• Specific Year
    Any

INCOME TAX ASSESSMENT ACT 1936 - SECT 78A Certain gifts not to be allowable deductions

INCOME TAX ASSESSMENT ACT 1936 - SECT 78A

Certain gifts not to be allowable deductions

  (1)   In this section:

"agreement" includes any agreement, arrangement or understanding, whether formal or informal or express or implied, and whether or not enforceable by legal proceedings (whether or not the agreement, arrangement or understanding was intended to be so enforceable).

"associate" , in relation to the donor of a gift, means:

  (a)   in the case of a donor being a natural person:

  (i)   a relative of the donor;

  (ii)   a partner of the donor;

  (iii)   if a partner of the donor is a natural person--the spouse of that partner;

  (iv)   a trustee of a trust estate where the donor or a person who is an associate of the donor by virtue of subparagraph   (i), (ii), (iii) or (v) benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts; or

  (v)   a company where:

  (A)   the company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the donor, of a person who is an associate of the donor by virtue of subparagraph   (i), (ii), (iii) or (iv) or of a company that is an associate of the donor by virtue of another application of this subparagraph; or

  (B)   the donor is, the persons who are associates of the donor by virtue of subparagraphs   (i), (ii), (iii) and (iv) are, or the donor and the persons who are associates of the donor by virtue of those paragraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the company; or

  (b)   in the case of a donor being a company:

  (i)   a partner of the donor company;

  (ii)   if a partner of the donor company is a natural person--the spouse of that partner;

  (iii)   another person where:

  (A)   the donor company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of that person, whether those directions, instructions or wishes are communicated directly to the donor company or its directors, or through any interposed companies; or

  (B)   that person is, or that person and the persons who, if that person were the donor, would be associates of that person by virtue of paragraph   (a) or by virtue of another subparagraph of this paragraph are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the donor company;

  (iv)   a trustee of a trust estate where the donor company or a person who is an associate of the donor company by virtue of subparagraph   (i), (ii), (iii), (v) or (vi) benefits, or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust, either directly or through any interposed companies, partnerships or trusts;

  (v)   another company where:

  (A)   the other company is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the donor company, of a person who is an associate of the donor company by virtue of subparagraph   (i), (ii), (iii), (iv) or (vi) or of a company that is an associate of the donor company by virtue of another application of this subparagraph; or

  (B)   the donor company is, the persons who are associates of the donor company by virtue of subparagraphs   (i), (ii), (iii), (iv) and (vi) are, or the donor company and the persons who are associates of the donor company by virtue of those subparagraphs are, in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of the other company; or

  (vi)   another person who, if a third person who is an associate of the donor company by virtue of subparagraph   (iii) were the donor, would be an associate of that third person by virtue of paragraph   (a) or by virtue of another subparagraph of this paragraph.

  (2)   Subject to this section, a gift of money, or of property other than money, made by a person (in this section referred to as the donor ) to a fund, authority, institution or person is not an allowable deduction under Division   30 of the Income Tax Assessment Act 1997 where:

  (a)   by reason of any act, transaction or circumstance that has occurred, will occur, or may reasonably be expected to occur, being an act, transaction or circumstance occurring as part of, in connexion with or as a result of:

  (i)   the making or receipt of the gift; or

  (ii)   any agreement or scheme entered into in association with the making or receipt of the gift;

    the amount or value of the benefit derived by the fund, authority, institution or person as a consequence of the gift is, will be, or may reasonably be expected to be, less than the amount or value at the time when the gift was made of the property comprising the gift;

  (b)   by reason of any act, transaction or circumstance of a kind referred to in paragraph   (a), any fund, authority, institution or person other than the fund, authority, institution or person to which the gift was made, makes, becomes liable to make, or may reasonably be expected to make or to become liable to make, a payment, or transfers, becomes liable to transfer, or may reasonably be expected to transfer or to become liable to transfer, any property, to any person or incurs, becomes liable to incur, or may reasonably be expected to incur or to become liable to incur, any other detriment, disadvantage, liability or obligation;

