INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 3 - Deductions  

Subdivision A - General  

SECTION 80   GENERAL DOMESTIC LOSSES OF PRE-1990 YEARS OF INCOME  

80(1AA)   [Application of section]  

This section does not apply to a loss incurred in the year of income commencing on 1 July 1989 or any later year of income.

80(1)   [Loss defined]  

For the purposes of this section, a loss shall be deemed to be incurred in any year when the allowable deductions (other than the deductions allowable under this section or section 80AAA or 80AA ) from the assessable income of that year exceed the sum of that income and the net exempt income of that year, and the amount of the loss shall be deemed to be the amount of such excess.

80(1A)   [Company within Subdiv B of Div 2A]  

Notwithstanding subsection (1), if Subdivision B of Division 2A applies in relation to a taxpayer being a company in relation to a year of income, a loss shall, for the purposes of this section, be deemed to be incurred by the taxpayer in the year of income if, and only if, the sum (in this subsection referred to as the ``loss amount'' ) of:

(a) if, for the purposes of that Subdivision, the taxpayer has a notional loss in respect of a relevant period, or notional losses in respect of relevant periods, in relation to the year of income and the amount of that notional loss or the sum of the amounts of those notional losses, as the case may be, exceeds the amount (if any) that is the eligible notional loss of the company in relation to the year of income - the amount of the excess; and

(b) if, in the application of subsection 50C(2) in relation to the taxpayer in relation to the year of income, the deductible amount referred to in that subsection exceeds the income amount referred to in that subsection - the amount of the excess;

exceeds the amount of any net exempt income of the company of the year income, and the amount of the loss for the purposes of this section shall be deemed to be the amount by which the loss amount exceeds the amount of that net exempt income.

80(2)   [Losses in previous seven year period]  

Subject to subsections (2B), (5), (6) and (7), so much of the losses incurred by a taxpayer in any of the 7 years next preceding the year of income as has not been allowed as a deduction from his income of any of those years shall be allowable as a deduction in accordance with the following provisions:

(a) where he has not in the year of income derived exempt income, the deduction shall be made from the assessable income;

(b) where he has in that year derived exempt income, the deduction shall be made successively from the net exempt income and from the assessable income;

(c) where a deduction is allowable under this section in respect of 2 or more losses, the losses shall be taken into account in the order in which they were incurred.

80(2AA)   [Reduced loss under commercial debt forgiveness provisions]  

If a loss referred to in subsection (2) is taken to be reduced under Subdivision 245-E of Schedule 2C in its application to the year of income or a previous year of income, any reference to that loss in this section is to be treated as a reference to that loss as so taken to be reduced.

80(2A)   [Where film and primary production losses incurred]  

Where a taxpayer has incurred a loss in any of the 7 years next preceding the year of income and:

(a) the taxpayer is deemed, for the purposes of section 80AAA , to have incurred a film loss in that preceding year; or

(b) the taxpayer is deemed, for the purposes of section 80AA , to have incurred a loss in engaging in primary production in that preceding year;

so much only of the first-mentioned loss as exceeds:

(c) in a case where the taxpayer is deemed to have incurred both a film loss for the purposes of section 80AAA and a loss in engaging in primary production for the purposes of section 80AA - the sum of the amounts of those losses;

(d) in a case where the taxpayer is deemed to have incurred a film loss for the purposes of section 80AAA and is not deemed to have incurred a loss in engaging in primary production for the purposes of section 80AA - the amount of the loss deemed to have been incurred by the taxpayer for the purposes of section 80AAA ; or

(e) in a case where the taxpayer is deemed to have incurred a loss in engaging in primary production for the purposes of section 80AA and is not deemed to have incurred a film loss for the purposes of section 80AAA - the amount of the loss deemed to have been incurred by the taxpayer for the purposes of section 80AA ;

shall be taken into account for the purposes of subsection (2).

80(2B)   [Deductions from assessable foreign income]  

The losses referred to in subsection (2) shall not be allowable as a deduction from assessable foreign income of a taxpayer except to the extent provided in an election under subsection (2C).

