INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-10 - FINANCIAL TRANSACTIONS  

Division 230 - Taxation of financial arrangements  

Subdivision 230-B - The accruals/realisation methods  

Reassessment and re-estimation

SECTION 230-195   Balancing adjustment if rate of return maintained on re-estimation  

230-195(1)  
If you make a fresh allocation of the gain or loss on the basis referred to in paragraph 230-190(6)(a) , you must make the following balancing adjustment:


(a) if you re-estimate a gain and the amount to which you apply the rate of return increases - you make a gain from the *financial arrangement, for the income year in which you make the re-estimation, equal to the amount of the increase;


(b) if you re-estimate a gain and the amount to which you apply the rate of return decreases - you make a loss from the arrangement, for the income year in which you make the re-estimation, equal to the amount of the decrease;


(c) if you re-estimate a loss and the amount to which you apply the rate of return increases - you make a loss from the arrangement, for the income year in which you make the re-estimation, equal to the amount of the increase;


(d) if you re-estimate a loss and the amount to which you apply the rate of return decreases - you make a gain from the arrangement, for the income year in which you make the re-estimation, equal to the amount of the decrease.

230-195(2)  
Subsection (3) applies if:


(a) the re-estimation is made wholly or partly on the basis that you have written off, as a bad debt, a right to receive a *financial benefit (or a part of a financial benefit); and


(b) the right:


(i) is not one in respect of money that you lent in the ordinary course of your *business of lending money; and

(ii) is not one that you bought in the ordinary course of your business of lending money.

230-195(3)  
The balancing adjustment to be made under paragraph (1)(b), to the extent that it relates to the writing off of the bad debt, must not exceed so much of the gain in relation to the *financial arrangement as:


(a) has been assessed under this Division; and


(b) is reasonably attributable to the *financial benefit (or the part of the financial benefit).

230-195(4)  
Subsection (5) applies if:


(a) the re-estimation is made wholly or partly on the basis that you have written off, as a bad debt, a right to receive a *financial benefit; and


(b) the right is one that you bought in the ordinary course of your *business of lending money.

230-195(5)  
The balancing adjustment to be made under paragraph (1)(b), to the extent that it relates to the writing off of the bad debt, must not exceed the value of the *financial benefit you provided to acquire the right to the financial benefit (or the part of the financial benefit).

230-195(6)  
For the purposes of this Act, a deduction for the balancing adjustment referred to in subsection (3) is to be treated as a deduction of a bad debt.

Note:

Various provisions in this Act and the Income Tax Assessment Act 1936 restrict the availability of deductions for bad debts and make provision in relation to the recoupment of amounts in relation to bad debts that have been written off. These provisions are set out in subsection 25-35(5) .


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