Income Tax Assessment Act 1997
If a gain or loss is to be taken into account using the realisation method, you are taken, for the purposes of section 230-15 , to make the gain or loss for the income year in which the gain or loss occurs.
For the purposes of subsection (1), a gain or loss from a * financial arrangement is taken to occur at:
(a) if the last of the * financial benefits, rights and obligations taken into account in determining the amount of the gain or loss is a financial benefit - the time the financial benefit:
(i) is provided; or
(ii) if the financial benefit is not provided at the time when it is due to be provided under the arrangement and it is reasonable to expect that the financial benefit will be provided - is due to be provided; or
(b) if the last of the financial benefits, rights and obligations taken into account in determining the amount of the gain or loss is a right to receive a financial benefit or an obligation to provide a financial benefit - the time:
(i) if the right or obligation ceases before the financial benefit is provided - the right or obligation ceases; or
(ii) otherwise - the financial benefit is provided.
This subsection has effect subject to subsection (3).
For the purposes of subsection (1), you make a loss from a *financial arrangement from writing off, as a bad debt, a right to a *financial benefit (or a part of a financial benefit) if:
(a) the financial benefit was taken into account in working out the amount of a gain from the arrangement and the gain has been included in your assessable income under this Division; or
(b) the right is one in respect of money that you lent in the ordinary course of your *business of lending money; or
(c) the right is one that you bought in the ordinary course of your business of lending money. 230-180(4)
The loss referred to in subsection (3) occurs when you write off the right to the *financial benefit (or the part of the financial benefit) as a bad debt. 230-180(5)
The amount of the loss referred to in subsection (3) is:
(a) if paragraph (3)(a) applies - so much of the gain referred to in that paragraph as is reasonably attributable to the *financial benefit (or the part of the financial benefit); or
(b) if paragraph (3)(b) applies - the amount of the financial benefit (or the part of the financial benefit); or
(c) if paragraph (3)(c) applies - the amount of the financial benefit (or the part of the financial benefit) but only up to the value of the financial benefit you provided to acquire the right to the financial benefit (or the part of the financial benefit). 230-180(6)
For the purposes of this Act, a deduction for the loss referred to in subsection (3) is to be treated as a deduction of a bad debt.
Various provisions in this Act and the Income Tax Assessment Act 1936 restrict the availability of deductions for bad debts and make provision in relation to the recoupment of amounts in relation to bad debts that have been written off. These provisions are set out in subsection 25-35(5) .
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