INCOME TAX ASSESSMENT ACT 1997

CHAPTER 1 - INTRODUCTION AND CORE PROVISIONS  

PART 1-4 - CHECKLISTS OF WHAT IS COVERED BY CONCEPTS USED IN THE CORE PROVISIONS  

Division 12 - Particular kinds of deductions  

SECTION 12-5   12-5   List of provisions about deductions  


The provisions set out in the table contain rules about specific types of deduction.

Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .


accrued leave transfer payments 26-10
advance expenditure
generally 82KZL to 82KZO
avoidance arrangements 82KJ
when deductible 82KZM to 82KZN
[ averaging of incomes] (Omitted by No 46 of 1998)
bad debts
deduction reduced because of forgiveness of debt if debtor and creditor are companies under common ownership and agree on the reduction 245-90
general 25-35 , 63F
companies Subdivisions 165-C , 166-C and 175-C
debt/equity swaps 63E , 63F , 709-220
deduction of a debt that used to be owed to a member of a consolidated group or MEC group by an entity that used to be a member of the group Subdivisions 709-D and 719-I
money lenders, listed country branches, no deduction for 63D
see also losses
balancing adjustment
see buildings, capital allowances, industrial property, R & D and tax exempt entities
banks
foreign banks, Australian branches of 160ZZVA to 160ZZZJ
boats
deferral of deductions 26-47
borrowing expenses 25-25
bribes to foreign public officials 26-52
bribes to public officials 26-53
buildings
income producing buildings, capital allowances Division 43
see also heritage conservation work
capital allowances
generally Division 40
balancing adjustments 40-285(2) , 40-370
business related costs 40-880
electricity and telephone lines 40-645
environmental protection activities 40-755
exploration or prospecting 40-80(1) , 40-730
in-house software 40-335 , 40-455
intellectual property Subdivisions 40-B and 40-I
IRUs Subdivision 40-B
landcare operations 40-630
low-value and software development pools Subdivision 40-E
mining and quarrying Subdivision 40-H and Subdivision 40-I
new business investment, additional deduction Division 41
Petroleum Resource Rent Tax 40-750
project pools 40-830 , 40-832
reducing deductions 40-25 , 40-27 , 40-290 and 40-291
spectrum licences Subdivision 40-B
tax preferred use of asset Division 250
telecommunications site access rights Subdivision 40-B
trees in carbon sink forests Subdivision 40-J
water facilities, horticultural plants, fodder storage assets and fencing assets Subdivision 40-F
capital gains
no deduction for an amount that would otherwise be deductible only because a net capital gain is included in assessable income 51AAA
small business retirement exemption, no deduction for payments made directly or indirectly to CGT concession stakeholder so company or trust complies with section 152-325 152-310
see also foreign residents
capital loss
net capital loss, no deduction for 102-10
net capital loss, transfer within company group Subdivision 170-B
car disposal
see capital allowances
car expenses
generally Division 28
" cents per kilometre " method Subdivision 28-C
" log book " method Subdivisions 28-F and 28-G
substantiation of car expenses Division 900
see also transport expenses
car expenses of employee
employee ' s car expenses where car provided by employer can be used for private purposes, no deduction for 51AF
carried interests
carried interests, no deduction for 118-21
car parking
employee ' s car parking expenses, no deduction for 51AGA
children ' s income
generally 102AA to 102AH
taxable income of a child, deductions taken into consideration in calculating 102AD
[ clean energy] (Repealed by No 83 of 2014)
club fees
club fees, no deduction for 26-45
see also subscriptions to associations
Commonwealth places windfall tax 26-17
companies, co-operative and mutual
generally 117 to 121
distributions of assessable income 120
companies, private
excessive payments to shareholders directors and associates, reduced deduction 109
conservation covenants Division 31
consolidated groups and MEC groups
assets in relation to Division 230 financial arrangement 701-61(4)
controlled foreign companies
generally 316 to 468
bad debts 399A
decline in value of depreciating assets 398
finance share dividends 394
taxes paid 393
convertible notes
see interest
copyrights
expenditure in obtaining registration Subdivisions 40-B and 40-I
currency exchange gains and losses
see foreign exchange
death of timber owner
see timber
debt interests
certain returns in respect of debt interests 25-85
depreciation
see capital allowances
designs
expenditure in obtaining or extending registration Subdivisions 40-B and 40-I
disposal of depreciating assets
see capital allowances
dividends
dividends including LIC capital gain component 115-280
franking credits, companies and foreign residents 207-95(2) , 207-95(3) , 220-405(3)
franking credits, pooled development funds (PDFs) 124ZM
non-share equity interests, no deduction for return in respect of 26-26
unfranked non-portfolio dividends 46FA
education expenses
