(iii) the original taxpayer is the trustee of a public trading trust in relation to the original year of income;
(iv) the original taxpayer is the trustee of a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust in relation to the original year of income;
(v) the original taxpayer is the trustee of a resident trust estate (within the meaning of Division 6) in relation to the year of income who is liable to be assessed and pay tax under section 99 or 99A in respect of a part of the net income of the trust estate;
then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the original assessable amount.
(17) For the purposes of this section, where:
(a) the first company has profits (in this subsection called the original profits) immediately before a distribution time for a distribution benefit in relation to the first company; and
(b) by virtue of subsection (1), an amount (in this subsection called the original assessable amount) is included in the assessable income of a taxpayer (in this subsection called the original taxpayer) of a year of income (in this subsection called the original year of income) under section 44 in respect of the distribution payment in relation to the distribution time; and
(c) all of the following conditions are satisfied:
(i) the original taxpayer is the trustee of a trust estate who is liable to be assessed and pay tax under section 98 in respect of a share in the net income of the trust estate of the original year of income;
(ii) the beneficiary who was entitled to that share was a resident at any time during the original year of income;
(iii) the whole or a part (which whole or part is in this subsection called the beneficiary’s portion of the original assessable amount) of the share of the net income is attributable to the original assessable amount;
then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the beneficiary’s portion of the original assessable amount.
(18) For the purposes of this section, where:
(a) the first company has profits (in this subsection called the original profits) immediately before a distribution time for a distribution benefit in relation to the first company; and
(b) by virtue of subsection (1), an amount (in this subsection called the original assessable amount) is included in the assessable income of a taxpayer (in this subsection called the original taxpayer) of a year of income (in this subsection called the original year of income) under section 44 in respect of the distribution payment in relation to the distribution time; and
(c) the original taxpayer is the trustee of a trust estate or a partnership; and
(d) the following conditions are satisfied in relation to another taxpayer (in this subsection called the actual taxpayer):
(i) an amount is included in the assessable income of the actual taxpayer of a year of income (in this subsection called the assessment year of income) under subsection 92(1) or section 97 or 100;
(ii) the actual taxpayer is:
(A) a resident at any time during the assessment year of income, being a company or a natural person (other than a company or a natural person in the capacity of a trustee); or
(C) the trustee of a public trading trust in relation to the assessment year of income; or
(D) the trustee of a complying superannuation fund, a non‑complying superannuation fund, a complying approved deposit fund, a non‑complying approved deposit fund or a pooled superannuation trust in relation to the assessment year of income; or
(E) the trustee of a trust estate who is liable to be assessed and pay tax under section 98 in respect of a share in the net income of a trust estate; or
(F) the trustee of a trust estate who is liable to be assessed and pay tax under section 99 or 99A in respect of a part of the net income of a trust estate; or
(G) the trustee of a trust estate where trustee beneficiary non‑disclosure tax is payable under Division 6D on the whole or part of the net income of the trust estate;
(iii) if sub‑subparagraph (ii)(A), (B), (C) or (D) applies—the whole or a part of the amount so included in the actual taxpayer’s assessable income (which whole or part is in this subsection called the actual taxpayer’s portion of the original assessable amount) is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;
(iv) if sub‑subparagraph (ii)(E) applies:
(A) the beneficiary who was entitled to the share concerned was a resident at any time during the assessment year of income; and
(B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer’s portion of the original assessable amount) of the share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;
(v) if sub‑subparagraph (ii)(F) applies:
(A) the trust estate was a resident trust estate (within the meaning of Division 6) in relation to the assessment year of income; and
(B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer’s portion of the original assessable amount) of the part of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;
(vi) if sub‑subparagraph (ii)(G) applies:
(A) the trust estate was a resident trust estate (within the meaning of Division 6) in relation to the assessment year of income; and
(B) the whole or a part (which whole or part is in this subsection also called the actual taxpayer’s portion of the original assessable amount) of the whole or the part of the share of the net income is attributable (either directly or indirectly through one or more interposed partnerships or trusts) to the original assessable amount;
then, in determining the profits that the first company has at a later time, no account is to be taken of so much of the original profits as is equal to the actual taxpayer’s portion of the original assessable amount.
(18A) An assessment may be made of a taxpayer on the assumption that subsection (2) will not be applicable in relation to a particular distribution payment made during a year of income of the taxpayer.
