INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 80AA   PRIMARY PRODUCTION LOSSES OF PRE-1990 YEARS OF INCOME  

80AA(1AA)   [No operation from 1997/98 year onwards]  

This section does not apply to the 1997-98 year of income or a later year of income.

Note:

To find out how much of a primary production loss incurred before the 1989-90 year of income you can deduct for the 1997-98 or a later year of income: see section 36-110 of the Income Tax (Transitional Provisions) Act 1997 .

80AA(1)   [Application]  

This section applies to losses incurred by a taxpayer in engaging in primary production in the year of income that commenced on 1 July 1957 and subsequent years before the year of income commencing on 1 July 1989.

80AA(1A)   [Application in Northern Territory]  

This section also applies to a loss incurred by a taxpayer in engaging in primary production in the Northern Territory in any of the 7 years immediately preceding the year of income that commenced on 1 July 1957 and, for the purposes of the application of this section in relation to such a year, a reference in this section to engaging in primary production in that year shall be read as a reference to engaging in primary production in the Northern Territory in that year.

80AA(2)   [Loss from primary production]  

For the purposes of this section, a taxpayer who has engaged in primary production in any year shall be deemed to have incurred a loss in engaging in primary production in that year if:

(a) the deductions (other than the deductions allowable under this section or section 80 ) allowable from so much of the assessable income of that year as was derived from engaging in primary production exceed that assessable income; and

(b) for the purposes of section 80 , a loss was incurred by the taxpayer in that year;

and the amount of the loss that the taxpayer is to be deemed to have incurred in engaging in primary production in that year shall be deemed to be:

(c) if the amount of the excess referred to in paragraph (a) is equal to the amount of the loss referred to in paragraph (b) - the amount of that excess; or

(d) in any other case - the amount of the excess referred to in paragraph (a) or the amount of the loss referred to in paragraph (b), whichever is the less.

80AA(3)   [Deductions allowable]  

The reference in subsection (2) to the deductions allowable from so much of the assessable income of a year as was derived from engaging in primary production shall be read as a reference to:

(a) any deductions allowable from the assessable income of that year that relate exclusively to engaging in primary production; and

(b) any other deductions allowable from the assessable income of that year to the extent to which they relate to engaging in primary production.

80AA(3A)   [Company to which Subdiv B of Div 2A applies]  

Notwithstanding subsection (2), if Subdivision B of Division 2A applies in relation to a taxpayer being a company in relation to a year of income, being a taxpayer who has engaged in primary production in the year of income, a loss shall, for the purposes of this section, be deemed to be incurred by the taxpayer in the year of income if, and only if, for the purposes of section 80 , a loss was incurred by the taxpayer in the year of income and:

(a) for the purposes of that Subdivision, the company has a notional loss in respect of a relevant period, or notional losses in respect of relevant periods, in relation to the year of income and the amount of that notional loss or the sum of the amounts of those notional losses, as the case may be, exceeds the amount (if any) that is the eligible notional loss of the company in relation to the year of income; or

(b) in the application of subsection 50C(2) in relation to the taxpayer in relation to the year of income, the deductible amount referred to in that subsection exceeds the income amount referred to in that subsection;

and the amount of the loss that the taxpayer is to be deemed to have incurred in engaging in primary production in that year of income shall be deemed to be:

(c) if the amount of the loss that, for the purposes of section 80 , was incurred by the taxpayer in the year of income is equal to the notional primary production loss of the taxpayer - the amount of the notional primary production loss; and

(d) in any other case - the amount of the loss that, for the purposes of section 80 , was incurred by the taxpayer in the year of income or the amount of the notional primary production loss of the taxpayer, whichever is the less.

80AA(3B)   [``notional primary production loss'']  

For the purposes of the application of subsection (3A) in relation to a taxpayer in relation to a year of income, ``notional primary production loss'' means:

(a) in a case where paragraph (3A)(a) applies but paragraph (3A)(b) does not apply - the amount of the excess referred to in paragraph (3A)(a);

(b) in a case where paragraph (3A)(b) applies but paragraph (3A)(a) does not apply - the amount of the excess referred to in paragraph (3A)(b); and

(c) in any other case - the sum of the amount of the excess referred to in paragraph (3A)(a) and the amount of the excess referred to in paragraph (3A)(b).