Higher Education Contribution Scheme, no deduction unless provided as fringe benefit 26-20
limit on deduction 82A
see also overseas debtors repayment levy
see also student start-up loans
election expenses
Federal and State Parliament election expenses 25-60 , 25-70
local government election expenses, limited deduction for 25-65 , 25-70
electricity connections
see capital allowances
embezzlement
see theft
employees
pensions, gratuities or retiring allowances for ex-employees 25-50
Seasonal Labour Mobility Program, delayed deduction for salary, wages etc. paid to employees under program until Seasonal Labour Mobility Program withholding tax payable has been paid 26-25A
see also shares
entertainment
expenditure, no deduction for some Division 32
meal entertainment, calculation of deductible amount 51AEA to 51AEC
environment
see capital allowances
excess non-concessional contributions tax
no deduction 26-75
exploration and prospecting
see capital allowances
family
no deduction for maintaining spouse or child 26-40
[ family tax benefit] (Repealed by No 56 of 2010)
farm management deposits
see primary production
[ film income] (Repealed by No 164 of 2007)
film licensed investment companies (FLICs)
see shares
financial arrangements
losses from 230-15(2) and (3)
see also borrowing expenses, interest, leases and securities
foreign exchange
losses 775-30
foreign financial entities ' Australian permanent establishments
generally Part IIIB
thin capitalisation Subdivision 820-FB
transfer of losses Subdivisions 170-A and 170-B
[ foreign income] (Repealed by No 143 of 2007 )
[ foreign investment funds (FIFs)] (Repealed by No 114 of 2010)
[ foreign life assurance policies] (Repealed by No 114 of 2010)
[ foreign residents] (Repealed by No 79 of 2007 )
[ foreign tax credits] (Repealed by No 143 of 2007 )
forestry managed investment schemes
payments under scheme 394-10(1)
franchise fees windfall tax 26-15
freight
freight for shipped goods 135A
fringe benefits
contributions for private component, no deduction for 51AJ
employee ' s car expenses where car provided by employer can be used for private purposes, no deduction for 51AF
employee ' s car parking expenses, no deduction for 51AGA
expense payment fringe benefits, reduced deduction 51AH
general insurance companies and companies that self insure
claims paid 321-25 and 321-95
increase in value of outstanding claims liability 321-15 and 321-85
increase in value of unearned premium reserve 321-55
gifts
general Division 30
limit on deduction 26-55
see also tax avoidance schemes
[ grape vines] (Repealed by No 129 of 2004)
[ GST - acquiring or upgrading plant to meet GST obligations etc] (Repealed by No 77 of 2001)
horticultural plants
see capital allowances
higher education assistance 26-20
hybrid mismatch rules
disallowing of deductions Division 832
illegal activities 26-54
income equalisation deposits
see primary production
industrial property
see intellectual property and R & D
infrastructure
see tax losses
[ insurance and annuity business] (Repealed by No 101 of 2004)
insurance with non-residents
generally 141 to 148
insurance premiums, no deduction unless arrangement to pay tax 145
reinsurance, no deduction for resident carrying on insurance business in Australia for reinsurance premiums paid to a non-resident 148
intellectual property
see capital allowances
interest
convertible notes, interest on, generally 82L to 82T
foreign residents, debt creation involving, generally 159GZY to 159GZZF
foreign residents, delayed deduction for interest paid to until withholding tax payable has been paid 26-25
life assurance premiums, interest etc. on loans to finance, no deduction for 26-85
superannuation contributions, interest etc. on loans to finance, no deduction for 26-80
underpayment or late payment of tax, interest for 25-5
international agreements
see transfer pricing
international profit shifting
see transfer pricing
investment company
see shares
IRUs
see capital allowances
land degradation
see primary production
lease document expenses 25-20
lease, authority, licence, permit or quota
expenditure to terminate 25-110
leases
finance leases and arrangements, use of property if end-user an exempt public body or use outside Australia to produce exempt income 159GE to 159GO
leases of assets being put to tax preferred use Division 250
leveraged arrangements, property used:
    · other than to produce assessable income; or
    · by a non-resident outside Australia; or
    · by a previous owner
51AD
payment for failure to comply with lease obligation to repair premises 25-15
leases of luxury cars
accrual amounts 242-35
adjustment amounts (lessee) 242-70
adjustment amounts (lessor) 242-65
lease payments not deductible 242-55
payments to acquire car not deductible 242-85
leave payments
accrued leave transfer payments 26-10
no deduction for leave payments until paid 26-10
leisure facilities
no deduction for 26-50
[ life assurance companies ] (Repealed by No 89 of 2000)
