(6) The superannuation guarantee period is the period beginning on 1 July 1992 and ending at the transition time.
Meaning of required award etc. contribution amount
(7) A required award etc. contribution amount is an amount required to be contributed to a superannuation fund by an employer for the benefit of an employee:
(a) by an industrial award; or
(b) by an occupational superannuation arrangement; or
(c) by a law of the Commonwealth, a State or a Territory; or
(d) otherwise.
Meaning of required superannuation guarantee contribution amount
(8) A required superannuation guarantee contribution amount is an amount that an employer would need to contribute in respect of a period so as not to have a superannuation guarantee shortfall under the Superannuation Guarantee (Administration) Act 1992 in respect of that period.
Note: The relevant periods for which shortfalls are or were calculated under that Act are quarters (from 1 July 1993 onwards) or half‑years (from 1 July 1992 to 30 June 1993).
57‑52 Section 57‑50 does not apply if there is a surplus at transition time
Section 57‑50 does not apply to a deduction of the kind mentioned in subsection 57‑50(1) if:
(a) at the transition time, according to the accounts of the fund concerned, an amount is available to meet liabilities of the transition taxpayer in relation to the fund to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer; and
(b) the amount exceeds the value (as worked out according to actuarial principles) of the liabilities of that kind that have accrued as at the transition time.
57‑55 Deductions reduced under both sections 57‑40 and 57‑50
If the amount of a deduction otherwise allowable to the transition taxpayer in respect of a contribution to a fund is required to be reduced under both sections 57‑40 and 57‑50:
(a) if the reduction is of a different amount—the amount is reduced only under that section that requires the greater reduction; or
(b) if the reduction is of the same amount—the amount is reduced only under section 57‑40.
Subdivision 57‑G—Denial of certain deductions
57‑60 Effect of pre‑transition time accrued leave entitlements
(1) This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under subsection 51(1) of this Act or section 8‑1 (about general deductions) of the Income Tax Assessment Act 1997 in respect of long service leave payments or annual leave payments to a person who was an employee of the transition taxpayer at any time before or after the transition time.
Note: Subsection 51(3) of this Act or section 26‑10 of the Income Tax Assessment Act 1997 (as appropriate) contains additional requirements for certain leave payments to be deductible.
Deduction allowable only if sum of all deductions exceeds leave threshold amount
(2) The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the leave threshold amount (see subsection (4)) for the year of income.
Amount of deduction not allowable
(3) If the sum is greater than the leave threshold amount, so much of the deduction as is worked out using the following formula is not allowable:
Start formula start fraction Amount of deduction over Sum of all deductions of the transition taxpayer to which this section applies for the year of income end fraction times Leave threshold amount for the year of income end formula
Meaning of leave threshold amount
(4) The leave threshold amount for a year of income is:
(a) if the year of income is the transition year—the (pre‑transition time service) leave amount (see subsection (5)) of the transition taxpayer; or
(b) in any other case—that amount as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income.
Meaning of (pre‑transition time service) leave amount
(5) The (pre‑transition time service) leave amount of the transition taxpayer is the sum of the following amounts:
(a) the amount that would be payable by the transition taxpayer in respect of annual leave and long service leave if, at the transition time, all employees of the transition taxpayer began to take all leave of that kind that they were eligible to take; and
(b) if the transition taxpayer elects, in accordance with subsection (6), that this paragraph applies—the amount that, according to actuarial principles, would need to be set aside at the transition time to meet all obligations of the transition taxpayer that might reasonably be expected to arise after that time to make annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) for periods of service of employees occurring before the transition time; and
(c) if paragraph (b) does not apply—the present value, at the transition time, of all annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) that the transition taxpayer would become liable to make after that time in respect of periods of service of employees occurring before that time if all such leave became eligible to be taken.
Election
(6) The election mentioned in paragraph (5)(b) must be made in writing before:
(a) the day by which the transition taxpayer’s return of income for the transition year is due to be lodged; or
(b) such later day as the Commissioner allows.
57‑65 Treatment of bad debts
(1) This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under this Act for the writing off as bad of the whole or part of a debt owing to the transition taxpayer.
Deduction allowable only if sum of all deductions exceeds doubtful debt provision limit
(2) The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the doubtful debt provision limit (see subsection (4)) for the year of income.
