INCOME TAX ASSESSMENT ACT 1936

SCHEDULE 2D - TAX EXEMPT ENTITIES THAT BECOME TAXABLE  

Division 57 - Tax exempt entities that become taxable  

Subdivision 57-G - Denial of certain deductions  

SECTION 57-60   EFFECT OF PRE-TRANSITION TIME ACCRUED LEAVE ENTITLEMENTS  

57-60(1)  
This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under subsection 51(1) of this Act or section 8-1 (about general deductions) of the Income Tax Assessment Act 1997 in respect of long service leave payments or annual leave payments to a person who was an employee of the transition taxpayer at any time before or after the transition time.

Note:

Subsection 51(3) of this Act or section 26-10 of the Income Tax Assessment Act 1997 (as appropriate) contains additional requirements for certain leave payments to be deductible.

57-60(2)   Deduction allowable only if sum of all deductions exceeds leave threshold amount.  

The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the leave threshold amount (see subsection (4)) for the year of income.

57-60(3)   Amount of deduction not allowable.  

If the sum is greater than the leave threshold amount, so much of the deduction as is worked out using the following formula is not allowable:


Amount of deduction × Leave threshold amount for the year of income
Sum of all deductions of the transition taxpayer to which this section applies for the year of income

57-60(4)   Meaning of leave threshold amount.  

The leave threshold amount for a year of income is:


(a) if the year of income is the transition year - the (pre-transition time service) leave amount (see subsection (5)) of the transition taxpayer; or


(b) in any other case - that amount as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income.

57-60(5)   Meaning of (pre-transition time service) leave amount.  

The (pre-transition time service) leave amount of the transition taxpayer is the sum of the following amounts:


(a) the amount that would be payable by the transition taxpayer in respect of annual leave and long service leave if, at the transition time, all employees of the transition taxpayer began to take all leave of that kind that they were eligible to take; and


(b) if the transition taxpayer elects, in accordance with subsection (6), that this paragraph applies - the amount that, according to actuarial principles, would need to be set aside at the transition time to meet all obligations of the transition taxpayer that might reasonably be expected to arise after that time to make annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) for periods of service of employees occurring before the transition time; and


(c) if paragraph (b) does not apply - the present value, at the transition time, of all annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) that the transition taxpayer would become liable to make after that time in respect of periods of service of employees occurring before that time if all such leave became eligible to be taken.

57-60(6)   Election.  

The election mentioned in paragraph (5)(b) must be made in writing before:


(a) the day by which the transition taxpayer ' s return of income for the transition year is due to be lodged; or


(b) such later day as the Commissioner allows.


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