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-E - Effect of abnormal trading on unlisted very widely held trust or wholesale widely held trust  

SECTION 266-160   UNLISTED VERY WIDELY HELD TRUST OR WHOLESALE WIDELY HELD TRUST MAY BE DENIED DEBT DEDUCTION  

266-160(1)  
If a trust is covered by subsection (2), it cannot deduct in the income year an amount:


(a) 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


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

unless it meets either:

  • · the condition in subsection 266-165(1) ; or
  • · the condition in subsection 266-165(2) .
  • 266-160(2)  
    A trust is covered by this subsection if:


    (a) in the period (the test period ) from the later of the end of any start-up period (within the meaning of subsection 272-120 (3)) and the beginning of:


    (i) if the debt was incurred in an earlier income year - the day on which the debt was incurred; or

    (ii) if the debt was incurred in the income year - the income year;
    until the end of the income year, the trust:

    (iii) was at all times an unlisted very widely held trust; or

    (iv) was at all times a wholesale widely held trust; or

    (v) was at some time an unlisted very widely held trust and, at any time when it was not, was a wholesale widely held trust or a listed widely held trust; or

    (vi) was at some time a wholesale widely held trust and, at any time when it was not, was an unlisted very widely held trust or a listed widely held trust; and


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

    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.


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