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Income Tax Assessment Act 1997

  • - C2008C00143
  • In force - Superseded Version
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Act No. 38 of 1997 as amended
An Act about income tax and related matters
Administered by: Treasury
General Comments: This compilation is affected by retrospective amendments. Please see the Tax Laws Amendment (2011 Measures No. 9) Act 2012 (Act No. 12, 2012) for details.
Registered 05 Jun 2008
Start Date 26 May 2008
End Date 30 Jun 2008

Income Tax Assessment Act 1997

Act No. 38 of 1997 as amended

This compilation was prepared on 2 June 2008
taking into account amendments up to Act No. 19 of 2008

Volume 1 includes:         Table of Contents
                                      Sections 1‑1 to 36‑55

The text of any of those amendments not in force
on that date is appended in the Notes section

The operation of amendments that have been incorporated
may be affected by application provisions that are set out in
the Notes section

Volume 2 includes:         Table of Contents
                                      Sections 401 to 5510

Volume 3 includes:         Table of Contents
                                      Sections 581 to 122‑205

Volume 4 includes:         Table of Contents
                                      Sections 1241 to 152‑430

Volume 5 includes:         Table of Contents
                                      Sections 1641 to 220‑800

Volume 6 includes:         Table of Contents
                                      Sections 2401 to 4105

Volume 7 includes:         Table of Contents
                                      Sections 7001 to 727910

Volume 8 includes:         Table of Contents
                                      Sections 768‑100 to 9951

Volume 9 includes:         Note 1
                                      Table of Acts
                                      Act Notes
                                      Table of Amendments
                                      Notes 2–10
                                      Table A

Prepared by the Office of Legislative Drafting and Publishing,
Attorney‑General’s Department, Canberra

  

  

  


Contents

Chapter 1—Introduction and core provisions                                                         1

Part 1‑1—Preliminary                                                                                                           1

Division 1—Preliminary                                                                                              1

1‑1......... Short title [see Note 1]....................................................................... 1

1‑2......... Commencement.................................................................................. 1

1‑3......... Differences in style not to affect meaning.......................................... 1

Part 1‑2—A Guide to this Act                                                                                          2

Division 2—How to use this Act                                                                            2

Subdivision 2‑A—How to find your way around                                                     2

2‑1......... The design........................................................................................... 2

Subdivision 2‑B—How the Act is arranged                                                            3

2‑5......... The pyramid....................................................................................... 3

Subdivision 2‑C—How to identify defined terms and find the definitions         4

2‑10....... When defined terms are identified...................................................... 4

2‑15....... When terms are not identified............................................................. 4

2‑20....... Identifying the defined term in a definition........................................ 5

Subdivision 2‑D—The numbering system                                                              5

2‑25....... Purposes............................................................................................. 5

2‑30....... Gaps in the numbering........................................................................ 6

Subdivision 2‑E—Status of Guides and other non‑operative material               6

2‑35....... Non‑operative material....................................................................... 6

2‑40....... Guides................................................................................................. 6

2‑45....... Other material..................................................................................... 7

Division 3—What this Act is about                                                                       8

3‑1......... What this Act is about........................................................................ 8

3‑5......... Annual income tax.............................................................................. 8

3‑10....... Your other obligations as a taxpayer.................................................. 9

3‑15....... Your obligations other than as a taxpayer........................................ 10

Part 1‑3—Core provisions                                                                                                11

Division 4—How to work out the income tax payable on your taxable income  11

4‑1......... Who must pay income tax................................................................ 11

4‑5......... Meaning of you................................................................................. 11

4‑10....... How to work out how much income tax you must pay................... 11

4‑15....... How to work out your taxable income............................................. 13

4‑25....... Special provisions for working out your basic income tax liability.. 15

Division 6—Assessable income and exempt income                                16

Guide to Division 6                                                                                                    16

6‑1......... Diagram showing relationships among concepts in this Division.... 16

Operative provisions                                                                                                 17

6‑5......... Income according to ordinary concepts (ordinary income).............. 17

6‑10....... Other assessable income (statutory income)..................................... 18

6‑15....... What is not assessable income.......................................................... 18

6‑20....... Exempt income................................................................................. 19

6‑23....... Non‑assessable non‑exempt income................................................. 20

6‑25....... Relationships among various rules about ordinary income.............. 20

Division 8—Deductions                                                                                             21

8‑1......... General deductions........................................................................... 21

8‑5......... Specific deductions........................................................................... 22

8‑10....... No double deductions....................................................................... 22

Part 1‑4—Checklists of what is covered by concepts used in the core provisions  23

Division 9—Entities that must pay income tax                                             23

9‑1A...... Effect of this Division...................................................................... 23

9‑1......... List of entities................................................................................... 23

9‑5......... Entities that work out their income tax by reference to something other than taxable income          24

Division 10—Particular kinds of assessable income                                 27

10‑1....... Effect of this Division...................................................................... 27

10‑5....... List of provisions about assessable income...................................... 27

Division 11—Particular kinds of non‑assessable income                        41

Subdivision 11‑A—Lists of classes of exempt income                                       41

11‑1A.... Effect of this Subdivision................................................................. 41

11‑1....... Overview.......................................................................................... 41

11‑5....... Entities that are exempt, no matter what kind of ordinary or statutory income they have               42

11‑10..... Ordinary or statutory income which is exempt, no matter whose it is 43

11‑15..... Ordinary or statutory income which is exempt only if it is derived by certain entities [see Note 5]                         44

Subdivision 11‑B—Particular kinds of non‑assessable non‑exempt income 51

11‑50..... Effect of this Subdivision................................................................. 51

11‑55..... List of non‑assessable non‑exempt income provisions.................... 51

Division 12—Particular kinds of deductions                                                  55

12‑1....... Effect of this Division...................................................................... 55

12‑5....... List of provisions about deductions [see Notes 2 and 6]................. 55

Division 13—Tax offsets                                                                                           71

13‑1A.... Effect of this Division...................................................................... 71

13‑1....... List of tax offsets.............................................................................. 71

Chapter 2—Liability rules of general application                                               77

Part 2‑1—Assessable income                                                                                         77

Division 15—Some items of assessable income                                          77

Guide to Division 15                                                                                                  77

15‑1....... What this Division is about.............................................................. 77

Operative provisions                                                                                                 78

15‑2....... Allowances and other things provided in respect of employment or services          78

15‑3....... Return to work payments................................................................ 78

15‑5....... Accrued leave transfer payments..................................................... 78

15‑10..... Bounties and subsidies..................................................................... 79

15‑15..... Profit‑making undertaking or plan.................................................... 79

15‑20..... Royalties........................................................................................... 79

15‑22..... Payments made to members of a copyright collecting society......... 79

15‑25..... Amount received for lease obligation to repair................................. 80

15‑30..... Insurance or indemnity for loss of assessable income...................... 80

15‑35..... Interest on overpayments and early payments of tax...................... 80

15‑40..... Providing mining, quarrying or prospecting information.................. 80

15‑45..... Amounts paid under forestry agreements........................................ 81

15‑46..... Amounts paid under forestry managed investment schemes........... 81

15‑50..... Work in progress amounts................................................................ 81

15‑55..... Certain amounts paid under funeral policy...................................... 82

15‑60..... Certain amounts paid under scholarship plan.................................. 82

15‑65..... Sugar industry exit grants................................................................. 83

15‑70..... Reimbursed car expenses.................................................................. 83

15‑75..... Bonuses............................................................................................ 84

Division 17—Effect of GST etc. on assessable income                            85

Guide to Division 17                                                                                                  85

17‑1....... What this Division is about.............................................................. 85

17‑5....... GST and increasing adjustments....................................................... 85

17‑10..... Certain decreasing adjustments......................................................... 85

17‑15..... Elements in calculation of amounts.................................................. 86

17‑20..... GST groups and GST joint ventures................................................ 86

17‑30..... Special credits because of indirect tax transition.............................. 86

17‑35..... Certain sections not to apply to certain assets or expenditure........ 87

Division 20—Amounts included to reverse the effect of past deductions             88

Guide to Division 20                                                                                                  88

20‑1....... What this Division is about.............................................................. 88

20‑5....... Other provisions that reverse the effect of deductions.................... 88

Subdivision 20‑A—Insurance, indemnity or other recoupment for deductible expenses    90

Guide to Subdivision 20‑A                                                                                        90

20‑10..... What this Subdivision is about......................................................... 90

20‑15..... How to use this Subdivision............................................................. 91

What is an assessable recoupment?                                                                      92

20‑20..... Assessable recoupments................................................................... 92

20‑25..... What is recoupment?........................................................................ 92

20‑30..... Tables of deductions for which recoupments are assessable............ 94

