Taxation Ruling IT 2422 - Income tax : application of Section 79C

What this ruling is about: This Office had occasion recently to advise on the operation of section 79C of the Income Tax Assessment Act in circumstances where a self-employed taxpayer had an entitlement under section 82AAT to an income tax deduction of $1,500 for contributions to a superannuation fund and was also entitled to an income tax deduction under section 80 for prior year losses. 2. Section 79C operates to limit the amount of deductions allowable under sections 77B, 77C, 78, 78B and 82AAT to the amount of income remaining after deducting from the assessable income all other allowable deductions except those allowable under sections 80, 80AAA, 80AA and Divisions 10, 10AA, 16B and 16C.


Ruling: 3. The short question involved in the enquiry was which of the two deductions was to be taken into account firstly, i.e. the superannuation contributions or the prior year losses. In terms of section 79C the advice given was that the superannuation contributions was to be taken into account before the prior year losses. 4. The effect of the advice given is illustrated in the following example:- 5. If, in the above example, expenditure of $9,500 deductible under section 51 had been incurred, section 79C would limit to $500 the income tax deduction allowable under section 82AAT, i.e. to the amount of income remaining after deducting from assessable income ($10,000) all other allowable deductions ($9,500) but without deducting the prior year losses. The amount of loss to be carried forward to the following year under section 80 would remain at $20,000. COMMISSIONER OF TAXATION 2 July 1987




Section 82AAT Contributions


Legislative references: 79C
Subject references: CARRY FORWARD LOSSES