expenditure of the transferor in

respect of the property as was allowed or allowable as a

deduction to the transferor under this Subdivision; or


applications of this section—so much of the capital

expenditure in respect of the property as was allowed or

allowable as a deduction to the prior successive

transferors under this Subdivision; and

(c) the 10-year period referred to in paragraph 123B(1)(a) or the

20-year period referred to in paragraph 123B(1)(b), as the

case may be, over which the transferee would otherwise be

allowed deductions in respect of the property were reduced

by one year for each year of income for which a deduction

was allowed or was allowable under this Subdivision to:





Inheritance of section 123BA election

(5) If the transferor made an election under section 123BA in respect

of capital expenditure incurred by the transferor in respect of the

property, this Subdivision applies as if the transferee had made an

election under that section in respect of the capital expenditure of

the transferee.

Rule where no section 123BA election made

(6) If the transferor did not make an election under section 123BA in

respect of capital expenditure incurred by the transferor in respect

of the property, the transferee is not entitled to make an election



Section 123BBA


under that section in respect of the capital expenditure of the

transferee.

Inheritance of section 123BB election

(7) If the transferor made an election under section 123BB in respect

of capital expenditure incurred by the transferor in respect of the

property, this Subdivision applies as if the transferee had made an

election under that section in respect of the capital expenditure of

the transferee.

Rule where no section 123BB election made

(8) If the transferor did not make an election under section 123BB in

respect of capital expenditure incurred by the transferor in respect

of the property, the transferee is not entitled to make an election

under that section in respect of the capital expenditure of the

transferee.

Subparagraphs 123B(1)(a)(i) and (ii) and paragraph 123B(1)(b)—

inheritance of threshold conditions

(9) If subparagraph 123B(1)(a)(i) or (ii) or paragraph 123B(1)(b)

applied to the expenditure of a capital nature of the transferor in

respect of the property, that paragraph or subparagraph has effect,

in relation to the transferee and in relation to the property, as if the

threshold conditions that were satisfied in relation to the transferor

were satisfied in relation to the transferee.




property:




that the property was acquired under a contract that was

entered into before, at or after a particular time.

Deduction where section 123BA election made by transferee

(11) If:



Section 123BBA


(a) the transferee incurs capital expenditure referred to in

subparagraph 123B(1)(a)(i) or (ii) in respect of the property;

and

(b) the transferee elects that section 123BA applies in respect of

the capital expenditure of the transferee; and

(c) apart from the disposal, a deduction (in this subsection called

the notional deduction) would have been allowable to the

transferor under paragraph 123BA(3)(a) in respect of a

particular year of income, being the year of income in which

the disposal took place or a subsequent year of income;

the amount of the notional deduction is taken to be a deduction

allowable under that paragraph to the transferee for the year of

income concerned.


assessments


assessment of the transferee where subsection 123A(2) has applied

to:



this section—one or more of the prior successive transferors

in respect of the property.


deductions

(13) If:




(iii) the use of the property by the transferee primarily and


otherwise terminated; and



then, for the purposes of the application of section 123C in relation






Section 123BBA





the property;




















transferee; and







property.


does not apply

(16) If, apart from this subsection, this section has applied to the




Section 123BC



property by:





Subdivision B—Transport of quarry materials

123BC Interpretation


eligible quarrying operations has the same meaning as in

Subdivision B of Division 10.

housing and welfare facilities has the same meaning as in

Subdivision A.

prescribed body has the same meaning as in Subdivision A.

processed materials means:

(a) materials resulting from the treatment of quarry materials;

and

(b) materials resulting from sintering or calcining; and

(c) such other materials, or materials resulting from such other

processes, as are prescribed.

quarry materials has the same meaning as in Subdivision B of

Division 10.

treatment has the same meaning as in Subdivision B of

Division 10.

(2) In this Subdivision, a reference to a railway, road, pipe-line or

other facility is to be read as including a reference to a port facility

or other facility for ships.

(3) In this Subdivision, a reference to capital expenditure on a railway,

road, pipe-line or other facility is to be read as including a

reference to capital expenditure incurred by a person:

(a) in obtaining a right, whether by means of a licence, permit or

otherwise, to construct or install a railway, road, pipe-line or



Section 123BCA


other facility, or a part of a railway, road, pipe-line or other

facility, on land owned or leased by another person; or

(b) in paying compensation in respect of any damage or loss

caused by the construction or installation of a railway, road,

pipe-line or other facility or of a part of a railway, road,

pipe-line or other facility; or

(c) on earthworks, bridges, tunnels and cuttings that are

necessary for a railway, road, pipe-line or other facility; or

(d) where the person is a prescribed body—on railway

rolling-stock;

but as not including a reference to expenditure in respect of:

(e) road vehicles or ships; or

(f) except as mentioned in paragraph (d)—railway rolling-stock;

or

(g) housing or welfare facilities, or works for the provision of

water, light or power, in connection with a port facility or

other facility for ships.

123BCA Subdivision subject to Division 245 of Schedule 2C


Schedule 2C.

123BD Application of Subdivision

(1) Subject to this section, this Subdivision applies to:

(a) capital expenditure incurred after 15 August 1989 and before

the 1997-98 year of income by a taxpayer on; or

(b) capital expenditure incurred after 15 August 1989 and before

the 1997-98 year of income by a taxpayer by way of

contribution to capital expenditure incurred by another

person on;

a railway, road, pipe-line or other facility constructed or acquired

for use, in the carrying on of a business for the purpose of gaining

or producing assessable income, primarily and principally for the

transport of:

(c) quarry materials obtained from the carrying on by any person

or persons of eligible quarrying operations; or

(d) processed materials produced from such quarry materials;



Section 123BD


other than transport wholly within the site of eligible quarrying

operations.


(2) This Subdivision does not apply, in relation to a taxpayer, to


contribution to capital expenditure of another person on, a port

facility or other facility for ships unless the expenditure has not

been allowed, and will not be allowable, as a deduction, and has

not been, and will not be, taken into account in ascertaining the

amount of an allowable deduction, from the assessable income of

the taxpayer of any year of income under any provision of this Act

other than a provision of this Subdivision.

(3) In determining whether subsection (2) applies in relation to capital

expenditure incurred by a taxpayer, the provisions of subsection

123E(1) are to be disregarded.

(3A) Subsections (4) and (5) do not apply to an amount received in the

1997-98 year of income or a later year of income if the amount is

received as recoupment as defined by section 20-25 of the Income

Tax Assessment Act 1997.


(4) This Subdivision does not apply in relation to a taxpayer to capital

expenditure in respect of which the taxpayer is recouped, or

becomes entitled to be recouped, by:

(a) the Commonwealth, a State or a Territory; or

(b) an authority constituted by or under a law of the

Commonwealth, a State or a Territory; or

(c) any other person;

where the amount of the recoupment is not, and will not be,

included in the assessable income of the taxpayer of any year of

income.



capital expenditure, the Commissioner may, for the purposes of





Section 123BE


123BE Deduction of expenditure

(1) Subject to this Subdivision, where a taxpayer has incurred or incurs

capital expenditure to which this Subdivision applies, 5% of that

expenditure is an allowable deduction from:

(a) the assessable income of the first year of income after the

year of income in which the facility in respect of which the

expenditure was incurred was, after the incurring of the

expenditure, used primarily and principally for a purpose

referred to in section 123BD; and

(b) the assessable income of each of the next 19 succeeding

years of income.



Note: Section 330-60 of the Income Tax (Transitional Provisions) Act 1997 converts any capital expenditure to which this Subdivision applies that is undeducted at the end of the 1996-97 year of income into transport capital expenditure incurred by a taxpayer in the 1997-98 year of income.

(2) Where capital expenditure to which this Subdivision applies was

incurred on:

(a) property that is disposed of, lost or destroyed; or

(b) property the use of which by the taxpayer primarily and

principally for a purpose referred to in section 123BD is

otherwise terminated;

a deduction in respect of that expenditure is not allowable under

this section from the assessable income of the year of income in

which the disposal, loss, destruction or termination of use takes

place or from the assessable income of any subsequent year of

income.



Section 123BF


123BF Roll-over relief where CGT roll-over relief allowed under



section 123F





(a) either:




or










Roll-over relief where joint election made under section 123F


made under subsection 123F(2) by both the transferor and the





(3) Section 123C (which deals with balancing charges and deductions)




Section 123BF






equal to so much of the capital expenditure of the transferor

in respect of the property as is expenditure to which this

Subdivision applies; and

(b) deductions were not allowable to the transferee under this

Subdivision in respect of:

(i) so much of the capital expenditure of the transferor in

respect of the property as was allowed or allowable as a

deduction to the transferor under this Subdivision; or


applications of this section—so much of the capital

expenditure in respect of the property as was allowed or

allowable as a deduction to the prior successive

transferors under this Subdivision; and

(c) the 20-year period referred to in subsection 123BE(1) over

which the transferee would otherwise be allowed deductions

in respect of the property were reduced by one year for each

year of income for which a deduction was allowed or

allowable under this Subdivision to:






assessments


assessment of the transferee where subsection 123BD(4) has

applied to:







Section 123BF



deductions

(6) If:
















the property;





















Section 123CA



transferee; and







property.


does not apply




property by:






123CA Subdivision subject to Division 245 of Schedule 2C


Schedule 2C.

123C Disposal, loss, destruction or termination of use of property


allowable under this Division in respect of expenditure and, in the

year of income, property on which any of that expenditure was

incurred has been disposed of, lost or destroyed, or the use of that

property by the taxpayer primarily and principally for a purpose

referred to in section 123A or 123BD has been otherwise

terminated.



Section 123C



of use of the property by the taxpayer primarily and principally for

a purpose referred to in section 123A or 123BD, must have

occurred in the 1996-97 year of income or an earlier year of

income.



(a) the sum of the deductions so allowed or allowable in respect

of expenditure on the property so disposed of, lost or

destroyed, or the use of which has been so terminated; and


destruction, or, in the case of other termination of the use of


of use;

exceeds the total expenditure of a capital nature by the taxpayer on

that property, so much of the amount of the excess as does not

exceed the sum of those deductions shall be included in the

assessable income.

(3) Where the total expenditure exceeds that aggregate, the excess

shall be an allowable deduction.

(4) In this section the consideration receivable in respect of the

disposal, loss or destruction means:






(b) where the property is sold with the other property and a

specified price is not allocated to the property—such part of

the total sale price, less the expenses of the sale, as the

Commissioner determines;








Section 123D


but does not include an amount which is included, or will, when



(5) Where capital expenditure referred to in subsection 123A(1) was

incurred prior to the year of income that commenced on 1 July

1967:

(a) for the purposes of this section, deductions shall be deemed

to have been allowed under this Division in respect of that

expenditure to the extent to which deductions in respect of

that expenditure, or in respect of moneys appropriated for the

purposes of that expenditure, have been allowed or are

allowable under any provision of the Income Tax Assessment

Act 1936, or of that Act as amended by any Act up to and

including the Income Tax Assessment Act (No. 4) 1967; and

(b) sections 59 and 122K do not apply in relation to property on

which that expenditure was incurred.

(6) Where property the use of which primarily and principally for a

purpose referred to in section 123A has been terminated again

comes into use primarily and principally for such a purpose, so

much of the expenditure on that property as the Commissioner

determines shall be deemed to be capital expenditure to which

Subdivision A applies incurred in the year of income in which the

property again comes into such use.

(7) Where property the use of which primarily and principally for a

purpose referred to in section 123BD has been terminated again

comes into use primarily and principally for such a purpose, so

much of the expenditure on that property as the Commissioner

determines is to be taken to be capital expenditure to which

Subdivision B applies incurred in the year of income in which the

property again comes into such use.

123D Transactions between parties not at arm’s length

Where:

(a) a person has purchased from another person property:

(i) in respect of which the vendor had incurred expenditure

to which Subdivision A or B applies; or


expenditure to which Subdivision A or B applies;



Section 123E







the opinion of the Commissioner, was the value of the

property at the time of the purchase;



been that amount.

123E Deductions not allowable under other provisions


incurred by a taxpayer has been allowed or is allowable as a

deduction under this Division, that expenditure shall not be an

allowable deduction, and shall not be taken into account in

ascertaining the amount of an allowable deduction, from the

assessable income of the taxpayer of any year of income under any

provision of this Act other than a provision of this Division.

(2) Subsection (1) does not prevent a deduction for depreciation being

allowed to a taxpayer in respect of a unit of property the use of

which primarily and principally for a purpose referred to in

section 123A or 123BD has been terminated and, where such a unit

of property is used by the taxpayer in any other way, then, for the

purposes of sections 56 and 62:




which it commenced to be used in that other way; and




income.

123EA Apportionment of expenditure deductible under both

Subdivision A and Subdivision B

Where a particular amount (in this section called the allowable


(a) capital expenditure to which Subdivision A applies;



Section 123F


(b) capital expenditure to which Subdivision B applies;



reasonable.

123F Change in interests in property
















(2) If deductions have been allowed or are allowable under

Subdivision A in respect of the property:





occurred; or


transferor and the transferee—section 123BBA applies to the

disposal.

(2A) If deductions have been allowed or are allowable under

Subdivision B in respect of the property:





occurred; or



Section 123G



transferor and the transferee—section 123BF applies to the

disposal.



(b) is made:






and



section 123BBA or 123BF, as the case may be, will apply to

the transferee’s holding of the property.




person’s behalf.

(3) A reference in subsection (2) or (2A) to the market value of

property at a particular time shall, if there is insufficient evidence

of the market value of the property at that time, be read as a

reference to such amount as, in the opinion of the Commissioner, is

fair and reasonable.

123G Modification of section 51AD and Division 16D—lessee of










person.



Section 123G





(b) Division 16D.


Division 10AA Prospecting and mining for petroleum

Section 124


Division 10AA—Prospecting and mining for petroleum

124 Interpretation

(1) In this Division:

net exempt income from petroleum, in relation to a taxpayer in

relation to a year of income, means the amount remaining after

deducting from the exempt income from petroleum derived by the

taxpayer during that year of income all expenses (other than

expenses of a capital nature) incurred in gaining or producing that

exempt income and any taxes paid during that year of income in

respect of exempt income from petroleum derived by the taxpayer

during that year of income or a preceding year of income.

prescribed petroleum operations means mining operations for the

purpose of obtaining petroleum, being operations carried on for the

purpose of gaining or producing assessable income.

property includes a mining or prospecting right.