How much is included in your assessable income?                                             97

20‑35..... If the expense is deductible in a single income year.......................... 97

20‑40..... If the expense is deductible over 2 or more income years................ 98

20‑45..... Effect of balancing charge............................................................... 101

20‑50..... If the expense is only partially deductible...................................... 102

20‑55..... Meaning of previous recoupment law............................................ 102

What if you can deduct a loss or outgoing incurred by another entity?        103

20‑60..... If you are the only entity that can deduct an amount for the loss or outgoing         103

20‑65..... If 2 or more entities can deduct amounts for the loss or outgoing.. 104

Subdivision 20‑B—Disposal of a car for which lease payments have been deducted            105

Guide to Subdivision 20‑B                                                                                      105

20‑100... What this Subdivision is about....................................................... 105

20‑105... Map of this Subdivision................................................................. 107

The usual case                                                                                                          107

20‑110... Disposal of a leased car for profit.................................................. 107

20‑115... Working out the profit on the disposal.......................................... 109

20‑120... Meaning of notional depreciation................................................... 110

The associate case                                                                                                   111

20‑125... Disposal of a leased car for profit.................................................. 111

Successive leases                                                                                                    113

20‑130... Successive leases............................................................................. 113

Previous disposals of the car                                                                                 113

20‑135... No amount included if earlier disposal for market value................ 113

20‑140... Reducing the amount to be included if there has been an earlier disposal                 113

Miscellaneous rules                                                                                                115

20‑145... No amount included if you inherited the car.................................. 115

20‑150... Reducing the amount to be included if another provision requires you to include an amount for the disposal          115

20‑155... Exception for particular cars taken on hire..................................... 115

20‑157... Exception for small business entities.............................................. 115

Disposals of interests in a car: special rules apply                                           116

20‑160... Disposal of an interest in a car....................................................... 116

Part 2‑5—Rules about deductibility of particular kinds of amounts      117

Division 25—Some amounts you can deduct                                               117

Guide to Division 25                                                                                                117

25‑1....... What this Division is about............................................................ 117

Operative provisions                                                                                               118

25‑5....... Tax‑related expenses....................................................................... 118

25‑7....... Advice about family tax benefit...................................................... 120

25‑10..... Repairs............................................................................................ 121

25‑15..... Amount paid for lease obligation to repair..................................... 121

25‑20..... Lease document expenses............................................................... 122

25‑25..... Borrowing expenses........................................................................ 122

25‑30..... Expenses of discharging a mortgage................................................ 125

25‑35..... Bad debts........................................................................................ 125

25‑40..... Loss from profit‑making undertaking or plan................................. 128

25‑45..... Loss by theft etc............................................................................. 129

25‑50..... Payments of pensions, gratuities or retiring allowances................. 129

25‑55..... Payments to associations............................................................... 130

25‑60..... Parliament election expenses.......................................................... 130

25‑65..... Local government election expenses............................................... 131

25‑70..... Deduction for election expenses does not extend to entertainment 132

25‑75..... Rates and land taxes on premises used to produce mutual receipts 132

25‑85..... Certain returns in respect of debt interests.................................... 133

25‑90..... Deduction relating to foreign non‑assessable non‑exempt income. 134

25‑95..... Deduction for work in progress amounts....................................... 135

25‑105... Deductions for United Medical Protection Limited support payments                   135

25‑100... Travel between workplaces............................................................ 136

25‑110... Capital expenditure to terminate lease etc...................................... 137

Division 26—Some amounts you cannot deduct, or cannot deduct in full              139

Guide to Division 26                                                                                                139

26‑1....... What this Division is about............................................................ 139

Operative provisions                                                                                               140

26‑5....... Penalties.......................................................................................... 140

26‑10..... Leave payments.............................................................................. 140

26‑15..... Franchise fees windfall tax.............................................................. 141

26‑17..... Commonwealth places windfall tax................................................ 141

26‑20..... Assistance to students.................................................................... 141

26‑25..... Interest or royalty.......................................................................... 142

26‑26..... Non‑share distributions and dividends........................................... 143

26‑30..... Relative’s travel expenses............................................................... 143

26‑35..... Reducing deductions for amounts paid to related entities.............. 145

26‑40..... Maintaining your family................................................................. 146

26‑45..... Recreational club expenses............................................................. 146

26‑47..... Non‑business boating activities...................................................... 147

26‑50..... Expenses for a leisure facility......................................................... 150

26‑52..... Bribes to foreign public officials..................................................... 151

26‑53..... Bribes to public officials................................................................. 154

26‑54..... Expenditure relating to illegal activities.......................................... 155

26‑55..... Limit on deductions........................................................................ 156

26‑60..... Superannuation contributions surcharge......................................... 156

26‑65..... Termination payments surcharge................................................... 157

26‑68..... Loss from disposal of eligible venture capital investments............ 157

26‑70..... Loss from disposal of venture capital equity................................. 158

26‑75..... Excess contributions tax cannot be deducted.................................. 158

26‑80..... Financing costs on loans to pay superannuation contribution....... 158

26‑85..... Borrowing costs on loans to pay life insurance premiums............. 158

26‑90..... Superannuation supervisory levy................................................... 159

26‑95..... Superannuation guarantee charge.................................................... 159

Division 27—Effect of input tax credits etc. on deductions                 160

Guide to Division 27                                                                                                160

27‑1....... What this Division is about............................................................ 160

Subdivision 27‑A—General                                                                                   160

27‑5....... Input tax credits and decreasing adjustments................................. 160

27‑10..... Certain increasing adjustments....................................................... 161

27‑15..... GST payments............................................................................... 161

27‑20..... Elements in calculation of amounts................................................ 162

27‑25..... GST groups and GST joint ventures.............................................. 162

27‑35..... Certain sections not to apply to certain assets or expenditure...... 162

Subdivision 27‑B—Effect of input tax credits etc. on capital allowances      163

27‑80..... Cost or opening adjustable value of depreciating assets reduced for input tax credits                       163

27‑85..... Cost or opening adjustable value of depreciating assets reduced: decreasing adjustments                 165

27‑87..... Certain decreasing adjustments included in assessable income....... 166

27‑90..... Cost or opening adjustable value of depreciating assets increased: increasing adjustments               166

27‑92..... Certain increasing adjustments can be deducted............................. 167

27‑95..... Balancing adjustment events........................................................... 167

27‑100... Pooling............................................................................................ 168

27‑105... Other Division 40 expenditure....................................................... 172

27‑110... Input tax credit etc. relating to 2 or more things............................. 173

Division 28—Car expenses                                                                                   174

Guide to Division 28                                                                                                174

28‑1....... What this Division is about............................................................ 174

28‑5....... Map of this Division...................................................................... 175

Subdivision 28‑A—Deductions for car expenses                                              175

28‑10..... Application of Division 28............................................................. 176

28‑12..... Car expenses................................................................................... 176

28‑13..... Meaning of car expense.................................................................. 176

Subdivision 28‑B—Choosing which method to use                                           177

Guide to Subdivision 28‑B                                                                                      177

28‑14..... What this Subdivision is about....................................................... 177

28‑15..... Choosing among the 4 methods...................................................... 177

Operative provision                                                                                                 179

28‑20..... Rules governing choice of method.................................................. 179

Subdivision 28‑C—The “cents per kilometre” method                                   179

28‑25..... How to calculate your deduction.................................................... 179

28‑30..... Capital allowances.......................................................................... 180

28‑35..... Substantiation................................................................................. 180

Subdivision 28‑D—The “12% of original value” method                               180

28‑45..... How to calculate your deduction.................................................... 180

28‑50..... Eligibility........................................................................................ 181

28‑55..... Capital allowances.......................................................................... 181

28‑60..... Substantiation................................................................................. 182

Subdivision 28‑E—The “one‑third of actual expenses” method                     182

28‑70..... How to calculate your deduction.................................................... 182

28‑75..... Eligibility........................................................................................ 182

28‑80..... Substantiation................................................................................. 183

Subdivision 28‑F—The “log book” method                                                        183

28‑90..... How to calculate your deduction.................................................... 183

28‑95..... Eligibility........................................................................................ 185

28‑100... Substantiation................................................................................. 185

Subdivision 28‑G—Keeping a log book                                                               186

Guide to Subdivision 28‑G                                                                                      186

28‑105... What this Subdivision is about....................................................... 186

28‑110... Steps for keeping a log book........................................................... 186

Operative provisions                                                                                               186

28‑115... Income years for which you need to keep a log book.................... 186

28‑120... Choosing the 12 week period for a log book.................................. 187

28‑125... How to keep a log book.................................................................. 188

