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Income Tax Assessment Act 1997

CHAPTER 1 - INTRODUCTION AND CORE PROVISIONS  

PART 1-4 - CHECKLISTS OF WHAT IS COVERED BY CONCEPTS USED IN THE CORE PROVISIONS  

Division 12 - Particular kinds of deductions  

SECTION 12-5  

12-5   List of provisions about deductions  

View history reference

The provisions set out in the table contain rules about specific types of deduction.

Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 .


accrued leave transfer payments 26-10
advance expenditure  
  generally 82KZL to 82KZO
  avoidance arrangements 82KJ
  when deductible 82KZM to 82KZN
Australian apprenticeship support loan  
  payment made to reduce a debt to the Commonwealth under the Australian Apprenticeship Support Loans Act 2014 , no deduction unless provided as fringe benefit 26-20
[ averaging of incomes] (Omitted by No 46 of 1998)  
bad debts  
  deduction reduced because of forgiveness of debt if debtor and creditor are companies under common ownership and agree on the reduction 245-90
  general 25-35 , 63F
  companies Subdivisions 165-C , 166-C and 175-C
  debt/equity swaps 63E , 63F , 709-220
  deduction of a debt that used to be owed to a member of a consolidated group or MEC group by an entity that used to be a member of the group Subdivisions 709-D and 719-I
  money lenders, listed country branches, no deduction for 63D
  see also losses  
balancing adjustment  
  see buildings, capital allowances, industrial property, R & D and tax exempt entities  
banks  
  foreign banks, Australian branches of 160ZZVA to 160ZZZJ
boats  
  deferral of deductions 26-47
borrowing expenses 25-25
bribes to foreign public officials 26-52
bribes to public officials 26-53
buildings  
  income producing buildings, capital allowances Division 43
  see also heritage conservation work  
capital allowances  
  generally Division 40
  balancing adjustments 40-285(2) , 40-370
  business related costs 40-880
  electricity and telephone lines 40-645
  environmental protection activities 40-755
  exploration or prospecting 40-80(1) , 40-730
  in-house software 40-335 , 40-455
  intellectual property Subdivisions 40-B and 40-I
  IRUs Subdivision 40-B
  landcare operations 40-630
  low-value and software development pools Subdivision 40-E
  mining and quarrying Subdivision 40-H and Subdivision 40-I
  new business investment, additional deduction Division 41
  Petroleum Resource Rent Tax 40-750
  project pools 40-830 , 40-832
  reducing deductions 40-25 , 40-27 , 40-290 and 40-291
  spectrum licences Subdivision 40-B
  tax preferred use of asset Division 250
  telecommunications site access rights Subdivision 40-B
  trees in carbon sink forests Subdivision 40-J
  water facilities, horticultural plants, fodder storage assets and fencing assets Subdivision 40-F
capital gains  
  no deduction for an amount that would otherwise be deductible only because a net capital gain is included in assessable income 51AAA
  small business retirement exemption, no deduction for payments made directly or indirectly to CGT concession stakeholder so company or trust complies with section 152-325 152-310
  see also foreign residents  
capital loss  
  net capital loss, no deduction for 102-10
  net capital loss, transfer within company group Subdivision 170-B
car disposal  
  see capital allowances  
car expenses  
  generally Division 28
  " cents per kilometre " method Subdivision 28-C
  " log book " method Subdivisions 28-F and 28-G
  substantiation of car expenses Division 900
  see also transport expenses  
car expenses of employee  
  employee ' s car expenses where car provided by employer can be used for private purposes, no deduction for 51AF
carried interests  
  carried interests, no deduction for 118-21
car parking  
  employee ' s car parking expenses, no deduction for 51AGA
children ' s income  
  generally 102AA to 102AH
