6‑1 Diagram showing relationships among concepts in this Division
Diagram showing relationships among concepts of ordinary income, statutory income, assessable income, exempt income and non-assessable non-exempt income in this Division
(1) Assessable income consists of ordinary income and statutory income.
(2) Some ordinary income, and some statutory income, is exempt income.
(3) Exempt income is not assessable income.
(4) Some ordinary income, and some statutory income, is neither assessable income nor exempt income.
For the effect of the GST in working out assessable income, see Division 17.
(5) An amount of ordinary income or statutory income can have only one status (that is, assessable income, exempt income or non‑assessable non‑exempt income) in the hands of a particular entity.
Operative provisions
6‑5 Income according to ordinary concepts (ordinary income)
(1) Your assessable income includes income according to ordinary concepts, which is called ordinary income.
Note: Some of the provisions about assessable income listed in section 10‑5 may affect the treatment of ordinary income.
(2) If you are an Australian resident, your assessable income includes the *ordinary income you *derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
(3) If you are a foreign resident, your assessable income includes:
(a) the *ordinary income you *derived directly or indirectly from all *Australian sources during the income year; and
(b) other *ordinary income that a provision includes in your assessable income for the income year on some basis other than having an *Australian source.
(4) In working out whether you have derived an amount of *ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.
6‑10 Other assessable income (statutory income)
(1) Your assessable income also includes some amounts that are not *ordinary income.
Note: These are included by provisions about assessable income.
For a summary list of these provisions, see section 10‑5.
(2) Amounts that are not *ordinary income, but are included in your assessable income by provisions about assessable income, are called statutory income.
Note 1: Although an amount is statutory income because it has been included in assessable income under a provision of this Act, it may be made exempt income or non‑assessable non‑exempt income under another provision: see sections 6‑20 and 6‑23.
Division Division 25 - Income Tax Assessment Act 1997 - Some amounts you can deduct | Zoe
Note 2: Many provisions in the summary list in section 10‑5 contain rules about ordinary income. These rules do not change its character as ordinary income.
(3) If an amount would be *statutory income apart from the fact that you have not received it, it becomes statutory income as soon as it is applied or dealt with in any way on your behalf or as you direct.
(4) If you are an Australian resident, your assessable income includes your *statutory income from all sources, whether in or out of Australia.
(5) If you are a foreign resident, your assessable income includes:
(a) your *statutory income from all *Australian sources; and
(b) other *statutory income that a provision includes in your assessable income on some basis other than having an *Australian source.
6‑15 What is not assessable income
(1) If an amount is not *ordinary income, and is not *statutory income, it is not assessable income (so you do not have to pay income tax on it).
(2) If an amount is *exempt income, it is not assessable income.
Note: If an amount is exempt income, there are other consequences besides it being exempt from income tax. For example:
the amount may be taken into account in working out the amount of a tax loss (see section 36‑10);
you cannot deduct as a general deduction a loss or outgoing incurred in deriving the amount (see Division 8);
capital gains and losses on assets used solely to produce exempt income are disregarded (see section 118‑12).
(3) If an amount is *non‑assessable non‑exempt income, it is not assessable income.
Note 1: You cannot deduct as a general deduction a loss or outgoing incurred in deriving an amount of non‑assessable non‑exempt income (see Division 8).
Note 2: Capital gains and losses on assets used to produce some types of non‑assessable non‑exempt income are disregarded (see section 118‑12).
6‑20 Exempt income
(1) An amount of *ordinary income or *statutory income is exempt income if it is made exempt from income tax by a provision of this Act or another *Commonwealth law.
For summary lists of provisions about exempt income,
see sections 11‑5 and 11‑15.
(2) *Ordinary income is also exempt income to the extent that this Act excludes it (expressly or by implication) from being assessable income.
(3) By contrast, an amount of *statutory income is exempt income only if it is made exempt from income tax by a provision of this Act outside this Division or another *Commonwealth law.
(4) If an amount of *ordinary income or *statutory income is *non‑assessable non‑exempt income, it is not exempt income.
Note: An amount of non‑assessable non‑exempt income is not taken into account in working out the amount of a tax loss.
6‑23 Non‑assessable non‑exempt income
An amount of *ordinary income or *statutory income is non‑assessable non‑exempt income if a provision of this Act or of another *Commonwealth law states that it is not assessable income and is not *exempt income.
Note: Capital gains and losses on assets used to produce some types of non‑assessable non‑exempt income are disregarded (see section 118‑12).
For a summary list of provisions about non‑assessable non‑exempt income, see Subdivision 11‑B.
6‑25 Relationships among various rules about ordinary income
(1) Sometimes more than one rule includes an amount in your assessable income:
the same amount may be \*ordinary income and may also be included in your assessable income by one or more provisions about assessable income; or
the same amount may be included in your assessable income by more than one provision about assessable income.
For a summary list of the provisions about assessable income,
see section 10‑5.
However, the amount is included only once in your assessable income for an income year, and is then not included in your assessable income for any other income year.
(2) Unless the contrary intention appears, the provisions of this Act (outside this Part) prevail over the rules about *ordinary income.
Note: This Act contains some specific provisions about how far the rules about ordinary income prevail over the other provisions of this Act.
Division 8—Deductions
Table of sections
8‑1 General deductions
8‑5 Specific deductions
8‑10 No double deductions
8‑1 General deductions
(1) You can deduct from your assessable income any loss or outgoing to the extent that:
(a) it is incurred in gaining or producing your assessable income; or
(b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.
Note: Division 35 prevents losses from non‑commercial business activities that may contribute to a tax loss being offset against other assessable income.
(2) However, you cannot deduct a loss or outgoing under this section to the extent that:
(a) it is a loss or outgoing of capital, or of a capital nature; or
(b) it is a loss or outgoing of a private or domestic nature; or
(c) it is incurred in relation to gaining or producing your *exempt income or your *non‑assessable non‑exempt income; or
(d) a provision of this Act prevents you from deducting it.
For a summary list of provisions about deductions, see section 12‑5.
(3) A loss or outgoing that you can deduct under this section is called a general deduction.
For the effect of the GST in working out deductions, see Division 27.
Note If you receive an amount as insurance, indemnity or other recoupment of a loss or outgoing that you can deduct under this section, the amount may be included in your assessable income: see Subdivision 20‑A.
8‑5 Specific deductions
(1) You can also deduct from your assessable income an amount that a provision of this Act (outside this Division) allows you to deduct.
(2) Some provisions of this Act prevent you from deducting an amount that you could otherwise deduct, or limit the amount you can deduct.
(3) An amount that you can deduct under a provision of this Act (outside this Division) is called a specific deduction.
Note: If you receive an amount as insurance, indemnity or other recoupment of a deductible expense, the amount may be included in your assessable income: see Subdivision 20‑A.
For a summary list of provisions about deductions, see section 12‑5.
8‑10 No double deductions
If 2 or more provisions of this Act allow you deductions in respect of the same amount (whether for the same income year or different income years), you can deduct only under the provision that is most appropriate.
Part 1‑4—Checklists of what is covered by concepts used in the core provisions
Division 9—Entities that must pay income tax
Table of sections
9‑1A Effect of this Division
9‑1 List of entities
9‑5 Entities that work out their income tax by reference to something other than taxable income
9‑1A Effect of this Division
This Division is a *Guide.
9‑1 List of entities
Income tax is payable by the entities listed in the table.
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.
Item
Income tax is payable by this kind of entity:
because of this provision:
1
An individual
section 4‑1
2
A company, that is: a body corporate; or an unincorporated body (except a partnership)
section 4‑1
3
A company that was a member of a wholly‑owned group if a former subsidiary in the group is treated as having disposed of leased plant and does not pay all of the income tax resulting from that treatment
section 45‑25
3A
A company that is a corporate collective investment vehicle (CCIV)
Subdivision 195 C
3B
The trustee of an attribution managed investment trust (AMIT)
sections 276 405 to 276 425
4
A superannuation provider in relation to a complying superannuation fund
sections 295‑5 and 295‑605
5
A superannuation provider in relation to a non‑complying superannuation fund
sections 295‑5 and 295‑605
6
A superannuation provider in relation to a complying approved deposit fund
section 295‑5
7
A superannuation provider in relation to a non‑complying approved deposit fund
section 295‑5
8
The trustee of a pooled superannuation trust
section 295‑5
8A
A sovereign entity
section 880‑55
9
A corporate limited partnership
section 94J
10
A mutual insurance association (as described in section 121)
section 121
11
A trustee (except one covered by another item in this table), but only in respect of some kinds of income of the trust
sections 98, 99, 99A and 102
13
The trustee of a public trading trust
section 102S
9‑5 Entities that work out their income tax by reference to something other than taxable income
(1) For some entities, some or all of their income tax for the *financial year is worked out as described in the table.
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.
Item
This kind of entity is liable to pay income tax worked out by reference to:
See:
1
A company that was a member of a wholly‑owned group is jointly and severally liable to pay an amount of income tax if a former subsidiary in the group is treated as having disposed of leased plant and does not pay all of the income tax resulting from that treatment.
section 45‑25
1A
The trustee of an attribution managed investment trust (AMIT) is liable to pay income tax on certain amounts reflecting under attribution of income or over attribution of tax offsets
sections 276 405 to 276 425
2
A superannuation provider in relation to a complying superannuation fund is to be assessed and is liable to pay income tax on no‑TFN contributions income as well as on taxable income.
sections 295‑5 and 295‑605
3
A superannuation provider in relation to a non‑complying superannuation fund is to be assessed and is liable to pay income tax on no‑TFN contributions income as well as on taxable income.
sections 295‑5 and 295‑605
4
An RSA provider is to be assessed and is liable to pay income tax on no‑TFN contributions income as well as on taxable income.
sections 295‑5, 295‑605 and 320‑155
5
An Australian resident individual with: eligible foreign remuneration under section 23AF; or foreign earnings under section 23AG;(from working in a foreign country) is liable to pay income tax worked out by reference to his or her assessable income less some of his or her deductions.
section 23AF or 23AG
6
A trustee covered by item 11 in the table in section 9‑1 is liable to pay income tax worked out by reference to the net income of the trust for the income year.
sections 98, 99 and 99A
8
The trustee of a public trading trust is liable to pay income tax worked out by reference to the net income of the trust for the income year.
section 102S
9
An entity that is liable to pay income tax (worked out by reference to taxable income or otherwise) is also liable to pay income tax worked out by reference to diverted income or diverted trust income for the income year.
section 121H
10
An Australian insurer that re‑insures overseas can elect to pay, as agent for the re‑insurer, income tax worked out by reference to the amount of the re‑insurance premiums.
section 148
(2) For entities covered by an item in the table in subsection (1), the income year is the same as the *financial year, except in these cases:
(a) for a company, or an entity covered by item 2 or 3 in the table, the income year is the previous financial year;
(b) if an entity has an accounting period that is not the same as the financial year, each such accounting period or, for a company, each previous accounting period is an income year.
Note 1: The Commissioner can allow an entity to adopt an accounting period ending on a day other than 30 June. See section 18 of the Income Tax Assessment Act 1936.
Note 2: An accounting period ends, and a new accounting period starts, when a partnership becomes, or ceases to be, a VCLP, an ESVCLP, an AFOF or a VCMP. See section 18A of the Income Tax Assessment Act 1936.
Division 10—Particular kinds of assessable income
10‑1 Effect of this Division
This Division is a *Guide.
10‑5 List of provisions about assessable income
The provisions set out in the table:
include in your assessable income amounts that are not \*ordinary income; and
vary or replace the rules that would otherwise apply for certain kinds of \*ordinary income.
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.
Accrued leave transfer payments
....................................
15‑5
alienated personal services income
....................................
86‑15
allowances
see employment
annual leave
see leave payments
annuities
....................................
27H
approved deposit fund (ADFs)
see superannuation
attributable income
see controlled foreign corporations
avoidance of tax
general .................................
177F
diversion of income .........................
121H
see also transfers of income
bad debts
see recoupment
balancing adjustment
see capital allowances, investments, R&D, scientific research and tax exempt entities
banking
offshore banking unit, deemed interest on payments to by owner
121EK
barter transactions
............................................
21, 21A, 15‑2
beneficiaries
see trusts
benefits
business, non‑cash ...................
21A
consideration, non‑cash ................
21
meals you provide in an in‑house dining facility
32‑70
see also employment and superannuation
bonus shares
see shares
bounties
............................................
15‑10
capital allowances
excess of termination value over adjustable value
generally.........................
40‑285
for some cars......................
40‑370
depreciating asset in low‑value pool........
40‑445(2)
expenditure in software development pool..........
40‑460
recovery of petroleum resource rent tax............
40‑750(3)
capital gains
....................................
102‑5
see also insurance
car expenses
cents per kilometres reimbursement of ............
15‑70
carried interests
carried interests, not ordinary income.............
118‑21
CFCs
see controlled foreign corporations
charters
see shipping
child
non‑trust income of, unearned ............
102AE
trust income of, unearned .....................
102AG
collecting societies
payments of royalties by copyright collecting societies..
15‑22
payments of royalties by resale royalty collecting society
15‑23
company
see controlled foreign corporations, co‑operative company, directors, dividends, liquidation, shareholders and shares
compensation
live stock or trees, recoveries for loss of ...........
385‑130
profits or income, insurance or indemnity for loss of....
15‑30
received by lessor for lessee’s non‑compliance with lease obligation to repair
15‑25
trading stock, insurance or indemnity for loss of ......
70‑115
see also insurance, live stock, recoupment and scientific research
consideration
see benefits
consolidated groups and MEC groups
Assets in relation to Division 230 financial arrangement.
701‑61(3)
controlled foreign corporations (CFCs)
attributable income of .......................
456 to 459A
see also dividends and taxes
co‑operative company
receipts of ...............................
119
credit union
see co‑operative company
currency gains
see foreign exchange
currency losses
see recoupment
death
see trusts
debt/equity swap
see shares and units
defence forces
allowances and benefits for service as a member of ....
15‑2
depreciation
see capital allowances
directors
excessive remuneration or retirement payment from company
109
distributions
see dividends
dividends
benefit of LIC capital gain through a trust or partnership .
115‑280
general .................................
44(1)
distribution from a controlled foreign corporation .....
47A(1)
franked dividends, credits on...................
207‑20(1), 207‑35(1), 207‑35(3)
see also liquidation
elections
local government, reimbursement of expenses of......
25‑65
see also recoupment
electricity connections
see recoupment
employees
see shares
employment
allowances and benefits in relation to employment or rendering services
15‑2
employment termination payment ...............
82‑1082‑6582‑70
other payments for employment termination .........
83‑295
return to work payments ......................
15‑3
see accrued leave transfer payments, leave payments, superannuation and sections 82‑10A and 82‑10C of the Income Tax (Transitional Provisions) Act 1997
environment
see recoupment
farm management deposits
repayments of ............................
393‑10
films
Australian, proceeds of investment in .............
26AG
financial arrangements
gains from...............................
230‑15(1)
foreign exchange
gains ..................................
775‑15
see also recoupment
foreign income tax deduction for franked distributions
Additional Tier 1 capital exception...............
15‑80
forestry agreement
amount where section 82KZMG of the 1936 Act applies.
15‑45
CGT event in relation to forestry interest in agreement..
82KZMGB
forestry managed investment schemes
forestry manager’s receipts under scheme...........
15‑46
CGT event in relation to forestry interest in scheme for initial participant
394‑25(2)
CGT event in relation to forestry interest in scheme for subsequent participant
394‑30(2)
franked dividends
see dividends
funeral policy
benefit under..............................
15‑55
general insurance companies and companies that self insure
gross premiums............................reduction in value of adjusted liability for incurred claims
321‑45321‑10
reduction in value of adjusted liability for remaining coverage
321‑50
reduction in value of outstanding claims liability......
321‑80
geothermal energy
providing geothermal exploration information .......
15‑40
grapevines
see recoupment
horticultural plants
see recoupment
improvements
see leases
imputation
see dividends
indemnity
see compensation and recoupment
insurance
bonuses .................................
26AH, 15‑75
company, demutualisation of ...................
121AT
life insurance, transfer of contributions by superannuation fund or approved deposit fund to
295‑260
payments from a non‑resident reinsurer in respectof a loss ..............................
148
premiums in respect of Australian business received by non‑resident insurers
143
premiums paid to a non‑resident for reinsurance
148
premiums paid to mutual insurance association .......
121
premiums payable to a non‑resident for insurance of property in Australia
142(1)
premiums payable to a non‑resident for insuring an event that can only happen in Australia
142(1)
premiums payable to a non‑resident under an insurance contract with a resident
142(2)
rebates and premiums refunded to a superannuation fund trustee
295‑320 (table item 4)
see also compensation, life insurance companies and recoupment
interest
overpaid tax, on ...........................
15‑35
qualifying securities, on ......................
159GQ, 159GW(1)
see also co‑operative companies and leases
investments
prizes from investment‑related lotteries ......
26AJ
qualifying securities, payments to partial residents made under
159GW(2)
qualifying securities, amount assessable to issuer of ....
159GT(1B)
qualifying securities, balancing adjustment on the transfer of
159GS
securities, variation in terms of .................
159GV(2)
securities lending arrangements .................
26BC
traditional securities, gains on the disposal or redemption of
26BB
see also films and interest
landcare operations
see recoupment
leased plant ..................................
Division 45
leases
amounts received by lessor from lessee for non‑compliance with lease obligation to repair
15‑25
interest component of payments under non‑leveraged finance leases
159GK
partnership leasing property under non‑leveraged finance lease, new partner or contribution of capital since 14 May 1985
159GO
premiums relating to assignment of a lease granted before 20 September 1985
26AB
profit on disposal of previously leased motor vehicles ..
foreign superannuation funds and schemes, benefits from
305‑70
member benefits ...........................
301‑20301‑25301‑35301‑40Subdivision 301‑C
foreign fund becoming Australian, effect of .........
295‑320 (table item 3)
no‑TFN contributions income ............
295‑605
release authorities, payments from ...............
304‑20
returned contributions .......................
290‑100
trustee’s liability to pay tax ....................
295‑5(2) and (3)
see insurance
tax avoidance
see avoidance of tax and transfers of income
tax exempt entities
treatment of income and gains on becoming taxable ....
Schedule 2D
taxes
see dividends, foreign investment funds, interest and recoupment
termination of employment
see directors, eligible termination payments, leave payments and shareholders
theft
see recoupment
trading stock
change in interests in ........................
70‑100
death of trader and .........................
70‑105
difference between opening and closing value of ......
70‑35
disposal not at arm’s length....................
70‑20
disposal of outside ordinary course of business .......
70‑90, 70‑95
see also compensation and tax exempt entities
transfer pricing
arm’s length principle for cross‑border conditions between entities
Subdivision 815‑B
arm’s length principle for permanent establishments....
Subdivision 815‑C
transfers of income
consideration for transfer of right to income .........
102CA
payments for transfer or disposal of property ........
262
transferee, effect on of transfer of right to income .....
102C
transferor, effect on of transfer of right to income .....
102B
travel expenses
see car expenses
trusts
beneficiary under legal disability or with a vested and indefeasible interest in trust income
100
deceased estates, income of ....................
101A
discretionary trusts .........................
101
net income of a trust estate, your present entitlement to
97, 101
non‑resident beneficiaries, liability to tax of ...
98A
non‑resident trust estates to which you have transferred property or services, income of
102AAZD
property of applied for benefit of beneficiaries .......
99B
trust estate includes income from another trust estate
94(5)
trustees’ liability to tax .......................
98, 99, 99A, 102, 102S
see also avoidance of tax and superannuation
unearned income
see child
units
acquired in a debt/equity swap, profit on the disposal, cancellation or redemption of
63E(4)
water conservation
see recoupment
winding‑up
see insurance and liquidation
wool clips
double wool clips, treatment of .................
385‑135, 385‑155
work in progress
receipt of a work in progress amount .............
15‑50
Division 11—Particular kinds of non‑assessable income
Table of Subdivisions
11‑A Lists of classes of exempt income
11‑B Particular kinds of non‑assessable non‑exempt income
Subdivision 11‑A—Lists of classes of exempt income
Table of sections
11‑1A Effect of this Subdivision
11‑1 Overview
11‑5 Entities that are exempt, no matter what kind of ordinary or statutory income they have
11‑15 Ordinary or statutory income which is exempt
11‑1A Effect of this Subdivision
This Subdivision is a *Guide.
11‑1 Overview
Ordinary income or statutory income which is exempt from income tax can be divided into 2 main classes:
(a) ordinary or statutory income of entities that are exempt, no matter what kind of ordinary or statutory income they have (see table in section 11‑5);
(b) ordinary or statutory income of a kind that is exempt (see table in section 11‑15).
11‑5 Entities that are exempt, no matter what kind of ordinary or statutory income they have
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.
Note: Special rules apply to entities that cease to be exempt. See Schedule 2D to the Income Tax Assessment Act 1936.
British Phosphate Commissioners Banaba Contingency Fund
50‑35
primary or secondary resources, and tourism
agricultural society etc. ......................
50‑40
aviation society etc. .........................
50‑40
horticultural society etc. ......................
50‑40
industrial society etc. ........................
50‑40
manufacturing society etc. ....................
50‑40
pastoral society etc. .........................
50‑40
tourism society etc. .........................
50‑40
viticultural society etc. .......................
50‑40
sports, culture or recreation
animal racing society etc. .....................
50‑45
art society etc. ............................
50‑45
Fédération Internationale de Football Association.....
50‑45
FWWC2023 Pty Ltd........................
50‑45
game society etc. ..........................
50‑45
ICC Business Corporation FZ‑LLC.........
50‑45
literature society etc. ........................
50‑45
music society etc. ..........................
50‑45
sport society etc. ...........................
50‑45
11‑15 Ordinary or statutory income which is exempt
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.
acute support packages for veterans and their families
acute support packages for veterans and their families...
52‑185
agricultural industry exit grants
tobacco industry exit grants....................
53‑10
copyright collecting societies
51‑43
Coronavirus economic response payment
certain payments in accordance with the Coronavirus Economic Response Package (Payments and Benefits) Act 2020
53‑25
credit unions
interest.................................
23G
defence
Defence Force member, allowances...............
51‑5
Defence Force member, compensation payments for loss of deployment allowance for warlike service
51‑5
Defence Force Ombudsman recommendation, reparation payments and additional payments in relation to
51‑5
F‑111 Deseal/Reseal Ex‑gratia Lump Sum Payments
51‑5
Former Reserve Defence Force member, compensation payments for loss of pay and/or allowances
51‑5
Reserve Defence Force member, pay and allowances...
51‑5
disasters
2018 storms—relief payments..................
51‑125
dividends or shares
pooled development fund company dividend ........
124ZM
pooled development fund company shares, income from sale of
124ZN
education and training
Apprenticeship Wage Top‑Up payment, recipient of
51‑10
bursary, educational allowance etc. ...............
51‑10 and 51‑35
Commonwealth Trade Learning Scholarship, recipient of
51‑10
CRAFT scheme, employer’s income from..........
51‑10
early completion bonuses for apprentices...........
51‑10 and 51‑42
Endeavour Awards, research fellowship under........
51‑10
Endeavour Executive Award...................
51‑10
foreign student, scholarship and bursary to..........
842‑105
full‑time student, income from a scholarship, bursary, other educational allowance or educational assistance
51‑10 and 51‑35
isolated child, income for the provision of education of..
51‑10 and 51‑40
secondary student, income for the provision of education of
51‑10 and 51‑40
Skills for Sustainability for Australian Apprentices payment, recipient of
51‑10
Tools for Your Trade payment (under the program known as the Australian Apprenticeships Incentives Program), recipient of
51‑10
family assistance
additional child care subsidy...................
52‑150
additional economic support payment 2020 or additional economic support payment 2021
52‑150
back to school bonus or single income family bonus....
52‑150
child care subsidy ..........................
52‑150
clean energy advance........................
52‑150
economic security strategy payment to families.......
52‑150
economic support payment, first or second 2020 payment
52‑150
ETR payment.............................
52‑150
ETR payment, payments under the scheme determined under Part 2 of Schedule 1 to the Family Assistance and Other Legislation Amendment (Schoolkids Bonus Budget Measures) Act 2012
52‑162
families, payments to, under the scheme determined under Schedule 4 to the Social Security and Other Legislation Amendment (Economic Security Strategy) Act 2008
52‑160
family tax benefit ..........................
52‑150
Household Stimulus Package Act (No. 2) 2009, payments under scheme determined under Schedule 4 to the
52‑165
single income family supplement................
52‑150
stillborn baby payment.......................
52‑150
financial arrangements
gains related to exempt income..................
230‑30
financial transactions
pooled development fund company dividends........
124ZM
pooled development fund company shares, income from sale of
124ZN
foreign aspects of income taxation
approved overseas project, income from ...........
23AF
Australian‑American Education Foundation, grant from
51‑10
Commonwealth of Nations country officer, official salary and foreign income
768‑100
consul and official staff member, official salary and foreign income
768‑100
Defence Force member, foreign resident, pay andallowances of ..........................
842‑105
Defence Force member, pay and allowances from being on eligible duty
23AD
defence of Australia, overseas person’s income from assisting in Australia’s defence
842‑105
diplomat and official staff member, official salary and foreign income
768‑100
educational, scientific, religious or philanthropic society, income of a visiting representative of
842‑105
expert, foreign resident, remuneration of ...........
842‑105
foreign society or association representative, income of .
government representative and members of the entourage, foreign resident, income of
842‑105
OBU investment trusts for overseas charitable institutions
121EL(2)
OBU off‑shore investment trusts, income to which subsection 121D(6) applies
121EL
overseas charitable institutions, income from OBUs....
121ELA(1)
overseas employment income, resident, income of .....
23AG
persecution victim, payments to .................
768‑105
press representative, foreign, income of ............
842‑105
resistance fighter and victim of wartime persecution, payments to
768‑105
United Nations, income from service with ..........
23AB
United States projects, income from approved overseas projects
23AA
health
Continence Aids Payment Scheme, payments under ....
52‑175
interest
judgement debt, personal injury.................
51‑57
unclaimed money and property..................
51‑120
life insurance companies
Subdivision 320‑B
National Disability Insurance Scheme
NDIS amounts............................
52‑180
non‑cash benefits
business benefit............................
23L(2)
exempt fringe benefit........................
23L(1A)
prizes
Prime Minister’s Literary Awards ...............
51‑60
Prime Minister’s Prize for Australian History ........
51‑60
Prime Minister’s Prize for Science ...............
51‑60
resale royalty collecting societies
51‑45
shipping
income from shipping activities.................
51‑100
social security or like payments
ABSTUDY scheme, payment under..............
Subdivision 52‑E
additional economic support payment 2020 or additional economic support payment 2021 under the Social Security Act 1991
52‑10
additional economic support payment 2020 or additional economic support payment 2021 under the Veterans’ Entitlements Act 1986
52‑65
Australian Victim of Terrorism Overseas Payment.....
52‑10
Better Start for Children with Disability initiative, Outer Regional and Remote payment under
52‑172
carer adjustment payment.....................
53‑10
carers, 2005 one‑off payment to, (carer payment related), 2005 one‑off payment to carers (carer service pension related) or 2005 one‑off payment to carers (carer allowance related)
52‑10
carers, 2006 one‑off payment to, (carer payment related), 2006 one‑off payment to carers (wife pension related), 2006 one‑off payment to carers (partner service pension related), 2006 one‑off payment to carers (carer service pension related) or 2006 one‑off payment to carers (carer allowance related)
52‑10
carers, 2007 one‑off payment to, (carer payment related), 2007 one‑off payment to carers (wife pension related), 2007 one‑off payment to carers (partner service pension related), 2007 one‑off payment to carers (carer service pension related) or 2007 one‑off payment to carers (carer allowance related).
52‑10
carers, 2008 one‑off payment to, (carer payment related), 2008 one‑off payment to carers (wife pension related), 2008 one‑off payment to carers (partner service pension related), 2008 one‑off payment to carers (carer service pension related) or 2008 one‑off payment to carers (carer allowance related)
52‑10
carers, one‑off payment to, (carer allowance related) or one‑off payment to carers (carer payment related)
52‑10
carers, payments to, under the scheme determined under Schedule 3 to the Family Assistance Legislation Amendment (More Help for Families—One‑off Payments) Act 2004
52‑10
carer supplement............................