28‑130... Replacing one car with another....................................................... 189

Subdivision 28‑H—Odometer records for a period                                           189

Guide to Subdivision 28‑H                                                                                      189

28‑135... What this Subdivision is about....................................................... 189

Operative provision                                                                                                 190

28‑140... How to keep odometer records for a car for a period..................... 190

Subdivision 28‑I—Retaining the log book and odometer records                  190

28‑150... Retaining the log book for the retention period.............................. 191

28‑155... Retaining odometer records............................................................ 192

Subdivision 28‑J—Situations where you cannot use, or don’t need to use, one of the 4 methods               192

Guide to Subdivision 28‑J                                                                                      192

28‑160... What this Subdivision is about....................................................... 192

Operative provisions                                                                                               193

28‑165... Exception for particular cars taken on hire..................................... 193

28‑170... Exception for particular cars used in particular ways.................... 193

28‑175... Further miscellaneous exceptions................................................... 195

28‑180... Car expenses related to award transport payments....................... 196

28‑185... Application of Subdivision 28‑J to recipients and payers of certain withholding payments            196

Division 30—Gifts or contributions                                                                  198

Guide to Division 30                                                                                                198

30‑1....... What this Division is about............................................................ 198

30‑5....... How to find your way around this Division.................................. 199

30‑10..... Index............................................................................................... 200

Subdivision 30‑A—Deductions for gifts or contributions                               200

30‑15..... Table of gifts or contributions that you can deduct....................... 200

30‑17..... Requirements for certain recipients................................................ 214

Subdivision 30‑B—Tables of recipients for deductible gifts                           215

Health                                                                                                                         217

30‑20..... Health............................................................................................. 217

Education                                                                                                                   219

30‑25..... Education........................................................................................ 219

30‑30..... Gifts that must be for certain purposes......................................... 223

30‑35..... Gifts to a public fund established to benefit a rural school hostel building must satisfy certain requirements           224

30‑37..... Scholarship etc. funds [see Note 4]................................................ 224

Research                                                                                                                   225

30‑40..... Research.......................................................................................... 225

Welfare and rights                                                                                                  226

30‑45..... Welfare and rights........................................................................... 226

30‑46..... Australian disaster relief funds....................................................... 230

Defence                                                                                                                      230

30‑50..... Defence........................................................................................... 230

Environment                                                                                                              232

30‑55..... The environment............................................................................. 232

30‑60..... Gifts to a National Parks body or conservation body must satisfy certain requirements                 234

Industry, trade and design                                                                                      234

30‑65..... Industry, trade and design.............................................................. 234

The family                                                                                                                 235

30‑70..... The family...................................................................................... 235

30‑75..... Marriage education organisations must be approved..................... 236

International affairs                                                                                                236

30‑80..... International affairs......................................................................... 236

30‑85..... Developing country relief funds..................................................... 238

30‑86..... Developed country disaster relief funds......................................... 239

Sports and recreation                                                                                             239

30‑90..... Sports and recreation...................................................................... 239

Philanthropic trusts                                                                                                240

30‑95..... Philanthropic trusts........................................................................ 240

Cultural organisations                                                                                           241

30‑100... Cultural organisations..................................................................... 241

Fire and emergency services                                                                                 241

30‑102... Fire and emergency services........................................................... 241

Other recipients                                                                                                      243

30‑105... Other recipients.............................................................................. 243

Subdivision 30‑BA—Endorsement of deductible gift recipients                    245

Guide to Subdivision 30‑BA                                                                                   245

30‑115... What this Subdivision is about....................................................... 245

Endorsement as a deductible gift recipient                                                         245

30‑120... Endorsement by Commissioner...................................................... 245

30‑125... Entitlement to endorsement............................................................ 246

30‑130... Maintaining a gift fund................................................................... 248

Government entities treated like entities                                                           249

30‑180... How this Subdivision applies to government entities.................... 249

Subdivision 30‑C—Rules applying to particular gifts of property                 249

Valuation requirements                                                                                         250

30‑200... Getting written valuations.............................................................. 250

30‑205... Proceeds of the sale would have been assessable........................... 250

30‑210... Approved valuers........................................................................... 251

30‑212... Valuations by the Commissioner.................................................... 251

Working out the amount you can deduct for a gift of property                       251

30‑215... How much you can deduct............................................................. 251

30‑220... Reducing the amount you can deduct............................................. 253

Joint ownership of property                                                                                   254

30‑225... Gift of property by joint owners................................................... 254

Subdivision 30‑CA—Administrative requirements relating to ABNs          254

Guide to Subdivision 30‑CA                                                                                   254

30‑226... What this Subdivision is about....................................................... 254

Requirements                                                                                                           255

30‑227... Entities to which this Subdivision applies..................................... 255

30‑228... Content of receipt for gift or contribution...................................... 255

30‑229... Australian Business Register must show deductibility of gifts to deductible gift recipient               257

Subdivision 30‑D—Testamentary gifts under the Cultural Bequests Program                   258

30‑230... Testamentary gifts of property...................................................... 258

30‑235... Getting a certificate......................................................................... 259

30‑240... Limit on total value of gifts for an income year.............................. 260

Subdivision 30‑DA—Donations to political parties and independent candidates and members                  260

Guide to Subdivision 30‑DA                                                                                   260

30‑241... What this Subdivision is about....................................................... 260

Operative provisions                                                                                               260

30‑242... Deduction for political contributions and gifts............................... 260

30‑243... Amount of the deduction................................................................ 261

30‑244... When an individual is an independent candidate............................ 262

30‑245... When an individual is an independent member............................... 263

Subdivision 30‑DB—Spreading certain gift and covenant deductions over up to 5 income years              263

Guide to Subdivision 30‑DB                                                                                   263

30‑246... What this Subdivision is about....................................................... 263

Operative provisions                                                                                               264

30‑247... Gifts and covenants for which elections can be made.................... 264

30‑248... Making an election.......................................................................... 264

30‑249... Effect of election............................................................................. 265

30‑249A Requirements—environmental property gifts................................ 265

30‑249B Requirements—heritage property gifts.......................................... 266

30‑249C Requirements—certain cultural property gifts............................... 266

30‑249D Requirements—conservation covenants......................................... 267

Subdivision 30‑E—Register of environmental organisations                         267

Guide to Subdivision 30‑E                                                                                      267

30‑250... What this Subdivision is about....................................................... 267

Operative provisions                                                                                               268

30‑255... Establishing the register [see Note 8]............................................. 268

30‑260... Meaning of environmental organisation........................................ 268

30‑265... Its principal purpose must be protecting the environment............ 268

30‑270... Other requirements it must satisfy [see Note 8]............................ 269

30‑275... Further requirement for a body corporate or a co‑operative society 269

30‑280... What must be on the register [see Note 8]..................................... 270

30‑285... Removal from the register [see Note 8].......................................... 270

Subdivision 30‑EA—Register of harm prevention charities                           271

Guide to Subdivision 30‑EA                                                                                   271

30‑286... What this Subdivision is about....................................................... 271

Operative provisions                                                                                               271

30‑287... Establishing the register.................................................................. 271

30‑288... Meaning of harm prevention charity.............................................. 271

30‑289... Principal activity—promoting the prevention or control of harm or abuse              272

30‑289A Other requirements......................................................................... 272

30‑289B What must be on the register.......................................................... 272

30‑289C Removal from the register............................................................... 273

Subdivision 30‑F—Register of cultural organisations                                    273

Guide to Subdivision 30‑F                                                                                      273

30‑290... What this Subdivision is about....................................................... 273

Operative provisions                                                                                               274

30‑295... Establishing the register.................................................................. 274

30‑300... Meaning of cultural organisation................................................... 274

30‑305... What must be on the register.......................................................... 275

30‑310... Removal from the register............................................................... 275

Subdivision 30‑G—Index to this Division                                                           276

30‑315... Index............................................................................................... 276

30‑320... Effect of this Subdivision............................................................... 286

Division 31—Conservation covenants                                                            287

Guide to Division 31                                                                                                287

31‑1....... What this Division is about............................................................ 287

Operative provisions                                                                                               287

31‑5....... Deduction for entering into conservation covenant........................ 287

31‑10..... Requirements for fund, authority or institution............................. 289

31‑15..... Valuations by the Commissioner.................................................... 289

Division 32—Entertainment expenses                                                           290

Guide to Division 32                                                                                                290

32‑1....... What this Division is about............................................................ 290

Subdivision 32‑A—No deduction for entertainment expenses                        290

32‑5....... No deduction for entertainment expenses...................................... 290

32‑10..... Meaning of entertainment............................................................... 291

32‑15..... No deduction for property used for providing entertainment........ 291

