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INCOME TAX ASSESSMENT ACT 1997 - SECT 165.120 To deduct a bad debt

INCOME TAX ASSESSMENT ACT 1997 - SECT 165.120

To deduct a bad debt

  (1)   A company cannot deduct a debt (or part of a debt) that it writes off as bad in the * current year unless:

  (a)   it meets the conditions in section   165 - 123 (which is about the company maintaining the same owners); or

Note:   See section   165 - 230 for a special alternative to the condition in this paragraph.

  (b)   the Commissioner thinks it would be unreasonable to require the company to meet the conditions in that section, having regard to the entities that beneficially owned the shares in the company when (in the Commissioner's opinion) the debt (or part) became bad; or

  (c)   the company meets the condition in section   165 - 126 (which is about the company satisfying the business continuity test).

Note 1:   In the case of a widely held or eligible Division   166 company, Subdivision   166 - C modifies how this Subdivision applies, unless the company chooses otherwise.

Note 2:   Normally bad debts are deductible under section   8 - 1 or 25 - 35.

Note 3:   Subdivisions   709 - D and 719 - I modify how this Subdivision operates in relation to a company that used to be a member of a consolidated group or MEC group and that writes off as bad a debt that used to be owed to a member of the group.

  (2)   The conditions in section   165 - 123 or 165 - 126 apply to different periods, depending on whether the debt was incurred in the * current year or an earlier income year:

 

Meaning of first continuity period and second continuity period


In this case:

the first continuity period :

and the second continuity period :

the debt was incurred in an earlier income year

  starts on the day when the debt was incurred; and

  ends at the end of that income year

is the * current year

the debt was incurred in the * current year (but not on the last day of it)

  starts on the first day of the * current year; and

  ends on the day when the debt was incurred

  starts on the day after the debt was incurred; and

  ends on the last day of the * current year

  (3)   A company cannot deduct a debt (or part of a debt) that it writes off as bad on the last day of the * current year if the debt was also incurred on that day.

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