Income Tax Assessment Act 1997
CHAPTER 1
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INTRODUCTION AND CORE PROVISIONS
PART 1-4
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CHECKLISTS OF WHAT IS COVERED BY CONCEPTS USED IN THE CORE PROVISIONS
Division 12
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Particular kinds of deductions
SECTION 12-5
12-5
List of provisions about deductions
The provisions set out in the table contain rules about specific types of deduction.
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 adjusted liability for incurred claims | 321-15 | |
| increase in value of adjusted liability for remaining coverage | 321-55 | |
| increase in value of outstanding claims liability | 321-85 | |
| 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) | |
| financial product advice | subsection 295-490(1) (table item 5) | |
| 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 | |
| previously FRT disallowed amounts | 820-56 | |
| 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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