Subdivision 32‑B—Exceptions                                                                              291

32‑20..... The main exception—fringe benefits.............................................. 292

32‑25..... The tables set out the other exceptions.......................................... 292

32‑30..... Employer expenses......................................................................... 292

32‑35..... Seminar expenses............................................................................ 295

32‑40..... Entertainment industry expenses................................................... 295

32‑45..... Promotion and advertising expenses............................................... 296

32‑50..... Other expenses............................................................................... 296

Subdivision 32‑C—Definitions relevant to the exceptions                              297

32‑55..... In‑house dining facility (employer expenses table items 1.1 and 1.2) 297

32‑60..... Dining facility (employer expenses table item 1.3)........................ 297

32‑65..... Seminars (seminar expenses table item 2.1).................................... 298

Subdivision 32‑D—In‑house dining facilities (employer expenses table item 1.2)               299

32‑70..... $30 is assessable for each meal provided to non‑employee in an in‑house dining facility                 299

Subdivision 32‑E—Anti‑avoidance                                                                       300

32‑75..... Commissioner may treat you as having incurred entertainment expense                  300

Subdivision 32‑F—Special rules for companies and partnerships                300

32‑80..... Company directors......................................................................... 301

32‑85..... Directors, employees and property of wholly‑owned group company                   301

32‑90..... Partnerships.................................................................................... 302

Division 34—Non‑compulsory uniforms                                                         303

Guide to Division 34                                                                                                303

34‑1....... What this Division is about............................................................ 303

34‑3....... What you need to read.................................................................... 303

Subdivision 34‑A—Application of Division 34                                                   304

34‑5....... This Division applies to employees and others............................. 304

34‑7....... This Division applies to employers and others............................. 305

Subdivision 34‑B—Deduction for your non‑compulsory uniform                  305

34‑10..... What you can deduct...................................................................... 305

34‑15..... What is a non‑compulsory uniform?............................................... 306

34‑20..... What are occupation specific clothing and protective clothing?...... 306

Subdivision 34‑C—Registering the design of a non‑compulsory uniform   307

34‑25..... Application to register the design................................................... 307

34‑30..... Industry Secretary’s decision on application................................. 308

34‑33..... Written notice of decision............................................................... 309

34‑35..... When uniform becomes registered.................................................. 310

Subdivision 34‑D—Appeals from Industry Secretary’s decision                   310

34‑40..... Review of decisions by the Administrative Appeals Tribunal...... 310

Subdivision 34‑E—The Register of Approved Occupational Clothing          310

34‑45..... Keeping of the Register.................................................................. 310

34‑50..... Changes to the Register.................................................................. 311

Subdivision 34‑F—Approved occupational clothing guidelines                      311

34‑55..... Approved occupational clothing guidelines.................................... 311

Subdivision 34‑G—The Industry Secretary                                                       312

34‑60..... Industry Secretary to give Commissioner information about entries 312

34‑65..... Delegation of powers by Industry Secretary................................. 312

Division 35—Deferral of losses from non‑commercial business activities           313

Guide to Division 35                                                                                                313

35‑1....... What this Division is about............................................................ 313

Operative provisions                                                                                               314

35‑5....... Object............................................................................................. 314

35‑10..... Deferral of deductions from non‑commercial business activities... 314

35‑15..... Modification if you have exempt income....................................... 317

35‑20..... Modification if you become bankrupt............................................ 317

35‑25..... Application of Division to certain partnerships............................ 318

35‑30..... Assessable income test................................................................... 318

35‑35..... Profits test...................................................................................... 318

35‑40..... Real property test.......................................................................... 319

35‑45..... Other assets test............................................................................. 320

35‑50..... Apportionment............................................................................... 321

35‑55..... Commissioner’s discretion............................................................. 321

Division 36—Tax losses of earlier income years                                      323

Guide to Division 36                                                                                                323

36‑1....... What this Division is about............................................................ 323

Subdivision 36‑A—Deductions for tax losses of earlier income years         323

36‑10..... How to calculate a tax loss for an income year............................... 323

36‑15..... How to deduct tax losses of entities other than corporate tax entities 324

36‑17..... How to deduct tax losses of corporate tax entities......................... 325

36‑20..... Net exempt income......................................................................... 328

36‑25..... Special rules about tax losses.......................................................... 329

Subdivision 36‑B—Effect of you becoming bankrupt                                       333

Guide to Subdivision 36‑B                                                                                      333

36‑30..... What this Subdivision is about....................................................... 333

Operative provisions                                                                                               333

36‑35..... No deduction for tax loss incurred before bankruptcy................... 333

36‑40..... Deduction for amounts paid for debts incurred before bankruptcy 334

36‑45..... Limit on deductions for amounts paid............................................ 335

Subdivision 36‑C—Excess franking offsets                                                       336

Guide to Subdivision 36‑C                                                                                      336

36‑50..... What this Subdivision is about....................................................... 336

Operative provision                                                                                                 336

36‑55..... Converting excess franking offsets into tax loss............................. 336


An Act about income tax and related matters

Chapter 1Introduction and core provisions

Part 1‑1Preliminary

Division 1Preliminary

Table of sections

1‑1            Short title

1‑2            Commencement

1‑3            Differences in style not to affect meaning

1‑1  Short title [see Note 1]

                   This Act may be cited as the Income Tax Assessment Act 1997.

1‑2  Commencement

                   This Act commences on 1 July 1997.

1‑3  Differences in style not to affect meaning

             (1)  This Act contains provisions of the Income Tax Assessment Act 1936 in a rewritten form.

             (2)  If:

                     (a)  that Act expressed an idea in a particular form of words; and

                     (b)  this Act appears to have expressed the same idea in a different form of words in order to use a clearer or simpler style;

the ideas are not to be taken to be different just because different forms of words were used.

Note:          A public or private ruling about a provision of the Income Tax Assessment Act 1936 is taken also to be a ruling about the corresponding provision of this Act, so far as the 2 provisions express the same ideas: see section 357‑85 in Schedule 1 to the Taxation Administration Act 1953.


 

Part 1‑2A Guide to this Act

Division 2How to use this Act

Table of Subdivisions

2‑A        How to find your way around

2‑B        How the Act is arranged

2‑C        How to identify defined terms and find the definitions

2‑D        The numbering system

2‑E        Status of Guides and other non‑operative material

Subdivision 2‑AHow to find your way around

2‑1  The design

                   This Act is designed to help you identify accurately and quickly the provisions that are relevant to your purpose in reading the income tax law.

                   The Act contains tables, diagrams and signposts to help you navigate your way.

                   You can start at Division 3 (What this Act is about) and follow the signposts as far into the Act as you need to go. You may also encounter signposts to several areas of the law that are relevant to you. Each one should be followed.

                   Sometimes they will lead down through several levels of detail. At each successive level, the rules are structured in a similar way. They will often be preceded by a Guide to the rules at that level. The rules themselves will usually deal first with the general or most common case and then with the more particular or special cases.

Subdivision 2‑BHow the Act is arranged

2‑5  The pyramid

                   This Act is arranged in a way that reflects the principle of moving from the general case to the particular.

                   In this respect, the conceptual structure of the Act is something like a pyramid. The pyramid shape illustrates the way the income tax law is organised, moving down from the central or core provisions at the top of the pyramid, to general rules of wide application and then to the more specialised topics.

 

 

Note:          The Taxation Administration Act 1953 contains the provisions on collection and recovery of tax and provisions on administration.

Subdivision 2‑CHow to identify defined terms and find the definitions

Table of sections

2‑10          When defined terms are identified

2‑15          When terms are not identified

2‑20          Identifying the defined term in a definition

2‑10  When defined terms are identified

             (1)  Many of the terms used in the income tax law are defined.

             (2)  Most defined terms in this Act are identified by an asterisk appearing at the start of the term: as in “*business”. The footnote that goes with the asterisk contains a signpost to the Dictionary definitions starting at section 995‑1.

2‑15  When terms are not identified

             (1)  Once a defined term has been identified by an asterisk, later occurrences of the term in the same subsection are not usually asterisked.

             (2)  Terms are not asterisked in the non‑operative material contained in this Act.

Note:          The non‑operative material is described in Subdivision 2‑E.

             (3)  The following basic terms used throughout the Act are not identified with an asterisk. They fall into 2 groups:

Key participants in the income tax system

 

Item

This term:

is defined in:

1.

Australian resident

section 995‑1

2.

