INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 75B   DEDUCTION OF EXPENDITURE ON CONSERVING OR CONVEYING WATER  

75B(1AA)   [No application 1997/98 income year onwards]  

A deduction is not allowable under this section for the 1997-98 year of income or a later year of income.

Note:

Subdivision 387-B of the Income Tax Assessment Act 1997 provides for deductions for the 1997-98 year of income and later years of income for expenditure on plant or a structural installation for conserving or conveying water (including expenditure incurred before the 1997-98 year of income - see Subdivision 387-B of the Income Tax (Transitional Provisions) Act 1997 ).

75B(1)   [Definitions]  

In this section:

"construction"
includes manufacture;

"extension"
includes an alteration or addition;

"plant or a structural improvement"
includes a dam, earth tank, underground tank, concrete tank, metal tank, stand for a tank, bore, well, irrigation channel or similar improvement, pipe, pump, water tower and windmill.

75B(1A)   [Commercial debt forgiveness]  

This section has effect subject to Division 245 of Schedule 2C .

75B(2)   [Qualifying expenditure]  

Subject to this section, this section applies to expenditure of a capital nature incurred on or after 14 April 1980 and before 20 September 1985 by a taxpayer who carries on a business of primary production on land in Australia, being expenditure incurred:

(a) on the construction, acquisition or installation of plant or a structural improvement for the purpose of conserving or conveying water for use in carrying on that business on that land; or

(b) on the construction, acquisition or installation of an extension to plant or to a structural improvement for the purpose of conserving or conveying water for use in carrying on that business on that land.

75B(3)   [Expenditure deductible in year incurred]  

Subject to the succeeding provisions of this section, where a taxpayer incurs expenditure to which this section applies by virtue of subsection (2), the amount of that expenditure is an allowable deduction to the taxpayer in respect of the year of income in which the expenditure is incurred.

75B(3A)   [Capital expenditure on or after 20.9.85]  

Subject to this section, this section also applies to expenditure of a capital nature incurred on or after 20 September 1985 by a taxpayer who carries on a business of primary production on land in Australia, being expenditure incurred:

(a) on the construction, acquisition or installation of plant or a structural improvement primarily and principally for the purpose of conserving or conveying water for use in carrying on that business on that land; or

(b) on the construction, acquisition or installation of an extension to plant or to a structural improvement primarily and principally for the purpose of conserving or conveying water for use in carrying on that business on that land.

75B(3B)   [Allowable deductions for post-19.9.85 expenditure]  

Subject to the succeeding provisions of this section, where a taxpayer incurs expenditure to which this section applies by virtue of subsection (3A), an amount equal to one-third of that expenditure is an allowable deduction to the taxpayer in respect of the year of income in which the expenditure is incurred and in respect of each of the 2 succeeding years of income.

75B(3C)   [Pre-20.9.85 contracts, construction or installation]  

For the purposes of this section:

(a) expenditure incurred on or after 20 September 1985 in pursuance of a contract entered into by a taxpayer on or after 14 April 1980 and before 20 September 1985; or

(b) expenditure incurred on or after 20 September 1985 on the construction or installation by a taxpayer of plant or a structural improvement or of an extension to plant or to a structural improvement where that construction or installation by the taxpayer commenced on or after 14 April 1980 and before 20 September 1985,

shall be deemed to have been incurred on or after 14 April 1980 and before 20 September 1985.

75B(3D)   [Subsec (4) has limited application]  

Subsection (4) does not apply to an amount received in the 1997-98 year of income or a later year of income if the amount is received as recoupment as defined by section 20-25 of the Income Tax Assessment Act 1997 .

Note:

Subdivision 20-A of the Income Tax Assessment Act 1997 applies instead.

75B(4)   [Recoupment of expenditure]  

This section does not apply, and shall be deemed never to have applied, to expenditure incurred by a taxpayer where -

(a) the taxpayer is recouped, or becomes entitled to be recouped, in respect of the expenditure by the Commonwealth, by a State, by a Territory, by an authority constituted by or under a law of the Commonwealth, of a State or of a Territory, or by any other person; and

(b) the amount recouped or to be recouped is not, and will not be, included in the assessable income of the taxpayer of any year of income.