80(2C)   [Election where assessable foreign income derived]  

A taxpayer who has derived assessable foreign income in a year of income may elect that the whole or a part of the losses referred to in subsection (2) shall be allowable as a deduction from the taxpayer's assessable foreign income of that year.

80(2D)   [Time of election]  

An election referred to in subsection (2C) must be made on or before the date of lodgment of the return of income of the taxpayer for the year of income to which the election relates or within such further period as the Commissioner allows.

80(3)   [Definitions]  

In this section:

"assessable foreign income"
has the same meaning as in section 160AFD ;

"exempt income"
does not include income to which section 23AH , 23AI , 23AJ or 23AK or paragraph 99B(2)(d) or (e) applies;

"net exempt income"
means:

(a) where the taxpayer is a resident - the amount by which the taxpayer's exempt income derived from all sources exceeds the sum of the expenses (not being expenses of a capital nature) incurred in deriving that income, and any taxes payable in respect of that income in any country or place outside Australia; and

(b) where the taxpayer is a non-resident - the amount by which the taxpayer's exempt income derived from sources in Australia (other than income, if any, to which section 128D applies) exceeds the sum of the expenses (not being expenses of a capital nature) incurred in deriving that income.

80(3A)    

80(3B)   [Net exempt income from petroleum]  

For the purposes of subsection (3), the net exempt income of a taxpayer, being a resident, of a year of income does not include so much of any net exempt income from petroleum within the meaning of Division 10AA derived by the taxpayer in that year of income as does not exceed the amount that would be the unrecouped capital expenditure of the taxpayer within the meaning of that Division as at the end of that year of income if the taxpayer had not derived that net exempt income from petroleum.

80(3C)   [Source of income]  

For the purposes of paragraph (3)(b), exempt income to which subsection 26AG(1) applies shall be deemed to be derived from sources in Australia and any taxes payable in respect of that income in any country or place outside Australia shall be deemed to be expenses incurred in deriving that income.

80(4)   [Bankruptcy, etc]  

Notwithstanding any other provision of this section, where, prior to the year of income, a taxpayer has become a bankrupt, or, not having become a bankrupt, has been released from any debts by the operation of an Act relating to bankruptcy, no loss incurred by him prior to the date on which he became a bankrupt or the date on which he was so released, as the case may be, shall be an allowable deduction.

80(4AA)   [Annulment of bankruptcy to to disregarded]  

If:

(a) a taxpayer becomes a bankrupt, but the bankruptcy is later annulled; and

(b) disregarding the annulment, subsection (4) applies to the bankruptcy; and

(c) the annulment occurred under section 74 of the Bankruptcy Act 1966 ; and

(d) under the composition or scheme of arrangement concerned, the taxpayer has been, will be or may be, released from any debts, from which he or she would have been released if he or she had been instead discharged from the bankruptcy;

then, for the purposes of subsection (4), the annulment is disregarded.

80(4A)   [Debt paid after bankruptcy, etc]  

Where, in the year of income, a taxpayer pays an amount in respect of a debt incurred by him in one of the 7 years next preceding the year of income, being a year in which the taxpayer incurred a loss to which subsection (4) applies, the amount paid by the taxpayer in respect of the debt shall, subject to subsection (4B), be an allowable deduction to the extent that it does not exceed so much of the debt as the Commissioner is satisfied was taken into account in ascertaining the amount of the loss.

80(4B)   [Maximum deduction under s 80(4A)]  

The aggregate of the deductions allowable under subsection (4A) from the income of the taxpayer of the year of income in relation to the payment of amounts in respect of debts incurred by the taxpayer in a year in which he incurred a loss (in this subsection referred to as ``the year of loss'' ) shall not exceed the amount of that loss less the sum of:

(a) the deductions, if any, allowed under subsection (4A) from his income of a year or years of income before the year of income in relation to the payment of other amounts in respect of debts incurred by the taxpayer in the year of loss;

(b) so much, if any, of the loss as has been allowed under subsection (2) as a deduction or deductions from his income (including his net exempt income) of a year or years of income before the year of income;

(c) so much, if any, of the loss, as, but for subsection (4), would have been allowed or allowable under subsection (2) as a deduction or deductions from his net exempt income of the year of income or of a year or years of income before the year of income;

(d) so much, if any, of a loss that, for the purposes of section 80AA , is to be deemed to have been incurred by him in the year of loss as has been allowed under subsection (4) of that section as a deduction or deductions from his income (including his net exempt income) of a year or years of income before the year of income; and

(e) so much, if any, of a loss that, for the purposes of section 80AA , is to be deemed to have been incurred by him in the year of loss as, but for subsection (6) of that section, would have been allowed or allowable under subsection (4) of that section as a deduction or deductions from his net exempt income of the year of income or of a year or years of income before the year of income.