  taxable income of a child, deductions taken into consideration in calculating 102AD
[ clean energy] (Repealed by No 83 of 2014)  
club fees  
  club fees, no deduction for 26-45
  see also subscriptions to associations  
Commonwealth places windfall tax 26-17
companies, co-operative and mutual  
  generally 117 to 121
  distributions of assessable income 120
companies, private  
  excessive payments to shareholders directors and associates, reduced deduction 109
conservation covenants Division 31
consolidated groups and MEC groups  
  assets in relation to Division 230 financial arrangement 701-61(4)
controlled foreign companies  
  generally 316 to 468
  bad debts 399A
  decline in value of depreciating assets 398
  finance share dividends 394
  taxes paid 393
convertible notes  
  see interest  
copyrights  
  expenditure in obtaining registration Subdivisions 40-B and 40-I
COVID-19  
  expenditure on COVID-19 tests 25-125
cross staple arrangements  
  rent from land investment 25-115 , 25-120
currency exchange gains and losses  
  see foreign exchange  
death of timber owner  
  see timber  
debt interests  
  certain returns in respect of debt interests 25-85
depreciation  
  see capital allowances  
designs  
  expenditure in obtaining or extending registration Subdivisions 40-B and 40-I
disposal of depreciating assets  
  see capital allowances  
dividends  
  dividends including LIC capital gain component 115-280
  franking credits, companies and foreign residents 207-95(2) , 207-95(3) , 220-405(3)
  franking credits, pooled development funds (PDFs) 124ZM
  non-share equity interests, no deduction for return in respect of 26-26
  unfranked non-portfolio dividends 46FA
education expenses  
  Higher Education Contribution Scheme, no deduction unless provided as fringe benefit 26-20
  see also overseas debtors repayment levy  
  see also student start-up loans  
  see also VET student loans  
election expenses  
  Federal and State Parliament election expenses 25-60 , 25-70
  local government election expenses, limited deduction for 25-65 , 25-70
electricity connections  
  see capital allowances  
embezzlement  
  see theft  
employees  
  labour mobility programs, delayed deduction for salary, wages etc. paid to employees under program until labour mobility program withholding tax payable has been paid 26-25A
  pensions, gratuities or retiring allowances for ex-employees 25-50
  see also shares  
entertainment  
  expenditure, no deduction for some Division 32
  meal entertainment, calculation of deductible amount 51AEA to 51AEC
environment  
  see capital allowances  
excess non-concessional contributions tax  
  no deduction 26-75
exploration and prospecting  
  see capital allowances  
family  
  no deduction for maintaining spouse or child 26-40
[ family tax benefit] (Repealed by No 56 of 2010)  
farm management deposits  
  see primary production  
[ film income] (Repealed by No 164 of 2007)  
film licensed investment companies (FLICs)  
  see shares  
financial arrangements  
  losses from 230-15(2) and (3)
  see also borrowing expenses, interest, leases and securities  
foreign exchange  
  losses 775-30
foreign financial entities ' Australian permanent establishments  
  generally Part IIIB
  thin capitalisation Subdivision 820-FB
  transfer of losses Subdivisions 170-A and 170-B
[ foreign income] (Repealed by No 143 of 2007 )  
[ foreign investment funds (FIFs)] (Repealed by No 114 of 2010)  
[ foreign life assurance policies] (Repealed by No 114 of 2010)  
[ foreign residents] (Repealed by No 79 of 2007 )  
[ foreign tax credits] (Repealed by No 143 of 2007 )  
forestry managed investment schemes  
  payments under scheme 394-10(1)
franchise fees windfall tax 26-15
freight  
  freight for shipped goods 135A
fringe benefits  
  contributions for private component, no deduction for 51AJ
  employee ' s car expenses where car provided by employer can be used for private purposes, no deduction for 51AF
