Income Tax Assessment Act 1936

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 52A   CERTAIN AMOUNTS DISREGARDED IN ASCERTAINING TAXABLE INCOME  

52A(1)    

Notwithstanding section 8-1 of the Income Tax Assessment Act 1997 , losses or outgoings consisting of expenditure incurred by a taxpayer in the purchase or acquisition, after 7 April 1978, of any prescribed property as trading stock of the taxpayer shall, if the Commissioner considers that it would be unreasonable that a deduction be allowable to the taxpayer in respect of the whole of those losses or outgoings, be allowable as a deduction to the taxpayer to the extent only that the Commissioner considers that it is reasonable in the circumstances that a deduction be allowable to the taxpayer in respect of those losses or outgoings.

52A(2)    
Where:

(a) expenditure incurred by a taxpayer in the purchase or acquisition, after 7 April 1978, of any prescribed property that was purchased or acquired in the carrying on or carrying out of any profit-making undertaking or scheme would, but for this subsection, be taken into account for the purpose of ascertaining whether any profit arose, or any loss was incurred, from the carrying on or carrying out of the undertaking or scheme and for the purpose of ascertaining the amount of any such profit or loss; and

(b) the Commissioner considers that it would be unreasonable that the whole of that expenditure be taken into account for those purposes;

that expenditure shall be taken into account for those purposes to the extent only that the Commissioner considers that it is reasonable in the circumstances that the expenditure be taken into account for those purposes.

52A(2A)    

Where:

(a) prescribed property that was acquired by a taxpayer after 24 September 1978 and before the commencement of this subsection or is acquired after the commencement of this subsection was or is treated or used by the taxpayer as an asset of a business carried on by the taxpayer;

(b) but for this subsection, a deduction would be allowable to the taxpayer in respect of the value of that property; and

(c) the Commissioner considers that it would be unreasonable that a deduction be allowable to the taxpayer in respect of the value of the property to the extent to which, but for this subsection, a deduction would be allowable to the taxpayer in respect of the value of the property;

a deduction shall be allowable to the taxpayer in respect of the value of the property to the extent only that the Commissioner considers that it is reasonable in the circumstances that a deduction be allowable to the taxpayer in respect of that value.

52A(2B)    

Where:

(a) the value of any prescribed property that:

(i) was acquired by a taxpayer after 24 September 1978 and before the commencement of this subsection or is acquired after the commencement of this subsection; and

(ii) was or is used by the taxpayer in the carrying on or carrying out of any profit-making undertaking or scheme,

would, but for this subsection, be taken into account for the purpose of ascertaining whether or not any profit arose, or any loss was incurred, from the carrying on or the carrying out of the undertaking or scheme and for the purpose of ascertaining the amount of any such profit or loss; and

(b) the Commissioner considers that it would be unreasonable that the value of the property be taken into account for those purposes to the extent to which the value would, but for this subsection, be taken into account for those purposes;

the value of the property shall be taken into account for those purposes to the extent only that the Commissioner considers that it is reasonable in the circumstances that that value be taken into account for those purposes.

52A(3)    

In forming an opinion for the purposes of subsection (1) or (2A) as to the extent to which it is reasonable that a deduction be allowable to a taxpayer in respect of expenditure incurred in the purchase or acquisition of prescribed property or in respect of the value of prescribed property, as the case may be, or in forming an opinion for the purposes of subsection (2) or (2B) as to the extent to which it is reasonable that expenditure incurred by a taxpayer in the purchase or acquisition of prescribed property should be taken into account for the purposes referred to in subsection (2) or that the value of prescribed property should be taken into account for the purposes referred to in subsection (2B), as the case may be:

(a) if the taxpayer expended moneys in purchasing or acquiring the prescribed property - the Commissioner shall have regard to the circumstances in which, and the person or persons from whom, the taxpayer obtained moneys:

(i) that were expended by the taxpayer in purchasing or acquiring the prescribed property; or

(ii) that, in the opinion of the Commissioner, were obtained by, or paid to, the taxpayer to enable the taxpayer to expend moneys in purchasing or acquiring the prescribed property;

(b) if the taxpayer borrowed from another person (in this paragraph referred to as the lender ) moneys that were expended by the taxpayer in purchasing or acquiring the prescribed property or moneys that, in the opinion of the Commissioner, were obtained by, or paid to, the taxpayer to enable the taxpayer to expend moneys in purchasing or acquiring the prescribed property - the Commissioner shall have regard to:

(i) the circumstances in which, and the terms and conditions on which, the taxpayer borrowed those moneys from the lender; and

(ii) whether, in the opinion of the Commissioner, the taxpayer and the lender were dealing with each other at arm ' s length in connexion with the borrowing of those moneys by the taxpayer;

