Income Tax (Consequential Amendments) Act 1997 (39 of 1997)

Schedule 1   Consequential amendments of the Income Tax Assessment Act 1936

49   After section 63C

Insert:

63CA When tax losses resulting from bad debts cannot be deducted

(1) If:

(a) a company can deduct a debt that is written off as bad in a year of income; and

(b) because of a change in the beneficial ownership of shares in the company or another company, the debt would not have been deductible in the year of income apart from subsection 63C(1); and

(c) the change occurred before the debt was written off as bad; and

(d) because the debt was deductible, the company has a tax loss, or there was an increase in the amount of its tax loss, for the year of income; and

(e) the Commissioner is satisfied that the company carried on a business during the year of income for the purpose (or for purposes including the purpose) of securing a deduction for the debt because of subsection 63C(1);

the company cannot deduct the tax loss, or cannot deduct it to the extent of the increase in the amount of the tax loss, in a later year of income unless:

(f) the company carried on, at all times during the later year of income, the same business as it carried on immediately before the change; and

(g) the company did not, at any time during the later year of income, derive income from a business of a kind that it did not carry on before the change, or from a transaction of a kind that it had not entered into in the course of business operations before the change.

(2) If a part of a debt is written off as bad, subsection (1) applies as if the part were an entire debt that is written off as bad.

(3) This section has the same effect in relation to an allowable deduction under section 63E for the whole or part of a debt that is extinguished as it has in relation to an allowable deduction under section 63 of this Act or section 8-1 of the Income Tax Assessment Act 1997 for the whole or part of a debt that is written off as bad.