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

3   Company bad debts

4   Consequential amendment of other Acts

Financial Corporations (Transfer of Assets and Liabilities) Act 1993

22   Subsections 22(2) and (3)

Repeal the subsections, substitute:

Modification of tests for receiving corporation to deduct bad debt

(2) In relation to a transfer of a debt, Subdivisions 165-C, 166-C and 175-C of the Income Tax Assessment Act 1997 have effect as if the debt had been incurred at the time of the transfer.

Note: Those Subdivisions are about companies deducting bad debts.

Easing of restrictions on transferring corporation

(3) If:

(a) this Act applies to one or more transfers of assets by the transferring corporation to the receiving corporation; and

(b) an entity incurs a debt to the transferring corporation in a year of income (the debt year); and

(c) the debt year is the income year in which this section (as originally enacted) commenced or an earlier income year; and

(d) Subdivision 165-C or 175-C, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount for the debt for an income year (the deduction year); and

(e) the transferring corporation did not, at any time in the deduction year, derive income from:

(i) a business of a kind that it did not carry on; or

(ii) a transaction of a kind that it had not entered into in the course of its business operations;

before the transfer, or the earliest of the transfers, occurred;

neither Subdivision 165-C nor 175-C of that Act prevents the transferring corporation from deducting that amount.

Note: Subdivision 165-C of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a bad debt.

Subdivision 175-C of that Act is about the Commissioner preventing a company from getting certain tax benefits through its unused bad debts.