Income Tax Assessment Act 1936

s 453 — Active income test—substantiation requirements for attributable taxpayer

(1) Where: (a) the Commissioner has reason to believe that: (i) a taxpayer is an attributable taxpayer in relation to a company, being a CFC, at the end of a statutory accounting period of the CFC; and (ii) the application of a provision of this Division to the company may be relevant to the assessment of the taxpayer; and (b) any of the following subparagraphs applies: (i) the taxpayer has claimed (whether in a return of income or otherwise) that the company has passed the active income test in relation to the statutory accounting period; (ii) the taxpayer’s return of income of any year of income has been prepared on the basis that the company has passed the active income test in relation to the statutory accounting period; (iii) the Commissioner has reason to believe that the company has passed the active income test in relation to the statutory accounting period; the Commissioner may, by notice in writing served on the taxpayer (in this section called the Commissioner’s notice ), request the taxpayer: (c) to obtain from the company, in accordance with a request made in a notice given to the company under subsection 451(2), copies of such documents as are specified in the Commissioner’s notice; and (d) if any of those copies are not in the English language—to make translations of those copies; and (e) to produce to the Commissioner, within the period and in the manner specified in the Commissioner’s notice: (i) in all cases—those copies; and (ii) if paragraph (d) applies—those translations. (2) The period specified in the Commissioner’s notice must end: (a) later than 90 days after the date of service of the notice; and (b) before the end of the retention period in relation to the statutory accounting period. (3) Upon written application made by the taxpayer within the period specified in the Commissioner’s notice, the Commissioner may, by notice in writing served on the taxpayer, extend the period specified in the Commissioner’s notice. (4) Where: (a) an application under subsection (3) is made before the end of the period specified in the Commissioner’s notice; and (b) at the end of the period, the Commissioner has not notified the taxpayer of the Commissioner’s decision on the application; the following provisions have effect: (c) if the Commissioner’s decision is not notified to the taxpayer before the end of the retention period in relation to the statutory accounting period concerned—the Commissioner is taken to have extended the period under subsection (3) to the end of the retention period; (d) if the Commissioner’s decision is notified to the taxpayer before the end of the retention period in relation to the statutory accounting period concerned—the Commissioner is taken to have extended the period under subsection (3) to the end of the day (in this subsection called the decision day ) on which the Commissioner’s decision is notified to the taxpayer; (e) if the Commissioner decides to extend the period—subject to subsection (5), the extended period must end after the decision day. (5) The period as extended under subsection (3) must end before the end of the retention period in relation to the statutory accounting period. (6) A reference in this section to the period specified in the Commissioner’s notice is a reference to the period as extended under subsection (3). (7) A refusal or failure to comply with the notice is not an offence. (8) If the taxpayer refuses or fails to comply with the notice, then, for the purposes of the application of this Part (other than this Division) to the taxpayer, the company is taken not to have passed the active income test in relation to the statutory accounting period concerned.

s 454 — Assessment on assumption—retention of accounts etc. and compliance with information notices

If: (a) a statutory accounting period of a company has ended; and (b) the retention period in relation to the statutory accounting period has not ended; an assessment may be made of a taxpayer on the assumption that, after the assessment is made, the following requirements will be complied with in relation to the statutory accounting period: (c) the requirements set out in paragraphs 451(1)(c) and (d) that are applicable to the company; (d) the requirements set out in paragraphs 452(1)(c) and (d) that are applicable to a partnership in which the company was a partner at any time during the statutory accounting period.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 75 of 2010, Sch 6 item 5 | Sch 6 item 6, effective Sch 1 (items 1–33, 35) and Sch 6 (items 2–6): 29 June 2010 (s 2(1) item 2) Sch 2 (items 1, 2, 25): 1 July 2010 (s 2(1) item 3) Sch 5 (items 2–6): 28 June 2010 (s 2(1) item 7)

s 455 — Amendment of assessments

Where: (a) an assessment has been made in relation to a year of income; and (b) a provision of this Subdivision that is relevant to the assessment is dependent on a circumstance that occurs or may occur after the end of the year of income; section 170 does not prevent the amendment of the assessment at any time for the purpose of giving effect to this Act in relation to the occurrence of that circumstance after the end of the year of income.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2)

s 456 — Assessability in respect of CFC’s attributable income

(1) Subject to subsection (2), where a CFC has attributable income for a statutory accounting period in respect of an attributable taxpayer, the taxpayer’s attribution percentage of the attributable income is included in the assessable income of the taxpayer of the year of income in which the end of the statutory accounting period occurs. (2) Where section 457 applies in relation to the attributable taxpayer in relation to one or more changes of residence by the CFC during the statutory accounting period, then only so much of the attributable income of the CFC as relates to: (a) where the CFC is a resident of an unlisted country at the end of the period: (i) any part of the period when the CFC was a resident of a listed country; or (ii) the part of the period, since the change of residence or last change of residence, as the case requires, when the CFC was a resident of the unlisted country; or (b) where the CFC is a resident of a listed country at the end of the period—any part of the period when the CFC was a resident of the listed country or any other listed country; is to be taken into account under subsection (1).

Amendment history: Inserted by No 5 of 1991, item 462 | item 5 | item 6 | item 1990 | item 28 | item 33 | item 49 | item 458 | item 371 | item 456 | item 79D | item 58, effective s 4–61: 8 Jan 1991 (s 2)

s 456A — Reduction of section 456 assessability where item subject to foreign accruals tax

(1) Where: (a) apart from this section, an amount (in this section called the otherwise assessable section 456 amount ) is included in the assessable income of a year of income of an attributable taxpayer in relation to a CFC under section 456, in relation to the attributable income of the CFC of a statutory accounting period; and (b) an attribution tracing interest of the attributable taxpayer, or of an interposed entity, in a CFE was taken into account in calculating the attributable taxpayer’s attribution percentage for the CFC; and (c) foreign tax is payable by the CFE under an accruals tax law of a listed country in respect of an amount that is calculated by reference to an item of net income or net profit of the CFC, where the amount is taxed in the listed country: (i) at that country’s normal company tax rate; and (ii) in a tax accounting period commencing or ending: (A) in the year of income of the attributable taxpayer; or (B) in the statutory accounting period of the CFC; and (d) the item constitutes the whole or part (which whole or part is in this section called the foreign accruals ‑ taxed attributable income ) of the attributable income of the CFC of the statutory accounting period; then the otherwise assessable section 456 amount is reduced by the amount calculated using the formula: where: Indirect attribution interests via CFE means the total of the attributable taxpayer’s indirect attribution interests in the CFC that are held through the CFE. Foreign accruals ‑ taxed attributable income means the amount of the foreign accruals ‑ taxed attributable income. (2) Where: (a) apart from this subsection, subsection (1) would reduce the otherwise assessable section 456 amount of the attributable taxpayer in relation to the CFC in a case where foreign tax is payable by 2 or more CFEs under accruals tax laws; and (b) any indirect attribution interest referred to in the formula component Indirect attribution interests via CFE in subsection (1) is held through any 2 or more of the CFEs; then that indirect attribution interest is only to be taken into account once in applying the subsection. (3) Where, because of any of subsections 362(2) to (5), the amount that would otherwise be the attribution percentage of the attributable taxpayer for the CFC is reduced, then the Commissioner may, for the purposes of this section, make such consequential reduction as the Commissioner considers reasonable in the circumstances to any indirect attribution interest in the CFC held by the attributable taxpayer.

Amendment history: Inserted by No 48 of 1991, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Amended by No 100 of 1991, Sch 2 item 77, effective s 15–28, 30–32, 33(b), (e), (f), 34–76 and 79–84): 27 June 1991 (s 2(1)) s 29 and 77: 24 Apr 1991 (s 2(3), (6)) s 33(a): 16 June 1990 (s 2(4)) s 33(c) and (d): 30 June 1989 (s 2(5)) s 78: 8 Jan 1991 (s 2(7)) | Amended by No 155 of 1997, Sch 1 item 104 | Sch 1 item 126, effective 24 Oct 1997 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6)

s 457 — Assessability where CFC changes residence from unlisted country to listed country or to Australia

(1) Where at any time (in this section called the residence ‑ change time ) a company that: (a) is a CFC; and (b) has an attributable taxpayer; ceases to be resident in an unlisted country and becomes: (c) a resident of a listed country; or (d) a Part X Australian resident; then the attributable taxpayer’s assessable income of the year of income in which the residence ‑ change time occurs includes the amount calculated under subsection (2). (2) The amount is calculated using the formula: where: Attribution percent means the attributable taxpayer’s attribution percentage, at the residence ‑ change time, in relation to the CFC. Adjusted distributable profits means: (a) if paragraph (1)(c) applies—the amount that would be the CFC’s distributable profits at the residence ‑ change time if: (i) the CFC’s income were its adjusted tainted income (excluding any non ‑ portfolio dividends) derived during the period beginning on the first day of the statutory accounting period in which the residence ‑ change time occurred and ending immediately before the time at which the residence ‑ change time occurs; and (ii) the CFC’s only other income were an amount that the CFC would have derived had it disposed of all of its tainted assets immediately before the residence ‑ change time for a consideration equal to their market value; and (iii) the CFC’s only expenses were expenses related to income covered by subparagraphs (i) and (ii); or (b) if paragraph (1)(d) applies—the amount that would be the CFC’s distributable profits at the residence ‑ change time if: (i) the CFC’s only income were its adjusted tainted income (excluding any non ‑ portfolio dividends) derived during the period beginning on the first day of the statutory accounting period in which the residence ‑ change time occurred and ending immediately before the time at which the residence ‑ change time occurs; and (ii) the CFC’s only expenses were expenses related to income covered by subparagraph (i). (3) If: (a) at the residence ‑ change time, regulations made for the purposes of section 320 come into effect; and (b) a result of those regulations coming into effect is that the company: (i) ceases to be a resident of an unlisted country; and (ii) becomes a resident of a listed country; at the residence ‑ change time; then no amount is to be included in the attributable taxpayer’s assessable income under subsection (1) in relation to that change of residence.

Amendment history: Inserted by No 5 of 1991, item 5 | item 6 | item 33 | item 49 | item 371 | item 1 | item 434 | item 79D | item 54 | item 58, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 155 of 1997, Sch 1 item 17 | Sch 1 item 37 | Sch 1 item 41 | Sch 1 item 48 | Sch 1 item 56 | Sch 1 item 126, effective 24 Oct 1997 (s 2) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 64 of 2005, Sch 2 item 7 | Sch 2 item 8 | Sch 2 item 9, effective Sch 1 (items 1–6), Sch 3 (items 1–4) and Sch 4 (items 2–27, 38, 39): 26 June 2005 (s 2(1) items 2, 4) Sch 2 (items 1–9): 27 June 2005 (s 2(1) item 3)

s 459A — Assessability where CFC or CFT has interest in certain attributable taxpayers

(1) Where: (a) an amount (in this subsection called the section 456 to 459A amount ) is included in the assessable income of an Australian partnership or of an Australian trust of a year of income under section 456 or 457 or under this section (apart from subsection (2)); and (b) a CFC or CFT has an individual interest in the net income of the Australian partnership, or a present entitlement to a share of the net income of the Australian trust, being an interest or entitlement held either directly or indirectly through interposed Australian partnerships, CFPs or Australian trusts (or any combination thereof); and (c) a taxpayer is an attributable taxpayer in relation to the CFC or CFT: (i) where the section 456 to 459A amount is included in assessable income under section 456—at the end of the statutory accounting period referred to in that section; or (ii) where the amount is included under section 457—at the residence ‑ change time referred to in that section; or (v) where the amount is included under this section—at the time referred to in whichever subparagraph of this paragraph applied for the purposes of so including the amount; then, subject to subsection (2), the assessable income of the attributable taxpayer of the year of income includes an amount calculated using the formula: where: AP [Attribution Percentage] means the taxpayer’s attribution percentage, at the time referred to in paragraph (c), for the CFC or CFT. Interest/Entitlement means the percentage of the net income of the Australian partnership or Australian trust represented by the sum of the direct and indirect interests or present entitlements of the CFC or CFT. Section 456 to 459A amount means the section 456 to 459A amount. (2) Where: (a) apart from this subsection, an amount (in this subsection called the subsection (1) amount ) is included under subsection (1) in the assessable income of an attributable taxpayer in relation to a CFT; and (b) the following conditions are satisfied in respect of one or more other amounts (each of which is in this subsection called an assessed attributable amount ); (i) each is: (A) apart from this subsection, included in the assessable income of a taxpayer (whether or not the attributable taxpayer), other than a trust or partnership; or (B) assessed to a trustee under section 98, 99 or 99A; (ii) each is attributable directly through the CFT, or indirectly through the CFT and any interposed partnerships or trusts (or any combination thereof), to the section 456 to 459A amount referred to in subsection (1); then the subsection (1) amount is reduced to the extent that the Commissioner considers it represents an assessed attributable amount or assessed attributable amounts. (3) A reference in subsection (1) to an Australian trust or in subsection (2) to a trust does not include a reference respectively to an Australian trust or a trust that is, in relation to the year of income concerned: (b) a public trading trust within the meaning of Division 6C of that Part; or (c) a complying superannuation fund, a non ‑ complying superannuation fund, a complying approved deposit fund, a non ‑ complying approved deposit fund or a pooled superannuation trust.

Amendment history: Inserted by No 48 of 1991, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 15 of 2007, Sch 1 item 126, effective Sch 1 (items 1–8, 22–149, 406(1)–(3)) and Sch 3 (items 6, 7): 15 Mar 2007 (s 2(1) items 2, 6) | Amended by No 53 of 2016, Sch 5 item 27, effective Sch 3 (item 1), Sch 5 (items 1, 3, 6–28, 75), Sch 6 (items 1–20) and Sch 8 (item 1): 5 May 2016 (s 2(1) items 2, 4)

s 460 — Only resident partners, beneficiaries etc. liable to be assessed as a result of attribution

(1) This section applies where an amount is included under section 456, 457, or 459A in the assessable income of an Australian partnership or an Australian trust of a year of income, except where the Australian trust is, in relation to the year of income: (b) a public trading trust within the meaning of Division 6C of that Part; or (c) a complying superannuation fund, a non ‑ complying superannuation fund, a complying approved deposit fund, a non ‑ complying approved deposit fund or a pooled superannuation trust. (2) Where: (a) as a result of the amount being so included, there is, apart from this subsection, a tax detriment for: (i) a partner in the Australian partnership; or (ii) a partner in another partnership (in this subsection called the ultimate partnership ), where the tax detriment occurred because there were one or more partnerships or trusts (but not companies) interposed between the partner and the Australian partnership or the Australian trust; and (b) the partner is not, in respect of his or her interest in the net income or partnership loss of the Australian partnership or the ultimate partnership, in the capacity of trustee of a trust; and (c) the tax detriment would be reduced by an amount if it were recalculated on the assumption that section 92 applied only to so much of the partner’s interest in the net income or partnership loss of the Australian partnership or the ultimate partnership as is attributable to periods when the partner was a Part X Australian resident; then, for the purposes of this Act, the tax detriment is taken to be reduced by that amount. (3) Where: (a) as a result of the amount being included as mentioned in subsection (1), there is, apart from this subsection, a tax detriment for: (i) a beneficiary in the Australian trust; or (ii) a beneficiary in another trust (in this subsection called the ultimate trust ), where the tax detriment occurred because there were one or more partnerships or trusts (but not companies) interposed between the beneficiary and the Australian partnership or the Australian trust; and (b) the beneficiary is not a partnership and is not, in respect of his or her share of the net income of the Australian trust or the ultimate trust, in the capacity of trustee of another trust; and (c) the tax detriment would be reduced by an amount if it were recalculated on the following assumptions: (i) sections 97, 98A and 100 applied only to so much of the beneficiary’s share of the net income of the Australian trust or the ultimate trust as is attributable to periods when the beneficiary was a Part X Australian resident; (ii) Subdivision 115 ‑ C of the Income Tax Assessment Act 1997 applied only to so much of the beneficiary’s share of each capital gain of the Australian trust or the ultimate trust as is attributable to periods when the beneficiary was a Part X Australian resident; (iii) Subdivision 207 ‑ B of the Income Tax Assessment Act 1997 applied only to so much of the beneficiary’s share of each franked distribution of the Australian trust or the ultimate trust as is attributable to periods when the beneficiary was a Part X Australian resident; then, for the purposes of this Act, the tax detriment is taken to be reduced by that amount. (4) Where: (a) as a result of the amount being included as mentioned in subsection (1), there is, apart from this subsection, a tax detriment for: (i) the trustee of the Australian trust; or (ii) the trustee of another trust (in this subsection called the ultimate trust ), where the tax detriment occurred because there were one or more partnerships or trusts (but not companies) interposed between the trustee and the Australian partnership or the Australian trust; and (b) the tax detriment would be reduced by an amount if it were recalculated on the assumption that: (i) section 98 applied only to so much of a beneficiary’s share of the net income of the Australian trust or the ultimate trust as is attributable to periods when the beneficiary was a Part X Australian resident; and (ii) sections 99 and 99A applied only to the Australian trust or the ultimate trust if it were a resident trust estate within the meaning of Division 6 of Part III; then, for the purposes of this Act, the tax detriment is taken to be reduced by that amount.

Amendment history: Inserted by No 5 of 1991, item 1990 | item 98, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 48 of 1991, item 83, effective s 9, 15, 33, 70 and 81–83: 8 Jan 1991 (s 2(2)) s 10–14, 16–31, 34(a), 35, 37–39, 41–51(1), 52–59(1), 60, 61,67, 68(1), 69, 71–80, 84(1)–(8), (10), (11), (13)–(17), 85, 86 and 88–90: 24 Apr 1991 (s 2(1)) s 32 and 84(9): 1 July 1991 (s 2(4)) s 34(b), 36, 40 and 87: 21 Aug 1990 (s 2(3)) s 51(2), 59(2), 62–66, 68(2) and 84(12): 25 Apr 1991 (s 2(5)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 15 of 2007, Sch 1 item 127, effective Sch 1 (items 1–8, 22–149, 406(1)–(3)) and Sch 3 (items 6, 7): 15 Mar 2007 (s 2(1) items 2, 6) | Amended by No 62 of 2011, Sch 2 item 44, effective Sch 1 (items 4, 5, 14), Sch 2 (items 1–7, 28–44, 51) and Sch 4 (items 1–32, 34): 29 June 2011 (s 2(1) items 2, 6) | Amended by No 53 of 2016, Sch 5 item 28, effective Sch 3 (item 1), Sch 5 (items 1, 3, 6–28, 75), Sch 6 (items 1–20) and Sch 8 (item 1): 5 May 2016 (s 2(1) items 2, 4)

s 460A — Effect of reducing section CGT event J1 amount

(1) This section applies in either of the following cases: (a) one or more schemes or arrangements have the effect of reducing the attribution percentage of an attributable taxpayer in relation to a company that is a CFC, and are intended by the attributable taxpayer or an associate of the attributable taxpayer to have that effect; (b) a company ceases to be a CFC in relation to a particular taxpayer. (2) Work out the amount (if any) included under this Division in the taxpayer’s assessable income because of CGT event J1 (as it notionally happens to the company under Division 7) as though the reduction or cessation had not happened. Note: CGT event J1 is about companies ceasing to be related after a roll ‑ over.