80(5)   [Losses referable to certain tax avoidance schemes disregarded]  

For the purposes of determining whether a deduction is allowable to a taxpayer under subsection (2) in respect of the year of income that commenced on 1 July 1978 or in respect of a subsequent year of income and for the purposes of ascertaining the amount of any such deduction, there shall be disregarded so much of the amount of any loss deemed to have been incurred by the taxpayer as would not have been deemed, for the purposes of this section, to have been incurred by the taxpayer if:

(a) section 6BA of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979 , were applicable in all cases where the shares referred to in that section as bonus shares were issued before the commencement of the Income Tax Assessment Amendment Act 1978 and in all cases where the shares so referred to in that section were issued after the commencement of that last-mentioned Act;

(b) section 36 of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979 , were amended by omitting from subsection (9) ``after 7 April 1978'';

(c) subsection 36(9) of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979 and as taken to be amended by paragraph (b) of this subsection, and subsection 36(10) of this Act as in force at that time, were applicable in relation to property disposed of at any time, whether before or after the commencement of the Income Tax Assessment Amendment Act 1978 ;

(d) section 6 of the Income Tax Assessment Amendment Act 1977 were amended by omitting subsection (2) and substituting the following subsection:

``(2) Section 36A of the Principal Act is amended by adding at the end thereof the following subsection:

`(5) A notice for the purposes of subsection (2) given on or after 24 May 1977 in respect of a change in the ownership of, or in the interests of persons in, property, being a chose in action, does not have any effect unless the persons giving the notice establish to the satisfaction of the Commissioner that the change in ownership or interests occurred before that date.'.'';

(e) section 36A of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979 , were amended by omitting subsections (6) and (7) and substituting the following subsection:

``(6) Notwithstanding subsection (2), a notice for the purposes of that subsection does not have any effect to the extent to which the notice is in respect of a change (whether occurring before or after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979 ) in the ownership of, or in the interests of persons in, property -

(a) that is not a chose in action;

(b) the value of which for the purposes of section 36 is determined by the Commissioner under subsection (9) of that section; and

(c) the value of which determined under subsection (9) of that section is less than or equal to the value of the property applicable in accordance with subsection (2) of this section.'';

(f) section 52A of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979 , were amended by omitting ``, after 7 April 1978,'' from subsection (1) and from paragraph (2)(a);

(g) section 52A of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979 , were amended by omitting ``after 24 September 1978 and'' from paragraph (2A)(a) and from subparagraph (2B)(a)(i);

(h) section 52A of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 4) 1979 , and as taken to be amended by paragraphs (f) and (g) of this subsection, were applicable in relation to property purchased or acquired at any time, whether before or after the commencement of the Income Tax Assessment Amendment Act 1978 ;

(ha) subsections 6(4) and (5) of the Income Tax Laws Amendment Act 1979 were omitted and the following subsection were substituted:

``(4) The amendment made by paragraph (1)(b) applies in relation to a taxpayer in relation to property acquired or constructed by the taxpayer at any time, whether before or after the commencement of this section.'';

(hb) ``after 12 June 1979 otherwise than under a contract entered into on or before that date'' were omitted from subsections 8(2) and 10(2) of the Income Tax Laws Amendment Act 1979 and ``at any time, whether before or after the commencement of this section'' were substituted;

(hc) ``after 12 June 1979 other than a change occurring in consequence of an agreement entered into on or before that date'' were omitted from subsection 9(2) of the Income Tax Laws Amendment Act 1979 and ``at any time, whether before or after the commencement of this section'' were substituted;

(hd) subsections 11(2) and (3) of the Income Tax Laws Amendment Act 1979 were omitted and the following subsection were substituted:

``(2) The amendment made by subsection (1) applies in relation to a taxpayer in relation to property acquired or constructed by the taxpayer at any time, whether before or after the commencement of this section.''

