Income Tax Assessment Act 1936

SCHEDULE 2F - TRUST LOSSES AND OTHER DEDUCTIONS  

Division 266 - Income tax consequences for fixed trusts of abnormal trading or change in ownership  

Subdivision 266-D - Effect of abnormal trading on listed widely held trust  

SECTION 266-135   LISTED WIDELY HELD UNIT TRUST MAY BE DENIED TAX LOSS DEDUCTION OTHERWISE ALLOWABLE  

Section applies after sections 266-110 and 266-130

266-135(1)    
This section applies if, after applying sections 266-110 and 266-130 , a trust can deduct in the income year the whole or part (the otherwise-deductible loss ) of a tax loss from a loss year.

Trust must satisfy condition if debt deduction etc.

266-135(2)    
If:

(a) there would have been no otherwise-deductible loss, or its amount would have been smaller, if the trust had not (after applying section 266-120 ) been able to deduct in the loss year an amount:

(i) under section 51 or 63 , or under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or

(ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and

(b) the trust could only deduct the amount in respect of the debt because it passed the business continuity test as mentioned in paragraph 266-125(2)(b) ; and

(c) the Commissioner considers that the trust passed the business continuity test as mentioned in that paragraph for the purpose, or for purposes including the purpose, of being able to deduct the amount because of that paragraph;

the trust cannot deduct the otherwise-deductible loss, or can only deduct the smaller amount mentioned in paragraph (a) of this section, unless it meets the condition in subsection (3).

Condition

266-135(3)    

The condition is that, at all times after the abnormal trading mentioned in paragraph 266-125(2)(b) and before the end of the income year, the trust must pass the business continuity test in relation to the time immediately before the abnormal trading.