52‑10
child disability assistance.....................
Subdivision 52‑A
clean energy payment under the Social Security Act 1991
52‑10
clean energy payment under the Veterans’ Entitlements Act 1986
52‑65
clean energy payment under the scheme prepared under Part VII of the Veterans’ Entitlements Act 1986
52‑65
clean energy payment under the Military Rehabilitation and Compensation Act 2004
52‑114
clean energy payment under the scheme determined under section 258 of the Military Rehabilitation and Compensation Act 2004
52‑114
Commonwealth education or training payment.......
Subdivision 52‑F
cost of living payment 2022 under the Social Security Act 1991
52‑10
cost of living payment 2022 under the Veterans’ Entitlements Act 1986
52‑65
disability services payment ....................
53‑10
economic security strategy payment under the Social Security Act 1991
52‑10
economic support payment, first or second 2020 payment under the Social Security Act 1991
52‑10
economic support payment, first or second 2020 payment under the Veterans’ Entitlements Act 1986
52‑65
education entry payment supplement under the Social Security Act 1991
52‑10
energy assistance payment, one‑off payment under the Social Security Act 1991
52‑10
energy assistance payment, one‑off payment under the Veterans’ Entitlements Act 1986
52‑65
ETR payment, payments under the scheme determined under Part 2 of Schedule 1 to the Family Assistance and Other Legislation Amendment (Schoolkids Bonus Budget Measures) Act 2012
52‑162
farm household allowance under the Farm Household Support Act 2014
Subdivision 52‑A
Helping Children with Autism package, Outer Regional and Remote payment under
52‑170
Household Stimulus Package Act (No. 2) 2009, payments under the scheme determined under Schedule 4 to the
52‑165
pension bonus and pension bonus bereavement payment.
52‑10 and 52‑65
persecution victim, payments to .................
768‑105
pharmaceutical supplement for Australian participants in British nuclear tests or in the British Commonwealth Occupation Force
Subdivision 52‑CB
pharmaceutical supplement for Australian surgical‑medical team members
Subdivision 52‑CC
resistance fighter and victim of wartime persecution, payments to
768‑105
Social Security and Other Legislation Amendment (Economic Security Strategy) Act 2008, payments under the scheme determined under Schedule 4 to the
52‑160
Social Security and Veterans’ Affairs Legislation Amendment (One‑off Payments and Other 2007 Budget Measures) Act 2007, payments under a scheme determined under item 1 of Schedule 2 to the
52‑10
Social Security and Veterans’ Affairs Legislation Amendment (One‑off Payments and Other 2007 Budget Measures) Act 2007, payments under the scheme determined under Schedule 4 to the
52‑10
Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments and Other Budget Measures) Act 2008, payments under a scheme determined under item 1 of Schedule 2 to the
52‑10
Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments and Other Budget Measures) Act 2008, payments under the scheme determined under Schedule 4 to the
52‑10
Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments to Increase Assistance for Older Australians and Carers and Other Measures) Act 2006, payments under the scheme determined under item 1 of Schedule 2 to the
52‑10
Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments to Increase Assistance for Older Australians and Carers and Other Measures) Act 2006, payments under the scheme determined under Schedule 4 to the
52‑10
Social Security Legislation Amendment (One‑off Payments for Carers) Act 2005, payments under the scheme determined under Schedule 2 to the
52‑10
social security payments ......................
Subdivision 52‑A
training and learning bonus under the Social Security Act 1991
52‑10
travelling expenses for Australian participants in British nuclear tests or in the British Commonwealth Occupation Force
Subdivision 52‑CB
travelling expenses for Australian surgical‑medical team members
Subdivision 52‑CC
veteran, Australian and United Kingdom, payment to ...
53‑20
veteran, payment to .........................
Subdivisions 52‑B and 52‑C
Veterans’ Entitlements Act 1986, lump sum payment under section 198N of the
52‑65
wounds and disability pension ..................
53‑10
see also welfare
structured settlements and structured orders
annuities and lump sums......................
Subdivisions 54‑B, 54‑C and 54‑D
student
see education and training
superannuation and related business
approved deposit fund, continuously complying fixed interest, income from 25 May 1988 deposits
295‑390 of the Income Tax (Transitional Provisions) Act 1997
approved deposit fund, income from a grant of financial assistance under Part 23 of the Superannuation Industry (Supervision) Act 1993
295‑405 (table item 1)
approved deposit fund, non‑reversionary bonuses on policies of life assurance
295‑335 (table item 1)
benefits from non‑complying funds ........
305‑5
pooled superannuation trust, income from constitutionally protected funds
295‑335 (table item 2)
pooled superannuation trust, income from current pension liabilities of complying superannuation funds
295‑400
pooled superannuation trust, non‑reversionary bonuses on policies of life assurance
295‑335 (table item 1)
superannuation fund, income from other assets used to meet current pension liabilities
295‑390
superannuation fund, income from segregated current pensions assets
295‑385
superannuation fund, non‑reversionary bonuses on policies of life assurance
295‑335 (table item 1)
superannuation fund, regulated, income from a grant of financial assistance under Part 23 of the Superannuation Industry (Supervision) Act 1993
eligible venture capital investments, gain or profit from realisation of
51‑54
eligible venture capital investments by ESVCLPs, income derived from
51‑52
venture capital equity, gain or profit from realisation of..
51‑55
welfare
Disaster recovery payments to special category visa (subclass 444) holders
51‑30
maintenance payment........................
51‑30 and 51‑50
thalidomide payment—payment under the Support for Australia’s Thalidomide Survivors program
51‑30
thalidomide payment—payment by the Thalidomide Australia Fixed Trust
51‑30
see also social security or like payments
Note: The following provisions of the Income Tax Assessment Act 1936 give rise to notional exempt income and not exempt income. For this reason the provisions do not appear in the lists of kinds of exempt income.
Note: The provisions are: paragraphs 384(1)(b) and 385(1)(b), subsection 402(2) and section 403.
Subdivision 11‑B—Particular kinds of non‑assessable non‑exempt income
Table of sections
11‑50 Effect of this Subdivision
11‑55 List of non‑assessable non‑exempt income provisions
11‑50 Effect of this Subdivision
This Subdivision is a *Guide.
11‑55 List of non‑assessable non‑exempt income provisions
The provisions set out in the list make amounts non‑assessable non‑exempt income.
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.
alienated personal services income
associate, non‑deductible payment or obligation to
85‑20(3)
entitlements to a share of net income that is personal services income already assessable to anindividual.............................
86‑35(2)
payments by personal services entity or associate of personal services income already assessable to an individual
86‑35(1)
personal services entity, amounts of personal services income assessable to an individual
86‑30
bonds
see securities
capital gains tax
small business retirement exemption, payments made directly or indirectly to CGT concession stakeholder so company or trust complies with section 152‑325
152‑310
cash flow boost
payments in accordance with the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020
59‑90
Coronavirus economic response
certain payments in accordance with the Coronavirus Economic Response Package (Payments and Benefits) Act 2020
59‑95
State and Territory grants to small business relating to the recovery from the coronavirus
59‑97
Commonwealth small business support payments relating to the coronavirus
59‑98
COVID‑19 disaster payment
59‑96
demutualisation of friendly society health or life insurers
amounts related to issue, or transfer from lost policy holders trust, of demutualisation assets
316‑255
payments received directly, or from lost policy holders trust, in exchange for cancellation or variation of interests under the demutualisation
316‑255
demutualisation of private health insurers
market value of shares and rights at time of issue......
315‑310
payments received in exchange for cancellation or variation of interests under the demutualisation
315‑310
disasters
2019‑20 bushfires—payments for volunteer work with fire services
59‑55
2019‑20 bushfires—disaster relief payments and non‑cash benefits
59‑60
2019 floods—recovery grants...................
59‑85
2019 floods—on‑farm grant program.......
59‑86
2021 floods and storms—recovery grants...........
59‑99
Cyclone Seroja—recovery grants................
59‑105
dividends
demerger dividends.........................
44(4)
later dividend set off against amount taken to be dividend
109ZC(3), 109ZCA(4)
electricity generation
refund of large‑scale generation shortfall charge
59‑100
employment
early retirement scheme payment, tax free amount of ...
83‑170
employment termination payment ...............
82‑1082‑6582‑70
foreign termination payment ...................
83‑23583‑240
genuine redundancy payment, tax free amount of .....
83‑170
unused long service leave payment, pre‑16/8/78period ...............................
83‑80
see superannuation and sections 82‑10A and 82‑10C of the Income Tax (Transitional Provisions) Act 1997
environment
water infrastructure improvement payments.........
59‑65
farm‑in farm‑out arrangements
rewards for providing exploration benefits..........
40‑1135
financial arrangements
gains related to non‑assessable non‑exempt income
230‑30
firearms surrender arrangements
compensation under.........................
59‑10
foreign aspects of income taxation
attributed controlled foreign company income, amounts paid out of
23AI
attributed foreign investment fund income, amounts paid out of
23AK
certain forex realisation gains...................
775‑25
branch profits of Australian companies............
23AH
distributions of conduit foreign income............
802‑20
income derived by foreign residents in exclusive economic zone or on or above continental shelf
768‑110
foreign equity distributions on participation interests...
768‑5
income derived by temporary residents.............
768‑910
interest paid by temporary residents...............
768‑980
managed investment trust withholding tax, amount subject to
840‑815
labour mobility program withholding tax, amount subject to
840‑915
superannuation fund, foreign, interest and dividend income of
128B(3)(jb)
withholding tax, dividend royalty or interest subject to..
128D
GST
GST payable on a taxable supply................
17‑5(a)
increasing adjustments.......................
17‑5(b) and (c)
investment manager regime
IMR concessions...........................
842‑215
life insurance companies..........................
Subdivision 320‑B
mining
withholding tax, payments to Indigenous persons and distributing bodies subject to
59‑15
mutual receipts
amounts that would be mutual receipts but for prohibition on distributions to members or issue of MCIs
59‑35
National Rental Affordability Scheme
payments made, and non‑cash benefits provided, by a State or Territory governmental body in relation to participation in the National Rental Affordability Scheme..................................................................
380‑35
native title benefits
native title benefits..........................
59‑50
non‑cash benefits
fringe benefits.............................
23L(1)
notional sale and loan
arrangement payments a notional seller receives or is entitled to receive
240‑40
luxury car leases, lease payments that the lessor receives or is entitled to receive
242‑40
deemed loan treatment for financial benefits provided for tax preferred use of asset
250‑160
related entities
amounts from, where deduction reduced for.........
26‑35(4)
repayable amounts
previously assessable amounts..................
59‑30
rights to acquire shares or units
market value of at time of issue.................
59‑40
small business assets
income arising from CGT event, company or trust owned asset continuously for 15 years
152‑110(2)
sovereign entities ..............................
Subdivision 880‑C
superannuation
benefits generally ..........................
Divisions 301 to 306
commutation of income stream, under 25 years .......
303‑5
death benefits .............................
302‑60302‑65302‑70302‑140
departing Australia superannuation benefits .........
301‑175
foreign superannuation funds, lump sum benefits .....
305‑60305‑65305‑70
KiwiSaver schemes, contributions to complying superannuation funds from
312‑10
KiwiSaver schemes, superannuation benefits paid from complying superannuation funds to
312‑15
KiwiSaver schemes, superannuation benefits paid by Commissioner to
312‑20
member benefits ...........................
301‑10301‑15301‑30301‑225
release authorities, payments from ...............
303‑15303‑20
roll‑over superannuation benefits ..........
306‑5
superannuation lump sum for recipient having terminal medical condition
303‑10
unclaimed money payment to government ..........
306‑20
tax loss transfers
consideration received by loss company from income company, generally
170‑25(1)
consideration received by loss company from income company, net capital loss
170‑125(1)
consideration received for transfer of tax losses relating to transitioned petroleum activities
417‑70
temporary residents
see foreign aspects of income taxation
trading stock
disposal outside ordinary course of business, amounts received upon
70‑90(2)
transfer of entitlements to deductions
consideration received for transfer of entitlements to deductions relating to transitioned petroleum activities
family trust distribution tax, amounts subject to.......
271‑105(3) in Schedule 2F
windfall amounts
business franchise fees, refund of when invalid.......
59‑20
State tax on Commonwealth place, refund of when invalid
59‑25
withholding taxes
see foreign aspects of income taxation and mining
Division 12—Particular kinds of deductions
12‑1 Effect of this Division
This Division is a *Guide.
12‑5 List of provisions about deductions
The provisions set out in the table contain rules about specific types of deduction.
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.
accrued leave transfer payments
....................................
26‑10
advance expenditure
generally ................................
82KZL to 82KZO
avoidance arrangements ......................
82KJ
when deductible ...........................
82KZM to 82KZN
Australian apprenticeship support loan
payment made to reduce a debt to the Commonwealth under the Australian Apprenticeship Support Loans Act 2014, no deduction unless provided as fringe benefit
26‑20
Australian IIR/UTPR tax and Australian DMT tax
no deduction .............................
26‑99C
see also tax related expenses
bad debts
deduction reduced because of forgiveness of debt if debtor and creditor are companies under common ownership and agree on the reduction
245‑90
general .................................
25‑35, 63F
companies ...............................
Subdivisions 165‑C, 166‑C and 175‑C
debt/equity swaps ..........................
63E, 63F, 709‑220
deduction of a debt that used to be owed to a member of a consolidated group or MEC group by an entity that used to be a member of the group
Subdivisions709‑D and 719‑I
money lenders, listed country branches, no deductionfor
63D
see also losses
balancing adjustment
see buildings, capital allowances, industrial property, R&D and tax exempt entities
banks
foreign banks, Australian branches of .............
160ZZVA to 160ZZZJ
boats
deferral of deductions .......................
26‑47
borrowing expenses
....................................
25‑25
bribes to foreign public officials ....................
26‑52
bribes to public officials ..........................
26‑53
buildings
build to rent development misuse tax, no deduction for ..
26‑99B
income producing buildings, capital allowances ......
Division 43
see also heritage conservation work
capital allowances
generally ................................
Division 40
balancing adjustments .......................
40‑285(2), 40‑370
business related costs ........................
40‑880
electricity and telephone lines ..................
new business investment, additional deduction .......
Division 41
Petroleum Resource Rent Tax ..................
40‑750
project pools .............................
40‑830, 40‑832
reducing deductions ........................
40‑25, 40‑27, 40‑290 and 40‑291
spectrum licences ..........................
Subdivision 40‑B
tax preferred use of asset......................
Division 250
telecommunications site access rights .............
Subdivision 40‑B
trees in carbon sink forests ....................
Subdivision 40‑J
water facilities, horticultural plants, fodder storage assets and fencing assets
Subdivision 40‑F
capital gains
no deduction for an amount that would otherwise be deductible only because a net capital gain is included in assessable income
51AAA
small business retirement exemption, no deduction for payments made directly or indirectly to CGT concession stakeholder so company or trust complies with section 152‑325
152‑310
see also foreign residents
capital loss
net capital loss, no deduction for ................
102‑10
net capital loss, transfer within company group .......
Subdivision 170‑B
car disposal
see capital allowances
car expenses
generally ................................
Division 28
“cents per kilometre” method ..................
Subdivision 28‑C
“log book” method .........................
Subdivisions 28‑F and 28‑G
substantiation of car expenses ..................
Division 900
see also transport expenses
car expenses of employee
employee’s car expenses where car provided by employer can be used for private purposes, no deduction for .
51AF
carried interests
carried interests, no deduction for................
118‑21
car parking
employee’s car parking expenses, no deduction for ....
51AGA
children’s income
generally ................................
102AA to 102AH
taxable income of a child, deductions taken into consideration in calculating
102AD
club fees
club fees, no deduction for ....................
26‑45
see also subscriptions to associations
Commonwealth places windfall tax
....................................
26‑17
companies, co‑operative and mutual
generally ................................
117 to 121
distributions of assessable income ...............
120
companies, private
excessive payments to shareholders directors and associates, reduced deduction
109
conservation covenants
....................................
Division 31
consolidated groups and MEC groups
assets in relation to Division 230 financialarrangement............................
701‑61(4)
controlled foreign companies
generally ................................
316 to 468
bad debts ................................
399A
decline in value of depreciating assets .............
398
finance share dividends ......................
394
taxes paid ...............................
393
convertible notes
see interest
copyrights
expenditure in obtaining registration ..............
Subdivisions 40‑B and 40‑I
COVID‑19
expenditure on COVID‑19 tests ...........
25‑125
cross staple arrangements
rent from land investment.....................
25‑115, 25‑120
currency exchange gains and losses
see foreign exchange
death of timber owner
see timber
debt interests
certain returns in respect of debt interests...........
25‑85
depreciation
see capital allowances
designs
expenditure in obtaining or extending registration .....
Subdivisions 40‑B and 40‑I
disposal of depreciating assets
see capital allowances
dividends
dividends including LIC capital gain component ......
115‑280
franking credits, companies and foreign residents......
207‑95(2), 207‑95(3), 220‑405(3)
franking credits, pooled development funds (PDFs) ....
124ZM
non‑share equity interests, no deduction for return in respect of
26‑26
unfranked non‑portfolio dividends.........
46FA
education expenses
Higher Education Contribution Scheme, no deduction unless provided as fringe benefit
26‑20
see also overseas debtors repayment levy
see also student start‑up loans
see also VET student loans
election expenses
Federal and State Parliament election expenses .......
25‑60, 25‑70
local government election expenses, limited deductionfor
25‑65, 25‑70
electricity connections
see capital allowances
embezzlement
see theft
employees
labour mobility programs, delayed deduction for salary, wages etc. paid to employees under program until labour mobility program withholding tax payable has been paid
26‑25A
pensions, gratuities or retiring allowances for ex‑employees
25‑50
see also shares
entertainment
expenditure, no deduction for some ..............
Division 32
meal entertainment, calculation of deductible amount ...
51AEA to 51AEC
environment
see capital allowances
excess non‑concessional contributions tax
no deduction .............................
26‑75
exploration and prospecting
see capital allowances
family
no deduction for maintaining spouse or child.........
26‑40
farm management deposits
see primary production
film licensed investment companies (FLICs)
see shares
financial arrangements
losses from...............................
230‑15(2) and (3)
see also borrowing expenses, interest, leases and securities
foreign exchange
losses ..................................
775‑30
foreign financial entities’ Australian permanent establishments
generally................................
Part IIIB
thin capitalisation..........................
Subdivision 820‑FB
transfer of losses...........................
Subdivisions 170‑A and 170‑B
forestry managed investment schemes
payments under scheme......................
394‑10(1)
franchise fees windfall tax
....................................
26‑15
freight
freight for shipped goods .....................
135A
fringe benefits
contributions for private component, no deduction for ..
51AJ
employee’s car expenses where car provided by employer can be used for private purposes, no deduction for
51AF
employee’s car parking expenses, no deduction for ....
general insurance companies and companies that self insure
claims paid...............................
321‑25 and 321‑95
increase in value of adjusted liability for incurred claims.
321‑15
increase in value of adjusted liability for remaining coverage
321‑55
increase in value of outstanding claims liability.......
321‑85
gifts
general .................................
Division 30
limit on deduction ..........................
26‑55
see also tax avoidance schemes
horticultural plants
see capital allowances
higher education assistance
26‑20
hybrid mismatch rules
disallowing of deductions.....................
Division 832
illegal activities
26‑54
income equalisation deposits
see primary production
industrial property
see intellectual property and R&D
infrastructure
see tax losses
insurance with non‑residents
generally ................................
141 to 148
insurance premiums, no deduction unless arrangement to pay tax
145
reinsurance, no deduction for resident carrying on insurance business in Australia for reinsurance premiums paid to a non‑resident
148
intellectual property
see capital allowances
interest
convertible notes, interest on, generally ............
82L to 82T
foreign residents, debt creation involving, generally ....
159GZY to 159GZZF
foreign residents, delayed deduction for interest paid to until withholding tax payable has been paid
26‑25
life assurance premiums, interest etc. on loans to finance, no deduction for
26‑85
superannuation contributions, interest etc. on loans to finance, no deduction for
26‑80
underpayment or late payment of tax, interest for .....
25‑5
international agreements
see transfer pricing
international profit shifting
see transfer pricing
investment company
see shares
IRUs
see capital allowances
land
land degradation, see primary production
vacant land, limit on deduction..................
26‑102
lease document expenses
....................................
25‑20
lease, authority, licence, permit or quota
expenditure to terminate......................
25‑110
leases
finance leases and arrangements, use of property if end‑user an exempt public body or use outside Australia to produce exempt income
159GE to 159GO
leases of assets being put to tax preferred use........
Division 250
leveraged arrangements, property used:
• other than to produce assessable income; or
• by a non‑resident outside Australia; or
• by a previous owner
....................................
51AD
payment for failure to comply with lease obligation to repair premises
25‑15
leases of luxury cars
accrual amounts...........................
242‑35
adjustment amounts (lessee)
242‑70
adjustment amounts (lessor)
242‑65
lease payments not deductible..................
242‑55
payments to acquire car not deductible.............
242‑85
leave payments
accrued leave transfer payments .................
26‑10
no deduction for leave payments until paid ..........
26‑10
leisure facilities
no deduction for ...........................
26‑50
life insurance companies..........................
Subdivision 320‑C
limited recourse debt
later payments.............................
243‑45
later payments (replacement debt)
243‑50
loans
see borrowing expenses, interest and securities
losses
foreign exchange ..........................
775‑30
profit‑making undertaking or scheme .......
25‑40
property sale .............................
25‑40
traditional securities, loss on disposal or redemptionof
70B
see also tax losses
managed investment trusts
losses from carried interests....................
275‑200(4)
management and investment company shares
see shares
membership of associations
see subscriptions to associations
mining
Laminaria and Corallina decommissioning levy ......
26‑96
see also capital allowances
misappropriation
by employee or agent........................
25‑47
mortgage
expenses of discharging a mortgage ..............
25‑30
motor vehicles
see car expenses and leases
National Disability Insurance Scheme
National Disability Insurance Scheme expenditure.....
26‑97
non‑cash transactions
non‑cash business benefits ..............
51AK
non‑cash consideration, money value deemed to have been paid or given
21
non‑commercial business activities
deferral of non‑commercial losses..........
Division 35
non‑resident trust estates
generally ................................
102AAA to 102AAZG
modified application of depreciation provisions .......
102AAY
modified application of trading stock provisions ......
102AAZ
no deductions allowable under Division 36 .........
102AAZC
notional sales and loans
adjustment amounts (lessee)
240‑110(1)
adjustment amounts (lessor)
240‑105(3)
arrangement payments, no deduction for...........
240‑55
notional interest............................
240‑50, 250‑155
deemed loan treatment for financial benefits provided for tax preferred use of asset
Subdivision 250‑C
payments to acquire property, no deduction for.......
240‑85
offshore banking units
generally ................................
121B to 121EL
overseas debtors repayment levy
payment made to reduce a liability to overseas debtors repayment levy under the Student Loans (Overseas Debtors Repayment Levy) Act 2015, no deduction unless provided as fringe benefit
26‑20
partnerships
foreign hybrid loss exposure adjustment.........................................
830‑50
losses, partner’s share of partnership loss ...........
90, 92
patents
expenditure relating to grant of patents, etc. .........
Subdivisions 40‑B and 40‑I
penalties
no deduction for penalties .....................
26‑5
personal services income
alienated personal services income...............
Subdivision 86‑B
general.................................
Division 85
political contributions and gifts
denial of certain deductions....................
26‑22
deductions for individuals.....................
Subdivision 30‑DA
pooled development funds (PDFs)
....................................
124ZM to 124ZZD
prepaid expenditure
see advance expenditure
primary production
farm management deposits....................
Division 393
see also capital allowances and timber
property
arrangements relating to assets being put to tax preferred use
Division 250
arrangements relating to use of property if end‑user an exempt public body or use outside Australia to produce exempt income
159GE to 159GO
leveraged arrangements, property used:
• other than to produce assessable income; or
• by a non‑resident outside Australia; or
• by a previous owner
....................................
51AD
sale of property, profit or loss ..................
82(2)
see also capital allowances and losses
public trading trusts
generally ................................
102M to 102T
qualifying securities
see securities
R&D
Division 355
rates and land taxes
premises used to produce mutual receipts...........
25‑75
rebatable benefits
no deduction for ...........................
26‑19
registered emissions units
expenditure incurred in becoming the holder of.......
420‑15
expenditure incurred in ceasing to hold............
420‑42
excess of opening over closing value of..................
reduction of deduction for payment or liability to......
26‑35,65(1B) and (1C)
repairs
general .................................
25‑10
repair covenants, payment for non‑compliance with covenant to repair under lease
25‑15
roads
see timber
royalties
royalty, no deduction for royalty paid to a foreign resident until the withholding tax payable has been paid
26‑25
scientific research
see R&D
securities
qualifying securities ........................
159GP to 159GZ
substituted securities ........................
23K
traditional securities, loss on disposal or redemptionof
70B
shares
buy‑backs .........................
159GZZZJ to 159GZZZT
cancellation of subsidiary’s shares in holding company .
159GZZZC to 159GZZZI
employee share schemes, deduction for provider of ESS interests
Subdivision 83A‑D
see also dividends and securities
Software
see capital allowances
spectrum licences
see capital allowances
State or Territory bodies (STBs)
body ceasing to be STB, some deductions not allowed ..
24AW to 24AYA
student start‑up loans
payment made to reduce a debt to the Commonwealth under Chapter 2AA of the Social Security Act 1991 (student start‑up loans), no deduction unless provided as fringe benefit
26‑20
payment made to reduce a debt to the Commonwealth under Part 2 of the Student Assistance Act 1973 (ABSTUDY student start‑up loans), no deduction unless provided as fringe benefit
26‑20
subscriptions to associations
....................................
25‑55
substantiation
work, travel and car expenses ..................
Division 900
superannuation
see insurance and annuity business and interest
superannuation and related business
generally ................................
Part 3‑30
asset disposals ............................
295‑85
death or disability benefits, deduction for future service element
295‑470
death or disability cover, premiums for ............
295‑465
financial assistance levy ......................
295‑490(1) (table item 3)
financial product advice
subsection295‑490(1) (table item 5)
superannuation contributions surcharge
no deduction .............................
26‑60
superannuation—deductibility of contributions
generally ......................................
Division 290
contributions for employees etc. .................
Subdivision 290‑B
contributions to non‑complying funds .......
sections 290‑10 and 290‑75
first home super saver scheme re‑contribution .
section 290‑168
limit on deduction ..........................
26‑55
no deduction under any other provision of the Act .....
section 290‑10
personal contributions .......................
Subdivision 290‑C
superannuation guarantee charge
no deduction for ...........................
26‑95
late contribution offset, no deduction for ...........
290‑95
superannuation supervisory levy
late lodgment amount, no deduction for............
26‑90
tax agent’s fees
see tax related expenses
tax avoidance schemes
companies, use of tax losses or deductions to avoid tax .
Division 175
diverted assessable income ....................
121F to 121L
dividend stripping..........................
177E
gifts ...................................
78A
imputation, manipulation of....................
207‑150(2), 207‑150(3)
prepaid outgoings to avoid tax ..................
82KJ
recouped expenditure ........................
82KH to 82KL
tax avoidance scheme, no deduction allowable where deduction the result of
177A to 177G
trading stock .............................
70‑20, 52A
tax exempt entities
treatment of losses and outgoings on becomingtaxable ...............................
transfer between companies in same wholly‑ownedgroup ................................
Subdivision 170‑A
tax preferred asset financing
generally................................
Division 250
denial of capital allowance deductions in relation to asset being put to tax preferred use
250‑145
reduction in capital allowance deductions in relation to asset being put to tax preferred use
250‑150
tax related expenses
....................................
25‑5
telecommunications site access rights
see capital allowances
telephone lines
see primary production
theft
by employee or agent........................
25‑45
thin capitalisation
disallowing of deductions.....................
