Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 716 - Miscellaneous special rules  

Subdivision 716-A - Assessable income and deductions spread over several membership or non-membership periods  

Operative provisions

SECTION 716-25   Deductions spread over 2 or more income years  

716-25(1)    
This section applies if, apart from this Part, a provision of this Act would spread an amount (the original amount ) over 2 or more income years (whether or not because of a choice) by entitling the same entity to deduct part of the original amount for each of those income years.

716-25(2)    
However, this section does not apply if the deductions would be for the decline in value of a ^* depreciating asset.

Note:

Such deductions arise under Division 40 (Capital allowances) and Division 328 (Small business entities).

Head company's deduction

716-25(3)    
If for some but not all of an income year an entity is a ^* subsidiary member of a ^* consolidated group, and:

(a) the ^* head company of the group could have deducted for that income year a part of the original amount if the entity had been a subsidiary member of the group throughout that income year; but

(b) the entity could have deducted that part for that income year if throughout that income year the entity had not been a subsidiary member of any ^* consolidated group;

the head company can deduct for that income year a proportion of that part.

Note 1:

Examples of when paragraphs (3)(a) and (b) could be satisfied are set out in note 1 to subsection 716-15(2) .

Note 2:

If the entity is a subsidiary member of the group throughout the income year, the head company can deduct that part for the income year, either:

• because the head company is the entity referred to in subsection (1) of this section; or

• because of section 701-1 (Single entity rule); or

• because of section 701-5 (Entry history rule).

716-25(4)    
The proportion is worked out by multiplying that part of the original amount by:

• the number of days that are in both the income year and the ^* spreading period, and on which the entity was a ^* subsidiary member of the group;

divided by:

• the number of days that are in both the income year and the spreading period.

Entity's deduction for a non-membership period

716-25(5)    
If:

(a) for some but not all of an income year, an entity is a ^* subsidiary member of a ^* consolidated group; and

(b) the entity could have deducted for that income year a part of the original amount if throughout that income year the entity had not been a subsidiary member of any ^* consolidated group;

the entity can deduct a proportion of that part for a part of the income year that is a non-membership period for the purposes of section 701-30 .

Note 1:

Section 701-30 is about working out an entity's tax position for a period when it is not a subsidiary member of any consolidated group.

Note 2:

If throughout the income year the entity is not a subsidiary member of any consolidated group or MEC group, this section does not affect the part of the original amount that the entity can deduct for the income year either:

• because the entity is the entity referred to in subsection (1); or

• because of section 701-40 (Exit history rule).

716-25(6)    
The proportion is worked out by multiplying that part of the original amount by:

• the number of days that are in both the non-membership period and the ^* spreading period;

divided by:

• the number of days that are in both the income year and the spreading period.

Spreading period

716-25(7)    
The spreading period for the original amount is the period by reference to which the respective parts of the original amount that, apart from this Part, an entity could deduct for the 2 or more income years are worked out.

Note:

For example, under section 82KZMD of the Income Tax Assessment Act 1936 an item of expenditure on something is spread over the period over which that thing is to be provided, which is called the eligible service period. Deductions for the item for a sequence of income years are worked out by reference to how much of that period falls within each of those income years.