Sue Lines (President) Share this | Link to this | Hansard source

I will put the questions on the remaining stages of the Treasury Laws Amendment (Making Multinationals Pay Their Share—Integrity And Transparency) Bill 2023. The question now is that the bill be read a second time.

Question agreed to.

Bill read a second time.

I shall now deal with the committee of the whole amendments, starting with the amendments circulated by the government. I understand the minister has a document to table.

Anthony Chisholm (Queensland, Australian Labor Party, Assistant Minister for Education) Share this | Link to this | Hansard source

I table a supplementary explanatory memorandum relating to the government's amendment to be moved to this bill.

Sue Lines (President) Share this | Link to this | Hansard source

The Australian Greens have circulated an amendment to government amendment 24 on sheet RU100. The question is that the Australian Greens amendment on sheet 2305 to government amendments be agreed to.

The Australian Greens ' circulated amendment—

(1) Amendment (24), item 29, subparagraph 820-52(1)(c)(i), after "preparation costs", insert "unless those costs relate to the clearing of native forests".

Question agreed to.

The question now is that the government amendments on sheet RU100 be agreed to.

Government's circulated amendment—

(1) Schedule 2, page 6 (after line 15), after item 4, insert:

4A Section 705-60 (after table item 5)

Insert:

4B Section 705-60 (table item 6, column headed "What the step requires")

Omit "step 5", substitute "step 5A".

(2) Schedule 2, item 7, page 7 (before line 3), before subparagraph 705-65(5A)(b)(ii), insert:

(ia) the step 5A amount under section 705-102; or

(3) Schedule 2, page 7 (after line 4), after item 7, insert:

7A Paragraph 705-65(5A)(c)

After "(b)(i)", insert "or (ia)".

(4) Schedule 2, page 7 (after line 6), after item 8, insert:

8A Subparagraph 705-75(5)(b)(ii)

Repeal the subparagraph, substitute:

(ii) the step 5A amount under section 705-102; or

(iii) the step 6 amount under section 705-110; or

(iv) the step 6A amount under section 705-112;

8B After section 705-100

Insert:

705-102 FRT disallowed amounts accruing to joined group before joining time — step 5A in working out allocable cost amount

(1) For the purposes of step 5A in the table in section 705-60, the step 5A amount is the sum of all *FRT disallowed amounts of the joining entity that:

(a) had not been applied by the joining entity under paragraph 820-56(2)(b) for the income year in which the joining time occurred or any earlier income year; and

(b) accrued to the joined group before the joining time (see subsection (2) of this section).

(2) For the purposes of subsection (1), a *FRT disallowed amount accrued to the joined group before the joining time if and to the extent that, assuming that as it arose it were instead a profit that was accruing, a distribution of that profit would have been a distribution made to the joined group out of profits that accrued to the joined group before the joining time.

(3) However, a *FRT disallowed amount is not to be taken into account under subsection (1) to the extent that it reduced the undistributed profits comprising the step 3 amount in the table in section 705-60.

8C Section 705-105 (heading)

Omit "to5", substitute "to5A".

8D Section 705-105

After "705-100", insert ", 705-102".

(5) Schedule 2, page 8 (before line 1), before item 10, insert:

9A At the end of paragraph 705-160(2)(c)

Add:

or (iii) an amount is required to be subtracted (also the second entity's profit/loss adjustment amount) under step 5A in the table in section 705-60 (about *FRT disallowed amounts accruing to a joined group before the joining time);

9B Subsection 705-160(2)

After "subparagraph (c)(ii)", insert "or (iii)".

9C At the end of paragraph 705-160(4)(d)

Add:

or (iii) an amount is required to be subtracted (also the third entity's profit/loss adjustment amount) under step 5A in the table in section 705-60 (about *FRT disallowed amounts accruing to a joined group before the joining time);

9D Subsection 705-160(4)

After "subparagraph (d)(ii)", insert "or (iii)".

9E At the end of paragraph 705-235(2)(b)

Add:

or (iii) an amount is required to be subtracted (also the second linked entity's profit/loss adjustment amount) under step 5A in the table in section 705-60 (about *FRT disallowed amounts accruing to a joined group before the joining time);

9F Subsection 705-235(2)

After "subparagraph (b)(ii)", insert "or (iii)".

9G At the end of paragraph 705-235(4)(c)

Add:

or (iii) an amount is required to be subtracted (also the third linked entity's profit/loss adjustment amount) under step 5A in the table in section 705-60 (about *FRT disallowed amounts accruing to a joined group before the joining time);

9H Subsection 705-235(4)

After "subparagraph (c)(ii)", insert "or (iii)".

(6) Schedule 2, item 14, page 9 (table item 2A, column 2), omit ", 820-C, 820-D or 820-E", substitute "or 820-C".

(7) Schedule 2, item 14, page 9 (table item 2A, column 2, paragraph (b)), omit the paragraph, substitute:

(b) debt deductions in relation to a financial arrangement that is entered into by an entity to fund etc. certain payments or distributions to one or more associate pairs of the entity.

(8) Schedule 2, page 9 (after line 5), after item 15, insert:

15A After section 820-30

Insert:

820-31 Order of application of Subdivisions

(1) First, work out if a *debt deduction of an entity for an income year is disallowed under Subdivision 820-EAA (debt deduction limitation rules for debt deduction creation).

(2) To the extent that all or part of a debt deduction is disallowed under that Subdivision, disregard the debt deduction in applying the following provisions in relation to the entity for the income year:

(a) Subdivision 820-AA;

(b) Subdivision 820-B;

(c) Subdivision 820-C.