Division 820
previously FRT disallowed amounts..............
820‑56
timber
death of owner of land carrying trees, deduction of the part of land cost attributable to trees
70‑120
disposal of land carrying trees, deduction of the part of land cost attributable to trees
70‑120
felling trees, deduction of cost of land attributable to trees felled or of cost of right to fell trees
70‑120
see also capital allowances
trading ships
see capital allowances
trading stock
Commissioner may determine whether consideration paid for chose in action is reasonable
52A
excess of opening stock over closing value ..........
70‑35(3)
expenditure deemed not to be of a capital nature ......
70‑25
prepayments, when stock becomes trading stock onhand ................................
70‑15
see also tax avoidance schemes and timber
traditional securities
see securities
training guarantee
training guarantee charge, no deduction for .........
51(7)
transfer pricing
arm’s length principle for cross‑border conditions between entities
Subdivision 815‑B
arm’s length principle for permanent establishments....
Subdivision 815‑C
transport expenses
incurred in travel between workplaces .............
25‑100
travel expenses
accompanying relatives, no deduction for some travel expenses
26‑30
travel related to the use of residential premises as residential accommodation
26‑31
see also substantiation
trees in carbon sink forests
see capital allowances
trusts
trust income, deductions considered in calculating .....
95 to 102
see also foreign residents, non‑resident trust estates and public trading trusts
uniforms
non‑compulsory uniforms ..............
Division 34
uranium mining
see mining
VET student loans
payment made to reduce a debt to the Commonwealth under Part 3A of the VET Student Loans Act 2016 (VETSL debts), no deduction unless provided as fringe benefit
26‑20
water facilities
improvements.............................
26‑100
see also capital allowances
work expenses
see substantiation
work in progress
payment of a work in progress amount ............
25‑95
Division 13—Tax offsets
13‑1A Effect of this Division
This Division is a *Guide.
13‑1 List of tax offsets
The provisions set out in the list allow you a tax offset.
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.
Aboriginal study assistance
see social security and other benefit payments
annual leave
see leave payments
annuity
see superannuation
approved deposit funds (ADFs)
see dividends
attribution managed investment trusts
non‑resident beneficiary ................
276‑110
averaging
see primary production
bonuses
see life assurance
child
increased tax payable under Part III Division 6AA, unreasonable
102AH
trust income ..............................
100(2)
corporate unit trusts
see dividends
critical minerals
....................................
Division 419
Cyclone Larry or Cyclone Monica income support payment
see social security and other benefit payments
defence force
members serving overseas ....................
79B
dependants
invalid relative, invalid spouse or carer in receipt of carer benefit
Subdivision 61‑A
dividends
general.................................
207‑20(2), 207‑45, 207‑110(2)(c), 210‑170(1)
early stage venture capital limited partnerships
contributions to ESVCLPs.........................................
Subdivision 61‑P
employment termination
employment termination payments ...............
82‑1082‑70
see leave payments, superannuation and sections 82‑10A and 82‑10C of the Income Tax (Transitional Provisions) Act 1997
TFN quoted to superannuation or RSA provider after no‑TFN contributions tax paid
295‑675
veterans’ invalidity pensions ...................
Subdivision 301‑F
termination payments
see employment termination, leave payments and superannuation
trustee
see dividends, low income earner and trusts
trusts
beneficiary in a foreign trust...................
98B
non‑resident beneficiary................
98A(2)(a)
trust income of beneficiary with legal disability.......
100(2)
trust income (modifications for special disability trusts).
95AB(5)
see also dividends, housing and small business entities
United Nations forces
salary, wages and allowances from service as a member of
23AB(7)
unemployment benefits
see social security and other benefit payments
unit trusts
see dividends
winding‑up of non‑resident trust estates
see trusts
withholding payments
made by companies to Australian seafarers..........
Subdivision 61‑N
zone
residents of isolated areas .....................
79A
Chapter 2—Liability rules of general application
Part 2‑1—Assessable income
Division 15—Some items of assessable income
Guide to Division 15
15‑1 What this Division is about
This Division sets out some items that are included in your assessable income. Remember that the general rules about assessable income in Division 6 apply to these items.
Table of sections
Operative provisions
15‑2 Allowances and other things provided in respect of employment or services
15‑3 Return to work payments
15‑5 Accrued leave transfer payments
15‑10 Bounties and subsidies
15‑15 Profit‑making undertaking or plan
15‑20 Royalties
15‑22 Payments made to members of a copyright collecting society
15‑23 Payments of resale royalties by resale royalty collecting society
15‑25 Amount received for lease obligation to repair
15‑30 Insurance or indemnity for loss of assessable income
15‑35 Interest on overpayments and early payments of tax
15‑40 Providing mining, quarrying or prospecting information or geothermal exploration information
15‑45 Amounts paid under forestry agreements
15‑46 Amounts paid under forestry managed investment schemes
15‑50 Work in progress amounts
15‑55 Certain amounts paid under funeral policy
15‑60 Certain amounts paid under scholarship plan
15‑70 Reimbursed car expenses
15‑75 Bonuses
15‑80 Franked distributions entitled to a foreign income tax deduction—Additional Tier 1 capital exception
Operative provisions
15‑2 Allowances and other things provided in respect of employment or services
(1) Your assessable income includes the value to you of all allowances, gratuities, compensation, benefits, bonuses and premiums *provided to you in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by you (including any service as a member of the Defence Force).
(2) This is so whether the things were *provided in money or in any other form.
(3) However, the value of the following are not included in your assessable income under this section:
(a) a *superannuation lump sum or an *employment termination payment;
(b) an *unused annual leave payment or an *unused long service leave payment;
(c) a *dividend or *non‑share dividend;
(d) an amount that is assessable as *ordinary income under section 6‑5;
(e) *ESS interests to which Subdivision 83A‑B or 83A‑C (about employee share schemes) applies.
Note: Section 23L of the Income Tax Assessment Act 1936 provides that fringe benefits are non‑assessable non‑exempt income.
15‑3 Return to work payments
Your assessable income includes an amount you receive under an *arrangement that an entity enters into for a purpose of inducing you to resume working for, or providing services to, any entity.
15‑5 Accrued leave transfer payments
Your assessable income includes an *accrued leave transfer payment that you receive.
To find out if the payment is deductible to the payer, see section 26‑10.
15‑10 Bounties and subsidies
Your assessable income includes a bounty or subsidy that:
(a) you receive in relation to carrying on a *business; and
(b) is not assessable as *ordinary income under section 6‑5.
15‑15 Profit‑making undertaking or plan
(1) Your assessable income includes profit arising from the carrying on or carrying out of a profit‑making undertaking or plan.
(2) This section does not apply to a profit that:
(a) is assessable as *ordinary income under section 6‑5; or
(b) arises in respect of the sale of property acquired on or after 20 September 1985.
Note: If you sell property you acquired before 20 September 1985 for profit‑making by sale, your assessable income includes the profit: see section 25A of the Income Tax Assessment Act 1936.
15‑20 Royalties
(1) Your assessable income includes an amount that you receive as or by way of royalty within the ordinary meaning of “royalty” (disregarding the definition of royalty in subsection 995‑1(1)) if the amount is not assessable as *ordinary income under section 6‑5.
(2) Subsection (1) does not apply to an amount of a payment to which section 15‑22 or 15‑23 applies.
15‑22 Payments made to members of a copyright collecting society
(1) This section, instead of Division 6 of Part III of the Income Tax Assessment Act 1936, applies to a payment that a *copyright collecting society, to which section 51‑43 applies, makes to you as a *member of the society.
(2) Your assessable income includes the amount of the payment, except to the extent that the payment represents an amount on which the directors of the society are or have been assessed, and are liable to pay *tax, under section 98, 99 or 99A of the Income Tax Assessment Act 1936.
Note: Section 410‑5 of this Act requires a copyright collecting society to give you a notice at the time of payment.
15‑23 Payments of resale royalties by resale royalty collecting society
(1) This section, instead of Division 6 of Part III of the Income Tax Assessment Act 1936, applies to a payment that the *resale royalty collecting society makes to you under section 26 of the Resale Royalty Right for Visual Artists Act 2009.
(2) Your assessable income includes the amount of the payment, except to the extent that the payment represents an amount on which the directors of the society are or have been assessed, and are liable to pay *tax, under section 98, 99 or 99A of the Income Tax Assessment Act 1936.
Note: Section 410‑50 of this Act requires the resale royalty collecting society to give you a notice at the time of payment.
15‑25 Amount received for lease obligation to repair
Your assessable income includes an amount you receive from an entity if:
(a) you receive it as a lessor or former lessor of premises; and
(b) the entity pays you the amount for failing to comply with a lease obligation to make repairs to the premises; and
(c) the entity uses or has used the premises for the *purpose of producing assessable income; and
(d) the amount is not assessable as *ordinary income under section 6‑5.
Note: The entity can deduct the amount: see section 25‑15.
15‑30 Insurance or indemnity for loss of assessable income
Your assessable income includes an amount you receive by way of insurance or indemnity for the loss of an amount (the lost amount) if:
(a) the lost amount would have been included in your assessable income; and
(b) the amount you receive is not assessable as *ordinary income under section 6‑5.
15‑35 Interest on overpayments and early payments of tax
Your assessable income includes interest payable to you under the Taxation (Interest on Overpayments and Early Payments) Act 1983. The interest becomes assessable when it is paid to you or applied to discharge a liability you have to the Commonwealth.
15‑40 Providing mining, quarrying or prospecting information or geothermal exploration information
(1) Your assessable income includes an amount you receive for providing *mining, quarrying or prospecting information to another entity if:
(a) you continue to *hold the information; and
(b) the amount you receive is not assessable as *ordinary income under section 6‑5.
(2) Your assessable income includes an amount you receive for providing *geothermal exploration information you have to another entity if:
(a) you continue to have the information; and
(b) the information is, and continues to be, relevant to:
(i) *geothermal energy extraction that you carry on or propose to carry on; or
(ii) a *business that you carry on that includes *exploration or prospecting for *geothermal energy resources from which energy can be extracted by geothermal energy extraction; and
(c) the amount you receive is not assessable as *ordinary income under section 6‑5.
It does not matter whether the information is generally available or not.
(3) Geothermal exploration information is geological, geophysical or technical information that:
(a) relates to the presence, absence or extent of *geothermal energy resources in an area; or
(b) is likely to help in determining the presence, absence or extent of such resources in an area.
(4) Geothermal energy extraction means operations that are for:
(a) the extraction of energy from *geothermal energy resources; and
(b) the *purpose of producing assessable income.
15‑45 Amounts paid under forestry agreements
(1) Your assessable income includes an amount you receive under an agreement for the planting and tending of trees for felling if:
(a) you are the manager of the agreement as mentioned in section 82KZMG of the Income Tax Assessment Act 1936; and
(b) the amount satisfies, for the entity that paid it, the requirements of that section.
The amount is included for the income year in which the entity can claim a deduction for the amount.
(2) No part of an amount included under subsection (1) is included in your assessable income for a later income year.
15‑46 Amounts paid under forestry managed investment schemes
(1) Your assessable income includes an amount you receive under a *forestry managed investment scheme if:
(a) you are the *forestry manager of the scheme, or an *associate of the forestry manager; and
(b) the entity that paid the amount can deduct or has deducted the amount under section 394‑10 in relation to the scheme (disregarding subsection 394‑10(5)).
The amount is included for the income year for which the entity that paid the amount can or has claimed a deduction for it (disregarding subsection 394‑10(5)).
(2) No part of an amount included under subsection (1) is included in your assessable income for a later income year.
15‑50 Work in progress amounts
Your assessable income includes a *work in progress amount that you receive.
Note: To find out whether the amount is deductible to the payer, see section 25‑95.
15‑55 Certain amounts paid under funeral policy
(1) Your assessable income includes the amount of a benefit provided to you by a *life insurance company under a *funeral policy issued after 31 December 2002 to pay for the funeral of the insured person, reduced by:
(a) the amount of the premium or premiums of the policy that is reasonably related to the benefit; and
(b) the amount of the fees and charges included in the company’s assessable income for any income year under paragraph 320‑15(1)(k) that is reasonably related to the benefit.
(2) This section does not apply if the benefit is included in your assessable income as:
(a) *ordinary income under section 6‑5; or
(b) *statutory income under a section of this Act other than this section.
15‑60 Certain amounts paid under scholarship plan
(1) Your assessable income includes the amount of a benefit provided to you, or on your behalf, by a *life insurance company under a *scholarship plan covered by subsection (2) or (3), reduced by the amount worked out under subsection (4), if:
(a) the benefit is provided on or after 1 January 2003; and
(b) you are nominated in the plan as a beneficiary whose education is to be helped by the benefit.
(2) This subsection covers a *scholarship plan issued by the *life insurance company after 31 December 2002.
(3) This subsection covers a *scholarship plan if:
(a) the plan was issued by the *life insurance company before 1 January 2003; and
(b) no amount received by the company on or after 1 January 2003 and attributable to the plan is *non‑assessable non‑exempt income of the company under paragraph 320‑37(1)(d).
(4) The amount of the reduction is the sum of:
(a) the amount of the premium or premiums of the plan that is reasonably related to the benefit; and
(b) the amount of the fees and charges included in the company’s assessable income for any income year under paragraph 320‑15(1)(k) that is reasonably related to the benefit.
15‑70 Reimbursed car expenses
Your assessable income includes a reimbursement mentioned in section 22 of the Fringe Benefits Tax Assessment Act 1986 (about exempt car expense payment benefits) that, but for that section, would be a *fringe benefit *provided to you.
15‑75 Bonuses
Your assessable income includes any amount you receive as or by way of bonus on a *life insurance policy, other than a reversionary bonus.
Note: Reversionary bonuses are covered by section 6‑5 of this Act if they are ordinary income and, if not, by section 26AH of the Income Tax Assessment Act 1936.
15‑80 Franked distributions entitled to a foreign income tax deduction—Additional Tier 1 capital exception
(1) If section 207‑158 would, apart from subsection 207‑158(2), apply to a *franked distribution, then an amount equal to the *foreign income tax deduction referred to in subsection (1) of that section is included in the assessable income of the entity that made the distribution for the income year mentioned in subsection (2) of this section.
(2) The income year is:
(a) if the *foreign tax period in which the *foreign income tax deduction arises falls wholly within an income year of the entity—that income year; or
(b) if the foreign tax period in which the foreign income tax deduction arises straddles 2 income years of the entity—the later of those income years.
Division 17—Effect of GST etc. on assessable income
Guide to Division 17
17‑1 What this Division is about
This Division sets out the effect of the GST in working out assessable income. Generally speaking, GST, input tax credits and adjustments under the GST Act are disregarded.
Table of sections
17‑5 GST and increasing adjustments
17‑10 Certain decreasing adjustments
17‑15 Elements in calculation of amounts
17‑20 GST groups and GST joint ventures
17‑30 Special credits because of indirect tax transition
17‑35 Certain sections not to apply to certain assets or expenditure
17‑5 GST and increasing adjustments
An amount is not assessable income, and is not *exempt income, to the extent that it includes an amount relating to:
(a) *GST payable on a *taxable supply; or
(b) an *increasing adjustment that relates to a *supply; or
(c) an *increasing adjustment that:
(i) relates to an *acquisition; and
(ii) arises in circumstances that also give rise to a *recoupment that is included in assessable income.
17‑10 Certain decreasing adjustments
(1) An amount of a *decreasing adjustment that arises under Division 129 or 132 of the *GST Act is assessable income, unless the entity that has the adjustment is an *exempt entity.
(2) However, the amount is not assessable income to the extent that, because it becomes a component of a *net input tax credit, a reduction is made under section 103‑30 (reduction of cost base etc. by net input tax credits).
17‑15 Elements in calculation of amounts
In calculating an amount that may be included in assessable income:
(a) an element in the calculation that is an amount received or receivable is treated as not including an amount equal to any *GST payable on a *taxable supply related to the amount received or receivable, or any *increasing adjustment related to that amount; and
(b) an element in the calculation that is an amount paid or payable is treated as not including an amount equal to any *input tax credit for an *acquisition related to the amount paid or payable, or any *decreasing adjustment related to that amount.
17‑20 GST groups and GST joint ventures
(1) A *member of a *GST group is to be treated, for the purposes of this Division, as if Subdivision 48‑B of the *GST Act (other than paragraph 48‑40(2)(a) and subsection 48‑40(3)) did not apply to that member.
(2) A *participant in a *GST joint venture is to be treated, for the purposes of this Division, as if Subdivision 51‑B of the *GST Act (other than subsections 51‑30(2) and (3)) did not apply to that participant.
17‑30 Special credits because of indirect tax transition
A special credit under section 19A of the A New Tax System (Goods and Services Tax Transition) Act 1999 is assessable income at the time it is attributed to a *tax period (for a credit under section 19A).
17‑35 Certain sections not to apply to certain assets or expenditure
Sections 17‑5, 17‑10 and 17‑15 do not apply to assets, or to expenditure, for which you can deduct amounts under Division 40 or Division 328.
Note: See instead Subdivision 27‑B.
Division 20—Amounts included to reverse the effect of past deductions
Table of Subdivisions
Guide to Division 20
20‑A Insurance, indemnity or other recoupment for deductible expenses
20‑B Disposal of a car for which lease payments have been deducted
Guide to Division 20
20‑1 What this Division is about
This Division includes amounts in your assessable income to reverse the effect of certain kinds of deductions.
Table of sections
20‑5 Other provisions that reverse the effect of deductions
20‑5 Other provisions that reverse the effect of deductions
The table lists other provisions that reverse the effect of certain kinds of deductions.
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.
<table cellspacing="0" cellpadding="0" style="width:309pt; margin-left:52.5pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:298.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Provisions that adjust your tax position in respect of deductions</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">See:</span></p></td></tr></thead><tbody><tr><td style="width:22.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:169.8pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A balancing adjustment for a depreciating asset is included in your assessable income.</span></p></td><td style="width:84pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>40</span><span>‑</span><span>285(1) and 40</span><span>‑</span><span>445(2)</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>An amount you receive by way of insurance or indemnity for a loss of trading stock is included in your assessable income.</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>70</span><span>‑</span><span>115</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2A</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Limited recourse debt that was used to finance expenditure deductible under a capital allowance (or on property for which you have deducted or can deduct amounts under a capital allowance) terminates: an amount is included in your assessable income</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>243</span><span>‑</span><span>40</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Because of:</span></p><p class="TLPTableBullet"><span>•</span><span style="width:10.7pt; text-indent:0pt; display:inline-block"> </span><span>petroleum resource rent tax; or</span></p><p class="TLPTableBullet"><span>•</span><span style="width:10.7pt; text-indent:0pt; display:inline-block"> </span><span>an instalment of petroleum resource rent tax;</span></p><p class="Tabletext"><span>that you have deducted or can deduct, an amount is refunded, credited, paid or applied: the amount is included in your assessable income.</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>40</span><span>‑</span><span>750(3)</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>You receive a fringe benefit by way of reimbursement or payment of a loss or outgoing you incurred: your deduction for the loss or outgoing is reduced.</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span style="font-weight:bold">51AH</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>You receive an amount as recoupment for your local governing body election expenses: an amount is included in your assessable income.</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span style="font-weight:bold">74A(4)</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>8</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>You receive superannuation benefits as a result of someone’s deductible contributions: the benefits are included in your assessable income.</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>290</span><span>‑</span><span>100</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>9</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>An R&D entity receives or becomes entitled to receive an amount:</span></p><p class="TLPTableBullet"><span>•</span><span style="width:10.7pt; text-indent:0pt; display:inline-block"> </span><span>for, or relating to, the results of R&D activities; or</span></p><p class="TLPTableBullet"><span>•</span><span style="width:10.7pt; text-indent:0pt; display:inline-block"> </span><span>attributable to it incurring expenditure on R&D activities or to its use of a depreciating asset for the purpose of conducting R&D activities;</span></p><p class="Tabletext"><span>and the entity is entitled under Division</span><span> </span><span>355 to a tax offset relating to those R&D activities.</span></p><p class="Tabletext"><span>The amount is included in its assessable income.</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>355</span><span>‑</span><span>410</span></p></td></tr><tr><td style="width:22.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>10</span></p></td><td style="width:169.8pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>An R&D entity:</span></p><p class="TLPTableBullet"><span>•</span><span style="width:10.7pt; text-indent:0pt; display:inline-block"> </span><span>receives, or becomes entitled to receive, a recoupment from government relating to R&D activities; or</span></p><p class="TLPTableBullet"><span>•</span><span style="width:10.7pt; text-indent:0pt; display:inline-block"> </span><span>can deduct, under Division</span><span> </span><span>355, expenditure on goods, materials or energy used during R&D activities to produce marketable products or products applied to the R&D entity’s own use;</span></p><p class="Tabletext"><span>and the entity is entitled under Division</span><span> </span><span>355 to a tax offset relating to those R&D activities.</span></p><p class="Tabletext"><span>An amount is included in its assessable income.</span></p></td><td style="width:84pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subdivision</span><span> </span><span>355</span><span>‑</span><span>G</span></p></td></tr></tbody></table>
Subdivision 20‑A—Insurance, indemnity or other recoupment for deductible expenses
Guide to Subdivision 20‑A
20‑10 What this Subdivision is about
Recoupment of expenses you incurred and can deduct
Your assessable income may include an amount that you receive by way of insurance, indemnity or other recoupment if:
it is for a deductible expense; and
it is not otherwise assessable income.
Recoupment of expenses you did not incur but can deduct
Your assessable income may include an amount that another entity receives by way of insurance, indemnity or other recoupment if:
it is for an expense that you can deduct; and
it is not otherwise your assessable income.
Table of sections
20‑15 How to use this Subdivision
What is an assessable recoupment?
20‑20 Assessable recoupments
20‑25 What is recoupment?
20‑30 Tables of deductions for which recoupments are assessable
How much is included in your assessable income?
20‑35 If the expense is deductible in a single income year
20‑40 If the expense is deductible over 2 or more income years
20‑45 Effect of balancing charge
20‑50 If the expense is only partially deductible
20‑55 Meaning of previous recoupment law
What if you can deduct a loss or outgoing incurred by another entity?
20‑60 If you are the only entity that can deduct an amount for the loss or outgoing
20‑65 If 2 or more entities can deduct amounts for the loss or outgoing
20‑15 How to use this Subdivision
If you incurred the deductible loss or outgoing
(1) First, read sections 20‑20 to 20‑30 to work out whether you have received an assessable recoupment. If not, you do not need to read the rest of the Subdivision.
(2) If you have received one or more assessable recoupments, sections 20‑35 to 20‑55 tell you how much is included in your assessable income for an income year.
If another entity incurred a loss or outgoing you can deduct
(3) Sections 20‑60 and 20‑65 tell you how to apply this Subdivision.
What is an assessable recoupment?
20‑20 Assessable recoupments
Exclusion
(1) An amount is not an assessable recoupment to the extent that it is *ordinary income, or it is *statutory income because of a provision outside this Subdivision.
Insurance or indemnity
(2) An amount you have received as *recoupment of a loss or outgoing is an assessable recoupment if:
(a) you received the amount by way of insurance or indemnity; and
(b) you can deduct an amount for the loss or outgoing for the *current year, or you have deducted or can deduct an amount for it for an earlier income year, under any provision of this Act.
Other recoupment
(3) An amount you have received as *recoupment of a loss or outgoing (except by way of insurance or indemnity) is an assessable recoupment if:
(a) you can deduct an amount for the loss or outgoing for the *current year; or
(b) you have deducted or can deduct an amount for the loss or outgoing for an earlier income year;
under a provision listed in section 20‑30.
20‑25 What is recoupment?
General
(1) Recoupment of a loss or outgoing includes:
(a) any kind of recoupment, reimbursement, refund, insurance, indemnity or recovery, however described; and
(b) a grant in respect of the loss or outgoing.
Amount paid for you
(2) If some other entity pays an amount for you in respect of a loss or outgoing that you incur, you are taken to receive the amount as recoupment of the loss or outgoing.
Remission of general interest charge or shortfall interest charge
(2A) If:
(a) you have incurred expenditure that consists of *general interest charge or *shortfall interest charge; and
(b) the Commissioner remits any of that charge;
then you are taken to receive the remitted amount as recoupment of that expenditure.
Amount for disposing of right to recoupment
(3) If you dispose of your right to receive an amount as *recoupment of a loss or outgoing you are taken to receive as recoupment of the loss or outgoing any amount you receive for disposing of that right. (The disposal need not be to another entity.)
Amount received that is recoupment to an unspecified extent
(4) If you receive an amount that is, to an unspecified extent, *recoupment of a loss or outgoing, the amount is taken to be recoupment of the loss or outgoing to whatever extent is reasonable.
Balancing adjustments not covered
(5) If a balancing adjustment is required for property on which you incurred a loss or outgoing, no part of the *termination value of the property is an amount you receive as recoupment of the loss or outgoing.
Note: The termination value is usually the amount you receive because of disposal, loss or destruction of the property.
20‑30 Tables of deductions for which recoupments are assessable
(1) This table shows the deductions under the Income Tax Assessment Act 1997 for which recoupments are assessable.
Note: References are to section numbers except where otherwise indicated.
20‑35 If the expense is deductible in a single income year
(1) Your assessable income includes an *assessable recoupment of a loss or outgoing if:
(a) you can deduct the whole of the loss or outgoing for the *current year; or
(b) you have deducted or can deduct the whole of the loss or outgoing for an earlier income year.
Note 1: The operation of this section may be affected if a balancing charge has been included in your assessable income because of a deduction for the loss or outgoing: see section 20‑45.
Note 2: Recoupment of a loss or outgoing for which you can deduct amounts over more than one income year is covered by section 20‑40.
Note 3: Recoupment of a loss or outgoing that is only partially deductible is covered by section 20‑50.
Total assessed not to exceed the loss or outgoing
(2) The total of all amounts that subsection (1) includes in your assessable income for one or more income years in respect of a loss or outgoing cannot exceed the amount of the loss or outgoing.
Recoupment received before income year of the deduction
(3) If:
(a) you can deduct the whole of a loss or outgoing for the *current year; and
(b) before the current year you received an *assessable recoupment of the loss or outgoing;
your assessable income for the current year includes so much of the recoupment as subsection (1) would have included if you had instead received the recoupment at the start of the current year.
20‑40 If the expense is deductible over 2 or more income years
(1) This section includes an amount in your assessable income if:
(a) you receive in the *current year an *assessable recoupment of a loss or outgoing for which you can deduct amounts over 2 or more income years; or
(b) you received in an earlier income year an *assessable recoupment of a loss or outgoing of that kind (unless all of the recoupment has already been included in your assessable income for one or more earlier income years by this section or a *previous recoupment law).
(This section applies even if the recoupment was received before the first of those income years.)
Note: Recoupment of a loss or outgoing that is only partially deductible is covered by section 20‑50.
(2) Work out as follows how much is included in your assessable income for the *current year because of one or more *assessable recoupments of the loss or outgoing.
Note: The method statement ensures that assessable recoupments are included:
Note: only so far as they have not already been included for an earlier income year; and
Note: only to the extent of your total deductions to date for the loss or outgoing.
Method statement
Step 1. Add up all the *assessable recoupments of the loss or outgoing that you have received (in the *current year or earlier). The result is the total assessable recoupment.
Step 2. Add up the amounts (if any) included in your assessable income for earlier income years, in respect of the loss or outgoing, by this section or a *previous recoupment law. The result is the recoupment already assessed. (If no amount was included, the recoupment already assessed is nil.)
Step 3. Subtract the recoupment already assessed from the total assessable recoupment. The result is the unassessed recoupment.
Step 4. Add up each amount that you can deduct for the loss or outgoing for the *current year, or you have deducted or can deduct for the loss or outgoing for an earlier income year. The result is the total deductions for the loss or outgoing.
Note: The total deductions may be reduced if an amount has been included in your assessable income because of a balancing adjustment: see section 20‑45.
Step 5. Subtract the recoupment already assessed from the total deductions for the loss or outgoing. The result is the outstanding deductions.