  employee ' s car parking expenses, no deduction for 51AGA
  expense payment fringe benefits, reduced deduction 51AH
general insurance companies and companies that self insure  
  claims paid 321-25 and 321-95
  increase in value of outstanding claims liability 321-15 and 321-85
  increase in value of unearned premium reserve 321-55
gifts  
  general Division 30
  limit on deduction 26-55
  see also tax avoidance schemes  
[ grape vines] (Repealed by No 129 of 2004)  
[ GST - acquiring or upgrading plant to meet GST obligations etc] (Repealed by No 77 of 2001)  
horticultural plants  
  see capital allowances  
higher education assistance 26-20
hybrid mismatch rules  
  disallowing of deductions Division 832
illegal activities 26-54
income equalisation deposits  
  see primary production  
industrial property  
  see intellectual property and R & D  
infrastructure  
  see tax losses  
[ insurance and annuity business] (Repealed by No 101 of 2004)  
insurance with non-residents  
  generally 141 to 148
  insurance premiums, no deduction unless arrangement to pay tax 145
  reinsurance, no deduction for resident carrying on insurance business in Australia for reinsurance premiums paid to a non-resident 148
intellectual property  
  see capital allowances  
interest  
  convertible notes, interest on, generally 82L to 82T
  foreign residents, debt creation involving, generally 159GZY to 159GZZF
  foreign residents, delayed deduction for interest paid to until withholding tax payable has been paid 26-25
  life assurance premiums, interest etc. on loans to finance, no deduction for 26-85
  superannuation contributions, interest etc. on loans to finance, no deduction for 26-80
  underpayment or late payment of tax, interest for 25-5
international agreements  
  see transfer pricing  
international profit shifting  
  see transfer pricing  
investment company  
  see shares  
IRUs  
  see capital allowances  
land  
  land degradation, see primary production vacant land, limit on deduction 26-102
[ land degradation] (Repealed by No 95 of 2019)  
lease document expenses 25-20
lease, authority, licence, permit or quota  
  expenditure to terminate 25-110
leases  
  finance leases and arrangements, use of property if end-user an exempt public body or use outside Australia to produce exempt income 159GE to 159GO
  leases of assets being put to tax preferred use Division 250
  leveraged arrangements, property used:
    • other than to produce assessable income; or
    • by a non-resident outside Australia; or
    • by a previous owner 		51AD
  payment for failure to comply with lease obligation to repair premises 25-15
leases of luxury cars  
  accrual amounts 242-35
  adjustment amounts (lessee) 242-70
  adjustment amounts (lessor) 242-65
  lease payments not deductible 242-55
  payments to acquire car not deductible 242-85
leave payments  
  accrued leave transfer payments 26-10
  no deduction for leave payments until paid 26-10
leisure facilities  
  no deduction for 26-50
[ life assurance companies ] (Repealed by No 89 of 2000)  
life insurance companies Subdivision 320-C
limited recourse debt  
  later payments 243-45
  later payments (replacement debt) 243-50
loans  
  see borrowing expenses, interest and securities  
losses  
  foreign exchange 775-30
  profit-making undertaking or scheme 25-40
  property sale 25-40
  traditional securities, loss on disposal or redemption of 70B
  see also tax losses  
managed investment trusts  
  losses from carried interests 275-200(4)
management and investment company shares  
  see shares  
membership of associations  
  see subscriptions to associations  
mining  
  Laminaria and Corallina decommissioning levy 26-96
  see also capital allowances  
misappropriation  
  by employee or agent 25-47
mortgage  
  expenses of discharging a mortgage 25-30
motor vehicles  
  see car expenses and leases  
National Disability Insurance Scheme  
