Tax Law Improvement Act (No. 1) 1998 (46 of 1998)

Schedule 1   Amendment of the Income Tax Assessment Act 1997

3   Section 166-35 (link note)

Repeal the link note, substitute:

Subdivision 166-C - Deducting bad debts

Table of sections

166-40 How Subdivision 165-C applies to a listed public company

166-45 How Subdivision 165-C applies to a 100% subsidiary of a listed public company

166-50 Companies can choose that this Subdivision is not to apply to them

166-40 How Subdivision 165-C applies to a listed public company

(1) This Subdivision modifies the way Subdivision 165-C applies to a company that is a *listed public company at all times during a period (the test period) consisting of the *first continuity period, the *second continuity period and any intervening period.

Note 1: Subdivision 165-C is about the conditions a company must satisfy before it can deduct a bad debt.

Note 2: This Subdivision also modifies how Subdivision 165-C applies to a 100% subsidiary of a listed public company: see section 166-45.

Note 3: A company can choose that this Subdivision is not to apply to it: see section 166-50.

Substantial continuity of ownership

(2) The *listed public company is taken to have met the conditions in section 165-123 (about the company maintaining the same owners) if there is *substantial continuity of ownership of the company as between whichever of these times the company chooses:

(a) the start of the income year in which the debt was incurred;

(b) the start of the *test period;

and each of these other times in the test period:

(c) the time of each *abnormal trading in *shares in the company;

(d) the end of each income year.

See section 166-145 to work out whether there is substantial continuity of ownership.

No substantial continuity of ownership

(3) The *listed public company is taken to have failed to meet the conditions in section 165-123 if there is no *substantial continuity of ownership of the company as between the start of the *test period and one or more of the other times referred to in subsection (2).

Satisfies the same business test

(4) However, if the *listed public company satisfies the *same business test for the *second continuity period (the same business test period), it is taken to have satisfied the condition in section 165-126 (which is about the company carrying on the same business).

For the same business test: see Subdivision 165-E.

(5) Apply the *same business test to the *business that the *listed public company carried on immediately before the first time (the test time) covered by paragraph (2)(a) or (b) for which there was no *substantial continuity of ownership of the company as between the start of the test period and that time.

166-45 How Subdivision 165-C applies to a 100% subsidiary of a listed public company

(1) This Subdivision also modifies the way Subdivision 165-C applies to a company that is not a *listed public company, but only if the conditions in subsections (2) and (3) are met.

Note: Subdivision 165-C is about the conditions a company must satisfy before it can deduct a bad debt for an earlier income year.

(2) The company (the subsidiary) must be a *100% subsidiary of another company (the holding company) at all times during a period consisting of:

(a) the *first continuity period of the subsidiary; and

(b) the *second continuity period of the subsidiary; and

(c) any intervening period.

(3) Also, the *holding company must be a *listed public company at all times during that period.

(4) If the conditions are met then, for the purposes of applying Subdivision 165-C to the subsidiary, this Subdivision applies to the subsidiary as if:

(a) the subsidiary were itself a *listed public company at all times during that period; and

(b) an *abnormal trading in *shares in the *holding company during that period were an abnormal trading in shares in the subsidiary.

(Subdivisions 166-D, 166-F and 166-G apply to the subsidiary in the same way and for the same purpose.)

166-50 Companies can choose that this Subdivision is not to apply to them

(1) The *listed public company or subsidiary can choose that Subdivision 165-C is to apply to it for the income year without the modifications made by this Subdivision.

(2) The company must choose on or before the day it lodges its *income tax return for the income year, or before a later day if the Commissioner allows.