Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision H - Period of deductibility of certain advance expenditure  

SECTION 82KZME   EXPENDITURE UNDER SOME AGREEMENTS  

82KZME(1)    
Section 82KZMF applies to set the amount and timing of deductions for expenditure that a taxpayer incurs in a year of income (the expenditure year ) if:

(a) apart from that section, the taxpayer could deduct the expenditure for the expenditure year under:

(i) section 8-1 ; or

(ii) section 355-205 (R & D expenditure) or 355-480 (earlier year associate R & D expenditure);

of the Income Tax Assessment Act 1997 ; and

(b) (Repealed by No 78 of 2001)

(c) the requirements of subsections (2) and (3) are met.

Note:

There are some exceptions: see subsections (5), (7), (8) and (9).

82KZME(2)   General requirements for expenditure.  

The expenditure must be incurred:

(a) after 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999 under an agreement; and

(b) in return for the doing of a thing under the agreement that is not to be wholly done within the expenditure year.

82KZME(3)   Requirements for agreement.  

There are these requirements for the agreement:

(a) the taxpayer ' s allowable deductions for the expenditure year that are attributable to the agreement must exceed the taxpayer ' s assessable income (if any) for the expenditure year that is attributable to the agreement; and

(b) the taxpayer does not have day to day control over the operation of the agreement (whether or not the taxpayer has the right to be consulted or give directions); and

(c) at least one of these must be satisfied:

(i) there is more than one participant in the agreement in the same capacity as the taxpayer;

(ii) the person who manages, arranges or promotes the agreement, or an associate of that person, manages, arranges or promotes similar agreements for other taxpayers.

82KZME(4)   Activities that relate to the agreement.  

Without affecting the operation of any other section in this Subdivision, an agreement referred to in this section includes all activities that relate to the agreement, including those that give rise to deductions or assessable income.

82KZME(5)   Exception 1: certain negatively geared investments.  

The expenditure must not be:

(a) a premium for building insurance, contents insurance or rent protection insurance; or

(b) interest on money borrowed to acquire:

(i) real property or an interest in real property; or

(ii) shares that are listed for quotation in the official list of an approved stock exchange; or

(iii) units in a trust that has at least 300 beneficiaries and is a widely held unit trust as defined in section 272-105 in Schedule 2F ;

where:

(c) the taxpayer has obtained, or can reasonably be expected to obtain, rent, dividends or trust income from the agreement; and

(d) the taxpayer has not obtained and will not obtain any other kind of assessable income from the agreement (except a capital gain or an insurance receipt); and

(e) all aspects of the agreement have been conducted at arm ' s length.

82KZME(6)    
(Repealed by No 4 of 2018)

82KZME(7)   Exception 3: expenditure is excluded expenditure.  

The expenditure must not be excluded expenditure (see subsection 82KZL(1) ).

82KZME(8)   Exception 4: expenditure meets a pre-existing obligation.  

The expenditure by the taxpayer must not meet a contractual obligation that:

(a) exists under an agreement at or before 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999; and

(b) requires the payment of an amount for the doing of a thing under the agreement; and

(c) requires the payment to be made before the doing of the thing; and

(d) cannot be escaped by unilateral action by the taxpayer.

82KZME(9)   Exception 5: agreement to which a product ruling applies.  

The expenditure must not be under an agreement to which a product ruling applies, describing expenditure under the agreement as being allowable as a deduction.

82KZME(10)    
The product ruling must be made:

(a) on or before 1 pm (by legal time in the Australian Capital Territory) on 11 November 1999; or

(b) in response to an application for a product ruling where:

(i) the application was received by the Commissioner on or before the time specified in paragraph (a); and

(ii) the Commissioner acknowledged receiving the application.

82KZME(11)    
In this section:

product ruling
means a public ruling made under Part IVAAA of the Taxation Administration Act 1953 about a particular investment product.