INCOME TAX ASSESSMENT ACT 1997 - SECT 12.5 List of provisions about deductions [see Note 4]

Commonwealth Consolidated Acts

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INCOME TAX ASSESSMENT ACT 1997 - SECT 12.5

List of provisions about deductions [see Note 4]

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
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 of Schedule 2C
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 ..................................	Subdivisions 709‑D and 719‑I
money lenders, listed country branches, no deduction for .........................................................................................	63D
see also losses
balancing adjustment
see buildings , capital allowances , industrial property , research & development 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
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 ...............................................	40‑645
environmental protection activities ......................................	40‑755
exploration or prospecting .....................................................	40‑80(1), 40‑730
in‑house software ....................................................................	40‑335, 40‑455
intellectual property ................................................................	Subdivisions 40‑B and 40‑I
IRUs ...........................................................................................	Subdivision 40‑B
landcare operations .................................................................	40‑630
low‑value and software development pools ........................	Subdivision 40‑E
mining and quarrying ..............................................................	Subdivision 40‑H and Subdivision 40‑I
new business investment, additional deduction ................	Division 41
Petroleum Resource Rent Tax ................................................	40‑750
project pools .............................................................................	40‑830, 40‑832
reducing deductions ...............................................................	40‑25, 40‑290
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 and horticultural plants ................................	Subdivision 40‑F
capital gains
beneficiary whose assessable income includes share of net income of trust with net capital gain.........................	115‑215
no deduction for an amount that would otherwise be deductible only because a net capital gain is included in assessable income.........................................................	51AAA
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
"one‑third of actual expenses" method ................................	Subdivision 28‑E
substantiation of car expenses ..............................................	Division 900
"12% of original value" method ............................................	Subdivision 28‑D
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
financial arrangements
Assets in relation to Division 230 financial arrangement...	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
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
limit on deduction ....................................................................	82A
election expenses
Federal and State Parliament election expenses ..................	25‑60, 25‑70
local government election expenses, limited deduction for..........................................................................................	25‑65, 25‑70
electricity connections
see capital allowances
embezzlement
see theft
employees
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 contributions tax
no deduction ............................................................................	26‑75
exploration and prospecting
see capital allowances
family
no deduction for maintaining spouse or child.....................	26‑40
family tax benefit
fee or commission for advice .................................................	25‑7
farm management deposits
see primary production
film income
Australian films ........................................................................	124ZAA to 124ZAP
see also tax losses
film licensed investment companies (FLICs)
see shares
financial arrangements
losses from.................................................................................	230‑15(2) and (3)
see also borrowing expenses , infrastructure borrowings , 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
foreign investment funds (FIFs)
generally ....................................................................................	469 to 624
loss under cash surrender values method ...........................	533
loss under market value method ............................................	532
notional deductions ................................................................	567 to 574
foreign life assurance policies
see foreign investment funds
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 ..........	51AGA
expense payment fringe benefits, reduced deduction .......	51AH
general insurance
claims paid.................................................................................	321‑25 and 323‑20 of Schedule 2J
increase in value of outstanding claims liability..................	321‑15 and 323‑10 of Schedule 2J
increase in value of unearned premium reserve...................	321‑55 of Schedule 2J
gifts
general .......................................................................................	Division 30
limit on deduction ....................................................................	26‑55
see also tax avoidance schemes
horticultural plants
see capital allowances
higher education assistance	26‑20
illegal activities	26‑54
income equalisation deposits
see primary production
industrial property
unit relating to copyright in Australian film.........................	124K to 124Z
see also intellectual property and research and development
infrastructure borrowings
generally ....................................................................................	159GZZZZD to 159GZZZZH
no deduction for ......................................................................	159GZZZZE
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
see also infrastructure borrowings
international agreements
see transfer pricing
international profit shifting
see transfer pricing
investment company
see shares
IRUs
see capital allowances
land degradation
see primary production
lease document expenses
.....................................................................................................	25‑20
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........................................................................	Schedule 2E (42A‑50)
adjustment amounts (lessee)..................................................	Schedule 2E (42A‑70(1))
