Income Tax Assessment Act 1997



Division 165 - Income tax consequences of changing ownership or control of a company  

Subdivision 165-C - Deducting bad debts  

Operative provisions

SECTION 165-126   Alternatively, the company must satisfy the business continuity test  


This section sets out the condition that a company must meet to be able to deduct a debt or part of a debt that it writes off as bad in the *current year if:

(a) either:

(i) the company fails to meet a condition in subsection 165-123(2) , (3) or (4) ; or

(ii) it is not practicable to show that the company meets the conditions in those subsections; and

(b) paragraph 165-120(1)(b) (about the Commissioner thinking it is unreasonable to require the company to meet the conditions in section 165-123 ) does not apply.


Other provisions may treat the company as meeting, or failing to meet, the conditions in subsections 165-123(2) , (3) and (4) .


The company must satisfy the *business continuity test for the *second continuity period (the business continuity test period ). Apply the test to the *business the company carried on immediately before the time (the test time ) shown in the relevant item of the table.

Test time
Item If: The test time is:
1 It is practicable to show there is a period that meets these conditions:

(a) the period starts at the start of the *first continuity period;

(b) the company would meet the conditions in subsections 165-123(2), (3) and (4) if the period were the *ownership test period for the purposes of this Act
The latest time that it is practicable to show is in the period
2 Item 1 does not apply and either:

(a) the debt was incurred before the *current year; or

(b) the company came into being during the current year
The end of the day on which the debt was incurred
3 All these conditions are met:

(a) item 1 does not apply;

(b) the debt was incurred in the *current year;

(c) the company was in being throughout the current year
The start of the current year

For the business continuity test: see Subdivision 165-E .

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