Note: The provisions mentioned in paragraphs (2)(a) to (c) may further disallow debt deductions of the entity.

(9) Schedule 2, page 10 (after line 27), after item 21, insert:

21A Subsection 820-39(1)

Omit "or 820-E", substitute ", 820-E or 820-EAA".

(10) Schedule 2, page 10 (after line 29), after item 22, insert:

22A Subsection 820-39(2)

Omit "or 820-E", substitute ", 820-E or 820-EAA".

(11) Schedule 2, item 29, page 14 (line 19), omit "subsection (4)", substitute "subsections (4) and (4A) of this section".

(12) Schedule 2, item 29, page 14 (after line 24), after subsection 820-47(4), insert:

(4A) If, under subsection 820-46(5), an entity is taken to have made a choice to apply the third party debt test in relation to an income year:

(a) the entity may not make a choice under subsection 820-46(3) (group ratio test applies) in relation to that income year; and

(b) any choice previously made under subsection 820-46(3) by the entity in relation to that income year is revoked and taken never to have been made.

(13) Schedule 2, item 29, page 14 (lines 25 and 26), omit "an entity revokes a choice under subsection (4)", substitute "a choice is revoked under subsection (4) or (4A) of this section".

(14) Schedule 2, item 29, page 15 (lines 2 to 11), omit paragraph 820-47(6)(b).

(15) Schedule 2, item 29, page 15 (lines 12 and 13), omit paragraph 820-47(6)(c), substitute:

(c) the entity has applied to the Commissioner, in the *approved form, to revoke the choice before the earlier of the following days:

(i) the day that is 4 years after the day the entity lodged its *income tax return for the income year;

(ii) the day that is 4 years after the day the entity was required to lodge its income tax return for the income year;

(16) Schedule 2, item 29, page 15 (line 22), omit "the entity mentioned in that subsection", substitute "an entity (the first entity)".

(17) Schedule 2, item 29, page 15 (line 24), before "entity", insert "first".

(18) Schedule 2, item 29, page 15 (line 33), omit "entity mentioned in subsection 820-46(5)", substitute "first entity".

(19) Schedule 2, item 29, page 16 (before line 5), before paragraph 820-48(2)(a), insert:

(aa) disregard the requirement in subsections 820-905(1) and (2A) that the entity is an *associate of the other entity, unless only paragraph 820-905(1)(b) applies; and

(20) Schedule 2, item 29, page 16 (line 32), omit "the assets", substitute "assets".

(21) Schedule 2, item 29, page 16 (after line 35), at the end of section 820-49, add:

(3) For the purposes of paragraph (1)(b), disregard assets that are *membership interests in the borrower.

(22) Schedule 2, item 29, page 17 (line 34), after "this Division", insert "other than Subdivision 820-EAA".

(23) Schedule 2, item 29, page 18 (line 25), after "this Division", insert "(other than Subdivision 820-EAA)".

(24) Schedule 2, item 29, page 18 (lines 29 to 32), omit paragraph 820-52(1)(c), substitute:

(c) next, add the sum of the entity's deductions (if any) from its assessable income for the income year that are any of the following:

(i) *general deductions that relate to forestry establishment and preparation costs;

(ii) deductions under Divisions 40 and 43 (other than deductions for the entire amount of an expense incurred by the entity);

(iii) deductions under section 70-120;

(25) Schedule 2, item 29, page 19 (before line 1), before paragraph 820-52(1)(d), insert:

(ca) next, if the entity is an entity to which subsection 820-60(1) applies—add the *excess tax EBITDA amount (if any) worked out under that section for the income year;

(26) Schedule 2, item 29, page 19 (line 1), after "paragraph (c)", insert "or (ca), as the case requires,".

(27) Schedule 2, item 29, page 19 (after line 6), after subsection 820-52(1), insert:

Tax losses from earlier income years

(1A) In working out the taxable income or *tax loss of a *corporate tax entity for an income year for the purposes of subsection (1), assume that:

(a) the entity chooses to deduct, under subsection 36-17(2) or (3), all of the entity's tax losses for *loss years occurring before the income year; and

(b) subsection 36-17(5) does not apply to that choice.

(28) Schedule 2, item 29, page 19 (line 8), at the end of subsection 820-52(2), add ", to the extent that Division results in an amount of, or a *share of, a *franking credit being included in the entity's assessable income for the income year".

(29) Schedule 2, item 29, page 19 (lines 9 to 13), omit subsection 820-52(3), substitute:

Dividends etc.

(3) In working out the taxable income or *tax loss of an entity for the purposes of subsection (1), disregard any *dividend or *non-share dividend paid to the entity by an *associate entity and included in the entity's assessable income under section 44 of the Income Tax Assessment Act 1936.

(30) Schedule 2, item 29, page 19 (line 14), at the end of the heading to subsection 820-52(4), add "other than AMITs".

(31) Schedule 2, item 29, page 19 (line 15), after "trust", insert "other than an *AMIT".

(32) Schedule 2, item 29, page 20 (line 1), at the end of the heading to subsection 820-52(6), add "other than AMITs".

(33) Schedule 2, item 29, page 20 (line 3), after "a trust", insert "other than an *AMIT".

