Income Tax Assessment Act 1997
CHAPTER 3
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SPECIALIST LIABILITY RULES
PART 3-5
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CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS
Division 175
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Use of a company
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s tax losses or deductions to avoid income tax
Subdivision 175-B
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Tax benefits from unused deductions
SECTION 175-25
Deduction injected into company because of available income or capital gain
175-25(1)
The Commissioner may disallow a deduction of a company for an income year to the extent that the company would not have incurred the loss, outgoing or expenditure that the deduction is for if it had not *derived some or all of the assessable income it derived in that income year, or had not made some or all of a *capital gain it made in that income year.
The Commissioner cannot disallow any of the deduction if:
(a) the *continuing shareholders will benefit from any profit or advantage that has arisen or might arise directly or indirectly from the loss, outgoing or expenditure being incurred; and
(b) the Commissioner thinks that the extent to which they will benefit is fair and reasonable having regard to their respective *shareholding interests in the company.
The continuing shareholders are the individuals who had *shareholding interests in the company both immediately before the loss, outgoing or expenditure was incurred, and immediately afterwards.
The Commissioner may disallow a deduction of a company for an income year to the extent that the company would not have incurred the loss, outgoing or expenditure that the deduction is for if it had not *derived some or all of the assessable income it derived in that income year, or had not made some or all of a *capital gain it made in that income year.
Note:
The disallowance may result in a tax loss for the income year. See section 175-35 .
175-25(2)
The Commissioner cannot disallow any of the deduction if:
(a) the *continuing shareholders will benefit from any profit or advantage that has arisen or might arise directly or indirectly from the loss, outgoing or expenditure being incurred; and
(b) the Commissioner thinks that the extent to which they will benefit is fair and reasonable having regard to their respective *shareholding interests in the company.
Note:
Section 175-100 allows the Commissioner to disallow a deduction of an insolvent company.
175-25(3)
The continuing shareholders are the individuals who had *shareholding interests in the company both immediately before the loss, outgoing or expenditure was incurred, and immediately afterwards.
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