Amendment history: Inserted by No 58 of 2000, Sch 1 item 11 | Sch 1 item 23 | Sch 1 item 24, effective s 4, Sch 1, Sch 2 (items 1, 4(1)), Sch 3 (item 3), Sch 6 (item 34), Sch 10 (items 1–11, 17(1), (2), 18–30, 38(1), (2)) and Sch 11 (items 1, 11): 31 May 2000 (s 2(1), (2)) Sch 3 (items 1, 2, 4–7) and Sch 6 (item 33): 16 July 1999 (s 2(3)–(6), (12)) Sch 8 (items 1–17, 21): 1 July 1998 (s 2(13)) Sch 8 (item 18): 1 July 1999 (s 2(13)) | Amended by No 58 of 2000, Sch 1 item 11 | Sch 1 item 23 | Sch 1 item 24, effective s 4, Sch 1, Sch 2 (items 1, 4(1)), Sch 3 (item 3), Sch 6 (item 34), Sch 10 (items 1–11, 17(1), (2), 18–30, 38(1), (2)) and Sch 11 (items 1, 11): 31 May 2000 (s 2(1), (2)) Sch 3 (items 1, 2, 4–7) and Sch 6 (item 33): 16 July 1999 (s 2(3)–(6), (12)) Sch 8 (items 1–17, 21): 1 July 1998 (s 2(13)) Sch 8 (item 18): 1 July 1999 (s 2(13))

s 461 — Reduction of disposal consideration or capital proceeds if attributed income not distributed

(1) If: (a) it is necessary, for the purposes of applying a provision of this Act in the assessment of a taxpayer for a year of income, to take into account: (i) the amount of consideration received, entitled to be received or taken to have been received, by the taxpayer in respect of the disposal of an asset; or (ii) the capital proceeds from a CGT event happening in relation to a CGT asset; being an asset that is an interest in an attribution account entity (the disposal entity ); and (b) immediately before the disposal or CGT event takes place, either or both of the following conditions are satisfied: (i) there is an attribution surplus for the disposal entity in relation to the taxpayer; (ii) there is an attribution surplus for one or more other attribution account entities in relation to the taxpayer, where each such entity is one in which the taxpayer has an indirect attribution account interest held through the disposal entity; then, for the purposes of this Act: (c) the consideration or capital proceeds that, apart from this section, would be taken into account under the provision referred to in paragraph (a) in respect of the disposal or CGT event is, subject to subsection (3), taken to be reduced by so much of the amount of the attribution surplus, or sum of the attribution surpluses, as the case requires; and (d) an attribution debit is taken to arise at the time of the disposal or the CGT event under section 372, in relation to the taxpayer, for each attribution account entity (the surplus entity ) in relation to which there is a surplus to which paragraph (c) applies; and (e) the amount of the attribution debit is equal to so much of the surplus as is taken into account under paragraph (c); and (f) there is no grossed ‑ up amount in relation to the attribution debit under section 373. (3) For the purposes of paragraph (1)(c): (a) if the disposal of the asset or the CGT event causes the taxpayer’s attribution account percentage for a surplus entity to be reduced by a proportion, then only that proportion of the attribution surplus for the entity is, subject to this subsection, to be taken into account under that paragraph; and (b) if there is only one attribution surplus referred to in that paragraph and (after any application of paragraph (a) of this subsection) it exceeds the consideration from the disposal or the capital proceeds from the CGT event, then only so much of the surplus as does not exceed that consideration or those capital proceeds is to be taken into account under paragraph (1)(c); and (c) where there are 2 or more attribution surpluses referred to in paragraph (1)(c) and (after any application of paragraph (a) of this subsection) their sum exceeds the consideration from the disposal or the capital proceeds from the CGT event, then: (i) if the taxpayer makes an election that, for the purposes of this paragraph, a part of each surplus (after any application of paragraph (a)) such that the sum of the amounts to which the election relates equals that consideration or those capital proceeds—only the part to which the election relates of each surplus is to be taken into account under paragraph (1)(c); or (ii) if subparagraph (i) does not apply—only a proportion of each surplus (after any application of paragraph (a)) is to be taken into account under paragraph (1)(c), being the proportion calculated using the formula: where: consideration means the amount of the consideration or the capital proceeds. total surplus means the sum of the attribution surpluses (after any application of paragraph (a)). (4) An election for the purposes of paragraph (3)(c) must be made on or before the date of lodgment of the taxpayer’s return of income for the year of income referred to in paragraph (1)(a) or within such further period after the lodgment of the return as the Commissioner allows. (4A) In determining, for the purposes of this section, whether there was an attribution surplus immediately before a CGT event, and the amount of such a surplus, also take into account any attribution credit that later arises because the CGT event caused section 104 ‑ 175 of the Income Tax Assessment Act 1997 (as it notionally applies to the CGT event entity under Division 7) to operate. (5) In this section: interest , in relation to an attribution account entity, means: (a) if the entity is a company—an interest in shares in the company, or an entitlement to acquire such an interest; or (b) if the entity is a partnership—an interest of a partner in the profits or property of the partnership, or an entitlement of a partner to acquire such an interest; or (c) if the entity is a trust—an entitlement of a beneficiary to a share of the income or corpus of the trust, or an entitlement of a beneficiary to acquire such an entitlement.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 101 of 1992, effective s 16–32, 34 and Sch 1–4: 30 June 1992 (s 2) | Amended by No 46 of 1998, Sch 10 item 126 | Sch 10 item 481 | Sch 10 item 482 | Sch 10 item 483 | Sch 10 item 484 | Sch 10 item 485 | Sch 10 item 486 | Sch 10 item 487 | Sch 10 item 488 | Sch 10 item 489 | Sch 10 item 490, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 58 of 2000, Sch 1 item 9 | Sch 1 item 25 | Sch 1 item 26, effective s 4, Sch 1, Sch 2 (items 1, 4(1)), Sch 3 (item 3), Sch 6 (item 34), Sch 10 (items 1–11, 17(1), (2), 18–30, 38(1), (2)) and Sch 11 (items 1, 11): 31 May 2000 (s 2(1), (2)) Sch 3 (items 1, 2, 4–7) and Sch 6 (item 33): 16 July 1999 (s 2(3)–(6), (12)) Sch 8 (items 1–17, 21): 1 July 1998 (s 2(13)) Sch 8 (item 18): 1 July 1999 (s 2(13)) | Amended by No 101 of 2006, Sch 1 item 176 | Sch 2 item 483 | Sch 2 item 484 | Sch 2 item 485 | Sch 2 item 487 | Sch 2 item 488 | Sch 2 item 489 | Sch 2 item 490, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 143 of 2007, Sch 1 item 123 | Sch 1 item 124, effective Sch 1 (items 2, 3, 18–127, 222, 223, 224(1), (2), 225, 226), Sch 4 (items 1–46, 51, 52), Sch 7 (items 9–17, 104(2)) and Sch 8: 24 Sept 2007 (s 2(1) items 2, 4, 11, 12) | Amended by No 114 of 2010, Sch 1 item 90 | Sch 1 item 91, effective Sch 1 (items 1–39, 93–96): 14 July 2010 (s 2(1) items 2, 4) Sch 1 (items 88–92): 14 Sept 2006 (s 2(1) item 3)

s 462 — Keeping of records—section 456

Subject to this Division, where: (a) a person is an attributable taxpayer in relation to a CFC at the end of a statutory accounting period of the CFC; and (b) the CFC has attributable income for the statutory accounting period in respect of the person; the person must keep records (in Australia or elsewhere) containing particulars of: (c) the acts, transactions and other circumstances that resulted in the person being an attributable taxpayer in relation to the CFC at that time; and (d) the basis of the calculation of: (i) the direct attribution interest; and (ii) the aggregate of the indirect attribution interests; in the CFC held by the person at that time; and (e) the basis of the calculation of the attribution percentage of the person in relation to the CFC at that time; and (f) the basis of the calculation of the amount (including a nil amount) included in the assessable income of the person under section 456 in relation to the CFC’s attributable income for the statutory accounting period in respect of the person. Note: There is an administrative penalty if you do not keep or retain records as required by this Division: see section 288 ‑ 25 in Schedule 1 to the Taxation Administration Act 1953 .

Amendment history: Inserted by No 5 of 1991, item 456 | item 79D, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 91 of 2000, Sch 2 item 42, effective Sch 2 (items 13–48, 130–142, 144(1), 145–147): 1 July 2000 (s 3(1))

s 462A — Keeping of records—section 457

Subject to this Division, where: (a) subsection 457(1) applies to a change of residence of a CFC; and (b) at the residence ‑ change time referred to in that subsection, a person is an attributable taxpayer in relation to the CFC; the person must keep records (in Australia or elsewhere) containing particulars of: (c) the acts, transactions and other circumstances that resulted in the person being an attributable taxpayer in relation to the CFC at that time; and (d) the basis of the calculation of: (i) the direct attribution interest; and (ii) the aggregate of the indirect attribution interests; in the CFC held by the person at that time; and (e) the basis of the calculation of the attribution percentage of the person in relation to the CFC at that time; and (f) the basis of the calculation of the amount (including a nil amount) included in the assessable income of the person under section 457 in relation to the change of residence concerned.

Amendment history: Inserted by No 100 of 1991, effective s 15–28, 30–32, 33(b), (e), (f), 34–76 and 79–84): 27 June 1991 (s 2(1)) s 29 and 77: 24 Apr 1991 (s 2(3), (6)) s 33(a): 16 June 1990 (s 2(4)) s 33(c) and (d): 30 June 1989 (s 2(5)) s 78: 8 Jan 1991 (s 2(7))

s 464A — Keeping of records—section 459A

Subject to this Division, where: (a) subsection 459A(1) applies in relation to an amount (in this section called the trigger amount ) included in the assessable income of an Australian partnership or of an Australian trust as mentioned in paragraph 459A(1)(a); and (b) at the time referred to in whichever subparagraph of paragraph 459A(1)(c) is applicable, a person is an attributable taxpayer in relation to the CFC or the CFT mentioned in that paragraph; the person must keep records (in Australia or elsewhere) containing particulars of: (c) the acts, transactions and other circumstances that resulted in the person being an attributable taxpayer in relation to the CFC or the CFT at that time; and (d) the basis of the calculation of: (i) the direct attribution interest; and (ii) the aggregate of the indirect attribution interests; in the CFC or the CFT held by the person at that time; and (e) the basis of the calculation of the attribution percentage of the person in relation to the CFC or the CFT at that time; and (f) the basis of the calculation of the amount (including a nil amount) that, apart from subsection 459A(2), would be included in the assessable income of the person under subsection 459A(1) in relation to the trigger amount.

Amendment history: Inserted by No 100 of 1991, Sch 2 item 82, effective s 15–28, 30–32, 33(b), (e), (f), 34–76 and 79–84): 27 June 1991 (s 2(1)) s 29 and 77: 24 Apr 1991 (s 2(3), (6)) s 33(a): 16 June 1990 (s 2(4)) s 33(c) and (d): 30 June 1989 (s 2(5)) s 78: 8 Jan 1991 (s 2(7))

s 465 — Offence of failing to keep records

(1) A person who contravenes section 462, 462A, or 464A commits an offence punishable on conviction by a fine not exceeding 30 penalty units. Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit. (2) An offence under section 462, 462A, or 464A is an offence of strict liability. Note: For strict liability , see section 6.1 of the Criminal Code .

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 100 of 1991, Sch 2 item 81, effective s 15–28, 30–32, 33(b), (e), (f), 34–76 and 79–84): 27 June 1991 (s 2(1)) s 29 and 77: 24 Apr 1991 (s 2(3), (6)) s 33(a): 16 June 1990 (s 2(4)) s 33(c) and (d): 30 June 1989 (s 2(5)) s 78: 8 Jan 1991 (s 2(7)) | Amended by No 91 of 2000, Sch 2 item 43 | Sch 2 item 44, effective Sch 2 (items 13–48, 130–142, 144(1), 145–147): 1 July 2000 (s 3(1)) | Amended by No 146 of 2001, Sch 4 item 87, effective Sch 4 (items 41–91): 15 Dec 2001 (s 2(1)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6) | Amended by No 4 of 2016, effective Sch 4 (items 1, 188, 397–399): 10 Mar 2016 (s 2(1) item 6)

s 466 — Manner in which records required to be kept

A person who is required by this Division to keep records must: (a) keep the records in writing in the English language or so as to enable the records to be readily accessible and convertible into writing in the English language; and (b) keep the records so as to enable the person’s liability under this Act to be readily ascertained.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2)

s 467 — Circumstances where records not required to be kept—reasonable excuse etc.

This Division does not require a person to keep a record of information if: (a) the person did not know, and had no reasonable grounds to suspect, that section 462, 462A or 464A, as the case requires, was applicable to the person; or (b) the person did not know that, and made all reasonable efforts to ascertain whether, section 462, 462A or 464A, as the case requires, was applicable to the person; or (c) the person did not know, and made all reasonable efforts to obtain, the information.

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2) | Amended by No 100 of 1991, Sch 2 item 82, effective s 15–28, 30–32, 33(b), (e), (f), 34–76 and 79–84): 27 June 1991 (s 2(1)) s 29 and 77: 24 Apr 1991 (s 2(3), (6)) s 33(a): 16 June 1990 (s 2(4)) s 33(c) and (d): 30 June 1989 (s 2(5)) s 78: 8 Jan 1991 (s 2(7)) | Amended by No 96 of 2004, effective Sch 2 (items 1–80, 85–138, 140, 141) and Sch 3: 29 June 2004 (s 2(1) items 3, 5, 6)

s 468 — Treatment of partnerships

(1) Subject to subsections (2) and (3), the following provisions apply to a partnership as if the partnership were a person: (a) sections 462 to 467 (inclusive); (b) subsections 262A(4) and (5), in so far as those subsections apply to records kept under or for the purposes of this Division; (c) Part III of the Taxation Administration Act 1953 , in so far as that Part of that Act relates to the provisions covered by paragraph (a) or (b) of this subsection. (2) Where, by virtue of subsection (1), an offence is taken to have been committed by a partnership, that offence is taken to have been committed by each of the partners. (3) In a prosecution of a person for an offence by virtue of subsection (2), it is a defence if the person proves that the person: (a) did not aid, abet, counsel or procure the act or omission by virtue of which the offence was taken to have been committed; and (b) was not in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, an act or omission by virtue of which the offence is taken to have been committed. Income Tax Assessment Act 1936 No. 27, 1936 Compilation No. 191 Compilation date: 1 April 2026 Includes amendments: Act No. 12, 2026 This compilation is in 7 volumes Volume 1: sections 1-78A Volume 2: sections 79A-121L Volume 3: sections 124ZM-204 Volume 4: sections 251R-468 Volume 5: Schedules Volume 6: Endnotes 1-4 Volume 7: Endnote 5 Each volume has its own contents About this compilation This compilation This is a compilation of the Income Tax Assessment Act 1936 that shows the text of the law as amended and in force on 1 April 2026 (the compilation date ). The notes at the end of this compilation (the endnotes ) include information about amending laws and the amendment history of provisions of the compiled law. Uncommenced amendments The effect of uncommenced amendments is not shown in the text of the compiled law. The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au). Application, saving and transitional provisions If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Editorial changes For more information about any editorial changes made in this compilation, see the endnotes. Presentational changes The Legislation Act 2003 provides for First Parliamentary Counsel to make presentational changes to a compilation. Presentational changes are applied to give a more consistent look and feel to legislation published on the Register, and enable the user to more easily navigate those documents. Modifications If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. Any modifications affecting the law are accessible on the Register. Self ‑ repealing provisions If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes. Contents

Amendment history: Inserted by No 5 of 1991, effective s 4–61: 8 Jan 1991 (s 2)

s 57-1 — What this Division is about

This Division is about the income tax treatment of a taxpayer whose income ceases to be wholly exempt. Broadly, income, outgoings, gains and losses are attributed to the periods before and after the loss of full exemption.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4))

s 57-5 — Entities to which this Division applies

If: (a) at a particular time, all of the income of a taxpayer is wholly exempt from income tax; and (b) immediately after that time, the taxpayer’s income becomes to any extent assessable income; then: (c) the taxpayer is a transition taxpayer ; and (d) the time when the taxpayer’s income becomes to that extent assessable is the transition time ; and (e) the year of income in which the transition time occurs is the transition year for the taxpayer.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4))

s 57-10 — Activities of transition taxpayer’s predecessor attributed to transition taxpayer

(1) If: (a) at the transition time, the transition taxpayer performs particular functions or carries on particular activities; and (b) during any period before the transition taxpayer first began to perform the functions or carry on the activities, an exempt government entity performed those same functions or carried on those same activities; and (c) at the end of the period, responsibility for performing the functions or carrying on the activities was transferred, either directly or through one or more other exempt government entities, to the transition taxpayer; this Division applies as if, during that period, anything done by or to the exempt government entity in performing those functions or carrying on those activities had instead been done by or to the transition taxpayer. Note: As a result of this provision, the transition taxpayer may for example be able to deduct after the transition time, under Division 40 of the Income Tax Assessment Act 1997 as modified by Subdivision 57 ‑ J of this Schedule, a portion of allowable capital expenditure incurred before the transition time by an exempt government entity whose functions were transferred to the transition taxpayer. (2) An exempt government entity is: (a) the Commonwealth, a State or a Territory; or (b) an STB, within the meaning of Division 1AB of Part III, that is exempt from tax under that Division.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 77 of 2001, Sch 2 item 106, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1))

s 57-15 — Time when income derived

(1) To the extent that income derived by the transition taxpayer before the transition time is in respect of: (a) services rendered; or (b) goods provided; or (c) the doing of any other thing; at or after the transition time, the income is treated for the purposes of this Act as having been derived at the time the services were rendered, the goods were provided or the thing was done, as the case requires. (2) To the extent that income derived by the transition taxpayer at or after the transition time is in respect of: (a) services rendered; or (b) goods provided; or (c) the doing of any other thing; before the transition time, the income is treated for the purposes of this Act as having been derived before that time.