(18B) Where:
(a) the assessment mentioned in subsection (18A) is made; and
(b) after the making of the assessment, the Commissioner becomes aware that subsection (2) was applicable in relation to the distribution payment concerned;
then, in spite of anything in section 170, the Commissioner may amend the assessment at any time for the purposes of ensuring that the assessment is made as if subsection (18A) of this section were disregarded.
(19) The provisions of section 102AAJ apply for the purposes of this section in like manner as they apply for the purposes of Division 6AAA.
(20) For the purposes of this section, the question whether a company is a resident of an unlisted country is to be determined in the same manner in which that question is determined for the purposes of Part X.
(21) In this section:
arm’s length value, in relation to the redemption or buy‑back of a share in a company or a unit in a unit trust, means the amount that the company or trustee could reasonably be expected to have been required to pay to obtain the redemption or buy‑back of the share or unit under a transaction where the parties to the transaction are dealing with each other at arm’s length in relation to the transaction.
arrangement means:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved.
associate has the same meaning as in Part X.
associated entity, in relation to a company, means either of the following entities:
(a) a shareholder in the company;
(b) an entity who is an associate of a shareholder in the company.
CFC has the same meaning as in Part X.
distribution benefit has the meaning given by subsection (3) of this section.
eligible equity interest:
(a) in relation to a company, means any of the following:
(i) a share, or an interest in a share, in the company;
(ii) a right to acquire a share, or an interest in a share, in the company;
(iii) an option to acquire a share, or an interest in a share, in the company; or
(b) in relation to a unit trust, means any of the following:
(i) a unit, or an interest in a unit, in the unit trust;
(ii) a right to acquire a unit, or an interest in a unit, in the unit trust;
(iii) an option to acquire a unit, or an interest in a unit, in the unit trust; or
entity has the same meaning as in Part X.
loan includes:
(a) an advance of money; and
(b) the provision of credit or any other form of financial accommodation; and
(c) the payment of an amount for, on account of, on behalf or at the request of an entity where there is an obligation (whether expressed or implied) to repay the amount; and
(d) a transaction (whatever its terms or form) which in substance effects a loan of money.
property has the same meaning as in Division 6AAA.
services has the same meaning as in Division 6AAA.
statutory accounting period has the same meaning as in Part X.
transfer has the same meaning as in Division 6AAA.
Division 3—Deductions
Subdivision A—General
51AAA Deductions not allowable in certain circumstances
(1) Where:
(a) an amount is included in the assessable income of a taxpayer of a year of income by section 102‑5 of the Income Tax Assessment Act 1997 (about net capital gains) or subsection 124ZZB(1) of this Act (about notional capital gains of PDFs);
(b) a deduction would, but for this section, be allowable under a provision listed in the table in subsection (2) to the taxpayer; and
(c) if the amount had not been included in the assessable income the deduction would not be allowable;
the deduction is not allowable.
(2) The table lists provisions allowing deductions that are affected by subsection (1). Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold, are provisions of the Income Tax Assessment Act 1936.
Deduction provisions affected by net capital gains limit
Item Provision Description
1 Subdivision A of Division 3 of Part III General
2 section 8‑1 General deductions
3 Division 25 Some expenses you can deduct
4 Division 30 Gifts or contributions
5 Division 34 Non‑compulsory uniforms
6 Division 36 Tax losses of earlier income years
7 Subdivision 40‑F Facilities to conserve or convey water
8 Subdivision 40‑F Establishing grapevines
9 Subdivision 40‑G Landcare operations
10 Subdivision 40‑G Mains electricity supply
11 Subdivision 40‑G Telephone lines
12 Division 165 Income tax consequences of changing ownership or control of a company
13 Subdivision 170‑A Transfer of tax losses within wholly‑owned groups of companies
14 Division 230 Financial arrangements
51AD Deductions not allowable in respect of property used under certain leveraged arrangements
(1) In this section:
arrangement includes:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.
associate has the same meaning in relation to a person as that expression has in relation to a person in section 318.
construction includes manufacture.
control means effectively control.
goods includes whatever is capable of being owned or used.
hire‑purchase agreement means a hire purchase agreement to which Division 240 of the Income Tax Assessment Act 1997 applies.
lease, in relation to property, includes:
(a) any arrangement under which a right to use the property is granted by the owner to another person; and
(b) any arrangement under which a right to use the property, being a right derived directly or indirectly from a right referred to in paragraph (a), is granted by a person to another person;
but does not include a hire‑purchase agreement.
owner, in relation to property, includes a person who has taken, and holds, the property on hire under a hire‑purchase agreement.
person includes a person in the capacity of a trustee.
prescribed time means one o’clock in the afternoon, by standard time in the Australian Capital Territory, on 24 June 1982.
