INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 65   PAYMENTS TO ASSOCIATED PERSONS AND RELATIVES  

65(1AA)   [Ongoing application limited to subsec (1B), (1C)]  

This section (other than subsections (1B) and (1C)) does not apply to the 1997-98 year of income or a later year of income.

Note 1:

Section 26-35 (Reduction of deduction for amounts paid to related entities) of the Income Tax Assessment Act 1997 deals with the deductibility of payments made to relatives or other related entities.

Note 2:

Section 26-40 (Maintaining your family) of the Income Tax Assessment Act 1997 deals with the deductibility of expenditure incurred on certain relatives.

65(1)   [Reasonable amount - Commissioner's discretion]  

Subject to this section, the amount, or a part of the amount, of any payment made or liability incurred in the year of income by a taxpayer to an associated person that would, but for this subsection, be an allowable deduction is allowable as a deduction only to the extent to which, in the opinion of the Commissioner, it is reasonable.

65(1A)   [Effect of Commissioner's disallowance on recipient]  

Subject to subsection (1B), where, by virtue of subsection (1), any amount is not an allowable deduction, that amount shall, for the purposes of this Act, be deemed not to be income of the associated person.

65(1D)   [``Associated persons'' defined]  

A reference in subsection (1) or subsection (1A) to an associated person shall be read as a reference:

(a) in the application of this section to a taxpayer, to:

(i) a relative of the taxpayer; or

(ii) a partnership a partner in which is a relative of the taxpayer; and

(b) in the application of this section to a partnership for the purpose of calculating in accordance with section 90 the net income of the partnership or a partnership loss, to:

(i) a relative (not being a partner in the partnership) of a partner in the partnership;

(ii) another partnership a partner in which is a relative of a partner in the first-mentioned partnership;

(iii) a person (not being a partner in the partnership) who is or has been, or is a relative of a person who is or has been, a shareholder in, or a director of, a company, being a private company, in relation to the year of income, that is a partner in the partnership; or

(iv) a person (not being a partner in the partnership) who is, or is a relative of, a beneficiary in a trust estate the trustee of which is, in his capacity as trustee of the trust estate, a partner in the partnership.

65(1E)   [Amendment of assessments]  

Nothing in any other provision of this Act prevents the amendment of an assessment at any time for the purpose of giving effect to the provisions of subsection (1A).

65(1F)   [Amendment of assessments]  

Where there is allowed as a deduction an amount that, in pursuance of subsection (1), was not previously allowed as a deduction, nothing in any other provision of this Act prevents the amendment of any assessment at any time to give effect to the inclusion in the income of a taxpayer of an amount that, in pursuance of subsection (1A), was treated, by virtue of the disallowance of the deduction, as not being so included for the purposes of the assessment.

65(2)   [Maintenance of family]  

Expenditure incurred, and payments becoming due, by the taxpayer in the year of income in or for the maintenance of the taxpayer's spouse, or of any member of the taxpayer's family under the age of 16 years, shall not, whether or not the expenditure was incurred in the production of assessable income, be an allowable deduction.

65(3)   [Reference to spouse]  

In subsection (2), a reference to the spouse of a person (in this subsection called the ``first person'' ) does not include a reference to a person who is legally married to the first person but is living separately and apart from the first person on a permanent basis.