Document ID: chunk:federal_register_of_legislation:C2025C00029:section:10:p7
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 10 (pt 7/8)
Character Range: 314520–317374

(step 5), so the amount of the outstanding deductions is included in assessable income, i.e. $10,000.
 Applying the method statement to the 2003‑04 income year: a further $10,000 is included in the company's assessable income.

20‑45  Effect of balancing charge
 (1) This section may affect the operation of section 20‑35 or 20‑40 (as appropriate) if:
 (a) a balancing adjustment is required for the *current year (or for an earlier income year) because you have deducted or can deduct an amount for an income year for the loss or outgoing; and
 (b) an amount (the balancing charge) is included in your assessable income for the *current year (or for the earlier income year) because of the balancing adjustment.
To find out about balancing adjustments, see Subdivision 40‑D.

Effect on section 20‑35
 (2) In applying section 20‑35, treat each of the following as reduced by the balancing charge:
 (a) the amount of the loss or outgoing;
 (b) the total of what you can deduct for the loss or outgoing for the *current year, or have deducted or can deduct for an earlier income year.

Effect on section 20‑40
 (3) In applying the method statement in subsection 20‑40(2), reduce the total deductions for the loss or outgoing by the balancing charge.
Example: Continuing the example in subsection 20‑40(2): at the start of the 2005‑06 income year, the company:
                  *   receives a further $10,000 as recoupment; and
                  *   sells the depreciating asset for $75,000.
 As a result of the sale, a balancing adjustment of $5,000 is included under section 40‑285 in the company's assessable income for that income year.
 How much of the recoupment amount received in the 2005‑06 income year is assessable for that income year?
 Applying the method statement in subsection 20‑40(2):
 After step 1: the total assessable recoupment is $30,000 (received during 2002‑03 and 2005‑06).
 After step 2: the recoupment already assessed is $20,000 (for 2002‑03 and 2003‑04).
 After step 3: the unassessed recoupment is:
total assessable recoupment minus recoupment already assessed,
i.e. $30,000 minus $20,000 = $10,000.
 After step 4: the total deductions for the loss or outgoing are $30,000 ($10,000 for each of 2002‑03, 2004‑04 and 2004‑05), reduced by $5,000 (the amount included in assessable income for the balancing adjustment), i.e. $25,000.
 After step 5: the outstanding deductions are:
total deductions for the loss or outgoing minus recoupment already assessed, i.e. $25,000 minus $20,000 = $5,000.
 After step 6: the unassessed recoupment (step 3) is greater than outstanding deductions (step 5), so the amount of the outstanding deductions is included in assessable income, i.e. $5,000.

20‑50  If the expense is only partially deductible
 (1) This section extends the operation of section 20‑35 or 20‑40 (as appropriate) to a case