(34) Schedule 2, item 29, page 20 (after line 10), after subsection 820-52(6), insert:

Attribution managed investment trusts

(6A) If the entity is an *AMIT:

(a) treat the reference in subsection (1) to the entity's taxable income as being a reference to the *net income of the entity; and

(b) treat the reference in subsection (1) to the entity's *net debt deductions as being a reference to the entity's net debt deductions taken into account in working out that net income; and

(c) treat the reference in subsection (1) to the entity's deductions as being a reference to the entity's deductions taken into account in working out that net income; and

(d) treat the references in subsection (1) to the entity's assessable income as being a reference to the entity's assessable income taken into account in working out that net income.

Members of AMITs

(6B) In working out the taxable income or *tax loss of an entity for the purposes of subsection (1), if the entity is a member of an *AMIT, and is an *associate entity of the AMIT:

(a) disregard the operation of Division 276 in relation to the AMIT; and

(b) disregard distributions from the AMIT to the entity.

(35) Schedule 2, item 29, page 20 (line 32), omit "(6)", substitute "(3), (6), (6B)".

(36) Schedule 2, item 29, page 21 (before line 1), before paragraph 820-52(9)(a), insert:

(aa) disregard the requirement in subsections 820-905(1) and (2A) that the entity is an *associate of the other entity, unless only paragraph 820-905(1)(b) applies; and

(37) Schedule 2, item 29, page 21 (after line 13), at the end of section 820-52, add:

Notional deductions of R&D entities

(10) In working out the taxable income or *tax loss of an entity for the purposes of subsection (1), if the entity is an *R&D entity that is entitled to a notional deduction for an income year under Division 355 in relation to *R&D activities of the R&D entity, subtract an amount equivalent to the amount of the notional deduction.

(38) Schedule 2, item 29, page 24 (before line 30), before paragraph 820-54(5)(a), insert:

(aa) disregard the requirement in subsections 820-905(1) and (2A) that the entity is an *associate of the other entity, unless only paragraph 820-905(1)(b) applies; and

(39) Schedule 2, item 29, page 28 (after line 15), at the end of Subdivision 820-AA, add:

820-60 Excess tax EBITDA amount

Scope

(1) This section applies to an entity (the controlling entity) if:

(a) the controlling entity is, for a period that is all or part of an income year, one of the following entities:

(i) a company that is an *Australian entity;

(ii) a unit trust that is a *resident trust for CGT purposes;

(iii) a *managed investment trust;

(iv) a partnership that is an Australian entity; and

(b) the controlling entity is a *general class investor for all or part of the income year; and

(c) the controlling entity has not made a choice under subsection 820-46(3) or (4) in relation to the income year; and

(d) one or more other entities (each of which is a controlled entity) satisfy the conditions in subsection (2) of this section in relation to the controlling entity for the income year.

(2) An entity (the test entity) satisfies the conditions in this subsection in relation to the controlling entity for an income year if:

(a) the controlling entity has a *TC direct control interest of 50% or more in the test entity at any time during the income year; and

(b) the test entity is, for a period that is all or part of the income year, one of the following entities:

(i) a company that is an *Australian entity;

(ii) a unit trust that is a *resident trust for CGT purposes;

(iii) a *managed investment trust;

(iv) a partnership that is an Australian entity; and

(c) the test entity is a *general class investor for all or part of the income year; and

(d) the test entity has not made a choice under subsection 820-46(3) or (4) in relation to the income year.

Excess tax EBITDA amount

(3) The controlling entity's excess tax EBITDA amount for the income year is the amount worked out using the following method statement.

Method statement

Step 1.For each controlled entity, work out the amount (if any) by which the *fixed ratio earnings limit of the controlled entity for the income year exceeds the sum of the following:

(a) the controlled entity's *net debt deductions for the income year (for the purposes of this paragraph, treat a negative amount of net debt deductions as nil);

(b) the total of the controlled entity's *FRT disallowed amounts for the 15 income years ending immediately before the income year (to the extent those amounts have not been applied under section 820-56).

Step 2. For each controlled entity:

(a) work out the controlling entity's *TC direct control interest for each day in the income year; and

(b) for each day on which the amount was 50% or greater, add the amounts; and

(c) divide the result of paragraph (b) by the number of days in the income year during which the controlled entity was in existence. Express the result as a percentage.

Step 3. For each controlled entity, multiply the result of step 1 by the percentage worked out under step 2. If the amount worked out under step 1 for a controlled entity is nil, the result for that controlled entity under this step will be nil.

Step 4. Add up the amounts worked out under step 3.

Step 5. Divide the result of step 4 by 0.3. The result of this step is the excess tax EBITDA amount.

Modification of TC direct control interest companies

(4) For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a company, apply subsection 820-855(2) as if it instead included the modifications of Part X of the Income Tax Assessment Act 1936 set out in the following table.

Modification of TC direct control interest trusts

(5) For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a trust, apply subsection 820-860(2) as if it also included the modifications of Part X of the Income Tax Assessment Act 1936 set out in the following table.

Modification of TC direct control interest partnerships

(6) For the purposes of this section, in working out whether the controlling entity holds a *TC direct control interest in a partnership, apply section 820-865 as if:

(a) the reference to "greatest" were a reference to "least"; and

(b) paragraph 820-865(b) were omitted.

Modified meaning of Australian entity

(7) For the purposes of this section, in determining whether an entity is an *Australian entity (including for the purposes of determining whether another entity is a *foreign entity) at a particular time:

(a) for the purposes of paragraph 336(a) of the Income Tax Assessment Act 1936, treat a partnership as being an Australian entity if, at that time, a *direct participation interest of 50% or more is held in the partnership by one or more of the following:

(i) an Australian resident;

(ii) an *Australian trust; and

(b) disregard section 337 of that Act.