  (c)   by reason of any act, transaction or circumstance of a kind referred to in paragraph   (a), the donor or an associate of the donor has obtained, will obtain or may reasonably be expected to obtain any benefit, advantage, right or privilege other than the benefit of any deduction that, but for this section, would be allowable from the assessable income of the donor under Division   30 of the Income Tax Assessment Act 1997 ; or

  (d)   by reason of any agreement or scheme entered into as part of or in association with the making of the gift, any property, other than property comprising the gift, has been acquired or will be acquired, whether directly or indirectly, from the donor or an associate of the donor by that fund, authority, institution or person or by another fund, authority, institution or person.

  (3)   Without limiting the application of subsection   (2), where the terms and conditions on which a gift of property other than money is made are such that the fund, authority, institution or person to which the gift is made does not receive immediate custody and control of the property, does not have the unconditional right to retain custody and control of the property in perpetuity to the exclusion of the donor or an associate of the donor or does not obtain an immediate, indefeasible and unencumbered legal and equitable title to the property, paragraph   (2)(c) shall be deemed to apply in relation to that gift.

  (4)   Paragraph   (2)(a) does not prevent a deduction under Division   30 of the Income Tax Assessment Act 1997 from being allowed from the assessable income of the donor where the amount or value of the benefit derived by the fund, authority, institution or person as a consequence of the gift is, will be, or may reasonably be expected to be, less than the amount or value at the time when the gift was made of the property comprising the gift by reason only that the fund, authority, institution or person has incurred, will incur, or may reasonably be expected to incur, expenses for the purpose of obtaining or soliciting the gift, being expenses that, in the opinion of the Commissioner, are reasonable in relation to the value of the gift.

  (5)   This section does not prevent a deduction under section   30 - 15 of the Income Tax Assessment Act 1997 (because of item   4, 5 or 6 of the table in that section) from being allowed from the assessable income of the donor in respect of a gift of property other than money by reason only that the terms and conditions on which the gift was made are such, or the effect of any arrangement (within the meaning of that Act) entered into in association with the making or receipt of the gift is such, that the value of the gift may be reduced in accordance with section   30 - 220 of that Act.

Method statement

Step 1.   Work out each capital gain (except a capital gain that is disregarded) that the company made during that year of income. Do so without indexing any amount used to work out the cost base of a CGT asset.

Step 2.   Total the capital gain or gains worked out under Step 1. The result is the net capital gain for that year of income.

 

Commonwealth Coat of Arms of Australia

Income Tax Assessment Act 1936

No.   27, 1936

Compilation No.   183

Compilation date:   1 January 2024

Includes amendments:   Act No. 61, 2023, Act No. 69, 2023 and Act No. 101, 2023

Registered:   11 January 2024

This compilation is in 7 volumes

Volume 1:   sections   1- 78A

Volume 2:   sections   79A- 121L

Volume 3:   sections   124ZM- 204

Volume 4:   sections   251R- 468

Volume 5:   Schedules

Volume 6:   Endnotes 1-4

Volume 7:   Endnote 5

Each volume has its own contents

About this compilation

This compilation

This is a compilation of the Income Tax Assessment Act 1936 that shows the text of the law as amended and in force on 1 January 2024 (the compilation date ).

The notes at the end of this compilation (the endnotes ) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the Register for the compiled law.

Application, saving and transitional provisions for provisions and amendments

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Editorial changes

For more information about any editorial changes made in this compilation, see the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the Register for the compiled law.