Step 6. The unassessed recoupment is included in your assessable income, unless it is greater than the outstanding deductions. In that case, the amount of the outstanding deductions is included instead.
Note: Example: At the start of the 2002‑03 income year, a company incurs $100,000 to start to hold a depreciating asset. The company uses the prime cost method, and the effective life is 10 years. $10,000 is deductible for the 2002‑03 income year and for each of the following 9 income years under section 40‑25.
Note: In the 2002‑03 income year, the company receives $20,000 as recoupment. How much is assessable for the 2002‑03 income year?
Note: Applying the method statement:
Note: After step 1: the total assessable recoupment is $20,000.
Note: After step 2: the recoupment already assessed is nil.
Note: After step 3: the unassessed recoupment is:
total assessable recoupment minus recoupment already assessed,
i.e. $20,000 minus 0 = $20,000.
Note: After step 4: the total deductions for the loss or outgoing are $10,000.
Note: After step 5: the outstanding deductions are:
total deductions for the loss or outgoing minus recoupment already assessed, i.e. $10,000 minus 0 = $10,000.
Note: After step 6: the unassessed recoupment (step 3) is greater than outstanding deductions (step 5), so the amount of the outstanding deductions is included in assessable income, i.e. $10,000.
Note: Applying the method statement to the 2003‑04 income year: a further $10,000 is included in the company’s assessable income.
20‑45 Effect of balancing charge
(1) This section may affect the operation of section 20‑35 or 20‑40 (as appropriate) if:
(a) a balancing adjustment is required for the *current year (or for an earlier income year) because you have deducted or can deduct an amount for an income year for the loss or outgoing; and
(b) an amount (the balancing charge) is included in your assessable income for the *current year (or for the earlier income year) because of the balancing adjustment.
To find out about balancing adjustments, see Subdivision 40‑D.
Effect on section 20‑35
(2) In applying section 20‑35, treat each of the following as reduced by the balancing charge:
(a) the amount of the loss or outgoing;
(b) the total of what you can deduct for the loss or outgoing for the *current year, or have deducted or can deduct for an earlier income year.
Effect on section 20‑40
(3) In applying the method statement in subsection 20‑40(2), reduce the total deductions for the loss or outgoing by the balancing charge.
Note: Example: Continuing the example in subsection 20‑40(2): at the start of the 2005‑06 income year, the company:
Note: receives a further $10,000 as recoupment; and
Note: sells the depreciating asset for $75,000.
Note: As a result of the sale, a balancing adjustment of $5,000 is included under section 40‑285 in the company’s assessable income for that income year.
Note: How much of the recoupment amount received in the 2005‑06 income year is assessable for that income year?
Note: Applying the method statement in subsection 20‑40(2):
Note: After step 1: the total assessable recoupment is $30,000 (received during 2002‑03 and 2005‑06).
Note: After step 2: the recoupment already assessed is $20,000 (for 2002‑03 and 2003‑04).
Note: After step 3: the unassessed recoupment is:
total assessable recoupment minus recoupment already assessed,
i.e. $30,000 minus $20,000 = $10,000.
Note: After step 4: the total deductions for the loss or outgoing are $30,000 ($10,000 for each of 2002‑03, 2004‑04 and 2004‑05), reduced by $5,000 (the amount included in assessable income for the balancing adjustment), i.e. $25,000.
Note: After step 5: the outstanding deductions are:
total deductions for the loss or outgoing minus recoupment already assessed, i.e. $25,000 minus $20,000 = $5,000.
Note: After step 6: the unassessed recoupment (step 3) is greater than outstanding deductions (step 5), so the amount of the outstanding deductions is included in assessable income, i.e. $5,000.
20‑50 If the expense is only partially deductible
(1) This section extends the operation of section 20‑35 or 20‑40 (as appropriate) to a case where the total of what you can deduct under a provision (the deduction provision) for a loss or outgoing is limited to a proportion of the loss or outgoing.
(2) If you receive an *assessable recoupment of the loss or outgoing, section 20‑35 or 20‑40 applies as if:
(a) you had incurred only that proportion of the loss or outgoing, but could deduct the whole of that proportion under the deduction provision; and
(b) you had received only that proportion of the recoupment.
Note: Example: You incur expenditure of $500. A provision listed in section 20‑30 entitles you to deduct 10% of the expenditure ($50) over 5 years. This means you can deduct $10 in each of the 5 years.
Note: You recoup $300 of the expenditure. This section treats you as receiving only 10% of the recoupment. Therefore, $30 is dealt with by section 20‑40.
20‑55 Meaning of previous recoupment law
(1) Previous recoupment law means a provision of the Income Tax Assessment Act 1936 listed in this table.
<table cellspacing="0" cellpadding="0" style="margin-left:56.7pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:290.15pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Previous recoupment law</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-weight:bold">Item</span></p></td><td style="width:130.15pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><br><span style="font-weight:bold">Provision</span></p></td><td style="width:113.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">What kind of expense the provision relates to:</span></p></td></tr></thead><tbody><tr><td style="width:24.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:130.15pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>former </span><span style="font-weight:bold">26(j)</span><span> (so far as it relates to an amount received for or in respect of a loss or outgoing that is a deduction)</span></p></td><td style="width:113.75pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>a loss or outgoing that is a deduction</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:130.15pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>former </span><span style="font-weight:bold">26(k)</span></p></td><td style="width:113.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>embezzlement or larceny by an employee</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:130.15pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>former </span><span style="font-weight:bold">63(3)</span></p></td><td style="width:113.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>bad debts</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:130.15pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>former </span><span style="font-weight:bold">69(8)</span></p></td><td style="width:113.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>tax</span><span>‑</span><span>related expenses</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:130.15pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>former </span><span style="font-weight:bold">70A(5)</span></p></td><td style="width:113.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>mains electricity connection expenditure</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:130.15pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>former </span><span style="font-weight:bold">72(2) </span><span>(so far as it relates to a refund of an amount you have deducted or can deduct)</span></p></td><td style="width:113.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>rates or taxes</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>6A</span></p></td><td style="width:130.15pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>former </span><span style="font-weight:bold">72A(4)(a) and (aa)</span></p></td><td style="width:113.75pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>petroleum resource rent tax</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>7</span></p></td><td style="width:130.15pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>former </span><span style="font-weight:bold">74(2)</span></p></td><td style="width:113.75pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>election expenses, Commonwealth and State elections</span></p></td></tr></tbody></table>
(2) Former section 330‑350 of this Act is also a previous recoupment law.
What if you can deduct a loss or outgoing incurred by another entity?
20‑60 If you are the only entity that can deduct an amount for the loss or outgoing
This Subdivision applies in a different way if:
(a) an entity (other than you) incurs a loss or outgoing; and
(b) you can deduct the whole of the loss or outgoing for an income year, or you can deduct amounts for the loss or outgoing over 2 or more income years; and
(c) no other entity can deduct an amount for the loss or outgoing; and
(d) the entity that incurred the loss or outgoing receives one or more amounts as *recoupment of the loss or outgoing.
This Subdivision (except this section and section 20‑65) applies as if you had incurred the loss or outgoing and had also received the *recoupment.
20‑65 If 2 or more entities can deduct amounts for the loss or outgoing
(1) Special rules apply if:
(a) an entity (the first entity) incurs a loss or outgoing; and
(b) 2 or more entities (the deducting entities, which may include the first entity) have deducted or can deduct amounts for the loss or outgoing (whether for the same income year or for different income years); and
(c) the first entity receives one or more amounts as *recoupment of the loss or outgoing.
(2) This Subdivision (except this section and section 20‑60) applies as if the first entity and the deducting entities together constituted a single entity (the notional entity) that had:
(a) incurred the loss or outgoing; and
(b) received the amount or amounts as *recoupment; and
(c) included in its assessable income any amount included in the assessable income of any of the deducting entities under a *previous recoupment law or this Subdivision (except this section).
(3) If because of subsection (2) the notional entity’s assessable income for an income year (the assessment year) would include an amount under this Subdivision (the assessable amount), the amount reverses in the assessment year the deductions for the loss or outgoing, in accordance with the rules in subsection (5).
(4) The assessable income of each deducting entity for the assessment year includes the total amounts (if any) by which that entity’s actual deductions for the loss or outgoing are reversed in that income year.
(5) Deductions for the loss or outgoing are reversed in the assessment year as follows:
(a) the amounts by which deductions are reversed total the assessable amount (unless all the deductions have been reversed);
(b) a deduction for an income year is not reversed until all deductions for earlier income years have been reversed;
(c) a deduction is not reversed in the assessment year to the extent that it has already been reversed in an earlier year;
(d) if each of 2 or more entities can deduct an amount for the loss or outgoing for the same income year, those deductions are reversed in the assessment year by amounts proportionate to the amounts of the deductions.
Subdivision 20‑B—Disposal of a car for which lease payments have been deducted
Guide to Subdivision 20‑B
20‑100 What this Subdivision is about
This Subdivision reverses the effect of deductions for lease payments for a car leased to you (or to your associate), but only if you make a profit by disposing of the car after acquiring it from the lessor. The smallest of these amounts is included in your assessable income:
your profit on the disposal;
the total deductible lease payments for the period of the lease;
the total amounts you could have deducted for the car’s decline in value if, instead of leasing it, you had owned it and used it solely for the purpose of producing assessable income.
Table of sections
20‑105 Map of this Subdivision
The usual case
20‑110 Disposal of a leased car for profit
20‑115 Working out the profit on the disposal
20‑120 Meaning of notional depreciation
The associate case
20‑125 Disposal of a leased car for profit
Successive leases
20‑130 Successive leases
Previous disposals of the car
20‑135 No amount included if earlier disposal for market value
20‑140 Reducing the amount to be included if there has been an earlier disposal
Miscellaneous rules
20‑145 No amount included if you inherited the car
20‑150 Reducing the amount to be included if another provision requires you to include an amount for the disposal
20‑155 Exception for particular cars taken on hire
20‑157 Exception for small business entities
Disposals of interests in a car: special rules apply
20‑160 Disposal of an interest in a car
20‑105 Map of this Subdivision
Flowchart summarising Subdivision 20-B. The main idea of the Subdivision is disposal of a leased car for profit. The Subdivision applies in 2 different cases: the usual case and the associate case. The rules that apply in both cases concern successive leases, previous disposals, miscellaneous rules and disposals of interests
The usual case
20‑110 Disposal of a leased car for profit
(1) Your assessable income includes the *profit you make on disposing of a *car if:
(a) the car was designed mainly for carrying passengers; and
(b) the car was leased to you and has been leased to no‑one else; and
(c) you or another entity can deduct for the income year any of the lease payments paid or payable by you, or have deducted or can deduct any of them for an earlier income year, under this Act; and
(d) you acquired the car from the lessor.
Note 1: Even if subsection (1) does not apply, an amount may still be included in your assessable income:
Note: under section 20‑125 (which deals with more complicated cases that may involve your associate); or
Note: if you disposed of an interest in a car (rather than the car itself): see section 20‑160.
Note 2: In some cases you do not include an amount in your assessable income:
Note: if there has been an earlier disposal of the car for market value: see section 20‑135; or
Note: if you inherited the car: see section 20‑145; or
Note: if the car was let on hire in the circumstances set out in section 20‑155.
(2) However, the amount included cannot exceed the smaller of these limits:
(a) the total lease payments for the lease that you or another entity have deducted or can deduct under this Act for an income year;
(b) the amount of *notional depreciation for the lease period.
Note 1: If, because of more than one lease of the car, there is more than one way to work out the amount to be included, you only include the largest amount: see section 20‑130.
Note 2: In some cases you reduce the amount to be included:
Note: if there has been an earlier disposal of the car, or of an interest in it: see section 20‑140; or
Note: if another provision requires you to include an amount because of the disposal: see section 20‑150.
(3) You increase those limits if you have previously leased the *car from the same lessor, or from an *associate of that lessor.
You increase the first limit by the total lease payments for each previous lease of that kind that you or another entity have deducted or can deduct under this Act for an income year.
You increase the second limit by the amount of *notional depreciation for the period of each previous lease of that kind.
20‑115 Working out the profit on the disposal
(1) The profit on the disposal is the amount by which the *consideration receivable for the disposal exceeds:
the amount it cost you to acquire the \*car;
plus:
any capital expenditure you incurred on the car after acquiring it.
(2) The consideration receivable is worked out using this table:
<table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:343.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Consideration receivable for the disposal of the car</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:144.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:153.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">the consideration receivable is:</span></p></td></tr></thead><tbody><tr><td style="width:24.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:144.25pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>you sell the </span><span style="font-size:8pt; vertical-align:3pt">*</span><span>car for an amount specific to it</span></p></td><td style="width:153.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the proceeds of the sale, less the expenses of the sale</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:144.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>you sell the </span><span style="font-size:8pt; vertical-align:3pt">*</span><span>car with other property without a specific amount being allocated to it</span></p></td><td style="width:153.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the part of the total proceeds of the sale that is reasonably attributable to the car less the part of the reasonably attributable expenses of the sale</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:144.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>you trade the </span><span style="font-size:8pt; vertical-align:3pt">*</span><span>car in and buy another car</span></p></td><td style="width:153.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the value of the trade</span><span>‑</span><span>in, plus any other consideration you receive</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:144.25pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>you sell the </span><span style="font-size:8pt; vertical-align:3pt">*</span><span>car and another entity buys another car</span></p></td><td style="width:153.05pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the amount by which the cost of the other car is reduced by the sale, plus any other consideration you receive</span></p></td></tr><tr><td style="width:24.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:144.25pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>you dispose of the </span><span style="font-size:8pt; vertical-align:3pt">*</span><span>car to an insurer because it is lost or destroyed</span></p></td><td style="width:153.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the amount or value received or receivable under the insurance policy</span></p></td></tr></tbody></table>
(3) However, if the disposal of the *car is a *taxable supply, the consideration receivable does not include an amount equal to the *GST payable on the supply.
20‑120 Meaning of notional depreciation
This is how to work out the notional depreciation for a lease period:
Method statement
Step 1. Compare:
• the *car’s *cost to the lessor for the purposes of Subdivision 40‑C (which is about working out the cost of *depreciating assets);
with:
• the car’s *termination value for the purposes of section 40‑300 when the lessor disposed of it.
Step 2. If the car’s cost exceeds the car’s termination value, multiply the excess by:
• the number of days in the lease period;
divided by:
• the number of days the lessor owned the car.
Step 3. The result is the notional depreciation for the lease period.
Step 4. If the car’s cost does not exceed the car’s termination value, the notional depreciation for the lease period is zero.
Note 1: The notional depreciation for the lease period represents:
Note: the amount you could have deducted for the car’s decline in value if, instead of leasing it, you had owned it and used it solely for the purpose of producing assessable income for that period;
Note: adjusted by:
Note: the balancing adjustment you would have made if you had disposed of the car at the end of that period.
Note 2: The car’s cost to the lessor is worked out differently if the lessor acquired it in the 1996‑97 income year or an earlier income year: see section 20‑105 of the Income Tax (Transitional Provisions) Act 1997.
Note 3: The car’s termination value is worked out differently if the lessor disposed of it in the 1996‑97 income year or an earlier income year: see section 20‑110 of the Income Tax (Transitional Provisions) Act 1997.
The associate case
20‑125 Disposal of a leased car for profit
(1) Your assessable income includes the *profit you make on disposing of a *car if:
(a) section 20‑110 does not include an amount in your assessable income because of the disposal; and
(b) the car was designed mainly for carrying passengers; and
(c) the car was leased to you or your *associate; and
(d) you, your associate or another entity can deduct for the income year any of the lease payments paid or payable by the lessee, or have deducted or can deduct any of them for an earlier income year, under this Act; and
(e) either:
(i) you, your associate, or entities including you or your associate, acquired the car from the lessor; or
(ii) another entity acquired the car from the lessor under an *arrangement that enabled you or your associate to acquire the car.
Note 1: Even if subsection (1) does not apply, an amount may be included in your assessable income if you disposed of an interest in a car (rather than the car itself): see section 20‑160.
Note 2: In some cases you do not include an amount in your assessable income:
Note: if there has been an earlier disposal of the car for market value: see section 20‑135; or
Note: if you inherited the car: see section 20‑145; or
Note: if the car was let on hire in the circumstances set out in section 20‑155.
(2) However, the amount included cannot exceed the smallest of these limits:
(a) the total lease payments for the lease that you, your *associate or another entity have deducted or can deduct under this Act for an income year;
(b) the amount of *notional depreciation for the lease period;
(c) if an entity other than you, or if entities including you, acquired the *car from the lessor—the amount by which the *consideration receivable for the disposal of the car by you exceeds the total of:
(i) the car’s cost to that entity, or those entities; and
(ii) any capital expenditure that entity, or any of those entities, incurred on the car after that acquisition and before you acquired it.
Note 1: If, because of more than one lease of the car, there is more than one way to work out the amount to be included, you only include the largest amount: see section 20‑130.
Note 2: In some cases you reduce the amount to be included:
Note: if there has been an earlier disposal of the car, or of an interest in it: see section 20‑140; or
Note: if another provision requires you to include an amount because of the disposal: see section 20‑150.
Note: Example: Your associate leases a car for 5 years and then acquires it from the lessor for $4,000. Your associate sells it to you for $3,000. You sell it for $10,000.
Note: Your profit is $10,000 (the consideration receivable) less $3,000 (the car’s cost to you) = $7,000.
Note: The first 2 limits on the amount to be included in your assessable income are $9,000 (total deductible lease payments for the lease) and $8,000 (notional depreciation for the lease period).
Note: Since your associate acquired the car from the lessor, the third limit is $10,000 (the consideration receivable by you) less $4,000 (the car’s cost to the associate) = $6,000.
Note: The amount you include in your assessable income cannot exceed the smallest of the limits. So, you do not include your profit of $7,000. Instead, you include $6,000 (the smallest of the limits).
(3) You increase the first 2 limits if you, or your associate, have previously leased the *car from the same lessor, or from an associate of that lessor.
You increase the first limit by the total lease payments for each previous lease of that kind that you, your *associate or another entity have deducted or can deduct under this Act for an income year.
You increase the second limit by the amount of *notional depreciation for the period of each previous lease of that kind.
Successive leases
20‑130 Successive leases
If, because of 2 or more leases of the *car, there are different amounts that could be included in your assessable income because of the disposal, only the largest of those amounts is included.
Previous disposals of the car
20‑135 No amount included if earlier disposal for market value
You do not include an amount in your assessable income because of the disposal if, after the lessor disposed of the *car and before you disposed of it, an entity other than you disposed of the car and:
(a) the *consideration receivable for that disposal was at least the *market value of the car at the time of that disposal; or
(b) because of that disposal, that market value was included, or an amount worked out using that market value was included, in the entity’s assessable income under this Act.
20‑140 Reducing the amount to be included if there has been an earlier disposal
Each limit on the amount to be included in your assessable income because of your disposal of the *car is reduced if, after the lease period began and before your disposal, the car, or an interest in it, was disposed of in one of these situations:
<table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Reducing each limit on the amount to be included</span></p></td></tr><tr><td style="width:24.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:214.95pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">In this situation:</span></p></td><td style="width:95.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">reduce each limit by:</span></p></td></tr></thead><tbody><tr><td style="width:24.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:214.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>20</span><span>‑</span><span>110 or 20</span><span>‑</span><span>125 included an amount in your assessable income in respect of such an earlier disposal by you</span></p></td><td style="width:95.55pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>that amount</span></p></td></tr><tr><td style="width:24.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:214.95pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>20</span><span>‑</span><span>110 or 20</span><span>‑</span><span>125 included an amount in another entity’s assessable income in respect of such an earlier disposal by the other entity</span></p></td><td style="width:95.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>that amount</span></p></td></tr><tr><td style="width:24.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:214.95pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>20</span><span>‑</span><span>110 or 20</span><span>‑</span><span>125 would have included an amount in your assessable income in respect of such an earlier disposal by you but for the operation of section</span><span> </span><span>20</span><span>‑</span><span>145</span></p></td><td style="width:95.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>that amount</span></p></td></tr><tr><td style="width:24.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:214.95pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>20</span><span>‑</span><span>110 or 20</span><span>‑</span><span>125 would have included an amount in another entity’s assessable income in respect of such an earlier disposal by the other entity but for the operation of section</span><span> </span><span>20</span><span>‑</span><span>145</span></p></td><td style="width:95.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>that amount</span></p></td></tr><tr><td style="width:24.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:214.95pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>20</span><span>‑</span><span>150 reduced the amount to be included in your assessable income in respect of such an earlier disposal by you</span></p></td><td style="width:95.55pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the amount of the reduction</span></p></td></tr><tr><td style="width:24.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:214.95pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>20</span><span>‑</span><span>150 reduced the amount to be included in another entity’s assessable income in respect of such an earlier disposal by the other entity</span></p></td><td style="width:95.55pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>the amount of the reduction</span></p></td></tr></tbody></table>
Note: Examples: Your associate leases a car for 5 years and then acquires it. Your associate disposes of it to you and section 20‑110 includes $500 in your associate’s assessable income.
Note: You later dispose of the car.
Note: In working out the amount to include in your assessable income for your disposal, you can reduce each limit in subsection 20‑125(2) by $500 because the disposal by your associate occurred after the lease period began.
Note: Contrast this case:
Note: You lease a car for 5 years and then acquire it. You dispose of it to another entity and section 20‑110 includes $1,000 in your assessable income.
Note: You lease the car from that entity for 2 years and then acquire it. You later dispose of it.
Note: In working out the amount to include in your assessable income in respect of the second lease, you cannot reduce each limit in subsection 20‑110(2) by $1,000 because the first disposal did not occur after the start of that lease.
Note: If the earlier disposal occurred in the 1996‑97 income year or an earlier income year, each limit may be able to be reduced by a further amount: see section 20‑115 of the Income Tax (Transitional Provisions) Act 1997.
Miscellaneous rules
20‑145 No amount included if you inherited the car
You do not include an amount in your assessable income because of the disposal if you inherited the *car.
20‑150 Reducing the amount to be included if another provision requires you to include an amount for the disposal
The amount to be included in your assessable income because of the disposal is reduced by any amount that another provision of this Act (except sections 40‑285 and 40‑370) requires you to include in your assessable income because of the disposal.
Note: sections 40‑285 and 40‑370 are about including an amount after making a balancing adjustment on the disposal of a car.
20‑155 Exception for particular cars taken on hire
This Subdivision does not apply to these kinds of leases:
(a) letting a *car on hire under a *hire purchase agreement; or
(b) letting a *car on hire under an agreement of a kind ordinarily entered into by people who take cars on hire intermittently on an hourly, daily, weekly or monthly basis.
20‑157 Exception for small business entities
This Subdivision does not apply to you if, at any time in the income year in which you disposed of the *car, it was allocated to a pool of yours under Division 328.
Disposals of interests in a car: special rules apply
20‑160 Disposal of an interest in a car
(1) This Subdivision applies to the disposal of an interest in a *car in almost the same way as it does to the disposal of the car itself. The differences are set out below.
(2) Your assessable income includes so much of your *profit on the disposal as is reasonable. The limits in subsections 20‑110(2) and 20‑125(2) do not apply.
(3) The cost of the interest to you is taken to be a reasonable amount.
(4) Sections 20‑135 and 20‑140 do not apply to the disposal.
Note 1: Section 20‑135 says that you do not include an amount if there has been an earlier disposal of the car for market value.
Note 2: Section 20‑140 allows you to reduce the amount to be included if there has been an earlier disposal of the car.
(5) Section 20‑145 applies to the disposal if you inherited either the interest or the *car itself.
Note: Section 20‑145 says that you do not include an amount if you inherited the car.
Part 2‑5—Rules about deductibility of particular kinds of amounts
Division 25—Some amounts you can deduct
Guide to Division 25
25‑1 What this Division is about
This Division sets out some amounts you can deduct. Remember that the general rules about deductions in Division 8 (which is about general deductions) apply to this Division.
Table of sections
Operative provisions
25‑5 Tax‑related expenses
25‑10 Repairs
25‑15 Amount paid for lease obligation to repair
25‑20 Lease document expenses
25‑25 Borrowing expenses
25‑30 Expenses of discharging a mortgage
25‑35 Bad debts
25‑40 Loss from profit‑making undertaking or plan
25‑45 Loss by theft etc.
25‑47 Misappropriation where a balancing adjustment event occurs
25‑50 Payments of pensions, gratuities or retiring allowances
25‑55 Payments to associations
25‑60 Parliament election expenses
25‑65 Local government election expenses
25‑70 Deduction for election expenses does not extend to entertainment
25‑75 Rates and land taxes on premises used to produce mutual receipts
25‑85 Certain returns in respect of debt interests
25‑90 Deduction relating to foreign non‑assessable non‑exempt income
25‑95 Deduction for work in progress amounts
25‑100 Travel between workplaces
25‑110 Capital expenditure to terminate lease etc.
25‑115 Deduction for payment of rent from land investment by operating entity to asset entity in relation to approved economic infrastructure facility
25‑120 Transitional—deduction for payment of rent from land investment by operating entity to asset entity
25‑125 COVID‑19 tests
Operative provisions
25‑5 Tax‑related expenses
(1) You can deduct expenditure you incur to the extent that it is for:
(a) managing your *tax affairs; or
(b) complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of an entity; or
(ca) a penalty under Subdivision 162‑D of the *GST Act; or
(cb) levy under the Major Bank Levy Act 2017; or
(d) obtaining a valuation in accordance with section 30‑212 or 31‑15; or
(e) managing your *Australian GloBE tax affairs; or
(f) complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the Australian GloBE tax affairs of an entity.
Note 1: To find out whether a trustee of a deceased estate can deduct expenditure under this section, see subsection 69(7) of the Income Tax Assessment Act 1936.
Note 2: If you receive an amount as recoupment of the expenditure, the amount may be included in your assessable income: see Subdivision 20‑A.
No deduction for certain expenditure
(2) You cannot deduct under subsection (1):
(a) *tax; or
(b) an amount withheld or payable under Part 2‑5 or Part 2‑10 in Schedule 1 to the Taxation Administration Act 1953; or
(c) expenditure for *borrowing money (including payments of interest) to pay an amount covered by paragraph (a) or (b); or
(d) expenditure for a matter relating to the commission (or possible commission) of an offence against an *Australian law or a *foreign law; or
(e) a fee or commission for advice about the operation of a *Commonwealth law relating to taxation, unless that advice is provided by a *recognised tax adviser.
No deduction for expenditure excluded from general deductions
(3) You cannot deduct expenditure under subsection (1) to the extent that a provision of this Act (except section 8‑1) expressly prevents or limits your deducting it under section 8‑1 (about general deductions). It does not matter whether the provision specifically refers to section 8‑1.
No deduction for capital expenditure
(4) You cannot deduct capital expenditure under subsection (1). However, for this purpose, expenditure is not capital expenditure merely because the *tax affairs or *Australian GloBE tax affairs concerned relate to matters of a capital nature.
Note: Example: Under this section, you can deduct expenditure you incur in applying for a private ruling on whether you can depreciate an item of property.
Use of property taken to be for income producing purpose
(5) Under some provisions of this Act it is important to decide whether you used property for the *purpose of producing assessable income. For provisions of that kind, your use of property is taken to be for that purpose insofar as you use the property for:
(a) managing your *tax affairs; or
(b) complying with an obligation imposed on you by a *Commonwealth law, insofar as that obligation relates to the *tax affairs of another entity.
Note: Example: You buy a computer to prepare your tax returns. The expenditure you incur in buying the computer is capital expenditure and cannot be deducted under this section.
Note: However, to the extent that you use the computer in preparing your income tax return, you will be able to deduct the decline in value of your computer under Division 40. That is because, under this subsection, the computer is property that you are taken to use for the purpose of producing assessable income.
(6) If another provision of this Act expressly provides that a particular use of property is not taken to be for the *purpose of producing assessable income, that provision overrides subsection (5).
Expenditure by trustee of deceased estate
(8) If:
(a) after you die, the trustee of your deceased estate incurs expenditure; and
(b) had you incurred the expenditure before you died, you could have deducted it under subsection (1);
for the purposes of assessing the trustee for the income year in which you died, the expenditure is a deduction under that subsection.