(40) Schedule 2, item 33, page 31 (lines 6 and 7), omit subsection 820-85(2E).

(41) Schedule 2, item 57, page 34 (line 10), omit "(2A)", substitute "(2C)".

(42) Schedule 2, item 57, page 36 (lines 1 and 2), omit subsection 820-185(2E).

(43) Schedule 2, item 76, page 39 (lines 6 to 9), omit paragraph 820-423(b), substitute:

(b) debt deductions in relation to a financial arrangement that is entered into by an entity to fund etc. certain payments or distributions to one or more associate pairs of the entity.

(44) Schedule 2, item 76, page 39 (after line 9), at the end of section 820-423, add:

The rules in this Subdivision are applied before the rules set out in Subdivisions 820-AA, 820-B and 820-C. If a debt deduction of an entity is disallowed under this Subdivision, the debt deduction is disregarded for the purpose of applying those other Subdivisions (see section 820-31).

(45) Schedule 2, item 76, page 39 (line 27), at the end of subparagraph 820-423A(1)(a)(iii), add "and".

(46) Schedule 2, item 76, page 39 (lines 28 and 29), omit subparagraphs 820-423A(1)(a)(iv) and (v).

(47) Schedule 2, item 76, page 39 (after line 29), after paragraph 820-423A(1)(a), insert:

(aa) the entity is not a *securitisation vehicle; and

(48) Schedule 2, item 76, page 39 (lines 32 and 33), omit ", see", substitute ": see".

(49) Schedule 2, item 76, page 39 (after line 33), after note 1, insert:

Note 1A: This Subdivision does not apply to certain special purpose entities: see section 820-39.

(50) Schedule 2, item 76, page 40 (line 13), omit "*associate pair", substitute "associate pair".

(51) Schedule 2, item 76, page 40 (line 21), at the end of subsection 820-423A(2), add:

; (e) the relevant entity's debt deduction mentioned in subsection (1) is referable to an amount paid or payable, either directly or indirectly, to any of the following:

(i) an associate pair of the relevant entity;

(ii) an associate pair of the acquirer;

(iii) an associate pair of an associate disposer;

(f) the acquisition mentioned in paragraph (a) of this subsection is not covered by section 820-423AA (which is about exceptions);

(g) the relevant entity has not made a choice under subsection 820-46(4) to use the third party debt test for the income year mentioned in subsection (1) of this section.

(52) Schedule 2, item 76, page 40 (after line 24), after subsection 820-423A(3), insert:

(3A) For the purposes of subsection (2):

(a) that subsection may apply in relation to an indirect *acquisition by an entity through one or more interposed entities even if an acquisition in the series is covered by section 820-423AA (which is about exceptions); and

(b) in determining whether an acquisition occurs indirectly through one or more interposed entities:

(i) it is sufficient if acquisitions exist between each entity; and

(ii) it is not necessary to demonstrate that each acquisition in a series of acquisitions happened before the next acquisition.

Example: Entity A acquires a membership interest in Entity B that is covered by the exception in subsection 820-423AA(1). Entity B later acquires, from Entity C, a CGT asset that is not covered by an exception in that section. There may be an indirect acquisition of the CGT asset by Entity A.

(53) Schedule 2, item 76, page 40 (line 25), omit "paragraph (2)(a) and subsection (3)", substitute "subsections (2), (3) and (3A)".

(54) Schedule 2, item 76, page 40 (line 27) to page 41 (line 22), omit subsection 820-423A(5), substitute:

Financial arrangements involving associate pairs

(5) This subsection applies if all of the following conditions are satisfied:

(a) an entity (the payer) enters into, or has a *financial arrangement with another entity;

(b) the payer uses the financial arrangement to:

(i) fund; or

(ii) facilitate the funding of;

one or more payments or distributions, of which one or more is a payment or distribution that, to an extent:

(iii) the payer makes to an entity (an associate recipient) that is an *associate pair of the payer; and

(iv) is covered by subsection (5A) (which is about types of payments or distributions);

(c) the entity mentioned in subsection (1) (the relevant entity) is any of the following:

(i) the payer;

(ii) an associate pair of the payer;

(iii) an associate pair of an associate recipient;

(d) the relevant entity's *debt deduction mentioned in subsection (1) is, wholly or partly, in relation to the financial arrangement mentioned in paragraph (a) of this subsection;

(e) the relevant entity's debt deduction is referable to an amount paid or payable, either directly or indirectly, to any of the following:

(i) an associate pair of the relevant entity;

(ii) an associate pair of the payer;

(iii) an associate pair of an associate recipient;

(f) the relevant entity has not made a choice under subsection 820-46(4) to use the third party debt test for the income year mentioned in subsection (1) of this section.

(5A) This subsection covers the following:

(a) a *dividend, *distribution or *non-share distribution;

(b) a distributionby a trustee or partnership;

(c) a return of capital, including a return of capital made by a distribution or payment made by a trustee or partnership;

(d) a payment or distribution in respect of the cancellation or redemption of a *membership interest in an entity;

(e) a *royalty, or a similar payment or distribution for the use of, or right to use, an asset;

(f) a payment or distribution that is wholly or partly referable to the repayment of principal under a *debt interest if:

(i) the debt interest is issued by the payer; and

(ii) the debt interest is a *financial arrangement that satisfies paragraphs (5)(a), (b) and (c);

(g) a payment or distribution of a kind similar to a payment or distribution mentioned in the preceding paragraphs;

(h) a payment or distribution prescribed by the regulations.