(2) A reference in this Division to a deduction or deductions allowed

or allowable under this Division (not including a reference to a

deduction or deductions allowed or allowable under a specified

provision of this Division) shall, unless the contrary intention

appears, be read as including a reference to a deduction or

deductions allowed or allowable under the Division for which this

Division was substituted.

(3) Where a taxpayer carries on prescribed petroleum operations on 2

or more petroleum fields, this Division (other than sections 124AE,

124AF and 124AH) shall, except to the extent to which a contrary

intention appears, be construed as applying in relation to the

operations of that taxpayer on and in connexion with each of those

petroleum fields as if it were the only petroleum field on which the

taxpayer carried on prescribed petroleum operations, and, for the

purposes of the application of this Division (other than

sections 124AE, 124AF and 124AH) in relation to a taxpayer in

relation to a petroleum field:

(a) any matters or things relating exclusively to any other

petroleum field on which the taxpayer carried on prescribed

petroleum operations shall be disregarded; and


Prospecting and mining for petroleum Division 10AA

Section 124AAA


(b) amounts of expenditure (including expenditure on plant for

use in operations on 2 or more of the petroleum fields on

which the taxpayer carried on prescribed petroleum

operations), or other amounts, to which paragraph (a) does

not apply shall be apportioned in such manner as the

Commissioner considers reasonable.

(4) For the purposes of this Division, any amount specified in a notice

given to the Commissioner under section 124AB in relation to the

acquisition from a taxpayer of a petroleum prospecting or mining

right or petroleum prospecting or mining information shall be

deemed to be wholly attributable to expenditure incurred by the

taxpayer, and the extent to which such an amount is attributable to

particular expenditure, to expenditure of a particular class or to

expenditure incurred at a particular time or during a particular

period shall be as determined by the Commissioner.

(5) A reference in a provision of this Division to an amount specified

in a notice shall, if another amount is deemed to be specified in that

notice in lieu of the amount in fact so specified by virtue of another

provision of this Division or by virtue of a provision of the

Division for which this Division was substituted, be read as a

reference to that other amount.

124AAA Division subject to Division 245 of Schedule 2C

This Division has effect subject to Division 245 of Schedule 2C.

124AA Allowable capital expenditure

(1) This section applies to expenditure that:

(a) was or is incurred after 17 September 1974 and before 1 July

1976 otherwise than in pursuance of a contract made on or

before 17 September 1974; or

(b) is incurred on or after 1 July 1976 and before the 1997-98

year of income.


(2) For the purposes of this Division, allowable capital expenditure of

a taxpayer is expenditure of a capital nature to which this section

applies incurred by the taxpayer in carrying on prescribed



Section 124AA


petroleum operations and on buildings, other improvements or

plant necessary for carrying on such operations, and includes:

(a) expenditure of a capital nature to which this section applies

incurred by the taxpayer in providing, or by way of

contribution to the cost of providing, water, light or power

for use on, or access to or communications with, the site of

prescribed petroleum operations carried on by the taxpayer;

(aa) expenditure of a capital nature to which this section applies

incurred by the taxpayer on or after 25 August 1977 on plant

for use solely in liquefying natural gas obtained from the

carrying on by the taxpayer of prescribed petroleum

operations;

(b) so much of any expenditure to which this section applies that

the taxpayer has incurred in acquiring from another person a

petroleum prospecting or mining right or petroleum

prospecting or mining information as is specified in a notice

under subsection 124AB(1) duly given to the Commissioner

by the taxpayer and that other person;

(ba) expenditure of a capital nature that the taxpayer is taken to

have incurred by section 124ABA;

(c) expenditure of a capital nature to which this section applies

incurred by the taxpayer in providing residential

accommodation for the use of employees of the taxpayer

engaged in, or in connexion with, prescribed petroleum

operations, or for the use of dependants of those employees,

being accommodation situated on or adjacent to the site of

the operations;

(d) expenditure of a capital nature to which this section applies

incurred by the taxpayer in providing health, educational,

recreational or other similar facilities, or facilities for the

supply of meals, on or adjacent to the site of prescribed

petroleum operations, being facilities that:

(i) are provided principally for the welfare of employees

referred to in paragraph (c) or of dependants of those

employees; and

(ii) are not conducted for the purpose of profit-making by

the taxpayer or any other person; and

(e) expenditure of a capital nature to which this section applies

incurred by the taxpayer in relation to works carried out

directly in connexion with accommodation and facilities



Section 124AA


referred to in paragraphs (c) and (d), including works for the

provision of water, light, power, access or communications;

but does not include expenditure incurred in relation to:

(f) pipe-lines constructed for the transport of petroleum obtained

from prescribed petroleum operations (other than transport

forming part of those operations), or plant (including

pumping apparatus, storage tanks, port facilities and other

terminal facilities) for use primarily and principally, and

directly, in connexion with the operation of such a pipe-line;

(g) ships, railway rolling-stock and road vehicles for use for the

transport of petroleum obtained from prescribed petroleum

operations other than road vehicles for use in those

operations; and

(h) plant for use in the refining of petroleum or of the products of

petroleum.

(2A) Expenditure on property (being plant or articles for the purposes of

section 54) is not allowable capital expenditure for the purposes of

this Division unless:


(i) the property was acquired by the taxpayer under a

contract entered into on or before 25 May 1988;

(ii) the property was constructed by the taxpayer and:

(A) the construction commenced on or before

25 May 1988; or

(B) the construction was under a contract entered

into on or before 25 May 1988, or under 2 or

more contracts any of which was entered into

on or before that date; and

(b) before 1 July 1991, the property:

(i) was used by the taxpayer for the purpose of producing

assessable income; or

(ii) was installed ready for use for that purpose and held in

reserve by the taxpayer.

(2B) Notwithstanding section 170, the Commissioner may at any time

amend an assessment for the purpose of giving effect to

subsection (2A) of this section.

(3) In this section, natural gas means a mixture of hydrocarbons, or of

hydrocarbons and other gases, that:



Section 124AB


(a) consists principally of methane; and

(b) is in a gaseous state at a temperature of 15 degrees Celsius

and a pressure of one atmosphere.

124AB Purchase of prospecting or mining rights or information

(1) Where a person (in this section referred to as the purchaser):

(a) has incurred or incurs expenditure after 17 September 1974

and before 1 July 1976 otherwise than in pursuance of a

contract made on or before 17 September 1974; or

(b) incurs expenditure on or after 1 July 1976;

in acquiring from another person (in this section referred to as the

vendor) a petroleum prospecting or mining right or petroleum

prospecting or mining information, the purchaser and the vendor

may agree to include in the allowable capital expenditure of the

purchaser a specified amount, representing all or part of the

proportion of the expenditure incurred by the purchaser in

acquiring the right or information that has not been the subject of

an agreement made under subsection 124ABA(2).

(2) Where a person (in this section also referred to as the purchaser):

(a) has incurred expenditure on or before 17 September 1974; or

(b) has incurred or incurs expenditure after 17 September 1974

and before 1 July 1976 in pursuance of a contract made on or

before 17 September 1974;

in acquiring from another person (in this section also referred to as

the vendor) a petroleum prospecting or mining right or petroleum

prospecting or mining information, the purchaser and the vendor

may give notice to the Commissioner that they have agreed to the

inclusion in the unrecouped previous capital expenditure of the

purchaser of an amount specified in the notice, being the whole or

a part of the expenditure so incurred.

(3) If the amount specified in an agreement made under this section in


(a) so much of the expenditure of a capital nature (other than

expenditure on plant) incurred by the vendor before the date

of the transaction in relation to the area that is the subject of

the right or to which the information relates as:

(i) to the extent to which that expenditure is not allowable




Section 124AB


meaning of section 124ADG—would have been

included in the residual previous capital expenditure, the

residual capital expenditure, the residual (1 May 1981 to

18 August 1981) capital expenditure or the residual

(19 August 1981 to 19 July 1982) capital expenditure of

the vendor as at the end of the year of income of the

vendor during which the transaction occurred but for the

transaction and any later transaction in relation to that

area; and

(ii) to the extent to which that expenditure is allowable


meaning of section 124ADG:

(A) has not been allowed and is not allowable as a

deduction to the vendor under subsection

124ADG(2) in respect of a year of income of

the vendor preceding the year of income during

which the transaction occurred; and

(B) is attributable to an amount of expenditure

incurred in relation to that area that has not

been taken into account in determining an

amount to be included in the allowable capital

expenditure of a person under paragraph

124AA(2)(b) in respect of a transaction entered

into before the first-mentioned transaction;

(b) so much of the expenditure of a capital nature incurred by the

vendor before the date of the transaction in relation to the

area that is the subject of the right or to which the

information relates as would have been included in the

unrecouped previous capital expenditure of the vendor as at

the end of the year of income of the vendor during which the

transaction occurred but for the transaction and any later

transaction in relation to that area;

(c) any expenditure of the vendor (other than expenditure on

plant in use by the vendor at the date of the transaction) to

which section 124AH applies incurred by the vendor before

the date of the transaction that has not been allowed and is

not allowable as a deduction to the vendor in the year of

income in which the transaction takes place or in any

preceding year of income; and



Section 124ABA


(d) the amount included in the vendor’s assessable income under

section 124AM in relation to property acquired by the

purchaser from the vendor in connexion with the transaction;

the amount specified in the agreement shall, for all purposes of this

Division, be deemed to be the amount in fact so specified less the

amount of the excess.

(4) For the purposes of paragraphs (3)(a) and (b), the expenditure of a

capital nature incurred by the vendor in relation to an area the

subject of a petroleum prospecting or mining right shall be deemed

not to include expenditure of a capital nature on buildings or other

improvements unless rights in respect of them are acquired by the

purchaser with the petroleum prospecting or mining right.

(5) An agreement under this section must be:

(a) in writing signed by or on behalf of each party to the

agreement; and

(b) made not later than 2 months after the end of the year of

income of the purchaser in which the transaction occurred, or


124ABA Allowable capital expenditure in respect of cash bidding

payments for exploration permits and production licences

(1) Where, immediately before the grant of a production licence or a

first production licence, as the case may be, that is related to a cash

bidding exploration permit, a person who has a qualifying interest

or qualifying interests in relation to the permit also has an

entitlement to an eligible cash bidding amount in relation to the

permit, the taxpayer shall be taken for the purposes of this Division

to have incurred, at the time at which the production licence is

granted, expenditure of a capital nature in relation to the qualifying

interest or qualifying interests of an amount equal to the eligible

cash bidding amount.

(1A) Where:

(a) a taxpayer makes a permit cash bidding payment in relation

to the grant of an exploration permit; and

(b) the payment is made at or after the time of the grant of a

production licence that is related to the exploration permit;



Section 124ABA


the amount of the payment shall be taken, for the purposes of this

Division, to be expenditure of a capital nature incurred by the

taxpayer at the time of payment.

(1B) Each licence cash bidding payment paid by a taxpayer shall be

taken, for the purposes of this Division, to be expenditure of a

capital nature incurred by the taxpayer:

(a) if the amount is paid before the grant of the production

licence—at the time of grant; and

(b) in any other case—at the time the payment is made.

(2) Where, at any time before the grant of a production licence or a

first production licence, as the case may be, that is related to a cash

bidding exploration permit, a person (in this section referred to as

the purchaser) incurs expenditure in acquiring a qualifying interest

in relation to the permit from another person (in this section

referred to as the vendor) who has an entitlement to an eligible

cash bidding amount in relation to the permit, the purchaser and

vendor may agree to transfer to the purchaser the proportion of the

vendor’s entitlement to the eligible cash bidding amount specified

in the agreement.

(3) An agreement under subsection (2) shall:

(a) be in writing signed by or on behalf of the persons making

the agreement;

(b) specify as the amount of the entitlement that is to be

transferred to the purchaser an amount that does not exceed

the expenditure incurred by the purchaser in acquiring the

qualifying interest in relation to the exploration permit

reduced by any amount of that expenditure specified in an

agreement previously made under subsection 124AB(1), or

specified in a notice given under subsection 124AB(1) of this

Act as in force immediately before 1 July 1992 or before the

commencement of the Taxation Laws Amendment (Self

Assessment) Act 1992, whichever is later; and

(c) be made not later than 2 months after the end of the year of

income of the purchaser in which the acquisition occurred, or




Section 124ABA


(4) Where at a particular time (in this subsection referred to as the

relevant time):

(a) a person is the holder of a qualifying interest or qualifying

interests in relation to a cash bidding exploration permit; and

(b) the sum of:

(i) if the permit was granted to the person (whether or not

the person holds the permit at the relevant time)—the

permit cash bidding payment, or the aggregate of the

permit cash bidding payments, as the case requires, paid

before the relevant time in relation to the grant of the

permit; and

(ii) in any case—all eligible cash bidding amounts (if any)

specified in notices duly given (including at a time after

the relevant time) under subsection (2), in relation to the

acquisition before the relevant time, by the person of

qualifying interests in relation to the permit;

exceeds the sum of all eligible cash bidding amounts (if any)

specified in notices duly given (including at a time after the

relevant time) under subsection (2) in relation to the

acquisition, before the relevant time, from the person of

qualifying interests in relation to the permit;

the person shall be taken to have at the relevant time in relation to

the permit an entitlement to an eligible cash bidding amount equal

to the amount of the excess referred to in paragraph (b).

(4A) In this section:

(a) a reference to the Petroleum Act includes a reference to a

corresponding law of a State or the Northern Territory; and

(b) a reference to a specified provision or provisions of the

Petroleum Act includes a reference to the corresponding

provision or provisions of the corresponding law of a State or

the Northern Territory.