Commissioner

section 995‑1

3.

company

section 995‑1

4.

entity

section 960‑100

4A.

foreign resident

section 995‑1

5.

individual

section 995‑1

6.

partnership

section 995‑1

7.

person

section 995‑1

8.

trustee

section 995‑1

9.

you

section 4‑5

Core concepts

 

Item

This term:

is defined in:

1.

amount

section 995‑1

2.

assessable income

Division 6

3.

assessment

section 995‑1

4.

deduct, deduction

Division 8

5.

income tax

section 995‑1

6.

income year

section 995‑1

7.

taxable income

section 4‑15

8.

this Act

section 995‑1

2‑20  Identifying the defined term in a definition

                   Within a definition, the defined term is identified by bold italics.

Subdivision 2‑DThe numbering system

Table of sections

2‑25          Purposes

2‑30          Gaps in the numbering

2‑25  Purposes

                   Two main purposes of the numbering system in this Act are:

·         To indicate the relationship between units at different levels.

                   For example, the number of Part 2‑15 indicates that the Part is in Chapter 2. Similarly, the number of section 165‑70 indicates that the section is in Division 165.

·         To allow for future expansion of the Act. The main technique here is leaving gaps between numbers.

2‑30  Gaps in the numbering

                   There are gaps in the numbering system to allow for the insertion of new Divisions and sections.

Subdivision 2‑EStatus of Guides and other non‑operative material

Table of sections

2‑35          Non‑operative material

2‑40          Guides

2‑45          Other material

2‑35  Non‑operative material

                   In addition to the operative provisions themselves, this Act contains other material to help you identify accurately and quickly the provisions that are relevant to you and to help you understand them.

                   This other material falls into 2 main categories.

2‑40  Guides

                   The first is the “Guides”. A Guide consists of sections under a heading indicating that what follows is a Guide to a particular Subdivision, Division etc.

                   Guides form part of this Act but are kept separate from the operative provisions. In interpreting an operative provision, a Guide may only be considered for limited purposes. These are set out in section 950‑150.

2‑45  Other material

                   The other category consists of material such as notes and examples. These also form part of the Act. They are distinguished by type size from the operative provisions, but are not kept separate from them.


 

Division 3What this Act is about

Table of sections

3‑1            What this Act is about

3‑5            Annual income tax

3‑10          Your other obligations as a taxpayer

3‑15          Your obligations other than as a taxpayer

3‑1  What this Act is about

                   This Act is mainly about income tax, and this Division is concerned only with income tax.

                   However, this Act also deals with a variety of other topics that may affect you:

 

Item

For a guide to this topic:

See:

1.

Medicare levy

Division 785

3‑5  Annual income tax

             (1)  Income tax is payable for each year by each individual and company, and by some other entities.

Note 1:       Individuals who are Australian residents, and some trustees, are also liable to pay Medicare levy for each year. See Division 785.

Note 2:       Income tax is imposed by the Income Tax Act 1986 and the other Acts referred to in the definition of income tax in section 995‑1.

             (2)  Most entities have to pay instalments of income tax before the income tax they actually have to pay can be worked out.

             (3)  This Act answers these questions:

                       1.  What instalments of income tax do you have to pay? When and how do you pay them?

See Schedule 1 to the Taxation Administration Act 1953.

                       2.  How do you work out how much income tax you must pay?

See Division 4, starting at section 4‑1.

                       3.  What happens if your income tax is more than the instalments you have paid? When and how must you pay the rest?

                   See sections 204, 213 and 219 of the Income Tax Assessment Act 1936 and Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953.

                       4.  What happens if your income tax is less than the instalments you have paid? How do you get a refund?

See Division 3A of Part IIB of the Taxation Administration Act 1953.

                       5.  What are your other obligations as a taxpayer, besides paying instalments and the rest of your income tax?

                   See section 3‑10.

                       6.  Do you have any other obligations under the income tax law?

                   See section 3‑15.

                       7.  If a dispute between you and the Commissioner of Taxation cannot be settled by agreement, what procedures for objection, review and appeal are available?

                   See Part IVC (sections 14ZL to 14ZZS) of the Taxation Administration Act 1953.

3‑10  Your other obligations as a taxpayer

             (1)  Besides paying instalments and the rest of your income tax, your main obligations as a taxpayer are:

                     (a)  to keep records and provide information as required by:

·         the Income Tax Assessment Act 1936; and

·         Division 900 (which sets out substantiation rules) of this Act; and

                     (b)  to lodge returns as required by:

·           the Income Tax Assessment Act 1936.

Tax file numbers

             (2)  Under Part VA of the Income Tax Assessment Act 1936, a tax file number can be issued to you. You are not obliged to apply for a tax file number. However, if you do not quote one in certain situations:

·         you may become liable for instalments of income tax that would not otherwise have been payable;

·         the amount of certain of your instalments of income tax may be increased.

3‑15  Your obligations other than as a taxpayer

                   Your main obligations under the income tax law, other than as a taxpayer are:

·         in certain situations, to deduct from money you owe to another person, and to remit to the Commissioner, instalments of income tax payable by that person.

See Part 4‑5 (Collection of income tax instalments),
starting at section 750‑1.


 

Part 1‑3Core provisions

Division 4How to work out the income tax payable on your taxable income

Table of sections

4‑1            Who must pay income tax

4‑5            Meaning of you

4‑10          How to work out how much income tax you must pay

4‑15          How to work out your taxable income

4‑25          Special provisions for working out your basic income tax liability

4‑1  Who must pay income tax

                   Income tax is payable by each individual and company, and by some other entities.

Note:          The actual amount of income tax payable may be nil.

For a list of the entities that must pay income tax,
see Division 9, starting at section 9‑1.

4‑5  Meaning of you

                   If a provision of this Act uses the expression you, it applies to entities generally, unless its application is expressly limited.

Note 1:       The expression you is not used in provisions that apply only to entities that are not individuals.

Note 2:       For circumstances in which the identity of an entity that is a managed investment scheme for the purposes of the Corporations Act 2001 is not affected by changes to the scheme, see Subdivision 960‑E of the Income Tax (Transitional Provisions) Act 1997.

4‑10  How to work out how much income tax you must pay

             (1)  You must pay income tax for each year ending on 30 June, called the financial year.

             (2)  Your income tax is worked out by reference to your taxable income for the income year. The income year is the same as the *financial year, except in these cases:

                     (a)  for a company, the income year is the previous financial year;

                     (b)  if you have an accounting period that is not the same as the financial year, each such accounting period or, for a company, each previous accounting period is an income year.

Note 1:       The Commissioner can allow you to adopt an accounting period ending on a day other than 30 June. See section 18 of the Income Tax Assessment Act 1936.

Note 2:       An accounting period ends, and a new accounting period starts, when a partnership becomes, or ceases to be, a VCLP, an ESVCLP, an AFOF or a VCMP. See section 18A of the Income Tax Assessment Act 1936.

             (3)  Work out your income tax for the *financial year as follows:

Method statement

Step 1.    Work out your taxable income for the income year.

To do this, see section 4‑15.

Step 2.    Work out your basic income tax liability on your taxable income using:

               (a)     the income tax rate or rates that apply to you for the income year; and

               (b)     any special provisions that apply to working out that liability.

See the Income Tax Rates Act 1986 and section 4‑25.

Step 3.    Work out your tax offsets for the income year. A tax offset reduces the amount of income tax you have to pay.

For the list of tax offsets, see section 13‑1.

Step 4.    Subtract your *tax offsets from your basic income tax liability. The result is how much income tax you owe for the *financial year.

Note:          Division 63 explains what happens if your tax offsets exceed your basic income tax liability. How the excess is treated depends on the type of tax offset.

Income tax worked out on another basis

             (4)  For some entities, some or all of their income tax for the *financial year is worked out by reference to something other than taxable income for the income year.

See section 9‑5.

4‑15  How to work out your taxable income

             (1)  Work out your taxable income for the income year like this:

Method statement

Step 1.    Add up all your assessable income for the income year.

To find out about your assessable income, see Division 6.

Step 2.    Add up your deductions for the income year.

To find out what you can deduct, see Division 8.

Step 3.    Subtract your deductions from your assessable income (unless they exceed it). The result is your taxable income. (If the deductions equal or exceed the assessable income, you don’t have a taxable income.)

Note:          If the deductions exceed the assessable income, you may have a tax loss which you may be able to deduct in a later income year: see Division 36.

             (2)  There are cases where taxable income is worked out in a special way:

 

Item

For this case ...

See:

1.

A company does not maintain continuity of ownership and control during the income year and does not satisfy the same business test

Subdivision 165‑B

1B.

An entity is a *member of a *consolidated group at any time in the income year

Part 3‑90

2.

A company becomes a PDF (pooled development fund) during the income year, and the PDF component for the income year is a nil amount

section 124ZTA of the Income Tax Assessment Act 1936

3.

