Income Tax Assessment Act 1997

CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION  

PART 2-1 - ASSESSABLE INCOME  

Division 20 - Amounts included to reverse the effect of past deductions  

Subdivision 20-A - Insurance, indemnity or other recoupment for deductible expenses  

What if you can deduct a loss or outgoing incurred by another entity?

SECTION 20-65   If 2 or more entities can deduct amounts for the loss or outgoing  

20-65(1)    
Special rules apply if:

(a) an entity (the first entity ) incurs a loss or outgoing; and

(b) 2 or more entities (the deducting entities , which may include the first entity) have deducted or can deduct amounts for the loss or outgoing (whether for the same income year or for different income years); and

(c) the first entity receives one or more amounts as ^* recoupment of the loss or outgoing.

20-65(2)    
This Subdivision (except this section and section 20-60 ) applies as if the first entity and the deducting entities together constituted a single entity (the notional entity ) that had:

(a) incurred the loss or outgoing; and

(b) received the amount or amounts as ^* recoupment; and

(c) included in its assessable income any amount included in the assessable income of any of the deducting entities under a ^* previous recoupment law or this Subdivision (except this section).

20-65(3)    
If because of subsection (2) the notional entity's assessable income for an income year (the assessment year ) would include an amount under this Subdivision (the assessable amount ), the amount reverses in the assessment year the deductions for the loss or outgoing, in accordance with the rules in subsection (5).

20-65(4)    
The assessable income of each deducting entity for the assessment year includes the total amounts (if any) by which that entity's actual deductions for the loss or outgoing are reversed in that income year.

20-65(5)    
Deductions for the loss or outgoing are reversed in the assessment year as follows:

(a) the amounts by which deductions are reversed total the assessable amount (unless all the deductions have been reversed);

(b) a deduction for an income year is not reversed until all deductions for earlier income years have been reversed;

(c) a deduction is not reversed in the assessment year to the extent that it has already been reversed in an earlier year;

(d) if each of 2 or more entities can deduct an amount for the loss or outgoing for the same income year, those deductions are reversed in the assessment year by amounts proportionate to the amounts of the deductions.