25‑10 Repairs
(1) You can deduct expenditure you incur for repairs to premises (or part of premises) or a *depreciating asset that you held or used solely for the *purpose of producing assessable income.
Property held or used partly for that purpose
(2) If you held or used the property only partly for that purpose, you can deduct so much of the expenditure as is reasonable in the circumstances.
No deduction for capital expenditure
(3) You cannot deduct capital expenditure under this section.
25‑15 Amount paid for lease obligation to repair
You can deduct an amount that you pay for failing to comply with a lease obligation to make repairs to premises if you use or have used the premises for the *purpose of producing assessable income.
Note: The amount is assessable income of the entity to which you pay it: either as ordinary income under section 6‑5 or because it is included by section 15‑25.
25‑20 Lease document expenses
(1) You can deduct expenditure you incur for preparing, registering or stamping:
(a) a lease of property; or
(b) an assignment or surrender of a lease of property;
if you have used or will use the property solely for the *purpose of producing assessable income.
Property used partly for that purpose
(2) If you have used, or will use, the leased property only partly for that purpose, you can deduct the expenditure to the extent that you have used, or will use, the leased property for that purpose.
25‑25 Borrowing expenses
(1) You can deduct expenditure you incur for *borrowing money, to the extent that you use the money for the *purpose of producing assessable income. In most cases the deduction is spread over the *period of the loan.
For the cases where the deduction is not spread, see subsection (6).
Note: Your deductions under this section may be reduced if any of your commercial debts have been forgiven in the income year: see Subdivision 245‑E.
Income year when money used solely for the purpose of producing assessable income
(2) You can deduct for an income year the maximum amount worked out under subsection (4) if you use the *borrowed money during that income year solely for the *purpose of producing assessable income.
Note: Example: In 1997‑98 you borrow $100,000 and incur expenditure of $1,500 for the borrowing. You use the money to buy a house. Throughout 1998‑99 you rent the house to a tenant. You can deduct for the expenditure for 1998‑99 the maximum amount worked out under subsection (4).
Income year when borrowed money used partly for that purpose
(3) If you use the money only partly for that purpose during that income year, you can deduct the proportion of that maximum amount that is appropriate having regard to the extent that you used the *borrowed money for that purpose.
Note: You cannot deduct anything for that income year if you do not use the money for that purpose at all during that income year.
Maximum deduction for an income year
(4) You work out as follows the maximum amount that you can deduct for the expenditure for an income year:
Method statement
Step 1. Work out the remaining expenditure as follows:
• For the income year in which the *period of the loan begins, it is the amount of the expenditure.
• For a later income year, it is the amount of the expenditure reduced by the maximum amount that you can deduct for the expenditure for each earlier income year.
Step 2. Work out the remaining loan period as follows:
• For the income year in which the *period of the loan begins, it is the period of the loan (as determined at the end of the income year).
• For a later income year, it is the period from the start of the income year until the end of the period of the loan (as determined at the end of the income year).
Step 3. Divide the remaining expenditure by the number of days in the remaining loan period.
Step 4. Multiply the result from Step 3 by the number of days in the remaining loan period that are in the income year.
Note: Example: To continue the example in subsection (2): suppose the original period of the loan is 4 years starting on 1 September 1997. What is the maximum amount you can deduct for the expenditure for 1997‑98?
Note: Applying the method statement:
Note: After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure).
Note: After Step 2: the remaining loan period is 4 years from 1 September 1997 (1,461 days).
Note: After Step 3: the result is $1,500 divided by 1,461 = $1.03.
Note: After Step 4: the result is $1.03 multiplied by 302 days = $310.06.
Note: Suppose you repay the loan early, on 31 December 1998. What is the maximum amount you can deduct for the expenditure for 1998‑99?
Note: Applying the method statement:
Note: After Step 1: the remaining expenditure is $1,500 (the amount of the expenditure) reduced by $310.06 (the maximum amount you can deduct for 1997‑98) = $1,189.94.
Note: After Step 2: the remaining loan period is the period from 1 July 1998 to 31 December 1998 (183 days).
Note: After Step 3: the result is $1,189.94 divided by 183 days = $6.50.
Note: After Step 4: the result is $6.50 multiplied by 183 days = $1,189.94.
Meaning of period of the loan
(5) The period of the loan is the shortest of these periods:
(a) the period of the loan as specified in the original loan contract;
(b) the period starting on the first day on which the money was borrowed and ending on the day the loan is repaid;
(c) 5 years starting on the first day on which the money was borrowed.
When deduction not spread
(6) If the total of the following is $100 or less:
(a) each amount of expenditure you incur in an income year for *borrowing money you use during that income year solely for the *purpose of producing assessable income;
(b) for each amount of expenditure you incur in that income year for borrowing money you use during that income year only partly for that purpose—the proportion of that amount that is appropriate having regard to the extent that you use the money during that income year for that purpose;
you can deduct for the income year:
(c) each amount covered by paragraph (a); and
(d) each proportion covered by paragraph (b).
25‑30 Expenses of discharging a mortgage
Mortgage for borrowed money
(1) You can deduct expenditure you incur to discharge a mortgage that you gave as security for the repayment of money that you *borrowed if you used the money solely for the *purpose of producing assessable income.
Mortgage for property bought
(2) You can deduct expenditure you incur to discharge a mortgage that you gave as security for the payment of the whole or part of the purchase price of property that you bought if you used the property solely for the *purpose of producing assessable income.
Money or property used partly for that purpose
(3) If you used the money you *borrowed, or the property you bought, only partly for the *purpose of producing assessable income, you can deduct the expenditure to the extent that you used the money or property for that purpose.
No deduction for payments of principal or interest
(4) You cannot deduct payments of principal or interest under this section.
25‑35 Bad debts
(1) You can deduct a debt (or part of a debt) that you write off as bad in the income year if:
(a) it was included in your assessable income for the income year or for an earlier income year; or
(b) it is in respect of money that you lent in the ordinary course of your *business of lending money.
Note: If a bad debt is in respect of a payment that is required to be made under a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936): see subsection 63(1A) of that Act.
Writing off a debt you have bought
(2) You can deduct a debt that you write off as bad in the income year if you bought the debt in the ordinary course of your *business of lending money. However, you cannot deduct more than the expenditure you incurred in buying the debt.
Writing off part of a debt you have bought
(3) You can deduct a part of a debt if:
(a) you write off that part as bad in the income year; and
(b) you bought the debt in the ordinary course of your *business of lending money.
(4) However, the maximum that you can deduct under subsection (3) for one or more income years is the amount (if any) by which:
• the expenditure you incurred in buying the debt;
exceeds:
• so much of the debt as has not yet been written off as bad.
Limit on deductions for bad debts under leases of luxury cars
(4A) There is a limit to how much you can deduct under this section for debts you write off that relate to *luxury car lease payments that have become or will become liable to be made under a lease of a *car to which Division 242 (about luxury car leases) applies.
(4B) The most you can deduct for an income year is:
• the interest for the notional loan you are taken to have made to the lessee;
reduced by:
• each amount that you have deducted, or can deduct, for an earlier income year under this section (or section 63 of the Income Tax Assessment Act 1936) for debts relating to *luxury car lease payments that have become or will become liable to be made under the lease.
Special rules affecting deductions under this section
(5) The rules described in the table may affect your entitlement to deductions under this section, or may result in a deduction being reversed.
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.
<table cellspacing="0" cellpadding="0" style="margin-left:56.7pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:286.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Rules affecting deductions for bad debts</span></p></td></tr><tr><td style="width:21.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:181.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">For the rules about this situation:</span></p></td><td style="width:62pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">See:</span></p></td></tr></thead><tbody><tr><td style="width:21.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:181.85pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A company cannot deduct a bad debt if there has been a change in ownership or control of the company and the company has not satisfied the business continuity test.</span></p></td><td style="width:62pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subdivisions</span><br><span>165</span><span>‑</span><span>C and 166</span><span>‑</span><span>C</span></p></td></tr><tr><td style="width:21.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:181.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A company cannot deduct a bad debt in various other cases that may involve trafficking in bad debts.</span></p></td><td style="width:62pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subdivision</span><br><span>175</span><span>‑</span><span>C and </span><span style="font-weight:bold">section</span><span style="font-weight:bold"> </span><span style="font-weight:bold">63D</span></p></td></tr><tr><td style="width:21.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:181.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A deduction under this section is reduced if the debt is forgiven and the debtor and creditor are companies under common ownership and agree for the creditor to forgo the deduction to a specified extent.</span></p></td><td style="width:62pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>section</span><span> </span><span>245</span><span>‑</span><span>90</span></p></td></tr><tr><td style="width:21.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:181.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>If you receive an amount as recoupment of a bad debt that you can deduct under this section, the amount may be included in your assessable income.</span></p></td><td style="width:62pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subdivision</span><br><span>20</span><span>‑</span><span>A</span></p></td></tr><tr><td style="width:21.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>5</span></p></td><td style="width:181.85pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Certain trusts cannot deduct a bad debt if there has been a change in ownership or control or an abnormal trading in their units</span></p></td><td style="width:62pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span style="font-weight:bold">Divisions</span><span style="font-weight:bold"> </span><span style="font-weight:bold">266 and 267 in Schedule</span><span style="font-weight:bold"> </span><span style="font-weight:bold">2F</span></p></td></tr><tr><td style="width:21.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>6</span></p></td><td style="width:181.85pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>An entity that used to be a member of a consolidated group or MEC group can deduct a bad debt that used to be owed to a member of the group only if certain conditions are met</span></p></td><td style="width:62pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subdivisions</span><br><span>709</span><span>‑</span><span>D and 719</span><span>‑</span><span>I</span></p></td></tr></tbody></table>
Note: Subsections 230‑180(3), (5) and (6) and 230‑195(3), (5) and (6) provide that in certain circumstances a deduction for a loss in relation to a financial arrangement is to be treated, for the purposes of this Act, as a deduction of a bad debt. The rules referred to in this subsection apply to that deduction.
25‑40 Loss from profit‑making undertaking or plan
(1) You can deduct a loss arising from the carrying on or carrying out of a profit‑making undertaking or plan if any profit from that plan would have been included in your assessable income by section 15‑15 (which is about profit‑making undertakings and plans).
When section does not apply
(2) You cannot deduct a loss under subsection (1) if the loss arises in respect of the sale of property acquired on or after 20 September 1985.
Note: If you sell property you acquired before 20 September 1985 for profit‑making by sale, you may be able to deduct a loss on the sale: see section 52 of the Income Tax Assessment Act 1936.
Notice to Commissioner
(3) You can deduct a loss under subsection (1), insofar as it arises in respect of property, only if:
(a) you notified the Commissioner that you acquired the property for the purpose of profit‑making by sale or for the carrying on or carrying out of any profit‑making undertaking or plan (however described); or
(b) the Commissioner is satisfied that you acquired the property for either of those purposes.
When notice must have been given
(4) The notice must have been given at or before the time you lodged your *income tax return:
(a) for the income year in which you acquired the property; or
(b) if you were not required to lodge an income tax return for that income year—for the first income year after that income year for which you were required to lodge one.
25‑45 Loss by theft etc.
You can deduct a loss in respect of money if:
(a) you discover the loss in the income year; and
(b) the loss was caused by theft, stealing, embezzlement, larceny, defalcation or misappropriation by your employee or *agent (other than an individual you employ solely for private purposes); and
(c) the money was included in your assessable income for the income year, or for an earlier income year.
Note: If you receive an amount as recoupment of the loss, the amount may be included in your assessable income: see Subdivision 20‑A.
25‑47 Misappropriation where a balancing adjustment event occurs
(1) You can deduct an amount if:
(a) a *balancing adjustment event occurs for a *depreciating asset you *held; and
(b) your employee or *agent misappropriates (whether by theft, embezzlement, larceny or otherwise) all or part of the amount applicable to you under:
(i) item 8 of the table in subsection 40‑300(2); or
(ii) item 1, 3, 4 or 6 of the table in subsection 40‑305(1);
in relation to the balancing adjustment event.
Note 1: The amount applicable to you under subsection 40‑300(2) or 40‑305(1) may be the market value of an asset or of a non‑cash benefit.
Note 2: If you receive an amount as recoupment of the amount misappropriated, the amount may be included in your assessable income: see Subdivision 20‑A.
(2) The amount you can deduct is so much of the amount misappropriated as represents an amount applicable to you under item 8 of the table in subsection 40‑300(2) or item 1, 3, 4 or 6 of the table in subsection 40‑305(1) in relation to the *balancing adjustment event.
(3) You can deduct the amount for the income year in which the misappropriation happens.
(4) You must reduce the amount you can deduct under this section if your deductions for the asset have been reduced under section 40‑25 because of use for a purpose other than a *taxable purpose. The reduction is by the same proportion you reduce the balancing adjustment amount for the asset under section 40‑290.
(4A) You must further reduce the amount you can deduct under this section if your deductions for the asset have been reduced under section 40‑27 (about second‑hand assets in residential property). The reduction is by the same proportion you reduce the balancing adjustment amount for the asset under section 40‑291.
(5) Section 170 of the Income Tax Assessment Act 1936 does not prevent the amendment of an assessment for the purposes of giving effect to this section for an income year if:
(a) you discover the misappropriation after you lodged your *income tax return for the income year; and
(b) the amendment is made at any time during the period of 4 years starting immediately after you discover the misappropriation.
25‑50 Payments of pensions, gratuities or retiring allowances
(1) You can deduct a payment of a pension, gratuity or retiring allowance that you make to:
(a) an employee; or
(b) a former employee; or
(c) a dependant of an employee or a former employee.
(2) However, you can deduct it only to the extent that it is made in good faith in consideration of the past services of the employee, or former employee, in any *business that you carried on for the purpose of gaining or producing assessable income.
(3) You cannot deduct a payment under this section if you can deduct it under any other provision of this Act.
25‑55 Payments to associations
(1) You can deduct a payment you make for membership of a trade, business or professional association.
Note: Alternatively, you can deduct the expense under section 8‑1 (which is about general deductions) if you satisfy the requirements of that section.
Maximum amount—$42
(2) However, $42 is the maximum amount you can deduct under this section for the payments that you make in the income year to any one association.
If you deduct under section 8‑1
(3) If you deduct a payment under section 8‑1 (which is about general deductions) instead of this section:
(a) the payment does not count towards the $42 limit; and
(b) the amount that you can deduct for the payment is not limited to $42.
25‑60 Parliament election expenses
(1) You can deduct expenditure you incur in contesting an election for membership of:
(a) the Parliament of the Commonwealth; or
(b) the Parliament of a State; or
(c) the Legislative Assembly for the Australian Capital Territory; or
(d) the Legislative Assembly of the Northern Territory of Australia.
Note 1: Entertainment expenses are excluded: see section 25‑70.
Note 2: If you receive an amount as recoupment of the expenditure, the amount may be included in your assessable income: see Subdivision 20‑A.
25‑65 Local government election expenses
(1) You can deduct expenditure you incur in contesting an election for membership of a *local governing body, but you cannot deduct more than $1,000 per election. You deduct the expenditure for the income year in which you incur it.
(2) However, you can deduct more than the $1,000 limit if:
(a) you have received an amount as *recoupment of the expenditure; and
(b) some or all of that amount is included in your assessable income for an income year; and
(c) the total of your deductions for the election would be less than the $1,000 limit if you disregarded so much (the assessed recoupment) of the expenditure as equals the amount so included in your assessable income.
In that case:
(d) the assessed recoupment is disregarded in applying the $1,000 limit; and
(e) the further amount that you can deduct because of paragraph (d) is deducted for the income year referred to in paragraph (b).
Note: Example: Chris is elected to the Bunyip Shire Council. In the 2007‑08 income year he incurs expenditure of $1,200 in contesting the election, of which he deducts $1,000 (the limit under subsection (1)).
Note: In 2008‑09, Chris receives $360 as an assessable recoupment of the expenditure. $300 of that is included in his assessable income by section 20‑35 (as extended by section 20‑50).
Note: Because of the assessable recoupment, $300 of the expenditure is disregarded under paragraph (2)(d) in applying the $1,000 limit. As a result, Chris’s deductions are treated as being only $700, which is less than the limit. This does not affect his original deduction for 2007‑2008, but it means he can deduct the previously undeducted $200, for 2008‑09 (see paragraph (2)(e)).
Note: This triggers a further application of section 20‑35 (as extended by section 20‑50) to include the remaining $60 of the assessable recoupment in Chris’s assessable income for 2008‑09. His total deductions (net of recoupment included in assessable income) come to $840, which is the same as his original expenditure (net of recoupment).
Note: An amount you receive as recoupment of expenditure may be included in your assessable income as an assessable recoupment under Subdivision 20‑A, as ordinary income under section 6‑5 or as statutory income under some other provision.
25‑70 Deduction for election expenses does not extend to entertainment
(1) To the extent that you incur expenditure in respect of providing *entertainment, you cannot deduct it under section 25‑60 or 25‑65.
(2) However, subsection (1) does not stop you deducting expenditure to the extent that you incur it in respect of:
(a) providing *entertainment that is available to the public generally; or
(b) providing food or drink to yourself, unless it would be concluded that you have a purpose of enabling or facilitating *entertainment to be provided to someone else.
25‑75 Rates and land taxes on premises used to produce mutual receipts
(1) An entity can deduct these amounts it pays for premises:
(a) rates which are annually assessed;
(b) land tax imposed under a *State law or *Territory law.
But only if it uses the premises:
(c) for the purpose of producing mutual receipts; or
(d) in carrying on a *business for the purpose of producing mutual receipts; or
(e) for the purpose of producing amounts to which section 59‑35 applies (amounts that would be mutual receipts but for prohibition on distributions to members or issue of MCIs); or
(f) in carrying on a *business for the purpose of producing amounts to which section 59‑35 applies.
Note: If the entity receives an amount as recoupment of the rates or land tax, the amount may be included in its assessable income: see Subdivision 20‑A
When premises used only for deductible purposes
(2) The entity can deduct the whole of the rates or land tax if it uses the premises only in one or more of these ways:
(a) for the purpose of producing mutual receipts;
(b) in carrying on a *business for the purpose of producing mutual receipts;
(c) for the *purpose of producing assessable income.
When premises used partly for deductible purposes
(3) If the entity uses the premises partly in one or more of the ways referred to in subsection (2) and partly in some other way, it can deduct the rates or land tax to the extent that it uses the premises in one or more of the ways referred to in that subsection.
No deduction under section 8‑1
(4) The entity cannot deduct the rates or land tax under section 8‑1 (which is about general deductions).
25‑85 Certain returns in respect of debt interests
(1) This section deals with a *return that an entity pays or provides on a *debt interest.
(2) The *return is not prevented from being a *general deduction for an income year under section 8‑1 merely because:
(a) the return is *contingent on aspects of the economic performance (whether past, current or future) of:
(i) the entity or a part of the entity’s activities; or
(ii) a *connected entity of the entity or a part of the activities of a connected entity of the entity; or
(b) the return secures a permanent or enduring benefit for the entity or a connected entity of the entity.
(3) If the *return is a *dividend, the entity can deduct the return to the extent to which it would have been a *general deduction under section 8‑1 if:
(a) the payment of the return were the incurring by the entity of a liability to pay the same amount as interest; and
(b) that interest were incurred in respect of the finance raised by the entity and in respect of which the return was paid or provided; and
(c) the *debt interest retained its character as a debt interest for the purposes of subsection (2).
(4) Subsections (2) and (3) do not apply to a *return to the extent to which it would be a *general deduction under section 8‑1 apart from this section.
(4A) Subsections (2) and (3) do not apply to a *return on a *debt interest that is a *Division 230 financial arrangement.
(5) Subject to regulations made for the purposes of subsection (6), subsections (2) and (3) do not apply to the return to the extent to which the annually compounded internal rate of return exceeds the *benchmark rate of return for the interest increased by 150 basis points.
(6) The regulations may provide that subsection (5) applies in the circumstances specified in the regulations as if the reference to 150 basis points were a reference to a greater or lesser number of basis points.
25‑90 Deduction relating to foreign non‑assessable non‑exempt income
An *Australian entity can deduct an amount of loss or outgoing from its assessable income for an income year if:
(a) the amount is incurred by the entity in deriving income from a foreign source; and
(b) the income is *non‑assessable non‑exempt income under section 768‑5, or section 23AI or 23AK of the Income Tax Assessment Act 1936; and
(c) the amount is a cost in relation to a *debt interest issued by the entity that is covered by paragraph (1)(a) of the definition of debt deduction.
Note: This section does not apply to a Division 230 financial arrangement.
25‑95 Deduction for work in progress amounts
(1) You can deduct a *work in progress amount that you pay for the income year in which you pay it to the extent that, as at the end of that income year:
(a) a recoverable debt has arisen in respect of the completion or partial completion of the work to which the amount related; or
(b) you reasonably expect a recoverable debt to arise in respect of the completion or partial completion of that work within the period of 12 months after the amount was paid.
(2) You can deduct the remainder (if any) of the *work in progress amount for the following income year.
(3) An amount is a work in progress amount to the extent that:
(a) an entity agrees to pay the amount to another entity (the recipient); and
(b) the amount can be identified as being in respect of work (but not goods) that has been partially performed by the recipient for a third entity but not yet completed to the stage where a recoverable debt has arisen in respect of the completion or partial completion of the work.
(4) An amount does not stop being a work in progress amount merely because it is paid after a recoverable debt has arisen in respect of the completion or partial completion of the work to which the amount related.
25‑100 Travel between workplaces
When a deduction is allowed
(1) If you are an individual, you can deduct a *transport expense to the extent that it is incurred in your *travel between workplaces.
Travel between workplaces
(2) Your travel between workplaces is travel directly between 2 places, to the extent that:
(a) while you were at the first place, you were:
(i) engaged in activities to gain or produce your assessable income; or
(ii) engaged in activities in the course of carrying on a *business for the purpose of gaining or producing your assessable income; and
(b) the purpose of your travel to the second place was to:
(i) engage in activities to gain or produce your assessable income; or
(ii) engage in activities in the course of carrying on a business for the purpose of gaining or producing your assessable income;
and you engaged in those activities while you were at the second place.
(3) Travel between 2 places is not travel between workplaces if one of the places you are travelling between is a place at which you reside.
(4) Travel between 2 places is not travel between workplaces if, at the time of your travel to the second place:
(a) the arrangement under which you gained or produced assessable income at the first place has ceased; or
(b) the *business in respect of which you engaged in activities at the first place has ceased.
No deduction for capital expenditure
(5) You cannot deduct expenditure under subsection (1) to the extent that the expenditure is capital, or of a capital nature.
25‑110 Capital expenditure to terminate lease etc.
(1) You can deduct an amount for capital expenditure you incur to terminate a lease or licence (including an authority, permit or quota) that results in the termination of the lease or licence if the expenditure is incurred:
(a) in the course of carrying on a *business; or
(b) in connection with ceasing to carry on a business.
(2) The amount you can deduct is 20% of the expenditure:
(a) for the income year in which the lease or licence is terminated; and
(b) for each of the next 4 income years.
Exceptions
(3) You cannot deduct any amount for expenditure you incur to terminate a lease that, in accordance with *accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board, is classified as a finance lease.
(4) If you incurred the expenditure under an *arrangement and:
(a) there is at least one other party to the arrangement with whom you did not deal at *arm’s length; and
(b) apart from this subsection, the amount of the expenditure would be more than the *market value of what it was for (assuming the termination did not occur and was never proposed to occur);
the amount of expenditure you take into account is that market value.
(5) You cannot deduct any amount for expenditure you incur to terminate a lease or licence if:
(a) after the termination, you or an *associate of yours enters into another lease or licence with the same party or an associate of that party; and
(b) the other lease or licence is of the same kind as the original one.
(6) You cannot deduct any amount for expenditure you incur to terminate a lease or licence to the extent that the expenditure is for the granting or receipt of another lease or licence in relation to the asset that was the subject of the original lease or licence.
25‑115 Deduction for payment of rent from land investment by operating entity to asset entity in relation to approved economic infrastructure facility
(1) An entity that is an *operating entity in relation to a *cross staple arrangement can deduct an amount, for an income year, of *rent from land investment if:
(a) another entity derives or receives the amount from the operating entity:
(i) in the income year; and
(ii) on or after 27 March 2018; and
(b) the cross staple arrangement was entered into in relation to:
(i) a facility that is covered by section 12‑439 in Schedule 1 to the Taxation Administration Act 1953 at a time in the income year; or
(ii) an improvement to a facility that is covered by that section at a time in the income year; and
(c) the other entity is an *asset entity in relation to the cross staple arrangement; and
(d) apart from this subsection, the operating entity could otherwise deduct the amount under this Act; and
(e) the amount is *excepted MIT CSA income of the asset entity for the income year; and
(f) each entity that is a *stapled entity in relation to the cross staple arrangement has made a choice in accordance with subsection (3).
(2) If the *asset entity is not a *managed investment trust in relation to the income year, for the purposes of paragraph (1)(e), treat it as a managed investment trust in relation to the income year.
(3) An entity makes a choice in accordance with this subsection if:
(a) the entity makes the choice in the *approved form; and
(b) the entity makes the choice before:
(i) the start of the income year in which the asset is first put to use; or
(ii) a later time allowed by the Commissioner; and
(c) the entity gives the choice to the Commissioner within 60 days after the entity makes the choice.
(4) The choice cannot be revoked.
25‑120 Transitional—deduction for payment of rent from land investment by operating entity to asset entity
(1) This section applies if the requirements in subsection 12‑440(1) or (2) in Schedule 1 to the Taxation Administration Act 1953 are satisfied in relation to a *cross staple arrangement.
(2) An entity that is an *operating entity in relation to the *cross staple arrangement can deduct, for an income year, an amount of *rent from land investment if:
(a) another entity derives or receives the amount from the operating entity at a time that:
(i) is in the income year; and
(ii) is on or after 27 March 2018; and
(iii) meets the requirements in subsection 12‑440(4) of Schedule 1 to the Taxation Administration Act 1953; and
(b) the other entity is an *asset entity in relation to the cross staple arrangement; and
(c) apart from this subsection, the operating entity could otherwise deduct the amount under this Act; and
(d) the amount is *excepted MIT CSA income of the asset entity for the income year.
(3) If the *asset entity is not a *managed investment trust in relation to the income year, for the purposes of paragraph (2)(d), treat it as a managed investment trust in relation to the income year.
25‑125 COVID‑19 tests
(1) You can deduct a loss or outgoing to the extent it is incurred in gaining or producing your assessable income if:
(a) you are an individual; and
(b) the loss or outgoing is incurred in respect of testing you for the novel coronavirus SARS‑CoV‑2 that causes COVID‑19 using a test covered by subsection (3); and
(c) the purpose of testing you is to determine whether you may attend or remain at a place where you:
(i) engage in activities to gain or produce your assessable income; or
(ii) engage in activities in the course of carrying on a *business for the purpose of gaining or producing your assessable income.
(2) However, you cannot deduct a loss or outgoing under this section to the extent that it is a loss or outgoing of capital, or of a capital nature.
(3) This subsection covers a test that:
(a) is a polymerase chain reaction test; or
(b) is a therapeutic good (within the meaning of the Therapeutic Goods Act 1989) that:
(i) is included in the Australian Register of Therapeutic Goods maintained under section 9A of that Act; and
(ii) has an intended purpose, accepted in relation to that inclusion, that relates to the detection of the novel coronavirus SARS‑CoV‑2 that causes COVID‑19.
Division 26—Some amounts you cannot deduct, or cannot deduct in full
Guide to Division 26
26‑1 What this Division is about
This Division sets out some amounts that you cannot deduct, or that you cannot deduct in full.