Self - repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

 

 

 

Contents

Part   III--Liability to taxation

Division   3--Deductions

79A   Rebates for residents of isolated areas

79B   Rebates for members of Defence Force serving overseas

82   Double deductions

Subdivision   D--Losses and outgoings incurred under certain tax avoidance schemes

82KH   Interpretation

82KJ   Deduction not allowable in respect of certain pre - paid outgoings

82KK   Schemes designed to postpone tax liability

82KL   Tax benefit not allowable in respect of certain recouped expenditure

Subdivision   H--Period of deductibility of certain advance expenditure

82KZL   Interpretation

82KZLA   Subdivision   does not apply to financial arrangements to which Subdivision   250 - E applies

82KZLB   How this Subdivision   applies to deductible R&D expenditure incurred to associates in earlier income years

82KZM   Expenditure by small and medium business entities and individuals incurring non - business expenditure

82KZMA   Application of section   82KZMD

82KZMD   Business expenditure and non - business expenditure by non - individual

82KZME   Expenditure under some agreements

82KZMF   Proportional deduction

82KZMG   Deductions for certain forestry expenditure

82KZMGA   Deductions for certain forestry expenditure

82KZMGB   CGT event in relation to interest in 82KZMG agreement

82KZN   Transfer etc. of rights under agreement

82KZO   Partnership changes where entire interest in agreement rights is not transferred

Division   3A--Convertible notes

82LA   Application of Division

82L   Interpretation

82M   New loans and replacement loans

82P   Bonus share allotments

82Q   Classes of shares

82R   Interest on certain convertible notes not to be an allowable deduction

82SA   Interest on certain convertible notes to be an allowable deduction--where loan made on or after 1   January 1976

82T   Value of shares

Division   5--Partnerships

90   Interpretation

91   Liability of partnerships

92   Income and deductions of partner

92A   Deductions in respect of outstanding subsection   92(2AA) amounts

94   Partner not having control and disposal of share in partnership income

Division   5A--Income of certain limited partnerships

Subdivision   A--Preliminary

94A   Object

94B   Interpretation

94C   Continuity of limited partnership not affected by changes in composition

Subdivision   B--Corporate limited partnerships

94D   Corporate limited partnerships

94E   Continuity of business test

94F   Change in composition of limited partnership--election that partnership not be treated as an eligible limited partnership

94G   Continuity of ownership test

Subdivision   C--Corporate tax modifications applicable to corporate limited partnerships

94H   Corporate tax modifications applicable to corporate limited partnerships

94J   Company includes corporate limited partnership

94K   Partnership does not include corporate limited partnership

94L   Dividend includes distribution of corporate limited partnership

94M   Drawings etc. deemed to be dividends paid out of profits

94N   Private company does not include corporate limited partnership

94P   Share includes interest in corporate limited partnership

94Q   Shareholder includes partner in corporate limited partnership

94R   Liquidator may include partner in corporate limited partnership

94S   Continuity of corporate limited partnership not affected by changes in composition

94T   Residence of corporate limited partnership

94U   Incorporation

94V   Obligations and offences

94X   Modification of loss provisions

Division   6--Trust income

95AAA   Simplified outline of the relationship between this Division, Division   6E and Subdivisions   115 - C and 207 - B of the Income Tax Assessment Act 1997

95AAB   Adjustments under Subdivision   115 - C or 207 - B of the Income Tax Assessment Act 1997 --references in this Act to assessable income under section   97, 98A or 100

95AAC   Adjustments under Subdivision   115 - C or 207 - B of the Income Tax Assessment Act 1997 --references in this Act to liabilities under section   98, 99 or 99A

95AAD   Division does not apply in relation to AMIT

95   Interpretation

95AB   Modifications for special disability trusts

95A   Special provisions relating to present entitlement

95B   Certain beneficiaries deemed not to be under legal disability

96   Trustees

97   Beneficiary not under any legal disability

97A   Beneficiaries who are owners of farm management deposits

98   Liability of trustee

98A   Non - resident beneficiaries assessable in respect of certain income

98B   Deduction from beneficiary's tax

99   Certain trust income to be taxed as income of an individual

99A   Certain trust income to be taxed at special rate

99B   Receipt of trust income not previously subject to tax

99C   Determining whether property is applied for benefit of beneficiary

99D   Refund of tax to non - resident beneficiary

99E   Later trust not taxed on income already taxed under subsection   98(4)

99G   Amounts covered by withholding requirement

99GA   Amounts covered by sovereign immunity exemption

99H   Late payments

100   Beneficiary assessable in respect of certain trust income

100AA   Failure to pay or notify present entitlement of exempt entity

100AB   Adjusted Division   6 percentage exceeding benchmark percentage: present entitlement of exempt entity

100A   Present entitlement arising from reimbursement agreement

101   Discretionary trusts

101A   Income of deceased received after death

102   Revocable trusts

Division   6AAA--Special provisions relating to non - resident trust estates etc.

