Document ID: chunk:federal_register_of_legislation:C2025C00029:section:6:p2
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 6 (pt 2/5)
Character Range: 3047039–3049805

unless:

                (a) if the debt was incurred in an earlier income year—the company had the same owners and the same control throughout the period from the day on which the debt was incurred to the end of the income year in which it writes off the debt as bad; or
                (b) 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 satisfies the business continuity test by carrying on the same business (including entering into no new kinds of transactions and conducting no new kinds of business), or by carrying on a similar business (on or after 1 July 2015).
                  Note: The exceptions mentioned in this section apply differently in relation to designated infrastructure project entities: see section 415‑40.

Table of sections

Operative provisions
165‑119 Application of Subdivision
165‑120 To deduct a bad debt
165‑123 Company must maintain the same owners
165‑126 Alternatively, the company must satisfy the business continuity test
165‑129 Same people must control the voting power, or the company must satisfy the business continuity test
165‑132 When tax losses resulting from bad debts cannot be deducted

Operative provisions

165‑119  Application of Subdivision
  This Subdivision applies to a debt only to the extent (if any) to which Subdivision 165‑CC does not apply in respect of the debt.
Note: Subdivision 165‑CC applies to certain capital losses or tax losses of a company to the extent to which the capital loss or tax loss does not exceed the company's unrealised net loss.

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
Note: See section 165‑230 for a special alternative to the condition in this paragraph.
 (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 condition in section 165‑126 (which is about the company satisfying the business continuity test).
Note 1: In the case of a widely held or eligible Division 166 company, 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.
Note 3: Subdivisions 709‑D and 719‑I modify how this Subdivision operates in relation