Table of sections
Operative provisions
26‑5 Penalties
26‑10 Leave payments
26‑15 Franchise fees windfall tax
26‑17 Commonwealth places windfall tax
26‑19 Rebatable benefits
26‑20 Assistance to students
26‑22 Political contributions and gifts
26‑25 Interest or royalty
26‑25A Payments to employees—labour mobility programs
26‑26 Non‑share distribution and dividends
26‑30 Relative’s travel expenses
26‑31 Travel related to use of residential premises as residential accommodation
26‑35 Reducing deductions for amounts paid to related entities
26‑40 Maintaining your family
26‑45 Recreational club expenses
26‑47 Non‑business boating activities
26‑50 Expenses for a leisure facility
26‑52 Bribes to foreign public officials
26‑53 Bribes to public officials
26‑54 Expenditure relating to illegal activities
26‑55 Limit on deductions
26‑60 Superannuation contributions surcharge
26‑68 Loss from disposal of eligible venture capital investments
26‑70 Loss from disposal of venture capital equity
26‑75 Excess non‑concessional contributions tax cannot be deducted
26‑80 Financing costs on loans to pay superannuation contribution
26‑85 Borrowing costs on loans to pay life insurance premiums
26‑90 Superannuation supervisory levy
26‑95 Superannuation guarantee charge
26 96 Laminaria and Corallina decommissioning levy cannot be deducted
26‑97 National Disability Insurance Scheme expenditure
26‑98 Division 293 tax cannot be deducted
26‑99 Excess transfer balance tax cannot be deducted
26‑99B Build to rent development misuse tax cannot be deducted
26‑99C Australian IIR/UTPR tax and Australian DMT tax cannot be deducted
26‑100 Expenditure attributable to water infrastructure improvement payments
26‑102 Expenses associated with holding vacant land
26‑105 Non‑compliant payments for work and services
Operative provisions
26‑5 Penalties
(1) You cannot deduct under this Act:
(a) an amount (however described) payable, by way of penalty, under an *Australian law or a *foreign law; or
(b) an amount ordered by a court to be paid on the conviction of an entity for an offence against an *Australian law or a *foreign law.
(1A) Without limiting paragraph (1)(a), you cannot deduct under this Act the *general interest charge or the *shortfall interest charge.
(2) This section does not apply to an amount payable, by way of penalty, under Subdivision 162‑D of the *GST Act.
Note: See paragraph 25‑5(1)(ca) for the deductibility of penalties that arise under Subdivision 162‑D of the GST Act.
26‑10 Leave payments
(1) You cannot deduct under this Act a loss or outgoing for long service leave, annual leave, sick leave or other leave except:
(a) an amount paid in the income year to the individual to whom the leave relates (or, if that individual has died, to that individual’s dependant or *legal personal representative); or
(b) an *accrued leave transfer payment that is made in the income year.
(2) An accrued leave transfer payment is a payment that an entity makes:
(a) in respect of an individual’s leave (some or all of which accrued while the entity was required to make payments in respect of the individual’s leave, or leave the individual might take); and
(b) when the entity is no longer required (or is about to stop being required) to make payments in respect of such leave; and
(c) to another entity when the other entity has begun (or is about to begin) to be required to make payments in respect of such leave; and
(d) under (or for the purposes of facilitating the provisions of) an *Australian law, or an award, order, determination or industrial agreement under an *Australian law.
It does not matter whether the leave accrues to the individual as an employee or for some other reason.
Note: Example: Your employee goes to a new employer. You pay the new employer $2,000 for the employee’s unused long service leave because an industrial agreement requires you to make that payment.
Note: An accrued leave transfer payment is included in the assessable income of the entity to which it is made: see section 15‑5.
26‑15 Franchise fees windfall tax
You cannot deduct under this Act any tax that is imposed by the Franchise Fees Windfall Tax (Imposition) Act 1997.
26‑17 Commonwealth places windfall tax
You cannot deduct under this Act any tax that is imposed by the Commonwealth Places Windfall Tax (Imposition) Act 1998.
26‑19 Rebatable benefits
(1) You cannot deduct under this Act a loss or outgoing to the extent that the loss or outgoing is incurred in gaining or producing a rebatable benefit (within the meaning of section 160AAA of the Income Tax Assessment Act 1936).
(2) To the extent that you use property in gaining or producing a rebatable benefit, your use of the property is taken not to be for the *purpose of producing assessable income if subsection (1) would stop you deducting a loss or outgoing if you incurred it in the income year in gaining or producing the rebatable benefit.
Note: Under some provisions of this Act, in order to deduct an amount for your property, you must have used the property for the purpose of producing assessable income.
26‑20 Assistance to students
(1) You cannot deduct under this Act:
(ca) a student contribution amount within the meaning of the Higher Education Support Act 2003 paid to a higher education provider (within the meaning of that Act); or
(cb) a payment made to reduce a debt to the Commonwealth under Chapter 4 of that Act; or
(cba) a payment made to reduce a debt to the Commonwealth under Part 3A of the VET Student Loans Act 2016; or
(cc) a payment made to reduce a debt to the Commonwealth under Chapter 2AA of the Social Security Act 1991 or Part 2 of the Student Assistance Act 1973; or
(cd) a payment made to reduce a debt to the Commonwealth under Chapter 3 of the Australian Apprenticeship Support Loans Act 2014; or
(ce) a payment made to reduce a liability to overseas debtors repayment levy under the Student Loans (Overseas Debtors Repayment Levy) Act 2015; or
(d) a payment made to reduce a debt to the Commonwealth, or to a participating corporation, under Chapter 2B of the Social Security Act 1991 or Part 4A of the Student Assistance Act 1973.
Exception when you provide a fringe benefit
(2) Subsection (1) does not stop you deducting expenditure you incur in *providing a *fringe benefit.
26‑22 Political contributions and gifts
You cannot deduct political contributions or gifts
(1) You cannot deduct under this Act (other than Subdivision 30‑DA):
(a) a contribution (including a membership fee) or gift to a political party that is registered under Part XI of the Commonwealth Electoral Act 1918 or under corresponding State or Territory legislation; or
(b) a contribution or gift to an individual when the individual is a candidate in an election for members of:
(i) an *Australian legislature; or
(ii) a *local governing body; or
(c) a contribution or gift to an individual who is a member of:
(i) an Australian legislature; or
(ii) a local governing body.
Exception for employees and office holders
(2) However, subsection (1) does not apply to a loss or outgoing incurred in gaining or producing assessable income from which an amount is required to be withheld under section 12‑35 or 12‑45 in Schedule 1 to the Taxation Administration Act 1953.
Note: These provisions of the Taxation Administration Act 1953 require amounts to be withheld from income of employees and office holders.
Starting and stopping being a candidate
(3) For the purposes of this section, an individual:
(a) starts being a candidate when the individual’s intention to be or to attempt to be a candidate for the election is publicly available; and
(b) stops being a candidate at the earlier of:
(i) the time when the result of the election is declared or otherwise publicly announced by an entity (an electoral official) authorised under the relevant electoral legislation; and
(ii) the time (if any) when the individual’s intention to no longer be a candidate for the election is publicly available.
Starting being a member
(4) An individual who becomes a member as a result of an election (including an election that is later declared void) is taken to start being a member when the individual’s election as a member is declared or otherwise publicly announced by an electoral official.
26‑25 Interest or royalty
(1) You cannot deduct under this Act interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936) or a *royalty if:
(a) Subdivision 12‑F in Schedule 1 to the Taxation Administration Act 1953 requires you to withhold an amount from the interest or royalty; and
(b) either:
(i) you fail to withhold the amount; or
(ii) after withholding the amount, you fail to comply with section 16‑70 in that Schedule in relation to that amount.
(2) You cannot deduct under this Act interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936), or a *royalty, that is in the form of a *non‑cash benefit if:
(a) section 14‑5 or 14‑10 in Schedule 1 to the Taxation Administration Act 1953 requires you to pay an amount to the Commissioner before providing the benefit, because of Subdivision 12‑F in that Schedule; and
(b) you fail to pay the amount as required by that section.
(3) If:
(a) apart from subsection (1) or (2), you can deduct interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936) or a *royalty for an income year; and
(b) the *withholding tax payable for the interest or the royalty is paid;
you can deduct the interest or royalty for that income year.
26‑25A Payments to employees—labour mobility programs
No deduction to extent amount not withheld
(1) You cannot deduct under this Act salary, wages, commission, bonuses or allowances from which Subdivision 12‑FC in Schedule 1 to the Taxation Administration Act 1953 (about labour mobility programs) requires you to withhold an amount, to the extent that:
(a) you fail to withhold the amount; or
(b) after withholding the amount, you fail to comply with section 16‑70 in that Schedule in relation to that amount.
Note: Section 16‑70 in that Schedule requires you to pay the amount to the Commissioner.
Deduction to extent amount not withheld but withholding tax paid
(2) You can deduct, for an income year, salary, wages, commission, bonuses or allowances to the extent that:
(a) you cannot deduct the salary, wages, commission, bonuses or allowances for that income year only because of subsection (1) of this section; and
(b) the *labour mobility program withholding tax payable for the salary, wages, commission, bonuses or allowance is paid.
26‑26 Non‑share distributions and dividends
(1) A company cannot deduct under this Act:
(a) a *non‑share distribution; or
(b) a return that has accrued on a *non‑share equity interest.
(2) A company cannot deduct a *dividend paid on an *equity interest in the company as a *general deduction under this Act.
26‑30 Relative’s travel expenses
(1) You cannot deduct under this Act a loss or outgoing you incur, insofar as it is attributable to your *relative’s travel, if:
(a) you travelled in the course of performing your duties as an employee, or in the course of carrying on a *business for the purpose of gaining or producing your assessable income; and
(b) your relative accompanied you while you travelled.
Exception to subsection (1)
(2) Subsection (1) does not stop you deducting a loss or outgoing if:
(a) your *relative, while accompanying you, performed substantial duties as your employer’s employee, or as your employee; and
(b) it is reasonable to conclude that your relative would still have accompanied you even if he or she had not had a personal relationship with you.
Exception when you provide a fringe benefit
(3) Subsection (1) does not stop you deducting expenditure you incur in *providing a *fringe benefit.
This section also applies to individuals who are not employees
(4) If an individual is not an employee, but receives, or is entitled to receive, *withholding payments covered by subsection (6), this section applies to the individual as if:
(a) he or she were an employee; and
(b) the entity, who pays (or is liable to pay) *withholding payments covered by subsection (6) that result in the individual being in receipt of, or entitled to receive, such payments, were the individual’s employer; and
(c) any other individual who receives (or is entitled to receive) *withholding payments covered by subsection (6):
(i) that result in that other individual being in receipt of, or entitled to receive, such payments; and
(ii) that the entity pays (or is liable to pay) to that other individual;
were an employee of the entity.
This section also applies to entities who are not employers
(5) If an entity is not an employer, but pays (or is liable to pay) *withholding payments covered by subsection (6), this section applies to the entity as if:
(a) it were an employer; and
(b) an individual to whom the entity pays (or is liable to pay) such withholding payments were the entity’s employee.
Withholding payments covered
(6) This subsection covers:
(a) a *withholding payment covered by any of the provisions in Schedule 1 to the Taxation Administration Act 1953 listed in the table; and
(b) a withholding payment covered by section 12‑47 in Schedule 1 to the Taxation Administration Act 1953 where:
(i) the payment is made to a religious practitioner by a religious institution; and
(ii) the activity, or series of activities, for which the payment is made is done by the religious practitioner as a member of the religious institution.
26‑31 Travel related to use of residential premises as residential accommodation
(1) You cannot deduct under this Act a loss or outgoing you incur, insofar as it is related to travel, if:
(a) it is incurred in gaining or producing your assessable income from the use of *residential premises as residential accommodation; and
(b) it is not necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.
Exception—kind of entity
(2) Subsection (1) does not stop you deducting a loss or outgoing if, at any time during the income year in which the loss or outgoing is incurred, you are:
(a) a *corporate tax entity; or
(b) a *superannuation plan that is not a *self managed superannuation fund; or
(c) a *managed investment trust; or
(d) a public unit trust (within the meaning of section 102P of the Income Tax Assessment Act 1936); or
(e) a unit trust or partnership, if each *member of the trust or partnership is covered by a paragraph of this subsection at that time during the income year.
26‑35 Reducing deductions for amounts paid to related entities
You can only deduct reasonable amounts paid to related entities
(1) If, under another provision of this Act, you can deduct an amount for a payment you make, or for a liability you incur, to a *related entity, then you can only deduct so much of the amount as the Commissioner considers reasonable.
Note: This section has a special operation if the payment is made, or the liability is incurred, by a partnership in which a private company is a partner: see section 65 (Payments to associated persons and relatives) of the Income Tax Assessment Act 1936.
Meaning of related entity
(2) A related entity is any of the following:
(a) your *relative; or
(b) a partnership in which your relative is a partner.
(3) In the case of a partnership, a related entity is any of the following:
(a) a *relative of a partner in the partnership;
(b) an individual who is or has been a director of a company that is a partner in the partnership and is a *private company for the income year;
(c) an entity that is or has been a shareholder in a company of that kind;
(d) a *relative of an individual who is or has been a director or shareholder of a company of that kind;
(e) a beneficiary of a trust if the trustee is a partner in the partnership;
(f) a *relative of a beneficiary of a trust if the trustee is a partner in the partnership;
(g) another partnership, if a partner in the other partnership is a *relative of a partner in the first partnership.
However, a partner in a partnership is not a related entity of the partnership.
If you can’t deduct, then related entity doesn’t include amount as income
(4) To the extent that subsection (1) stops you deducting an amount, the amount is neither assessable income, nor exempt income, of the *related entity.
26‑40 Maintaining your family
You cannot deduct under this Act expenditure you incur for maintaining:
(a) your *spouse (except a spouse permanently living separately and apart from you); or
(b) your *child who is under 16 years.
Note: Example: A farmer cannot deduct an amount for food or lodgings that the farmer provides to his or her child who is under 16 years for the work the child performs on the farm.
26‑45 Recreational club expenses
(1) You cannot deduct under this Act a loss or outgoing to the extent you incur it to obtain or maintain:
(a) membership of a *recreational club; or
(b) rights to enjoy (otherwise than as a *member) facilities provided by a *recreational club for the use or benefit of its *members;
whether for yourself or someone else.
Meaning of recreational club
(2) A recreational club is a company that was established or is carried on mainly to provide facilities, for the use or benefit of its *members, for drinking, dining, *recreation or entertainment.
Exception when you provide a fringe benefit
(3) Subsection (1) does not stop you deducting expenditure you incur in *providing a *fringe benefit.
26‑47 Non‑business boating activities
Object
(1) The object of this section is to improve the integrity of the taxation system by preventing deductions from boating activities that are not carried on as a *business being offset against other assessable income.
Rule
(2) This Act applies to you as if so much of the amounts relating to using or *holding boats that you could otherwise deduct for an income year as exceeds your assessable income from using or holding boats for that year:
(a) were not deductible for that income year; and
(b) were an amount (a quarantined amount) relating to using or holding boats that you can deduct for the next income year.
Note: A quarantined amount may be reduced under subsection (5) (for boat capital gains), reduced under subsection (7) (where you deduct part of a quarantined amount under subsection (6) for boat business profits), reduced under subsection (8) (about exempt income) or affected by subsection (10) (about bankruptcy).
Note: Example: Ian does not use his boat in a business. In Year 1, Ian would be able to claim $100,000 in deductions for the boat (but for this subsection), including interest, depreciation and running costs. He earns only $40,000 of income from the boat. He can only deduct $40,000. He carries the remaining $60,000 forward to Year 2 (the quarantined amount).
Note: In Year 2, Ian has $95,000 of expenses and $30,000 of income for the boat. He can deduct $30,000. The quarantined amount is now $125,000: the quarantined amount from Year 1 plus the excess of expenses over income from Year 2.
Note: In Year 3, Ian has $60,000 of expenses and $150,000 of income from the boat. The expenses from Year 3 plus the quarantined amount is $185,000. Therefore, Ian claims a deduction of $150,000 and carries forward $35,000 to Year 4.
Exception: business use
(3) The rule in subsection (2) does not apply to amounts that are attributable to one or more of the following:
(a) *holding a boat as your *trading stock;
(b) using a boat (or holding it) mainly for letting it on hire in the ordinary course of a *business that you carry on;
(c) using a boat (or holding it) mainly for transporting the public or goods for payment in the ordinary course of a business that you carry on;
(d) using a boat for a purpose that is essential to the efficient conduct of a business that you carry on.
Note: Even if this exception applies to you, you may still have to quarantine losses under Division 35 (deferral of losses from non‑commercial business activities).
Exception: fringe benefits
(4) The rule in subsection (2) does not apply to so much of an amount you incur in *providing a *fringe benefit.
Modification if you have boat capital gains
(5) You reduce a quarantined amount you have for an income year by so much of that amount as is applied under section 118‑80 to reduce a *capital gain you have for the year in relation to a boat. You make this reduction before you deduct an amount under subsection (6).
Deduction if you have boat business profits
(6) You can deduct all or part of your remaining quarantined amount for an income year if your assessable income for the year from activities of a kind referred to in subsection (3) exceeds your deductions for the year relating to those activities. The amount you can deduct is the lesser of that excess and that remaining quarantined amount.
(7) You reduce your quarantined amount for the year by the amount you deduct. You make this reduction before a reduction under subsection (8).
Modification if you have exempt income
(8) You reduce any remaining quarantined amount you have for an income year by your *net exempt income for that year (after *utilising the net exempt income under section 35‑15 (about non‑commercial business activities) or section 36‑10 or 36‑15 (about tax losses)).
Modification if you become bankrupt
(9) The modification in subsection (10) has effect if:
(a) in an income year (the current year) you become bankrupt or are released from a debt by the operation of an Act relating to bankruptcy; or
(b) you became bankrupt before the current year and:
(i) the bankruptcy is annulled in the current year under section 74 of the Bankruptcy Act 1966 because your creditors have accepted a proposal for a composition or scheme of arrangement; and
(ii) under the composition or scheme of arrangement, you have been, will be or may be released from some or all of the debts from which you would have been released if you had instead been discharged from the bankruptcy.
(10) This Act applies to you as if any amount that:
(a) is a quarantined amount for you for the current year or was a quarantined amount for you for an earlier year; and
(b) has not been applied under section 118‑80 and that you have not yet deducted;
were not an amount relating to using or holding boats that you can deduct for the current year or a later year.
26‑50 Expenses for a leisure facility
(1) You cannot deduct under this Act a loss or outgoing to the extent you incur it:
(a) to acquire ownership of a *leisure facility; or
(b) to retain ownership of a leisure facility; or
(c) to acquire rights to use a leisure facility; or
(d) to retain rights to use a leisure facility; or
(e) to use, operate, maintain or repair a leisure facility; or
(f) in relation to any obligation associated with your ownership of a leisure facility; or
(g) in relation to any obligation associated with your rights to use a leisure facility.
However, there are exceptions (see subsections (3), (4) and (8)).
What is a leisure facility?
(2) A leisure facility is land, a building, or part of a building or other structure, that is used (or held for use) for holidays or *recreation.
Exception—leisure facilities
(3) Subsection (1) does not stop you deducting a loss or outgoing for a *leisure facility if at all times in the income year:
(a) you hold the leisure facility for sale in the ordinary course of your business of selling leisure facilities; or
(b) you use the leisure facility (or hold it for use) mainly to provide it:
(i) in the ordinary course of your *business of providing leisure facilities for payment; or
(ii) to produce your assessable income in the nature of rents, lease premiums, licence fees or similar charges; or
(iii) for your employees to use; or
(iv) for the care of your employees’ *children.
In the case of a company, subparagraphs (b)(iii) and (iv) do not apply to employees who are *members or directors of the company.
Exception—part year use of leisure facilities
(4) If you use a *leisure facility (or hold it) as described in subsection (3) at all times during part of the income year, then subsection (1) does not stop you deducting so much of the loss or outgoing as is reasonable in the circumstances.
Anti‑avoidance—when exceptions do not apply
(7) A *leisure facility is taken not to be used (or held) as described in subsection (3) if:
(a) apart from this subsection, the leisure facility would be used (or held) in that way because of a *scheme; and
(b) in the Commissioner’s opinion, the scheme would not have been entered into or carried out if this section had not been enacted.
Exception when you provide a fringe benefit
(8) Subsection (1) does not stop you deducting expenditure you incur in *providing a *fringe benefit.
26‑52 Bribes to foreign public officials
(1) You cannot deduct under this Act a loss or outgoing you incur that is a *bribe to a foreign public official.
(2) An amount is a bribe to a foreign public official to the extent that:
(a) you incur the amount in, or in connection with:
(i) providing a benefit to another person; or
(ii) causing a benefit to be provided to another person; or
(iii) offering to provide, or promising to provide, a benefit to another person; or
(iv) causing an offer of the provision of a benefit, or a promise of the provision of a benefit, to be made to another person; and
(b) you incur the amount with the intention of improperly influencing a *foreign public official (who may be the other person) in order to obtain or retain business or a business or personal advantage (whether or not for yourself).
The benefit may be any advantage and is not limited to property.
(2A) For the purposes of subsection (2), disregard whether business, or a business or personal advantage, was actually obtained or retained.
Payments that written law of foreign public official’s country requires or permits
(3) An amount is not a bribe to a foreign public official if, assuming the benefit had been provided, and all related acts had been done, in the *foreign public official’s country, a written law of that country would have required or permitted the provision of the benefit.
Facilitation payments
(4) An amount is not a bribe to a foreign public official if:
(a) the value of the benefit is of a minor nature; and
(b) the amount is incurred for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature.
(5) For the purposes of this section, a routine government action is an action of a *foreign public official that:
(a) is ordinarily and commonly performed by the official; and
(b) is covered by any of the following subparagraphs:
(i) granting a permit, licence or other official document that qualifies a person to do business in a foreign country or in a part of a foreign country;
(ii) processing government papers such as a visa or work permit;
(iii) providing police protection or mail collection or delivery;
(iv) scheduling inspections associated with contract performance or related to the transit of goods;
(v) providing telecommunications services, power or water;
(vi) loading and unloading cargo;
(vii) protecting perishable products, or commodities, from deterioration;
(viii) any other action of a similar nature; and
(c) does not involve a decision about:
(i) whether to award new business; or
(ii) whether to continue existing business with a particular person; or
(iii) the terms of new business or existing business; and
(d) does not involve encouraging a decision about:
(i) whether to award new business; or
(ii) whether to continue existing business with a particular person; or
(iii) the terms of new business or existing business.
Improper influence
(6) In determining whether influence is improper, disregard the following:
(a) the fact that the benefit, or the offer or promise to provide the benefit, may be, or be perceived to be, customary, necessary or required in the situation;
(b) any official tolerance of the benefit;
(c) if particular business or a particular business or personal advantage is relevant to determining whether influence is improper—the following:
(i) if the value of the business or advantage is insignificant—that fact;
(ii) in the case of an advantage—any official tolerance of the advantage;
(iii) in the case of an advantage—the fact that the advantage may be customary, or perceived to be customary, in the situation.
Duties of foreign public official
(8) The duties of a *foreign public official are any authorities, duties, functions or powers that:
(a) are conferred on the official; or
(b) the official holds himself or herself out as having.
26‑53 Bribes to public officials
(1) You cannot deduct under this Act a loss or outgoing you incur that is a *bribe to a public official.
(2) An amount is a bribe to a public official to the extent that:
(a) you incur the amount in, or in connection with:
(i) providing a benefit to another person; or
(ii) causing a benefit to be provided to another person; or
(iii) offering to provide, or promising to provide, a benefit to another person; or
(iv) causing an offer of the provision of a benefit, or a promise of the provision of a benefit, to be made to another person; and
(b) the benefit is not legitimately due to the other person (see subsection (3)); and
(c) you incur the amount with the intention of influencing a *public official (who may or may not be the other person) in the exercise of the official’s duties as a public official in order to:
(i) obtain or retain business; or
(ii) obtain or retain an advantage in the conduct of business that is not legitimately due to you, or another person, as the recipient, or intended recipient, of the advantage in the conduct of business (see subsection (4)).
The benefit may be any advantage and is not limited to property.
Benefit not legitimately due
(3) In working out if a benefit is not legitimately due to another person in a particular situation, disregard the following:
(a) the fact that the benefit may be customary, or perceived to be customary, in the situation;
(b) the value of the benefit;
(c) any official tolerance of the benefit.
Advantage in the conduct of business that is not legitimately due
(4) In working out if an advantage in the conduct of business is not legitimately due in a particular situation, disregard the following:
(a) the fact that the advantage may be customary, or perceived to be customary, in the situation;
(b) the value of the advantage;
(c) any official tolerance of the advantage.
Duties of public official
(5) The duties of a *public official are any authorities, duties, functions or powers that:
(a) are conferred on the official; or
(b) the official holds himself or herself out as having.
26‑54 Expenditure relating to illegal activities
(1) You cannot deduct under this Act a loss or outgoing to the extent that it was incurred in the furtherance of, or directly in relation to, a physical element of an offence against an *Australian law of which you have been convicted if the offence was, or could have been, prosecuted on indictment.
(2) Despite section 170 of the Income Tax Assessment Act 1936, the Commissioner may amend your assessment at any time within 4 years after you are convicted of the relevant offence for the purpose of giving effect to subsection (1) of this section.
26‑55 Limit on deductions
(1) There is a limit on the total of the amounts you can deduct for the income year under these provisions:
(a) section 25‑50 (which is about payments of pensions, gratuities or retiring allowances) of this Act;
(ba) Division 30 (which is about deductions for gifts or contributions) of this Act;
(bb) Division 31 (which is about deductions for conservation covenants) of this Act;
(d) section 290‑150 (which is about deductions for personal superannuation contributions).
Do not include in the total an amount that you could also deduct under another provision of this Act, apart from section 8‑10 (which prevents double deductions).
(2) The limit is worked out by subtracting from your assessable income all your deductions except:
(a) *tax losses; and
See Division 36 (which is about tax losses of earlier income years).
(c) the amount you can deduct for the income year under section 393‑5 (which provides for deductions for making \*farm management deposits).
26‑60 Superannuation contributions surcharge
You cannot deduct under this Act:
(a) a superannuation contributions surcharge within the meaning of the Superannuation Contributions Tax (Assessment and Collection) Act 1997; or
(b) a superannuation contributions surcharge within the meaning of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997.
26‑68 Loss from disposal of eligible venture capital investments
Partners in VCLPs and ESVCLPs
(1) You cannot deduct under this Act your share of a loss made from the disposal or other realisation of an *eligible venture capital investment if:
(a) it is made by a *VCLP, or an *ESVCLP, that is *unconditionally registered; and
(b) were that disposal or other realisation to be a *disposal of a *CGT asset, your share of any *capital gain or *capital loss would be disregarded under section 118‑405 or 118‑407.
Partners in AFOFs
(2) You cannot deduct under this Act your share of a loss made from the disposal or other realisation of an *eligible venture capital investment if:
(a) it is made by:
(i) an *AFOF that is *unconditionally registered; or
(ii) a *VCLP, or an *ESVCLP, that is unconditionally registered and in which an AFOF that is *unconditionally registered is a partner; and
(b) were that disposal or other realisation to be a *disposal of a *CGT asset, your share of any *capital gain or *capital loss would be disregarded under section 118‑410.
Eligible venture capital investors
(3) You cannot deduct under this Act a loss made from the disposal or other realisation of an *eligible venture capital investment if:
(a) you are an *eligible venture capital investor; and
(b) were that disposal or other realisation to be a *disposal of a *CGT asset, any *capital gain or *capital loss would be disregarded under section 118‑415.
26‑70 Loss from disposal of venture capital equity
You cannot deduct under this Act a loss made from the disposal or other realisation of *venture capital equity in a *resident investment vehicle if:
(a) it is made by a *venture capital entity or a *limited partnership referred to in subsection 118‑515(2); and
(b) if that disposal or other realisation were a *disposal of a *CGT asset, any *capital gain or *capital loss would be disregarded under Subdivision 118‑G.
26‑75 Excess non‑concessional contributions tax cannot be deducted
You cannot deduct under this Act an amount of *excess non‑concessional contributions tax that you pay.
26‑80 Financing costs on loans to pay superannuation contribution
(1) You can only deduct under this Act a *financing cost connected with a contribution you make to a *superannuation plan if you can deduct the contribution under Subdivision 290‑B.