life insurance companies Subdivision 320-C
limited recourse debt
later payments 243-45
later payments (replacement debt) 243-50
loans
see borrowing expenses, interest and securities
losses
foreign exchange 775-30
profit-making undertaking or scheme 25-40
property sale 25-40
traditional securities, loss on disposal or redemption of 70B
see also tax losses
managed investment trusts
losses from carried interests 275-200(4)
management and investment company shares
see shares
membership of associations
see subscriptions to associations
mining
see capital allowances
misappropriation
by employee or agent 25-47
mortgage
expenses of discharging a mortgage 25-30
motor vehicles
see car expenses and leases
National Disability Insurance Scheme
National Disability Insurance Scheme expenditure 26-97
non-cash transactions
non-cash business benefits 51AK
non-cash consideration, money value deemed to have been paid or given 21
non-commercial business activities
deferral of non-commercial losses Division 35
non-resident trust estates
generally 102AAA to 102AAZG
modified application of depreciation provisions 102AAY
modified application of trading stock provisions 102AAZ
no deductions allowable under Division 36 102AAZC
notional sales and loans
adjustment amounts (lessee) 240-110(1)
adjustment amounts (lessor) 240-105(3)
arrangement payments, no deduction for 240-55
notional interest 240-50 , 250-155
deemed loan treatment for financial benefits provided for tax preferred use of asset Subdivision 250-C
payments to acquire property, no deduction for 240-85
offshore banking units
generally 121A to 121EL
deductions for 121EG
overseas debtors repayment levy
limit on deduction 82A
payment made to reduce a liability to overseas debtors repayment levy under the Student Loans (Overseas Debtors Repayment Levy) Act 2015 , no deduction unless provided as fringe benefit 26-20
partnerships
foreign hybrid loss exposure adjustment 830-50
losses, partner ' s share of partnership loss 90 , 92
patents
expenditure relating to grant of patents, etc. Subdivisions 40-B and 40-I
penalties
no deduction for penalties 26-5
personal services income
alienated personal services income Subdivision 86-B
general Division 85
[ petroleum prospecting and mining] (Repealed by No 77 of 2001)
[ plant and articles] (Repealed by No 77 of 2001)
political contributions and gifts
denial of certain deductions 26-22
deductions for individuals Subdivision 30-DA
pooled development funds (PDFs) 124ZM to 124ZZD
[ pooled software] (Repealed by No 77 of 2001)
prepaid expenditure
see advance expenditure
primary production
farm management deposits Division 393
see also capital allowances and timber
property
arrangements relating to assets being put to tax preferred use Division 250
arrangements relating to use of property if end-user an exempt public body or use outside Australia to produce exempt income 159GE to 159GO
leveraged arrangements, property used:
    · other than to produce assessable income; or
    · by a non-resident outside Australia; or
    · by a previous owner
51AD
sale of property, profit or loss 82(2)
see also capital allowances and losses
public trading trusts
generally 102M to 102T
qualifying securities
see securities
[ quarrying] (Repealed by No 77 of 2001)
R & D Division 355
rates and land taxes
premises used to produce mutual receipts 25-75
rebatable benefits
no deduction for 26-19
[ regional headquarters (RHQs)] (Repealed by No 47 of 2016)
registered emissions units
expenditure incurred in becoming the holder of 420-15
expenditure incurred in ceasing to hold 420-42
excess of opening over closing value of 420-45
reimbursements
expense payment fringe benefits, reduced deduction 51AH
reinsurance
see insurance with non-residents
related entities (including relatives)
reduction of deduction for payment or liability to 26-35 , 65(1B) and (1C)
repairs
general 25-10
repair covenants, payment for non-compliance with covenant to repair under lease 25-15
[ research & development] (Repealed by No 93 of 2011)
roads
see timber
royalties
royalty, no deduction for royalty paid to a foreign resident until the withholding tax payable has been paid 26-25
scientific research
see R & D
securities
qualifying securities 159GP to 159GZ
substituted securities 23K
traditional securities, loss on disposal or redemption of 70B
shares
buy-backs 159GZZZJ to 159GZZZT
cancellation of subsidiary ' s shares in holding company 159GZZZC to 159GZZZI
employee share schemes, deduction for provider of ESS interests Subdivision 83A-D
see also dividends and securities
[ small-medium enterprises (SMEs)] (Repealed by No 23 of 2018)
Software
see capital allowances
spectrum licences
see capital allowances
State or Territory bodies (STBs)
body ceasing to be STB, some deductions not allowed 24AW to 24AYA
student start-up loans
limit on deduction 82A
payment made to reduce a debt to the Commonwealth under Chapter 2AA of the Social Security Act 1991 (student start-up loans), no deduction unless provided as fringe benefit 26-20