Subdivision   A--Preliminary

102AAA   Object of Division

102AAB   Interpretation

102AAC   Each listed country and unlisted country to be treated as a separate foreign country

102AAD   Subject to tax --application of subsection   324(2)

102AAE   Listed country trust estates

102AAF   Public unit trusts

102AAG   When entity is in a position to control a trust estate

102AAH   Non - resident family trusts

102AAJ   Transfer of property or services

102AAK   Deemed transfers of property or services to trust estate

102AAL   Division   not to apply to transfers by trustees of deceased estates

Subdivision   B--Payment of interest by taxpayer on distributions from certain non - resident trust estates

102AAM   Payment of interest by taxpayer on distributions from certain non - resident trust estates

102AAN   Collection etc. of interest

Subdivision   D--Accruals system of taxation of certain non - resident trust estates

102AAS   Object of Subdivision

102AAT   Accruals system of taxation--attributable taxpayer

102AAU   Attributable income of a trust estate

102AAV   Double tax agreements to be disregarded

102AAW   Certain provisions to be disregarded in calculating attributable income

102AAY   Modified application of trading stock provisions

102AAZ   Modified application of depreciation provisions

102AAZB   General modifications--CGT

102AAZBA   Modified application of CGT--effect of certain changes of residence

102AAZC   Modified application of loss provisions--pre - 1990 - 91 losses

102AAZD   Assessable income of attributable taxpayer to include attributable income of trust estate to which taxpayer has transferred property or services

102AAZE   Accruals system of taxation does not apply to small amounts

102AAZF   Only resident partners, beneficiaries etc. liable to be assessed as a result of attribution

102AAZG   Keeping of records

Division   6AA--Income of certain children

102AA   Interpretation

102AB   Application of Division

102AC   Persons to whom Division   applies

102AD   Taxable income to which Division   applies

102AE   Eligible assessable income

102AF   Employment income and business income

102AG   Trust income to which Division   applies

102AGA   Transfer of property as the result of a family breakdown

Division   6A--Alienation of income

102A   Interpretation

102B   Certain income transferred for short periods to be included in assessable income of transferor

102C   Effect of certain transfers of rights to receive income from property

102CA   Consideration in respect of transfer to be included in assessable income of transferor in certain cases

Division   6C--Income of certain public trading trusts

102M   Interpretation

102MA   Arrangements not covered

102MB   Investing in land

102MC   When trading business not carried on

102MD   Exempt institution that is eligible for a refund not treated as exempt entity

102N   Trading trusts

102NA   Certain interposed trusts not trading trusts

102P   Public unit trusts

102Q   Resident unit trusts

102R   Public trading trusts

102S   Taxation of net income of public trading trust

102T   Modified application of Act in relation to certain unit trusts

Division   6D--Provisions relating to certain closely held trusts

Subdivision   A--Overview

102UA   What this Division   is about

Subdivision   B--Interpretation

102UB   Definitions--general

102UC   Closely held trust

102UD   Trustee beneficiary

102UE   Meaning of untaxed part

102UG   Correct TB statement

102UH   TB statement period

102UI   Tax - preferred amount

102UJ   Extended concept of present entitlement to capital of a trust

Subdivision   C--Trustee beneficiary non - disclosure tax on share of net income

102UK   Trustee beneficiary non - disclosure tax where no correct TB statement

102UL   Exclusion of directors of closely held trust from liability to pay tax

102UM   Trustee beneficiary non - disclosure tax where share is distributed to trustee of closely held trust