(2) A financing cost connected with a contribution is expenditure incurred to the extent that it relates to obtaining finance to make the contribution, including:
(a) interest, and payments in the nature of interest; and
(b) expenses of borrowing.
26‑85 Borrowing costs on loans to pay life insurance premiums
(1) You can only deduct under this Act interest on, or other expenses associated with, money you borrow to pay a premium for a *life insurance policy if:
(a) the *risk component of the premium received by the insurer is the entire amount of the premium; and
(b) each amount the insurer is liable to pay under the policy would be included in your assessable income if it were paid.
(2) The risk component of a premium for a *life insurance policy means the amount of the premium worked out on the basis specified in the regulations.
26‑90 Superannuation supervisory levy
You cannot deduct under this Act so much of a levy imposed by the Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Act 1991 as represents the late lodgment amount (within the meaning of section 6 of that Act).
26‑95 Superannuation guarantee charge
(1) You cannot deduct under this Act a charge imposed by the Superannuation Guarantee Charge Act 1992.
(2) However, if the charge relates to a *superannuation guarantee shortfall for which you qualify for an amnesty under section 74 of the Superannuation Guarantee (Administration) Act 1992, this section does not apply to a payment that:
(a) is made, under that Act, during the amnesty period (within the meaning of subsection 74(3) of that Act); and
(b) is made in relation to the charge, whether or not the Commissioner applies the payment to satisfy your liability to pay the charge;
except to the extent that the payment, when taken together with any other such payments made in relation to the charge, exceeds the amount paid as a result of a disclosure to which paragraph 74(1)(a) of that Act applies in relation to the shortfall.
26‑96 Laminaria and Corallina decommissioning levy cannot be deducted
You cannot deduct under this Act an amount of *Laminaria and Corallina decommissioning levy that you pay.
26‑97 National Disability Insurance Scheme expenditure
A participant (within the meaning of the National Disability Insurance Scheme Act 2013) cannot deduct under this Act a loss or outgoing to the extent the loss or outgoing is funded (including funded by way of reimbursement) by an *NDIS amount the participant *derives.
26‑98 Division 293 tax cannot be deducted
You cannot deduct under this Act any of the following:
(a) an amount of *Division 293 tax that you pay;
(b) an amount of *debt account discharge liability that you pay.
26‑99 Excess transfer balance tax cannot be deducted
You cannot deduct under this Act an amount of *excess transfer balance tax that you pay.
26‑99B Build to rent development misuse tax cannot be deducted
You cannot deduct under this Act an amount of *build to rent development misuse tax that you pay.
26‑99C Australian IIR/UTPR tax and Australian DMT tax cannot be deducted
You cannot deduct under this Act an amount of *Australian IIR/UTPR tax or *Australian DMT tax that you pay.
26‑100 Expenditure attributable to water infrastructure improvement payments
(1) You cannot deduct under this Act *SRWUIP expenditure if the matching *SRWUIP payment is, or is reasonably expected to be, *non‑assessable non‑exempt income (whether for you or for another entity) under section 59‑65.
(2) SRWUIP expenditure, in respect of a *SRWUIP program, is expenditure that:
(a) you incur that satisfies an obligation under an *arrangement under the program; and
(b) is, or is reasonably expected to be, matched by a *SRWUIP payment in respect of the program.
(3) However, treat the expenditure as if it had never been SRWUIP expenditure if it is no longer reasonable to expect that the expenditure will be matched by a *SRWUIP payment in respect of the program.
26‑102 Expenses associated with holding vacant land
Limit on deduction
(1) If:
(a) at a particular time, you incur a loss or outgoing relating to holding land (including interest or any other ongoing costs of borrowing to acquire the land); and
(b) at the earlier of the following (the critical time):
(i) that time;
(ii) if you have ceased to hold the land—the time just before you ceased to hold the land;
there is no substantial and permanent structure in use or available for use on the land having a purpose that is independent of, and not incidental to, the purpose of any other structure or proposed structure;
you can only deduct under this Act the loss or outgoing to the extent that the land is in use, or available for use, in carrying on a business covered by subsection (2) at the time applying under subsection (3).
Note 1: The ordinary meaning of structure includes a building and anything else built or constructed.
Note 2: The land need not be all of the land under a land title.
(2) A *business is covered by this subsection if the business is carried on for the purpose of gaining or producing the assessable income of one or more of the following entities:
(a) you;
(b) your *affiliate, or an entity of which you are an affiliate;
(c) if you are an individual—your *spouse, or any of your *children who is under 18 years of age;
(d) an entity *connected with you.
(3) The time applying under this subsection is the critical time unless:
(a) the business referred to in subsection (1) ceases before the critical time; and
(b) the loss or outgoing is otherwise deductible because of the use or availability for use of the land at an earlier time or during an earlier period; and
(c) at that earlier time or during that earlier period the land was in use or available for use in carrying on that business;
in which case the time applying under this subsection is that earlier time or the end of that earlier period.
Disregard certain residential premises if not rented etc.
(4) For the purposes of paragraph (1)(b), treat a building as not being a substantial and permanent structure if it is *residential premises constructed, or *substantially renovated, while you hold the land unless:
(a) the residential premises are lawfully able to be occupied; and
(b) the residential premises are:
(i) leased, hired or licensed; or
(ii) available for lease, hire or licence.
Note: If all of the structures on the land are disregarded under this subsection, then subsection (1) may deny you a deduction for a loss or outgoing relating to the land.
Exception—kind of entity
(5) Subsection (1) does not stop you deducting a loss or outgoing if, at any time during the income year in which the loss or outgoing is incurred, you are:
(a) a *corporate tax entity; or
(b) a *superannuation plan that is not a *self managed superannuation fund; or
(c) a *managed investment trust; or
(d) a public unit trust (within the meaning of section 102P of the Income Tax Assessment Act 1936); or
(e) a unit trust or partnership, if each *member of the trust or partnership is covered by a paragraph of this subsection at that time during the income year.
Exception—structures affected by natural disasters or other exceptional circumstances
(6) Subsection (1) does not stop you deducting a loss or outgoing relating to holding land if:
(a) had an earlier time been the critical time (see paragraph (1)(b)), paragraph (1)(b) would not have applied to you for the land because of the existence at that earlier time of a substantial and permanent structure on the land; and
(b) after that earlier time, paragraph (1)(b):
(i) began to apply to you for the land wholly or mainly because of a circumstance affecting that structure; and
(ii) continued to do so at the critical time; and
(c) the circumstance was exceptional and beyond the reasonable control of you, and of all the entities referred to in paragraphs (2)(b), (c) and (d); and
(d) the critical time happened before:
(i) the third anniversary of the time paragraph (1)(b) began to apply to you for the land as described in subparagraph (b)(i) of this subsection; or
(ii) such later time as the Commissioner allows.
(7) If subsection (6) applies to you and you deduct the loss or outgoing, you must keep written records of:
(a) the circumstance; and
(b) the circumstance’s effect on the affected structure;
until the fifth anniversary of the end of the income year in which you incurred the loss or outgoing.
Note: There is an administrative penalty if you fail to keep these records (see section 288‑25 in Schedule 1 to the Taxation Administration Act 1953).
Exception—land held by primary producers
(8) Subsection (1) does not stop you deducting a loss or outgoing relating to holding land if, at the critical time (see paragraph (1)(b)):
(a) the land is under lease, hire or licence to another entity; and
(b) you are, or an entity referred to in paragraph (2)(b), (c) or (d) is, carrying on a *primary production business; and
(c) the land does not contain *residential premises; and
(d) residential premises are not being constructed on the land.
Exception—land in use or available for use in carrying on a business
(9) Subsection (1) does not stop you deducting a loss or outgoing relating to holding land if, at the critical time (see paragraph (1)(b)):
(a) the land is under lease, hire or licence to another entity as a result of a dealing at *arm’s length; and
(b) the land is in use, or available for use, in carrying on a *business; and
(c) the land does not contain *residential premises; and
(d) residential premises are not being constructed on the land.
26‑105 Non‑compliant payments for work and services
No deduction if amount not withheld or Commissioner not notified
(1) You cannot deduct under this Act a payment if:
(a) any of the following provisions in Schedule 1 to the Taxation Administration Act 1953 require you to withhold an amount from the payment:
(i) section 12‑35 (about payments to employees);
(ii) section 12‑40 (about payments to directors);
(iii) section 12‑47 (about payments to *religious practitioners);
(iv) section 12‑60 (about payments under labour hire and certain other arrangements);
(v) in relation to a *supply, other than a supply referred to in subsection (3) of this section—section 12‑190 (about quoting of *ABN); and
(b) either:
(i) you fail to withhold an amount (whether or not that amount is the amount required to be withheld as mentioned in paragraph (a)) from the payment; or
(ii) after withholding the amount from the payment, you fail to comply, or purportedly comply, with section 16‑150 or 389‑5 (as the case requires) in that Schedule, in relation to the amount.
(2) You cannot deduct under this Act a *non‑cash benefit if:
(a) section 14‑5 in Schedule 1 to the Taxation Administration Act 1953 requires you to pay an amount to the Commissioner before providing the benefit, because of any of the following provisions in that Schedule:
(i) section 12‑35 (about payments to employees);
(ii) section 12‑40 (about payments to directors);
(iii) section 12‑47 (about payments to *religious practitioners);
(iv) section 12‑60 (about payments under labour hire and certain other arrangements);
(v) in relation to a *supply, other than a supply referred to in subsection (3) of this section—section 12‑190 (about quoting of *ABN); and
(b) you fail to comply, or purportedly comply, with section 16‑150 in that Schedule in relation to the amount.
(3) For the purposes of subparagraphs (1)(a)(v) and (2)(a)(v), the supplies are supplies that are wholly a *supply of either or both of the following:
(a) a supply of goods (within the meaning of section 195‑1 of the *GST Act);
(b) a supply of real property (within the meaning of that section of that Act).
Exception—nil amounts
(4) Subsection (1) or (2) does not apply if the amount required to be withheld, or the amount required to be paid to the Commissioner, (as the case requires) is a nil amount.
Exception—ABN quoted
(5) Subsection (1) does not apply in relation to an amount required to be withheld from a payment under section 12‑35 in Schedule 1 to the Taxation Administration Act 1953, if:
(a) when the payment is made, you have been given:
(i) an *invoice or some other document that relates to the payment that *quotes the individual’s *ABN; or
(ii) if the payment relates to a *supply that has been made through an *agent—an invoice or some other document that relates to the payment that quotes the agent’s ABN; or
(b) when the payment is made:
(i) you have been given an invoice or some other document that relates to the payment that purports to quote the individual’s ABN; and
(ii) the individual does not have an ABN, or the invoice or other document does not in fact quote the individual’s ABN; and
(iii) you have no reasonable grounds to believe that the individual does not have an ABN, or that the invoice or other document does not quote the individual’s ABN; or
(c) if the payment relates to a supply that has been made through an agent—when the payment is made:
(i) you have been given an invoice or some other document that relates to the payment that purports to quote the agent’s ABN; and
(ii) the agent does not have an ABN, or the invoice or other document does not in fact quote the agent’s ABN; and
(iii) you have no reasonable grounds to believe that the agent does not have an ABN, or that the invoice or other document does not quote the agent’s ABN.
(6) Subsection (2) does not apply in relation to a *non‑cash benefit that requires an amount to be paid to the Commissioner, if:
(a) when the non‑cash benefit is provided, you have been given:
(i) an *invoice or some other document that relates to the non‑cash benefit that *quotes the individual’s *ABN; or
(ii) if the non‑cash benefit relates to a *supply that has been made through an *agent—an invoice or some other document that relates to the non‑cash benefit that quotes the agent’s ABN; or
(b) when the non‑cash benefit is provided:
(i) you have been given an invoice or some other document that relates to the non‑cash benefit that purports to quote the individual’s ABN; and
(ii) the individual does not have an ABN, or the invoice or other document does not in fact quote the individual’s ABN; and
(iii) you have no reasonable grounds to believe that the individual does not have an ABN, or that the invoice or other document does not quote the individual’s ABN; or
(c) if the non‑cash benefit relates to a supply that has been made through an agent—when the non‑cash benefit is provided:
(i) you have been given an invoice or some other document that relates to the non‑cash benefit that purports to quote the agent’s ABN; and
(ii) the agent does not have an ABN, or the invoice or other document does not in fact quote the agent’s ABN; and
(iii) you have no reasonable grounds to believe that the agent does not have an ABN, or that the invoice or other document does not quote the agent’s ABN.
Exception—voluntarily tell the Commissioner about a mistake
(7) Subsection (1) does not apply if, before the Commissioner tells you that an examination is to be made of your affairs relating to a *taxation law for a relevant period, you voluntarily tell the Commissioner, in the *approved form, that you have failed to:
(a) withhold an amount; or
(b) comply with section 16‑150 or 389‑5 (as the case requires) in Schedule 1 to the Taxation Administration Act 1953 in relation to the amount.
(8) Subsection (2) does not apply if, before the Commissioner tells you that an examination is to be made of your affairs relating to a *taxation law for a relevant period, you voluntarily tell the Commissioner, in the *approved form, that you have failed to comply with section 16‑150 in Schedule 1 to the Taxation Administration Act 1953 in relation to the amount.
Division 27—Effect of input tax credits etc. on deductions
Table of Subdivisions
Guide to Division 27
27‑A General
27‑B Effect of input tax credits etc. on capital allowances
Guide to Division 27
27‑1 What this Division is about
This Division sets out the effect of the GST in working out deductions. Generally speaking, input tax credits, GST and adjustments under the GST Act are disregarded.
Subdivision 27‑A—General
Table of sections
27‑5 Input tax credits and decreasing adjustments
27‑10 Certain increasing adjustments
27‑15 GST payments
27‑20 Elements in calculation of amounts
27‑25 GST groups and GST joint ventures
27‑35 Certain sections not to apply to certain assets or expenditure
27‑5 Input tax credits and decreasing adjustments
You cannot deduct under this Act a loss or outgoing you incur, to the extent that the loss or outgoing includes an amount relating to an *input tax credit to which you are entitled or a *decreasing adjustment that you have.
27‑10 Certain increasing adjustments
(1) You can deduct an amount of an *increasing adjustment that arises under Division 129 of the *GST Act.
(2) However, you cannot deduct the amount to the extent (if any) that the adjustment arises from an increase in the extent to which the activity giving rise to the adjustment is of a private or domestic nature.
(3) If:
(a) you have an *increasing adjustment under Division 138 of the *GST Act in respect of an asset as a result of the cancellation of your registration under Part 2‑5 of the GST Act; and
(b) immediately after the cancellation, you held the asset for the purpose of gaining or producing assessable income;
you can deduct the amount of the increasing adjustment.
(4) However, you cannot deduct an amount under subsection (1) or (3) to the extent that, because it becomes a component of a *net input tax credit, a reduction is made under section 103‑30 (reduction of cost base etc. by net input tax credits).
27‑15 GST payments
(1) You cannot deduct under this Act a loss or outgoing consisting of a payment under Division 33 of the *GST Act.
(2) This section does not apply to the payment:
(a) to the extent (if any) that the *net amount to which the payment relates was increased under section 21‑5 of the *Wine Tax Act (which allows for such increases to take account of wine equalisation tax); and
(b) to the extent (if any) that the *net amount was increased under section 13‑5 of the *Luxury Car Tax Act (which allows for such increases to take account of luxury car tax); and
(c) to the extent (if any) that the *net amount was increased under paragraph 13‑10(1)(a) of the Luxury Car Tax Act (which allows for such alterations to take account of increasing luxury car tax adjustments under that Act).
(3) This section does not apply to the payment of *assessed GST (under section 33‑15 of the *GST Act) on a *taxable importation that:
(a) was not a *creditable importation; or
(b) was *partly creditable;
but only to the extent that that payment of assessed GST exceeds the *input tax credit (if any) to which you are entitled for that importation.
(4) This section does not apply to the payment of an *assessed net amount under section 33‑3 or 33‑5 of the *GST Act to the extent that the assessed net amount includes *GST on a *taxable supply that:
(a) exceeds the *input tax credit (if any) to which you are entitled for a *creditable acquisition that relates to that supply; and
(b) is payable by you (and is not payable by the supplier of that supply) because of the operation of Division 83, 84 or 86 of the GST Act.
27‑20 Elements in calculation of amounts
In calculating an amount that you may be able to deduct:
(a) an element in the calculation that is an amount paid or payable is treated as not including an amount equal to any *input tax credit for an *acquisition related to the amount paid or payable, or any *decreasing adjustment related to that amount; and
(b) an element in the calculation that is an amount received or receivable is treated as not including an amount equal to any *GST payable on a *taxable supply related to the amount received or receivable, or any *increasing adjustment related to that amount.
27‑25 GST groups and GST joint ventures
(1) A *member of a *GST group is to be treated, for the purposes of this Division, as if Subdivision 48‑B of the *GST Act (other than subsections 48‑45(3) and (4)) did not apply to that member.
(2) A *participant in a *GST joint venture is to be treated, for the purposes of this Division, as if Subdivision 51‑B of the *GST Act did not apply to that participant.
27‑35 Certain sections not to apply to certain assets or expenditure
Sections 27‑5, 27‑10, 27‑15 and 27‑20 do not apply to assets, or to expenditure, for which you can deduct amounts under Division 40 or 328.
Note: See instead Subdivision 27‑B.
Subdivision 27‑B—Effect of input tax credits etc. on capital allowances
Table of sections
27‑80 Cost or opening adjustable value of depreciating assets reduced for input tax credits
27‑85 Cost or opening adjustable value of depreciating assets reduced: decreasing adjustments
27‑87 Certain decreasing adjustments included in assessable income
27‑90 Cost or opening adjustable value of depreciating assets increased: increasing adjustments
27‑92 Certain increasing adjustments can be deducted
27‑95 Balancing adjustment events
27‑100 Pooling
27‑105 Other Division 40 expenditure
27‑110 Input tax credit etc. relating to 2 or more things
27‑80 Cost or opening adjustable value of depreciating assets reduced for input tax credits
(1) A *depreciating asset’s *cost is reduced if:
(a) an entity’s acquisition or importation of the asset constitutes a *creditable acquisition or *creditable importation; and
(b) the entity is or becomes entitled to an *input tax credit for the acquisition or importation; and
(c) the entity can deduct amounts for the asset under Division 40 or 328.
The reduction is the amount of the input tax credit.
(2) A *depreciating asset’s *cost is also reduced if:
(a) the entity that *holds the asset incurs expenditure that is included in the second element of the asset’s cost for the income year in which the asset’s *start time occurs; and
(b) the entity is or becomes entitled to an *input tax credit for the *creditable acquisition or *creditable importation to which the expenditure relates; and
(c) the entity can deduct amounts for the asset under Division 40 or 328.
The reduction is the amount of the input tax credit.
(3) However, subsections (1) and (2) do not apply if the *cost of the *depreciating asset is modified under Division 40 to be its *market value.
(3A) A *depreciating asset’s *opening adjustable value for an income year and its *cost is reduced if:
(a) an entity’s acquisition or importation of the asset constitutes a *creditable acquisition or *creditable importation; and
(b) the entity is or becomes entitled to an *input tax credit in an income year (the credit year) for the acquisition or importation and the credit year occurs after the income year in which the acquisition or importation occurred; and
(c) the income year is after the one in which the asset’s *start time occurs; and
(d) the entity can deduct amounts for the asset under Division 40 or 328.
The reduction is the amount of the input tax credit.
(4) A *depreciating asset’s *opening adjustable value for an income year and its *cost is reduced if:
(a) the entity that *holds the asset incurs expenditure that is included in the second element of the asset’s cost for that income year; and
(b) that income year is after the one in which the asset’s*start time occurs; and
(c) the entity is or becomes entitled to an *input tax credit for the *creditable acquisition or *creditable importation to which the expenditure relates for the income year in which the expenditure was incurred; and
(d) the entity can deduct amounts for the asset under Division 40 or 328.
The reduction is the amount of the input tax credit.
(5) If the reduction under subsection (2), (3A) or (4) is more than:
(a) for a subsection (2) case—the *depreciating asset’s *cost; or
(b) for a subsection (3A) or (4) case—the depreciating asset’s *opening adjustable value;
the excess is included in the entity’s assessable income unless the entity is an *exempt entity.
Exception: pooling
(6) This section does not apply to:
(a) a depreciating asset allocated to a low‑value pool or a pool under Division 328 for or in the *current year; or
(b) *in‑house software if expenditure on the software is allocated to a software development pool for the current year; or
(c) a project pool.
27‑85 Cost or opening adjustable value of depreciating assets reduced: decreasing adjustments
(1) This section applies to an entity if:
(a) the entity can deduct amounts for a *depreciating asset under Division 40 or 328; and
(b) the entity has a *decreasing adjustment in an income year that relates directly or indirectly to the asset.
(1A) However, this section does not apply to a *decreasing adjustment that arises under Division 129 or 132 of the *GST Act.
Note: See instead section 27‑87.
(2) The asset’s *cost is reduced by an amount equal to the *decreasing adjustment if the adjustment arises in the income year in which the asset’s *start time occurs.
(3) The asset’s *opening adjustable value for an income year and its *cost is reduced by an amount equal to the *decreasing adjustment if the adjustment arises in that year and that year is after the one in which the asset’s*start time occurs.
(4) If the reduction under subsection (2) or (3) is more than:
(a) for a subsection (2) case—the *depreciating asset’s *cost; or
(b) for a subsection (3) case—the depreciating asset’s *opening adjustable value;
the excess is included in the entity’s assessable income unless the entity is an *exempt entity.
Exception: pooling
(5) This section does not apply to:
(a) a depreciating asset allocated to a low‑value pool or a pool under Division 328 for or in the *current year; or
(b) *in‑house software if expenditure on the software is allocated to a software development pool for the current year; or
(c) a project pool.
27‑87 Certain decreasing adjustments included in assessable income
(1) This section applies to an entity if:
(a) the entity can deduct amounts for a *depreciating asset under Division 40 or 328; and
(b) the entity has a *decreasing adjustment that arises under Division 129 or 132 of the *GST Act in an income year that relates directly or indirectly to the asset; and
(c) section 27‑95 does not apply to the entity in relation to the asset.
(2) The amount of the *decreasing adjustment is included in the entity’s assessable income for the income year unless the entity is an *exempt entity.
27‑90 Cost or opening adjustable value of depreciating assets increased: increasing adjustments
(1) This section applies to an entity if:
(a) the entity can deduct amounts for a *depreciating asset under Division 40 or 328; and
(b) the entity has an *increasing adjustment in an income year that relates directly or indirectly to the asset.
(1A) However, this section does not apply to an *increasing adjustment that arises under Division 129 or 132 of the *GST Act.
Note: See instead section 27‑92.
(2) The asset’s *cost is increased by an amount equal to the *increasing adjustment if the adjustment arises in the income year in which the asset’s *start time occurs.
(3) The asset’s *opening adjustable value for an income year and its *cost is increased by an amount equal to the *increasing adjustment if the adjustment arises in that year and that year is after the one in which the asset’s *start time occurs.
Exception: pooling
(4) This section does not apply to:
(a) a depreciating asset allocated to a low‑value pool or a pool under Division 328 for or in the *current year; or
(b) *in‑house software if expenditure on the software is allocated to a software development pool for the current year; or
(c) a project pool.
27‑92 Certain increasing adjustments can be deducted
(1) This section applies to an entity if:
(a) the entity can deduct amounts for a *depreciating asset under Division 40 or 328; and
(b) the entity has an *increasing adjustment that arises under Division 129 or 132 of the *GST Act in an income year that relates directly or indirectly to the asset.
(2) The entity can deduct the amount of the *increasing adjustment for the income year.
(3) However, the entity cannot deduct the amount to the extent (if any) that the adjustment arises from an increase in the extent to which the activity giving rise to the adjustment is of a private or domestic nature.
27‑95 Balancing adjustment events
(1) The *termination value of a *depreciating asset is reduced if the relevant *balancing adjustment event is a *taxable supply. The reduction is an amount equal to the *GST payable on the supply.
(2) However, subsection (1) does not apply if the *termination value of the *depreciating asset is modified under Division 40 to be its *market value.
(3) The *termination value of a *depreciating asset is increased if the entity that *held the asset has a *decreasing adjustment that relates directly or indirectly to that *taxable supply in the income year in which the *balancing adjustment event occurred. The increase is the amount of the decreasing adjustment.
(4) The *termination value of a *depreciating asset is decreased if the entity that *held the asset has an *increasing adjustment that relates directly or indirectly to that *taxable supply in the income year in which the *balancing adjustment event occurred. The decrease is the amount of the increasing adjustment.
(5) An amount is included in the assessable income of the entity that *held the asset if the entity has a *decreasing adjustment that relates directly or indirectly to that *taxable supply in a later income year. The amount included is the amount of the decreasing adjustment.
(6) The entity that *held the asset can deduct an amount if the entity has an *increasing adjustment that relates directly or indirectly to that *taxable supply in a later income year. The amount it can deduct is the amount of the increasing adjustment.
27‑100 Pooling
(1) This section contains special rules for expenditure (the pooled expenditure) incurred by an entity:
(a) on a *depreciating asset allocated to a low‑value pool; or
(b) on a depreciating asset allocated to a pool under Division 328 for or in an income year; or
(c) on *in‑house software if the expenditure on the software is allocated to a software development pool; and
(d) on *project amounts if the amounts are allocated to a project pool.
Reduction to pools etc.
(2) There is a reduction under subsection (3) or (5) if:
(a) the pooled expenditure relates directly or indirectly to a *creditable acquisition or *creditable importation; and
(b) the entity is or becomes entitled to an *input tax credit in an income year (the credit year) for the acquisition or importation and the credit year occurs after the income year in which the acquisition or importation occurred.
(2A) There is a reduction under subsection (4) if:
(a) the pooled expenditure relates directly or indirectly to a *creditable acquisition or *creditable importation; and
(b) the entity is or becomes entitled to an *input tax credit in an income year (the credit year) for the acquisition or importation.
Reduced cost of assets allocated to a pool
(2B) A *depreciating asset’s *cost is reduced if:
(a) an entity’s acquisition or importation of the asset constitutes a *creditable acquisition or *creditable importation; and
(b) the entity is or becomes entitled to an *input tax credit for the acquisition or importation and the income year in which the acquisition or importation occurred is the same as the one in which the input tax credit arose; and
(c) the asset is allocated to a low‑value pool or a pool under Division 328 for or in that year.
The reduction is the amount of the input tax credit.
Low‑value pools
(3) For a low‑value pool, the *closing pool balance of the pool for:
(a) if the credit year is later than the first income year for which *depreciating assets were allocated to the pool—the income year before the credit year; or
(b) if the credit year is the first income year for which *depreciating assets were allocated to the pool—the credit year;
is reduced by an amount equal to the input tax credit.
Software development pools and project pools
(4) For a software development pool or a project pool, the expenditure in the pool for the credit year, or the *pool value for the credit year, is reduced by an amount equal to the *input tax credit.
Small business pools
(5) For a pool under Division 328, the *opening pool balance of the pool for the credit year is reduced by an amount equal to the input tax credit.
No reduction if market value
(5A) However, there is no reduction to the *cost of a *depreciating asset if its cost is modified under Division 40 to be its *market value.
Second element of cost
(6) There is a reduction under subsection (7) if:
(a) the entity incurs expenditure in an income year (also the credit year) that is included in the second element of the *cost of a *depreciating asset allocated to a low‑value pool or a pool under Division 328 for or in the credit year; and
(b) the entity is or becomes entitled, after the credit year, to an *input tax credit for the expenditure.
(7) An amount equal to the amount of the *input tax credit is applied in reduction of:
(a) for a low‑value pool:
(i) if the credit year is later than the first income year for which *depreciating assets were allocated to the pool—the *closing pool balance of the pool for the income year before the credit year; or
(ii) if the credit year is the first income year for which *depreciating assets were allocated to the pool—the *closing pool balance of the pool for the credit year; or
(b) for a pool under Division 328—the *opening pool balance of the pool for the credit year.