(55) Schedule 2, item 76, page 41 (line 23), omit "paragraph (5)(c)", substitute "paragraph (5)(b)".

(56) Schedule 2, item 76, page 41 (line 27), omit "(4)", substitute "(7)".

(57) Schedule 2, item 76, page 41 (lines 28 and 29), omit "first associate issues the *debt interest", substitute "payer enters into or has the *financial arrangement mentioned in paragraph (5)(a)".

(58) Schedule 2, item 76, page 41 (line 30), omit "second associate", substitute "entity with whom the payer enters into or has the financial arrangement,".

(59) Schedule 2, item 76, page 42 (after line 3), after section 820-423A, insert:

820-423AA Exceptions for acquisition of certain CGT assets

Acquisition of new membership interests in entities

(1) For the purposes of paragraph 820-423A(2)(f), the acquisition of a *CGT asset is covered by this section if:

(a) the CGT asset is a *membership interest in:

(i) an *Australian entity; or

(ii) a *foreign entity that is a company; and

(b) the membership interest has not previously been held by any entity.

Acquisition of certain new depreciating assets

(2) For the purposes of paragraph 820-423A(2)(f), the acquisition of a *CGT asset is covered by this section if all of the following conditions are satisfied:

(a) the CGT asset is a *depreciating asset other than an intangible asset;

(b) an entity (the acquirer) holds the CGT asset immediately after its acquisition;

(c) at the time of the acquisition, it is reasonable to conclude that the acquirer expects to use the CGT asset:

(i) for a *taxable purpose; and

(ii) within Australia; and

(iii) within 12 months;

(d) at the time of the acquisition, the CGT asset has not been *installed ready for use, or previously used for a taxable purpose, by any of the following:

(i) the acquirer;

(ii) an associate disposer of the acquirer;

(iii) an *associate pair of the acquirer.

Acquisition of certain debt interests

(3) For the purposes of paragraph 820-423A(2)(f), the acquisition of a *CGT asset is covered by this section if all of the following conditions are satisfied:

(a) the CGT asset is a *debt interest;

(b) an entity (the acquirer) holds the debt interest immediately after its acquisition;

(c) the debt interest is issued by an *associate pair of the acquirer;

(d) the debt interest has not previously been held by any entity.

(60) Schedule 2, item 76, page 42 (lines 14 to 19), omit subsection 820-423B(2), substitute:

Financial arrangements involving associate pairs

(2) If the conditions in subsection 820-423A(5) are met, then under subsection 820-423A(1) the *debt deduction is disallowed to the same extent as the extent to which the payer mentioned in paragraph 820-423A(5)(a) uses the *financial arrangement in a manner that satisfies paragraph 820-423A(5)(b).

(61) Schedule 2, item 76, page 42 (line 21), after "deductions", insert "under".

(62) Schedule 2, item 76, page 43 (after line 25), at the end of Subdivision 820-EAA, add:

820-423E Modified meaning of associate pair

(1) This section applies for the purposes of determining whether, for the purposes of this Subdivision, an entity that is a unit trust is an associate pair of another entity.

Treating certain unit trusts as companies

(2) Subsection (3) applies if any of the following *CGT events are capable of applying to all of the units and interests in the trust:

(a) *CGT event E4;

(b) *CGT event E10.

(3) For the purposes of determining, under section 318 of the Income Tax Assessment Act 1936, whether:

(a) the trust is an *associate of another entity; or

(b) another entity is an associate of the trust;

treat the trust as if it were a company.

Application of sufficient influence test

(4) In determining whether the trust is sufficiently influenced by another entity for the purposes of subsection 318(2) of the Income Tax Assessment Act 1936, as applied by subsection (3) of this section:

(a) treat the trust as sufficiently influenced by another entity or other entities if the trust is accustomed or under an obligation (whether formal or informal), or might reasonably be expected, to act in accordance with the directions, instructions or wishes of the other entity or other entities (whether those directions, instructions or wishes are, or might reasonably be expected to be, communicated directly or through interposed companies, partnerships or trusts); and

(b) another entity or other entities are taken to hold a majority voting interest in the trust if either of the following percentages is not less than 50%:

(i) the percentage of the income of the trust represented by the share of the income to which the other entity or other entities are entitled, or that the other entity or other entities are entitled to acquire;

(ii) the percentage of the corpus of the trust represented by the share of the corpus to which the other entity or other entities are entitled, or that the other entity or other entities are entitled to acquire; and

(c) disregard the operation that paragraphs 318(6)(b) and (c) of that Act would otherwise have by reason only of subsection (3) of this section.

(5) Subsection (6) applies in determining whether the trust:

(a) is sufficiently influenced by another entity for the purposes of section 318 of the Income Tax Assessment Act 1936; or

(b) sufficiently influences another entity for the purposes of that section.

(6) If:

(a) there is any breach by any entity of the terms of a *debt interest issued by, or held by, the trust; and

(b) there are reasonable grounds to believe that the breach occurred only to protect the interests of secured creditors in relation to the debt interest;

sufficient influence is not taken to exist in relation to the trust merely because of the breach.

