INCOME TAX ASSESSMENT ACT 1936

SCHEDULE 2F - TRUST LOSSES AND OTHER DEDUCTIONS  

Division 266 - Income tax consequences for fixed trusts of abnormal trading or change in ownership  

Subdivision 266-D - Effect of abnormal trading on listed widely held trust  

SECTION 266-120   LISTED WIDELY HELD TRUST MAY BE DENIED DEBT DEDUCTION  

Type of trust to which this section applies

266-120(1)  
This section applies to a trust that:


(a) can deduct in the income year an amount:


(i) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or

(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and


(b) was a listed widely held trust at all times in the period (the test period ):


(i) if the debt was incurred in an earlier income year - beginning on the day the debt was incurred and ending at the end of the income year; or

(ii) if the debt was incurred in the income year - consisting of the income year; and


(c) was not an excepted trust at all times in the test period.

Note:

Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.

Condition for deducting amount

266-120(2)  
The trust cannot deduct the amount unless it meets either:

  • · the condition in subsection 266-125(1) ; or
  • · the condition in subsection 266-125(2) .

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