Amendment history: Inserted by No 78 of 1996, Sch 4 item 57, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4))

s 57-20 — Time when losses and outgoings incurred

(1) To the extent that a loss or outgoing (within the meaning of section 51 of this Act or section 8 ‑ 1 of the Income Tax Assessment Act 1997 , as appropriate) incurred by the transition taxpayer before the transition time is in respect of: (a) services rendered; or (b) goods provided; or (c) the doing of any other thing; at or after the transition time, the loss or outgoing is treated for the purposes of this Act as having been incurred at the time the services were rendered, the goods were provided or the thing was done, as the case requires. (2) To the extent that a loss or outgoing (within the meaning of section 51 of this Act or section 8 ‑ 1 of the Income Tax Assessment Act 1997 , as appropriate) incurred by the transition taxpayer at or after the transition time is in respect of: (a) services rendered; or (b) goods provided; or (c) the doing of any other thing; before the transition time, the loss or outgoing is treated for the purposes of this Act as having been incurred before that time.

Amendment history: Inserted by No 78 of 1996, Sch 4 item 57, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 34 | Sch 2D item 35, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2))

s 57-25 — Deemed disposal and re ‑ acquisition of assets

(1) This section applies to: (a) the disposal of an asset by the transition taxpayer after the transition time; and (b) a CGT event that happens after the transition time in relation to an asset owned by the transition taxpayer; where the transition taxpayer owned the asset at all times from the transition time until the disposal or the CGT event. Deemed disposal and re ‑ purchase (2) Subject to subsection (5), in determining for the purposes of this Act (other than the excluded provisions mentioned in subsection (4)) whether an amount is included in, or allowable as a deduction from, the assessable income of the transition taxpayer in respect of the disposal, the transition taxpayer is taken: (a) to have sold, immediately before the transition time, each of its assets; and (b) to have purchased each of its assets again at the transition time for consideration equal to the asset’s adjusted market value at the transition time. (2A) For the purposes of Parts 3 ‑ 1 and 3 ‑ 3 of the Income Tax Assessment Act 1997 (about CGT), in determining whether the transition taxpayer makes a capital gain or capital loss from a CGT event that happens after the transition time in relation to an asset referred to in subsection (1), the cost base and reduced cost base of the asset (at the transition time) is its adjusted market value at that time. (3) An asset’s adjusted market value at the transition time is the asset’s market value at that time: (a) reduced by any amount of income received or receivable by the transition taxpayer in respect of the asset at or after the transition time that: (i) because of subsection 57 ‑ 15(2); or (ii) because all of the income of the transition taxpayer was wholly exempt from income tax before the transition time; is not included in the transition taxpayer’s assessable income; and (b) increased by any amount of income received or receivable by the transition taxpayer in respect of the asset before the transition time that: (i) because of subsection 57 ‑ 15(1); or (ii) because the transition taxpayer’s income ceased to be exempt from income tax at the transition time; is included in the transition taxpayer’s assessable income. Note: If the asset is, or is part of, a Division 230 financial arrangement, section 57 ‑ 32 may affect how the market value of the asset is worked out. Excluded provisions (4) For the purposes of subsection (2), the excluded provisions are: (e) former Division 10B of Part III of this Act (about industrial property); and (f) former Division 10BA of Part III of this Act (about Australian films); and (ga) Division 40 of the Income Tax Assessment Act 1997 (about capital allowances); and (i) Division 43 of the Income Tax Assessment Act 1997 (about deductions for capital works); and (j) section 70 ‑ 120 of the Income Tax Assessment Act 1997 (about deducting capital costs of acquiring trees); (la) Division 373 of the Income Tax Assessment Act 1997 (about intellectual property). Listed provisions not affected (5) If the transition taxpayer: (a) acquired an asset (whether before the transition time or otherwise) before the commencement of a provision listed in subsection (6); and (b) after acquiring the asset, owned the asset at all times before the transition time; the deemed acquisition of the asset under subsection (2) does not affect the operation of the listed provision. Listed provisions (6) The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 . Listed provisions Item Provision 1 section 26BB 3 section 70B 4 the former Division 3B of Part III 5 Division 16E of Part III 6 Subdivision 20 ‑ A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under the former subsection 82Z(1) 6A Division 230 7 Division 775 8 Subdivision 20 ‑ A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under section 775 ‑ 30 (6A) For the purposes of the application of subsection (5) to the transition taxpayer, a provision covered by item 7 or 8 of the table in subsection (6) is taken to have commenced at the start of the taxpayer’s applicable commencement date (within the meaning of Division 775 of the Income Tax Assessment Act 1997 ). Note: For applicable commencement date , see section 775 ‑ 155 of the Income Tax Assessment Act 1997 . (6B) The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer in relation to a provision covered by item 7 or 8 of the table in subsection (6) if the taxpayer makes an election under section 775 ‑ 150 of the Income Tax Assessment Act 1997 . Avoidance of doubt—debt write ‑ off (7) To avoid doubt, an effect of subsection (2) is that the sum of all allowable deductions (if any) in respect of the writing off as bad of the whole or part of a debt to which that subsection applies will not exceed the market value of the debt at the transition time. Avoidance of doubt—disposal need not involve an alienation (8) To avoid doubt, an asset may be disposed of for the purposes of this section whether or not the disposal involves alienating the asset.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 36 | Sch 2D item 37, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 46 of 1998, Sch 10 item 30 | Sch 10 item 112 | Sch 10 item 520 | Sch 10 item 521 | Sch 10 item 25, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 77 of 2001, Sch 2 item 107 | Sch 2 item 108 | Sch 2 item 109 | Sch 2 item 110, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1)) | Amended by No 133 of 2003, Sch 4 item 31 | Sch 4 item 32 | Sch 4 item 33 | Sch 4 item 34, effective Sch 1 (items 1–3, 17(1)) and Sch 4 (items 21–37, 77, 78): 17 Dec 2003 (s 2) | Amended by No 101 of 2006, Sch 2 item 505 | Sch 2 item 506, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 164 of 2007, Sch 10 item 48 | Sch 10 item 49, effective s 4, Sch 1 (items 27–35, 71), Sch 8 (items 1–5, 13(1)), Sch 10 (items 2–6) and Sch 11 (items 1–48, 78–80): 25 Sept 2007 (s 2(1) items 1, 2, 5, 8) Sch 10 (items 26–56): 1 July 2010 (s 2(1) item 6) Sch 12 (items 66–71): 27 Sept 2007 (s 2(1) item 9) | Amended by No 97 of 2008, Sch 3 item 39 | Sch 3 item 30, effective Sch 1 (items 1, 2, 12) and Sch 3 (items 5–43): 3 Oct 2008 (s 2(1) items 2, 3) | Amended by No 15 of 2009, Sch 1 item 51, effective Sch 1 (items 31–51, 102–105): 26 Mar 2009 (s 2(1) item 2) | Amended by No 47 of 2016, Sch 6 item 15, effective Sch 6 (items 8–15, 19–25): 6 May 2016 (s 2(1) item 8) | Amended by No 95 of 2019, Sch 1 item 1 | Sch 1 item 57, effective Sch 1 and Sch 4 (items 1–4, 6): 1 Jan 2020 (s 2(1) item 2)

s 57-30 — Deemed cessation and re ‑ assumption of liabilities

(1) Subject to subsection (3), for the purposes of determining a deduction allowable to, or an amount included in the assessable income of, the transition taxpayer after the transition time in respect of the satisfaction of a liability owed by the transition taxpayer immediately before the transition time, the transition taxpayer is taken: (a) to have ceased immediately before the transition time to have any liabilities; and (b) to have assumed each of its liabilities again at the transition time in return for consideration equal to the adjusted market value (see subsection (2)) at that time of the right or other asset, corresponding to the liability, that was held by the person to whom the liability was owed. (2) The adjusted market value of the corresponding right or other asset is the market value of that right or asset at the transition time: (a) reduced by any amount paid or that becomes payable by the transition taxpayer in respect of the liability at or after the transition time, where: (i) because of subsection 57 ‑ 20(2); or (ii) because all of the transition taxpayer’s income was wholly exempt from income tax before the transition time; the amount is not an allowable deduction; and (b) increased by any amount paid or that became payable by the transition taxpayer in respect of the liability before the transition time, where: (i) because of subsection 57 ‑ 20(1); or (ii) because the transition taxpayer’s income ceased to be exempt from income tax at the transition time; the amount is an allowable deduction. Note: If the liability is, or is part of, a Division 230 financial arrangement, section 57 ‑ 32 may affect how the market value of the corresponding right or other asset is worked out. (3) A provision listed in subsection (4) only applies to a liability of the transition taxpayer at the transition time if the liability first came into existence after the day on which Division 3B of Part III commenced. (4) The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text. The other provisions, in bold , are provisions of the Income Tax Assessment Act 1936 . Listed provisions Item Provision 1 the former Division 3B of Part III 2 Subdivision 20 ‑ A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under the former subsection 82Z(1) . (5) A provision listed in subsection (6) only applies to a liability of the transition taxpayer at the transition time if the taxpayer first assumed the liability on or after the taxpayer’s applicable commencement date (within the meaning of Division 775 of the Income Tax Assessment Act 1997 ). Note: For applicable commencement date , see section 775 ‑ 155 of the Income Tax Assessment Act 1997 . (6) The provisions are listed in the table below. Provisions of the Income Tax Assessment Act 1997 are identified in normal text. Listed provisions Item Provision 1 Division 775 2 Subdivision 20 ‑ A, so far as it applies to an amount that may be an assessable recoupment because a deduction has been allowed or is allowable under section 775 ‑ 30. (7) The rule in subsection (5) does not apply, and is taken never to have applied, to the transition taxpayer if the taxpayer makes an election under section 775 ‑ 150 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 38 | Sch 2D item 39 | Sch 2D item 40, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 133 of 2003, Sch 4 item 35 | Sch 4 item 36 | Sch 4 item 37, effective Sch 1 (items 1–3, 17(1)) and Sch 4 (items 21–37, 77, 78): 17 Dec 2003 (s 2) | Amended by No 95 of 2019, Sch 1 item 2 | Sch 1 item 3 | Sch 1 item 57, effective Sch 1 and Sch 4 (items 1–4, 6): 1 Jan 2020 (s 2(1) item 2)

s 57-32 — Division 230 financial arrangements—market value of assets and rights

(1) This section applies in relation to an asset (the subject asset ) held by an entity (the holder ) if: (a) the subject asset is: (i) covered by subsection 57 ‑ 25(1); or (ii) a right, or other asset, corresponding to a liability covered by subsection 57 ‑ 30(1); and (b) the subject asset, or the corresponding liability for the subject asset, is or is part of a Division 230 financial arrangement at the transition time; and (c) when the arrangement was entered into: (i) the parties to the arrangement were not dealing at arm’s length (within the meaning of the Income Tax Assessment Act 1997 ) in relation to the subject asset; or (ii) if the subject asset gives rise to an interest that is not an equity interest in an entity—the return on the interest would reasonably be expected to be less than the benchmark rate of return (within the meaning of that Act) for the interest. (2) For the purposes mentioned in subsection (3), assume at the transition time that the market value of the subject asset is the total amount (the initial amount ) of the financial benefits (within the meaning of the Income Tax Assessment Act 1997 ) that the holder provided in relation to the subject asset before the transition time: (a) reduced by: (i) repayments of principal made in relation to the subject asset before the transition time; and (ii) the amount of any impairment (within the meaning of the accounting principles (within the meaning of that Act)) of the subject asset at the transition time; and (b) increased by the amount of the cumulative amortisation (worked out using the effective interest method recognised by the accounting principles (within the meaning of that Act)) of any difference at the transition time between: (i) the initial amount; and (ii) the amount payable on the maturity of the subject asset. (3) Subsection (2) has effect for the purposes of working out the subject asset’s adjusted market value under section 57 ‑ 25 or 57 ‑ 30 for use when applying Division 230 of the Income Tax Assessment Act 1997 to the subject asset or the corresponding liability for the subject asset.

Amendment history: Inserted by No 95 of 2019, Sch 1 item 1 | Sch 1 item 2 | Sch 1 item 57, effective Sch 1 and Sch 4 (items 1–4, 6): 1 Jan 2020 (s 2(1) item 2)

s 57-33 — Division 230 financial arrangements—transition taxpayer’s right to receive or obligation to provide payment

(1) This section applies in relation to the following: (a) an asset covered by subsection 57 ‑ 25(1) to which section 57 ‑ 32 applies; (b) the corresponding liability for a right, or other asset, covered by subsection 57 ‑ 30(1) to which section 57 ‑ 32 applies. Note: Section 57 ‑ 32 applies if the asset or liability is or is part of a Division 230 financial arrangement. (2) For the purposes of section 230 ‑ 60 of the Income Tax Assessment Act 1997 , assume the following: (a) in the case of an asset—that the transition taxpayer acquired the asset at the transition time in return for the transition taxpayer starting to have an obligation to provide one or more financial benefits in relation to the Division 230 financial arrangement; (b) in the case of a liability—that the transition taxpayer started to have the liability at the transition time in return for the transition taxpayer starting to have a right to receive one or more financial benefits under the Division 230 financial arrangement.

Amendment history: Inserted by No 95 of 2019, effective Sch 1 and Sch 4 (items 1–4, 6): 1 Jan 2020 (s 2(1) item 2)

s 57-35 — Interpretation

In this Subdivision: asset means property, or a right, of any kind, and includes: (a) any legal or equitable estate or interest (whether present or future, vested or contingent, tangible or intangible, in real or personal property) of any kind; and (b) any chose in action; and (c) any right, interest or claim of any kind including rights, interests or claims in or in relation to property (whether arising under an instrument or otherwise, and whether liquidated or unliquidated, certain or contingent, accrued or accruing); and (e) a CGT asset; but does not include trading stock. liability includes a duty or obligation of any kind (whether arising under an instrument or otherwise, and whether actual, contingent or prospective).

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 46 of 1998, Sch 10 item 522, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 101 of 2006, Sch 1 item 190, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 57-40 — Contributions under defined benefit superannuation schemes

(1) This section applies to a deduction allowable apart from this Subdivision to the transition taxpayer under section 290 ‑ 60 of the Income Tax Assessment Act 1997 for a contribution made to a fund in relation to a person if: (a) the person was an employee of the transition taxpayer at any time before or after the transition time; and (b) the contribution was made under a defined benefit superannuation scheme (within the meaning of section 6A of the Superannuation Guarantee (Administration) Act 1992 ). Deduction allowable only if sum of all deductions exceeds defined benefit threshold amount (2) The deduction is not allowable for a year of income if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the defined benefit threshold amount (see subsection (4)) for the year of income. Amount of deduction not allowable (3) If the sum is greater than that amount, so much of the deduction as is worked out using the following formula is not allowable: Meaning of defined benefit threshold amount (4) The defined benefit threshold amount for a year of income is: (a) if the year of income is the transition year—the unfunded liability amount (see subsection (5)); or (b) in any other case—that amount as reduced by the total amount of deductions to which this section applies, that, because of subsection (2) or (3), have not (disregarding section 57 ‑ 55) been allowable to the transition taxpayer for all previous years of income. Meaning of unfunded liability amount (5) The unfunded liability amount is the value, worked out as at the transition time in accordance with actuarial principles, of the liabilities of the transition taxpayer to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer, where the liabilities: (a) had accrued as at the transition time; and (b) were, according to actuarial principles, unfunded at that time; and (c) were liabilities only under defined benefit superannuation schemes.

Amendment history: Inserted by No 78 of 1996, Sch 4 item 57, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 174 of 1997, Sch 4 item 1 | Sch 4 item 2, effective s 4, Sch 1–5, Sch 6 (items 17–23(2), (3)), Sch 7 (items 1–16, 32(1)) and Sch 9 (items 24–30(2), (3)): 21 Nov 1997 (s 2(1)–(3)) | Amended by No 15 of 2007, Sch 1 item 142, effective Sch 1 (items 1–8, 22–149, 406(1)–(3)) and Sch 3 (items 6, 7): 15 Mar 2007 (s 2(1) items 2, 6)

s 57-45 — Deduction for surplus to meet defined benefit superannuation scheme liabilities

If: (a) at the transition time, according to a particular defined benefit superannuation scheme’s accounts, an amount is available to meet liabilities of the transition taxpayer under the scheme to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer; and (b) the amount exceeds the total value (as worked out according to actuarial principles) of the liabilities of that kind that have accrued as at the transition time; and (c) before the transition time, the transition taxpayer makes a written election that the excess is to be used solely to meet liabilities of that kind accruing after the transition time, and the excess is later used solely to meet such liabilities; the excess is an allowable deduction of the transition taxpayer for the transition year.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 174 of 1997, Sch 4 item 2 | Sch 4 item 9, effective s 4, Sch 1–5, Sch 6 (items 17–23(2), (3)), Sch 7 (items 1–16, 32(1)) and Sch 9 (items 24–30(2), (3)): 21 Nov 1997 (s 2(1)–(3))

s 57-50 — Contributions generally

(1) This section applies to a deduction allowable apart from this Subdivision to the transition taxpayer under section 290 ‑ 60 of the Income Tax Assessment Act 1997 for a contribution made to a fund in relation to a person if the person was an employee of the transition taxpayer at any time before or after the transition time. Deduction allowable only if sum of all deductions exceeds general superannuation threshold amount (2) The deduction is not allowable for a year of income if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the general superannuation threshold amount (see subsection (4)) for the year of income. Amount of deduction not allowable (3) If the sum is greater than the general superannuation threshold amount, so much of the deduction as is worked out using the following formula is not allowable: Meaning of general superannuation threshold amount (4) The general superannuation threshold amount for a year of income is: (a) if the year of income is the transition year—the undischarged superannuation liability amount (see subsection (5)); or (b) in any other case—the amount applicable under paragraph (a), reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not (disregarding section 57 ‑ 55) been allowable to the transition taxpayer for all previous years of income. Meaning of undischarged superannuation liability amount (5) This is how to work out the transition taxpayer’s undischarged superannuation liability amount : Step 1. For each person who was an employee of the transition taxpayer at any time before the transition time, take the sum of: (a) if the whole or any part of the person’s period of employment with the transition taxpayer took place before the beginning of the superannuation guarantee period (see subsection (6)) and there were one or more required award etc. contribution amounts (see subsection (7)) in respect of any of that whole or part—that amount or those amounts; and (b) if, for the whole or any part or parts of the superannuation guarantee period, there were one or more required award etc. contribution amounts that were greater than the required superannuation guarantee contribution amount or amounts (see subsection (8))—that greater amount or those greater amounts; and (c) if, for the whole or any part or parts of the superannuation guarantee period, either there was no required award etc. contribution amount or there was such an amount but it was not greater than the required superannuation guarantee contribution amount—the required superannuation guarantee contribution amount for the whole or the part of the period, or the sum of the required superannuation guarantee contribution amounts for the parts of the period, as the case may be. Step 2. Reduce the sum from Step 1 by the sum of amounts that the transition taxpayer actually contributed before the start of the transition year: (a) in payment of required award etc. contribution amounts or required superannuation guarantee contribution amounts for the employee that are included in the sum in Step 1; or (b) voluntarily to a superannuation fund for the purpose of providing superannuation benefits for the employee, or dependants of the employee; in respect of any period of employment of the employee with the transition taxpayer before the transition time. Step 3. If the result after applying Step 2 for a particular employee is less than nil, it is nil instead. Step 4. Add up the results for all of the employees. This final sum is the transition taxpayer’s undischarged superannuation liability amount . Meaning of superannuation guarantee period (6) The superannuation guarantee period is the period beginning on 1 July 1992 and ending at the transition time. Meaning of required award etc. contribution amount (7) A required award etc. contribution amount is an amount required to be contributed to a superannuation fund by an employer for the benefit of an employee: (a) by an industrial award; or (b) by an occupational superannuation arrangement; or (c) by a law of the Commonwealth, a State or a Territory; or (d) otherwise. Meaning of required superannuation guarantee contribution amount (8) A required superannuation guarantee contribution amount is an amount that an employer would need to contribute in respect of a period so as not to have a superannuation guarantee shortfall under the Superannuation Guarantee (Administration) Act 1992 in respect of that period. Note: The relevant periods for which shortfalls are or were calculated under that Act are quarters (from 1 July 1993 onwards) or half ‑ years (from 1 July 1992 to 30 June 1993).