(j) section 82KH of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 5) 1979 , were amended by omitting paragraph (1F)(a) and substituting the following paragraph:

``(a) that amount of relevant expenditure was incurred by reason of, as a result of or as part of a tax avoidance agreement; and'';

(k) section 82KJ of this Act, as in force immediately after the commencement of the Income Tax Assessment Amendment Act (No. 5) 1979 , were amended by omitting from paragraph (a) ``after 19 April 1978'';

(m) Subdivision D (other than section 82KK ) of Division 3 of Part III of this Act, as in force immediately after the commencement of the Taxation Laws Amendment Act 1985 , and as taken to be amended by paragraphs (j) and (k) of this subsection, were applicable in relation to losses, outgoings or expenditure incurred at any time, whether before or after the commencement of the Income Tax Assessment Amendment Act 1979 ; and

(n) ``after 12 June 1979 other than a change occurring in consequence of an agreement entered into on or before that date'' were omitted from subsections 16(2), 17(2) and 18(2) of the Income Tax Laws Amendment Act 1979 and ``at any time, whether before or after the commencement of this section'' were substituted.

80(6)   [Losses from s 36A tax avoidance schemes disregarded]  

For the purpose of determining whether a deduction is allowable to a taxpayer under subsection (2) in respect of the year of income that commenced on 1 July 1980 or in respect of a subsequent year of income and for the purpose of ascertaining the amount of any such deduction, there shall be disregarded so much of the amount of any loss deemed to have been incurred by the taxpayer as would not have been deemed, for the purposes of this section, to have been incurred by the taxpayer if section 36A of this Act, as in force immediately after the commencement of the Income Tax Laws Amendment Act 1981 , were amended by omitting subsection (8) and substituting the following section:

``(8) Where -

(a) at any time, whether before or after the commencement of the Income Tax Laws Amendment Act 1981 , a change has occurred, otherwise than in the course of ordinary family or commercial dealing, in the ownership of, or in the interests of persons in, property;

(b) consideration was received or receivable in connection with the change in ownership or interests by the persons, or by any one or more of the persons, who owned the property before the change;

(c) a notice for the purposes of subsection (2) in respect of the change in ownership or interests was at any time, whether before or after the commencement of the Income Tax Laws Amendment Act 1981 , given to the Commissioner; and

(d) the amount of value of that consideration substantially exceeds the amount or value of the consideration that might reasonably be expected to have been received or receivable by the person or persons referred to in paragraph (b) in connection with the change in ownership or interests if the value of the property, immediately before the change, had been the value applicable in accordance with subsection (2),

then, notwithstanding subsection (2), the notice does not have any effect to the extent to which the notice is in respect of that change in ownership or interests.''

80(7)   [Losses from Pt IVA tax avoidance schemes disregarded]  

For the purpose of determining whether a deduction is allowable to a taxpayer under subsection (2) in respect of the year of income that commenced on 1 July 1980 or in respect of a subsequent year of income and for the purpose of ascertaining the amount of any such deduction, there shall be disregarded so much of the amount of any loss deemed to have been incurred by the taxpayer as would not have been deemed to have been incurred by the taxpayer if Part IVA extended to schemes entered into or carried out on or before 27 May 1981.

80(8)   [Foreign source income]  

For the purposes of subsection (1), where the amount of a class of income derived by a taxpayer in a year of income from a foreign source is exceeded by the sum of:

(a) any deductions allowed or allowable from the assessable income of the taxpayer of the year of income that relate exclusively to income of that class derived from that source; and

(b) so much of any other deductions allowed or allowable from that assessable income (other than apportionable deductions) as, in the opinion of the Commissioner, may appropriately be related to income of that class derived from that source;

the amount of the excess shall be disregarded.

80(9)   [Interpretation]  

In subsection (8), ``class of income'' and ``foreign source'' have the same meanings as in section 160AFD , as in force immediately before the commencement of the Taxation Laws Amendment (Foreign Income) Act 1990 .