Inserts for
Tax Laws Amendment (2011 Measures No. 7) Bill 2011: Taxation of Financial Arrangements

EXPOSURE DRAFT

Commencement information	
Column 1	Column 2	Column 3	
Provision(s)	Commencement	Date/Details	
1.  Schedule 1	The day after this Act receives the Royal Assent.		
2.  Schedule 2	The day this Act receives the Royal Assent.		
3.  			

Schedule 1—Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009
  
1  At the end of subitem 104(5) of Schedule 1
Add:
Note:	The Commissioner may, in limited circumstances, extend the time on or before which the election must be notified to the Commissioner. See item 104A.
2  After item 104 of Schedule 1
Insert:
104A  Application of financial arrangement amendments (financial arrangements)—late notices
(1)	A reference in paragraph 104(5)(b) to the lodgment date is to be treated, in relation to an election under subitem 104(2), as being a reference to a later date specified in a notice the Commissioner gives to you under this item, if the Commissioner gives you such a notice in relation to the election.
(2)	The Commissioner may give you a notice in relation to the election if:
	(a)	the Commissioner is satisfied that the election was not notified to the Commissioner on or before the lodgment date because of:
	(i)	an honest mistake of yours; or
	(ii)	an inadvertence of yours; or
	(b)	the Commissioner is satisfied that:
	(i)	the election was not notified to the Commissioner on or before the lodgment date because of circumstances outside of your control; and
	(ii)	you took all reasonable steps to notify the Commissioner of the election on or before the lodgment date, or there were no such steps you could have taken.
(3)	The later date specified in the notice must be a date that occurred no later than 3 months after the lodgment date mentioned in paragraph 104(5)(b) (disregarding this item).
3  Subitem 105(1) of Schedule 1
Omit “item 104 applies to arrangements that are not financial arrangements in the same way that it applies”, substitute “items 104 and 104A apply to arrangements that are not financial arrangements in the same way that those items apply”.
4  Application provision
The amendments made by this Schedule apply in relation to lodgment dates mentioned in paragraph 104(5)(b) of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009, whether the lodgment dates occur before, on or after the commencement of this item.

Schedule 2—Taxation of financial arrangements and PAYG instalments
Part 1—Amendments
Taxation Administration Act 1953
1  After subsection 45‑120(2B) in Schedule 1
Insert:
Effect of Division 230 of the Income Tax Assessment Act 1997 on instalment income
	(2C)	Your instalment income for a period also includes the difference between:
	(a)	a gain (or gains) you make from a *financial arrangement to the extent to which it is (or they are):
	(i)	assessable under Division 230 of the Income Tax Assessment Act 1997; and
	(ii)	reasonably attributable to that period; and
	(b)	a loss (or losses) you make from a financial arrangement to the extent to which it is (or they are):
	(i)	allowable to you as a deduction under Division 230 of the Income Tax Assessment Act 1997; and
	(ii)	reasonably attributable to that period.
This is so only if the gain (or gains) referred to in paragraph (a) equals or exceeds the loss (or losses) referred to in paragraph (b).
	(2D)	However, your instalment income for a period is worked out disregarding subsection (2C) if any of the following apply:
	(a)	you are an individual;
	(b)	the only gains and losses that would be taken into account under subsection (2C) for the period are from *financial arrangements that are *qualifying securities.
	(2E)	A gain or loss that is taken into account under subsection (2C) in working out an amount (including a nil amount) to be included in your instalment income for a period is not to be, to any extent, taken into account again under another provision of this section in calculating your instalment income for the same or any other period.