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 174 of 1997, Sch 4 item 4 | Sch 4 item 5 | Sch 4 item 6 | Sch 4 item 57, effective s 4, Sch 1–5, Sch 6 (items 17–23(2), (3)), Sch 7 (items 1–16, 32(1)) and Sch 9 (items 24–30(2), (3)): 21 Nov 1997 (s 2(1)–(3)) | Amended by No 51 of 2002, Sch 1 item 182 | Sch 1 item 183 | Sch 1 item 184, effective s 4, Sch 1 (item 202(2)), Sch 3 (items 1, 2, 4), Sch 4 and 5: 29 June 2002 (s 2(1) items 3, 7–9) Sch 1 (items 170–184): 1 July 2003 (s 2(1) item 2) | Amended by No 15 of 2007, Sch 1 item 143, effective Sch 1 (items 1–8, 22–149, 406(1)–(3)) and Sch 3 (items 6, 7): 15 Mar 2007 (s 2(1) items 2, 6) | Amended by No 57 of 2025, Sch 1 item 78, effective sch 1 (item 78): 1 July 2026 (s 2(1) item 1)

s 57-52 — Section 57 ‑ 50 does not apply if there is a surplus at transition time

Section 57 ‑ 50 does not apply to a deduction of the kind mentioned in subsection 57 ‑ 50(1) if: (a) at the transition time, according to the accounts of the fund concerned, an amount is available to meet liabilities of the transition taxpayer in relation to the fund to provide superannuation benefits for, or for dependants of, employees of the transition taxpayer; and (b) the amount exceeds the value (as worked out according to actuarial principles) of the liabilities of that kind that have accrued as at the transition time.

Amendment history: Inserted by No 174 of 1997, effective s 4, Sch 1–5, Sch 6 (items 17–23(2), (3)), Sch 7 (items 1–16, 32(1)) and Sch 9 (items 24–30(2), (3)): 21 Nov 1997 (s 2(1)–(3))

s 57-55 — Deductions reduced under both sections 57 ‑ 40 and 57 ‑ 50

If the amount of a deduction otherwise allowable to the transition taxpayer in respect of a contribution to a fund is required to be reduced under both sections 57 ‑ 40 and 57 ‑ 50: (a) if the reduction is of a different amount—the amount is reduced only under that section that requires the greater reduction; or (b) if the reduction is of the same amount—the amount is reduced only under section 57 ‑ 40.

Amendment history: Inserted by No 78 of 1996, Sch 4 item 57, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4))

s 57-60 — Effect of pre ‑ transition time accrued leave entitlements

(1) This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under subsection 51(1) of this Act or section 8 ‑ 1 (about general deductions) of the Income Tax Assessment Act 1997 in respect of long service leave payments or annual leave payments to a person who was an employee of the transition taxpayer at any time before or after the transition time. Note: Subsection 51(3) of this Act or section 26 ‑ 10 of the Income Tax Assessment Act 1997 (as appropriate) contains additional requirements for certain leave payments to be deductible. Deduction allowable only if sum of all deductions exceeds leave threshold amount (2) The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the leave threshold amount (see subsection (4)) for the year of income. Amount of deduction not allowable (3) If the sum is greater than the leave threshold amount, so much of the deduction as is worked out using the following formula is not allowable: Meaning of leave threshold amount (4) The leave threshold amount for a year of income is: (a) if the year of income is the transition year—the (pre ‑ transition time service) leave amount (see subsection (5)) of the transition taxpayer; or (b) in any other case—that amount as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income. Meaning of (pre ‑ transition time service) leave amount (5) The (pre ‑ transition time service) leave amount of the transition taxpayer is the sum of the following amounts: (a) the amount that would be payable by the transition taxpayer in respect of annual leave and long service leave if, at the transition time, all employees of the transition taxpayer began to take all leave of that kind that they were eligible to take; and (b) if the transition taxpayer elects, in accordance with subsection (6), that this paragraph applies—the amount that, according to actuarial principles, would need to be set aside at the transition time to meet all obligations of the transition taxpayer that might reasonably be expected to arise after that time to make annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) for periods of service of employees occurring before the transition time; and (c) if paragraph (b) does not apply—the present value, at the transition time, of all annual leave payments and long service leave payments (other than in respect of leave taken into account under paragraph (a)) that the transition taxpayer would become liable to make after that time in respect of periods of service of employees occurring before that time if all such leave became eligible to be taken. Election (6) The election mentioned in paragraph (5)(b) must be made in writing before: (a) the day by which the transition taxpayer’s return of income for the transition year is due to be lodged; or (b) such later day as the Commissioner allows.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 41 | Sch 2D item 42, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2))

s 57-65 — Treatment of bad debts

(1) This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under this Act for the writing off as bad of the whole or part of a debt owing to the transition taxpayer. Deduction allowable only if sum of all deductions exceeds doubtful debt provision limit (2) The deduction is not allowable if the sum of all deductions of the transition taxpayer to which this section applies for the year of income is less than or equal to the doubtful debt provision limit (see subsection (4)) for the year of income. Amount of deduction not allowable (3) If the sum is greater than that limit, so much of the deduction as is worked out using the following formula is not allowable: Meaning of doubtful debt provision limit (4) The doubtful debt provision limit for a year of income is: (a) if the year of income is the transition year—the pre ‑ transition doubtful debt limit (see subsection (5)); or (b) in any other case—that limit as reduced by the total amount of deductions to which this section applies that, because of subsection (2) or (3), have not been allowable to the transition taxpayer for all previous years of income. Meaning of pre ‑ transition doubtful debt limit (5) The pre ‑ transition doubtful debt limit is the total of the amounts that, under generally accepted accounting principles, would be the appropriate doubtful debt provisions in relation to all debts owed to the transition taxpayer as at the transition time. Reduction of limit for excess recovery (6) If: (a) at the transition time, a debt is owed to the transition taxpayer; and (b) the sum of: (i) the amount (if any) that, under generally accepted accounting principles, would be the appropriate doubtful debt provision in relation to the debt as at the transition time; and (ii) any amounts later recovered in respect of the debt; exceeds the amount of the debt; the pre ‑ transition doubtful debt limit is reduced by the amount of the excess. Reduction of limit if debt later disposed of (7) If: (a) at the transition time, a debt is owed to the transition taxpayer; and (b) there is an amount (the debt provision amount ) greater than nil that, under generally accepted accounting principles, would be the appropriate doubtful debt provision in relation to the debt as at the transition time; and (c) after the transition time, the transition taxpayer disposes of the debt to another person; the pre ‑ transition doubtful debt limit is reduced by: (d) if, after the transition time, the transition taxpayer wrote off part of the debt as bad—the excess (if any) of the debt provision amount over the amount or amounts so written off; or (e) in any other case—the debt provision amount.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 174 of 1997, Sch 4 item 7, effective s 4, Sch 1–5, Sch 6 (items 17–23(2), (3)), Sch 7 (items 1–16, 32(1)) and Sch 9 (items 24–30(2), (3)): 21 Nov 1997 (s 2(1)–(3))

s 57-70 — Treatment of superannuation lump sums and employment termination payments

(1) This section applies to a deduction otherwise allowable to the transition taxpayer for a year of income under section 8 ‑ 1 (about general deductions) or 25 ‑ 50 (about pensions, gratuities or retiring allowances) of the Income Tax Assessment Act 1997 for a superannuation lump sum or an employment termination payment for a person who was an employee of the transition taxpayer at any time before the transition time (regardless of whether the person was an employee at or after the transition time). (2) So much (if any) of the deduction as relates to a period of service of the employee before the transition time is not allowable. (3) This section does not apply to an early retirement scheme payment (within the meaning of the Income Tax Assessment Act 1997 ), or a genuine redundancy payment (within the meaning of that Act).

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 43, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 15 of 2007, Sch 1 item 144 | Sch 1 item 145 | Sch 1 item 146, effective Sch 1 (items 1–8, 22–149, 406(1)–(3)) and Sch 3 (items 6, 7): 15 Mar 2007 (s 2(1) items 2, 6)

s 57-75 — Domestic losses

In applying section 36 ‑ 15 or 36 ‑ 17 of the Income Tax Assessment Act 1997 (about how to deduct tax losses) to the transition taxpayer: (a) only exempt income derived at or after the transition time is taken into account as exempt income of the transition taxpayer; and (b) the transition taxpayer’s deductions are taken into account only so far as they are in respect of: (i) services rendered; or (ii) goods provided; or (iii) the doing of any other thing; at or after the transition time.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 44 | Sch 2D item 45, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 142 of 2003, Sch 8 item 2, effective s 4, Sch 1 (items 1, 16, 17), Sch 2 (items 1, 3), Sch 4 (items 1, 2) and Sch 8 (items 1–3, 24(1)): 17 Dec 2003 (s 2(1) items 1–3, 6, 11, 13)

s 57-85 — What are the modified deduction rules and corresponding deduction provisions ?

(1) A modified deduction rule is a provision listed in column 3 of an item in the table in subsection (3). Provisions of the Income Tax Assessment Act 1997 are identified in normal text, while provisions of the Income Tax Assessment Act 1936 are in bold . (2) The corresponding deduction provision (if any) for a modified deduction rule listed in column 3 of an item in the table in subsection (3) is the provision of the Income Tax Assessment Act 1936 listed in column 4 of the item. (3) The table is as follows: Modified deduction rules and corresponding deduction provisions Column 1 Item Column 2 Description Column 3 Modified deduction rule Column 4 Corresponding deduction provision 1 Borrowing expenses Section 25 ‑ 25 Former section 67 5 Films, Australian Former Division 10BA of Part III 7 Industrial property (copyright in Australian film) Former Division 10B of Part III 9 Gifts Section 25 ‑ 50 and Division 30 Former section 78 13 R&D Division 355 14 Scientific research Section 73A 18 Cost of acquiring trees Section 70 ‑ 120 Former section 124J 19 Capital allowances Division 40

Amendment history: Inserted by No 78 of 1996, Sch 4 item 57, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Repealed and substituted by No 16 of 1998, Sch 2D item 46, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 46 of 1998, Sch 10 item 26 | Sch 10 item 19, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 39 of 1999, Sch 1 item 3, effective s 4 and Sch 1 (items 1–3): 31 May 1999 (s 2) | Amended by No 54 of 1999, Sch 1 item 12, effective s 4, Sch 1 (items 2–13, 36), Sch 3, Sch 5 (items 11–15), Sch 6 and Sch 7 (items 1, 3): 5 July 1999 (s 2(1)) | Amended by No 77 of 2001, Sch 2 item 111 | Sch 2 item 112 | Sch 2 item 113 | Sch 2 item 114 | Sch 2 item 115 | Sch 2 item 116 | Sch 2 item 117 | Sch 2 item 118 | Sch 2 item 119 | Sch 2 item 120 | Sch 2 item 121 | Sch 2 item 122 | Sch 2 item 123 | Sch 2 item 124 | Sch 2 item 125, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1)) | Amended by No 170 of 2001, Sch 4 item 25 | Sch 4 item 66, effective Sch 1 (items 1, 5, 6), Sch 2 (items 1, 2), Sch 3 (items 1–10, 19(1)) and Sch 4: 1 Oct 2001 (s 2(1)) Sch 2 (items 4–27, 51): 12 pm (A.C.T.) 29 Jan 2001 (s 2(2)) Sch 2 (items 52–68, 92): 30 June 2001 (s 2(3)) | Amended by No 119 of 2002, Sch 3 item 1, effective s 4, Sch 3 (item 100(1)) and Sch 4: 2 Dec 2002 (s 2(1) items 1, 10) Sch 3 (items 1–3): 30 June 2001 (s 2(1) item 3) | Amended by No 101 of 2006, Sch 1 item 192 | Sch 2 item 507 | Sch 2 item 508 | Sch 2 item 509 | Sch 2 item 510, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 164 of 2007, Sch 10 item 50 | Sch 10 item 51 | Sch 11 item 48, effective s 4, Sch 1 (items 27–35, 71), Sch 8 (items 1–5, 13(1)), Sch 10 (items 2–6) and Sch 11 (items 1–48, 78–80): 25 Sept 2007 (s 2(1) items 1, 2, 5, 8) Sch 10 (items 26–56): 1 July 2010 (s 2(1) item 6) Sch 12 (items 66–71): 27 Sept 2007 (s 2(1) item 9) | Amended by No 93 of 2011, Sch 3 item 51, effective Sch 3 (items 5–14, 44–53) and Sch 4 (items 1–6): 8 Sept 2011 (s 2(1) items 3, 6, 7) Sch 3 (item 43): never commenced (s 2(1) item 5)

s 57-90 — Post ‑ transition deductions—assume that the transition taxpayer had never been exempt

In working out the transition taxpayer’s allowable deductions under a modified deduction rule for the transition year or a later year of income, assume that the modified deduction rule had applied at all times before the transition time as if the transition taxpayer’s income had never been exempt from income tax.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 47, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 101 of 2006, Sch 2 item 511, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 57-95 — Amount of deduction not allowable for transition year

(1) If, apart from this section, an amount would be an allowable deduction under a modified deduction rule for the transition year in respect of expenditure incurred before the transition time (whether or not during the transition year), only so much of the amount as is worked out using the following formula is so allowable: where: post ‑ expenditure part means: (a) if the expenditure was incurred before the transition year—the number of days in the transition year; or (b) otherwise—the number of days in the period from the beginning of the day on which the expenditure is incurred until the end of the transition year. (2) This section does not apply to an amount to which paragraph 57 ‑ 110(1)(b) (which deals with balancing adjustments) applies.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4))

s 57-100 — No elections etc. before transition time

In working out the transition taxpayer’s allowable deductions under a modified deduction rule: (a) assume that the transition taxpayer did not, at any time, make any election or declaration, or give any notice, under the rule in relation to a year of income before the transition year; and (b) any election or declaration (other than one under former subsection 124ZADA(1)) the transition taxpayer makes, or any notice the transition taxpayer gives, under the rule in relation to the transition year has no effect in so far as it relates to expenditure incurred before the transition time.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 101 of 2006, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 164 of 2007, Sch 10 item 52, effective s 4, Sch 1 (items 27–35, 71), Sch 8 (items 1–5, 13(1)), Sch 10 (items 2–6) and Sch 11 (items 1–48, 78–80): 25 Sept 2007 (s 2(1) items 1, 2, 5, 8) Sch 10 (items 26–56): 1 July 2010 (s 2(1) item 6) Sch 12 (items 66–71): 27 Sept 2007 (s 2(1) item 9)

s 57-105 — Special rules for mining and quarrying

Exploration and prospecting—assume no expenditure (1) In working out the transition taxpayer’s allowable deductions under the former Subdivision 330 ‑ A or 330 ‑ C or Division 40 of the Income Tax Assessment Act 1997 , assume that the transition taxpayer incurred no expenditure on exploration and prospecting before the transition time. Assume that no excess deductions available (2) In working out the transition taxpayer’s allowable deductions under the former Subdivision 330 ‑ A or 330 ‑ C of the Income Tax Assessment Act 1997 , assume that, for each year of income before the transition year, the transition taxpayer’s assessable income would have exceeded the total of the transition taxpayer’s deductions for the year. Note: This means that the transition taxpayer can have no excess deductions remaining from years of income before the transition year.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 77 of 2001, Sch 2 item 126 | Sch 2 item 127 | Sch 2 item 128, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1))

s 57-110 — Apportionment of balancing adjustments

(1) If, apart from this subsection, a balancing adjustment provision (see subsection (2)) would: (a) require an amount to be included in the transition taxpayer’s assessable income for the transition year or a later year of income in respect of particular expenditure; or (b) allow an amount as a deduction from the transition taxpayer’s assessable income for the transition year or a later year of income in respect of particular expenditure; then only so much of the amount as is worked out using the following formula is so included or allowable: where: actual deductions is the sum of all deductions actually allowed or allowable to the transition taxpayer for the expenditure under the deduction rule to which the balancing adjustment provision relates (see subsection (2)). notional deductions is the sum of all deductions for the expenditure that would have been allowable to the transition taxpayer under the deduction rule to which the balancing adjustment provision relates, if the transition taxpayer had never been wholly exempt from income tax. (2) Each balancing adjustment provision and its related deduction rule are shown in an item of the table. Provisions of the Income Tax Assessment Act 1997 are shown in ordinary text, and provisions of the Income Tax Assessment Act 1936 are shown in bold . Balancing adjustment provisions and related deduction rules Item Topic Balancing adjustment provision Deduction rule to which the balancing adjustment provision relates 1 Capital works: buildings, structural improvements, environment protection earthworks and extensions, alterations or improvements Section 43 ‑ 40 Division 43 and whichever of former Divisions 10C and 10D of Part III is appropriate 2A Capital allowances Section 40 ‑ 285 Division 40 5 Industrial property (copyright in Australian film) Former sections 124N and 124P Former Division 10B of Part III 7 R&D Sections 40 ‑ 292, 40 ‑ 293, 355 ‑ 315 and 355 ‑ 525 Section 40 ‑ 25, 355 ‑ 305 or 355 ‑ 520 8 Scientific research Subsection 73A(4) Section 73A Note: Item 7 of the table is expanded by section 355 ‑ 340 of the Income Tax (Transitional Provisions) Act 1997 .

