Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 165 - Income tax consequences of changing ownership or control of a company  

Subdivision 165-CD - Reductions after alterations in ownership or control of loss company  

Operative provisions

SECTION 165-115Y   Relevant debt interest  

165-115Y(1)  
An entity (not an individual) has a relevant debt interest in a *loss company at a particular time if, at that time:


(a) the entity has a controlling stake in the loss company (see section 165-115Z ); and


(b) the entity is owed by the loss company a debt of not less than $10,000 (a debt ) or debts at least one of which is not less than $10,000 (each debt of not less than $10,000 is also called a debt ).

165-115Y(2)  
An entity (not an individual) also has a relevant debt interest in a *loss company at a particular time if, at that time:


(a) the entity has a controlling stake in the loss company; and


(b) the entity is owed by an entity (the debtor entity ) other than the loss company a debt of not less than $10,000 (also a debt ) or debts at least one of which is not less than $10,000 (each debt of not less than $10,000 is also called a debt ); and


(c) the debtor entity has a relevant equity interest or a relevant debt interest in the loss company.

165-115Y(3)  
The total of the debts referred to in subsections (1) and (2) constitutes the entity ' s relevant debt interest in the *loss company.

165-115Y(3A)  


A *widely held company that, apart from this subsection, would have a relevant debt interest in a *loss company at a particular time does not have such an interest at that time.

165-115Y(3B)  


Subsection (3A) does not apply if:


(a) an entity has a controlling stake in the loss company (see section 165-115Z ); and


(b) that entity has a direct or indirect interest in, or is owed a debt by, the *widely held company, being an interest or debt in respect of which:


(i) the entity could, if a *CGT event happened in respect of the interest or debt, make a *capital loss (other than a capital loss that would be disregarded) that reflects any part of the loss company ' s overall loss; or

(ii) the entity has deducted or can deduct, or could deduct at a later time, an amount in respect of the cost of the *acquisition, or a net loss on the *disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company ' s overall loss.

165-115Y(3C)  


Subsection (3A) does not apply in respect of a particular time if an entity that had a direct or indirect interest in, or was owed a debt by, the *widely held company at an earlier time, and had a controlling stake in the *loss company (see section 165-115Z ) at the earlier time;


(a) made a *capital loss (other than a capital loss that was disregarded) because a *CGT event happened in respect of the interest or debt, where the capital loss reflected any part of the loss company ' s overall loss; or


(b) has deducted or could have deducted at an earlier time, or could deduct at a later time, an amount in respect of the cost of the *acquisition, or a net loss on the *disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company ' s overall loss.

165-115Y(4)  
An entity (the first entity ) that, apart from this subsection, would have a relevant debt interest in a *loss company at a particular time does not have such an interest if, at that time, there is no other entity that has a direct or indirect interest in, or is owed a debt by, the first entity, being an interest or debt in respect of which:


(a) the other entity could, if a *CGT event happened in respect of the interest or debt, make a *capital loss (other than a capital loss that would be disregarded) that reflects any part of the loss company ' s overall loss; or


(b) the other entity could deduct, or can deduct or could deduct at a later time:


(i) an amount in respect of the cost of the *acquisition of the interest or debt; or

(ii) a net loss on the *disposal of the interest or debt;
where the deduction reflects, or would have reflected, any part of the loss company ' s overall loss.

165-115Y(4A)  


Subsection (4) does not apply if the first entity is a *widely held company.

165-115Y(5)  


Subsection (4) does not apply to the first entity in respect of a particular time if an entity that had a direct or indirect interest in, or was owed a debt by, the first entity at an earlier time:


(a) made a capital loss (other than a capital loss that would be disregarded) at an earlier time because a *CGT event happened in respect of the interest or debt, where the capital loss reflected any part of the *loss company ' s overall loss; or


(b) has deducted or could have deducted at an earlier time, or could deduct at a later time, an amount in respect of the cost of the *acquisition, or a net loss on the *disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company ' s overall loss.

165-115Y(6)  
An individual is not taken to have a relevant debt interest in a *loss company at any time.

165-115Y(7)  


A partnership that consists only of individuals is not taken to have a relevant debt interest in a *loss company at any time.

165-115Y(8)  
If section 106-30 , 106-50 or 106-60 would treat an act referred to in that section that is done in relation to a debt as having been done by an individual, the debt is not a relevant debt interest.


 

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