adjustment amounts (lessor)...................................................	Schedule 2E (42A‑65(3))
lease payments not deductible...............................................	Schedule 2E (42A‑55)
payments to acquire car not deductible................................	Schedule 2E (42A‑85 and 42A‑100)
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 redemption of ...	70B
see also tax losses
management and investment company shares
see shares
membership of associations
see subscriptions to associations
mining
see capital allowances
misappropriation
by employee or agent...............................................................	25‑47
mortgage
expenses of discharging a mortgage ....................................	25‑30
motor vehicles
see car expenses and leases
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 ....................................................................................	121A to 121EL
deductions for ..........................................................................	121EG
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 parties
contributions to .......................................................................	Division 30
pooled development funds (PDFs)
.....................................................................................................	124ZM to 124ZZD
prepaid expenditure
see advance expenditure
primary production
farm management deposits......................................................	393‑1 to 393‑65 of Schedule 2G
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
rates and land taxes
premises used to produce mutual receipts...........................	25‑75
regional headquarters (RHQs)
.....................................................................................................	82C to 82CE
reimbursements
expense payment fringe benefits, reduced deduction .......	51AH
reinsurance
see insurance with non‑residents
related entities (including relatives)
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
research & development
generally ....................................................................................	73B to 73G
scientific research ....................................................................	73A
175% deduction .......................................................................	73P to 73Z
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 research & development
securities
qualifying securities ................................................................	159GP to 159GZ
substituted securities ..............................................................	23K
traditional securities, loss on disposal or redemption of ...	70B
shares
buy‑backs .................................................................................	159GZZZJ to 159GZZZT
cancellation of subsidiary's shares in holding company ..	159GZZZC to 159GZZZI
employee share acquisition schemes, deduction for provider of qualifying shares or rights ..........................	139DC
film licensed investment companies, deduction for subscription for shares in ................................................	Subdivision 375‑H
small‑medium enterprise, loss on disposal of shares in .....	128TG to 128TL
see also dividends and securities
small‑medium enterprises (SMEs)
see shares
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
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
detriment payments .................................................................	295‑485
financial assistance levy .........................................................	295‑490(1) (table item 3)
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
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)
international profit shifting, transfer pricing .......................	136AA to 136AF
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 becoming taxable ..	Schedule 2D
tax losses
bad debts, companies .............................................................	165‑120
change of ownership or control of a company
generally .................................................................	Division 165
for earlier income years ........................................	Subdivision 165‑A
for income year of the change ............................	Subdivision 165‑B
earlier income years .................................................................	Division 36
film losses .................................................................................	Subdivision 375‑G
life insurance companies.........................................................	Subdivision 320‑D
pooled development funds ....................................................	Subdivision 195‑A
transfer between companies in same wholly‑owned group ...................................................................................	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
termination payments surcharge
no deduction ............................................................................	26‑65
theft
by employee or agent...............................................................	25‑45
thin capitalisation
disallowing of deductions.......................................................	Division 820
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 allowancesn
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 on hand .....................................................................................	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
generally ....................................................................................	136AA to 136AF
adjustments to deductions .....................................................	136AF
transport expenses
incurred in travel between workplaces .................................	25‑100
travel expenses
accompanying relatives, no deduction for some travel expenses .............................................................................	26‑30
see also substantiation
trees in carbon sink forests
see capital allowances
trusts
trust income, deductions considered in calculating ...........	95 to 102
unit trusts ..................................................................................	102D to 102L
see also foreign residents , non‑resident trust estates and public trading trusts
uniforms
non‑compulsory uniforms ......................................................	Division 34
United Medical Protection Limited support payments
.....................................................................................................	25‑105
uranium mining
see mining
water facilities
see capital allowances
work expenses
see substantiation
work in progress
payment of a work in progress amount ................................	25‑95

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