payment made to reduce a debt to the Commonwealth under Part 2 of the Student Assistance Act 1973 (ABSTUDY student start-up loans), no deduction unless provided as fringe benefit 26-20
subscriptions to associations 25-55
substantiation
work, travel and car expenses Division 900
superannuation
see insurance and annuity business and interest
superannuation and related business
generally Part 3-30
asset disposals 295-85
death or disability benefits, deduction for future service element 295-470
death or disability cover, premiums for 295-465
financial assistance levy 295-490(1) (table item 3)
superannuation contributions surcharge
no deduction 26-60
superannuation - deductibility of contributions
generally Division 290
contributions for employees etc. Subdivision 290-B
contributions to non-complying funds sections 290-10 and 290-75
first home super saver scheme re-contribution section 290-168
limit on deduction 26-55
no deduction under any other provision of the Act section 290-10
personal contributions Subdivision 290-C
[ superannuation - employer contributions] (Repealed by No 15 of 2007)
superannuation guarantee charge
no deduction for 26-95
late contribution offset, no deduction for 290-95
superannuation supervisory levy
late lodgment amount, no deduction for 26-90
tax agent ' s fees
see tax related expenses
tax avoidance schemes
companies, use of tax losses or deductions to avoid tax Division 175
diverted assessable income 121F to 121L
dividend stripping 177E
gifts 78A
imputation, manipulation of 207-150(2) , 207-150(3)
prepaid outgoings to avoid tax 82KJ
recouped expenditure 82KH to 82KL
tax avoidance scheme, no deduction allowable where deduction the result of 177A to 177G
trading stock 70-20 , 52A
tax exempt entities
treatment of losses and outgoings on becoming taxable Schedule 2D
tax losses
bad debts, companies 165-120
change of ownership or control of a company
    generally
Division 165
    for earlier income years Subdivision 165-A
    for income year of the change Subdivision 165-B
designated infrastructure project entities Division 415
earlier income years Division 36
life insurance companies Subdivision 320-D
pooled development funds Subdivision 195-A
transfer between companies in same wholly-owned group Subdivision 170-A
tax preferred asset financing
generally Division 250
denial of capital allowance deductions in relation to asset being put to tax preferred use 250-145
reduction in capital allowance deductions in relation to asset being put to tax preferred use 250-150
tax related expenses 25-5
telecommunications site access rights
see capital allowances
telephone lines
see primary production
[ termination payments surcharge] (Repealed by No 23 of 2018)
theft
by employee or agent 25-45
thin capitalisation
disallowing of deductions Division 820
timber
death of owner of land carrying trees, deduction of the part of land cost attributable to trees 70-120
disposal of land carrying trees, deduction of the part of land cost attributable to trees 70-120
felling trees, deduction of cost of land attributable to trees felled or of cost of right to fell trees 70-120
see also capital allowances
trade support loan
limit on deduction 82A
payment made to reduce a debt to the Commonwealth under the Trade Support Loans Act 2014 , no deduction unless provided as fringe benefit 26-20
trading ships
see capital allowances
trading stock
Commissioner may determine whether consideration paid for chose in action is reasonable 52A
excess of opening stock over closing value 70-35(3)
expenditure deemed not to be of a capital nature 70-25
prepayments, when stock becomes trading stock on hand 70-15
see also tax avoidance schemes and timber
traditional securities
see securities
training guarantee
training guarantee charge, no deduction for 51(7)
transfer pricing
arm ' s length principle for cross-border conditions between entities Subdivision 815-B
arm ' s length principle for permanent establishments Subdivision 815-C
transport expenses
incurred in travel between workplaces 25-100
travel expenses
accompanying relatives, no deduction for some travel expenses 26-30
travel related to the use of residential premises as residential accommodation 26-31
see also substantiation
trees in carbon sink forests
see capital allowances
trusts
trust income, deductions considered in calculating 95 to 102
see also foreign residents , non-resident trust estates and public trading trusts
uniforms
non-compulsory uniforms Division 34
United Medical Protection Limited support payments 25-105
uranium mining
see mining
VET student loans
limit on deduction 82A
payment made to reduce a debt to the Commonwealth under Part 3A of the VET Student Loans Act 2016 (VETSL debts), no deduction unless provided as fringe benefit 26-20
water facilities
improvements 26-100
see also capital allowances
work expenses
see substantiation
work in progress
payment of a work in progress amount 25-95


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