(5) For the purposes of this section:

(a) a production licence is related to an exploration permit if:

(i) because of the grant of the production licence, the

exploration permit ceases to be in force in respect of:

(A) in the case of a production licence under Part III

of the Petroleum Act—the block or blocks in

respect of which the production licence is

granted; or



Section 124ABA


(B) in any other case—the whole or part of the area

in respect of which the production licence is

granted; or

(ii) because of the grant of the production licence, a

retention lease that is related to the exploration permit

ceases to be in force in respect of:

(A) in the case of a production licence under Part III

of the Petroleum Act—a block or blocks in

respect of which a production licence is

granted; or

(B) in any other case—the whole or part of the area

in respect of which the production licence is

granted;

(b) a retention lease is related to an exploration permit if,

because of the grant of the retention lease, the exploration

permit ceases to be in force in respect of:

(i) in the case of a retention lease under Part III of the

Petroleum Act—the block or blocks in respect of which

the retention lease is granted; or

(ii) in any other case—the whole or part of the area in

respect of which the retention lease is granted;

(c) where an exploration permit or a retention lease (in this

paragraph referred to respectively as the original permit and

the original lease) is renewed, the renewed permit or

renewed lease shall be taken to be a continuation of the

original permit or original lease notwithstanding that the

renewal may not have been granted in respect of all of the

blocks or other area in respect of which the original permit or

original lease was granted; and

(d) a person shall be taken to have a qualifying interest in

relation to an exploration permit if the person is the holder of

the permit or a retention lease that is related to the permit, or

of an interest in the permit or such a lease.


block has the same meaning as in the Petroleum Act.

cash bidding exploration permit means an exploration permit in

respect of which a permit cash bidding payment is or was made.



Section 124ABA


exploration permit means:

(a) an exploration permit for petroleum under Part III of the

Petroleum Act; or

(b) any permit, licence, lease or other authority (other than a

production licence) that:

(i) is granted under a law of the Commonwealth, a State, a

Territory or a foreign country (other than a law of a

foreign country declared by the regulations as

mentioned in paragraph (7)(a)); and

(ii) authorises exploration or prospecting for petroleum,

whether or not it also authorises other things.

licence cash bidding payment means:

(a) any of the following amounts paid on or after 15 January

1986 in respect of the grant of a production licence, if the

amount is incurred in carrying on prescribed petroleum


petroleum obtainable by prescribed petroleum operations:

(i) a deposit referred to in paragraph 48(1)(b) of the

Petroleum Act;

(ii) an amount paid as mentioned in paragraph 50(b) of the

Petroleum Act;

(iii) an instalment paid by the registered holder of the

production licence under:

(A) an agreement entered into under section 109 of

the Petroleum Act; or

(B) subsection 109(4) of that Act; or

(b) a deposit referred to in paragraph 48(1)(b) of the Petroleum

Act that was paid before 15 January 1986 in respect of the

grant of a production licence, where none of the balance

referred to in paragraph 50(b) of the Petroleum Act was paid

before that date; or

(c) an amount paid for the grant of a production licence (other

than one granted under Part III of the Petroleum Act), if:

(i) the licence was auctioned or tendered for, or was

granted to a person who responded to a public invitation

to apply for it within a specified period or by a specified

day; and



Section 124ABA


(ii) the amount is not an application fee or a deposit, except

to the extent that the amount is applied in payment for

the grant of the production licence; and

(iii) the amount is incurred in carrying on prescribed

petroleum operations or for the purpose of exploring or

prospecting for petroleum obtainable by prescribed

petroleum operations.

permit cash bidding payment means:

(a) any of the following amounts paid on or after 15 January

1986 in respect of the grant of an exploration permit, if the

amount is incurred in carrying on prescribed petroleum


petroleum obtainable by prescribed petroleum operations:

(i) an amount referred to in paragraph 22B(5)(b) of the

Petroleum Act;

(ii) a deposit referred to in paragraph 24(1)(b) of the

Petroleum Act;

(iii) an amount paid as mentioned in paragraph 27(b) of the

Petroleum Act;

(iv) an instalment paid by the registered holder of the

exploration permit under:

(A) an agreement entered into under section 109 of

the Petroleum Act; or

(B) subsection 109(4) of that Act; or

(b) a deposit referred to in paragraph 24(1)(b) of the Petroleum

Act that was paid before 15 January 1986 in respect of the

grant of an exploration permit, where none of the balance

referred to in paragraph 27(b) of the Petroleum Act was paid

before that date; or

(c) an amount paid for the grant of an exploration permit (other

than one issued under Part III of the Petroleum Act), if:

(i) the permit was auctioned or tendered for, or was granted

to a person who responded to a public invitation to

apply for it within a specified period or by a specified

day; and

(ii) the amount is not an application fee or a deposit, except

to the extent that the amount is applied in payment for

the grant of the exploration permit; and



Section 124ABA


(iii) the amount is incurred in carrying on prescribed

petroleum operations or for the purpose of exploring or


petroleum operations.

Petroleum Act means the Petroleum (Submerged Lands) Act 1967.

production licence means:

(a) a production licence for petroleum under Part III of the

Petroleum Act; or

(b) any permit, licence, lease or other authority that:





(ii) authorises the carrying on of mining operations for the

extraction (other than merely by taking samples) of

petroleum from its natural site, whether or not it also

authorises other things.

retention lease means:

(a) a retention lease under Part III of the Petroleum Act; or

(b) any permit, licence (other than a production licence), lease or

authority in relation to an area that:





(ii) is only permitted to be granted to a person who is the

holder of, or of an interest in, an exploration permit, or

retention lease, in relation to the area.

(7) Where:

(a) a law of a foreign country is declared by the regulations to

contain provisions equivalent to those of Divisions 2 and 3 of

Part III of the Petroleum Act; and

(b) the Commissioner considers that, if the preceding provisions

of this section had applied in relation to the law of the foreign

country in the same way, with appropriate modifications, as

they apply in relation to Divisions 2 and 3 of Part III of the

Petroleum Act, the taxpayer would have been taken by this



Section 124AC


section to have incurred an amount of expenditure of a

capital nature at a particular time;

then the taxpayer is taken by this section to have incurred that

amount of expenditure at that time.

124AC Residual previous capital expenditure

(1) For the purposes of this Division, but subject to the succeeding

provisions of this section, the residual previous capital expenditure



deducting from the sum of:

(a) the amount of allowable capital expenditure (other than

allowable capital expenditure to which paragraph (b) applies)

incurred by the taxpayer on or before 17 August 1976 and

before the end of the relevant year of income; and

(b) any amount of allowable capital expenditure that is deemed

by subsection (2) to have been incurred by the taxpayer in the

relevant year of income or in a preceding year of income;




section 124AD from the assessable income of a year of




Commissioner under section 124AB by the taxpayer

and a person who acquired the last-mentioned property

from the taxpayer) that has been disposed of, lost or

destroyed or the use of which by the taxpayer for the

purposes of carrying on prescribed petroleum operations

has been otherwise terminated, and has not been

allowed and is not allowable as a deduction from the

assessable income of any year of income that ended

before the year of income in which the disposal, loss,

destruction or termination of use took place;


given to the Commissioner under section 124AB in relation

to the acquisition from the taxpayer, during the relevant year

of income or a preceding year of income, of a petroleum

prospecting or mining right or petroleum prospecting or



Section 124AC


mining information as is attributable to expenditure that

would, but for this paragraph, be included in the residual


the relevant year of income; and

(e) the amounts of subsidy received by the taxpayer in respect of

expenditure incurred after 17 September 1974 (other than

expenditure incurred before 1 July 1976 in pursuance of a

contract made on or before 17 September 1974, being a

contract under which property was to be acquired by, or work

was to be performed for, the taxpayer) being amounts

received before or during the relevant year of income under

agreements entered into under an Act relating to the search

for petroleum, reduced by any amounts of such subsidy

repaid by the taxpayer before or during the relevant year of

income.

(2) Where:

(a) on or before 17 August 1976:

(i) the taxpayer incurred allowable capital expenditure on

property the use of which by the taxpayer for the


has, before the relevant year of income, been

terminated; or

(ii) the taxpayer, otherwise than in carrying on prescribed

petroleum operations, incurred expenditure of a capital

nature on property, being expenditure that would have

been allowable capital expenditure if it had been

incurred in carrying on such operations; and

(b) the property has, after 17 September 1974, come into use by

the taxpayer for purposes for which allowable capital


so much of that expenditure as the Commissioner determines shall

be deemed to have been incurred by the taxpayer in respect of that

property, during the year of income in which the property so came

into use by the taxpayer, for the purposes for which the property so

came into use.

(3) Nothing contained in section 122N prejudices the operation of

subsection (2).



Section 124AD


124AD Deduction of residual previous capital expenditure


taxpayer, an amount of residual previous capital expenditure, an

amount ascertained in accordance with this section is an allowable

deduction.



Note: Section 330-1 of the Income Tax (Transitional Provisions) Act 1997 converts any undeducted residual previous capital expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.


ascertained by dividing the amount of residual previous capital

expenditure referred to in subsection (1) by a number equal to the

number of whole years in the estimated life of the petroleum field

or proposed petroleum field as at the end of the year of income or

by 25, whichever number is the less.

(3) The amount, or the total of the amounts, of the deduction or

deductions allowable under this section shall not exceed an amount

equal to so much of the assessable income from petroleum derived

by the taxpayer in the year of income as remains after deducting

from that assessable income from petroleum all deductions

allowable otherwise than under this section, section 124ADB,

section 124ADD, section 124ADF, section 124ADG and

section 124AH in respect of that assessable income from

petroleum, and, where the total of the amounts of 2 or more

deductions that would be allowable under this section but for this

subsection exceeds the maximum amount determined in

accordance with this subsection, those deductions shall be reduced

respectively by amounts proportionate to those deductions and

equal in total to the excess.

(4) The reference in subsection (3) to all deductions allowable

otherwise than under this section, section 124ADB,

section 124ADD, section 124ADF, section 124ADG and

section 124AH in respect of the assessable income from petroleum

derived by a taxpayer in a year of income is a reference to:

(a) any deductions allowable otherwise than under this section,

section 124ADB, section 124ADD, section 124ADF,

section 124ADG and section 124AH from the assessable



Section 124ADA


income of the taxpayer of that year of income that relate

exclusively to that assessable income from petroleum; and

(b) so much of any other deduction allowable otherwise than

under this section, section 124ADB, section 124ADD,

section 124ADF, section 124ADG and section 124AH from

the assessable income of the taxpayer of that year of income

as, in the opinion of the Commissioner, may appropriately be

related to that assessable income from petroleum;

and includes a reference to any deductions allowable under

sections 124AF and 124AM.


Commissioner is not satisfied that the estimated life of a petroleum

field as made by the taxpayer is a reasonable estimate, the

estimated life shall, for the purposes of subsection (2), be taken to

be such period as the Commissioner considers reasonable.

124ADA Residual capital expenditure


provisions of this section, the residual capital expenditure of a

taxpayer as at the end of a year of income (in this section referred

to as the relevant year of income) shall be ascertained by

deducting from the sum of:



incurred by the taxpayer after 17 August 1976 and before the

end of the relevant year of income, being:

(i) expenditure incurred on or before 30 April 1981; or

(ii) expenditure incurred after 30 April 1981:

(A) under a contract entered into on or before

30 April 1981; or

(B) in respect of the construction of property by the

taxpayer where that construction commenced

on or before 30 April 1981; and


by subsection (2) to have been incurred by the taxpayer on or

before 30 April 1981;





Section 124ADA



section 124ADB from the assessable income of a year

of income preceding the relevant year of income; or












destruction or termination of use took place; and










(2) Where:

(a) after 17 August 1976:

(i) the taxpayer has incurred allowable capital expenditure

on property the use of which by the taxpayer for the



terminated; or

(ii) the taxpayer has, otherwise than in carrying on

prescribed petroleum operations, incurred expenditure

of a capital nature on property, being expenditure that

would have been allowable capital expenditure if it had

been incurred in carrying on such operations;

being:

(iii) expenditure incurred on or before 30 April 1981; or

(iv) expenditure incurred after 30 April 1981:



Section 124ADB



30 April 1981; or



on or before 30 April 1981; and

(b) the property has, on or before 30 April 1981, come into use

by the taxpayer for purposes for which allowable capital




property, on the day on which the property so came into use by the

taxpayer, for the purposes for which the property so came into use.


subsection (2).

124ADB Deduction of residual capital expenditure


taxpayer, an amount of residual capital expenditure, an amount

ascertained in accordance with this section is an allowable

deduction.



Note: Section 330-1 of the Income Tax (Transitional Provisions) Act 1997 converts any undeducted residual capital expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.


ascertained by dividing the amount of residual capital expenditure

referred to in subsection (1) by a number equal to the number of

whole years in the estimated life of the petroleum field or proposed

petroleum field as at the end of the year of income or by 5,


(3) The amount of the deduction, or the total of the amounts of the

deductions, allowable under this section shall not exceed an

amount equal to so much of the assessable income of the taxpayer

of the year of income as remains after deducting from that

assessable income all deductions allowable otherwise than under

this section and sections 124ADD, 124ADF, 124ADG and 124AH



Section 124ADC


in respect of that assessable income and, where the total of the

amounts of 2 or more deductions that would be allowable under

this section but for this subsection exceeds the maximum amount

determined in accordance with this subsection, those deductions

shall be reduced respectively by amounts proportionate to those

deductions and equal in total to the excess.



field or proposed petroleum field as made by the taxpayer is a

reasonable estimate, the estimated life shall, for the purposes of

subsection (2), be taken to be such period as the Commissioner

considers reasonable.

124ADC Residual (1 May 1981 to 18 August 1981) capital

expenditure


provisions of this section, the residual (1 May 1981 to 18 August

1981) capital expenditure of a taxpayer as at the end of a year of

income (in this section referred to as the relevant year of income)

shall be ascertained by deducting from the sum of:



incurred by the taxpayer after 30 April 1981 and before the


(i) expenditure incurred on or before 18 August 1981; or

(ii) expenditure incurred after 18 August 1981:


18 August 1981; or



on or before 18 August 1981;

but not being:

(iii) expenditure incurred under a contract entered into on or

before 30 April 1981; or

(iv) expenditure incurred in respect of the construction of

property by the taxpayer where that construction

commenced on or before 30 April 1981; and



Section 124ADC



by subsection (2) to have been incurred by the taxpayer after

30 April 1981 and on or before 18 August 1981;




section 124ADD from the assessable income of a year

of income preceding the relevant year of income; or




















(1 May 1981 to 18 August 1981) capital expenditure of the

taxpayer as at the end of the relevant year of income.