Amount of deduction not allowable
(3) If the sum is greater than that limit, so much of the deduction as is worked out using the following formula is not allowable:
Start formula start fraction Amount of deduction over Sum of all deductions of the transition taxpayer to which this section applies for the year of income end fraction times Doubtful debt provision limit for the year of income end formula
Meaning of doubtful debt provision limit
(4) The doubtful debt provision limit for a year of income is:
(a) if the year of income is the transition year—the pre‑transition doubtful debt limit (see subsection (5)); or
(b) in any other case—that limit as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income.
Meaning of pre‑transition doubtful debt limit
(5) The pre‑transition doubtful debt limit is the total of the amounts that, under generally accepted accounting principles, would be the appropriate doubtful debt provisions in relation to all debts owed to the transition taxpayer as at the transition time.
Reduction of limit for excess recovery
(6) If:
(a) at the transition time, a debt is owed to the transition taxpayer; and
(b) the sum of:
(i) the amount (if any) that, under generally accepted accounting principles, would be the appropriate doubtful debt provision in relation to the debt as at the transition time; and
(ii) any amounts later recovered in respect of the debt;
exceeds the amount of the debt;
the pre‑transition doubtful debt limit is reduced by the amount of the excess.
Reduction of limit if debt later disposed of
(7) If:
(a) at the transition time, a debt is owed to the transition taxpayer; and
(b) there is an amount (the debt provision amount) greater than nil that, under generally accepted accounting principles, would be the appropriate doubtful debt provision in relation to the debt as at the transition time; and
(c) after the transition time, the transition taxpayer disposes of the debt to another person;
the pre‑transition doubtful debt limit is reduced by:
(d) if, after the transition time, the transition taxpayer wrote off part of the debt as bad—the excess (if any) of the debt provision amount over the amount or amounts so written off; or
(e) in any other case—the debt provision amount.
57‑70 Treatment of superannuation lump sums and employment termination payments
(1) This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under section 8‑1 (about general deductions) or 25‑50 (about pensions, gratuities or retiring allowances) of the Income Tax Assessment Act 1997 for a superannuation lump sum or an employment termination payment for a person who was an employee of the transition taxpayer at any time before the transition time (regardless of whether the person was an employee at or after the transition time).
(2) So much (if any) of the deduction as relates to a period of service of the employee before the transition time is not allowable.
(3) This section does not apply to an early retirement scheme payment (within the meaning of the Income Tax Assessment Act 1997), or a genuine redundancy payment (within the meaning of that Act).
Subdivision 57‑H—Domestic losses
57‑75 Domestic losses
In applying section 36‑15 or 36‑17 of the Income Tax Assessment Act 1997 (about how to deduct tax losses) to the transition taxpayer:
(a) only exempt income derived at or after the transition time is taken into account as exempt income of the transition taxpayer; and
(b) the transition taxpayer’s deductions are taken into account only so far as they are in respect of:
(i) services rendered; or
(ii) goods provided; or
(iii) the doing of any other thing;
at or after the transition time.
Subdivision 57‑J—Capital allowances and certain other deductions
57‑85 What are the modified deduction rules and corresponding deduction provisions?
(1) A modified deduction rule is a provision listed in column 3 of an item in the table in subsection (3). Provisions of the Income Tax Assessment Act 1997 are identified in normal text, while provisions of the Income Tax Assessment Act 1936 are in bold.
(2) The corresponding deduction provision (if any) for a modified deduction rule listed in column 3 of an item in the table in subsection (3) is the provision of the Income Tax Assessment Act 1936 listed in column 4 of the item.
(3) The table is as follows:
Modified deduction rules and corresponding deduction provisions
1 Borrowing expenses Section 25‑25 Former section 67
5 Films, Australian Former Division 10BA of Part III
7 Industrial property (copyright in Australian film) Former Division 10B of Part III
9 Gifts Section 25‑50 and Division 30 Former section 78
13 R&D Division 355
14 Scientific research Section 73A
18 Cost of acquiring trees Section 70‑120 Former section 124J
19 Capital allowances Division 40
57‑90 Post‑transition deductions—assume that the transition taxpayer had never been exempt
In working out the transition taxpayer’s allowable deductions under a modified deduction rule for the transition year or a later year of income, assume that the modified deduction rule had applied at all times before the transition time as if the transition taxpayer’s income had never been exempt from income tax.
57‑95 Amount of deduction not allowable for transition year
(1) If, apart from this section, an amount would be an allowable deduction under a modified deduction rule for the transition year in respect of expenditure incurred before the transition time (whether or not during the transition year), only so much of the amount as is worked out using the following formula is so allowable:
Start formula start fraction Number of whole days in transition year after transition time over Post-expenditure part end fraction times Amount of deduction end formula
where:
post‑expenditure part means:
(a) if the expenditure was incurred before the transition year—the number of days in the transition year; or
(b) otherwise—the number of days in the period from the beginning of the day on which the expenditure is incurred until the end of the transition year.
