Commonwealth Numbered Acts

INCOME TAX ASSESSMENT AMENDMENT ACT 1978 No. 57 of 1978 - SECT 9

9. After section 52 of the Principal Act the following section is inserted:
Certain expenditure disregarded in ascertaining taxable income
''52A. (1) Notwithstanding section 51, losses or outgoings consisting of
expenditure incurred by a taxpayer in the purchase or acquisition, after 7
April 1978, of any prescribed property as trading stock of the taxpayer shall,
if the Commissioner considers that it would be unreasonable that a deduction
be allowable to the taxpayer in respect of the whole of those losses or
outgoings, be allowable as a deduction to the taxpayer to the extent only that
the Commissioner considers that it is reasonable in the circumstances that a
deduction be allowable to the taxpayer in respect of those losses or
outgoings.

''(2) Where-

   (a)  expenditure incurred by a taxpayer in the purchase or acquisition,
        after 7 April 1978, of any prescribed property that was purchased or
        acquired in the carrying on or carrying out of any profit-making
        undertaking or scheme would, but for this sub-section, be taken into
        account for the purpose of ascertaining whether any profit arose, or
        any loss was incurred, from the carrying on or carrying out of the
        undertaking or scheme and for the purpose of ascertaining the amount
        of any such profit or loss; and

   (b)  the Commissioner considers that it would be unreasonable that the
        whole of that expenditure be taken into account for those purposes,
        that expenditure shall be taken into account for those purposes to the
        extent only that the Commissioner considers that it is reasonable in
        the circumstances that the expenditure be taken into account for those
        purposes.

''(3) In forming an opinion for the purposes of sub-section (1) as to the
extent to which it is reasonable that a deduction be allowable to a taxpayer
in respect of expenditure incurred in the purchase or acquisition of
prescribed property or in forming an opinion for the purposes of sub-section
(2) as to the extent to which it is reasonable that expenditure incurred by a
taxpayer in the purchase or acquisition of prescribed property should be taken
into account for the purposes referred to in sub-section (2)-

   (a)  the Commissioner shall have regard to the circumstances in which, and
        the person or persons from whom, the taxpayer obtained moneys-

        (i)    that were expended by the taxpayer in purchasing or acquiring
               the prescribed property; or

        (ii)   that, in the opinion of the Commissioner, were obtained by, or
               paid to, the taxpayer to enable the taxpayer to expend moneys
               in purchasing or acquiring the prescribed property;

   (b)  if the taxpayer borrowed from another person (in this paragraph
        referred to as the 'lender') moneys that were expended by the taxpayer
        in purchasing or acquiring the prescribed property or moneys that, in
        the opinion of the Commissioner, were obtained by, or paid to, the
        taxpayer to enable the taxpayer to expend moneys in purchasing or
        acquiring the prescribed property-the Commissioner shall have regard
        to-

        (i)    the circumstances in which, and the terms and conditions on
               which, the taxpayer borrowed those moneys from the lender; and

        (ii)   whether, in the opinion of the Commissioner, the taxpayer and
               the lender were dealing with each other at arm's length in
               connexion with the borrowing of those moneys by the taxpayer;

   (c)  if, either before or after the purchase or acquisition of the
        prescribed property by the taxpayer, an agreement or arrangement
        (whether or not enforceable by legal proceedings and whether or not
        intended to be so enforceable) was entered into, or an understanding
        was reached, as a result of which there has been, or there could
        reasonably be expected to be, a substantial reduction in the value of
        the prescribed property-the Commissioner shall have regard to that
        agreement, arrangement or understanding;

   (d)  if the purchase or acquisition of the prescribed property by the
        taxpayer arose out of, or was made in the course of, a transaction,
        operation, undertaking, scheme or arrangement that was entered into or
        carried out for the purpose, or for purposes that included the
        purpose, of securing that a person who, if the transaction, operation,
        undertaking, scheme or arrangement, had not been entered into or
        carried out, would have been liable to pay income tax in respect of a
        year of income would not be liable to pay income tax in respect of
        that year of income or would be liable to pay less income tax in
        respect of that year of income than that person would have been liable
        to pay if the transaction, operation, undertaking, scheme or
        arrangement had not been entered into or carried out-the Commissioner
        shall have regard to that transaction, operation, undertaking, scheme
        or arrangement;

   (e)  if the purchase or acquisition of the prescribed property by the
        taxpayer arose out of, or was made in the course of, a transaction,
        operation, undertaking, scheme or arrangement that the Commissioner is
        satisfied was by way of dividend stripping or was similar to a
        transaction, operation, undertaking, scheme or arrangement by way of
        dividend stripping-the Commissioner shall have regard to that
        transaction, operation, undertaking, scheme or arrangement;

   (f)  if-

        (i)    the purchase or acquisition of the prescribed property by the
               taxpayer arose out of, or was made in the course of, a
               transaction, operation, undertaking, scheme or arrangement
               under which, or in the course of which, money was to be paid,
               or other property was to be transferred or made available by a
               person other than the taxpayer, whether before or after the
               purchase or acquisition of the prescribed property, to the
               taxpayer, to the taxpayer and a person or persons other than
               the taxpayer or to a person or persons other than the taxpayer;
               and

        (ii)   the Commissioner is satisfied that the amount of money so to be
               paid, or the value of the property so to be transferred or made
               available, as the case may be, was to be not less than, or not
               substantially less than, the amount expended by the taxpayer in
               the purchase or acquisition of the prescribed property,

the Commissioner shall have regard to the fact that the purchase or
acquisition of the prescribed property by the taxpayer arose out of, or was
made in the course of such a transaction, operation, undertaking, scheme or
arrangement; and

   (g)  the Commissioner shall have regard to any other matters that he
        considers relevant.

''(4) In this section, 'prescribed property' means-

   (a)  a share or stock in the capital of a company;

   (b)  a debenture, note or other security issued in respect of a loan to a
        company; or

   (c)  any other chose in action.

''(5) For the purposes of this section, a person to whom prescribed property
is issued or allotted by a company shall be taken to have acquired that
prescribed property.

''(6) The reference in paragraph (b) of sub-section (3) to terms and
conditions shall be read as including a reference to implied terms and
conditions and to terms and conditions that are not enforceable by legal
proceedings whether or not they were intended to be so enforceable.

''(7) Where, by virtue of the application of the preceding provisions of this
section, the amount (in this sub-section referred to as the 'relevant amount')
of the deduction that is allowable to a taxpayer in respect of losses or
outgoings incurred by the taxpayer in the purchase or acquisition of
prescribed property is less than the amount of those losses and outgoings, the
cost or cost price of that prescribed property shall, for the purposes of the
application of Subdivision B of Division 2 of Part III in relation to that
property in relation to the taxpayer, be taken to be an amount that is the
same as the relevant amount.''.