(2) Where:






terminated; or






Section 124ADD



been incurred in carrying on such operations; and

(b) the property has, after 30 April 1981 and on or before

18 August 1981, come into use by the taxpayer for purposes

for which allowable capital expenditure may be incurred;






subsection (2).

124ADD Deduction of residual (1 May 1981 to 18 August 1981)

capital expenditure


taxpayer, an amount of residual (1 May 1981 to 18 August 1981)





Note: Section 330-1 of the Income Tax (Transitional Provisions) Act 1997 converts any undeducted residual (1 May 1981 to 18 August 1981) capital expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.


ascertained by dividing the amount of residual (1 May 1981 to

18 August 1981) capital expenditure referred to in subsection (1)

by a number equal to the number of whole years in the estimated

life of the petroleum field or proposed petroleum field as at the end

of the year of income or by 6, whichever number is the less.






this section, section 124ADF, section 124ADG and section 124AH

in respect of that assessable income and, where the total of the



Section 124ADE


amounts of 2 or more deductions that would be allowable under

this section but for this subsection exceeds the maximum amount

determined in accordance with this subsection, those deductions

shall be reduced respectively by amounts proportionate to those

deductions and equal in total to the excess.





subsection (2), be taken to be such period as the Commissioner


124ADE Residual (19 August 1981 to 19 July 1982) capital

expenditure


provisions of this section, the residual (19 August 1981 to 19 July

1982) capital expenditure of a taxpayer as at the end of a year of

income (in this section referred to as the relevant year of income)

shall be ascertained by deducting from the sum of:



incurred by the taxpayer after 18 August 1981 and before the


(i) expenditure incurred on or before 19 July 1982; or

(ii) expenditure incurred after 19 July 1982:


19 July 1982; or



on or before 19 July 1982;

but not being:

(iii) expenditure incurred under a contract entered into on or

before 18 August 1981; or

(iv) expenditure incurred in respect of the construction of

property by the taxpayer where that construction

commenced on or before 18 August 1981; and


by subsection (2) to have been incurred by the taxpayer after

18 August 1981 and on or before 19 July 1982;



Section 124ADE





section 124ADF from the assessable income of a year of





















(19 August 1981 to 19 July 1982) capital expenditure of the

taxpayer as at the end of the relevant year of income.

(2) Where:




purpose of carrying on prescribed petroleum operations


terminated; or





been incurred in carrying on such operations; and



Section 124ADF


(b) the property has, after 18 August 1981 and on or before

19 July 1982, come into use by the taxpayer for purposes for

which allowable capital expenditure may be incurred;






subsection (2).

124ADF Deduction of residual (19 August 1981 to 19 July 1982)

capital expenditure


taxpayer, an amount of residual (19 August 1981 to 19 July 1982)





Note: Section 330-1 of the Income Tax (Transitional Provisions) Act 1997 converts any undeducted residual (19 August 1981 to 19 July 1982) capital expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.


ascertained by dividing the amount of residual (19 August 1981 to

19 July 1982) capital expenditure referred to in subsection (1) by a

number equal to the number of whole years in the estimated life of

the petroleum field or proposed petroleum field as at the end of the

year of income or by 10, whichever number is the less.






this section, section 124ADG and section 124AH in respect of that

assessable income and, where the total of the amounts of 2 or more

deductions that would be allowable under this section but for this

subsection exceeds the maximum amount determined in

accordance with this subsection, those deductions shall be reduced



Section 124ADG


respectively by amounts proportionate to those deductions and

equal in total to the excess.





subsection (2) be taken to be such period as the Commissioner


124ADG Deduction of allowable (post 19 July 1982) capital

expenditure

(1) In this section, allowable (post 19 July 1982) capital expenditure,

in relation to a taxpayer, means allowable capital expenditure

incurred by the taxpayer after 19 July 1982 and before the 1997-98

year of income, not being expenditure incurred:

(a) under a contract entered into on or before 19 July 1982; or

(b) in respect of the construction of property by the taxpayer

where that construction commenced on or before 19 July

1982.


(2) Where, in a year of income, a taxpayer incurs allowable (post

19 July 1982) capital expenditure, an amount ascertained in

accordance with this section is an allowable deduction in respect of

that expenditure in respect of that year of income and in respect of

subsequent years of income.






referred to as the relevant year of income) in respect of an amount

of allowable (post 19 July 1982) capital expenditure incurred by a

taxpayer is the amount ascertained by dividing the amount of that



Section 124ADG


expenditure that is unrecouped as at the end of the relevant year of

income by:

(a) a number equal to the difference between 10 and the number

of years of income (if any) preceding the relevant year of


is allowable, or, but for the operation of subsection (6),

would have been allowed or would be allowable, under

subsection (2) in respect of that amount of expenditure; or


life of the petroleum field or proposed petroleum field as at

the end of the relevant year of income;



(post 19 July 1982) capital expenditure incurred by a taxpayer that

is unrecouped as at the end of a year of income (in this subsection


deducting from the amount of that allowable (post 19 July 1982)

capital expenditure the sum of:

(a) any part of that allowable (post 19 July 1982) capital

expenditure that:




in respect of a year of income preceding the relevant

year of income; or




and a person who acquired the property from the

taxpayer):


(B) the use of which by the taxpayer for the

purposes of carrying on prescribed petroleum

operations has been otherwise terminated;



income preceding the relevant year of income; and

(b) so much of any amounts specified in notices duly given to

the Commissioner under section 124AB in relation to the




Section 124ADG


income or a year of income preceding the relevant year of

income, of a petroleum prospecting or mining right or

petroleum prospecting or mining information as:

(i) is attributable to that allowable (post 19 July 1982)

capital expenditure; and



preceding the relevant year of income.



under subsection (2) but for the operation of subsection (6) shall be

deemed to have been allowed or to be allowable as such a

deduction.

(6) The amount, or the total of the amounts, of the deduction or

deductions allowable under subsection (2) in respect of a year of

income (including any amount that is deemed to be a deduction so

allowable by virtue of subsection (7)) shall not exceed an amount

equal to so much of the assessable income of the year of income as

remains after deducting all allowable deductions, other than

deductions allowable under this section or under section 124AH,

and, where the total of the amounts of 2 or more deductions that

would be allowable under this section but for this subsection

exceeds the maximum amount determined in accordance with this

subsection, those deductions shall be reduced respectively by

amounts proportionate to those deductions and equal in total to the

excess.



subsection (6), that whole or part shall be deemed to be a deduction

that is allowable under subsection (2) in respect of the next

succeeding year of income.


(8) Where:

(a) an amount of allowable (post 19 July 1982) capital

expenditure was incurred by a taxpayer on property (not



Section 124ADG


being property in respect of which a notice has been duly

given to the Commissioner under section 124AB) that,

during a year of income, has been disposed of, lost or


purposes of carrying on prescribed petroleum operations has

been otherwise terminated; and







paragraph (a);


relevant amount.

(9) Where:

(a) an amount is specified in a notice duly given to the

Commissioner under section 124AB in relation to the

acquisition from a taxpayer, during a year of income, of a

petroleum prospecting or mining right or petroleum

prospecting or mining information; and







paragraph (a);


relevant amount.

(10) Where:


(i) a taxpayer has incurred allowable capital expenditure on

property the use of which by the taxpayer for the


has been terminated; or

(ii) a taxpayer has, otherwise than in carrying on prescribed

petroleum operations, incurred expenditure of a capital

nature on property, being expenditure that would have



Section 124ADH


been allowable capital expenditure if it had been

incurred in carrying on such operations; and

(b) the property has, after 19 July 1982, come into use by the

taxpayer for purposes for which allowable capital


so much of the expenditure referred to in subparagraph (a)(i) or

(ii), as the case may be, as the Commissioner determines shall, for

the purposes of this section, be deemed to have been incurred by

the taxpayer on that property, on the day on which that property so

came into use by the taxpayer, for the purposes for which that

property so came into use.



field or a proposed petroleum field as made by the taxpayer is a


paragraph (3)(b), be taken to be such period as the Commissioner


124ADH Election in relation to limit on certain deductions


subsection (3) shall apply in relation to all allowable capital

expenditure of the taxpayer incurred after the end of the year of

income that commenced on 1 July 1984.

(2) An election under subsection (1) must be made on or before the

last day for the furnishing of the taxpayer’s return of income of the

year of income to which the election relates or within such further

time as the Commissioner allows.

(3) Where:


to expenditure of a kind referred to in that subsection in


(b) but for this subsection any of the following subsections:

(i) subsection 124ADB(3);

(ii) subsection 124ADD(3);

(iii) subsection 124ADF(3);

(iv) subsection 124ADG(6);



Section 124AE


would apply to limit or reduce the amount of a deduction

otherwise allowable under this Division in relation to a year

of income in relation to an amount of expenditure of that

kind;

none of the subsections referred to in subparagraphs (b)(i) to (iv)

(inclusive) applies to limit or reduce the amount of the deduction.

(4) Where, apart from this section, any of the subsections referred to in

subparagraphs (3)(b)(i) to (iv) (inclusive) would apply to limit or

reduce the amount of a deduction otherwise allowable in relation to

a year of income in relation to an amount of expenditure in respect

of which a taxpayer has not made an election under this section in

relation to the year of income, nothing in this section affects the

application of that subsection in relation to that year of income in

relation to that amount.

124AE Unrecouped previous capital expenditure

For the purposes of this Division, the unrecouped previous capital

expenditure of a taxpayer as at the end of a year of income (in this

section referred to as the relevant year of income) is the amount, if

any, remaining after deducting from the sum of:

(a) so much of the amount that, for the purposes of

section 124DF of the Income Tax Assessment Act 1936-1973

as amended by the Income Tax Assessment Act 1974, was the

unrecouped capital expenditure of the taxpayer as at the end

of the year of income of the taxpayer next preceding the year

of income of the taxpayer in which 17 September 1974

occurred as remains after deducting from that amount any

part of that amount that has been allowed or is allowable as a

deduction under section 124DG of that Act as so amended

from the assessable income of that next preceding year of

income; and

(b) so much of any expenditure of a capital nature that would be

allowable capital expenditure of the taxpayer for the purposes

of section 124DD of the Income Tax Assessment Act

1936-1973 as amended by the Income Tax Assessment Act

1974 if that section were still in force as was incurred by the

taxpayer after the year of income first referred to in

paragraph (a) and before the end of the relevant year of

income, being expenditure incurred on or before

17 September 1974, or incurred after 17 September 1974 and



Section 124AE


before 1 July 1976 in pursuance of a contract made on or

before 17 September 1974, being a contract under which

property or petroleum prospecting or mining information was

to be acquired by, or work was to be performed for, the

taxpayer;

the aggregate of the following amounts:

(c) any part of the expenditure included in the sum of the

amounts referred to in paragraphs (a) and (b) that:


section 124AF from the assessable income of a year of







destroyed or the use of which by the taxpayer for






destruction or termination of use took place;

(d) so much of any amounts specified in notices duly given to

the Commissioner under section 124AB in relation to the


income or a preceding year of income, of a petroleum


mining information, as are attributable to expenditure that

would, but for this paragraph, be included in the unrecouped


the relevant year of income;

(e) the total net exempt income from petroleum derived by the

taxpayer in the relevant year of income or in an earlier year

of income subsequent to the year of income next preceding

the year of income of the taxpayer in which 17 September

1974 occurred, reduced by the sum of:

(i) where, but for the net exempt income from petroleum

derived by the taxpayer in any of those preceding years

of income, a loss would have been incurred by the

taxpayer for the purposes of section 79E, 79F, 80,



Section 124AF


80AAA or 80AA in any of those preceding years of

income or the amount of a loss incurred by the taxpayer

for the purposes of any of those sections in any of those

preceding years of income would have been greater:

the amount that would have been the amount of that loss or

the amount by which that loss would have been greater, as

the case may be;

(ii) where, but for the net exempt income from petroleum

derived by the taxpayer in any of those preceding years

of income, a deduction would have been allowable

under section 79E, 79F, 80, 80AAA or 80AA from the

assessable income of the taxpayer of any of those

preceding years of income, or the amount of a deduction

allowed or allowable under any of those sections from

the assessable income of the taxpayer of any of those

preceding years of income would have been greater—

the amount that would have been the amount of that

deduction or the amount by which that deduction would

have been greater, as the case may be; and

(iii) the amount of any loss incurred by the taxpayer in the

relevant year of income or in any of those preceding

years of income in relation to exempt income from

petroleum; and

(g) any amounts of subsidy received by the taxpayer in respect of

expenditure incurred on or before 17 September 1974, or

incurred after 17 September 1974 and before 1 July 1976 in

pursuance of a contract made on or before 17 September

1974, being a contract under which property was to be

acquired by, or work was to be performed for, the taxpayer,

being amounts of subsidy received after the year of income

first referred to in paragraph (a) and before the end of the

relevant year of income under agreements entered into under

an Act relating to the search for petroleum, reduced by any

amounts of such subsidy repaid by the taxpayer before or

during the relevant year of income.

124AF Deductions of unrecouped previous capital expenditure

(1) Where, in the year of income, a taxpayer derives assessable income

from petroleum, so much of the amount of the unrecouped

previous capital expenditure of the taxpayer as at the end of the



Section 124AG


year of income as does not exceed the amount remaining after

deducting from that assessable income from petroleum all

deductions allowable otherwise than under this section and

sections 124AD, 124ADB, 124ADD, 124ADF, 124ADG and

124AH in respect of that assessable income from petroleum is an

allowable deduction.




otherwise than under this section and sections 124AD, 124ADB,

124ADD, 124ADF, 124ADG and 124AH in respect of the

assessable income from petroleum derived by a taxpayer in the

year of income is a reference to:

(a) any deductions allowable otherwise than under this section

and sections 124AD, 124ADB, 124ADD, 124ADF, 124ADG

and 124AH from the assessable income of the taxpayer of the

year of income that relate exclusively to that assessable

income from petroleum; and


under this section and sections 124AD, 124ADB, 124ADD,

124ADF, 124ADG and 124AH from the assessable income

of the taxpayer of the year of income as, in the opinion of the

Commissioner, may appropriately be related to that

assessable income from petroleum.