  National Disability Insurance Scheme expenditure 26-97
non-cash transactions  
  non-cash business benefits 51AK
  non-cash consideration, money value deemed to have been paid or given 21
non-commercial business activities  
  deferral of non-commercial losses Division 35
non-resident trust estates  
  generally 102AAA to 102AAZG
  modified application of depreciation provisions 102AAY
  modified application of trading stock provisions 102AAZ
  no deductions allowable under Division 36 102AAZC
notional sales and loans  
  adjustment amounts (lessee) 240-110(1)
  adjustment amounts (lessor) 240-105(3)
  arrangement payments, no deduction for 240-55
  notional interest 240-50 , 250-155
  deemed loan treatment for financial benefits provided for tax preferred use of asset Subdivision 250-C
  payments to acquire property, no deduction for 240-85
offshore banking units  
  generally 121B to 121EL
overseas debtors repayment levy  
  payment made to reduce a liability to overseas debtors repayment levy under the Student Loans (Overseas Debtors Repayment Levy) Act 2015 , no deduction unless provided as fringe benefit 26-20
partnerships  
  foreign hybrid loss exposure adjustment 830-50
  losses, partner ' s share of partnership loss 90 , 92
patents  
  expenditure relating to grant of patents, etc. Subdivisions 40-B and 40-I
penalties  
  no deduction for penalties 26-5
personal services income  
  alienated personal services income Subdivision 86-B
  general Division 85
[ petroleum prospecting and mining] (Repealed by No 77 of 2001)  
[ plant and articles] (Repealed by No 77 of 2001)  
political contributions and gifts  
  denial of certain deductions 26-22
  deductions for individuals Subdivision 30-DA
pooled development funds (PDFs) 124ZM to 124ZZD
[ pooled software] (Repealed by No 77 of 2001)  
prepaid expenditure  
  see advance expenditure  
primary production  
  farm management deposits Division 393
  see also capital allowances and timber  
property  
  arrangements relating to assets being put to tax preferred use Division 250
  arrangements relating to use of property if end-user an exempt public body or use outside Australia to produce exempt income 159GE to 159GO
  leveraged arrangements, property used:
    • other than to produce assessable income; or
    • by a non-resident outside Australia; or
    • by a previous owner 		51AD
  sale of property, profit or loss 82(2)
  see also capital allowances and losses  
public trading trusts  
  generally 102M to 102T
qualifying securities  
  see securities  
[ quarrying] (Repealed by No 77 of 2001)  
R & D Division 355
rates and land taxes  
  premises used to produce mutual receipts 25-75
rebatable benefits  
  no deduction for 26-19
[ regional headquarters (RHQs)] (Repealed by No 47 of 2016)  
registered emissions units  
  expenditure incurred in becoming the holder of 420-15
  expenditure incurred in ceasing to hold 420-42
  excess of opening over closing value of 420-45
reimbursements  
  expense payment fringe benefits, reduced deduction 51AH
reinsurance  
  see insurance with non-residents  
related entities (including relatives)  
  reduction of deduction for payment or liability to 26-35 , 65(1B) and (1C)
repairs  
  general 25-10
  repair covenants, payment for non-compliance with covenant to repair under lease 25-15
[ research & development] (Repealed by No 93 of 2011)  
roads  
  see timber  
royalties  
  royalty, no deduction for royalty paid to a foreign resident until the withholding tax payable has been paid 26-25
scientific research  
  see R & D  
securities  
  qualifying securities 159GP to 159GZ
  substituted securities 23K
  traditional securities, loss on disposal or redemption of 70B
shares  
  buy-backs 159GZZZJ to 159GZZZT
  cancellation of subsidiary ' s shares in holding company 159GZZZC to 159GZZZI
  employee share schemes, deduction for provider of ESS interests Subdivision 83A-D
   