75B(5)   [Extent of recoupment]  

Where a taxpayer receives, or becomes entitled to receive, an amount that constitutes to an unspecified extent a recoupment of expenditure to which this section would, apart from subsection (4), apply, the Commissioner may, for the purposes of subsection (4), determine the extent to which the amount constitutes a recoupment of that expenditure.

75B(6)   [Pre-14 April 1980 contract, etc]  

This section does not apply, and shall be deemed never to have applied, in relation to a taxpayer, to:

(a) expenditure incurred in pursuance of a contract entered into by the taxpayer before 14 April 1980; or

(b) expenditure incurred on the construction or installation by the taxpayer of plant or a structural improvement or of an extension to plant or to a structural improvement where that construction or installation by the taxpayer commenced before 14 April 1980.

75B(7)   [Deduction reduced in certain circumstances]  

Where:

(a) apart from this subsection, a deduction would be allowable to a taxpayer under this section in respect of expenditure incurred on the construction, acquisition or installation of plant or a structural improvement or of an extension to plant or to a structural improvement; and

(b) the plant or structural improvement or the extension, as the case may be, was not wholly for use in carrying on a business of primary production on land in Australia or was not wholly for use for the purpose of producing assessable income,

the amount of that deduction shall be reduced by such amount as, in the opinion of the Commissioner, is fair and reasonable.

75B(8)   [Deduction previously allowed on acquisition of plant]  

A deduction is not allowable under this section to a taxpayer in respect of a year of income in relation to expenditure incurred by the taxpayer on the acquisition of plant or a structural improvement if, in relation to expenditure incurred by the taxpayer or another person on the construction of the plant or structural improvement or on a previous acquisition of the plant or structural improvement:

(a) (Omitted by No 107 of 1989)

(b) a deduction has been allowed or is allowable under section 75A to the taxpayer or that other person in respect of any year of income or would have been so allowed or be so allowable but for paragraph (2)(b) of that section; or

(c) a deduction has been allowed or is allowable under this section to the taxpayer or that other person in respect of any year of income or would have been so allowed or be so allowable but for subsection (4) of this section.

75B(9)   [Deduction previously allowed on acquisition of extension]  

A deduction is not allowable under this section to a taxpayer in respect of a year of income in relation to expenditure incurred by the taxpayer on the acquisition of an extension to plant or to a structural improvement if, in relation to expenditure incurred by the taxpayer or another person on the construction of the extension or on a previous acquisition of the extension:

(a) (Omitted by No 107 of 1989)

(b) a deduction has been allowed or is allowable under section 75A to the taxpayer or that other person in respect of any year of income or would have been so allowed or be so allowable but for paragraph (2)(b) of that section; or

(c) a deduction has been allowed or is allowable under this section to the taxpayer or that other person in respect of any year of income or would have been so allowed or be so allowable but for subsection (4) of this section.

75B(10)   [Partnership]  

This section does not apply in relation to the calculation of the net income of a partnership, or a partnership loss, in accordance with section 90 , but, where a partnership has incurred expenditure to which this section would apply if the partnership were a taxpayer, then, for the purposes of the application of subsection (3) or (3B) in respect of a partner in the partnership, that partner shall be deemed to have incurred:

(a) so much of the amount of that expenditure as the partners have agreed is to be borne by that partner; or

(b) if the partners have not agreed as to the part of that amount that is to be borne by that partner - so much of that amount as bears to that amount the same proportion as the individual interest of the partner in the net income of the partnership of the year of income in which the relevant expenditure was incurred bears to that net income or, as the case requires, as the individual interest of the partner in the partnership loss for that year of income bears to that partnership loss.

