Income Tax Assessment Act 1936 - Other Operative Highlights

Other Operative Highlights

• Section 26AH — the "ten-year rule" for life insurance policies and friendly society investment bonds. Gains on policy surrender etc. are taxed as income unless held for 10 years. Introduced in 1983.

• Sections 82KZL to 82KZO — deductibility of interest paid up to 12 months in advance on an investment loan. Lenders often promote such pre-payment (near the end of the tax year) as a tax advantage.

• Section 99A — tax on undistributed income of a trust, at the top personal rate plus medicare levy. This penal rate ensures trusts such as listed property trusts always distribute all their income.

• Division 6AA, being sections 102AA to 102AJ — tax on the unearned income of minors at penalty rates. This is an anti-avoidance provision to stop parents putting investments in the names of their children.

• Sections 160ZB(6), 26BB and 70B — taxing traditional securities, such as convertible notes (interest bearing notes convertible into shares), as income rather than capital gains.

• Part IVA (sections 177A to 177G). Part IVA of the 1936 Tax Act is a General Anti Avoidance Provision (‘GAAR’) which can apply to strike down any Australian income tax benefits arising from a scheme where the Commissioner of Taxation, who is the head of the Australian Taxation Office, can successfully establish that the dominant purpose of a party involved in the transaction was to reduce the incidence of Australian income tax.

• Division 2, being sections 202B to 202BF — Tax File Numbers.