Amendment history: Inserted by No 78 of 1996, Sch 4 item 57, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 50, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2)) | Amended by No 46 of 1998, Sch 10 item 27, effective s 4, Sch 2 (items 49–522), Sch 3 (items 13–20), Sch 4 (items 12–27), Sch 5 (items 6–10), Sch 6 (items 8–30), Sch 7 (items 12–19), Sch 8 (items 2–9) and Sch 9 (items 7, 8): 22 June 1998 (s 2(1)–(4)) | Amended by No 54 of 1999, Sch 1 item 13, effective s 4, Sch 1 (items 2–13, 36), Sch 3, Sch 5 (items 11–15), Sch 6 and Sch 7 (items 1, 3): 5 July 1999 (s 2(1)) | Amended by No 77 of 2001, Sch 2 item 129 | Sch 2 item 130 | Sch 2 item 131 | Sch 2 item 132 | Sch 2 item 133 | Sch 2 item 134 | Sch 2 item 135 | Sch 2 item 136 | Sch 2 item 137 | Sch 2 item 138 | Sch 2 item 139 | Sch 2 item 140, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1)) | Amended by No 170 of 2001, Sch 4 item 26 | Sch 4 item 27 | Sch 4 item 67 | Sch 4 item 68, effective Sch 1 (items 1, 5, 6), Sch 2 (items 1, 2), Sch 3 (items 1–10, 19(1)) and Sch 4: 1 Oct 2001 (s 2(1)) Sch 2 (items 4–27, 51): 12 pm (A.C.T.) 29 Jan 2001 (s 2(2)) Sch 2 (items 52–68, 92): 30 June 2001 (s 2(3)) | Amended by No 101 of 2006, Sch 1 item 193 | Sch 2 item 513, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 164 of 2007, Sch 10 item 53 | Sch 10 item 54, effective s 4, Sch 1 (items 27–35, 71), Sch 8 (items 1–5, 13(1)), Sch 10 (items 2–6) and Sch 11 (items 1–48, 78–80): 25 Sept 2007 (s 2(1) items 1, 2, 5, 8) Sch 10 (items 26–56): 1 July 2010 (s 2(1) item 6) Sch 12 (items 66–71): 27 Sept 2007 (s 2(1) item 9) | Amended by No 93 of 2011, Sch 3 item 52 | Sch 3 item 53 | Sch 4 item 355, effective Sch 3 (items 5–14, 44–53) and Sch 4 (items 1–6): 8 Sept 2011 (s 2(1) items 3, 6, 7) Sch 3 (item 43): never commenced (s 2(1) item 5)

s 57-115 — Modification of trading stock provisions

(1) For the purposes of applying Division 70 of the Income Tax Assessment Act 1997 in relation to the transition year, the only trading stock of the transition taxpayer that is to be taken into account under section 70 ‑ 35 of that Act as being on hand at the beginning of the transition year is such trading stock as was on hand at the transition time. (2) For the purpose of working out the value at which the trading stock is to be taken into account, the year of income preceding the transition year is taken to have ended immediately before the transition time. Note: The value of trading stock on hand at the beginning of the transition year will, under section 70 ‑ 40 of the Income Tax Assessment Act 1997 , be the same as at the end of the preceding year of income. (3) If: (a) the basis of valuation of the trading stock at the end of the transition year is cost; and (b) the basis of valuation at the beginning of the transition year is different; then, for the purposes of the valuation at the end of the transition year, the cost of the trading stock for the purposes of Division 70 of the Income Tax Assessment Act 1997 is taken to be equal to the value at which it was taken into account at the beginning of the transition year.

Amendment history: Inserted by No 78 of 1996, effective Sch 1, 2 and Sch 4 (items 1–57): 19 Dec 1996 (s 2(1), (2)) Sch 4 (items 56, 57): 5 pm (A.C.T.) 23 July 1996 (s 2(4)) | Amended by No 16 of 1998, Sch 2D item 52 | Sch 2D item 53 | Sch 2D item 54 | Sch 2D item 55 | Sch 2D item 56, effective s 4, Sch 1 (items 1–58), Sch 6 (items 1–17) and Sch 10 (items 20–57): 16 Apr 1998 (s 2(1), (2))

s 57-120 — Cancellation of franking surplus, credit or debit

Cancellation of surplus (1) Subject to subsections (3) and (4), if, immediately before the transition time, the transition taxpayer or a subsidiary (see section 57 ‑ 125) of the transition taxpayer has a franking surplus, then the surplus is reduced to nil at the transition time. Cancellation of credit/debit (2) Subject to subsections (3) and (4), if: (a) at any time after the transition time, there arises a franking credit or a franking debit of the transition taxpayer or of a subsidiary of the transition taxpayer; and (b) the franking credit or franking debit is to any extent attributable to a period, or to an event taking place, before the transition time; the franking credit or franking debit is to that extent taken not to have arisen. Cases where subsections (1) and (2) do not apply to the transition taxpayer (3) If: (a) one or more franking debits of the transition taxpayer arise after the transition time; and (b) any of the debits is to an extent (the amount of which is the pre ‑ transition time component of the debit) attributable to the period, or to an event taking place, before the transition time; and (c) immediately before the transition time: (i) there was a franking surplus of the transition taxpayer that was less than the total of the pre ‑ transition time components of all of the debits; or (ii) there was no franking surplus of the transition taxpayer; then: (d) in a case covered by subparagraph (c)(i)—subsection (1) does not apply to the surplus; and (e) in any case—subsection (2) does not apply to the debits. Cases where subsections (1) and (2) do not apply to a subsidiary (4) If: (a) one or more franking debits of a subsidiary of the transition taxpayer arise after the transition time; and (b) any of the debits is to an extent (the amount of which is the pre ‑ transition time component of the debit) attributable to the period, or to an event taking place, before the transition time; and (c) immediately before the transition time: (i) there was a franking surplus of the subsidiary that was less than the total of the pre ‑ transition time components of all of the debits; or (ii) there was no franking surplus of the subsidiary; then: (d) in a case covered by subparagraph (c)(i)—subsection (1) does not apply to the surplus; and (e) in any case—subsection (2) does not apply to the debits.

Amendment history: Inserted by No 147 of 1997, effective s 4, Sch 1 (items 1–43, 45), Sch 2 (item 1), Sch 3–5, Sch 6 (items 1–3, 5–9), Sch 8, Sch 10, Sch 13, Sch 14 (items 1–39, 41, 42), Sch 15 (items 1–6) and Sch 17: 14 Oct 1997 (s 2(1), (4)) Sch 6 (item 4) and Sch 14 (item 40): 1 July 1997 (s 2(2), (6A)) Sch 11 (items 1–12): 19 Dec 1996 (s 2(5)) | Amended by No 23 of 2005, Sch 3 item 59 | Sch 3 item 60 | Sch 3 item 63 | Sch 3 item 64 | Sch 3 item 65 | Sch 3 item 68 | Sch 3 item 69 | Sch 3 item 70, effective s 4 and Sch 3 (items 14–74, 111(3)–(5), 112–114): 21 Mar 2005 (s 2(1) items 1, 6)

s 57-125 — Subsidiary

(1) A company (the subsidiary company ) is a subsidiary of another company (the holding company ) if all the shares in the subsidiary company are beneficially owned by: (a) the holding company; or (b) one or more subsidiaries of the holding company; or (c) the holding company and one or more subsidiaries of the holding company. (2) A company (other than the subsidiary company) is a subsidiary of the holding company if, and only if: (a) it is a subsidiary of the holding company; or (b) it is a subsidiary of a subsidiary of the holding company; because of any other application or applications of this section.

Amendment history: Inserted by No 147 of 1997, Sch 4 item 1 | Sch 4 item 57, effective s 4, Sch 1 (items 1–43, 45), Sch 2 (item 1), Sch 3–5, Sch 6 (items 1–3, 5–9), Sch 8, Sch 10, Sch 13, Sch 14 (items 1–39, 41, 42), Sch 15 (items 1–6) and Sch 17: 14 Oct 1997 (s 2(1), (4)) Sch 6 (item 4) and Sch 14 (item 40): 1 July 1997 (s 2(2), (6A)) Sch 11 (items 1–12): 19 Dec 1996 (s 2(5))

s 57-130 — Plant or depreciating assets covered by Subdivision 58 ‑ B of the Income Tax Assessment Act 1997

(1) Subdivision 57 ‑ J, and Subdivision 57 ‑ K in so far as it applies to balancing adjustments for plant or depreciating assets, do not apply in respect of an asset to which Subdivision 58 ‑ B of the Income Tax Assessment Act 1997 applies. (2) Despite subsection (1), Subdivision 57 ‑ J applies for the purposes of section 40 ‑ 35 of the Income Tax (Transitional Provisions) Act 1997 to capital expenditure incurred by a transition taxpayer before 1 July 2001 that relates to property that is not a depreciating asset.

Amendment history: Inserted by No 93 of 1999, effective s 4, Sch 1 (items 1–35, 39–48), Sch 2, Sch 3 (items 26–33), Sch 4 (items 1–23, 25), Sch 5 and 7: 16 July 1999 (s 2(1)) Sch 4 (item 24): 16 Apr 1998 (s 2(2)) | Repealed and substituted by No 77 of 2001, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1)) | Amended by No 119 of 2002, Sch 3 item 2 | Sch 3 item 3, effective s 4, Sch 3 (item 100(1)) and Sch 4: 2 Dec 2002 (s 2(1) items 1, 10) Sch 3 (items 1–3): 30 June 2001 (s 2(1) item 3) | Amended by No 101 of 2006, Sch 2 item 514, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 57-135 — Balancing adjustment on ceasing to have a Division 230 financial arrangement referred to in section 57 ‑ 32

(1) This section applies if: (a) section 57 ‑ 32 was applied to work out the market value of an asset (the subject asset ); and (b) the transition taxpayer is a party to the Division 230 financial arrangement (the financial arrangement ) to which the subject asset, or the corresponding liability for the subject asset, is or is part of; and (c) a balancing adjustment is made under Subdivision 230 ‑ G of the Income Tax Assessment Act 1997 , after the transition time, in relation to the financial arrangement. (2) For the purposes of making the balancing adjustment under Subdivision 230 ‑ G of the Income Tax Assessment Act 1997 in relation to the financial arrangement, adjust the amount worked out using the method statement (the method statement ) in subsection 230 ‑ 445(1) of that Act by: (a) if the transition taxpayer is the holder of the subject asset—increasing any gain or reducing any loss by the amount worked out under subsection (4) of this section; or (b) if the transition taxpayer is the holder of the corresponding liability for the subject asset—reducing any gain or increasing any loss by the amount worked out under subsection (4) of this section. (3) Despite subsection (2): (a) if the amount worked out under subsection (4) exceeds the amount of the loss to be reduced under paragraph (2)(a)—the transition taxpayer is taken, for the purposes of making the balancing adjustment, to have made a gain equal to the amount of the excess; or (b) if the amount worked out under subsection (4) exceeds the amount of the gain to be reduced under paragraph (2)(b)—the transition taxpayer is taken, for the purposes of making the balancing adjustment, to have made a loss equal to the amount of the excess; or (c) if when applying the method statement no balancing adjustment is made in relation to the financial arrangement—the transition taxpayer is taken, for the purposes of making the balancing adjustment, to have: (i) if the transition taxpayer is the holder of the subject asset—made a gain equal to the amount worked out under subsection (4); or (ii) if the transition taxpayer is the holder of the corresponding liability for the subject asset—made a loss equal to the amount worked out under subsection (4). (4) For the purposes of subsections (2) and (3), the amount is the difference between: (a) the amount that the transition taxpayer would need to receive or pay under the financial arrangement without an amount being assessable income of, or deductible to, the transition taxpayer if the subject asset, or the corresponding liability for the subject asset, were disposed of at the time the balancing adjustment is made; and (b) the amount that the transition taxpayer would need to receive or pay under the financial arrangement without an amount being assessable income of, or deductible to, the transition taxpayer if: (i) the subject asset, or the corresponding liability for the subject asset, were disposed of at the time the balancing adjustment is made; and (ii) the assumptions in subsection (5) were made. (5) The assumptions referred to in subparagraph (4)(b)(ii) are that, when the financial arrangement was entered into: (a) the parties to the arrangement were dealing with each other at arm’s length (within the meaning of the Income Tax Assessment Act 1997 ) in relation to the arrangement; and (b) if the arrangement gives rise to an interest that is not an equity interest in an entity—the return on the interest would reasonably be expected to be equal to the benchmark rate of return (within the meaning of the Income Tax Assessment Act 1997 ) for the interest. (6) This section applies despite section 230 ‑ 510 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 95 of 2019, effective Sch 1 and Sch 4 (items 1–4, 6): 1 Jan 2020 (s 2(1) item 2)

s 265-5 — What this Schedule is about

If there is a change in ownership or control of a trust or an abnormal trading in its units, it: • may be prevented from deducting its tax losses of earlier income years; and • may have to work out in a special way its net income and tax loss for the income year; and • may be prevented from deducting certain amounts in respect of debts incurred in the income year or earlier income years. This will not be the case if the trust is an excepted trust. However, if it became one by making a family trust election, a special tax may be payable on certain distributions and other amounts. If a trust is involved in a scheme to take advantage of deductions, it may be prevented from making full use of them.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-5 — What this Division is about

This Division is about the income tax consequences, for various kinds of fixed trusts, of certain events: • for an ordinary fixed trust, the event is a change in ownership (subject to a non ‑ fixed trust exception); • for an unlisted widely held trust, the event is an abnormal trading in its units, or the end of an income year, together with a change in ownership; • for a listed widely held trust, the event is an abnormal trading in its units, together with a change in ownership and business; • for an unlisted very widely held trust or a wholesale widely held trust, the event is an abnormal trading in its units, together with a change in ownership.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-15 — What this Subdivision is about

An ordinary fixed trust: • cannot deduct a tax loss from an earlier income year; or • has to work out its net income and tax loss for the income year in a special way; or • cannot deduct certain amounts in respect of debts incurred in the income year or an earlier income year; unless there has been continuity of ownership throughout a particular period or an exception relating to holdings by non ‑ fixed trusts applies. Note: The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415 ‑ 25 and 415 ‑ 30 of the Income Tax Assessment Act 1997.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 7, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 266-25 — Fixed trust may be denied tax loss deduction

Type of trust to which this section applies (1) This section applies to a trust that: (a) can deduct in the income year a tax loss from a loss year; and (b) was a fixed trust at all times in the period (the test period ) from the beginning of the loss year until the end of the income year; and (c) was not a widely held unit trust at all times in the test period; and (d) was not an excepted trust at all times in the test period. To find out the meaning of fixed trust : see section 272 ‑ 65. To find out the meaning of widely held unit trust : see section 272 ‑ 105. To find out the meaning of excepted trust : see section 272 ‑ 100. Condition for deducting tax loss (2) The trust cannot deduct the tax loss unless it meets either: • the condition in section 266 ‑ 40; or • the conditions in section 266 ‑ 45.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 24, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-30 — Fixed trust may be required to work out its net income and tax loss in a special way

A trust that: (a) was a fixed trust at all times in the income year (the test period ); and (b) was not a widely held unit trust at all times in the test period; and (c) was not an excepted trust at all times in the test period; must work out its net income and tax loss for the income year under Division 268 (How to work out a trust’s net income and tax loss for the income year), unless it meets either: • the condition in section 266 ‑ 40; or • the conditions in section 266 ‑ 45. Note: See section 415 ‑ 25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 268 | Sch 2F item 24, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 8, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 266-35 — Fixed trust may be denied debt deduction

Type of trust to which this section applies (1) This section applies to a trust that: (a) can deduct in the income year an amount: (i) under section 51 or 63, or under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or (ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and (b) was a fixed trust at all times in the period (the test period ): (i) if the debt was incurred in an earlier income year—beginning on the day the debt was incurred and ending at the end of the income year; or (ii) if the debt was incurred in the income year—consisting of the income year; and (c) was not a widely held unit trust at all times in the test period; and (d) was not an excepted trust at all times in the test period. Note: Subdivisions 709 ‑ D and 719 ‑ I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad. Condition for deducting amount (2) The trust cannot deduct the amount unless it meets either: • the condition in section 266 ‑ 40; or • the conditions in section 266 ‑ 45.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 24, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 41 of 2005, Sch 6 item 6, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3) | Amended by No 162 of 2005, Sch 3 item 9, effective Sch 1, Sch 3 (items 8–15, 33) and Sch 5: 19 Dec 2005 (s 2(1) item 2) Sch 6 (items 14, 15): 1 July 2001 (s 2(1) item 6)

s 266-40 — The trust must pass 50% stake test

The fixed trust must pass the 50% stake test for the test period. To find out whether the trust passes the 50% stake test for the period: see Subdivision 269 ‑ C.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 272 | Sch 2F item 24, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-45 — The trust must meet non ‑ fixed trust stake test

(1) If the condition in section 266 ‑ 40 is not met, the trust must satisfy the conditions in this section. First condition (2) At all times during the test period: (a) 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 trust; or (b) both: (i) a fixed trust or a company (which trust or company is the holding entity ) must have held, directly or indirectly, all of the fixed entitlements to income and capital of the trust; 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. Second condition (3) 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)(a) case—the trust; or (b) in a paragraph (2)(b) case—the holding entity; at the beginning of the test period must have held those entitlements to those shares at all times during the test period. Third condition (4) At the beginning of the test period: (a) individuals must not have had more than a 50% stake in the income of the trust; or (b) individuals must not have had more than a 50% stake in the capital of the trust. Fourth condition (5) It must be the case that, for each non ‑ fixed trust (other than an excepted trust) that, at any time in the test period, held directly or indirectly a fixed entitlement to a share of the income or capital of the trust: (a) if this section is being applied for the purposes of section 266 ‑ 25—section 267 ‑ 20 would not have prevented the non ‑ fixed trust from deducting the tax loss concerned if it, rather than the fixed trust, had incurred the loss; or (b) if this section is being applied for the purposes of section 266 ‑ 30—section 267 ‑ 60 does not require the non ‑ fixed trust to work out its net income and tax loss for the income year under Division 268; or (c) if this section is being applied for the purposes of section 266 ‑ 35—section 267 ‑ 25, or section 267 ‑ 65, as the case requires, would not have prevented the non ‑ fixed trust from deducting the amount concerned if it, rather than the fixed trust, would otherwise be entitled to deduct the amount.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-50 — Deducting part of a tax loss

(1) If section 266 ‑ 25 prevents the fixed trust from deducting a tax loss, it can deduct the part of the tax loss that is attributable to a part of the loss year. (2) However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of sections 266 ‑ 40 and 266 ‑ 45, the trust would have been entitled to deduct the tax loss.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-55 — Information about non ‑ fixed trusts with interests in fixed trust

