SCHEDULE 1 to the Bill amends the Income Tax Assessment Act 1997 to remove the automatic debiting of the private company’s franking account when a deemed dividend arises under Division 7A of Part III of ITAA 1936. The Fringe Benefits Tax Assessment Act 1986 is also amended so that FBT does not apply to Division 7A compliant loans. Section 108 of the ITAA 1936 is also being repealed. In the main, the changes take effect from 1 July 2006. However, the Commissioner’s general discretion is retrospective and can be utilised in respect of 2001-02 and later income years. The FBT amendments apply from 1 April 2007.
SCHEDULE 2 to the Bill amends the Income Tax (Transitional Provisions) Act 1997 to ensure that certain superannuation contributions (such as those made by a friend) made prior to 1 July 2007 are appropriately subject to a contributions cap. Date of effect: 7 December 2006.
SCHEDULE 3 to the Bill amends the ITAA 1997 to allow a trustee of a resident testamentary trust to choose to be assessed on capital gains of the trust. The capital gains would otherwise be assessed to an income beneficiary (or the trustee on behalf of such a beneficiary) who, under the terms of the trust, would not receive the benefit of the capital gains. Date of effect: These amendments apply to the 2005-06 and later income years.
SCHEDULE 4 to the Bill deals with the taxation of superannuation death benefits to non-dependants of defence personnel and police killed in the line of duty. These amendments will apply to lump sum superannuation death benefit payments received in the 2007-08 income year and later income years.
SCHEDULE 5 to the Bill amends the Income Tax (Transitional Provisions) Act 1997 to extend by one year (from three to four years) a transitional period relating to the application of accounting standards under the thin capitalisation rules. This amendment applies from the date of Royal Assent, such that the transitional period will apply to four consecutive income years commencing on or after 1 January 2005.
SCHEDULE 6 to the Bill repeals the dividend tainting rules. These amendments will apply in relation to distributions made on or after 1 July 2004.
SCHEDULE 7 to the Bill amends the ITAA 1936 to more closely specify which debt interests are eligible for exemption from interest withholding tax (IWT) in ss 128F and 128FA. Date of effect: 7 December 2006.
SCHEDULE 8 to the Bill amends the ITAA 1997 in relation to investments in forestry managed investment schemes. This measure applies to amounts paid by a participant under a forestry scheme on or after 1 July 2007, provided that no other amounts were paid by the participant or any other participant under the scheme before 1 July 2007.
SCHEDULE 9 to the Bill amends the ITAA 1936 and the ITAA 1997 to ensure that a trustee can be taxed on net income of the trust in relation to a non-resident trustee beneficiary similar to the treatment of non-resident company and individual beneficiaries. This treatment is, in effect, similar to a withholding system because the beneficiary is still assessed on these amounts but can reduce their tax liability by the tax paid by the trustee.
SCHEDULE 10 to the Bill amends the income tax law to expand the existing pay-as-you-go withholding system to cover distributions made to foreign residents, of net income by managed investment trusts attributable to Australian sources (either directly or through certain Australian intermediaries). Income consisting of dividends, interest or royalty income is generally excluded from this measure, as are capital gains on assets other than taxable Australian property. This measure will apply to income years beginning on or after 1 July following Royal Assent.
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For a copy of the Explanatory Memorandum, go here