INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 63AA   SECTION 63A INAPPLICABLE TO EARLIER YEAR DEBTS IF COMPANY SATISFIES NON-FIXED TRUST OWNERSHIP TEST  

63AA(1)   [Deduction is allowable]  

Section 63A does not prevent an amount in respect of a debt incurred in an earlier year of income being an allowable deduction in the year of income if the company satisfies the conditions in this section.

63AA(2)   First condition.  

At all times during:

(a) the part (the eligible earlier year period ) of the earlier year of income occurring after the beginning of the day on which the debt was incurred; and

(b) during the year of income;

either:

(c) non-fixed trusts (see subsection (6)), other than family trusts (see subsection (6)), must have held fixed entitlements (see subsection (6)) to a 50% or greater share of the income or a 50% or greater share of the capital of the company; or

(d) both:

(i) a fixed trust (see subsection (6)) or a company (which trust or company is the holding entity ) must have held, directly or indirectly (see subsection (6)), fixed entitlements to all of the income and capital of the company; and

(ii) non-fixed trusts, other than family trusts, must have held fixed entitlements to a 50% or greater share of the income or a 50% or greater share of the capital of the holding entity.

63AA(3)   Second condition.  

The persons holding fixed entitlements to shares of the income, and the persons holding fixed entitlements to shares of the capital, of:

(a) in a paragraph (2)(c) case - the company; or

(b) in a paragraph (2)(d) case - the holding entity;

at the beginning of the eligible earlier year period must have held those entitlements to those shares at all times during the eligible earlier year period and the year of income.

63AA(4)   Third condition.  

At the beginning of the eligible earlier year period:

(a) individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the income of the company; or

(b) individuals must not have had (between them), directly or indirectly, and for their own benefit, fixed entitlements to a greater than 50% share of the capital of the company.

63AA(5)   Fourth condition.  

It must be the case that, for each non-fixed trust (other than an excepted trust as defined in subsection (6)) that, at any time in the eligible earlier year period or the year of income, held directly or indirectly a fixed entitlement to a share of the income or capital of the company, section 267-25 of Schedule 2F would not have prevented the non-fixed trust from deducting the amount in respect of the debt if it, rather than the company, would otherwise be entitled to deduct the amount.

63AA(6)   Meaning of expressions.  

The expressions directly or indirectly, excepted trust, family trust, fixed entitlement, fixed trust and non-fixed trust have the same meanings as in Schedule 2F .