Document ID: chunk:federal_register_of_legislation:C2010C00584:clause:6_5:p1
Version: federal_register_of_legislation:C2010C00584
Segment Type: clause
Provision Reference: sch 6 cl 5 (pt 1/3)
Character Range: 50822–53333

5  At the end of Division 709
Add:

Subdivision 709‑D—Deducting bad debts

Guide to Subdivision 709‑D

709‑200  What this Subdivision is about

      An entity can deduct a bad debt that:

                (a) has for a period been owed to a member of a consolidated group; and
                (b) has for another period been owed to an entity that was not a member of that group;
      only if each entity that has been owed the debt for such a period could have deducted the debt had it been written off as bad at the end of the period. This applies even if the debt is owed to the same entity for different periods.

Table of sections

Application and object

709‑205 Application of this Subdivision
709‑210 Object of this Subdivision

Limit on deduction of bad debt

709‑215 Limit on deduction of bad debt

Application and object

709‑205  Application of this Subdivision

 (1) This Subdivision affects whether an entity (the claimant) that is or has been a *member of a *consolidated group and writes off a debt, or part of a debt, as bad may deduct the debt or part if the conditions in subsection (2) exist.

 (2) The conditions are that, in the time starting when the debt was incurred (whether to the claimant or another entity) and ending when the claimant wrote off the debt or part:
 (a) the debt was owed to an entity (whether the claimant or another entity) for a period (a debt test period) when the entity was a *member of a *consolidated group; and
 (b) the debt was owed to an entity (whether the claimant or another entity) for a period (also a debt test period) when the entity was a not a member of that group.

Note 1: The debt must have been owed to the claimant for at least one of the debt test periods for the claimant to have been able to write it off.

Note 2: One effect of section 701‑1 (Single entity rule) is that a debt is taken to be owed to the head company of a consolidated group while the debt is owed to a subsidiary member of the group.

 (3) Ignore section 701‑5 (Entry history rule) and section 701‑40 (Exit history rule) in identifying a debt test period.

Note: Subsection (3) does not affect sections 701‑5 and 701‑40 so far as they operate to treat the debt, or part of the debt, as having been included in the claimant's assessable income. That inclusion is generally a condition under section 25‑35 for the claimant to be able to deduct the debt.

 (4) This Subdivision does not apply in relation to a debt merely because it is assigned:
 (a) from an entity