A shipowner or charterer:

    has its principal place of business outside Australia; and

    carries passengers, freight or mail shipped in Australia

section 129 of the Income Tax Assessment Act 1936

4.

An insurer who is a foreign resident enters into insurance contracts connected with Australia

sections 142 and 143 of the Income Tax Assessment Act 1936

5.

The Commissioner makes a default or special assessment of taxable income

sections 167 and 168 of the Income Tax Assessment Act 1936

6.

The Commissioner makes a determination of the amount of taxable income to prevent double taxation in certain treaty cases

section 24 of the International Tax Agreements Act 1953

Note:          A life insurance company can have a taxable income of the complying superannuation class and/or a taxable income of the ordinary class for the purposes of working out its income tax for an income year: see Subdivision 320‑D.

4‑25  Special provisions for working out your basic income tax liability

                   Subsection 392‑35(3) may increase your basic income tax liability beyond the liability worked out simply by applying the income tax rates to your taxable income.

Note:          Subsection 392‑35(3) increases some primary producers’ tax liability by requiring them to pay extra income tax on their averaging components worked out under Subdivision 392‑C.


 

Division 6Assessable income and exempt income

Guide to Division 6

Table of sections

6‑1            Diagram showing relationships among concepts in this Division

Operative provisions

6‑5            Income according to ordinary concepts (ordinary income)

6‑10          Other assessable income (statutory income)

6‑15          What is not assessable income

6‑20          Exempt income

6‑23          Non‑assessable non‑exempt income

6‑25          Relationships among various rules about ordinary income

6‑1  Diagram showing relationships among concepts in this Division

             (1)  Assessable income consists of ordinary income and statutory income.

             (2)  Some ordinary income, and some statutory income, is exempt income.

             (3)  Exempt income is not assessable income.

             (4)  Some ordinary income, and some statutory income, is neither assessable income nor exempt income.

For the effect of the GST in working out assessable income, see Division 17.

             (5)  An amount of ordinary income or statutory income can have only one status (that is, assessable income, exempt income or non‑assessable non‑exempt income) in the hands of a particular entity.

Operative provisions

6‑5  Income according to ordinary concepts (ordinary income)

             (1)  Your assessable income includes income according to ordinary concepts, which is called ordinary income.

Note:          Some of the provisions about assessable income listed in section 10‑5 may affect the treatment of ordinary income.

             (2)  If you are an Australian resident, your assessable income includes the *ordinary income you *derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

             (3)  If you are a foreign resident, your assessable income includes:

                     (a)  the *ordinary income you *derived directly or indirectly from all *Australian sources during the income year; and

                     (b)  other *ordinary income that a provision includes in your assessable income for the income year on some basis other than having an *Australian source.

             (4)  In working out whether you have derived an amount of *ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.

6‑10  Other assessable income (statutory income)

             (1)  Your assessable income also includes some amounts that are not *ordinary income.

Note:          These are included by provisions about assessable income.
For a summary list of these provisions, see section 10‑5.

             (2)  Amounts that are not *ordinary income, but are included in your assessable income by provisions about assessable income, are called statutory income.

Note 1:       Although an amount is statutory income because it has been included in assessable income under a provision of this Act, it may be made exempt income or non‑assessable non‑exempt income under another provision: see sections 6‑20 and 6‑23.

Note 2:       Many provisions in the summary list in section 10‑5 contain rules about ordinary income. These rules do not change its character as ordinary income.

             (3)  If an amount would be *statutory income apart from the fact that you have not received it, it becomes statutory income as soon as it is applied or dealt with in any way on your behalf or as you direct.

             (4)  If you are an Australian resident, your assessable income includes your *statutory income from all sources, whether in or out of Australia.

             (5)  If you are a foreign resident, your assessable income includes:

                     (a)  your *statutory income from all *Australian sources; and

                     (b)  other *statutory income that a provision includes in your assessable income on some basis other than having an *Australian source.

6‑15  What is not assessable income

             (1)  If an amount is not *ordinary income, and is not *statutory income, it is not assessable income (so you do not have to pay income tax on it).

             (2)  If an amount is *exempt income, it is not assessable income.

Note:          If an amount is exempt income, there are other consequences besides it being exempt from income tax. For example:

·         the amount may be taken into account in working out the amount of a tax loss (see section 36‑10);

·         you cannot deduct as a general deduction a loss or outgoing incurred in deriving the amount (see Division 8);

·         capital gains and losses on assets used solely to produce exempt income are disregarded (see section 118‑12).

             (3)  If an amount is *non‑assessable non‑exempt income, it is not assessable income.

Note 1:       You cannot deduct as a general deduction a loss or outgoing incurred in deriving an amount of non‑assessable non‑exempt income (see Division 8).

Note 2:       Capital gains and losses on assets used to produce some types of non‑assessable non‑exempt income are disregarded (see section 118‑12).

6‑20  Exempt income

             (1)  An amount of *ordinary income or *statutory income is exempt income if it is made exempt from income tax by a provision of this Act or another *Commonwealth law.

For summary lists of provisions about exempt income,
see sections 11‑5, 11‑10 and 11‑15.

             (2)  *Ordinary income is also exempt income to the extent that this Act excludes it (expressly or by implication) from being assessable income.

             (3)  By contrast, an amount of *statutory income is exempt income only if it is made exempt from income tax by a provision of this Act outside this Division or another *Commonwealth law.

             (4)  If an amount of *ordinary income or *statutory income is *non‑assessable non‑exempt income, it is not exempt income.

Note:          An amount of non‑assessable non‑exempt income is not taken into account in working out the amount of a tax loss.

6‑23  Non‑assessable non‑exempt income

                   An amount of *ordinary income or *statutory income is non‑assessable non‑exempt income if a provision of this Act or of another *Commonwealth law states that it is not assessable income and is not *exempt income.

Note:          Capital gains and losses on assets used to produce some types of non‑assessable non‑exempt income are disregarded (see section 118‑12).

For a summary list of provisions about non‑assessable non‑exempt income, see Subdivision 11‑B.

6‑25  Relationships among various rules about ordinary income

             (1)  Sometimes more than one rule includes an amount in your assessable income:

·         the same amount may be *ordinary income and may also be included in your assessable income by one or more provisions about assessable income; or

·         the same amount may be included in your assessable income by more than one provision about assessable income.

For a summary list of the provisions about assessable income,
 see section 10‑5.

However, the amount is included only once in your assessable income for an income year, and is then not included in your assessable income for any other income year.

             (2)  Unless the contrary intention appears, the provisions of this Act (outside this Part) prevail over the rules about *ordinary income.

Note:          This Act contains some specific provisions about how far the rules about ordinary income prevail over the other provisions of this Act.


 

Division 8Deductions

Table of sections

8‑1            General deductions

8‑5            Specific deductions

8‑10          No double deductions

8‑1  General deductions

             (1)  You can deduct from your assessable income any loss or outgoing to the extent that:

                     (a)  it is incurred in gaining or producing your assessable income; or

                     (b)  it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.

Note:          Division 35 prevents losses from non‑commercial business activities that may contribute to a tax loss being offset against other assessable income.

             (2)  However, you cannot deduct a loss or outgoing under this section to the extent that:

                     (a)  it is a loss or outgoing of capital, or of a capital nature; or

                     (b)  it is a loss or outgoing of a private or domestic nature; or

                     (c)  it is incurred in relation to gaining or producing your *exempt income or your *non‑assessable non‑exempt income; or

                     (d)  a provision of this Act prevents you from deducting it.

For a summary list of provisions about deductions, see section 12‑5.

             (3)  A loss or outgoing that you can deduct under this section is called a general deduction.

For the effect of the GST in working out deductions, see Division 27.

Note           If you receive an amount as insurance, indemnity or other recoupment of a loss or outgoing that you can deduct under this section, the amount may be included in your assessable income: see Subdivision 20‑A.

8‑5  Specific deductions

             (1)  You can also deduct from your assessable income an amount that a provision of this Act (outside this Division) allows you to deduct.

             (2)  Some provisions of this Act prevent you from deducting an amount that you could otherwise deduct, or limit the amount you can deduct.

             (3)  An amount that you can deduct under a provision of this Act (outside this Division) is called a specific deduction.

Note:          If you receive an amount as insurance, indemnity or other recoupment of a deductible expense, the amount may be included in your assessable income: see Subdivision 20‑A.

For a summary list of provisions about deductions, see section 12‑5.

8‑10  No double deductions

                   If 2 or more provisions of this Act allow you deductions in respect of the same amount (whether for the same income year or different income years), you can deduct only under the provision that is most appropriate.