Subdivision   D--Payment etc. of trustee beneficiary non - disclosure tax

102UN   Amount of trustee beneficiary non - disclosure tax reduced by notional tax offset

102UO   Payment of trustee beneficiary non - disclosure tax

102UP   Late payment of trustee beneficiary non - disclosure tax

102UR   Notice of liability

102URA   Request for notice of liability

102USA   Recovery of trustee beneficiary non - disclosure tax from trustee beneficiaries providing incorrect information etc. to head trustee

Subdivision   E--Making correct TB statement about trustee beneficiaries of tax - preferred amounts

102UT   Requirement to make correct TB statement about trustee beneficiaries of tax - preferred amounts

Subdivision   F--Special provisions about tax file numbers

102UU   Trustee beneficiary may quote tax file number to trustee of closely held trust

102UV   Trustee of closely held trust may record etc. tax file number

Division   6E--Adjustment of Division   6 assessable amount in relation to capital gains, franked distributions and franking credits

102UW   Application of Division

102UX   Adjustment of Division   6 assessable amount in relation to capital gains, franked distributions and franking credits

102UY   Interpretation

Division   7--Private companies

102V   Application of Division   to non - share dividends

103   Interpretation

103A   Private companies

109   Excessive payments to shareholders, directors and associates deemed to be dividends

Division   7A--Distributions to entities connected with a private company

Subdivision   A--Overview of this Division

109B   Simplified outline of this Division

Subdivision   AA--Application of Division

109BA   Application of Division   to non - share dividends

109BB   Application of Division   to closely - held corporate limited partnerships

109BC   Application of Division   to non - resident companies

Subdivision   B--Private company payments, loans and debt forgiveness are treated as dividends

109C   Payments treated as dividends

109CA   Payment includes provision of asset

109D   Loans treated as dividends

109E   Amalgamated loan from a previous year treated as dividend if minimum repayment not made

109F   Forgiven debts treated as dividends

Subdivision   C--Forgiven debts that are not treated as dividends

109G   Debt forgiveness that does not give rise to a dividend

Subdivision   D--Payments and loans that are not treated as dividends

109H   Simplified outline of this Subdivision

109J   Payments discharging pecuniary obligations not treated as dividends

109K   Inter - company payments and loans not treated as dividends

109L   Certain payments and loans not treated as dividends

109M   Loans made in the ordinary course of business on arm's length terms not treated as dividends

109N   Loans meeting criteria for minimum interest rate and maximum term not treated as dividends

109NA   Certain liquidator's distributions and loans not treated as dividends

109NB   Loans to purchase shares under employee share schemes not treated as dividends

109P   Amalgamated loans not treated as dividends in the year they are made

109Q   Commissioner may allow amalgamated loan not to be treated as dividend

109R   Some payments relating to loans not taken into account

Subdivision   DA--Demerger dividends not treated as dividends

109RA   Demerger dividends not treated as dividends

Subdivision   DB--Other exceptions

109RB   Commissioner may disregard operation of Division   or allow dividend to be franked

109RC   Dividend may be franked if taken to be paid because of family law obligation

109RD   Commissioner may extend period for repayments of amalgamated loan

Subdivision   E--Payments and loans through interposed entities

109S   Simplified outline of this Subdivision

109T   Payments and loans by a private company to an entity through one or more interposed entities

109U   Payments and loans through interposed entities relying on guarantees

109UA   Certain liabilities under guarantees treated as payments

109V   Amount of private company's payment to target entity through one or more interposed entities

109W   Private company's loan to target entity through one or more interposed entities

109X   Operation of Subdivision   D in relation to payment or loan

Subdivision   EA--Unpaid present entitlements

109XA   Payments, loans and debt forgiveness by a trustee in favour of a shareholder etc. of a private company with an unpaid present entitlement

109XB   Amounts included in assessable income

109XC   Modifications

109XD   Forgiveness of loan debt does not give rise to assessable income if loan gives rise to assessable income