124AG Election that Division not to apply to plant

(1) A person may elect that this section shall apply in respect of

expenditure on a unit of plant incurred in the year of income and

any further expenditure on that unit of plant incurred in a

subsequent year and, where such an election has been made,

expenditure to which the election applies shall be deemed not to be

allowable capital expenditure for the purposes of this Division or to

be expenditure referred to in section 124AH.

(2) The year of income to which an election under this section relates

must be the first year of income in which the taxpayer incurs, in

relation to the unit of plant to which the election relates,

expenditure that, but for the election, would be allowable capital

expenditure or expenditure referred to in section 124AH.



Section 124AH


(3) An election under this section must be made on or before the last

day for the furnishing of the taxpayer’s return of income of the



124AH Exploration and prospecting expenditure

(1) Subject to this section, expenditure incurred by the taxpayer during

the year of income on exploration or prospecting for petroleum

obtainable by prescribed petroleum operations is an allowable

deduction.



Note: Subdivision 330-A of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for expenditure incurred on exploration or prospecting for petroleum obtainable by eligible mining operations in the 1997-98 year of income or a later year of income.

(2) A deduction is not allowable under this section in any year of

income in respect of expenditure incurred on or before 17 August

1976 (including expenditure incurred on or before that date that is

deemed, by virtue of subsection (4), to be incurred during that year

of income) unless, in the year of income, the taxpayer derives

assessable income from petroleum, and the amount of the

deduction in respect of that expenditure shall not exceed the

amount remaining after deducting from that assessable income

from petroleum all allowable deductions (other than deductions

under this section) in respect of that assessable income.

(3) The reference in subsection (2) to all other allowable deductions in

respect of assessable income from petroleum derived by a taxpayer

in the year of income is a reference to:

(a) any other deductions allowable from the assessable income

of the taxpayer of the year of income that relate exclusively

to that assessable income from petroleum; and

(b) so much of any other deductions allowable from the

assessable income of the taxpayer of the year of income as, in

the opinion of the Commissioner, may appropriately be

related to that assessable income from petroleum;

and includes a reference to any deductions allowable under

sections 124AD, 124ADB, 124ADD, 124ADF, 124ADG, 124AF

and 124AM.



Section 124AH




expenditure incurred on or before 17 August 1976 (including any

expenditure incurred on or before that date that is deemed to have

been incurred during the year of income by any previous

application or applications of this subsection), exceeds the amount

of the deduction allowable under this section in respect of that




in which the taxpayer derives assessable income from petroleum.


(4A) Subject to subsection (4AC), the amount of the deduction

allowable under this section in respect of expenditure incurred

during the year of income, being expenditure incurred after

17 August 1976, shall not exceed an amount equal to so much of

the assessable income of the year of income as remains after

deducting all allowable deductions, other than deductions

allowable under this section in respect of expenditure incurred after

that date.

(4AA) A taxpayer may elect, in relation to a year of income, being the

year of income that commenced on 1 July 1985 or a subsequent

year of income, that the limit in subsection (4A) shall not apply in

relation to actual expenditure in relation to the taxpayer in relation


(4AB) An election under subsection (4AA) must be made on or before the

last day for the furnishing of the taxpayer’s return of income of the



(4AC) Where:

(a) a taxpayer makes an election under subsection (4AA) in


(b) but for this subsection, subsection (4A) would apply to limit






Section 124AH



(c) subsection (4A) does not apply in relation to expenditure




the year of income is an amount ascertained in accordance

with the formula A C

A + B, where:

A is the number of whole dollars in the amount of the


the year of income.

B is the number of whole dollars in the amount of the actual

expenditure in relation to the taxpayer in relation to the year

of income; and

C is an amount equal to the assessable income of the

taxpayer of the year of income reduced by the sum of all

deductions allowable from that assessable income, other than

deductions allowable under this section in respect of

expenditure incurred after 17 August 1976.

(4AD) For the purposes of subsections (4AA) and (4AC):








kind referred to in subsection (1) that is deemed by

subsection (4B) to have been incurred by the taxpayer during

the year of income.

(4B) Where the amount of the expenditure of the kind referred to in


expenditure incurred after 17 August 1976 (including any

expenditure incurred after that date that is deemed to have been

incurred during the year of income by any previous application or







Section 124AH





(4C) A deduction is not allowable under this section in respect of

expenditure incurred during the year of income, being expenditure

incurred after 17 August 1976, unless:


the taxpayer carried on, or proposed to carry on, prescribed

petroleum operations; or





petroleum operations; and


that business.

(5) Where an amount specified in a notice duly given to the

Commissioner under section 124AB in relation to the acquisition

from the taxpayer of a petroleum prospecting or mining right or

petroleum prospecting or mining information is attributable to the

whole or a part of an excess amount of expenditure referred to in

subsection (4) or (4B), the excess amount or the part of the excess

amount, as the case may be:

(a) shall not, under that subsection, be deemed to have been

incurred by the vendor in the year of income in which the

transaction to which the notice relates occurred or any

subsequent year of income; and

(b) shall not be taken into account in calculating the amount to

be included in the allowable capital expenditure or

unrecouped previous capital expenditure of a purchaser by

virtue of a notice given to the Commissioner under

section 124AB in respect of a transaction entered into after

the first-mentioned transaction.

(6) This section applies only to expenditure incurred by the taxpayer in

the year of income of the taxpayer in which 17 September 1974

occurred or in a subsequent year of income, other than expenditure



Section 124AJ


incurred on or before 17 September 1974 or incurred after

17 September 1974 and before 1 July 1976 in pursuance of a

contract made on or before 17 September 1974, being a contract

under which property was to be acquired by, or work was to be

performed for, the taxpayer.

(7) In this section, exploration or prospecting includes geological,

geophysical and geochemical surveys, exploration drilling and

appraisal drilling but does not include development drilling or

operations in the course of working a petroleum field.

124AJ Prospecting or mining by contractors, profit-sharing

arrangements etc.

(1) For the purposes of this Division, where the holder of a petroleum

prospecting or mining right has, for a consideration provided or to

be provided by him, not being a payment of a share of income

derived by him from the sale of petroleum or of the products of

petroleum or a consideration by way of an assignment or sub-lease

of a petroleum prospecting or mining right, procured the

performance of work which, if it had been performed by him,

would have constituted prescribed petroleum operations or would

have constituted exploration or prospecting:

(a) the work shall constitute prescribed petroleum operations or

exploration or prospecting, as the case may be, carried on by

him and shall not constitute prescribed petroleum operations

or exploration or prospecting carried on by the person by

whom the work was performed; and

(b) any such consideration shall be deemed to be expenditure

incurred by him in the carrying on of prescribed petroleum

operations or of exploration or prospecting, as the case may

be.

(2) Where a person who derives income from the sale of petroleum

obtained from mining operations carried on by him in an area, or

from the sale of products of petroleum so obtained, pays to another

person a share of the income so derived in pursuance of an

agreement under which:

(a) that other person has carried on prescribed petroleum

operations in that area or has engaged in that area in

exploration or prospecting for the purpose of discovering

petroleum; or



Section 124AK


(b) the first-mentioned person has acquired, or has agreed or has

an option to acquire, from that other person a petroleum


mining information in relation to that area;

the amount so paid to that other person shall, for the purposes of

this Division:

(c) be deemed to be income derived by that other person from

the sale of petroleum obtained from the carrying on by him

of mining operations in that area; and

(d) be deemed not to be expenditure of a kind in respect of which

deductions are or have been allowable under this Division

incurred by the first-mentioned person.

(3) Notwithstanding section 21, where a person has assigned or sub-let

a petroleum prospecting or mining right in respect of an area to

another person in pursuance of an agreement under which that

other person has carried on, or is carrying on, in that area or in

another area in respect of which the first-mentioned person holds

or has held a petroleum prospecting or mining right, prescribed

petroleum operations or has engaged, or is engaging, in that area in

exploration or prospecting for the purpose of discovering

petroleum, the first-mentioned person shall not be deemed, by

virtue of the assignment or sub-lease, to have incurred for the

purposes of this Division expenditure of a kind in respect of which

deductions are or have been allowable under this Division.

124AK Transactions between persons not at arm’s length

Where:


property (other than a petroleum prospecting or mining

right):

(i) in respect of which the vendor had incurred expenditure

of a kind in respect of which deductions are or have

been allowable under this Division; or


expenditure of such a kind;







Section 124AL



the opinion of the Commissioner, was the value of the unit at

the time of the purchase;



been that amount.

124AL Petroleum or petroleum products used in manufacturing

other goods

Where a taxpayer uses petroleum obtained from mining operations

carried on by him in Australia, or a product of petroleum so

obtained, for the purpose of manufacturing other goods, an amount

equal to the market value of the petroleum or petroleum product at

the time it is used for that purpose shall, for the purposes of this

Division, be deemed to be assessable income from petroleum

derived by the taxpayer during the year of income in which it is

used for that purpose.

124AM Disposal, loss, destruction or termination of use of property


allowable under this Division in respect of expenditure of a capital

nature by the taxpayer in respect of property of the taxpayer that, in

the year of income has been disposed of, lost or destroyed, or the

use of which by the taxpayer for purposes of carrying on

prescribed petroleum operations or of exploring or prospecting for

petroleum has, in the year of income, been otherwise terminated.


of use of the property by the taxpayer for purposes of carrying on

prescribed petroleum operations or of exploration or prospecting

for petroleum, must have occurred in the 1996-97 year of income

or an earlier year of income.



(a) the sum of the deductions so allowed, or allowable; and


destruction or, in the case of other termination of the use of



Section 124AM



of use;

exceeds the total expenditure of a capital nature of the taxpayer in

respect of that property, there shall be included in the assessable

income of the taxpayer of the year of income so much of the

amount of the excess as does not exceed the sum of those

deductions, and the amount so included shall be deemed for the

purposes of this Division to be assessable income from petroleum.

(3) Where the total expenditure referred to in subsection (2) exceeds

the aggregate referred to in that subsection, the excess is, subject to

subsection (4), an allowable deduction from the assessable income

of the taxpayer of the year of income.

(4) The amount of the deduction, or the sum of the amounts of the

deductions, allowable under subsection (3) in respect of the year of

income in relation to property:

(a) that was disposed of, lost or destroyed on or before

17 August 1976; or

(b) the use of which by the taxpayer for the purposes mentioned

in subsection (1) was otherwise terminated on or before that

date;

shall not exceed the amount remaining after deducting from the

assessable income from petroleum derived by the taxpayer in the

year of income all deductions allowable otherwise than under this

Division in respect of that assessable income.

(5) If the amount of the deduction, or the sum of the amounts of the

deductions, that would, but for subsection (4), be allowable from

the assessable income of the taxpayer of the year of income under

subsection (3) (including any amount or amounts that would be an

allowable deduction or allowable deductions from that assessable

income by any previous application or applications of this

subsection) is reduced by the operation of subsection (4), the

amount of the reduction shall be deemed to be an allowable

deduction under subsection (3) from the assessable income of the

taxpayer of the first subsequent year of income in which the

taxpayer derives assessable income from petroleum.


otherwise than under this Division in respect of assessable income



Section 124AM


from petroleum derived by the taxpayer in the year of income is a

reference to:

(a) any deductions allowable otherwise than under this Division

from the assessable income of the taxpayer of the year of

income that relate exclusively to that assessable income from

petroleum; and


under this Division from the assessable income of the

taxpayer of the year of income as, in the opinion of the

Commissioner, may appropriately be related to that


(7) In this section, consideration receivable in respect of the disposal,

loss or destruction means:






(b) where the property is sold with other property and a specified

price is not allocated to the property—such part of the total

sale price, less the expenses of the sale, as the Commissioner

determines;










taken to be use for purposes of carrying on prescribed petroleum

operations or of exploring or prospecting for petroleum if:



site on which the taxpayer conducted:

(i) prescribed petroleum operations within the meaning of

subsection 124(1); or



Section 124AMAA


(ii) activities in respect of which a deduction is allowable,

or has been allowed, under section 124AH; and

(c) either of the following conditions is satisfied:


section 54;

(ii) expenditure on the property is covered by paragraph

124AA(2)(c), (d) or (e).

(9) A reference in subsection (8) to use of property by a taxpayer for a






Division 10AB.

124AMAA Roll-over relief where CGT roll-over relief allowed

under section 160ZZM, 160ZZMA, 160ZZN, 160ZZNA

or 160ZZO or where election for roll-over relief made

under section 124AO





(a) either:




or







are allowable under this Division to the transferor in respect

of the property.



Section 124AMAA



Roll-over relief where joint election made under section 124AO


made under section 124AO by both the transferor and the

transferee referred to in that section in relation to the disposal of

property before the 1997-98 year of income.



(3) Section 124AM (which deals with balancing charges and

deductions) does not apply to the disposal of the property by the

transferor.


