Income Tax Assessment Act 1997
CHAPTER 2
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LIABILITY RULES OF GENERAL APPLICATION
PART 2-5
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RULES ABOUT DEDUCTIBILITY OF PARTICULAR KINDS OF AMOUNTS
Division 25
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Some amounts you can deduct
Operative provisions
SECTION 25-85
Certain returns in respect of debt interests
25-85(1)
This section deals with a *return that an entity pays or provides on a *debt interest.
25-85(2)
The *return is not prevented from being a *general deduction for an income year under section 8-1 merely because:
(a) the return is *contingent on aspects of the economic performance (whether past, current or future) of:
(b) the return secures a permanent or enduring benefit for the entity or a connected entity of the entity.
25-85(3)
If the *return is a *dividend, the entity can deduct the return to the extent to which it would have been a *general deduction under section 8-1 if:
(a) the payment of the return were the incurring by the entity of a liability to pay the same amount as interest; and
(b) that interest were incurred in respect of the finance raised by the entity and in respect of which the return was paid or provided; and
(c) the *debt interest retained its character as a debt interest for the purposes of subsection (2).
25-85(4)
Subsections (2) and (3) do not apply to a *return to the extent to which it would be a * general deduction under section 8-1 apart from this section.
25-85(4A)
Subsections (2) and (3) do not apply to a *return on a *debt interest that is a *Division 230 financial arrangement.
25-85(5)
Subject to regulations made for the purposes of subsection (6), subsections (2) and (3) do not apply to the return to the extent to which the annually compounded internal rate of return exceeds the *benchmark rate of return for the interest increased by 150 basis points.
25-85(6)
The regulations may provide that subsection (5) applies in the circumstances specified in the regulations as if the reference to 150 basis points were a reference to a greater or lesser number of basis points.
View history note
Hide history noteThis section deals with a *return that an entity pays or provides on a *debt interest.
25-85(2)
The *return is not prevented from being a *general deduction for an income year under section 8-1 merely because:
(a) the return is *contingent on aspects of the economic performance (whether past, current or future) of:
(i) the entity or a part of the entity's activities; or
(ii) a * connected entity of the entity or a part of the activities of a connected entity of the entity; or
(b) the return secures a permanent or enduring benefit for the entity or a connected entity of the entity.
25-85(3)
If the *return is a *dividend, the entity can deduct the return to the extent to which it would have been a *general deduction under section 8-1 if:
(a) the payment of the return were the incurring by the entity of a liability to pay the same amount as interest; and
(b) that interest were incurred in respect of the finance raised by the entity and in respect of which the return was paid or provided; and
(c) the *debt interest retained its character as a debt interest for the purposes of subsection (2).
25-85(4)
Subsections (2) and (3) do not apply to a *return to the extent to which it would be a * general deduction under section 8-1 apart from this section.
25-85(4A)
Subsections (2) and (3) do not apply to a *return on a *debt interest that is a *Division 230 financial arrangement.
25-85(5)
Subject to regulations made for the purposes of subsection (6), subsections (2) and (3) do not apply to the return to the extent to which the annually compounded internal rate of return exceeds the *benchmark rate of return for the interest increased by 150 basis points.
25-85(6)
The regulations may provide that subsection (5) applies in the circumstances specified in the regulations as if the reference to 150 basis points were a reference to a greater or lesser number of basis points.
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