820-423F Modified meaning of Australian entity

For the purposes of this Subdivision, in determining whether an entity is an *Australian entity (including for the purposes of determining whether another entity is a *foreign entity) at a particular time:

(a) for the purposes of paragraph 336(a) of the Income Tax Assessment Act 1936, treat a partnership as being an Australian entity if, at that time, a *direct participation interest of 50% or more is held in the partnership by one or more of the following:

(i) an Australian resident;

(ii) an *Australian trust; and

(b) disregard section 337 of that Act.

(63) Schedule 2, item 76, page 44 (line 1), after "a choice", insert ", or that are taken to have made a choice,".

(64) Schedule 2, item 76, page 44 (line 4), omit "subparagraph 820-85(1A)(b)(i)", substitute "subsection 820-85(2C)".

(65) Schedule 2, item 76, page 44 (line 6), omit "subparagraph 820-185(1A)(b)(i)", substitute "subsection 820-185(2C)".

(66) Schedule 2, item 76, page 44 (line 22), omit "if", substitute "to the extent that".

(67) Schedule 2, item 76, page 44 (line 26), omit "referrable to an amount paid", substitute "referable to an amount paid or payable".

(68) Schedule 2, item 76, page 45 (lines 3 to 8), omit paragraph 820-427A(3)(c), substitute:

(c) disregarding recourse to minor or insignificant assets, the holder of the debt interest has recourse for payment of the debt to which the debt interest relates only to Australian assets that:

(i) are covered by subsection (4); and

(ii) are not rights covered by subsection (5) (about credit support rights);

(69) Schedule 2, item 76, page 45 (line 17), omit "Australian resident", substitute "*Australian entity (see section 820-427E)".

(70) Schedule 2, item 76, page 45 (lines 18 to 27), omit subsection 820-427A(4), substitute:

(4) This subsection covers Australian assets that:

(a) are held by the entity; or

(b) are *membership interests in the entity (unless the entity has a legal or equitable interest, whether directly or indirectly, in an asset that is not an Australian asset); or

(c) are held by an *Australian entity that is a *member of the *obligor group in relation to the *debt interest.

(71) Schedule 2, item 76, page 45 (lines 28 to 31), omit subsection 820-427A(5), substitute:

(5) This subsection covers a right under or in relation to a guarantee, security or other form of credit support, other than a right that:

(a) is any of the following:

(i) a right that provides recourse, directly or indirectly, only to one or more Australian assets covered by subsection (4) that are not rights covered by this subsection;

(ii) a right that, assuming that the holder of the right exercised the right, would not reasonably be expected to allow, directly or indirectly, the holder or another entity to have recourse for payment of the debt mentioned in paragraph (3)(c) against an *associate entity (see section 820-427D) of the entity that issued that debt interest;

(iii) a right that relates wholly to the creation or development of a *CGT asset that is, or is reasonably expected to be, land situated in Australia (including an interest in land, if the land is situated in Australia);

(iv) a right that relates wholly to the creation or development of a CGT asset that is, or is reasonably expected to be, moveable property situated, or to be situated, on land of a kind mentioned in subparagraph (iii), where that moveable property is, or is reasonably expected to be, relevant to the income producing use of the land and situated on the land for the majority of its useful life;

(v) a right that relates wholly to the creation or development of a CGT asset that is, or is reasonably expected to be, offshore renewable energy infrastructure (within the meaning of the Offshore Electricity Infrastructure Act 2021) situated, or to be situated, in a declared area (within the meaning of that Act) for the majority of its useful life;

(vi) a right that relates wholly to the creation or development of a CGT asset that is, or is reasonably expected to be, offshore electricity transmission infrastructure (within the meaning of the Offshore Electricity Infrastructure Act 2021) that is directly related to offshore renewable energy infrastructure covered by subparagraph (v); and

(b) assuming that the holder of the right exercised the right, the right would not reasonably be expected to allow, directly or indirectly, the holder or another entity to have recourse for payment of the debt mentioned in paragraph (3)(c) of this section against a *foreign entity that is an *associate entity of the entity that issued the *debt interest.

(72) Schedule 2, item 76, page 45 (after line 31), at the end of section 820-427A, add:

(6) For the purposes of subparagraphs (5)(a)(iii), (iv), (v) and (vi), in determining whether a right relates wholly to the creation or development of a *CGT asset of a kind mentioned in the relevant subparagraph, disregard the extent (if any) to which the right relates incidentally to another matter.

(73) Schedule 2, item 76, page 45 (line 32) to page 46 (line 21), omit section 820-427B, substitute:

820-427B Modified third party debt conditions for conduit financing

(1) If a *debt interest satisfies the conditions in subsection 820-427C(1) in relation to an income year, then this section applies in relation to:

(a) that debt interest (the relevant debt interest); and

(b) the debt interest that is the ultimate debt interest mentioned in subsection 820-427C(1) in relation to the relevant debt interest.

Special rules for third party debt conditions ultimate debt interest and relevant debt interest

(2) In applying section 820-427A in relation to the income year, in relation to the relevant debt interest and the ultimate debt interest:

(a) treat the reference in subparagraph 820-427A(3)(d)(ii) to *associate entity debt as being a reference to associate entity debt other than:

(i) a debt interest that satisfies the conditions in subsection 820-427C(1) in relation to the ultimate debt interest; or

(ii) a debt interest issued by an entity that is an *Australian entity and that has made a choice under subsection 820-46(4) to use the third party debt test for the income year; and

(b) treat references in paragraphs 820-427A(4)(a) and (b) to the entity as including the conduit financer mentioned in paragraph 820-427C(1)(a) and each entity that issues a debt interest that satisfies the conditions in subsection 820-427C(1) in relation to the ultimate debt interest.

