Document ID: chunk:federal_register_of_legislation:C2004C00958:clause:1_2:p4
Version: federal_register_of_legislation:C2004C00958
Segment Type: clause
Provision Reference: sch 1 cl 2 (pt 4/7)
Character Range: 551587–554424

amount is more than zero, it is the company's net capital loss.

Note 1: The net capital loss can be applied against the company's capital gains for a later income year: see sections 102‑5 and 102‑15.

Note 2: For exceptions and modifications to these rules: see section 102‑30.

Subdivision 165‑C—Deducting bad debts

Guide to Subdivision 165‑C

165‑117  What this Subdivision is about

      A company cannot deduct a bad debt unless:

           if the debt was incurred in an earlier income year—the company had the same owners and the same control during the rest of that income year and also during the income year in which it writes off the debt as bad; or

          • if the debt was incurred in the current year—the company had the same owners and the same control during the income year both before and after the debt was incurred;

      or, if there has been a change of ownership or control, the company has since carried on the same business, entered no new kinds of transactions and conducted no new kinds of business.

Table of sections

Operative provisions

165‑120 To deduct a bad debt
165‑123 Company must maintain the same owners
165‑126 Alternatively, company must carry on same business
165‑129 Same people must control the voting power, or company must carry on same business
165‑132 When tax losses resulting from bad debts cannot be deducted

Operative provisions

165‑120  To deduct a bad debt

 (1) A company cannot deduct a debt (or part of a debt) that it writes off as bad in the *current year unless:

 (a) it meets the conditions in section 165‑123 (which is about the company maintaining the same owners); or

 (b) the Commissioner thinks it would be unreasonable to require the company to meet the conditions in that section, having regard to the entities that beneficially owned the shares in the company when (in the Commissioner's opinion) the debt (or part) became bad; or

 (c) the company meets the conditions in section 165‑126 (which is about the company carrying on the same business).

Note 1: In the case of a listed public company or its 100% subsidiary, Subdivision 166‑C modifies how this Subdivision applies, unless the company chooses otherwise.

Note 2: Normally bad debts are deductible under section 8‑1 or 25‑35.

 (2) The conditions in section 165‑123 or 165‑126 apply to different periods, depending on whether the debt was incurred in the *current year or an earlier income year:

Meaning of first continuity period and second continuity period
                                                                            the first continuity period:                         and the second continuity period:
In this case:
the debt was incurred in an earlier income year                             • starts on the day when the debt was incurred; and  is the