  see also dividends and securities  
[ small-medium enterprises (SMEs)] (Repealed by No 23 of 2018)  
Software  
  see capital allowances  
spectrum licences  
  see capital allowances  
State or Territory bodies (STBs)  
  body ceasing to be STB, some deductions not allowed 24AW to 24AYA
student start-up loans  
  payment made to reduce a debt to the Commonwealth under Chapter 2AA of the Social Security Act 1991 (student start-up loans), no deduction unless provided as fringe benefit 26-20
  payment made to reduce a debt to the Commonwealth under Part 2 of the Student Assistance Act 1973 (ABSTUDY student start-up loans), no deduction unless provided as fringe benefit 26-20
subscriptions to associations 25-55
substantiation  
  work, travel and car expenses Division 900
superannuation  
  see insurance and annuity business and interest  
superannuation and related business  
  generally Part 3-30
  asset disposals 295-85
  death or disability benefits, deduction for future service element 295-470
  death or disability cover, premiums for 295-465
  financial assistance levy 295-490(1) (table item 3)
superannuation contributions surcharge  
  no deduction 26-60
superannuation - deductibility of contributions  
  generally Division 290
  contributions for employees etc. Subdivision 290-B
  contributions to non-complying funds sections 290-10 and 290-75
  first home super saver scheme re-contribution section 290-168
  limit on deduction 26-55
  no deduction under any other provision of the Act section 290-10
  personal contributions Subdivision 290-C
[ superannuation - employer contributions] (Repealed by No 15 of 2007)  
superannuation guarantee charge  
  no deduction for 26-95
  late contribution offset, no deduction for 290-95
superannuation supervisory levy  
  late lodgment amount, no deduction for 26-90
tax agent ' s fees  
  see tax related expenses  
tax avoidance schemes  
  companies, use of tax losses or deductions to avoid tax Division 175
  diverted assessable income 121F to 121L
  dividend stripping 177E
  gifts 78A
  imputation, manipulation of 207-150(2) , 207-150(3)
  prepaid outgoings to avoid tax 82KJ
  recouped expenditure 82KH to 82KL
  tax avoidance scheme, no deduction allowable where deduction the result of 177A to 177G
  trading stock 70-20 , 52A
tax exempt entities  
  treatment of losses and outgoings on becoming taxable Schedule 2D
tax losses  
  bad debts, companies 165-120
  change of ownership or control of a company
    generally 		Division 165
      for earlier income years Subdivision 165-A
      for income year of the change Subdivision 165-B
  designated infrastructure project entities Division 415
  earlier income years Division 36
  life insurance companies Subdivision 320-D
  pooled development funds Subdivision 195-A
  transfer between companies in same wholly-owned group Subdivision 170-A
tax preferred asset financing  
  generally Division 250
  denial of capital allowance deductions in relation to asset being put to tax preferred use 250-145
  reduction in capital allowance deductions in relation to asset being put to tax preferred use 250-150
tax related expenses 25-5
telecommunications site access rights  
  see capital allowances  
telephone lines  
  see primary production  
[ termination payments surcharge] (Repealed by No 23 of 2018)  
theft  
  by employee or agent 25-45
thin capitalisation  
  disallowing of deductions Division 820
timber  
  death of owner of land carrying trees, deduction of the part of land cost attributable to trees 70-120
  disposal of land carrying trees, deduction of the part of land cost attributable to trees 70-120
  felling trees, deduction of cost of land attributable to trees felled or of cost of right to fell trees 70-120
  see also capital allowances  
[ trade support loan] (Repealed by No 61 of 2023)  
trading ships  
  see capital allowances  
trading stock  
  Commissioner may determine whether consideration paid for chose in action is reasonable 52A
  excess of opening stock over closing value 70-35(3)
  expenditure deemed not to be of a capital nature 70-25
  prepayments, when stock becomes trading stock on hand 70-15
  see also tax avoidance schemes and timber  
traditional securities  
  see securities  
training guarantee  
  training guarantee charge, no deduction for 51(7)
transfer pricing  
  arm ' s length principle for cross-border conditions between entities Subdivision 815-B
  arm ' s length principle for permanent establishments Subdivision 815-C
transport expenses  
  incurred in travel between workplaces 25-100
travel expenses  
  accompanying relatives, no deduction for some travel expenses 26-30
  travel related to the use of residential premises as residential accommodation 26-31
  see also substantiation  
trees in carbon sink forests  
  see capital allowances  
trusts  
  trust income, deductions considered in calculating 95 to 102
  see also foreign residents , non-resident trust estates and public trading trusts  
uniforms  
  non-compulsory uniforms Division 34
[ United Medical Protection Limited support payments] (Repealed by No 105 of 2019)  
uranium mining  
  see mining  
VET student loans  
  payment made to reduce a debt to the Commonwealth under Part 3A of the VET Student Loans Act 2016 (VETSL debts), no deduction unless provided as fringe benefit 26-20
water facilities  
  improvements 26-100
  see also capital allowances  
work expenses  
  see substantiation  
work in progress  
  payment of a work in progress amount 25-95

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