80AA(3C)   [Primary production income and deductions not to be ignored]  

In the application of Subdivision B of Division 2A in relation to a company in relation to a year of income for the purposes of subsection (3A), regard shall not be had to assessable income of the company other than assessable income derived from engaging in primary production and regard shall not be had to allowable deductions other than deductions allowable from assessable income derived from engaging in primary production.

80AA(4)   [Conditions for allowance of losses]  

Subject to subsections (9), (10) and (11), so much of the losses to which this section applies incurred by a taxpayer in any of the years preceding the year of income as has not been allowed as a deduction from his income of any of those years under this section is allowable as a deduction in accordance with the following provisions:

(a) where he has not in the year of income derived exempt income, the deduction shall be made from the assessable income;

(b) where he has in that year derived exempt income, the deduction shall be made successively from the net exempt income and from the assessable income;

(c) where a deduction is allowable under this section in respect of 2 or more losses, the losses shall be taken into account in the order in which they were incurred.

80AA(4A)   [Reduced loss under commercial debt forgiveness provisions]  

If a loss referred to in subsection (4) is taken to be reduced under Subdivision 245-E of Schedule 2C in its application to the year of income or a previous year of income, any reference to that loss in this section is to be treated as a reference to that loss as so taken to be reduced.

80AA(5)   [Interpretation]  

In this section, ``exempt income'' and ``net exempt income'' have the same respective meanings as in section 80 .

80AA(5A)   [When s 80AA(4) losses deductible]  

The losses referred to in subsection (4) are not allowable as a deduction from assessable foreign income of a taxpayer except to the extent provided in an election under subsection (5B).

80AA(5B)   [Election re losses]  

A taxpayer who has derived assessable foreign income in a year of income may elect that the whole or a specified part of the losses referred to in subsection (5A) be allowable as a deduction from the taxpayer's assessable foreign income of that year.

80AA(5C)   [``assessable foreign income'']  

In subsections (5A) and (5B):

"assessable foreign income"
has the same meaning as in section 160AFD .

80AA(5D)   [When election must be made]  

An election under subsection (5B) must be made:

(a) before whichever is the later of the following:

(i) the end of the period of 6 months after the commencement of this subsection;

(ii) the day after the day of lodgment of the taxpayer's return of income of the year of income to which the election relates; or

(b) within such further period as the Commissioner allows.

80AA(6)   [Bankruptcy, etc]  

Notwithstanding any other provision of this section, where, before the year of income, a taxpayer has become a bankrupt, or, not having become a bankrupt, has been released from any debts by the operation of an Act relating to bankruptcy, no loss to which this section applies that was incurred by him before the date on which he became a bankrupt or the date on which he was so released, as the case may be, is an allowable deduction.

80AA(6A)   [Annulment of bankruptcy to be disregarded]  

If:

(a) a taxpayer becomes a bankrupt, but the bankruptcy is later annulled; and

(b) disregarding the annulment, subsection (6) applies to the bankruptcy; and

(c) the annulment occurred under section 74 of the Bankruptcy Act 1966 ; and

(d) under the composition or scheme of arrangement concerned, the taxpayer has been, will be or may be, released from any debts, from which he or she would have been released if he or she had been instead discharged from the bankruptcy;

then, for the purposes of subsection (6), the annulment is disregarded.

80AA(7)   [Debt paid after bankruptcy, etc]  

Where, in the year of income, a taxpayer pays an amount in respect of a debt incurred by him in the course of engaging in primary production in a year in which he incurred a loss to which subsection (6) applies, being a year not later than the eighth year next preceding the year of income, the amount paid by the taxpayer in respect of the debt is, subject to subsection (8), an allowable deduction to the extent to which it does not exceed so much of the debt as the Commissioner is satisfied was taken into account in ascertaining the amount of the loss.