Special rules for third party debt conditions relevant debt interest

(3) In applying subsection 820-427A(3) in relation to the income year, in relation to the relevant debt interest, in addition to applying subsection (2) of this section:

(a) treat the conditions in paragraphs 820-427A(3)(a) and (b) as being satisfied; and

(b) treat subsection 820-427A(3) as also including the condition that the ultimate debt interest satisfies the *third party debt conditions (having regard to subsection (2) of this section) in relation to the income year.

(74) Schedule 2, item 76, page 46 (line 23) to page 47 (line 21), omit subsection 820-427C(1), substitute:

(1) If, in relation to an income year:

(a) an entity (the conduit financer) issues a *debt interest (the ultimate debt interest) to an entity (the ultimate lender) that is not an *associate entity (see section 820-427D) of the conduit financer; and

(b) an entity (the borrower) that is an associate entity of the conduit financer issues another debt interest (the relevant debt interest) to:

(i) the conduit financer; or

(ii) another entity (the conduit borrower) that is an associate entity of the conduit financer and the borrower; and

(c) the amount loaned under the relevant debt interest:

(i) if subparagraph (b)(i) applies—was financed by the conduit financer only with proceeds from the ultimate debt interest; or

(ii) if subparagraph (b)(ii) applies—was financed by the conduit borrower only with proceeds from another debt interest that is also a debt interest that satisfies the conditions in this subsection in relation to the ultimate debt interest because of a previous operation of this subsection; and

(d) the terms of the relevant debt interest, to the extent that those terms relate to costs incurred by the borrower in relation to the relevant debt interest, are the same as the terms of the ultimate debt interest, to the extent that those terms relate to such costs incurred by the conduit financer in relation to the ultimate debt interest; and

(e) the conduit financer, the borrower and each conduit borrower (if any) are *Australian entities (see section 820-427E); and

(f) it is not the case that subparagraph 820-46(1)(b)(i) or (ii) applies (fixed ratio test or group ratio test applies) to the conduit financer, the borrower or any conduit borrowers;

then the relevant debt interest satisfies the conditions in this subsection in relation to the income year.

(75) Schedule 2, item 76, page 47 (line 22), omit "(1)(e)", substitute "(1)(d)".

(76) Schedule 2, item 76, page 47 (line 29), after "allowing", insert "(whether directly, or indirectly through one or more interposed borrowers)".

(77) Schedule 2, item 76, page 47 (line 33), after "allowing", insert "(whether directly, or indirectly through one or more interposed borrowers)".

(78) Schedule 2, item 76, page 47 (line 37), after "allowing", insert "(whether directly, or indirectly through one or more interposed borrowers)".

(79) Schedule 2, item 76, page 48 (line 7), at the end of subsection 820-427C(2), add:

; and (e) disregard the terms (if any) of a relevant debt interest, to the extent that those terms have the effect of allowing (whether directly, or indirectly through one or more interposed borrowers) the recovery of costs of a borrower that:

(i) are a debt deduction for the income year of the borrower; and

(ii) are a debt deduction that is treated as being attributable to another debt interest under subsection 820-427A(2) because it is directly associated with hedging or managing the interest rate risk in respect of that other debt interest.

(80) Schedule 2, item 76, page 48 (line 9), before "For", insert "(1)".

(81) Schedule 2, item 76, page 48 (line 14), omit "820-427A(4)(b)", substitute "820-427A(5)(b)".

(82) Schedule 2, item 76, page 48 (after line 18), after paragraph 820-427D(a), insert:

(aa) disregard the requirement in subsections 820-905(1) and (2A) that the entity is an *associate of the other entity, unless only paragraph 820-905(1)(b) applies; and

(83) Schedule 2, item 76, page 48 (after line 27), at the end of section 820-427D, add:

(2) For the purposes of this Subdivision:

(a) treat an entity (the first entity) that has entered into a *cross-staple arrangement with another entity as an associate entity of that other entity; and

(b) if that other entity is itself an associate entity of a conduit financer mentioned in section 820-427C (whether because of another operation of this subsection or otherwise)—treat the first entity as an associate entity of the conduit financer.

(84) Schedule 2, item 76, page 48 (after line 27), at the end of Subdivision 820-EAB, add:

820-427E Modified meaning of Australian entity

For the purposes of this Subdivision, in determining whether an entity is an *Australian entity at a particular time:

(a) for the purposes of paragraph 336(a) of the Income Tax Assessment Act 1936, treat a partnership as being an Australian entity if, at that time, a *direct participation interest of 50% or more is held in the partnership by one or more of the following:

(i) an Australian resident;

(ii) an *Australian trust; and

(b) disregard section 337 of that Act.

(85) Schedule 2, item 88, page 52 (line 12), omit "820-59B(6)(b)", substitute "820-59(4)(b)".

(86) Schedule 2, page 54 (after line 31), after item 98, insert:

98A Paragraph 820-881(a)

Before "an *outward investing entity (non-ADI)", insert "a *general class investor,".

(87) Schedule 2, page 55 (after line 11), after item 100, insert:

100A Subsection 820-910(1)

Before "an *outward investing entity (non-ADI)", insert "a *general class investor,".

(88) Schedule 2, item 121, page 58 (after line 9), after the definition of entity EBITDA in subsection 995-1(1), insert:

excess tax EBITDA amount has the meaning given by section 820-60.

