Document ID: chunk:federal_register_of_legislation:C2025C00029:section:6:p8
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 6 (pt 8/9)
Character Range: 354528–356980

lent in the ordinary course of your *business of lending money.
Note: If a bad debt is in respect of a payment that is required to be made under a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936): see subsection 63(1A) of that Act.

Writing off a debt you have bought
 (2) You can deduct a debt that you write off as bad in the income year if you bought the debt in the ordinary course of your *business of lending money. However, you cannot deduct more than the expenditure you incurred in buying the debt.

Writing off part of a debt you have bought
 (3) You can deduct a part of a debt if:
 (a) you write off that part as bad in the income year; and
 (b) you bought the debt in the ordinary course of your *business of lending money.
 (4) However, the maximum that you can deduct under subsection (3) for one or more income years is the amount (if any) by which:
 • the expenditure you incurred in buying the debt;
exceeds:
 • so much of the debt as has not yet been written off as bad.

Limit on deductions for bad debts under leases of luxury cars
 (4A) There is a limit to how much you can deduct under this section for debts you write off that relate to *luxury car lease payments that have become or will become liable to be made under a lease of a *car to which Division 242 (about luxury car leases) applies.
 (4B) The most you can deduct for an income year is:
 • the interest for the notional loan you are taken to have made to the lessee;
reduced by:
 • each amount that you have deducted, or can deduct, for an earlier income year under this section (or section 63 of the Income Tax Assessment Act 1936) for debts relating to *luxury car lease payments that have become or will become liable to be made under the lease.

Special rules affecting deductions under this section
 (5) The rules described in the table may affect your entitlement to deductions under this section, or may result in a deduction being reversed.
  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.

Rules affecting deductions for bad debts
Item                                      For the rules about this situation:                                                                                                                                                                          See: