Income Tax Assessment Act 1936
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:
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
until the end of the income year, the trust:
(ii) if the debt was incurred in the income year - the income year;
(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.
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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