Notice about non ‑ resident non ‑ fixed trust (1) The Commissioner may give the trustee of a fixed trust a notice in accordance with section 266 ‑ 60 if the requirements of subsections (2) to (5) of this section are met. First requirement (2) In its return of income for an income year, the fixed trust: (a) must have deducted a tax loss from an earlier income year; or (b) must not have worked out its net income and tax loss for the income year under Division 268; or (c) must have deducted an amount in relation to a debt; where it would not be allowed to deduct the tax loss or amount in respect of the debt, or would be required to work out its net income and tax loss under that Division, unless it met the conditions in section 266 ‑ 45. Second requirement (3) In order to determine whether it meets the conditions in section 266 ‑ 45, the Commissioner must need information about a non ‑ fixed trust mentioned in subsection 266 ‑ 45(5). Third requirement (4) When the Commissioner gives the notice: (a) a trustee of the non ‑ fixed trust must be a non ‑ resident; or (b) the central management and control of the non ‑ fixed trust must be outside Australia. Fourth requirement (5) The Commissioner must give the notice before the later of: (a) 5 years after the end of the income year mentioned in subsection (2); and (b) the end of the period during which the trustee of the fixed trust is required by section 262A to retain records in relation to that income year.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-60 — Notices where requirements of section 266 ‑ 55 are met

Information required (1) The notice that the Commissioner may give if the requirements of subsections 266 ‑ 55(2) to (5) are met must require the trustee to give the Commissioner specified information that is relevant to determining whether the requirements of subsection 266 ‑ 45(5) are satisfied in relation to the non ‑ fixed trust mentioned in subsections 266 ‑ 55(3) and (4). Trustee knowledge (2) The information need not be within the knowledge of the trustee at the time the notice is given. Period for giving information (3) The notice must specify a period within which the trustee is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice. Consequence of not giving the information (4) If the trustee does not give the information within the period or within such further period as the Commissioner allows, the fixed trust is taken not to meet, and never to have met, the conditions in section 266 ‑ 45. Application of Division 268 (5) If, because of subsection (4), the fixed trust is required to work out under Division 268 its net income and tax loss for the income year mentioned in subsection 266 ‑ 55(2), that Division is to be applied as if Subdivision 268 ‑ B required the income year to be divided into such periods as would result in the highest possible net income for the income year. No offences or penalties (6) To avoid doubt, subsections (4) and (5) do not cause the trustee of the fixed trust to commit any offence or be liable to any penalty under Part 4 ‑ 25 in Schedule 1 to the Taxation Administration Act 1953 for deducting the amount concerned, or for not working out the trust’s net income and tax loss under Division 268, in its return.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 101 of 2006, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 266-65 — What this Subdivision is about

An unlisted widely held trust: • cannot deduct a tax loss from an earlier income year; or • has to work out its net income and tax loss for the income year in a special way; or • cannot deduct certain amounts in respect of debts; unless its ownership has been the same after any abnormal trading in its units and at the end of income years, during a certain period. Note: The exception mentioned in this section applies differently in relation to designated infrastructure project entities: see sections 415 ‑ 25 and 415 ‑ 30 of the Income Tax Assessment Act 1997.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 9, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 266-75 — Unlisted widely held trust may be denied tax loss deduction

Type of trust to which this section applies—case 1 (1) This section applies to a trust that: (a) can in the income year deduct a tax loss from a loss year; and (b) was an unlisted widely held trust at all times in the period (the test period ) from the beginning of the loss year until the end of the income year; and (c) was not a wholesale widely held trust at all times in the test period; and (d) was not an unlisted very widely held trust at all times in the test period; and (e) was not an excepted trust at all times in the test period. To find out the meaning of unlisted widely held trust : see section 272 ‑ 110. To find out the meaning of wholesale widely held trust : see section 272 ‑ 125. To find out the meaning of unlisted very widely held trust : see section 272 ‑ 120. To find out the meaning of excepted trust : see section 272 ‑ 100. Type of trust to which this section applies—case 2 (2) This section also applies to a trust that: (a) can in the income year deduct a tax loss from a loss year; and (b) was an unlisted widely held trust, other than an unlisted very widely held trust or a wholesale widely held trust, at some time in the period (the test period ) from the beginning of the loss year until the end of the income year; and (c) was a listed widely held trust at all other times in the test period; and (d) was not an excepted trust at all times in the test period. To find out the meaning of listed widely held trust : see section 272 ‑ 115. Condition for deducting tax loss (3) The trust cannot deduct the tax loss unless it meets the condition in section 266 ‑ 90.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-80 — Unlisted widely held trust may be required to work out its net income and tax loss in a special way

Type of trust to which this section applies—case 1 (1) A trust that: (a) was an unlisted widely held trust at all times in the income year (the test period ); and (b) was not a wholesale widely held trust at all times in the test period; and (c) was not an unlisted very widely held trust at all times in the test period; and (d) was not an excepted trust at all times in the test period; must work out its net income and tax loss for the income year under Division 268 (How to work out a trust’s net income and tax loss for the income year), unless it meets the condition in section 266 ‑ 90. Type of trust to which this section applies—case 2 (2) A trust that: (a) was an unlisted widely held trust, other than an unlisted very widely held trust or a wholesale widely held trust, at some time in the income year (the test period ); and (b) was a listed widely held trust at all other times in the test period; and (c) was not an excepted trust at all times in the test period; must work out its net income and tax loss for the income year under Division 268 (How to work out a trust’s net income and tax loss for the income year), unless it meets the condition in section 266 ‑ 90. Note: See section 415 ‑ 25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 10, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 266-85 — Unlisted widely held trust may be denied debt deduction

Type of trust to which this section applies—case 1 (1) This section applies to a trust that: (a) can deduct in the income year an amount: (i) under section 51 or 63, or under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or (ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and (b) was an unlisted widely held trust at all times in the period (the test period ): (i) if the debt was incurred in an earlier income year—beginning on the day the debt was incurred and ending at the end of the income year; or (ii) if the debt was incurred in the income year—consisting of the income year; and (c) was not a wholesale widely held trust at all times in the test period; and (d) was not an unlisted very widely held unit trust at all times in the test period; and (e) was not an excepted trust at all times in the test period. Type of trust to which this section applies—case 2 (2) This section also applies to a trust that: (a) can deduct in the income year an amount: (i) under section 51 or 63, or under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or (ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and (b) was an unlisted widely held trust, other than an unlisted very widely held trust or a wholesale widely held trust, at some time in the period (the test period ): (i) if the debt was incurred in an earlier income year—beginning on the day the debt was incurred and ending at the end of the income year; or (ii) if the debt was incurred in the income year—consisting of the income year; and (c) was a listed widely held trust at all other times in the test period; and (d) was not an excepted trust at all times in the test period. Condition for deducting amount (3) The trust cannot deduct the amount unless it meets the condition in section 266 ‑ 90. Note: Subdivisions 709 ‑ D and 719 ‑ I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 41 of 2005, Sch 6 item 7, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3) | Amended by No 162 of 2005, Sch 3 item 10, effective Sch 1, Sch 3 (items 8–15, 33) and Sch 5: 19 Dec 2005 (s 2(1) item 2) Sch 6 (items 14, 15): 1 July 2001 (s 2(1) item 6)

s 266-90 — If abnormal trading or end of income year, trust must pass the 50% stake test

(1) If this section is being applied for the purposes of section 266 ‑ 75 or 266 ‑ 85, on each occasion when either of the following events occurs: (a) an abnormal trading in the trust’s units occurs during the test period; (b) an income year of the trust ends during the test period (including at the end of the test period); the trust must pass the 50% stake test in respect of the following times: (c) the beginning of the test period; (d) immediately after the event occurs. To find out whether the trust passes the 50% stake test: see Subdivision 269 ‑ C. (2) If this section is being applied for the purposes of section 266 ‑ 80, on each occasion when an abnormal trading in the trust’s units occurs during the test period, the trust must pass the 50% stake test in respect of the following times: (a) the beginning of the test period; and (b) immediately after the abnormal trading occurs.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 272, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-95 — Deducting part of a tax loss

(1) If section 266 ‑ 75 prevents the trust from deducting a tax loss, it can deduct the part of the tax loss that is attributable to a part of the loss year. (2) However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of section 266 ‑ 90, the trust would have been entitled to deduct the tax loss.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-100 — What this Subdivision is about

A listed widely held trust: • cannot deduct a tax loss from an earlier income year; or • has to work out its net income and tax loss for the income year in a special way; or • cannot deduct certain amounts in respect of debts incurred in the same year or earlier income years; unless either: • there was no abnormal trading; or • there was abnormal trading, but the trust’s ownership and business did not change. Also, it may still be prevented from deducting the tax loss to the extent that it is attributable to certain debt deductions. Note: The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415 ‑ 25 and 415 ‑ 30 of the Income Tax Assessment Act 1997.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 11, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 266-110 — Listed widely held trust may be denied tax loss deduction

Type of trust to which this section applies (1) This section applies to a trust that: (a) can in the income year deduct a tax loss from a loss year; and (b) was a listed widely held trust at all times in the period (the test period ) from the beginning of the loss year until the end of the income year; and (c) was not an excepted trust at all times in the test period. To find out the meaning of listed widely held trust : see section 272 ‑ 115. To find out the meaning of excepted trust : see section 272 ‑ 100. Condition for deducting tax loss (2) The trust cannot deduct the tax loss unless it meets either: • the condition in subsection 266 ‑ 125(1); or • the condition in subsection 266 ‑ 125(2). Additional restriction on deducting tax loss (3) Even if it meets either of the conditions, it still cannot deduct the tax loss, or part of the tax loss, if section 266 ‑ 135 (which deals with certain debt deductions) prevents it from doing so.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-115 — Listed widely held trust may be required to work out its net income and tax loss in a special way

A trust that: (a) was a listed widely held trust at all times in the income year (the test period ); and (b) was not an excepted trust at all times in the test period; must work out its net income and tax loss for the income year under Division 268 (How to work out a trust’s net income and tax loss for the income year), unless it meets either: • the condition in subsection 266 ‑ 125(1); or • the condition in subsection 266 ‑ 125(2). Note: See section 415 ‑ 25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 269, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 12, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 266-120 — Listed widely held trust may be denied debt deduction

Type of trust to which this section applies (1) This section applies to a trust that: (a) can deduct in the income year an amount: (i) under section 51 or 63, or under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or (ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and (b) was a listed widely held trust at all times in the period (the test period ): (i) if the debt was incurred in an earlier income year—beginning on the day the debt was incurred and ending at the end of the income year; or (ii) if the debt was incurred in the income year—consisting of the income year; and (c) was not an excepted trust at all times in the test period. Note: Subdivisions 709 ‑ D and 719 ‑ I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad. Condition for deducting amount (2) The trust cannot deduct the amount unless it meets either: • the condition in subsection 266 ‑ 125(1); or • the condition in subsection 266 ‑ 125(2).

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 41 of 2005, Sch 6 item 8, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3) | Amended by No 162 of 2005, Sch 3 item 11, effective Sch 1, Sch 3 (items 8–15, 33) and Sch 5: 19 Dec 2005 (s 2(1) item 2) Sch 6 (items 14, 15): 1 July 2001 (s 2(1) item 6)

s 266-125 — There must be no abnormal trading (subject to 50% stake or business continuity exceptions)

(1) There must be no abnormal trading in the trust’s units during the test period. To find out the meaning of abnormal trading : see Subdivision 269 ‑ B. (2) If there is abnormal trading on one or more occasions, then either: (a) for each abnormal trading, the trust must pass the 50% stake test in respect of the following times: (i) the beginning of the test period; (ii) immediately after the abnormal trading; or (b) if it does not, at all times after the first or only abnormal trading in respect of which the requirement in paragraph (a) is not satisfied and before the end of the test period, the trust must pass the business continuity test in relation to the time immediately before that abnormal trading. To find out whether the trust passes the 50% stake test: see Subdivision 269 ‑ C. To find out whether the trust passes the business continuity test: see Subdivision 269 ‑ F.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 7 of 2019, Sch 1 item 23 | Sch 1 item 24 | Sch 1 item 25, effective Sch 1 (items 14–32, 164): 1 Apr 2019 (s 2(1) item 1)

s 266-130 — Deducting part of a tax loss

(1) If section 266 ‑ 110 prevents the trust from deducting a tax loss, it can deduct the part of the tax loss that is attributable to a part of the loss year. (2) However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of section 266 ‑ 125, the trust would have been entitled to deduct the tax loss. (3) Also, the trust cannot deduct the part of the tax loss, or some of it, if section 266 ‑ 135 (which deals with certain debt deductions) prevents it from doing so.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-135 — Listed widely held unit trust may be denied tax loss deduction otherwise allowable

Section applies after sections 266 ‑ 110 and 266 ‑ 130 (1) This section applies if, after applying sections 266 ‑ 110 and 266 ‑ 130, a trust can deduct in the income year the whole or part (the otherwise ‑ deductible loss ) of a tax loss from a loss year. Trust must satisfy condition if debt deduction etc. (2) If: (a) there would have been no otherwise ‑ deductible loss, or its amount would have been smaller, if the trust had not (after applying section 266 ‑ 120) been able to deduct in the loss year an amount: (i) under section 51 or 63, or under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or (ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; and (b) the trust could only deduct the amount in respect of the debt because it passed the business continuity test as mentioned in paragraph 266 ‑ 125(2)(b); and (c) the Commissioner considers that the trust passed the business continuity test as mentioned in that paragraph for the purpose, or for purposes including the purpose, of being able to deduct the amount because of that paragraph; the trust cannot deduct the otherwise ‑ deductible loss, or can only deduct the smaller amount mentioned in paragraph (a) of this section, unless it meets the condition in subsection (3). Condition (3) The condition is that, at all times after the abnormal trading mentioned in paragraph 266 ‑ 125(2)(b) and before the end of the income year, the trust must pass the business continuity test in relation to the time immediately before the abnormal trading.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 7 of 2019, Sch 1 item 27, effective Sch 1 (items 14–32, 164): 1 Apr 2019 (s 2(1) item 1)

s 266-140 — What this Subdivision is about

An unlisted very widely held trust or a wholesale widely held trust: • cannot deduct a tax loss from an earlier income year; or • has to work out its net income and tax loss for the income year in a special way; or • cannot deduct certain amounts in respect of debts incurred in the income year or earlier income years; unless either: • there was no abnormal trading; or • there was abnormal trading, but the trust’s ownership did not change. Note: The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415 ‑ 25 and 415 ‑ 30 of the Income Tax Assessment Act 1997.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 13, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 266-150 — Unlisted very widely held trust or wholesale widely held trust may be denied tax loss deduction

(1) If a trust is covered by subsection (2), it cannot deduct in the income year a tax loss from a loss year unless it meets either: • the condition in subsection 266 ‑ 165(1); or • the condition in subsection 266 ‑ 165(2). (2) A trust is covered by this subsection if: (a) in the period (the test period ) from the later of: (i) the beginning of the loss year; and (ii) the end of any start ‑ up period (within the meaning of subsection 272 ‑ 120(3)); until the end of the income year, the trust: (iii) was at all times an unlisted very widely held trust; or (iv) was at all times a wholesale widely held trust; or (v) was at some time an unlisted very widely held trust and, at any time when it was not, was a wholesale widely held trust or a listed widely held trust; or (vi) was at some time a wholesale widely held trust and, at any time when it was not, was an unlisted very widely held trust or a listed widely held trust; and (b) in the test period, the trust was not at all times an excepted trust. To find out the meaning of unlisted very widely held trust : see section 272 ‑ 120. To find out the meaning of wholesale widely held trust : see section 272 ‑ 125. To find out the meaning of excepted trust : see section 272 ‑ 100. To find out the meaning of listed widely held trust : see section 272 ‑ 115.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-155 — Unlisted very widely held trust or wholesale widely held trust may be required to work out its net income and tax loss in a special way

(1) If a trust is covered by subsection (2), it must work out its net income and tax loss for the income year under Division 268 (How to work out a trust’s net income and tax loss for the income year), unless it meets either: • the condition in subsection 266 ‑ 165(1); or • the condition in subsection 266 ‑ 165(2). (2) A trust is covered by this subsection if: (a) in the period (the test period ) consisting of so much of the income year as occurs after the end of any start ‑ up period (within the meaning of subsection 272 ‑ 120(3)), the trust: (i) was at all times an unlisted very widely held trust; or (ii) was at all times a wholesale widely held trust; or (iii) was at some time an unlisted very widely held trust and, at any time when it was not, was a wholesale widely held trust or a listed widely held trust; or (iv) was at some time a wholesale widely held trust and, at any time when it was not, was an unlisted very widely held trust or a listed widely held trust; and (b) in the test period, the trust was not at all times an excepted trust. Note: See section 415 ‑ 25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 14, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 266-160 — Unlisted very widely held trust or wholesale widely held trust may be denied debt deduction

(1) If a trust is covered by subsection (2), it cannot deduct in the income year an amount: (a) under section 51 or 63, or under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt as bad; or (b) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt; unless it meets either: • the condition in subsection 266 ‑ 165(1); or • the condition in subsection 266 ‑ 165(2). (2) A trust is covered by this subsection if: (a) in the period (the test period ) from the later of the end of any start ‑ up period (within the meaning of subsection 272 ‑ 120(3)) and the beginning of: (i) if the debt was incurred in an earlier income year—the day on which the debt was incurred; or (ii) if the debt was incurred in the income year—the income year; until the end of the income year, the trust: (iii) was at all times an unlisted very widely held trust; or (iv) was at all times a wholesale widely held trust; or (v) was at some time an unlisted very widely held trust and, at any time when it was not, was a wholesale widely held trust or a listed widely held trust; or (vi) was at some time a wholesale widely held trust and, at any time when it was not, was an unlisted very widely held trust or a listed widely held trust; and (b) in the test period, the trust was not at all times an excepted trust. Note: Subdivisions 709 ‑ D and 719 ‑ I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 41 of 2005, Sch 6 item 9, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3) | Amended by No 162 of 2005, Sch 3 item 12, effective Sch 1, Sch 3 (items 8–15, 33) and Sch 5: 19 Dec 2005 (s 2(1) item 2) Sch 6 (items 14, 15): 1 July 2001 (s 2(1) item 6)

s 266-165 — There must be no abnormal trading (subject to 50% stake exception)

(1) There must be no abnormal trading in the units of the trust during the test period. To find out the meaning of abnormal trading : see Subdivision 269 ‑ B. (2) If there is abnormal trading on one or more occasions, then for each abnormal trading the trust must pass the 50% stake test in respect of the following times: (a) the beginning of the test period; (b) immediately after the abnormal trading. To find out whether the trust passes the 50% stake test: see Subdivision 269 ‑ C.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-170 — Deducting part of a tax loss

(1) If section 266 ‑ 150 prevents the trust from deducting a tax loss, it can deduct the part of the tax loss that is attributable to a part of the loss year. (2) However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of section 266 ‑ 165, the trust would have been entitled to deduct the tax loss.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-175 — What this Subdivision is about

