INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 63C   BAD DEBTS ETC. OF A COMPANY MAY BE ALLOWABLE DEDUCTIONS WHERE COMPANY CARRIES ON SAME BUSINESS  

63C(1A)   [No application from 1998/99 year onwards]  

This section does not apply to the 1998-99 year of income or a later year of income.

Note:

Subdivisions 165-C , 166-C and 175-C of the Income Tax Assessment Act 1997 deal with a company deducting bad debts for those income years.

63C(1)   [Same business test]  

Subject to subsection (2), where -

(a) a debt that is written off by a company as a bad debt during the year of income would not, but for this section, by reason of a change that has taken place in the beneficial ownership of shares in the company or in any other company, be an allowable deduction;

(b) the first-mentioned company carried on -

(i) if the debt was incurred before the year of income - at all times during the year of income; or

(ii) if the debt was incurred during the year of income - at all times during the part of the year of income that followed the day on which the debt was incurred,

the same business as it carried on immediately before the change referred to in paragraph (a) took place; and

(c) the first-mentioned company did not derive income -

(i) if the debt was incurred before the year of income - at any time during the year of income; or

(ii) if the debt was incurred during the year of income - at any time during the part of the year of income that followed the day on which the debt was incurred,

from a business of a kind that it did not carry on, or from a transaction of a kind that it had not entered into in the course of its business operations, before the change took place,

sections 63A and 63B do not prevent the debt being an allowable deduction.

63C(2)   [New business before ownership change]  

Subsection (1) does not apply in respect of a debt that is written off by a company as a bad debt during the year of income if -

(a) before the change referred to in that subsection took place, the company commenced to carry on a business that it had not previously carried on, or entered into, in the course of its business operations, a transaction of a kind that it had not previously entered into; and

(b) the company commenced to carry on that business or entered into that transaction for the purpose, or for purposes that included the purpose, of securing that a deduction would be allowable by virtue of subsection (1) in respect of a debt that the company had written off, or might write off, as a bad debt.

63C(3)   [Part debt write offs]  

Where a part of a debt is written off by a company as bad, the preceding provisions of this section apply as if the part were an entire debt that is written off by the company as bad.

63C(4)   [Losses re debt/equity swaps]  

This section has the same effect in relation to an allowable deduction under section 63E in respect of the whole or part of a debt that is extinguished as it has in relation to an allowable deduction under section 8-1 or 25-35 of the Income Tax Assessment Act 1997 in respect of the whole or part of a debt that is written off as bad.