(4) This Division applies as if:


the property is allowable capital expenditure of the transferor

and no part of the expenditure of the transferor in respect of

the property is unrecouped previous capital expenditure of

the transferor—the transferee had acquired the property for a


formula:


where:




transferor.


allowed or allowable to the transferor under this Division in

respect of so much of the expenditure of a capital nature of



Section 124AMAA






property; and

(aa) if any part of the expenditure of the transferor in respect of

the property is unrecouped previous capital expenditure of

the transferor:

(i) the transferee had acquired the property for a

consideration equal to the sum of:

(A) so much of the total expenditure of a capital

nature of the transferor in respect of the

property as is unrecouped previous capital

expenditure of the transferor as at the end of the

year of income immediately preceding the year

of income in which the disposal took place; and

(B) if any part of the expenditure of the transferor

in respect of the property is allowable capital

expenditure of the transferor—the amount

worked out using the formula in paragraph (a);

and

(ii) section 124AE has effect in relation to the transferee

and in relation to the property as if so much of the

expenditure which the transferee is taken to have

incurred because of sub-subparagraph (i)(A) of this

paragraph were covered by paragraph 124AE(a) or (b);

and

(iii) a deduction were not allowable to the transferor under

section 124AF for the year of income in which the

disposal took place in respect of so much of the

unrecouped previous capital expenditure of the

transferor as at the end of that year of income as is

attributable to the total expenditure of a capital nature of

the transferor in respect of the property; and


property is:

(i) allowable capital expenditure of the transferor; or

(ii) unrecouped previous capital expenditure of the

transferor;



Section 124AMAA



and

(c) if any part of the expenditure of the transferor in respect of


and the property is a petroleum prospecting or mining right

or petroleum prospecting or mining information:

(i) a notice under section 124AB in respect of the




worked out using the formula in paragraph (a) of this

subsection; and

(iii) subsections 124AB(3), 124ADG(9) and 124AH(5) were

not applicable to that notice; and

(d) if any part of the expenditure of the transferor in respect of


and the property is not a petroleum prospecting or mining

right or petroleum prospecting or mining information—

subsection 124ADG(8) were not applicable to the disposal of

the property; and

(e) if:

(i) the property is a qualifying interest in relation to a cash

bidding exploration permit (within the meaning of

section 124ABA); and

(ii) immediately before the disposal, the transferor had an

entitlement to an eligible cash bidding amount (within

the meaning of that section) in relation to that permit;

then:

(iii) a notice under section 124ABA in respect of the



(iv) the amount specified in the notice were equal to the

whole of the transferor’s entitlement to the eligible cash

bidding amount; and

(f) the reference in paragraph 124ADG(3)(a) to a year of income

in respect of which a deduction has been allowed or is

allowable, or, apart from the operation of subsection

124ADG(6), would have been allowed or would be

allowable, in respect of an amount of allowable capital

expenditure of the transferee in respect of the property



Section 124AMAA


included a reference to a year of income in respect of which a

deduction has been allowed or is allowable, or, apart from the

operation of subsection 124ADG(6), would have been

allowed or would be allowable, in respect of allowable

capital expenditure of:





Transfer of subsection 124ADG(7) excess amounts



subsection 124ADG(2) in respect of the property:


subsection 124ADG(7);






then:

(d) the excess amount is taken, under subsection 124ADG(7), to

be a deduction that is allowable under subsection 124ADG(2)

to the transferee for the year of income in which the disposal

took place; and


subsection 124ADG(2) in respect of the excess amount.

Transfer of subsection 124AH(4) excess amounts



transferor under subsection 124AH(1) in respect of the property:


subsection 124AH(4);






Section 124AMAA



income from petroleum in the year of income in which the

disposal took place or a subsequent year of income;

then:

(d) the excess amount is taken, under subsection 124AH(4), to

be a deduction that is allowable under subsection 124AH(1)

to the transferee for:

(i) if the transferee derives assessable income from

petroleum in the year of income in which the disposal

took place—that year of income; or


transferee derives assessable income from petroleum;

and


subsection 124AH(1) in respect of the excess amount.

Transfer of subsection 124AH(4B) excess amounts



transferor under subsection 124AH(1) in respect of the property:


subsection 124AH(4B);







then:

(d) the excess amount is taken, under subsection 124AH(4B), to

be a deduction that is allowable under subsection 124AH(1)

to the transferee for:



income; or




subsection 124AH(1) in respect of the excess amount.



Section 124AMAA


Section 124AB, 124AC, 124ADA, 124ADC and 124ADE and

subsection 124ADG(1)—inheritance of threshold conditions

(8) If section 124AB, 124AC, 124ADA, 124ADC or 124ADE or

subsection 124ADG(1) applied to the expenditure of a capital

nature of the transferor in respect of the property, that section or

subsection has effect, in relation to the transferee and in relation to

the property, as if the threshold conditions that were satisfied in

relation to the transferor were satisfied in relation to the transferee.




property:




that the contract was, or was not, entered into before, at or


(c) if the expenditure was incurred in respect of the construction

of property—a condition that the construction commenced,

or did not commence, before, at or after a particular time.

Subsection 124AH(4)—inheritance of threshold conditions

(10) If subsection 124AH(4) applied to the expenditure of the transferor

in respect of the property, that subsection has effect, in relation to

the transferee and in relation to the property, as if the threshold

conditions that were satisfied in relation to the transferor were





property:







Section 124AMAA


Inheritance of section 124AG election

(12) If the transferor made an election under section 124AG in respect

of expenditure on the property, the transferee is taken to have made

an election under section 124AG in respect of expenditure on the

property.

Rule where no section 124AG election made

(13) If the transferor did not make an election under section 124AG in

respect of expenditure on the property, the transferee is not entitled

to make an election under section 124AG in respect of expenditure

on the property.

Inheritance of subsection 124AA(2A) threshold conditions

(14) If:

(a) the property is plant or articles for the purposes of section 54;

and

(b) the expenditure of a capital nature of the transferor in respect

of the property is allowable capital expenditure;

then, section 124AA has effect in relation to the transferee and in

relation to the property, as if the conditions set out in subsection

124AA(2A) that were satisfied in relation to the transferor were



assessments


assessment of the transferee where section 124AQ has applied to:






deductions

(16) If:





Section 124AMAA



(iii) the use of property by the transferee for purposes of

carrying on prescribed petroleum operations or of

exploring or prospecting for petroleum (within the

meaning of section 124AM) is otherwise terminated;

and



then, for the purposes of the application of section 124AM in

relation to the loss, destruction, disposal or termination, the total

of:


this Division in relation to the property; and



successive transferors under this Division in relation to the

property;


transferee under this Division in relation to the property.







(iii) the use of the property by the taxpayer for purposes of

carrying on prescribed petroleum operations or of

exploring or prospecting for petroleum (within the

meaning of section 124AM) is otherwise terminated;

and



then, for the purposes of the application of section 124AM in

relation to the loss, destruction, disposal or termination, the total






Section 124AMA



transferee; and


this section—each prior sucessive disposal.





property.


does not apply




property by:








have apart from this subsection, those sections also have the effect




124AMA Application of section 124AM before 1 July 1991—

subsequent use of property for rehabilitation

(1) This section applies to property if:



section 54;

(ii) expenditure on the property is covered by paragraph

124AA(2)(c), (d) or (e); and



Section 124AMA


(b) section 124AM has applied in respect of the termination of

use of the property; and

(c) the date of the termination (in this section called the

section 124AM termination date) was before 1 July 1991;

and

(d) no deduction is allowable, or has been allowed, in respect of

the use of the property that occurred in the period

commencing on the section 124AM termination date and

ending on 30 June 1991; and

(e) the taxpayer commences to use the property for

rehabilitation-related activities on the day after the

section 124AM termination date; and

(f) the taxpayer has not ceased to use the property for

rehabilitation-related activities before 1 July 1991.

(2) For the purposes of this section, the estimated eligible

rehabilitation period is the period:


(b) ending on the day on which, as at 1 July 1991, it is estimated

that the property will cease to be used by the taxpayer for

rehabilitation-related activities.

(3) If, having regard to information in the Commissioner’s possession,

the Commissioner is not satisfied that the estimate is a reasonable

estimate, the estimated eligible rehabilitation period is taken to end

on such day as the Commissioner considers reasonable.

(4) For the purposes of this section, the estimated total rehabilitation


(a) commencing on the day after the section 124AM termination

date; and

(b) ending at the end of the estimated eligible rehabilitation

period.

(5) For the purposes of this section, the actual eligible rehabilitation



(b) ending on the day on which the property is disposed of, lost

or destroyed, or the use of which by the taxpayer for

rehabilitation-related activities has been otherwise

terminated.



Section 124AMA


(6) For the purposes of this section, the actual total rehabilitation


(a) commencing on the day after the section 124AM termination

date; and

(b) ending at the end of the actual eligible rehabilitation period.

(7) An amount calculated using the following formula is allowable as a

deduction to the taxpayer for each year of income any part of

which occurs during both the actual eligible rehabilitation period

and the estimated eligible rehabilitation period:

Eligible rehabilitation days

in yearCapital amount

Days in estimated total


where:


property.

Eligible rehabilitation days in year means the number of days in

so much of the year of income as occurs during both of the actual

eligible rehabilitation period and the estimated eligible


Days in estimated total rehabilitation period means the number of

days in the estimated total rehabilitation period.

(8) Subsections (9) and (10) apply in relation to a year of income if:

(a) deductions are allowable, or have been allowed, under

subsection (7) in respect of the property; and

(b) the actual eligible rehabilitation period ends in the year of

income.

(9) The amount (if any) calculated using the following formula is an

allowable deduction to the taxpayer for the year of income:

DeductionsActual eligible rehabilitation daysCapital – previouslyamount Days in actual total allowed


where:



Section 124AMA



property.





Deductions previously allowed means the total deductions that are

allowable, or have been allowed, under subsection (7) in respect of

the property.

(10) The amount (if any) calculated using the following formula is

included in the assessable income of the taxpayer of the year of

income:

Actual eligible rehabilitation daysFinal value

Days in actual total


where:

Final value means whichever of the following amounts is

applicable in relation to the property:

(a) in the case of the disposal, loss or destruction of the

property—the consideration receivable in respect of the

disposal, loss or destruction; or

(b) in the case of other termination of the use of the property—

the value of the property at the end of the actual eligible






(11) A reference in this section to use of property by a taxpayer for a




(12) Where an amount is included in the assessable income of a

taxpayer under subsection (10), the amount is taken to be




Section 124AN



actual eligible rehabilitation period has the meaning given by

subsection (5).

actual total rehabilitation period has the meaning given by

subsection (6).

capital amount, in relation to property, means the lesser of:

(a) the total expenditure of a capital nature of the taxpayer in

respect of the property; and

(b) the value of the property as at the section 124AM termination

date.

estimated eligible rehabilitation period has the meaning given by

subsection (2).

estimated total rehabilitation period has the meaning given by

subsection (4).


Division 10AB.

section 124AM termination date has the meaning given by

subsection (1).

124AN Double deductions


incurred by a taxpayer has been allowed or is or may become

allowable as a deduction under this Division, no part of that

expenditure shall be an allowable deduction, or be taken into

account in ascertaining the amount of an allowable deduction, from

the assessable income of the taxpayer of any year of income under

a provision of this Act other than this Division.

(2) Subsection (1) does not prevent a deduction being allowed to a

taxpayer under a provision of this Act other than this Division in

respect of a unit of property the use of which by the taxpayer in

carrying on prescribed petroleum operations, or in exploring or

prospecting for petroleum, has been terminated and, where such a

unit of property is used by the taxpayer for the purpose of gaining

or producing assessable income other than assessable income from



Section 124AO


petroleum, then, for the purposes of sections 56 and 62 and

Division 10 and notwithstanding subsection 122C(2) or 122DA(2):




which it commenced to be used for that purpose; and




income.

(3) For the purposes of subsection (1), an amount that would have

been allowed or allowable as a deduction under this Division but

for the operation of subsection 124AD(3), 124ADB(3),

124ADD(3), 124ADF(3), 124ADG(6), 124AF(1), 124AH(2) or

(4A) or 124AM(4) shall be deemed to have been allowed or to be

allowable as such a deduction.

124AO Change in interests in property
















(2) Unless a joint election for roll-over relief is made by both the

transferor and the transferee, this Division applies as if the

consideration for the disposal were equal to the market value of the

property immediately before the time when the change occurred.



Section 124AP


(2A) If a joint election for roll-over relief is made by both the transferor

and the transferee, section 124AMAA applies to the disposal.



(b) is made:






and



section 124AMAA will apply to the transferee’s holding of

the property.




person’s behalf.

(3) A reference in subsection (2) to the market value of property at a

particular time shall, if there is insufficient evidence of the market

value of the property at that time, be read as a reference to such

amount as, in the opinion of the Commissioner, is fair and

reasonable.

124AP Commissioner to determine deductions attributable to

particular expenditure

For any purpose of this Act, the Commissioner may determine the

extent to which a deduction allowed or allowable under this

Division is to be treated as attributable to particular expenditure

that has been taken into account in the calculations by which the

entitlement of the taxpayer to the deduction has been ascertained.

124AQ Recoupment of expenditure

(1A) This section does not apply to an amount received in the 1997-98

year of income or a later year of income if the amount is received



Section 124AR


as recoupment as defined by section 20-25 of the Income Tax



(1) This Division does not apply, and shall be deemed never to have

applied, in relation to a taxpayer, to expenditure of a capital nature

in respect of which the taxpayer is recouped, or becomes entitled to




by any other person (other than a recoupment by way of subsidy

received under an agreement entered into under an Act relating to

the search for petroleum) where the amount of the recoupment is

not, and will not be, included in the assessable income of the

taxpayer of any year of income.



expenditure of a capital nature, the Commissioner may, for the

purposes of subsection (1), determine the extent to which the

amount constitutes a recoupment of that expenditure.

124AR Modification of section 51AD and Division 16D—lessee of










person.




(b) Division 16D.


