Income Tax Assessment Act 1997
Chapter 4 inserted by No 162 of 2001.
Part 4-5 inserted by No 162 of 2001.
Division 820 inserted by No 162 of 2001.
Subdivision 820-A inserted by No 162 of 2001.
Debt deduction , of an entity and for an income year, is a cost incurred by the entity in relation to a *debt interest issued by the entity, to the extent to which:
(a) the cost is:
(i) interest, an amount in the nature of interest, or any other amount that is calculated by reference to the time value of money; or
(ii) the difference between the *financial benefits received, or to be received, by the entity under the *scheme giving rise to the debt interest and the financial benefits provided, or to be provided, under that scheme; or
(iii) any amount directly incurred in obtaining or maintaining the financial benefits received, or to be received, by the entity under the scheme giving rise to the debt interest; or
(iv) any other expense incurred by the entity that is specified in the regulations made for the purposes of this subparagraph; and
(b) the entity can, apart from this Division, deduct the cost from its assessable income for that year;
(c) (Repealed by No 101 of 2006)
S 820-40(1) amended by No 101 of 2006, s 3 and Sch 3 item 16 and Sch 4 item 9, by repealing para (c) (including the note), effective 1 January 2008. Para (c) formerly read:
(c) the cost is not incurred before 1 July 2001 if the entity can deduct it under section 25-25 of this Act or former section 67 of the Income Tax Assessment Act 1936 .
The sections referred to in paragraph (c) spread deductions for borrowing expenses over up to 5 years in most cases.
S 820-40(1) amended by No 101 of 2006 , s 3 and Sch 2 item 750, by amending the reference to a repealed inoperative provision in para (c), effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .
S 820-40(1) amended by No 142 of 2003.
A cost covered by paragraph (1)(a) includes, but is not limited to, any of the following:
(a) an amount in substitution for interest;
(b) a discount in respect of a security;
(c) a fee or charge in respect of a debt, including application fees, line fees, service fees, brokerage and stamp duty in respect of document registration or security for the debt interest;
(d) an amount that is taken under an *income tax law to be an amount of interest in respect of a lease, a hire purchase arrangement or any other *arrangement specified in that law;
(e) any loss in respect of:
(i) a reciprocal purchase agreement (otherwise known as a repurchase agreement);
(ii) a sell-buyback arrangement;
(iii) a securities loan arrangement;
(f) any amount covered by paragraph (1)(a) that has been assigned or is dealt with in any way on behalf of the party who would otherwise be entitled to that amount. 820-40(3)
To avoid doubt, the following amounts that are incurred by an entity in relation to a *debt interest issued by the entity are not covered by paragraph (1)(a):
(a) losses and outgoings directly associated with hedging or managing the financial risk in respect of the debt interest;
(b) losses incurred by the entity in relation to which the following apply:
(i) the losses would otherwise be a cost covered by subparagraph (1)(a)(ii); but
(ii) the benefits mentioned in that subparagraph are measured in a foreign currency or a unit of account other than Australian currency (for example, ounces of gold) and the losses have arisen only because of changes in the rate of converting that foreign currency or that unit of account into Australian currency;
(c) salary or wages;
(d) rental expenses for a lease if the lease is not a debt interest;
(e) an expense specified in the regulations made for the purposes of this paragraph.
S 820-40 inserted by No 162 of 2001.
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