Part 2—Application provision
2  Definitions
In this Part:
amended instalment income definition means section 45‑120 in Schedule 1 to the Taxation Administration Act 1953 as amended by this Schedule.
first TOFA year means the first income year commencing on or after 1 July 2010 for which:
	(a)	either or both of the following applies:
	(i)	a gain (or gains) from a financial arrangement is included in your assessable income under Division 230 of the Income Tax Assessment Act 1997;
	(ii)	a loss (or losses) from a financial arrangement is allowable to you as a deduction under that Division; and
	(b)	at least one gain or loss referred to in paragraph (a) is from a financial arrangement other than a qualifying security.
3  Application provision
Main rule
(1)	Subitem (2) applies to you if:
	(a)	the Commissioner gives you an instalment rate under section 45‑15 in Schedule 1 to the Taxation Administration Act 1953 at a time that is:
	(i)	after this Act receives the Royal Assent; and
	(ii)	in the first instalment quarter in an income year (the commencing year); and
	(b)	the base year that applies in working out that rate is your first TOFA year, or a later year.
(2)	Subject to subitems (4) and (6), the amended instalment income definition applies to you in working out:
	(a)	your base assessment instalment income for the base year mentioned in paragraph (1)(b), and later years; and
	(b)	your instalment income for periods in the commencing year, and later years.
Partnerships
(3)	Subitem (4) applies in relation to your instalment income for a period if:
	(a)	the period starts after this Act receives the Royal Assent; and
	(b)	you are a partner in a partnership at any time during the period; and
	(c)	in working out the amount to be included in your instalment income for the period under section 45‑260 in Schedule 1 to the Taxation Administration Act 1953, the last income year mentioned in the numerator of the formula in subsection 45‑260(1) in that Schedule is:
	(i)	the first TOFA year for the partnership; or
	(ii)	a later year.
(4)	For the purpose of working out the amount to be included in your instalment income for the period (the current period) under section 45‑260 in Schedule 1 to the Taxation Administration Act 1953, the amended instalment income definition applies in working out the instalment income of the partnership for:
	(a)	the last income year mentioned in the numerator of the formula in subsection 45‑260(1) in that Schedule; and
	(b)	the current period.
Trusts
(5)	Subitem (6) applies in relation to your instalment income for a period if:
	(a)	the period starts after this Act receives the Royal Assent; and
	(b)	you are a beneficiary of a trust at any time during the period; and
	(c)	in working out the amount to be included in your instalment income for the period under section 45‑280 in Schedule 1 to the Taxation Administration Act 1953, the last income year mentioned in the numerator of the formula in subsection 45‑280(1) in that Schedule is:
	(i)	the first TOFA year for the trust; or
	(ii)	a later year.
(6)	For the purpose of working out the amount to be included in your instalment income for the period (the current period) under section 45‑280 in Schedule 1 to the Taxation Administration Act 1953, the amended instalment income definition applies in working out the instalment income of the trust for:
	(a)	the last income year mentioned in the numerator of the formula in subsection 45‑280(1) in that Schedule; and
	(b)	the current period.
Early opt‑in for amended instalment income definition
(7)	Subitem (8) applies to you if:
	(a)	the Commissioner gives you an instalment rate under section 45‑15 in Schedule 1 to the Taxation Administration Act 1953 at a time that is:
	(i)	after this Act receives the Royal Assent; and
	(ii)	in the first instalment quarter in an income year (the commencing year); and
	(b)	the base year that applies in working out that rate is an income year before your first TOFA year; and
	(c)	you elect to have subitem (8) apply to you; and
	(d)	the Commissioner, having regard to the object of Part 2‑10 in Schedule 1 to the Taxation Administration Act 1953, is of the opinion that it is reasonable for that subitem to apply to you.
(8)	Despite subitems (1) and (2), the amended instalment income definition applies to you in working out:
	(a)	your base assessment instalment income for the base year mentioned in paragraph (7)(b), and later years; and
	(b)	your instalment income for periods in the commencing year, and later years.
(9)	If subitem (8) applies to you, in working out your base assessment instalment income for the base year (or a later income year that ends before your first TOFA year) (a pre‑TOFA year), the financial arrangement amendments (within the meaning of Part 3 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009) are taken to apply:
	(a)	to you in a pre‑TOFA year in the same way they apply to you in your first TOFA year; and
	(b)	to financial arrangements you have in a pre‑TOFA year in the same way they apply to financial arrangements you have in your first TOFA year.