Document ID: chunk:federal_register_of_legislation:C2004C00958:clause:1_6:p5
Version: federal_register_of_legislation:C2004C00958
Segment Type: clause
Provision Reference: sch 1 cl 6 (pt 5/6)
Character Range: 594295–596966

bad debt
175‑90 Second case: someone else obtains a tax benefit because of bad debt deduction available to company

175‑80  When Commissioner can disallow deduction for bad debt

 (1) This Subdivision sets out cases where the Commissioner may disallow some or all of a deduction for a debt (or part of a debt) that is owed to a company and is written off as bad in the income year.

 (2) However, the Commissioner cannot disallow any of the deduction if:

 (a) the company fails to meet a condition in section 165‑123 (about the company maintaining the same owners) in respect of the *first continuity period or the *second continuity period; but

 (b) meets the condition in section 165‑126 (about the company carrying on the same *business).

175‑85  First case: income or capital gain injected into company because of available bad debt

 (1) The Commissioner may disallow some or all of the deduction if the company would not have had some or all (the injected amount) of its assessable income or *capital gains for the income year if:

 (a) the debt had not been incurred; and

 (b) the debt (or the relevant part of the debt) had not been written off (or able to be written off) as bad.

 (2) However, the Commissioner cannot disallow any of the deduction if the *continuing shareholders will benefit from the company having the injected amount to an extent that the Commissioner thinks fair and reasonable having regard to their respective rights and interests in the company.

 (3) The continuing shareholders are:

 (a) all of the persons who had *more than 50% of the voting power in the company throughout the *first continuity period and the *second continuity period; and

 (b) all of the persons who had rights to *more than 50% of the company's dividends throughout the *first continuity period and the *second continuity period; and

 (c) all of the persons who had rights to *more than 50% of the company's capital distributions throughout the *first continuity period and the *second continuity period.

To find out who they were, apply whichever tests are applied in order to determine whether the company can deduct the debt (or the relevant part of the debt) in the first place.

See section 165‑123 (about the company maintaining the same owners).

175‑90  Second case: someone else obtains a tax benefit because of bad debt deduction available to company

 (1) The Commissioner may disallow some or all of the deduction if:

 (a) a person has obtained or will obtain a tax benefit in connection with a *scheme; and

 (b) the scheme would not have been entered into or carried out if the debt had not been incurred and the debt