Note: This section applies to deductions under Division 40 (Capital allowances) and Division 43 (Capital works) of the Income Tax Assessment Act 1997 as if you were the owner of an asset you hold (under that Division) instead of any other person: see section 40‑135 of that Act.
(1A) This section does not apply to property that is put to a tax preferred use (within the meaning of the Income Tax Assessment Act 1997) if the tax preferred use:
(a) starts on or after 1 July 2007; and
(b) does not occur under a legally enforceable arrangement entered into before 1 July 2007.
(1B) This section does not apply to property that is put to a tax preferred use (within the meaning of the Income Tax Assessment Act 1997) if:
(a) the tax preferred use starts on or after 1 July 2007; and
(b) the tax preferred use occurs under a legally enforceable arrangement that was entered into before 1 July 2007; and
(c) an election is made under item 71 of Schedule 1 to the Tax Laws Amendment (2007 Measures No. 5) Act 2007 to have subitem 71(2) of that Schedule apply to the property.
(1C) This section does not apply to property on or after 1 July 2007 if:
(a) Division 16D applied to the property immediately before 1 July 2007; or
(b) this section did not apply to the property immediately before 1 July 2007 and Division 16D would apply to the property on or after 1 July 2007 but for subsection 159GH(2).
For the purposes of applying paragraph (b), disregard the operation of section 159GL.
(1D) Subparagraph (4)(a)(iii) and sub‑subparagraph (4)(b)(ii)(D) do not apply to property acquired by a taxpayer if:
(a) the property is acquired by the taxpayer on or after 1 July 2007; and
(b) the property is not acquired under a legally enforceable arrangement entered into before 1 July 2007.
(2) In this section, a reference to the acquisition of property by a person is a reference to:
(a) the person becoming the owner of the property; or
(b) the construction of the property for the person by another person or other persons on premises of the first‑mentioned person.
(3) In this section, a reference to property being held for use includes a reference to property that is installed ready for use and held in reserve.
(3B) For the purpose of this section, 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 section applies as if the person who was the owner of the property before the transfer continues to be the owner after the transfer.
(4) Subject to subsections (1A), (1B), (1C), (1D) and (8), this section applies, in relation to a taxpayer, to property acquired or constructed by the taxpayer, being property acquired by the taxpayer under a contract entered into after the prescribed time or property constructed by the taxpayer, construction having commenced after that time, if:
(a) at a time when the property is owned by the taxpayer, a person (which person is in this section referred to as the end‑user) holds rights as lessee under a lease of the property, and:
(i) in a case where the end‑user is not a resident of Australia—while the lease is in force, the property is, or is to be, used by a person other than the taxpayer wholly or principally outside Australia;
(ii) while the lease is in force, the property is, or is to be, used by a person other than the taxpayer otherwise than wholly and exclusively for the purpose of producing assessable income; or
(iii) in a case where the property was acquired by the taxpayer—the property was, prior to its acquisition by the taxpayer, owned, and used or held for use, by the end‑user; or
(b) in a case to which paragraph (a) does not apply:
(i) at a time when the property is owned by the taxpayer, the property is, or is to be, used (whether or not by the taxpayer) wholly or partly in or in connection with the production, supply, carriage, transmission or delivery of goods or the provision of services; and
(ii) a person other than the taxpayer (which person is in this section also referred to as the end‑user) controls, will control, or is or will be able to control, directly or indirectly, that use of the property, and:
(A) in a case where the end‑user is not a resident of Australia—that use of the property takes place, or is to take place, wholly or principally outside Australia;
(B) in a case where some or all of the goods are, or are to be, produced for the end‑user or supplied, carried, transmitted or delivered to or for the end‑user, or some or all of the services are, or are to be, provided to or for the end‑user—any of those goods or services are, or are to be, used by the end‑user otherwise than wholly and exclusively for the purpose of producing assessable income;