Subdivision   EB--Unpaid present entitlements--interposed entities

109XE   Simplified outline of this Subdivision

109XF   Payments through interposed entities

109XG   Loans through interposed entities

109XH   Amount and timing of payment or loan through interposed entities

109XI   Entitlements to trust income through interposed trusts

Subdivision   F--General rules applying to all amounts treated as dividends

109Y   Proportional reduction of dividends so they do not exceed distributable surplus

109Z   Characteristics of dividends taken to be paid under this Division

109ZA   No dividend taken to be paid for withholding tax purposes

109ZB   Amount treated as dividend is not a fringe benefit

109ZC   Treatment of dividend that is reduced on account of an amount taken under this Division   to be a dividend

109ZCA   Treatment of dividend that is reduced on account of an amount included in assessable income under Subdivision   EA

Subdivision   G--Defined terms

109ZD   Defined terms

109ZE   Interpretation rules about entities

Division   9--Co - operative and mutual companies

117   Co - operative companies

118   Company not co - operative if less than 90% of business with members

119   Sums received to be taxed

120   Deductions allowable to co - operative company

121   Mutual insurance associations

Division   9AA--Demutualisation of insurance companies and affiliates

Subdivision   A--What this Division   is about

121AA   What this Division   is about

Subdivision   B--Key concepts and related definitions

121AB   Insurance company definitions

121AC   Mutual affiliate company

121AD   Demutualisation and demutualisation resolution day

121AE   Demutualisation methods, the policyholder/member group and the listing period

121AEA   Replacement of policyholders by persons exercising certain rights

121AF   Demutualisation method 1

121AG   Demutualisation method 2

121AH   Demutualisation method 3

121AI   Demutualisation method 4

121AJ   Demutualisation method 5

121AK   Demutualisation method 6

121AL   Demutualisation method 7

121AM   Embedded value of a mutual life insurance company

121AN   Net tangible asset value of a general insurance company or mutual affiliate company

121AO   Treasury bond rate, capital reserve adequacy level, eligible actuary and security

121AP   Subsidiary and wholly - owned subsidiary

121AQ   Other definitions

121AR   List of definitions

Subdivision   C--Tax consequences of demutualisation

121AS   CGT consequences of demutualisation

121AT   Other tax consequences of demutualisation

121AU   This Subdivision   does not apply to demutualisation of friendly society health or life insurers

Division   9A--Offshore banking units

Subdivision   A--Object and simplified outline

121B   Simplified outline

Subdivision   B--Interpretation

121C   Interpretation

121D   Meaning of OB activity

121DA   Meaning of expressions relevant to investment activity

121DB   Meaning of OB eligible contract activity

121DC   Meaning of OB advisory activity

121DD   Meaning of OB leasing activity

121E   Meaning of offshore person

121EA   OBU requirement

121EAA   Activities recorded in domestic books not OB activities

121EB   Internal financial dealings of an OBU

121EC   Meaning of OBU resident - owner money

121ED   Meaning of trade with a person

121EDA   Meaning of OB income

121EE   Definitions relating to assessable income of an OBU

121EF   Definitions relating to allowable deductions of an OBU

Subdivision   C--Operative provisions

121EJ   Source of income derived from OB activities

121EK   Deemed interest on 90% of certain OBU resident - owner money

121EL   Exemption of income etc. of OBU offshore investment trusts

121ELA   Exemption of income etc. of overseas charitable institutions

121ELB   Adjustment of capital gains and losses from disposal of units in OBU offshore investment trusts

Division   9C--Assessable income diverted under certain tax avoidance schemes

121F   Interpretation

121G   Diverted income and diverted trust income

121H   Assessment of diverted income and diverted trust income

121J   Ascertainment of diverted income or diverted trust income deemed to be an assessment

121K   Application of International Tax Agreements Act

121L   Division   applies notwithstanding exemption under other laws

Download

No downloadable files available