(7A) There is a reduction to an amount of expenditure included in the second element of the *cost of a *depreciating asset if:
(a) the asset is allocated to a low‑value pool or a pool under Division 328 for or in the income year in which the expenditure was incurred; and
(b) the entity that incurred the expenditure is or becomes entitled to an *input tax credit for the expenditure; and
(c) the entitlement arises in the income year in which the expenditure was incurred.
The reduction is the amount of the input tax credit.
Increasing adjustments
(8) There is an increase under subsection (9) if the entity has an *increasing adjustment (except one that arises under Division 129 or 132 of the *GST Act) in an income year (the adjustment year) that relates directly or indirectly to a *creditable acquisition or *creditable importation to which the pooled expenditure relates.
Note: For an increasing adjustment that arises under Division 129 or 132 of the GST Act, see section 27‑92.
(9) An amount equal to the amount of that *increasing adjustment is added to:
(a) for a low‑value pool:
(i) if the adjustment year is later than the first income year for which *depreciating assets were allocated to the pool—the *closing pool balance of the pool for the income year before the adjustment year; or
(ii) if the adjustment year is the first income year for which *depreciating assets were allocated to the pool—the *closing pool balance of the pool for the adjustment year; or
(b) for a pool under Division 328—the *opening pool balance of the pool for the adjustment year; or
(c) for *in‑house software—the amount of expenditure allocated to the software development pool for the adjustment year; or
(d) for a project pool—the *pool value for the adjustment year.
Decreasing adjustments
(10) There is a decrease under subsection (11) if the entity has a *decreasing adjustment (except one that arises under Division 129 or 132 of the *GST Act) in an income year (also the adjustment year) that relates directly or indirectly to a *creditable acquisition or *creditable importation to which the pooled expenditure relates.
Note: For a decreasing adjustment that arises under Division 129 or 132 of the GST Act, see section 27‑87.
(11) An amount equal to the amount of the *decreasing adjustment is applied in reduction of:
(a) for a low‑value pool:
(i) if the adjustment year is later than the first income year for which *depreciating assets were allocated to the pool—the *closing pool balance of the pool for the income year before the adjustment year; or
(ii) if the adjustment year is the first income year for which *depreciating assets were allocated to the pool—the *closing pool balance of the pool for the adjustment year; or
(b) for a pool under Division 328—the *opening pool balance of the pool for the adjustment year; or
(c) for *in‑house software—the amount of expenditure allocated to the software development pool for the adjustment year; or
(d) for a project pool—the *pool value for the adjustment year.
(12) If the amount available for reduction under subsection (11) is more than the amount referred to in paragraph (11)(a), (b), (c) or (d) (whichever is applicable), the excess is included in the entity’s assessable income unless the entity is an *exempt entity.
27‑105 Other Division 40 expenditure
(1) This section applies to expenditure for which an entity can deduct amounts under Division 40 (but not under Subdivision 40‑B or 40‑E, or Subdivision 40‑I to the extent that that Subdivision relates to project pools).
(2) The amount of the expenditure is reduced if the entity is or becomes entitled to an *input tax credit for a *creditable acquisition or *creditable importation to which the expenditure directly or indirectly relates. The reduction is the amount of the input tax credit that relates to that expenditure.
(3) If the entity has a *decreasing adjustment in an income year that relates directly or indirectly to the expenditure, an amount equal to the decreasing adjustment is included in the entity’s assessable income for that income year.
(4) If the entity has an *increasing adjustment in an income year that relates directly or indirectly to the expenditure, the entity can deduct an amount equal to the increasing adjustment for that income year.
(5) If the entity is a partnership and partners in that partnership can deduct amounts under Division 40 because section 40‑570 or 40‑665 applies, an amount equal to the *input tax credit, the *decreasing adjustment or the *increasing adjustment is apportioned to each of the partners as set out in subsection 40‑570(2) or 40‑665(2).
(6) However, this section does not apply to an *exempt entity.
27‑110 Input tax credit etc. relating to 2 or more things
This Subdivision applies to an *input tax credit, or an *increasing adjustment or *decreasing adjustment, that relates directly or indirectly to 2 or more things of which at least one is a *depreciating asset as if a reasonable proportion of the input tax credit or adjustment related directly or indirectly to each of those depreciating assets and each of those other things.
Division 28—Car expenses
Table of Subdivisions
Guide to Division 28
28‑A Deductions for car expenses
28‑B Choosing which method to use
28‑C The “cents per kilometre” method
28‑F The “log book” method
28‑G Keeping a log book
28‑H Odometer records for a period
28‑I Retaining the log book and odometer records
28‑J Situations where you cannot use, or do not need to use, one of the 2 methods
Guide to Division 28
28‑1 What this Division is about
This Division sets out the rules for working out deductions for car expenses if you own or lease a car or hire a car under a hire purchase agreement.
Table of sections
28‑5 Map of this Division
28‑5 Map of this Division
Flowchart summarising Division 28. Section 28-12 contains the basic operative provision: the 2 methods of calculating car expenses. Subdivision 28-B sets out the rules about choosing a method of calculating car expense deductions. Subdivision 28-C sets out the “cents per km” method and Subdivision 28-F sets out the “log book” method. The “log book” method is more complicated because it involves further Subdivisions about log books and odometer records (Subdivisions 28-G, 28-H and 28-I). Subdivision 28-J sets out exceptions, which cover unusual cases which will not apply to most taxpayers
Subdivision 28‑A—Deductions for car expenses
Table of sections
28‑10 Application of Division 28
28‑12 Car expenses
28‑13 Meaning of car expense
28‑10 Application of Division 28
(1) This Division applies to an individual.
(2) It also applies to a partnership that includes at least one individual, as if the partnership were an individual.
(3) It does not apply to any other entity.
28‑12 Car expenses
(1) If you owned or leased a *car, you can deduct for the car’s expenses an amount or amounts worked out using one of 2 methods.
Note 1: For particular types of cars taken on hire you cannot use one of the 2 methods: see section 28‑165.
Note 2: In certain circumstances the lessee of a luxury car is taken to be its owner (see subsection 242‑15(2)).
Note 3: In certain circumstances (for example, under a hire purchase agreement) the notional buyer of property is taken to be its owner (see subsection 240‑20(2)).
(2) You must use one of the 2 methods unless an exception applies. If you can’t use either of the methods, you can’t deduct anything for the *car expenses.
28‑13 Meaning of car expense
(1) A car expense is a loss or outgoing to do with a *car.
(2) In addition, any of the following is a car expense:
(a) a loss or outgoing to do with operating a *car;
(b) the decline in value of a car.
(3) None of the following is a car expense:
(a) a loss or outgoing incurred, or a payment made, in respect of travel outside Australia;
(b) a taxi fare or similar loss or outgoing.
Subdivision 28‑B—Choosing which method to use
Guide to Subdivision 28‑B
28‑14 What this Subdivision is about
This Subdivision sets out the rules about choosing a method of calculating car expense deductions.
Table of sections
28‑15 Choosing between the 2 methods
Operative provision
28‑20 Rules governing choice of method
28‑15 Choosing between the 2 methods
(1) Below is a diagram giving information about the 2 methods of calculating car expense deductions.
(2) The 2 methods give you the choice of which method best suits your situation and needs. For instance, one method may involve more paperwork than the other, but could give you bigger deductions.
Diagram giving information about the two methods of calculating car expense deductions.
The “Cents per km” method has no special eligibility rules. The expense base consists of business kms travelled. The deduction is calculated by multiplying the business kms travelled by X cents for each km. Using the “Cents per km” method, you do not have to substantiate the expenses.
The “Log book” method has a special eligibility rule: the car must have been “held”. The expense base consists of the dollar value of car expenses e.g. fuel, tyres, servicing. The deduction is calculated by multiplying the dollar value of car expenses by the business use percentage. Using the “Log book” method, expenses you do have to substantiate the expenses
Operative provision
28‑20 Rules governing choice of method
(1) You can choose only one method for all the *car expenses for the *car for the income year. Choosing one method precludes the other method.
(2) However, you can change your choice for the income year.
Note: Example: You choose the “log book” method and deduct $1,000. On audit, the Commissioner finds that your claim is too high and should be reduced to $500. You would have been able to deduct $700 if you had chosen the “cents per kilometre” method. This rule lets you change your choice and deduct the $700.
(3) You can also choose different methods for the same *car for different income years and different methods for different cars for the same year.
Subdivision 28‑C—The “cents per kilometre” method
Table of sections
28‑25 How to calculate your deduction
28‑30 Capital allowances
28‑35 Substantiation
28‑25 How to calculate your deduction
(1) To calculate your deduction using the “cents per kilometre” method, use this formula:
Start formula Number of *business kilometres travelled by the *car in the income year times Rate of cents/kilometre determined under subsection (4) for the car for the income year end formula
(2) But you can use this formula for the first 5,000 *business kilometres only. If the *car travelled more than 5,000 business kilometres, you must discard the kilometres in excess of 5,000.
Note: Example: If the car travelled 5,085 business kilometres, you could claim for 5,000, and would lose the extra 85.
(3) Business kilometres are kilometres the *car travelled in the course of:
(a) producing your assessable income; or
(b) your *travel between workplaces.
You calculate the number of business kilometres by making a reasonable estimate.
(4) For the purposes of subsection (1), the Commissioner may, by legislative instrument, determine rates of cents per kilometre for cars for an income year.
(5) In determining a rate, the Commissioner must have regard to the average operating costs for the cars to be covered by that rate.
Note: Examples of operating costs include fixed costs such as registration, insurance and depreciation, and variable costs such as fuel and maintenance.
28‑30 Capital allowances
If a *balancing adjustment event occurs for the *car, you will need to refer to the capital allowances rules in Division 40 to find out how using this method affects the operation of those rules. See section 40‑370 (about balancing adjustments for some cars).
28‑35 Substantiation
To use this method, you do not need to substantiate the *car expenses for the *car.
Subdivision 28‑F—The “log book” method
Table of sections
28‑90 How to calculate your deduction
28‑95 Eligibility
28‑100 Substantiation
28‑90 How to calculate your deduction
(1) To use the “log book” method, you multiply the amount of each *car expense by the *business use percentage.
The expense
(2) The expense must qualify as a deduction under some provision of this Act outside this Division (or would qualify if, while you *held the *car, you had used it only in producing your assessable income). If only part of the expense would qualify, you multiply that part by the *business use percentage.
Note: Example: You borrow money to buy a car. You make repayments of principal and payments of interest.
Note: You cannot deduct the repayments of principal because they are capital expenses.
Note: The interest payments would be deductible in full if, throughout the income year, you had used the car only in producing your assessable income.
Note: Using the “log book” method:
Note: if you held the car for the whole income year—multiply the interest payments by the business use percentage;
Note: if you held the car for only 6 months of the income year—multiply the interest payments for those 6 months by the business use percentage.
To find out whether an expense qualifies as a deduction under this Act, see Division 8 (Deductions).
The percentage
(3) The business use percentage is calculated by dividing:
the number of *business kilometres that the *car travelled in the period when you *held it during the income year;
by
the total number of kilometres that the car travelled in that period;
and expressing the result as a percentage.
(4) Business kilometres are kilometres the *car travelled in the course of:
(a) producing your assessable income; or
(b) your *travel between workplaces.
(5) You calculate the number of business kilometres by making a reasonable estimate. The estimate must take into account all relevant matters, including:
(a) any log books, odometer records or other records you have; and
(b) any variations in the pattern of use of the *car; and
(c) any changes in the number of cars you used in the course of producing your assessable income.
(6) You hold a *car while you own it, or it is leased to you, for use in the course of producing your assessable income, even if it is also used for some other purpose.
Note 1: In certain circumstances the lessee of a luxury car is taken to be its owner (see subsection 242‑15(2)).
Note 2: In certain circumstances the notional buyer of property is taken to be its owner (see subsection 240‑20(2)).
28‑95 Eligibility
You can use this method only if you *held the *car for some or all of the income year.
28‑100 Substantiation
(1) To use this method, you must substantiate the *car expenses under Subdivision 900‑C.
(2) You must also keep a log book. Subdivision 28‑G explains:
how often you need to keep a log book;
how to keep a log book.
The log book is relevant to estimating the number of business kilometres the *car travelled in the period when you *held it during the income year.
(3) You must keep odometer records for the period when you *held the *car during the income year. Subdivision 28‑H tells you about odometer records, which document the total number of kilometres the car travelled in that period.
(4) You must record the following information, in writing, before you lodge your *income tax return:
(a) your estimate of the number of *business kilometres; and
(b) the *business use percentage.
However, the Commissioner may allow you to record the information later.
(5) You must retain the log book and the odometer records. Subdivision 28‑I has the rules about this.
Subdivision 28‑G—Keeping a log book
Guide to Subdivision 28‑G
28‑105 What this Subdivision is about
This Subdivision tells you how to keep a log book. A log book is relevant to estimating the number of business kilometres the car travelled in the period when you held it during the income year.
Table of sections
28‑110 Steps for keeping a log book
Operative provisions
28‑115 Income years for which you need to keep a log book
28‑120 Choosing the 12 week period for a log book
28‑125 How to keep a log book
28‑130 Replacing one car with another
28‑110 Steps for keeping a log book
There are 3 steps you need to follow in keeping a log book:
identify an income year for which to keep a log book;
choose a period of at least 12 weeks for the log book to cover;
record journeys made in the car during the log book period in the course of producing your assessable income.
Operative provisions
28‑115 Income years for which you need to keep a log book
(1) You need to keep a log book for the first income year for which you use this method for the *car.
(2) Having kept a log book for one income year, you don’t need to keep a new one for the next 4 or more income years unless subsection (3) or (4) requires it. If you haven’t kept a new log book for 4 income years in a row, you must keep one for the next income year.
Note: Example: If you keep a log book in 1997‑98, you would need to keep the next one in 2002‑2003, unless subsection (3) or (4) requires one sooner.
(3) You must keep a log book for an income year if the Commissioner sends you a notice before the year directing you to keep a log book for the *car for that year.
(4) You must keep a log book for an income year if, during that year, you get one or more additional *cars for which you want to use the “log book” method for that year.
(5) When you replace one *car with another, you might have a period when you *hold both the new car and the old car, or a period when you no longer *hold the old car but do not yet hold the new car. In both these cases, you are treated for the purposes of subsection (4) as if you held the one car continuously.
(6) You may choose to keep a log book for an income year even if you don’t need to; for example, because you want to establish a higher *business use percentage.
28‑120 Choosing the 12 week period for a log book
(1) The log book must cover a continuous period of at least 12 weeks throughout which you *held the *car. If you hold the car for less than 12 weeks, the period must be the entire period for which you held the car.
(2) The period may overlap the start or end of the income year, so long as it includes part of the year.
(3) If you want to use the “log book” method for 2 or more *cars for the same income year, the log books for those cars must cover periods that are concurrent.
28‑125 How to keep a log book
(1) It is in your interests to record in the log book any journey made in the *car during the log book period in the course of producing your assessable income. If a journey is not recorded, the log book will indicate a lower *business use percentage than is actually the case.
(2) A journey is recorded by making in the log book an entry specifying:
(a) the day the journey began and the day it ended;
(b) the *car’s odometer readings at the start and end of the journey;
(c) how many kilometres the car travelled on the journey;
(d) why the journey was made.
The record must be made at the end of the journey or as soon as possible afterwards.
(3) If 2 or more journeys in a row are made in the *car on the same day in the course of producing your assessable income, they can be recorded as a single journey.
(4) The following must be entered in the log book:
(a) when the log book period begins and ends;
(b) the *car’s odometer readings at the start and the end of the period;
(c) the total number of kilometres that the car travelled during the period;
(d) the number of kilometres that the car travelled, in the course of producing your assessable income, on journeys recorded in the log book;
(e) the number of kilometres referred to in paragraph (d), expressed as a percentage of the total number referred to in paragraph (c).
Each of the entries must be made at or as soon as possible after the start or end of the period, as appropriate.
(5) Each entry in the log book must be in English.
28‑130 Replacing one car with another
(1) For the purposes of using the “log book” method, you may nominate one *car as having replaced another car with effect from a day specified in the nomination.
(2) After the nomination takes effect, the replacement *car is treated as the original car, and the original car is treated as a different car. This means that you do not need to repeat for the replacement car the steps you have already taken for the original car under this Subdivision.
(3) You must record the nomination in writing before you lodge your *income tax return for the income year in which the nomination takes effect. However, the Commissioner may allow you to do it later.
(4) You must retain the nomination document until the end of the period for which you must retain the last log book that you began to keep for the original *car before the day of effect of the nomination.
(5) Section 28‑150 (which is about retaining log books) applies to the nomination document in the same way as it applies to that last log book.
Subdivision 28‑H—Odometer records for a period
Guide to Subdivision 28‑H
28‑135 What this Subdivision is about
This Subdivision tells you how to keep odometer records for a car during a particular period. Odometer records document the total number of kilometres the car travelled during a particular period.
Table of sections
Operative provision
28‑140 How to keep odometer records for a car for a period
Operative provision
28‑140 How to keep odometer records for a car for a period
(1) Odometer records for a period are kept in the form of a document in which the following are entered:
(a) the *car’s odometer readings at the start and the end of the period;
(b) if there is a nomination under section 28‑130 to replace the car with another *car with effect from a day in that period—the odometer readings, at the end of that day, of both cars affected by the nomination.
(2) Each entry under subsection (1) must be in English and must be made at or as soon as possible after the start or end of the period, or the end of the specified day, as appropriate.
(3) The following must also be entered in the document:
(a) the *car’s make, model and registration number (if any);
(b) if the car has an internal combustion engine—its engine capacity expressed in cubic centimetres;
(c) if there is a nomination under section 28‑130 to replace the car with another *car—the corresponding details for the other car affected by the nomination.
(4) Each entry under subsection (3) must be made in English and must be made before you lodge your *income tax return.
(5) The Commissioner may allow you to make an entry under this section after you lodge your *income tax return.
Subdivision 28‑I—Retaining the log book and odometer records
Table of sections
28‑150 Retaining the log book for the retention period
28‑155 Retaining odometer records
28‑150 Retaining the log book for the retention period
(1) You must retain the log book:
(a) first, until the end of the latest income year for which you rely on the log book to support your calculation of the *business use percentage for the *car; and
(b) then for another 5 years.
The period for which you must retain the log book is called the retention period.
(2) The 5 years start on the due day for lodging your *income tax return for that latest income year. If you lodge your return later, the 5 years start on the day you lodge it.
(3) However, the *retention period is extended if, when the 5 years end, you are involved in a dispute with the Commissioner that relates to a deduction worked out using a *business use percentage that you are relying on the log book to support. See section 900‑170.
(4) If you do not retain the log book for the *retention period, you cannot deduct any amount worked out using a *business use percentage that you are relying on the log book to support. If you have already deducted such an amount, your assessment may be amended to disallow the deduction.
(5) For the purposes of the rules about retaining and producing records of expenses (see Subdivision 900‑G), the log book is treated as a record of the *car expenses for each year for which you use a *business use percentage that you are relying on the log book to support.
(6) If you lose the log book, there are rules that might help you in section 900‑205. For the purposes of the rules about relief from the effects of failing to substantiate (see Subdivision 900‑H), not doing something required by this Division is treated in the same way as not doing something necessary to follow the rules in Division 900.
28‑155 Retaining odometer records
(1) You must retain your odometer records relating to the period when you *held the *car in the income year.
(2) If you keep a log book for the income year, you must retain the odometer records for the same period as the log book, and section 28‑150 applies to them in the same way as it applies to the log book.
(3) If you don’t keep a log book for the income year, you must retain the odometer records for the same period as written evidence of a *car expense for the *car for the income year, and section 900‑75 applies to them in the same way as it applies to written evidence of an expense.
Note: Section 900‑75 is about retaining written evidence of a car expense.
Subdivision 28‑J—Situations where you cannot use, or do not need to use, one of the 2 methods
Guide to Subdivision 28‑J
28‑160 What this Subdivision is about
This Subdivision sets out the situations where you cannot use, or don’t need to use, either of the 2 methods. These situations involve either the nature of your car or the way you use it.
Table of sections
Operative provisions
28‑165 Exception for particular cars taken on hire
28‑170 Exception for particular cars used in particular ways
28‑175 Further miscellaneous exceptions
28‑180 Car expenses related to award transport payments
28‑185 Application of Subdivision 28‑J to recipients and payers of certain withholding payments
Operative provisions
28‑165 Exception for particular cars taken on hire
(1) For particular types of *cars taken on hire you cannot use one of the 2 methods to calculate your deductions for *car expenses.
(2) Instead, you must calculate the deductions under the normal principles governing deductions, including the rules for apportioning a loss or outgoing that is only partly attributable to producing assessable income.
(3) This section applies to a taxi taken on hire.
(4) It also applies to a *motor vehicle taken on hire under an agreement of a kind ordinarily entered into by people who take motor vehicles on hire intermittently, as the occasion requires, on an hourly, daily, weekly or short term basis, except if the motor vehicle:
(a) has been taken on hire under successive agreements of a kind that result in substantial continuity of the motor vehicle being taken on hire; or
(b) it is reasonable to expect that the motor vehicle will be taken on hire under successive agreements of a kind that will so result.
28‑170 Exception for particular cars used in particular ways
(1) For particular types of *cars used in particular ways you don’t need to use one of the 2 methods to calculate your deductions for *car expenses.
(2) You may use one of the 2 methods, or you may instead calculate the deductions under the normal principles governing deductions, including the rules for apportioning a loss or outgoing that is only partly attributable to producing assessable income.
(3) This section applies if, whenever you used the *car in the income year:
(a) the car was covered by the description in column 2 of an item in the table below; and
(b) you used the car as described in column 3 of that item.
Item
Column 2Particular car
Column 3Exempt use
1.
The *car was:(a) a panel van or utility truck; or(b) any other road vehicle designed to carry a load of less than 1 tonne (other than a vehicle designed principally to carry passengers); or
You used the car only in one or more of the following ways:(a) in the course of producing your assessable income;(b) to go between your residence and a place where you use the car in the course of producing your assessable income;(c) by providing the car to someone else to drive between his or her residence and a place where the car is used in the course of producing your assessable income;
(c) a taxi.
(d) for the purpose of travel that is incidental to using the car in the course of producing your assessable income;(e) for your own or someone else’s private use that was minor, infrequent and irregular.
2.
The *car was part of the *trading stock of a *business of selling cars that you carried on.
You used the car in the course of the business.
3.
The *car was any type of car.
You let the car on lease or hire in the course of a *business of letting cars on lease or hire that you carry on.
4.
The *car was any type of car.
As an employer, you provided the car for the exclusive use of one or more of the following:(a) your employees;(b) their *relatives;in circumstances where one or more of them was entitled to use the car for private purposes.Note: This Subdivision also applies to entities that are not employers, but pay (or are liable to pay) withholding payments covered by subsection 28‑185(3).
28‑175 Further miscellaneous exceptions
(1) This section lists some miscellaneous cases where you don’t need to use one of the 2 methods to calculate your deductions for *car expenses.
(2) You may use one of the 2 methods, or you may instead calculate the deductions under the normal principles governing deductions, including the rules for apportioning a loss or outgoing that is only partly attributable to producing assessable income.
(3) The cases are as follows:
(a) the *car was unregistered throughout the period when you *held it during the income year, and during that period you used it principally in the course of producing your assessable income; or
(b) at some time during the income year the *car was part of the *trading stock of a *business of selling cars that you carried on, and you didn’t use the car at any time during that year; or
(c) the expense is to do with repairs to or other work on the *car, and you incurred it in the course of a *business that you carried on of doing repairs or other work on cars.
In applying paragraph (a), the car is taken to be registered in a particular place while it is lawful to drive the car on a public road there.
28‑180 Car expenses related to award transport payments
(1) Subdivision 900‑I (Award transport payments) allows certain losses or outgoings to be deducted without getting written evidence. The losses or outgoings are *transport expenses related to an allowance or reimbursement paid or payable to you by your employer under an *industrial instrument that was in force on 29 October 1986.
Note: This Subdivision also applies to entities that are not employers, but pay (or are liable to pay) withholding payments covered by subsection 28‑185(3).
(2) If that Subdivision lets you deduct *car expenses, or parts of *car expenses, without getting written evidence, you don’t need to use any of the 2 methods to calculate your deductions for those expenses or parts of expenses.
(3) However, your use of the 2 methods for other *car expenses you incur for the *car for the income year is affected, unless you elect not to rely on Subdivision 900‑I. Section 900‑250 deals with this matter.
28‑185 Application of Subdivision 28‑J to recipients and payers of certain withholding payments
Application to recipients
(1) If an individual receives, or is entitled to receive, *withholding payments covered by subsection (3), this Subdivision applies to him or her:
(a) in the same way as it applies to an employee; and
(b) as if an entity (a notional employer) that makes (or is liable to make) such payments to him or her were his or her employer; and
(c) as if any other individual who receives, or is entitled to receive, such payments from a notional employer were also an employee of the notional employer.
Application to payers
(2) This Division applies to an entity that makes, or is liable to make, *withholding payments covered by subsection (3):
(a) in the same way as it applies to an employer; and
(b) as if an individual to whom the entity makes (or is liable to make) such payments were the entity’s employee.
Withholding payments covered
(3) This subsection covers a *withholding payment covered by any of the provisions in Schedule 1 to the Taxation Administration Act 1953 listed in the table.
30‑C Rules applying to particular gifts of property
30‑CA Administrative requirements relating to ABNs
30‑DA Donations to political parties and independent candidates and members
30‑DB Spreading certain gift and covenant deductions over up to 5 income years
30‑G Index to this Division
Guide to Division 30
30‑1 What this Division is about
This Division sets out the rules for working out deductions for certain gifts or contributions that you make.
Table of sections
30‑5 How to find your way around this Division
30‑10 Index
30‑5 How to find your way around this Division
(1) You should start at Subdivision 30‑A unless you are making a contribution or gift to a political party, independent candidate or member.
Note: Subdivision 30‑DA deals with the deductibility of contributions and gifts to political parties, independent candidates and members.
(2) Subdivision 30‑A contains a table of all the gifts and contributions that you can deduct. You need to look at the table to see whether the type of gift or contribution you are making is covered by it.
(3) In some cases, the table sends you off to Subdivision 30‑B. It has a number of tables that list particular funds, authorities or institutions that deductible gifts can be made to.
(4) In other cases, the table sends you off to Subdivision 30‑C. It contains rules that apply to particular gifts of property.
(4AA) Subdivision 30‑BA provides for the Commissioner to endorse as a deductible gift recipient an entity that is, or operates, a fund, authority or institution. The relevance of the Subdivision to you is that generally you can deduct only a gift you make to a recipient that is endorsed or named in:
(a) this Division; or
(b) regulations made for the purposes of this Division.
Note: The fact that gifts to a recipient registered in the Australian Business Register are deductible will be shown in the Register.
(4AB) Subdivision 30‑CA sets out administrative rules which do not directly affect whether you can deduct a gift you make. The rules require:
(a) a receipt issued by an entity for a gift to the entity or to a fund, authority or institution operated by the entity to show the entity’s ABN; and
(b) the Australian Business Registrar to enter in the Australian Business Register a statement in relation to an entity entered in the Register if:
(i) gifts to the entity are deductible; or
(ii) gifts to a fund, authority or institution operated by the entity are deductible.
(4B) Subdivision 30‑DB allows you to spread deductions for certain gifts and covenants over up to 5 income years.
30‑10 Index
There is an index to this Division in Subdivision 30‑G.
Subdivision 30‑A—Deductions for gifts or contributions
Table of sections
30‑15 Table of gifts or contributions that you can deduct
30‑17 Requirements for certain recipients
30‑15 Table of gifts or contributions that you can deduct
(1) You can deduct a gift or contribution that you make in the situations set out in the following table. It tells you:
who the recipient of the gift or contribution can be; and
the type of gift or contribution that you can make; and
how much you can deduct for the gift or contribution; and
any special conditions that apply.
(2) A testamentary gift or contribution is not deductible under this section.
Note: Subdivision 30‑DA deals with the deductibility of contributions and gifts to political parties, independent candidates and members.