Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p23
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 23/46)
Character Range: 3110158–3112812

How Subdivision 165‑C applies to a widely held or eligible Division 166 company
166‑50 Companies can choose that this Subdivision is not to apply to them

166‑40  How Subdivision 165‑C applies to a widely held or eligible Division 166 company
 (1) This Subdivision modifies the way Subdivision 165‑C applies to a company that is:
 (a) a *widely held company at all times during the *current year; or
 (b) an *eligible Division 166 company at all times during the current year; or
 (c) a widely held company for a part of the current year and an eligible Division 166 company for the rest of the current year.
Note 1: Subdivision 165‑C is about the conditions a company must meet before it can deduct a bad debt.
Note 2: A company can choose that this Subdivision is not to apply to it: see section 166‑50.
Note 3: See section 165‑255 for the rule about incomplete current years.

Meaning of test period
 (2) The company's test period is the period:
 (a) that begins at whichever of the following times the company chooses:
 (i) the start of the income year in which the debt was incurred;
 (ii) the start of the *first continuity period; and
 (b) that ends at the end of the *second continuity period;
and includes any intervening period.
Note: See section 165‑255 for the rule about incomplete test periods.

Substantial continuity of ownership
 (3) The company is taken to have met the conditions in section 165‑123 (about the company maintaining the same owners) if there is *substantial continuity of ownership of the company as between the start of the *test period and:
 (a) the end of each income year in that period; and
 (b) the *end of each *corporate change in that period.
Note: See sections 166‑145 and 166‑175 to work out whether there is substantial continuity of ownership and a corporate change.

No substantial continuity of ownership
 (4) The company is taken to have failed to meet the conditions in section 165‑123 if there is no *substantial continuity of ownership of the company as between the start of the *test period and:
 (a) the end of an income year in that period; or
 (b) the *end of a *corporate change in that period.

Satisfies the business continuity test
 (5) However, if the company satisfies the *business continuity test for the *second continuity period (the business continuity test period), it is taken to have satisfied the condition in section 165‑126.
Note 1: For the business continuity test, see Subdivision 165‑E.
Note 2: See section 165‑255 for the rule about incomplete test periods.
 (6) Apply the *business continuity test to the *business that the company carried on immediately before the earlier of