Tax Laws Amendment (2005 Measures No. 5) Act 2005 (162 of 2005)

Schedule 3   Consolidation

Part 1   Bad debts

Division 2   Deducting debt/equity swap loss

Income Tax Assessment Act 1997

3   At the end of Subdivision 709-D

Add:

Extension of Subdivision to debt/equity swap loss

709-220 Limit on deduction of swap loss

Object

(1) The object of this section is to limit the circumstances in which an entity can deduct a swap loss (as defined in section 63E of the Income Tax Assessment Act 1936) resulting from a debt/equity swap (as defined in that section) to circumstances similar to those in which this Subdivision lets an entity deduct a debt it writes off as bad.

Modified operation of sections 709-205, 709-210 and 709-215

(2) Sections 709-205, 709-210 and 709-215 (except subsection 709-215(2)) apply in relation to the extinction (however described) of a debt as part of a debt/equity swap in the same way as they apply in relation to the writing off of a debt as bad.

(3) Subsection 709-215(1):

(a) applies in relation to a swap loss from a debt/equity swap in the same way as it applies in relation to a debt, or part of a debt; and

(b) applies as if paragraph 709-215(1)(a) referred to subsection 63E(3) of the Income Tax Assessment Act 1936 instead of sections 8-1 and 25-35.

(4) This section has effect despite subsection 63E(5) of the Income Tax Assessment Act 1936.