 

Part 1‑4Checklists of what is covered by concepts used in the core provisions

Division 9Entities that must pay income tax

Table of sections

9‑1A         Effect of this Division

9‑1            List of entities

9‑5            Entities that work out their income tax by reference to something other than taxable income

9‑1A  Effect of this Division

                   This Division is a *Guide.

9‑1  List of entities

                   Income tax is payable by the entities listed in the table.

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.

 

Item

Income tax is payable by this kind of entity:

because of this provision:

1

An individual

section 4‑1

2

A company, that is:

    a body corporate; or

    an unincorporated body (except a partnership)

section 4‑1

3

A company that was a member of a wholly‑owned group if a former subsidiary in the group is treated as having disposed of leased plant and does not pay all of the income tax resulting from that treatment

section 45‑25

4

A superannuation provider in relation to a complying superannuation fund

sections 295‑5 and 295‑605

5

A superannuation provider in relation to a non‑complying superannuation fund

sections 295‑5 and 295‑605

6

A superannuation provider in relation to a complying approved deposit fund

section 295‑5

7

A superannuation provider in relation to a non‑complying approved deposit fund

section 295‑5

8

The trustee of a pooled superannuation trust

section 295‑5

9

A corporate limited partnership

section 94J

10

A mutual insurance association (as described in section 121)

section 121

11

A trustee (except one covered by another item in this table), but only in respect of some kinds of income of the trust

sections 98, 99, 99A and 102

12

The trustee of a corporate unit trust

section 102K

13

The trustee of a public trading trust

section 102S

9‑5  Entities that work out their income tax by reference to something other than taxable income

             (1)  For some entities, some or all of their income tax for the *financial year is worked out as described in the table.

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.

 

Item

This kind of entity is liable to pay income tax worked out by reference to:

See:

1

A company that was a member of a wholly‑owned group is jointly and severally liable to pay an amount of income tax if a former subsidiary in the group is treated as having disposed of leased plant and does not pay all of the income tax resulting from that treatment.

section 45‑25

2

A superannuation provider in relation to a complying superannuation fund is to be assessed and is liable to pay income tax on no‑TFN contributions income as well as on taxable income.

sections 295‑5 and 295‑605

3

A superannuation provider in relation to a non‑complying superannuation fund is to be assessed and is liable to pay income tax on no‑TFN contributions income as well as on taxable income.

sections 295‑5 and 295‑605

4

An RSA provider is to be assessed and is liable to pay income tax on no‑TFN contributions income as well as on taxable income.

sections 295‑5, 295‑605 and 320‑155

5

An Australian resident individual with:

    eligible foreign remuneration under section 23AF; or

    foreign earnings under section 23AG;

(from working in a foreign country) is liable to pay income tax worked out by reference to his or her assessable income less some of his or her deductions.

section 23AF or 23AG

6

A trustee covered by item 11 in the table in section 9‑1 is liable to pay income tax worked out by reference to the net income of the trust for the income year.

sections 98, 99 and 99A

7

The trustee of a corporate unit trust is liable to pay income tax worked out by reference to the net income of the trust for the income year.

section 102K

8

The trustee of a public trading trust is liable to pay income tax worked out by reference to the net income of the trust for the income year.

section 102S

9

An entity that is liable to pay income tax (worked out by reference to taxable income or otherwise) is also liable to pay income tax worked out by reference to diverted income or diverted trust income for the income year.

section 121H

10

An Australian insurer that re‑insures overseas can elect to pay, as agent for the re‑insurer, income tax worked out by reference to the amount of the re‑insurance premiums.

section 148

             (2)  For entities covered by an item in the table in subsection (1), the income year is the same as the *financial year, except in these cases:

                     (a)  for a company, or an entity covered by item 2 or 3 in the table, the income year is the previous financial year;

                     (b)  if an entity has an accounting period that is not the same as the financial year, each such accounting period or, for a company, each previous accounting period is an income year.

Note 1:       The Commissioner can allow an entity to adopt an accounting period ending on a day other than 30 June. See section 18 of the Income Tax Assessment Act 1936.

Note 2:       An accounting period ends, and a new accounting period starts, when a partnership becomes, or ceases to be, a VCLP, an ESVCLP, an AFOF or a VCMP. See section 18A of the Income Tax Assessment Act 1936.


 

Division 10Particular kinds of assessable income

10‑1  Effect of this Division

                   This Division is a *Guide.

10‑5  List of provisions about assessable income

                   The provisions set out in the table:

·         include in your assessable income amounts that are not *ordinary income; and

·         vary or replace the rules that would otherwise apply for certain kinds of *ordinary income.

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.

 

Accrued leave transfer payments

 

 

...................................................................................................

15‑5

 

alienated personal services income

 

 

...................................................................................................

86‑15

 

allowances

 

 

see employment

 

 

annual leave

 

 

see leave payments

 

 

annuities

 

 

...................................................................................................

27H

 

approved deposit fund (ADFs)

 

 

see superannuation

 

 

attributable income

 

 

see controlled foreign corporations and foreign investment funds

 

 

 

avoidance of tax

 

 

general .....................................................................................

177F

 

diversion of income ................................................................

121H

 

profits shifted out of Australia ............................................

136AD, 136AE

 

see also transfers of income

 

 

bad debts

 

 

see recoupment

 

 

balancing adjustment

 

 

see capital allowances, industrial property, investments, research & development, scientific research and tax exempt entities

 

 

banking

 

 

offshore banking activities, income from ...........................

121EG(1)

 

offshore banking unit, deemed interest on payments to by owner ...........................................................................


121EK

 

barter transactions

 

 

...................................................................................................

21, 21A, 15‑2

 

beneficiaries

 

 

see trusts

 

 

benefits

 

 

business, non‑cash ................................................................

21A

 

consideration, non‑cash .......................................................

21

 

meals you provide in an in‑house dining facility ..............

32‑70

 

see also employment and superannuation

 

 

bonus shares

 

 

see shares

 

 

bounties

 

 

...................................................................................................

15‑10

 

capital allowances

 

 

excess of termination value over adjustable value

 

 

generally................................................................

40‑285

 

for some cars.........................................................

40‑370

 

depreciating asset in low‑value pool...................................

40‑445(2)

 

expenditure in software development pool.........................

40‑460

 

recovery of petroleum resource rent tax..............................

40‑750(3)

 

capital gains

 

 

...................................................................................................

102‑5

 

see also insurance

 

 

car expenses

 

 

cents per kilometres reimbursement of ...............................

15‑70

 

carried interests

 

 

carried interests, not ordinary income.................................

118‑21

 

CFCs

 

 

see controlled foreign corporations

 

 

charters

 

 

see shipping

 

 

child

 

 

non‑trust income of, unearned .............................................

102AE

 

trust income of, unearned .....................................................

102AG

 

company

 

 

see controlled foreign corporations, co‑operative company, directors, dividends, liquidation, shareholders and shares

 

 

compensation

 

 

live stock or trees, recoveries for loss of ............................

385‑130

 

profits or income, insurance or indemnity for loss of........

15‑30

 

received by lessor for lessee’s non‑compliance with lease obligation to repair.................................................


15‑25

 

trading stock, insurance or indemnity for loss of .............

70‑115

 

see also insurance, live stock, recoupment and scientific research

 

 

consideration

 

 

see benefits

 

 

controlled foreign corporations (CFCs)

 

 

attributable income of ............................................................

456 to 459A

 

see also dividends and taxes

 

 

co‑operative company

 

 

receipts of ................................................................................

119

 

credit union

 

 

see co‑operative company

 

 

currency gains

 

 

see foreign exchange

 

 

currency losses

 

 

see recoupment

 

 

death

 

 

see trusts

 

 

debt/equity swap

 

 

see shares and units

 

 

defence forces

 

 

allowances and benefits for service as a member of .........

15‑2

 

depreciation

 

 

see capital allowances

 

 

directors

 

 

excessive remuneration or retirement payment from company ............................................................................


109

 

distributions

 

 

see dividends

 

 

dividends

 

 

benefit of LIC capital gain through a trust or partnership .............................................................................................

115‑280

 

general .....................................................................................

44(1)

 

distribution from a controlled foreign corporation ...........

47A(1)

 

franked dividends, credits on................................................

207‑20(1), 207‑35(1), 207‑35(3)

 

see also liquidation

 

 

elections

 

 

local government, reimbursement of expenses of..............

25‑65

 

see also recoupment

 

 

electricity connections

 

 

see recoupment

 

 

employees

 

 

see shares

 

 

employment

 

 

allowances and benefits in relation to employment or rendering services ...........................................................


15‑2

 

employment termination payment .......................................

82‑10
82‑65
82‑70

 

other payments for employment termination .....................

83‑295

 

return to work payments .......................................................