80AA(8)   [Maximum deductions under s 80AA(7)]  

The aggregate of the deductions allowable under subsection (7) from the income of the taxpayer of the year of income in relation to the payment of amounts in respect of debts incurred by the taxpayer in a year in which he incurred a loss to which this section applies (in this subsection referred to as ``the year of loss'' ) shall not exceed the amount of that loss less the sum of:

(a) the deductions, if any, allowed under subsection (7) of this section or subsection 80(4A) from his income of a year or years of income before the year of income in relation to the payment of other amounts in respect of debts incurred by the taxpayer in the course of engaging in primary production in the year of loss;

(b) so much, if any, of the loss as has been allowed under subsection (4) as a deduction or deductions from his income (including his net exempt income) of a year or years of income before the year of income;

(c) so much, if any, of the loss as, but for subsection (6), would have been allowed or allowable under subsection (4) as a deduction or deductions from his net exempt income of the year of income or of a year or years of income before the year of income; and

(d) the amount, if any, by which the sum of:

(i) the deductions, if any, allowed under subsection 80(4A) from his income of a year or years of income before the year of income in relation to the payment of amounts in respect of debts (other than debts incurred in the course of engaging in primary production) incurred by the taxpayer in the year of loss;

(ii) the deductions, if any, allowed under subsection 80(2) from his income (including his net exempt income) of a year or years of income before the year of income in respect of a loss that, for the purposes of section 80 , is to be deemed to have been incurred by him in the year of loss; and

(iii) the deductions, if any, that, but for subsection 80(4) , would have been allowed or allowable in respect of that loss under subsection 80(2) from his net exempt income of the year of income or of a year or years of income before the year of income,

exceeds the difference, if any, between the amount of the loss that, for the purposes of section 80 , is to be deemed to have been incurred by him in the year of loss and the amount of the loss to which this section applies that was incurred by him in that year.

80AA(9)   [Losses referable to certain tax avoidance schemes disregarded]  

For the purposes of determining whether a deduction is allowable to a taxpayer under subsection (4) in respect of the year of income that commenced on 1 July 1978 or in respect of a subsequent year of income and for the purposes of ascertaining the amount of any such deduction, there shall be disregarded so much of the amount of any loss deemed to have been incurred by the taxpayer in engaging in primary production as would not have been deemed, for the purposes of this section, to have been incurred by the taxpayer in engaging in primary production if the conditions specified in the paragraphs of subsection 80(5) were applicable for the purpose of determining whether the taxpayer is deemed, in any year of income, to have incurred a loss in engaging in primary production and in determining the amount of any such loss.

80AA(10)   [Losses from s 36A tax avoidance schemes disregarded]  

For the purpose of determining whether a deduction is allowable to a taxpayer under subsection (4) in respect of the year of income that commenced on 1 July 1980 or in respect of a subsequent year of income and for the purpose of ascertaining the amount of any such deduction, there shall be disregarded so much of the amount of any loss deemed to have been incurred by the taxpayer in engaging in primary production as would not have been deemed, for the purposes of this section, to have been incurred by the taxpayer in engaging in primary production if the condition specified in subsection 80(6) were applicable for the purpose of determining whether the taxpayer is deemed, in any year of income, to have incurred a loss in engaging in primary production and in determining the amount of any such loss.

80AA(11)   [Losses from Part IVA tax avoidance schemes disregarded]  

For the purpose of determining whether a deduction is allowable to a taxpayer under subsection (4) in respect of the year of income that commenced on 1 July 1980 or in respect of a subsequent year of income and for the purpose of ascertaining the amount of any such deduction, there shall be disregarded so much of the amount of any loss deemed to have been incurred by the taxpayer in engaging in primary production as would not have been deemed to have been incurred by the taxpayer in engaging in primary production if Part IVA extended to schemes entered into or carried out on or before 27 May 1981.