Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-5 - CORPORATE TAXPAYERS AND CORPORATE DISTRIBUTIONS  

Division 164 - Non-share capital accounts for companies  

Operative provisions  

SECTION 164-20   Debits to non-share capital account  

164-20(1)    
The company may debit the whole or a part of a *non-share distribution against the company ' s *non-share capital account:

(a) to the extent to which the distribution is made as consideration for the surrender, cancellation or redemption of a *non-share equity interest in the company; or

(b) to the extent to which:

(i) the distribution is made in connection with a reduction in the *market value of a non-share equity interest in the company; and

(ii) the amount of the distribution is equal to the amount of the reduction in market value.

164-20(2)    
The total of the amounts debited to the account in respect of a particular *non-share equity interest must not exceed the total of the amounts credited to the account in respect of the interest.

164-20(3)    

If:

(a) an *equity interest in the company changes at a particular time (the change time ) to a *debt interest in the company because of subsection 974-110(1) or (2) ; or

(b) an equity interest in the company changes to a debt interest in the company, with effect from a time (the change time ) that is the start of a particular income year, because of subsection 974-110(1A) ; or

(c) the following conditions are satisfied in relation to an interest in the company:

(i) subsection 974-75(6) does not apply to the interest in relation to a particular income year;

(ii) the interest is an equity interest in the company at the end of that income year;

(iii) subsection 974-75(6) applies to the interest from the time (the change time ) that is the start of the next income year;

there is, or is taken to have been, a debit to the *non-share capital account at the change time equal to:

Credits in relation to the interest

−

Debits in relation to the interest

where:

credits in relation to the interest
is the sum of all the credits that have been made to the *non-share capital account in relation to the interest before the change time.

debits in relation to the interest
is the sum of all the debits that have been made to the *non-share capital account in relation to the interest before the change time.

164-20(4)    

To avoid doubt, if:

(a) it appears that a debit to the company ' s *non-share capital account has arisen because an interest in the company appears to be, or have become, a *debt interest at a time in a particular income year; and

(b) because subsection 974-75(6) or 974-110(1A) is subsequently found not to apply in relation to the interest and that income year, the interest was not in fact, or did not in fact become, a debt interest at that time;

the debit referred to in paragraph (a) is taken never to have arisen.