(c) if, either before or after the purchase or acquisition of the prescribed property by the taxpayer, an agreement or arrangement (whether or not enforceable by legal proceedings and whether or not intended to be so enforceable) was entered into, or an understanding was reached, as a result of which there has been, or there could reasonably be expected to be, a substantial reduction in the value of the prescribed property - the Commissioner shall have regard to that agreement, arrangement or understanding;

(d) if the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement that was entered into or carried out for the purpose, or for purposes that included the purpose, of securing that a person who, if the transaction, operation, undertaking, scheme or arrangement, had not been entered into or carried out, would have been liable to pay income tax in respect of a year of income would not be liable to pay income tax in respect of that year of income or would be liable to pay less income tax in respect of that year of income than that person would have been liable to pay if the transaction, operation, undertaking, scheme or arrangement had not been entered into or carried out - the Commissioner shall have regard to that transaction, operation, undertaking, scheme or arrangement;

(e) if the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement that the Commissioner is satisfied was by way of dividend stripping or was similar to a transaction, operation, undertaking, scheme or arrangement by way of dividend stripping - the Commissioner shall have regard to that transaction, operation, undertaking, scheme or arrangement;

(f) if:

(i) the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement under which, or in the course of which, money was to be paid, or other property was to be transferred or made available by a person other than the taxpayer, whether before or after the purchase or acquisition of the prescribed property, to the taxpayer, to the taxpayer and a person or persons other than the taxpayer or to a person or persons other than the taxpayer;

(ii) the Commissioner is satisfied that the amount of money so to be paid, or the value of the property so to be transferred or made available, as the case may be, was to be not less than, or not substantially less than, the amount expended by the taxpayer in the purchase or acquisition of the prescribed property;

the Commissioner shall have regard to the fact that the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of such a transaction, operation, undertaking, scheme or arrangement;

(g) if the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement under which, or in the course of which, other prescribed property was to be issued or allotted by a company (whether to the taxpayer or any other person or persons) and it could reasonably be expected that, as a result of the issue or allotment of that other prescribed property, the value of the prescribed property purchased or acquired by the taxpayer would be substantially reduced - the Commissioner shall have regard to that transaction, operation, undertaking, scheme or arrangement;

(h) if the purchase or acquisition of the prescribed property by the taxpayer arose out of, or was made in the course of, a transaction, operation, undertaking, scheme or arrangement under which, or in the course of which, rights in respect of the prescribed property or in respect of other prescribed property (whether that other prescribed property had been issued or allotted before the time of the purchase or acquisition by the taxpayer of the first-mentioned prescribed property or was to be issued or allotted at a later time) were to be withdrawn or varied and it could reasonably be expected that, as a result of a withdrawal or variation of those rights, the value of the prescribed property purchased or acquired by the taxpayer would be substantially reduced - the Commissioner shall have regard to that transaction, operation, undertaking, scheme or arrangement; and

(j) the Commissioner shall have regard to any other matters that he or she considers relevant.

52A(4)    

In this section, prescribed property means any chose in action.

52A(4A)    

In the preceding provisions of this section, references to the value of any prescribed property shall, unless the contrary intention appears, be read as including references to part of the value of that prescribed property.

52A(5)    

For the purposes of this section:

(a) a person to whom prescribed property is issued or allotted by a company shall be taken to have acquired that prescribed property;

(b) a person upon whom prescribed property devolves by reason of the death of a person shall be taken to have acquired that prescribed property; and

(c) a person in whom prescribed property vests by the operation of any trust or the exercise of any power under a trust shall be taken to have acquired that prescribed property.

52A(6)    

The reference in paragraph (3)(b) to terms and conditions shall be read as including a reference to implied terms and conditions and to terms and conditions that are not enforceable by legal proceedings whether or not they were intended to be so enforceable.

52A(7)    

Where, by virtue of the application of the preceding provisions of this section, the amount (in this subsection referred to as the relevant amount ) of the deduction that is allowable to a taxpayer in respect of losses or outgoings incurred by the taxpayer in the purchase or acquisition of prescribed property is less than the amount of those losses and outgoings, the cost of that prescribed property shall, for the purposes of the application of Divisions 70 (Trading Stock) and 385 (Primary production) of the Income Tax Assessment Act 1997 in relation to that property in relation to the taxpayer, be taken to be an amount that is the same as the relevant amount.

52A(8)    

References in this section to expenditure incurred by a taxpayer in the purchase or acquisition of any prescribed property shall, in the case of prescribed property being a share or stock in the capital of a company, be read as including references to any payment made or other consideration given by the taxpayer to the company in respect of the prescribed property, whether as a payment of unpaid capital in respect of the prescribed property or otherwise and whether on application for or allotment of the prescribed property, to meet calls or otherwise.

52A(9)    

Subsection (8) applies to a non-share equity interest in the same way as it applies to a share.