Taxation Laws Amendment Act (No. 1) 1999 (16 of 1999)

Schedule 4   Effect of bankruptcy on carrying forward tax offsets

Income Tax Assessment Act 1997

1   At the end of Division 65

Add:

65-50 Effect of bankruptcy

(1) If during the *current year:

(a) you became bankrupt; or

(b) you were released from debts under a law relating to bankruptcy;

you cannot apply a *tax offset that you have carried forward from an earlier income year in working out the tax offset for the current year or a later income year.

(2) Subsection (1) applies even though your bankruptcy is annulled if:

(a) the annulment happens under section 74 of the Bankruptcy Act 1966 because your creditors have accepted your proposal for a composition or scheme of arrangement; and

(b) under the composition or scheme of arrangement concerned, you were, will be or may be released from debts from which you would have been released if instead you had been discharged from the bankruptcy.

65-55 Deduction for amounts paid for debts incurred before bankruptcy

(1) If:

(a) you pay an amount in the *current year for a debt that you incurred in an earlier income year; and

(b) you have a *tax offset referred to in section 65-50 for that earlier income year;

you can deduct the amount paid, but only to the extent that it does not exceed so much of the debt as the Commissioner is satisfied was taken into account in calculating the amount of the tax offset.

(2) The total of the following amounts cannot exceed the total of the expenditure that the Commissioner is satisfied was taken into account in calculating the amount of the *tax offset that you are unable to apply because of section 66-50:

(a) your deductions under subsection (1) for amounts paid in the *current year or an earlier income year for debts incurred in the income year for which you have the tax offset; and

(b) the expenditure that the Commissioner is satisfied was taken into account in calculating any amounts of the tax offset that, apart from section 65-50, would have been applied in reducing your *net exempt income for the current year or earlier income years.