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-C - Effect of change in ownership of unlisted widely held trust  

SECTION 266-85   UNLISTED WIDELY HELD TRUST MAY BE DENIED DEBT DEDUCTION  

Type of trust to which this section applies - case 1

266-85(1)    
This section applies to a trust that:

(a) can deduct in the income 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) was an unlisted widely held trust at all times in the period (the test period ):

(i) if the debt was incurred in an earlier income year - beginning on the day the debt was incurred and ending at the end of the income year; or

(ii) if the debt was incurred in the income year - consisting of the income year; and

(c) was not a wholesale widely held trust at all times in the test period; and

(d) was not an unlisted very widely held unit trust at all times in the test period; and

(e) was not an excepted trust at all times in the test period.

Type of trust to which this section applies - case 2

266-85(2)    
This section also applies to a trust that:

(a) can deduct in the income 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) was an unlisted widely held trust, other than an unlisted very widely held trust or a wholesale widely held trust, at some time in the period (the test period ):

(i) if the debt was incurred in an earlier income year - beginning on the day the debt was incurred and ending at the end of the income year; or

(ii) if the debt was incurred in the income year - consisting of the income year; and

(c) was a listed widely held trust at all other times in the test period; and

(d) was not an excepted trust at all times in the test period.

Condition for deducting amount

266-85(3)    
The trust cannot deduct the amount unless it meets the condition in section 266-90 .

Note:

Subdivisions 709-D and 719-I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.