A New Tax System (Pay As You Go) Act 1999 (178 of 1999)

Schedule 1   Pay as you go (PAYG) system of collecting income tax and other liabilities

Part 2   Consequential amendment of Acts

Income Tax Assessment Act 1997

5   After section 26-20

Insert:

26-25 Interest or royalty

(1) You cannot deduct under this Act a payment of interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936) or a *royalty if:

(a) you are required to withhold an amount from the interest or royalty under Division 12 in Schedule 1 to the Taxation Administration Act 1953; and

(b) either:

(i) you fail to withhold the amount; or

(ii) after withholding the amount, you fail to comply with section 16-70 in that Schedule in relation to that amount.

(2) You cannot deduct under this Act a payment of interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936), or a *royalty, that is in the form of a *non-cash benefit if:

(a) you are required to pay to the Commissioner an amount under section 14-5 or 14-10 in Schedule 1 to the Taxation Administration Act 1953 for that payment; and

(b) you fail to do so.

(3) If:

(a) apart from subsection (1) or (2), you can deduct a payment of interest (within the meaning of Division 11A of Part III of the Income Tax Assessment Act 1936) or a *royalty, for an income year; and

(b) the *withholding tax payable for the interest or the royalty is paid;

you can deduct the interest or royalty for that income year.