(2) This section does not apply to an amount to which paragraph 57‑110(1)(b) (which deals with balancing adjustments) applies.
57‑100 No elections etc. before transition time
In working out the transition taxpayer’s allowable deductions under a modified deduction rule:
(a) assume that the transition taxpayer did not, at any time, make any election or declaration, or give any notice, under the rule in relation to a year of income before the transition year; and
(b) any election or declaration (other than one under former subsection 124ZADA(1)) the transition taxpayer makes, or any notice the transition taxpayer gives, under the rule in relation to the transition year has no effect in so far as it relates to expenditure incurred before the transition time.
57‑105 Special rules for mining and quarrying
Exploration and prospecting—assume no expenditure
(1) In working out the transition taxpayer’s allowable deductions under the former Subdivision 330‑A or 330‑C or Division 40 of the Income Tax Assessment Act 1997, assume that the transition taxpayer incurred no expenditure on exploration and prospecting before the transition time.
Assume that no excess deductions available
(2) In working out the transition taxpayer’s allowable deductions under the former Subdivision 330‑A or 330‑C of the Income Tax Assessment Act 1997, assume that, for each year of income before the transition year, the transition taxpayer’s assessable income would have exceeded the total of the transition taxpayer’s deductions for the year.
Note: This means that the transition taxpayer can have no excess deductions remaining from years of income before the transition year.
Subdivision 57‑K—Balancing adjustments
57‑110 Apportionment of balancing adjustments
(1) If, apart from this subsection, a balancing adjustment provision (see subsection (2)) would:
(a) require an amount to be included in the transition taxpayer’s assessable income for the transition year or a later year of income in respect of particular expenditure; or
(b) allow an amount as a deduction from the transition taxpayer’s assessable income for the transition year or a later year of income in respect of particular expenditure;
then only so much of the amount as is worked out using the following formula is so included or allowable:
Start formula start fraction Actual deductions over Actual deductions plus Notional deductions end fraction times Amount concerned end formula
where:
actual deductions is the sum of all deductions actually allowed or allowable to the transition taxpayer for the expenditure under the deduction rule to which the balancing adjustment provision relates (see subsection (2)).
notional deductions is the sum of all deductions for the expenditure that would have been allowable to the transition taxpayer under the deduction rule to which the balancing adjustment provision relates, if the transition taxpayer had never been wholly exempt from income tax.
(2) Each balancing adjustment provision and its related deduction rule are shown in an item of the table. Provisions of the Income Tax Assessment Act 1997 are shown in ordinary text, and provisions of the Income Tax Assessment Act 1936 are shown in bold.
Balancing adjustment provisions and related deduction rules
Item Topic Balancing adjustment provision Deduction rule to which the balancing adjustment provision relates
1 Capital works: buildings, structural improvements, environment protection earthworks and extensions, alterations or improvements Section 43‑40 Division 43 and whichever of former Divisions 10C and 10D of Part III is appropriate
2A Capital allowances Section 40‑285 Division 40
5 Industrial property (copyright in Australian film) Former sections 124N and 124P Former Division 10B of Part III
7 R&D Sections 40‑292, 40‑293, 355‑315 and 355‑525 Section 40‑25, 355‑305 or 355‑520
8 Scientific research Subsection 73A(4) Section 73A
Note: Item 7 of the table is expanded by section 355‑340 of the Income Tax (Transitional Provisions) Act 1997.
Subdivision 57‑L—Trading stock
57‑115 Modification of trading stock provisions
(1) For the purposes of applying Division 70 of the Income Tax Assessment Act 1997 in relation to the transition year, the only trading stock of the transition taxpayer that is to be taken into account under section 70‑35 of that Act as being on hand at the beginning of the transition year is such trading stock as was on hand at the transition time.
(2) For the purpose of working out the value at which the trading stock is to be taken into account, the year of income preceding the transition year is taken to have ended immediately before the transition time.
Note: The value of trading stock on hand at the beginning of the transition year will, under section 70‑40 of the Income Tax Assessment Act 1997, be the same as at the end of the preceding year of income.
(3) If:
(a) the basis of valuation of the trading stock at the end of the transition year is cost; and
(b) the basis of valuation at the beginning of the transition year is different;