75B(11)   [Pre-14 April 1980 contract for acquisition, etc, of plant]  

Where the Commissioner is satisfied that -

(a) a contract or arrangement was entered into by a taxpayer before 14 April 1980 for the acquisition of plant or a structural improvement (in this subsection referred to as the original unit );

(b) on or after that date:

(i) the taxpayer entered into a contract (whether with the same or another person) for the acquisition (whether with or without the acquisition of other property) of the original unit or of other plant or another structural improvement (in this subsection referred to as the substituted unit ) identical with, or having a purpose similar to that of, the original unit and intended by the taxpayer to be in lieu of the original unit; or

(ii) the taxpayer commenced the construction of other plant or another structural improvement (in this subsection also referred to as the substituted unit ) identical with, or having a purpose similar to that of, the original unit and intended by the taxpayer to be in lieu of the original unit; and

(c) the taxpayer entered into the contract for the acquisition of the original unit or substituted unit, or commenced the construction of the substituted unit, for the purpose, or for purposes that included the purpose, of obtaining a deduction under this section,

the Commissioner may refuse to allow a deduction under this section:

(d) in a case to which subparagraph (b)(i) applies - in relation to the original unit or the substituted unit; or

(e) in a case to which subparagraph (b)(ii) applies - in relation to the substituted unit.

75B(12)   [Pre-14 April 1980 commencement of construction]  

Where the Commissioner is satisfied that -

(a) a taxpayer commenced construction of plant or a structural improvement (in this subsection referred to as the original unit ) before 14 April 1980;

(b) on or after that date:

(i) the taxpayer commenced the construction of other plant or another structural improvement (in this subsection referred to as the substituted unit ) identical with, or having a purpose similar to that of, the original unit and intended by the taxpayer to be in lieu of the original unit; or

(ii) the taxpayer entered into a contract for the acquisition (whether with or without the acquisition of other property) of the original unit or of other plant or another structural improvement (in this subsection also referred to as the substituted unit ) identical with, or having a purpose similar to that of, the original unit and intended by the taxpayer to be in lieu of the original unit; and

(c) the taxpayer commenced the construction of the substituted unit, or entered into the contract for the acquisition of the original unit or of the substituted unit, for the purpose, or for purposes that included the purpose, of obtaining a deduction under this section,

the Commissioner may refuse to allow a deduction under this section:

(d) in a case to which subparagraph (b)(i) applies - in relation to the substituted unit; or

(e) in a case to which subparagraph (b)(ii) applies - in relation to the original unit or the substituted unit.

75B(13)   [Acquisition of plant, etc]  

In subsections (11) and (12), a reference to the acquisition by a taxpayer of plant or a structural improvement shall be read as including a reference to the construction of the plant or structural improvement for the taxpayer by another person or other persons.

75B(14)   [Parties not at arm's length]  

Where -

(a) in a year of income, a taxpayer has incurred expenditure (in this subsection referred to as the ``relevant expenditure'' ) on the construction, acquisition or installation of plant or a structural improvement;

(b) that expenditure is attributable, in whole or in part, to a transaction to which the taxpayer was a party;

(c) the Commissioner is satisfied that, having regard to any connection between any 2 or more of the parties to the transaction and to any other relevant circumstances, those parties were not dealing with each other at arm's length in relation to the transaction; and

(d) the Commissioner is satisfied that the amount of the relevant expenditure is greater than the amount (in this subsection referred to as the ``arm's length amount'' ) that would have been the amount of expenditure incurred by the taxpayer in that year of income in respect of the construction, acquisition or installation of that plant or structural improvement if the parties to the transaction had dealt with each other at arm's length in relation to the transaction,

the arm's length amount shall, for the purposes of this section, be deemed to be the amount of the expenditure incurred by the taxpayer in that year of income in respect of the construction, acquisition or installation of that plant or structural improvement.

75B(15)   [Reference to plant or structural improvement]  

A reference in subsections (11), (12), (13) and (14) to plant or a structural improvement shall be read as including a reference to -

(a) a portion of plant or a structural improvement; and

(b) an extension to plant or to a structural improvement.