Division 10AB Rehabilitation and restoration of mining, quarrying and petroleum sites

Section 124B


Division 10AB—Rehabilitation and restoration of mining,

quarrying and petroleum sites

124B Interpretation

In this Division:

ancillary activities, in relation to a person, means:

(a) the preparation of a site for the carrying on by the person of

prescribed mining operations within the meaning of

Subdivision A of Division 10; or

(b) the provision of:

(i) water, light or power for use on; or

(ii) access to or communications with;

a site on which prescribed mining operations within the

meaning of Subdivision A of Division 10 are carried on, or to

be carried on, by the person; or

(c) the treatment of minerals obtained from the carrying on by

the person of prescribed mining operations within the

meaning of Subdivision A of Division 10; or

(d) the storage (whether before or after treatment) of minerals in

relation to the operation of plant for use primarily and

principally in the treatment of minerals obtained from the

carrying on by the person of prescribed mining operations

within the meaning of Subdivision A of Division 10; or

(e) the preparation of a site for the carrying on by the person of

eligible quarrying operations within the meaning of

Subdivision B of Division 10; or

(f) the provision of:



a site on which eligible quarrying operations within the

meaning of Subdivision B of Division 10 are carried on, or to

be carried on, by the person; or

(g) the treatment of quarry materials obtained from the carrying

on by the person of eligible quarrying operations within the

meaning of Subdivision B of Division 10; or

(h) the storage (whether before or after treatment) of quarry

materials in relation to the operation of plant for use

primarily and principally in the treatment of quarry materials


Rehabilitation and restoration of mining, quarrying and petroleum sites Division 10AB

Section 124B


obtained from the carrying on by the person of eligible

quarrying operations within the meaning of Subdivision B of

Division 10; or

(i) the provision of:



a site on which prescribed petroleum operations within the

meaning of Division 10AA are carried on, or to be carried

on, by the person; or

(j) the liquefaction of natural gas obtained from the carrying on

by the person of prescribed petroleum operations within the

meaning of Division 10AA.

eligible building site, in relation to a person, means a site on which

buildings, or other improvements or plant necessary for the

carrying on by the person of:

(a) prescribed mining operations within the meaning of


(b) eligible quarrying operations within the meaning of


(c) prescribed petroleum operations within the meaning of

Division 10AA;

are or were located, but does not include that part (if any) of the

site on which housing and welfare are or were located.

extractive activities means:

(a) eligible exploration or prospecting activities; or

(b) eligible quarrying operations within the meaning of


(c) prescribed mining operations within the meaning of


(d) prescribed petroleum operations within the meaning of

Division 10AA.

eligible exploration or prospecting activities means activities in

respect of which a deduction is allowable, or has been allowed,

under section 122J, 122JF or 124AH.

housing and welfare means:

(a) residential accommodation; or

(b) health, educational, recreational or other similar facilities; or



Section 124B


(c) facilities for the provision of meals;

and includes works carried out directly in connection with such

accommodation or facilities (including works for the provision of

water, light, power, access or communications).

land includes:

(a) a legal or equitable estate or interest in land; or

(b) a right, power or privilege over, or in connection with, land.

person means any of the following:

(a) a company;

(b) a partnership;

(c) a person in the capacity of trustee;

(d) any other person.

predecessor means a predecessor, whether immediate or otherwise.

quarry materials has the same meaning as in Subdivision B of

Division 10.

rehabilitation-related activities has the meaning given by

section 124BB.

restore includes rehabilitate.

site includes a part of a site.

treatment:

(a) in relation to minerals—has the same meaning as in

Subdivision A of Division 10; and

(b) in relation to quarry materials—has the same meaning as in

Subdivision B of Division 10.



Section 124BA


124BA Deduction of expenditure on rehabilitation-related activities

(1) Subject to this Division, expenditure (whether of a capital nature or

otherwise) incurred by a taxpayer on or after 1 July 1991 and

before the 1997-98 year of income, to the extent to which the

expenditure is in respect of rehabilitation-related activities, is an

allowable deduction for the year of income in which the

expenditure is incurred.

Note: Subdivision 330-I of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for expenditure incurred on rehabilitation in the 1997-98 year of income or a later year of income.

(2) A provision of this Act (including a provision of section 51, other

than subsection 51(1)) that expressly prevents or restricts the

operation of section 51 applies in the same way to this section.

124BB Rehabilitation-related activity

(1) A reference in this Division to a rehabilitation-related activity in

relation to a taxpayer is a reference to the restoration of a site on

which the taxpayer conducted extractive activities or ancillary

activities to, or to a reasonable approximation of, the pre-mining

condition of the site.

(1A) A reference in this section to the restoration of a site includes a

reference to the partial restoration of the site (even if the taxpayer

had no intention of completing the restoration).

(2) A reference in this section to the pre-mining condition of a site is a

reference to the condition the site was in before extractive activities

or ancillary activities or both were first commenced on the site,

whether by the taxpayer or by a predecessor of the taxpayer.

(3) A reference in this section to a site on which the taxpayer

conducted ancillary activities includes a reference to an eligible

building site.

(4) In the case of an eligible building site, a reference in this section to

the time at which ancillary activities were first commenced on the

site is a reference to the earliest time at which the buildings,

improvements or plant concerned were located on the site.



Section 124BC


124BC No deduction for certain expenditure

(1) A deduction is not allowable under section 124BA for expenditure

in respect of:

(b) acquiring land; or

(c) constructing buildings or other structures; or

(d) a bond or security, however described, for the performance

of rehabilitation-related activities.


of a capital nature in respect of housing and welfare.


to the extent to which it is taken into account in calculating an

amount of depreciation that is allowable as a deduction.

124BD No deduction where expenditure is recouped

(1) Section 124BA does not apply, and is to be taken never to have

applied, to expenditure where both of the following conditions are

satisfied:

(a) the taxpayer is recouped, or becomes entitled to be recouped,

in respect of the expenditure;

(b) the amount of the recoupment is not, and will not be,

included in the assessable income of the taxpayer of any year

of income.



expenditure, the Commissioner may, for the purposes of



(3) Section 170 does not prevent the amendment of an assessment at

any time for the purpose of giving effect to this section.

124BE Transactions between persons not at arm’s length

If:

(a) a person has incurred expenditure in connection with a

transaction where the parties to the transaction are not

dealing with each other at arm’s length in relation to the

transaction; and



Section 124BF


(b) deductions are or have been allowable under this Division in

respect of the expenditure; and

(c) the amount of the expenditure is greater or less than is

reasonable;

the amount of the expenditure is taken, for all purposes of the

application of this Act in relation to the parties to the transaction,

to be the amount that would have been reasonable if the parties

were dealing with each other at arm’s length.

124BF Property used for rehabilitation-related activities taken to be

used for the purpose of producing assessable income

(1) For the purposes of this Act, where property is used by a taxpayer

on or after 1 July 1991 for rehabilitation-related activities, that use

of the property by the taxpayer is taken to be for the purpose of

producing assessable income of the taxpayer.

(2) Subsection (1) has effect subject to a provision of this Act that

expressly provides that a particular use of property is not taken to

be for the purpose of producing assessable income.


Division 10A Timber operations and timber mill buildings

Section 124EAA


Division 10A—Timber operations and timber mill

buildings

Subdivision AA—Application of this Division

124EAA This Division does not apply after 1996-97 year of income

An amount is not deductible under this Division for an income year

after the 1996-97 year of income.

Note 1: Subdivision 387-G of the Income Tax Assessment Act 1997 allows deductions for the 1997-98 year of income and later years of income for capital expenditure on forestry roads for timber operations and for capital expenditure on timber mill buildings (including capital expenditure incurred before the 1997-98 year of income: see Subdivision 387-G of the Income Tax (Transitional Provisions) Act 1997).

Note 2: Paragraphs 70-120(2)(a) and (b) and subsection 70-120(3) of the Income Tax Assessment Act 1997 allow deductions for the 1997-98 year of income and later years of income for the price paid (at any time) for land carrying trees or for a right to fell trees.

Subdivision A—Timber operations

124E Interpretation

In this Subdivision:

access road means a road (including a bridge, culvert or similar

work forming part of the road) constructed primarily and

principally for the purpose of providing access to an area so as to

enable:

(a) the planting or tending of trees in the area; or

(b) the removal from the area of timber felled in the area.

timber operations means:

(a) the planting or tending of trees for felling;

(b) the felling of standing timber;

(c) the removal of felled timber; or

(d) the milling or other processing of felled timber.


Timber operations and timber mill buildings Division 10A

Section 124EA


124EA Subdivision subject to Division 245 of Schedule 2C


Schedule 2C.

124F Deduction of expenditure

(1) Where a person, in connexion with the carrying on by him of

timber operations for the purpose of gaining or producing

assessable income, has incurred expenditure of a capital nature on

an access road (not being expenditure in respect of which a

deduction has been allowed or is allowable under a provision of the

previous Act or of this Act, other than a provision of this

Subdivision, or which has been or is taken into account in

ascertaining the amount of an allowable deduction under such a

provision), an amount ascertained in accordance with this section

shall be an allowable deduction in respect of the expenditure.

(2) The deduction allowable is the amount ascertained by dividing the

residual capital expenditure, as at the end of the year of income,

ascertained in accordance with the succeeding provisions of this

section, by:

(a) a number equal to the number of whole years, as at the end of

the year of income, in the estimated period during which the

access road will be used for the purpose for which it was

primarily and principally constructed; or

(b) 25;


(3) For the purposes of this section, but subject to subsections (4) and

(5), the residual capital expenditure shall be ascertained by

deducting from the amount of expenditure specified in

subsection (1) any part of that expenditure which:

(a) has been allowed or is allowable as a deduction under this

section from the assessable income of a year of income prior

to the year of income; or

(b) was incurred on:

(i) property which has been disposed of or destroyed; or

(ii) property the use of which by the taxpayer for the

purpose for which the access road was primarily and

principally constructed has been otherwise terminated;



Section 124G


and has not been allowed and is not allowable as a deduction

under this section from the assessable income of any year of

income which ended before the year of income in which the

disposal, destruction or termination of use took place.

(4) Where property referred to in subparagraph (3)(b)(ii) again comes

into use for the purpose for which the access road was primarily

and principally constructed, the residual capital expenditure shall

be deemed to be increased by so much of the expenditure on that

property as the Commissioner determines.

(5) Where any of the expenditure specified in subsection (1) was

incurred in a year of income prior to the year of income which

commenced on 1 July 1956, the residual capital expenditure shall

be deemed to be the amount that would have been the residual

capital expenditure if the provisions of this Subdivision had

applied to assessments in respect of income of that first-mentioned

year of income and to assessments in respect of income of each

subsequent year of income.

124G Disposal, destruction or termination of use of property


allowable under section 124F in respect of expenditure of a capital

nature on an access road and, in the year of income, property on

which any of that expenditure was incurred has been disposed of or

destroyed, or the use by the taxpayer of that property for the

purpose for which the access road was primarily and principally

constructed has been otherwise terminated.

(2) Where:

(a) the consideration receivable in respect of the disposal or

destruction of the property; or

(b) in the case of other termination of the use of the property, the

value of the property at the date of the termination of use;

exceeds the portion of the residual capital expenditure which, at the

time of the disposal, destruction or termination of use, is

attributable to expenditure on the property, so much of the amount

of the excess as does not exceed the sum of the deductions allowed

or allowable under section 124F in respect of expenditure on the

property so disposed of or destroyed, or the use of which has been

so terminated, shall be included in the assessable income.



Section 124GA


(3) Where the portion of the residual capital expenditure which, at the

time of the disposal, destruction or termination of use of the

property, is attributable to expenditure on the property exceeds:


destruction of the property; or

(b) in the case of other termination of the use of the property, the

value of the property at the date of the termination of use;

the amount of the excess shall be an allowable deduction.

(4) In this section, the consideration receivable in respect of the

disposal or destruction means:

(a) in the case of a sale of the property—the sale price less the

expenses of the sale of the property;

(b) in the case of destruction of the property—the amount or

value received or receivable under a policy of insurance or

otherwise in respect of the destruction;

(c) in the case where the property is sold with other property and

no separate value is allocated to the property—the amount

determined by the Commissioner; and

(d) in the case where the property is disposed of otherwise than

by sale—the value, if any, of the property at the date of

disposal;

but does not include an amount which is included, or will, when



124GA Roll-over relief where CGT roll-over relief allowed under


160ZZO


(1) This section applies to the disposal of property by a taxpayer (in

this section called the transferor) to another taxpayer (in this

section called the transferee) if:

(a) either:




or



Section 124GA








are allowable under section 124F to the transferor in respect

of the property.


(2) Section 124G (which deals with balancing charges and deductions)



(3) This Subdivision applies as if:


equal to the residual capital expenditure immediately before

the disposal; and

(b) section 124H had not been enacted.


deductions

(4) If:


(i) the property is destroyed; or


(iii) the use by the transferee of the property for the purpose

for which the access road was primarily and principally

constructed is otherwise terminated; and



then, for the purposes of the application of section 124G in relation

to the destruction, disposal or termination, the total of:


section 124F in relation to the property; and





Section 124H


successive transferors under section 124F in relation to the

property;


transferee under section 124F in relation to the property.


does not apply




property by:





124H Acquisition of property

(1) Where a person has purchased property from another person

carrying on timber operations for the purpose of gaining or

producing assessable income, so much (if any) of the purchase

price as exceeds the sum of:

(a) the amount which, if the property had not been sold, would

have been, at the end of the year of income in which the sale

took place, the portion of the residual capital expenditure of

the vendor attributable to expenditure on that property; and

(b) any part of the purchase price which is included in the

assessable income of the vendor in pursuance of subsection

124G(2);

shall not, for the purposes of this Subdivision, be included in the

expenditure of the purchaser on that property.

(2) This section does not apply where the Commissioner is of opinion

that the circumstances are such that it should not apply.

124J Timber felled upon acquired land or under right

(1) Where:

(a) a taxpayer has acquired:



Section 124JAA


(i) land carrying standing timber and part of the price paid

for the land is attributable to that timber; or

(ii) a right to fell standing timber; and

(b) during the year of income, the whole or a part of the timber is

felled:

(i) for sale, or for use in manufacture, by the taxpayer for

the purpose of producing assessable income; or

(ii) in pursuance of a right to fell timber granted by the

taxpayer to another person in consideration of payments

to be made to the taxpayer as or by way of royalty;

so much of that part of the price so paid by the taxpayer to acquire

the land, or so much of the amount paid by him to acquire the right,

as the case may be, as is attributable to the timber felled during the

year shall be an allowable deduction.

(2) For the purposes of subsection (1), if:

(a) the taxpayer acquired the land or the right, as the case may

be, in a transaction where the parties did not deal with each

other at arm’s length in relation to the transaction; and

(b) the price paid by the taxpayer for the land or the right, as the

case may be, was greater than was reasonable;

the price paid by the taxpayer for the land or the right, as the case

may be, is taken to be the amount that would have been reasonable

if the parties had dealt with each other at arm’s length.

Subdivision B—Timber mill buildings

124JAA Subdivision subject to Division 245 of Schedule 2C


Schedule 2C.

124JA Deduction of expenditure

(1) Where a person has incurred expenditure of a capital nature (not

being expenditure in respect of which a deduction has been

allowed or is allowable under a provision of this Act, other than a

provision of this Subdivision, or which has been or is to be taken

into account in ascertaining the amount of an allowable deduction

under such a provision) in respect of the construction or purchase

of a building:



Section 124JA


(a) for use primarily and principally in carrying on a business of

milling timber for the purpose of gaining or producing

assessable income, including a building for use primarily and

principally as residential accommodation by employees of

the person who are engaged in, or in connexion with, that

business, or by dependants of those employees; and

(b) situated in a forest and in or adjacent to the area where timber

milled in the course of that business is or is to be felled;

deductions in respect of the expenditure are allowable in

accordance with this section.

