Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 175 - Use of a company ' s tax losses or deductions to avoid income tax  

Subdivision 175-B - Tax benefits from unused deductions  

SECTION 175-20   Income or capital gain injected into company because of available deductions  

175-20(1)  

The Commissioner may disallow deductions of a company (or parts of them) for an income year if:

(a) the company has *derived assessable income, or a *capital gain accrued to the company, some or all of which (the injected amount ) would not have been derived, or would not have accrued, if the company did not have those deductions; and

(b) the income was derived, or the capital gain accrued, in that income year.

The disallowed deductions and parts of deductions may exceed the *injected amount.

Note:

The disallowance may result in a tax loss for the income year. See section 175-35 .

175-20(2)  

The Commissioner cannot disallow the deductions or parts of the deductions if the *continuing shareholders will benefit from the derivation of the *injected amount to an extent that the Commissioner thinks fair and reasonable having regard to their respective *shareholding interests in the company.

Note:

Section 175-100 allows the Commissioner to disallow the whole or part of any deductions of an insolvent company.

175-20(3)  

The continuing shareholders are the individuals who had *shareholding interests in the company both immediately before the *injected amount was *derived, and immediately afterwards.