(89) Schedule 2, item 144, page 63 (after line 8), after subitem (2), insert:

(3) Despite subitem (1), Subdivision 820-EAA of the Income Tax Assessment Act 1997, as inserted by Part 1 of this Schedule, applies in relation to assessments for income years starting on or after 1 July 2024.

Question agreed to.

I will now deal with the amendments circulated by Senator David Pocock. The question is the amendment on sheet 2294 be agreed to.

Senator David Pocock's circulated amendments—

(1) Clause 2, page 2 (table item 1), omit "3", substitute "4".

(2) Page 2 (after line 11), after clause 3, insert:

4 Review of operation of amendments

(1) The Minister must cause an independent review to be conducted of the operation of the amendments made by Schedule 2 to this Act.

Public consultation

(2) The review must make provision for public consultation.

Timeframe for review

(3) The review must commence no later than 1 February 2026.

Report

(4) The persons who conduct the review must give the Minister a written report of the review within 17 months of the commencement of the review.

Tabling

(5) The Minister must cause a copy of the report of the review to be tabled in each House of the Parliament within 15 sitting days of that House after the Minister receives the report.

Question agreed to.

I will now deal with the amendments circulated by Pauline Hanson's One Nation. The question is that the amendments on sheet 2383 be agreed to.

Pauline Hanson's One Nation's circulated amendments—

(1) Schedule 2, item 144, page 63 (line 3), omit "The amendments", substitute "Subject to this Part, the amendments".

(2) Schedule 2, Part 2, page 63 (after line 17), at the end of the Part, add:

146 Saving — old law continues to apply to Australian plantation forestry entities

(1) Despite the amendments made by Part 1 of this Schedule, the old law continues to apply in relation to assessments for income years starting on or after 1 July 2023 for entities that are Australian plantation forestry entities for a period that is all or part of the income year, as if the amendments had not been made.

(2) In this item:

Australian plantation forestry entity, at a particular time, means an entity that solely or predominantly carries on a business, at that time, of establishing and tending trees for felling in Australia.

old law means the following provisions, as in force immediately before the commencement of this item:

(a) Division 820 of the Income Tax Assessment Act 1997;

(b) any other provision of that Act to the extent that it relates to that Division;

(c) any provision in an instrument (whether legislative or administrative) made under that Act to the extent that it relates to that Division.

Sue Lines (President) Share this | Link to this | Hansard source

I will now deal with the amendments circulated by the opposition. The question is that the amendments on sheet 2248 be agreed to.

Opposition's circulated amendments—

(1) Clause 2, page 2 (at the end of the table), add:

(2) Schedule 2, item 144, page 63 (line 4), omit "2023", substitute "2024".

(3) Schedule 2, item 144, page 63 (line 8), omit "2023", substitute "2024".

(4) Page 63 (after line 17), at the end of the Bill, add:

Schedule 3 — Consultation

1 Consultation

(1) Before 1 July 2024, the Treasurer must ensure that:

(a) consultation on the amendments made by Schedule 2 to this Act is undertaken:

(i) for a period of at least 3 months; and

(ii) with such industry participants as the Treasurer considers appropriate; and

(b) a report is prepared on the consultation.

(2) As soon as practicable after the completion of the report referred to in paragraph (1)(b), the persons who prepared the report must give it to the Treasurer.

(3) The Treasurer must cause a copy of the report to be tabled in each House of the Parliament within 15 sitting days of that House after the report is given to the Treasurer.

Sue Lines (President) Share this | Link to this | Hansard source

I will now deal with the amendments circulated by the Australian Greens. The question is that the amendments on sheet 2234 be agreed to.

Australian Greens' circulated amendments—

(1) Clause 2, page 2 (at the end of the table), add:

(2) Page 63 (after line 17), at the end of the Bill, add:

Schedule 3 — Petroleum resource rent tax transparency

Taxation Administration Act 1953

1 Subsection 3E(1)

After "a year of tax", insert "in relation to a petroleum project".

2 Subsection 3E(1)

After "the year of tax", insert "and the petroleum project".

3 Paragraph 3E(3)(b)

After "the year of tax" (wherever occurring), insert "and the petroleum project".

4 At the end of subsection 3E(3)

Add:

; (c) the following information, according to information reported to the Commissioner sin the entity's PRRT return for the year of tax and the petroleum project:

(i) the total assessable receipts derived by the entity for the year of tax and the project;

(ii) the total deductible expenditure incurred by the entity for the year of tax and the project;

(iii) if the total deductible expenditure mentioned in subparagraph (ii) exceeds the total assessable receipts mentioned in subparagraph (i)—the amount of the excess;

(iv) the total of the amounts (if any) transferred by the entity to the project in relation to the year of tax under section 45A of the Petroleum Resource Rent Tax Assessment Act 1987;

(v) the total of the amounts (if any) transferred by another entity to the project in relation to the project and the year of tax under section 45B of the Petroleum Resource Rent Tax Assessment Act 1987;

(vi) the taxable profit of the entity for the year of tax and the project.

Note: The amount of the excess mentioned in subparagraph (c)(iii) is known as the undeducted expenditure.

5 Paragraph 3E(4)(a)

After "paragraph (3)(b)", insert "or (c)".

6 Subsection 3E(7)

Insert:

petroleum project has the meaning given by the Petroleum Resource Rent Tax Assessment Act 1987.

7 Application of amendments

The amendments of section 3E of the Taxation Administration Act 1953 made by this Schedule apply in relation to a year of tax ending on or after the commencement of this item.