(2) The deduction allowable in respect of a year of income is the

amount ascertained by dividing the residual capital expenditure in

respect of the building, as at the end of that year of income,

ascertained in accordance with subsections (3) and (4), by:

(a) a number equal to the number of whole years, as at the end of

that year of income, in the estimated period during which the

building will be used for the purpose for which it was

primarily and principally constructed or purchased; or

(b) 25;


(3) For the purposes of this section but subject to subsection (4), the

residual capital expenditure in respect of a building as at the end of

a year of income, or as at any time during a year of income, shall

be ascertained by deducting from the amount of expenditure

specified in subsection (1) incurred in respect of the building any

part of that expenditure that has been allowed or is allowable as a

deduction under this section from assessable income of a year of

income before that year of income.

(4) Where any expenditure specified in subsection (1) was incurred in

respect of a building in a year of income prior to the year of

income that commenced on 1 July 1963, the residual capital

expenditure in respect of that building at any time shall be deemed

to be the amount that would have been the residual capital

expenditure in respect of that building at that time if the provisions

of this Subdivision had applied to assessments in respect of income

of that first-mentioned year of income and to assessments in

respect of income of each subsequent year of income.



Section 124JB


(5) Where a building has been disposed of or destroyed, a deduction is

not allowable under this section in respect of expenditure in respect

of that building from the assessable income of the taxpayer of the

year of income in which the disposal or destruction took place or of

any succeeding year of income.

(6) Where the use of a building by a taxpayer for the purpose for

which it was primarily and principally constructed or purchased

has been terminated otherwise than by disposal or destruction, a

deduction is not allowable under this section in respect of

expenditure in respect of that building from the assessable income

of the taxpayer of the year of income in which the termination of

use took place or of any succeeding year of income in which the

building was not used by the taxpayer for that purpose.

124JB Disposal, destruction or termination of use of building


allowable under section 124JA in respect of expenditure of a

capital nature on a building and, in the year of income, the building

has been disposed of or destroyed, or the use by the taxpayer of the

building for the purpose for which it was primarily and principally

constructed or purchased has been otherwise terminated.

(2) Where:


destruction of the building; or

(b) in the case of other termination of the use of the building, the

value of the building at the date of the termination of use;

exceeds the residual capital expenditure in respect of the building

immediately before the time of the disposal, destruction or

termination of use, so much of the amount of the excess as does not

exceed the sum of the deductions allowed or allowable under

section 124JA in respect of expenditure in respect of the building

shall be included in the assessable income.

(3) Where the residual capital expenditure in respect of the building

immediately before the time of the disposal, destruction or

termination of use exceeds:


destruction of the building; or



Section 124JC


(b) in the case of other termination of the use of the building, the

value of the building at the date of the termination of use;

the amount of the excess shall be an allowable deduction.

(4) In this section, the consideration receivable in respect of the

disposal or destruction means:

(a) in the case of a sale of the building—the sale price less the

expenses of the sale of the building;

(b) in the case of destruction of the building—the amount or

value received or receivable under a policy of insurance or

otherwise in respect of the destruction;

(c) in the case where the building is sold with other property and

no separate value is allocated to the building—the amount

determined by the Commissioner; and

(d) in the case where the building is disposed of otherwise than

by sale—the value, if any, of the building at the date of

disposal;




124JC Acquisition of building

(1) Where a person has purchased a building from another person

carrying on a business of milling timber for the purpose of gaining

or producing assessable income, so much (if any) of the purchase

price as exceeds the sum of:

(a) the amount that, if the building had not been sold, would

have been, at the end of the year of income in which the sale

took place, the residual capital expenditure of the vendor in

respect of the building; and

(b) any part of the purchase price that is included in the

assessable income of the vendor in pursuance of

section 124JB;


expenditure of the purchaser in respect of the building.

(2) Where a person has purchased from another person a building in

respect of which depreciation has been allowed or is allowable

under this Act, so much (if any) of the purchase price as exceeds

the sum of:



Section 124JD


(a) the depreciated value of the building immediately before the

time of the purchase; and

(b) any part of the purchase price that is included in the

assessable income of the vendor in pursuance of section 59;


expenditure of the purchaser in respect of the building.

(3) This section does not apply where the Commissioner is of opinion

that the circumstances are such that it should not apply.

124JD Roll-over relief where CGT roll-over relief allowed under


160ZZO


(1) This section applies to the disposal of a building by a taxpayer (in

this section called the transferor) to another taxpayer (in this

section called the transferee) if:

(a) either:



applies to the disposal of the building by the transferor;

or





in the building; and


are allowable under section 124JA to the transferor in respect

of the building.


(2) Section 124JB (which deals with balancing charges and

deductions) does not apply to the disposal of the building by the

transferor.


(3) This Subdivision applies as if:



Section 124JD


(a) the transferee had acquired the building for a consideration

equal to the residual capital expenditure immediately before

the disposal; and

(b) section 124JC had not been enacted.


deductions

(4) If:

(a) after the disposal of the building to the transferee:

(i) the building is destroyed; or

(ii) the transferee disposes of the building; or

(iii) the use by the transferee of the building for the purpose

for which it was primarily and principally purchased is




then, for the purposes of the application of section 124JB in

relation to the destruction, disposal or termination, the total of:


section 124JA in relation to the building; and



successive transferors under section 124JA in relation to the

building;


transferee under section 124JA in relation to the building.


does not apply


disposal of the building to the transferee, then, in working out


building by:







Section 124JE



124JE Transactions between persons not at arm’s length

If:


property where:

(i) the vendor had incurred capital expenditure of a kind in

respect of which deductions are or have been allowable

under this Division; or

(ii) the expenditure of the purchaser in acquiring the unit of

property is capital expenditure of a kind in respect of

which deductions are or have been allowable under this

Division; and

(b) it would be concluded that, having regard to any connection

between the vendor and the purchaser or to any other relevant

circumstances, those persons were not dealing with each

other at arm’s length; and

(c) the purchase price is greater or lesser than the market value

of the unit at the time of the purchase;

the purchase price is, for all purposes of the application of this Act

in relation to the vendor or the purchaser, taken to have been the

amount of the market value of the unit at the time of the purchase.

124JF Modification of section 51AD and Division 16D—lessee of










person.





Section 124JF



(b) Division 16D.


Division 10B Industrial property

Section 124K


Division 10B—Industrial property

124K Interpretation

(1) In this Division, unless the contrary intention appears:

Australian film means a film that is certified in writing by the

Minister to be a film that:

(a) has been, or is to be, made wholly or substantially in

Australia or in an external Territory and has, or will have, a

significant Australian content; or

(b) has been, or is to be, made in pursuance of an agreement or

arrangement entered into between the Government of

Australia or an authority of the Government of Australia and

the Government of another country or an authority of the

Government of another country.

film means an aggregate of images, or of images and sounds,

embodied in any material.

Minister means the Minister for the Arts, Sport, the Environment,

Tourism and Territories.

Senior Executive Service office means a position that is occupied

by an SES employee or acting SES employee.

the owner, in relation to a unit of industrial property, means the

person who possesses the rights in respect of that unit of industrial

property.

unit of industrial property means:

(a) rights possessed by a person under a law of Australia as:

(i) the grantee or proprietor of a patent for an invention; or

(ii) the owner of a copyright; or

(iii) the owner of a registered design; or

(iv) a licensee under such a patent, copyright or design;

and includes equitable rights in respect of such a patent,

copyright or design or in respect of a licence under such a

patent, copyright or design; or

(b) rights possessed by a person under a law of a foreign country

that are equivalent to the rights referred to in paragraph (a).


Industrial property Division 10B

Section 124K


(1A) In considering for the purposes of the definition of Australian film

in subsection (1) whether a film has or will have a significant

Australian content, the Minister shall have regard to:

(a) the subject-matter of the film;

(b) the place or places where the film was, or is to be, made;

(c) the nationalities and places of residence of:

(i) the persons who took part, or are to take part, in the

making of the film (including authors, composers,

actors, scriptwriters, editors, producers, directors and

technicians);

(ii) the persons who are, or will be, the beneficial owners of

the shares or stock in the capital of any company

concerned in the making of the film; and

(iii) the persons who are, or will be, the beneficial owners of

the copyright in the film;

(d) the source from which moneys used, or to be used, in the

making of the film were, or will be, derived; and

(e) any other matters that he considers to be relevant.

(1B) The Minister may, by writing, delegate to the Secretary to the

Minister’s Department, or to a person holding or performing the

duties of a Senior Executive Service office in the Minister’s

Department, all or any of the Minister’s powers under this section.

(1C) Applications may be made to the Tribunal for review of a decision:

(a) to refuse to give a certificate of the kind referred to in the

definition of Australian film in subsection (1); or

(b) to revoke such a certificate.

(1D) Where the Minister makes a decision of the kind referred to in

subsection (1C) and gives to a person whose interests are affected

by the decision notice in writing of the decision, that notice shall:

(a) in all cases—include a statement to the effect that, subject to

the Administrative Appeals Tribunal Act 1975, application

may be made to the Administrative Appeals Tribunal, by or

on behalf of any person whose interests are affected by the

decision, for review of the decision; and

(b) except where subsection 28(4) of that Act applies—include a

statement to the effect that a request may be made under

section 28 of that Act by or on behalf of such a person for a

statement setting out the findings on material questions of



Section 124K


fact, referring to the evidence or other material on which

those findings were based and giving the reasons for the

decision.

(1E) A failure to comply with the requirements of subsection (1D) in

relation to a decision does not affect the validity of the decision.

(2) Subject to subsection (2A), a reference in this Division to

expenditure of a capital nature does not include a reference to:

(a) expenditure in respect of which a deduction has been allowed

or is allowable under a provision of the previous Act or of

this Act, other than a provision of this Division, or which has

been or is taken into account in ascertaining the amount of an

allowable deduction under such a provision; or

(b) the expenditure of moneys by a taxpayer, under a contract

entered into on or after 1 October 1980, in producing, or by

way of contribution to the cost of producing, a film where:

(i) the expenditure of the moneys was expenditure of a

capital nature;

(ii) at the time when the moneys were expended, the

taxpayer was a resident;

(iii) at the time when the moneys were expended, a

certificate under section 124ZAB or 124ZAC was in

force in relation to the film;

(iv) the Commissioner is satisfied, in relation to the

expenditure of those moneys by the taxpayer, as

mentioned in paragraph 124ZAF(1)(c) or

124ZAFA(1)(c); and

(v) the taxpayer has not made an election under

section 124ZAE in relation to that film; or

(c) expenditure on software (within the meaning of the Income

Tax Assessment Act 1997).

(2A) Where a taxpayer has expended moneys as mentioned in

paragraph (2)(b) and, by reason of the operation of

section 124ZAM, the taxpayer is deemed, for the purposes of

Division 10BA, not to have expended those moneys or not to have

expended part of those moneys, paragraph (2)(b) does not apply in

respect of the expenditure of those moneys or of that part of those

moneys, as the case may be.



Section 124KAA


(3) Where a unit of industrial property is transmitted to a person by

operation of law, this Division has effect as if that unit had been

disposed of to that person by the last preceding owner of the unit at

the time of the transmission.

(4) In this Division, a reference to the transmission of a unit of

industrial property by operation of law includes, without limiting

the generality of that expression, a reference to the transmission of

a unit of industrial property to a person:

(a) as trustee of the estate of the deceased owner of the unit;

(b) as a beneficiary under the will or a codicil of the deceased

owner of the unit or under an order of a court that varied or

modified the provisions or such a will or codicil; or

(c) as a beneficiary on the intestacy of the deceased owner of the

unit or as a beneficiary under an order of a court that varied

or modified the application, in relation to the estate of the

deceased owner of the unit, of the provisions of the law

relating to the distribution of the estates of persons who die

intestate.

(5) For the purpose of this Division, disregard an acquisition or

disposal of property by way of the transfer of the property for the

provision or redemption of a security. Consequently this Division

applies as if the person who was the owner of the property before

the transfer continues to be the owner after the transfer.

124KAA Division subject to Division 245 of Schedule 2C

This Division has effect subject to Division 245 of Schedule 2C.

124KA Application of Division where deduction allowable under

section 124ZAF or 124ZAFA

(1) Where:

(a) a partnership has expended capital moneys in producing, or

by way of contribution to the cost of producing, a film;

(b) by virtue of the expenditure of those moneys by the

partnership, a deduction has been allowed, or is allowable,

under section 124ZAF or 124ZAFA to a taxpayer being a

partner in the partnership;




Section 124KA


(c) for the purposes of this Division other than this section, the

partnership shall not be taken to have incurred any

expenditure of a capital nature directly in relation to

producing the film; and

(d) where an amount (in this paragraph referred to as the

relevant amount) of moneys expended by the partnership

under a contract (in this subsection referred to as the relevant

contract):

(i) is taken, for the purposes of subsection 124ZAP(2), to

have been expended by the partnership in producing, or

by way of contribution to the cost of producing, the

film; or

(ii) would be taken, for the purposes of that subsection, to

have been expended by the partnership in producing, or

by way of contribution to the cost of producing, the film

if that subsection and Subdivision B of Division 10BA

extended to the expenditure of moneys under contracts

entered into before 1 October 1980;

a taxpayer, being a partner in the partnership, shall, subject to

subsection 124K(2), be taken for the purposes of this

Division to have expended capital moneys in producing the

film of an amount equal to:

(iii) so much of the relevant amount as the partners have

agreed is to be borne by the taxpayer; or

(iv) if the partners have not agreed as to the part of the

relevant amount that is to be borne by the taxpayer—so

much of the relevant amount as bears to the relevant

amount the same proportion as the individual interest of

the taxpayer in the net income of the partnership of the

year of income in which the relevant amount was

expended by the partnership bears to that net income or,

as the case requires, the individual interest of the

taxpayer in the partnership loss for that year of income

bears to that partnership loss;

and the amount deemed to be expended by the taxpayer shall

be deemed to have been expended under a contract entered

into at the time when the relevant contract was entered into

by the partnership.



Section 124KA


(2) In this section, a reference to the expenditure of capital moneys is a

reference to the expenditure of moneys that is expenditure of a

capital nature.

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