Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 175 - Use of a company ' s tax losses or deductions to avoid income tax  

Subdivision 175-B - Tax benefits from unused deductions  

SECTION 175-25   Deduction injected into company because of available income or capital gain  

175-25(1)    
The Commissioner may disallow a deduction of a company for an income year to the extent that the company would not have incurred the loss, outgoing or expenditure that the deduction is for if it had not *derived some or all of the assessable income it derived in that income year, or had not made some or all of a *capital gain it made in that income year.

Note:

The disallowance may result in a tax loss for the income year. See section 175-35 .

175-25(2)    
The Commissioner cannot disallow any of the deduction if:

(a) the *continuing shareholders will benefit from any profit or advantage that has arisen or might arise directly or indirectly from the loss, outgoing or expenditure being incurred; and

(b) the Commissioner thinks that the extent to which they will benefit is fair and reasonable having regard to their respective *shareholding interests in the company.

Note:

Section 175-100 allows the Commissioner to disallow a deduction of an insolvent company.

175-25(3)    
The continuing shareholders are the individuals who had *shareholding interests in the company both immediately before the loss, outgoing or expenditure was incurred, and immediately afterwards.