If a trust would only avoid the tax consequences of this Division because of interests held by a non ‑ resident family trust, the Commissioner may require the trust to give certain information about the non ‑ resident family trust. If it is not given, the trust does not avoid the tax consequences of this Division.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-180 — Information about family trusts with interests in other trusts

Notice about family trust (1) The Commissioner may give the trustee of a trust (the primary trust ) a notice in accordance with section 266 ‑ 185 if the requirements of subsections (2) to (5) of this section are met. First requirement (2) In its return of income for an income year, the primary trust: (a) must have deducted a tax loss from an earlier income year; or (b) must not have worked out its net income and tax loss for the income year under Division 268; or (c) must have deducted an amount in relation to a debt; where it would not be allowed to deduct the tax loss or amount in respect of the debt, or would be required to work out its net income and tax loss under that Division, if it did not meet a condition or conditions as mentioned in section 266 ‑ 40, 266 ‑ 45, 266 ‑ 90, 266 ‑ 125 or 266 ‑ 165 (the conditions provision ). Second requirement (3) The Commissioner must be satisfied that the primary trust would not meet the condition or conditions if one or more trusts were not family trusts. Third requirement (4) When the Commissioner gives the notice, for at least one of the family trusts: (a) a trustee of the trust must be a non ‑ resident; or (b) the central management and control of the trust must be outside Australia. Fourth requirement (5) The Commissioner must give the notice before the later of: (a) 5 years after the end of the income year to which the return relates; and (b) the end of the period during which the trustee of the primary trust is required by section 262A to retain records in relation to that income year.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 266-185 — Notices where requirements of section 266 ‑ 180 are met

Information required (1) The notice that the Commissioner may give if the requirements of subsections 266 ‑ 180(2) to (5) are met must require the trustee of the primary trust to give the Commissioner specified information about conferrals of present entitlements to, and distributions of, income and capital, since the beginning of the test period mentioned in the conditions provision, by all of the family trusts meeting the requirements of paragraph 266 ‑ 180(4)(a) or (b). Trustee knowledge (2) The information need not be within the knowledge of the trustee at the time the notice is given. Period for giving information (3) The notice must specify a period within which the trustee is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice. Consequence of not giving the information (4) If the trustee does not give the information within the period or within such further period as the Commissioner allows, the primary trust is taken not to meet, and never to have met, the condition or conditions in the conditions provision. (5) If, because of subsection (4), the fixed trust is required to work out under Division 268 its net income and tax loss for the income year mentioned in subsection 266 ‑ 180(2), that Division is to be applied as if Subdivision 268 ‑ B required the income year to be divided into such periods as would result in the highest possible net income for the income year. No offences or penalties (6) To avoid doubt, subsections (4) and (5) do not cause the trustee of the primary trust to commit any offence or be liable to any penalty under Part 4 ‑ 25 in Schedule 1 to the Taxation Administration Act 1953 for deducting the amount concerned, or for not working out the trust’s net income and tax loss under Division 268, in the trust’s return.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 101 of 2006, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 124 of 2013, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 267-5 — What this Division is about

This Division is about the income tax consequences for a non ‑ fixed trust if its ownership or control changes.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-15 — What this Subdivision is about

A non ‑ fixed trust cannot deduct: • a tax loss from a loss year; or • certain amounts in respect of debts incurred in earlier income years; unless: • if applicable, it meets an ownership test based on income and capital distributions; and • it did not fail that test in a previous year; and • if applicable, it meets an ownership test based on fixed entitlements to income and capital; and • its control has stayed the same. Note: The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415 ‑ 25 and 415 ‑ 30 of the Income Tax Assessment Act 1997.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 15, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 267-20 — Non ‑ fixed trust may be denied tax loss deduction

Type of trust to which this Subdivision applies (1) This section applies to a trust that: (a) can deduct in the income year a tax loss from a loss year; and (b) was a non ‑ fixed trust at any time in the period (the test period ) from the beginning of the loss year until the end of the income year; and (c) was not an excepted trust at all times in the test period. To find out the meaning of non ‑ fixed trust : see section 272 ‑ 70. To find out the meaning of excepted trust : see section 272 ‑ 100. Conditions for deducting tax loss (2) The trust cannot deduct the tax loss unless it meets: • the condition in subsection 267 ‑ 30(2) (if applicable); and • the condition in section 267 ‑ 35; and • the condition in subsection 267 ‑ 40(2) (if applicable); and • the condition in section 267 ‑ 45.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 267 | Sch 2F item 269 | Sch 2F item 14, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-25 — Non ‑ fixed trust may be denied debt deduction

Type of trust to which this section applies (1) This section applies to a trust that: (a) can deduct in the income year an amount: (i) under section 51 or 63, or under section 8 ‑ 1 or 25 ‑ 35 of the Income Tax Assessment Act 1997 , in respect of the writing off of the whole or part of a debt, incurred in an earlier income year, as bad; or (ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt incurred in an earlier income year; and (b) was a non ‑ fixed trust at any time in the period (the test period ) beginning on the day the debt was incurred and ending at the end of the income year; and (c) was not an excepted trust at all times in the test period. Note: Subdivisions 709 ‑ D and 719 ‑ I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad. Condition for deducting amount (2) The trust cannot deduct the amount unless it meets: • the condition in subsection 267 ‑ 30(2) (if applicable); and • the condition in section 267 ‑ 35; and • the condition in subsection 267 ‑ 40(2) (if applicable); and • the condition in section 267 ‑ 45.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 269 | Sch 2F item 15, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 41 of 2005, Sch 6 item 709 | Sch 6 item 10, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3) | Amended by No 162 of 2005, Sch 3 item 13, effective Sch 1, Sch 3 (items 8–15, 33) and Sch 5: 19 Dec 2005 (s 2(1) item 2) Sch 6 (items 14, 15): 1 July 2001 (s 2(1) item 6)

s 267-30 — If certain distributions are made, the trust must pass the pattern of distributions test

When trust must meet the condition (1) If either or both of the following happened, the trust must meet the condition in subsection (2): (a) the trust distributed income: (i) in the income year or within 2 months after its end; and (ii) in at least one of the 6 earlier income years; or (b) the trust distributed capital: (i) in the income year or within 2 months after its end; and (ii) in at least one of the 6 earlier income years. The condition (2) The condition is that the trust must pass the pattern of distributions test for the income year. To find out whether the trust passes the pattern of distributions test for the income year: see Subdivision 269 ‑ D.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 267 | Sch 2F item 269 | Sch 2F item 14 | Sch 2F item 15 | Sch 2F item 19, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-35 — The trust must not have previously failed to meet the condition in subsection 267 ‑ 30(2)

The trust must not have been prevented from deducting the tax loss in an earlier income year because of a failure to meet the condition in subsection 267 ‑ 30(2) or conditions that included that condition.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 267, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-40 — If there are individuals with more than a 50% stake in income or capital, more than a 50% stake in income or capital must be maintained

When trust must meet condition (1) If at any time (the test time ) in the test period, individuals (the threshold group ) have more than a 50% stake in the income or capital of the trust, the trust must meet the condition in subsection (2). To find out whether individuals have more than a 50% stake in the income or capital of the trust: see Subdivision 269 ‑ C. Condition (2) The condition is that, during the period beginning at the test time and finishing at the end of the test period, the same individuals (who must be some or all of the threshold group) must have had more than a 50% stake in the income or the capital, respectively, of the trust. Commissioner discretion (3) If: (a) after the test time, some or all of the threshold group cease to have a 50% stake in the income or capital of the trust at a particular time; and (b) having regard to the likely manner of exercise of any discretion of the trustee to distribute income or capital of the trust after the particular time and to any other relevant matter, the Commissioner considers it fair and reasonable that the individuals should be taken to have the stake at the particular time and at all later times in the test period; the individuals are taken to have that stake at the particular time and at all later times in the test period.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 267 | Sch 2F item 272, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-45 — Group must not begin to control the trust

A group must not, during the test period, begin to control the trust directly or indirectly. To find out what it means for a group to control the trust: see Subdivision 269 ‑ E.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 267, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-50 — Deducting part of a tax loss

(1) If section 267 ‑ 20 prevents a trust from deducting a tax loss because the trust does not meet the condition in section 267 ‑ 40 or 267 ‑ 45 or both conditions, it can deduct the part of the tax loss that is attributable to a part of the loss year. (2) However, the trust can do this only if, assuming that that part of the loss year had been treated as the whole of the loss year for the purposes of sections 267 ‑ 40 and 267 ‑ 45, the trust would have been entitled to deduct the tax loss.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-55 — What this Subdivision is about

A non ‑ fixed trust: • must work out its net income and tax loss for the income year in a special way; or • cannot deduct certain amounts in respect of debts incurred in the income year; unless: • if applicable, it meets an ownership test relating to fixed entitlements to shares of income and capital; and • its control has stayed the same. Note: The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see sections 415 ‑ 25 and 415 ‑ 30 of the Income Tax Assessment Act 1997.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-60 — Trust may be required to work out its net income and tax loss in a special way

Type of trust to which this Subdivision applies A trust that: (a) was a non ‑ fixed trust at any time in the income year (the test period ); and (b) was not an excepted trust at all times in the test period; must work out its net income and tax loss for the income year under Division 268 (How to work out a trust’s net income and tax loss for the income year), unless it meets: • the condition in subsection 267 ‑ 70(2) (if applicable); and • the condition in section 267 ‑ 75. To find out the meaning of excepted trust : see section 272 ‑ 100. Note: See section 415 ‑ 25 of the Income Tax Assessment Act 1997 if the trust was a designated infrastructure project entity during part, but not the whole, of the test period.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266 | Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 17, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 267-65 — Non ‑ fixed trust may be denied debt deduction

Type of trust to which this section applies (1) This section applies to a trust that: (a) can deduct in the income year (the test period ) an amount: (i) under section 51 or 63 in respect of the writing off of the whole or part of a debt, incurred in the income year, as bad; or (ii) under subsection 63E(3) or (4) in respect of a debt/equity swap relating to the whole or part of a debt incurred in the income year; and (b) was a non ‑ fixed trust at any time in the test period; and (c) was not an excepted trust at all times in the test period. Note: Subdivisions 709 ‑ D and 719 ‑ I of the Income Tax Assessment Act 1997 also affect when a trust that used to be a member of a consolidated group or MEC group may deduct a debt that used to be owed to a member of the group and that the trust writes off as bad. Condition for deducting amount (2) The trust cannot deduct the amount unless it meets • the condition in subsection 267 ‑ 70(2) (if applicable); and • the condition in section 267 ‑ 75.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 266, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 41 of 2005, Sch 6 item 709 | Sch 6 item 11, effective s 4, Sch 3 (items 1–16, 22), Sch 6 (items 1, 6–11), Sch 8, Sch 9 (items 3–13), Sch 10 (items 19–35, 270) and Sch 11 (items 1–3, 5): 1 Apr 2005 (s 2(1) items 1, 2, 4, 5, 23, 24) Sch 9 (items 1, 2): 29 June 2004 (s 2(1) item 3) | Amended by No 162 of 2005, Sch 3 item 14 | Sch 3 item 19, effective Sch 1, Sch 3 (items 8–15, 33) and Sch 5: 19 Dec 2005 (s 2(1) item 2) Sch 6 (items 14, 15): 1 July 2001 (s 2(1) item 6)

s 267-70 — If there are individuals with more than a 50% stake in income or capital, more than a 50% stake in income or capital must be maintained

When trust must meet condition (1) If at any time (the test time ) in the test period, individuals (the threshold group ) have more than a 50% stake in the income or capital of the trust, the trust must meet the condition in subsection (2). To find out whether individuals have more than a 50% stake in the income or capital of the trust: see Subdivision 268 ‑ C. Condition (2) The condition is that, during the period beginning at the test time and finishing at the end of the test period, the same individuals (who must be some or all of the threshold group) must have more than a 50% stake in the income or the capital, respectively, of the trust. Commissioner discretion (3) If: (a) after the test time, some or all of the threshold group cease to have a 50% stake in the income or capital of the trust at a particular time; and (b) having regard to the likely manner of exercise of any discretion of the trustee to distribute income or capital of the trust after the particular time and to any other relevant matter, the Commissioner considers it fair and reasonable that the individuals should be taken to have the stake at the particular time and at all later times in the test period; the individuals are taken to have that stake at the particular time and at all later times in the test period.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 267 | Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-75 — Group must not begin to control trust

A group must not, during the test period, begin to control the trust directly or indirectly. To find out what it means for a group to control the trust: see Subdivision 269 ‑ E.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 267, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-80 — What this Subdivision is about

If a trust would only avoid the tax consequences of this Division because of interests held by a non ‑ resident family trust, the Commissioner may require the trust to give certain information about the non ‑ resident family trust. If it is not given, the trust does not avoid the tax consequences of this Division.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-85 — Information about family trusts with interests in other trusts

Notice about family trust (1) The Commissioner may give the trustee of a trust (the primary trust ) a notice in accordance with section 267 ‑ 90 if the requirements of subsections (2) to (5) of this section are met. First requirement (2) In its return of income for an income year, the primary trust: (a) must have deducted a tax loss from an earlier income year; or (b) must not have worked out its net income and tax loss for the income year under Division 268; or (c) must have deducted an amount in relation to a debt; where it would not be allowed to deduct the tax loss or amount in respect of the debt, or would be required to work out its net income and loss under that Division, if it did not meet a condition or conditions as mentioned in section 267 ‑ 40 or 267 ‑ 70 (the conditions provision ). Second requirement (3) The Commissioner must be satisfied that the primary trust would not meet the condition or conditions if one or more trusts were not family trusts. Third requirement (4) When the Commissioner gives the notice, for at least one of the family trusts: (a) a trustee of the trust must be a non ‑ resident; or (b) the central management and control of the trust must be outside Australia. Fourth requirement (5) The Commissioner must give the notice before the later of: (a) 5 years after the end of the income year to which the return relates; and (b) the end of the period during which the trustee of the primary trust is required by section 262A to retain records in relation to that income year.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 267, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 267-90 — Notices where requirements of section 267 ‑ 85 are met

Information required (1) The notice that the Commissioner may give if the requirements of subsections 267 ‑ 85(2) to (5) are met must require the trustee to give the Commissioner specified information about conferrals of present entitlements to, and distributions of, income and capital, since the beginning of the test period mentioned in the conditions provision, by all of the family trusts meeting the requirements of paragraph 267 ‑ 85(4)(a) or (b). Trustee knowledge (2) The information need not be within the knowledge of the trustee at the time the notice is given. Period for giving information (3) The notice must specify a period within which the trustee is to give the information. The period must not end earlier than 21 days after the day on which the Commissioner gives the notice. Consequence of not giving the information (4) If the trustee does not give the information within the period or within such further period as the Commissioner allows, the primary trust is taken not to meet, and never to have met, the condition or conditions in the conditions provision. Application of Division 268 (5) If, because of subsection (4), the fixed trust is required to work out under Division 268 its net income and tax loss for the income year mentioned in subsection 267 ‑ 85(2), that Division is to be applied as if Subdivision 268 ‑ B required the income year to be divided into such periods as would result in the highest possible net income for the income year. No offences or penalties (6) To avoid doubt, subsections (4) and (5) do not cause the trustee of the primary trust to commit any offence or be liable to any penalty under Part VII for deducting the amount concerned, or for not working out the trust’s net income and tax loss under Division 268, in the trust’s return.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 267, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 268-5 — What this Division is about

This Division requires a trust’s net income and tax loss to be worked out in a special way. The income year is divided into periods as the basis for the calculation.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 268-10 — Income year of fixed trust to be divided into periods—first case

(1) If: (a) a trust’s net income and tax loss for the income year are required by section 266 ‑ 30 to be worked out under this Division; and (b) the trust did not meet the requirements of subsections 266 ‑ 45(2) and (4); the income year is divided into periods as follows. (2) The first period begins at the beginning of the income year. Each later period begins immediately after the end of the previous period. (3) The last period ends at the end of the income year. Each period (except the last) ends at the latest time that would result in the trust passing the 50% stake test for the whole of the period.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 415 | Sch 2 item 50 | Sch 2 item 51, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 268-15 — Income year of fixed trust to be divided into periods—second case

(1) If: (a) a trust’s net income and tax loss for the income year are required by section 266 ‑ 30 to be worked out under this Division; and (b) the trust met the requirements of subsections 266 ‑ 45(2) and (4); the income year is divided into periods as follows. (2) The first period begins at the beginning of the income year. Each later period begins immediately after the end of the previous period. (3) The last period ends at the end of the income year. Each period (except the last) ends at the earliest of: (a) the latest time that would result in the persons holding fixed entitlements to shares of the income or shares of the capital of: (i) if the trust met the requirements of paragraph 266 ‑ 45(2)(a)—the trust; or (ii) if the trust met the requirements of paragraph 266 ‑ 45(2)(b)—the holding entity mentioned in that paragraph; and the percentages of the shares that they hold, remaining the same during the whole of the period; and (b) the times that, for all of the non ‑ fixed trusts (other than excepted trusts) holding directly or indirectly a fixed entitlement to a share of the income or capital of the trust at any time during the income year, are the latest times that would result in individuals having more than a 50% stake in their income or capital; and (c) the earliest time in the period when a group begins to control a non ‑ fixed trust (other than an excepted trust) that holds directly or indirectly a fixed entitlement to a share of the income or capital of the trust at any time during the income year. To find out when a group begins to control a trust: see Subdivision 269 ‑ E.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 52 | Sch 2 item 53, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 268-20 — Income year of widely held unit trust to be divided into periods

(1) If a trust’s net income and tax loss for the income year are required by section 266 ‑ 80, 266 ‑ 115 or 266 ‑ 155 to be worked out under this Division, the income year is divided into periods as follows. (2) The first period begins at the beginning of the income year. Each later period begins immediately after the end of the previous period. (3) The last period ends at the end of the income year. Each period (except the last) ends at the earliest time at which there is an abnormal trading in the trust’s units, where the trust does not pass the 50% stake test in respect of the following times: (a) the beginning of the period; (b) immediately after the abnormal trading. (4) However, what would, apart from this subsection, be 2 or more successive periods are treated as a single period if: (a) the trust is a listed widely held trust; and (b) during all of the periods the trust passed the business continuity test in relation to the time immediately before the end of the first of the successive periods.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 269, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 415 | Sch 2 item 18 | Sch 2 item 54 | Sch 2 item 55, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22) | Amended by No 7 of 2019, Sch 1 item 28, effective Sch 1 (items 14–32, 164): 1 Apr 2019 (s 2(1) item 1)

s 268-25 — Income year of non ‑ fixed trust to be divided into periods

(1) If a trust’s net income and tax loss for the income year are required by section 267 ‑ 60 to be worked out under this Division, the income year is divided into periods as follows. (2) The first period begins at the beginning of the income year. Each later period begins immediately after the end of the previous period. (3) The last period ends at the end of the income year. (4) If the condition in subsection 267 ‑ 70(2) applies but the trust does not meet the condition, each period (except the last) ends at the earlier of: (a) the latest time, after the test time mentioned in that section, that would result in the same individuals having more than a 50% stake in the income or the capital, as the case requires, of the trust during the whole of the period; or (b) the earliest time when a group begins to control the trust directly or indirectly. (5) If the condition in subsection 267 ‑ 70(2) does not apply, or does apply and the trust meets the condition, each period (except the last) ends at the earliest time when a group begins to control the trust directly or indirectly.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 56 | Sch 2 item 57, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 268-30 — Calculate the notional loss or net income for each period

(1) A notional loss or notional net income of the trust must be worked out for each period into which the income year has been divided in accordance with Subdivision 268 ‑ B. (2) The trust has a notional loss for a period if the deductions attributed to the period under section 268 ‑ 35 exceed the assessable income attributed to the period under section 268 ‑ 40. The notional loss is the amount of the excess. For a period during which the trust was in partnership, the notional loss is worked out under Subdivision 268 ‑ D. (3) On the other hand, if that assessable income exceeds those deductions, the trust has a notional net income for the period, equal to the excess. For a period during which the trust was in partnership, the notional net income is worked out under Subdivision 268 ‑ D. (4) If the trust has a notional loss for none of the periods in the income year, this Subdivision has no further application, and the trust’s net income for the income year is calculated in the usual way. The usual way of working out net income is set out in section 95.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 268-35 — How to attribute deductions to periods

(1) The trust’s deductions for the income year are attributed to periods in the income year as follows. (2) The following deductions are attributed to each period in proportion to the length of the period: (aa) deductions for the decline in value of a depreciating asset; See Division 40 of the Income Tax Assessment Act 1997 . (c) deductions for expenditure, deductions for which are spread over 2 or more years, but not full year deductions (see subsection (5)); (d) deductions for expenditure of capital monies in connection with an Australian film. See former section 124ZAFA. (3) All other deductions (except full year deductions) are attributed to periods as if each period were an income year. (4) Full year deductions are not attributed to any of the periods. They are brought in at a later stage of the process of calculating the trust’s net income for the income year. (5) These are full year deductions : (a) deductions for bad debts under section 8 ‑ 1 (about general deductions) of the Income Tax Assessment Act 1997 ; (b) deductions for bad debts under section 25 ‑ 35 (about bad debts) of the Income Tax Assessment Act 1997 , or for losses on debt/equity swaps under section 63E; (c) deductions, so far as they are allowable under Division 8 (which is about deductions) of the Income Tax Assessment Act 1997 , because Subdivision H (Period of deductibility of certain advance expenditure) of Division 3 of Part III applies to the trust in relation to the income year; (d) deductions allowable under Division 30 of the Income Tax Assessment Act 1997 ; (e) deductions for payments of pensions, gratuities or retiring allowances under section 25 ‑ 50 of the Income Tax Assessment Act 1997 ; (f) deductions for tax losses of earlier income years; See Division 36 of the Income Tax Assessment Act 1997 . (j) deductions for farm management deposits. Note: See Division 393 of the Income Tax Assessment Act 1997 . (6) However, a deduction for the balance of capital expenditure is not a full year deduction if the deduction results from the disposal, loss, lapse, termination of use or destruction of the property. See Subdivision 40 ‑ D of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 17 of 1998, Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 85 of 1998, Sch 2G item 26, effective Sch 1: 2 Jan 1999 (s 2(2)) | Amended by No 169 of 1999, Sch 10 item 5, effective Sch 2 (items 4, 5), Sch 3 (items 5–7), Sch 4 (items 16–19), Sch 7 (items 1–5, 10, 12) and Sch 9 (items 16–22): 10 Dec 1999 (s 2(1), (3)) Sch 5 (item 15): 22 Feb 1999 (s 2(2)) Sch 7 (items 6–9): 22 Sept 2002 (s 2(4)) Sch 9 (item 15): 22 Dec 1999 (s 2(5)) | Amended by No 77 of 2001, Sch 2 item 145 | Sch 2 item 146 | Sch 2 item 147, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1)) | Amended by No 101 of 2006, Sch 1 item 195 | Sch 2 item 521 | Sch 2 item 522 | Sch 2 item 523 | Sch 2 item 524 | Sch 2 item 525 | Sch 2 item 526 | Sch 2 item 527, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 164 of 2007, Sch 10 item 55, effective s 4, Sch 1 (items 27–35, 71), Sch 8 (items 1–5, 13(1)), Sch 10 (items 2–6) and Sch 11 (items 1–48, 78–80): 25 Sept 2007 (s 2(1) items 1, 2, 5, 8) Sch 10 (items 26–56): 1 July 2010 (s 2(1) item 6) Sch 12 (items 66–71): 27 Sept 2007 (s 2(1) item 9) | Amended by No 79 of 2010, Sch 1 item 12 | Sch 4 item 36 | Sch 4 item 37, effective Sch 1 (items 1, 2, 17–26, 53, 57, 66), Sch 3 (item 1), Sch 4 (items 1, 9–37, 51) and Sch 5 (items 1, 3–5, 13): 1 July 2010 (s 2(1) items 2, 4) Sch 2 (items 1, 10–15): 1 July 2010 (s 2(1) item 3)

s 268-40 — How to attribute assessable income to periods

(1) The trust’s assessable income for the income year is attributed to periods in the income year as follows. (2) The following amounts are attributed to periods so far as they are reasonably attributable to those periods: (a) amounts included in the trust’s assessable income under section 97 (Beneficiary of a trust estate not under a legal disability); or (b) amounts included in the trust’s assessable income under section 98A (Non ‑ resident beneficiaries assessable in respect of certain income). (3) The following items of assessable income are attributed to each period in proportion to the length of the period: (a) insurance recoveries for loss of livestock or trees; See section 385 ‑ 130 of the Income Tax Assessment Act 1997 . (b) amounts included in assessable income as a result of elections relating to the forced disposal of livestock; See Subdivision 385 ‑ E and section 385 ‑ 160 of the Income Tax Assessment Act 1997 . (c) recoupment of mains electricity connection expenditure. See item 1.25 in section 20 ‑ 30, which lists deductions for which recoupments are assessable under Subdivision 20 ‑ A, of the Income Tax Assessment Act 1997 . (4) An amount included in the trust’s assessable income under section 385 ‑ 185 (Election to defer including profit on second wool clip) of the Income Tax Assessment Act 1997 is attributed to the period when the wool would ordinarily have been shorn. (5) An amount included in the trust’s assessable income that is a dividend under: (a) section 65 (Payments to associated persons); or (c) section 109 (Excessive payments to shareholders and associates); or (d) Division 7A of Part III (Distributions to entities connected with a private company); is attributed to the period when the amount was paid or credited, whichever occurred first. (6) All other items of assessable income (except full year amounts) are attributed to periods as if each period were an income year. (7) Full year amounts are amounts referred to in paragraphs (2)(a) and (b), so far as they are not reasonably attributable to a period. They are brought in at a later stage of the process of calculating the trust’s net income for the income year.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 47 of 1998, Sch 8 item 6, effective Sch 3 (items 17–20), Sch 4 (items 1, 6–65, 69), Sch 6, 7, Sch 8 (items 1–10) and Sch 9 (items 7–14, 15(3), 16): 23 June 1998 (s 2(1)) | Amended by No 77 of 2001, Sch 2 item 148, effective Sch 2 (items 20–148, 488(1)): 30 June 2001 (s 2(1)) | Amended by No 101 of 2006, Sch 2 item 528 | Sch 2 item 529 | Sch 2 item 530 | Sch 2 item 531 | Sch 4 item 5, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3) | Amended by No 79 of 2007, Sch 1 item 38, effective Sch 1 (items 1–27, 33–38, 43(1), (4), (5)), Sch 6 (items 1, 2, 8), Sch 7 (items 1–16), Sch 9 (items 1–13, 30–33) and Sch 10 (items 3–9, 32): 21 June 2007 (s 2(1) items 2, 4, 6) Sch 8 (items 1, 4–11, 26(1), (2) and (4)): 1 July 2007 (s 2(1) item 5)

s 268-45 — How to calculate the trust’s net income for the income year

(1) The trust’s net income for the income year is worked out as follows. (2) Add up the notional net incomes (if any) worked out under section 268 ‑ 30 or 268 ‑ 70. Note: A notional loss for a period is not taken into account, but counts towards the trust’s tax loss for the income year. (3) Add the full year amounts referred to in subsection 268 ‑ 40(7) (if any). (4) Subtract the trust’s full ‑ year deductions of these kinds: (a) deductions for bad debts under section 8 ‑ 1 (about general deductions) of the Income Tax Assessment Act 1997 ; (b) deductions for bad debts under section 25 ‑ 35 (about bad debts) of the Income Tax Assessment Act 1997 ; (c) deductions, so far as they are allowable under Division 8 (which is about deductions) of the Income Tax Assessment Act 1997 because Subdivision H (Period of deductibility of certain advance expenditure) of Division 3 of Part III applies to the trust in relation to the income year; unless they exceed the total of the notional net incomes and the full year amounts. (If they equal or exceed that total, the trust does not have a net income for the income year.) (5) If an amount remains, subtract from it the trust’s other full year deductions, in the order shown in subsection 268 ‑ 35(5), unless they exceed the amount remaining. (If they equal or exceed that amount, the trust does not have a net income for the income year.) (6) The amount (if any) remaining is the trust’s net income for the income year.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 101 of 2006, Sch 2 item 532 | Sch 2 item 533 | Sch 2 item 534, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 268-60 — How to work out the trust’s section 36 ‑ 10 tax loss for the income year

(1) For the purposes of Division 36 (Tax losses of earlier income years) of the Income Tax Assessment Act 1997 , instead of working out the trust’s tax loss for the year under section 36 ‑ 10 of that Act, it is worked out as follows. (2) Total the notional losses. (3) Add the amount (if any) by which the trust’s full year deductions of these kinds: (a) deductions for bad debts under section 8 ‑ 1 (about general deductions) of the Income Tax Assessment Act 1997 ; (b) deductions for bad debts under section 25 ‑ 35 ( about bad debts) of the Income Tax Assessment Act 1997 ; (c) deductions, so far as they are allowable under Division 8 (which is about deductions) of the Income Tax Assessment Act 1997 because Subdivision H (Period of deductibility of certain advance expenditure) of Division 3 of Part III applies to the trust in relation to the income year; exceed the total of: (d) the notional net incomes (if any); and To work out the notional net income: see sections 268 ‑ 30 and 268 ‑ 70. (e) the full year amounts referred to in section 268 ‑ 40 (if any). (4) If the trust derived exempt income, subtract its net exempt income as defined in section 36 ‑ 20 of the Income Tax Assessment Act 1997 . (5) Any amount remaining is the trust’s tax loss for the income year. To find out how much of the tax loss can be deducted in later income years, see Division 266 or 267. To find out how to deduct it, see section 36 ‑ 15 or 36 ‑ 17 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 17 of 1998, Sch 2F item 268 | Sch 2F item 30, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 142 of 2003, Sch 8 item 3, effective s 4, Sch 1 (items 1, 16, 17), Sch 2 (items 1, 3), Sch 4 (items 1, 2) and Sch 8 (items 1–3, 24(1)): 17 Dec 2003 (s 2(1) items 1–3, 6, 11, 13)

s 268-70 — How to calculate the trust’s notional loss or net income for a period when the trust was a partner

(1) This section applies if at any time during a period the trust was a partner in one or more partnerships. (2) The trust has a notional loss for the period if the total (the loss total ) of: (a) the deductions attributed to the period under section 268 ‑ 35; and (b) the trust’s share of each notional loss (if any) of a partnership for the period; exceeds the total (the income total ) of: (c) the assessable income attributed to the period under section 268 ‑ 40; and (d) the trust’s share of each notional net income (if any) of a partnership for the period. The notional loss is the amount of the excess. Note: A notional loss is taken into account in working out the trust’s tax loss under section 268 ‑ 60. (3) On the other hand, if the income total exceeds the loss total, the trust has a notional net income for the period, equal to the excess. Note: A notional net income is taken into account in working out the trust’s net income under section 268 ‑ 45. (4) If the trust has a notional net income for all periods in the income year, this Subdivision has no further application, and the trust’s net income for the income year is worked out in the usual way. The usual way of working out net income is set out in section 95.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 101 of 2006, Sch 2 item 535, effective Sch 1 (items 1, 5–199), Sch 2 (items 118–565, 1017, 1023–1037) and Sch 6 (items 1–4, 6–15): 14 Sept 2006 (s 2(1) items 2, 4) Sch 3 (items 1–10) and Sch 4 (items 1–11): 1 Jan 2008 (s 2(1) item 3)

s 268-75 — How to calculate the trust’s share of a partnership’s notional loss or notional net income for a period if both entities have the same income year

(1) This section applies if at any time during a period the trust is a partner in a partnership that has an income year that begins and ends when the trust’s income year begins and ends. (2) The partnership’s notional loss or notional net income for the period is worked out in the same way as the notional loss or notional net income of a trust. (3) The trust’s share is calculated by dividing: (a) the trust’s interest in the partnership’s net income or partnership loss of the income year; by: (b) the amount of that net income or partnership loss; and expressing the result as a percentage. (4) However, if the partnership had neither a net income nor a partnership loss, the trust’s share is a percentage that is fair and reasonable having regard to the extent of the trust’s interest in the partnership.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 268-80 — How to calculate the trust’s share of a partnership’s notional loss or notional net income for a period if the entities have different income years

(1) This section applies if at any time during a period the trust is a partner in a partnership that has an income year that begins and ends at a different time from when the trust’s income year begins and ends. (2) So much of the partnership’s net income or partnership loss of an income year as was derived during the period is a notional net income or notional loss of the partnership for the period. (For the purposes of this subsection, the partnership’s net income or partnership loss is calculated without taking account of the partnership’s full year deductions for that income year.) Note: The partnership’s full year deductions are dealt with in section 268 ‑ 85. (3) The trust’s share is calculated by dividing: (a) the trust’s interest in the partnership’s net income or partnership loss of the income year; by: (b) the amount of that net income or partnership loss; and expressing the result as a percentage.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 268-85 — Trust’s full year deductions include a share of partnership’s full year deductions

(1) This section applies if at any time during the income year the trust is a partner in a partnership that has one or more full year deductions for the income year of the partnership that corresponds to the income year of the trust. (2) The partnership’s full year deductions are treated as full year deductions of the trust, but only to the extent of the trust’s share. (3) If the partnership’s income year is the same as the trust’s, the trust’s share is calculated by dividing: (a) the trust’s interest in the partnership’s net income or partnership loss of the income year; by: (b) the amount of that net income or partnership loss; and expressing the result as a percentage. (4) However, if the partnership had neither a net income nor a partnership loss, the trust’s share is a percentage that is fair and reasonable having regard to the extent of the trust’s interest in the partnership. (5) If the partnership’s income year does not begin and end at the same time as the trust’s income year, the trust’s share is a percentage that is fair and reasonable having regard to all relevant circumstances.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 268, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 124 of 2013, Sch 2 item 59, effective Sch 2 (items 1, 7–20): 11 July 2013 (s 2(1) item 3) Sch 2 (items 49–65): 29 June 2013 (s 2(1) item 4) Sch 11 (items 33, 34, 56(1)): 30 June 2013 (s 2(1) item 22)

s 269-5 — What this Division is about

This Division explains the following concepts or tests that are used in preceding Divisions of this Schedule: • abnormal trading; • 50% stake test etc.; • pattern of distributions test; • control; • business continuity test.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2) | Amended by No 7 of 2019, Sch 1 item 29, effective Sch 1 (items 14–32, 164): 1 Apr 2019 (s 2(1) item 1)

s 269-10 — Trading

A trading in units in a unit trust occurs if there is an issue, redemption or transfer of, or other dealing in, the units.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 272, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 269-15 — Abnormal trading—general

(1) There is an abnormal trading in units in a unit trust if there is a trading in the units that is abnormal having regard to all relevant factors, including: (a) the timing of the trading, when compared to the normal timing for trading in its units; and (b) the number of units traded, when compared to the normal number of units traded; and (c) any connection between the trading and any other trading in units in the trust; and (d) any connection between the trading and a tax loss or other deduction of the trust. (2) There may also be an abnormal trading under any of the following provisions.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 272, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 269-20 — Abnormal trading—suspected acquisition or merger

There is an abnormal trading in units in a unit trust if a trading occurs in its units that the trustee knows or reasonably suspects is part of an acquisition of the trust or merger of the trust with another trust.

Amendment history: Inserted by No 17 of 1998, Sch 2F item 269 | Sch 2F item 272, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 269-25 — Abnormal trading—5% of units in a single transaction

There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if 5% or more of the units are traded in one transaction.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 269-30 — Abnormal trading—suspected 5% of units in a series of transactions

(1) There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if the trustee knows or reasonably suspects that a person, or a person and one or more associates of the person, have acquired or redeemed 5% or more of the units in 2 or more transactions and would not have done so if the trust did not have a tax loss or other deduction. (2) For the purposes of other provisions of this Schedule, the abnormal trading occurs at the time of the particular transaction that causes the 5% figure to be exceeded.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 269-35 — Abnormal trading—20% of units traded, issued or redeemed over 60 day period

(1) There is an abnormal trading in units in a unit trust (other than a wholesale widely held trust) if more than 20% of the units on issue at the end of any 60 day period were traded during the period. (2) For the purposes of other provisions of this Schedule, the abnormal trading occurs at the end of the 60 day period.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 269-40 — Abnormal trading—50% stake not maintained

(1) There is an abnormal trading in units in a wholesale widely held trust during a period if the trustee knows or reasonably suspects that the same persons did not hold more than 50% of its units at the beginning and end of the period. (2) For the purposes of other provisions of this Schedule, the abnormal trading occurs immediately before the end of the period.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)

s 269-45 — Time at which trustee to have knowledge or suspicion

For the purposes of section 269 ‑ 20, 269 ‑ 30 or 269 ‑ 40, the trustee must have the knowledge or reasonable suspicion mentioned in that section: (a) if the section is being applied in determining for the purposes of section 268 ‑ 20 whether an abnormal trading occurred—at some time during the income year mentioned in that section; or (b) if it is being applied in determining for the purposes of any other provision whether an abnormal trading occurred during a period—at some time during the period.

Amendment history: Inserted by No 17 of 1998, effective s 4 and Sch 1: 16 Apr 1998 (s 2)