15‑3

 

see accrued leave transfer payments, leave payments, superannuation and sections 82‑10A and 82‑10C of the Income Tax (Transitional Provisions) Act 1997

 

 

environment

 

 

see recoupment

 

 

farm management deposits

 

 

repayments of .........................................................................

393‑1 of Schedule 2G

 

FIFs

 

 

see foreign investment funds

 

 

films

 

 

Australian, proceeds of investment in ................................

26AG

 

foreign exchange

 

 

gains .........................................................................................

775‑15

 

see also recoupment

 

 

foreign investment funds (FIFs)

 

 

attributable income of ............................................................

529

 

see also taxes

 

 

forestry agreement

 

 

amount where section 82KZMG of the 1936 Act applies.

15‑45

 

CGT event in relation to forestry interest in agreement....

82KZMGB

 

forestry managed investment schemes

 

 

forestry manager’s receipts under scheme.........................

15‑46

 

CGT event in relation to forestry interest in scheme for initial participant...............................................................

394‑25(2)

 

CGT event in relation to forestry interest in scheme for subsequent participant....................................................

394‑30(2)

 

franked dividends

 

 

see dividends

 

 

funeral policy

 

 

benefit under............................................................................

15‑55

 

general insurance

 

 

gross premiums.......................................................................

321‑45 of Schedule 2J

 

reduction in value of outstanding claims liability..............

321‑10 and 323‑5 of Schedule 2J

 

reduction in value of unearned premium reserve...............

321‑50 of Schedule 2J

 

grapevines

 

 

see recoupment

 

 

horticultural plants

 

 

see recoupment

 

 

improvements

 

 

see leases

 

 

imputation

 

 

see dividends

 

 

indemnity

 

 

see compensation and recoupment

 

 

industrial property

 

 

consideration for disposal of unit relating to copyright in Australian film...................................................................


124P

 

see also intellectual property and research and development

 

 

infrastructure borrowings

 

 

see interest

 

 

insurance

 

 

bonuses ...................................................................................

26AH, 15‑75

 

company, demutualisation of ...............................................

121AT

 

foreign life assurance policy ................................................

529

 

life insurance, transfer of contributions by superannuation fund or approved deposit fund to ....


295‑260

 

payments from a non‑resident reinsurer in respect
of a loss .............................................................................


148

 

premiums in respect of Australian business received by non‑resident insurers ......................................................


143

 

premiums paid to a non‑resident for reinsurance ..............

148

 

premiums paid to mutual insurance association ...............

121

 

premiums payable to a non‑resident for insurance of property in Australia .......................................................


142(1)

 

premiums payable to a non‑resident for insuring an event that can only happen in Australia ......................


142(1)

 

premiums payable to a non‑resident under an insurance contract with a resident ..................................................


142(2)

 

rebates and premiums refunded to a superannuation fund trustee .................................................................................

295‑320 (table item 4)

see also compensation, life insurance companies and recoupment

 

 

interest

 

 

infrastructure borrowings, on ..............................................

159GZZZZG

 

loans raised in Australia by foreign governments, on .....

27

 

overpaid tax, on ......................................................................

15‑35

 

qualifying securities, on ........................................................

159GQ, 159GW(1)

 

see also co‑operative companies and leases

 

 

investments

 

 

non‑interest bearing Commonwealth securities, gains on disposal or redemption of ...............................................


26C

 

prizes from investment‑related lotteries ..............................

26AJ

 

qualifying securities, payments to partial residents made under ..................................................................................


159GW(2)

 

qualifying securities, amount assessable to issuer of ......

159GT(1B)

 

qualifying securities, balancing adjustment on the transfer of ..........................................................................


159GS

 

securities, variation in terms of ............................................

159GV(2)

 

securities lending arrangements ..........................................

26BC

 

traditional securities, gains on the disposal or redemption of ...................................................................


26BB

 

see also films and interest

 

 

landcare operations

 

 

see recoupment

 

 

leased plant ..........................................................................................

Division 45

 

leases

 

 

amounts received by lessor from lessee for non‑compliance with lease obligation to repair...........


15‑25

 

interest component of payments under non‑leveraged finance leases ...................................................................


159GK

 

partnership leasing property under non‑leveraged finance lease, new partner or contribution of capital since 14 May 1985 ...........................................................



159GO

 

premiums relating to assignment of a lease granted before 20 September 1985................................................


26AB

 

profit on disposal of previously leased motor vehicles ...

Subdivision 20‑B

 

leases of luxury cars

 

 

accrual amounts......................................................................

Schedule 2E (42A‑35(1))

 

adjustment amounts (lessee).................................................

Schedule 2E (42A‑70(2))

 

adjustment amounts (lessor).................................................

Schedule 2E (42A‑65(2))

 

profit on actual sale................................................................

Schedule 2E (42A‑35(3))

 

profit on notional sale............................................................

Schedule 2E (42A‑35(2))

 

leave payments

 

 

accrued leave transfer payment ...........................................

15‑5

 

unused annual leave payment .............................................

83‑10

 

unused long service leave payment ....................................

83‑80

 

see employment

 

 

life insurance companies

Subdivision 320‑B

 

limited recourse debt

 

 

excessive deduction amount (debtor)..................................

243‑40

 

excessive deduction amount (partner).................................

243‑65

 

liquidation

 

 

distribution to a shareholder in winding up a company...

47(1)

 

live stock

 

 

death or destruction of ..........................................................

Subdivision 385‑E

 

departing Australia and ........................................................

385‑160, 385‑163

 

insolvency, and ......................................................................

385‑160, 385‑163

 

profits on death or disposal of .............................................

Subdivision 385‑E, 385‑160

 

see also compensation and trading stock

 

 

long service leave

 

 

see leave payments

 

 

losses

 

 

see compensation

 

 

lotteries

 

 

see investments

 

 

meals

 

 

see benefits

 

 

Mining

 

 

providing mining, quarrying or prospecting information

15‑40

 

minors

 

 

see child

 

 

motor vehicles

 

 

see car expenses and leases

 

 

mutual insurance

 

 

see insurance

 

 

non‑cash benefits

 

 

see benefits and employment

 

 

notional sales and loans

 

 

adjustment amounts (lessee).................................................

240‑110(2)

 

adjustment amounts (lessor).................................................

240‑105(2)

 

notional interest......................................................................

240‑35(1)

 

profit on actual sale................................................................

240‑35(3)

 

profit on notional sale............................................................

240‑35(2)

 

offshore banking units

 

 

see banking

 

 

partnerships

 

 

net income of, partner’s interest in ......................................

92(1)

 

uncontrolled partnership income, effect of ........................

94

 

see also leases

 

 

payments to members of copyright collecting societies

 

 

payments by copyright collecting societies.......................

15‑22

 

petroleum

 

 

resource rent tax, recovery of ...............................................

20‑30(1)

 

see also capital allowances

 

 

premiums

 

 

see insurance, leases and superannuation

 

 

primary production

 

 

see recoupment

 

 

prizes

 

 

see investments

 

 

profits

 

 

profit‑making undertaking or plan........................................

15‑15

 

sale of property acquired before 20 September 1985 for profit‑making by sale........................................................


25A

 

see also avoidance of tax

 

 

Project pools

 

 

An amount received for the abandonment, sale or other disposal of a project.........................................................


40‑830, 40‑832

 

property

 

 

see profits and trusts

 

 

quarrying

 

 

see mining and recoupment

 

 

rates

 

 

see recoupment

 

 

recoupment

 

 

insurance or indemnity for deductible losses or
outgoings...........................................................................


Subdivision 20‑A

 

other recoupment for certain deductible losses or outgoings...........................................................................


Subdivision 20‑A

 

see also car expenses, compensation, elections and petroleum

 

 

reimbursements

 

 

see car expenses, dividends, elections, petroleum and recoupment

 

 

reinsurance

 

 

see insurance

 

 

research & development

 

 

consideration for loss or disposal etc. of plant, assets or buildings used for ............................................................


73B(23) to (27C), 73BF, 73BM
, 73G(4)

 

return on ..................................................................................

73B(27A), (27C), 73BF(4), (6), 73BM(4), (6)

 

transferee of property used for, effect of disposal or change of use by .............................................................


73F(10)

 

residual value

 

 

see industrial property

 

 

retirement payments

 

 

see directors, leave payments and shareholders

 

 

rights to income

 

 

see transfers of income

 

 

roads

 

 

see timber

 

 

royalties

 

 

...................................................................................................

15‑20

 

schemes

 

 

see avoidance of tax

 

 

scholarship plan

 

 

benefit under............................................................................

15‑60

 

scientific research

 

 

consideration for disposal or destruction of buildings acquired for scientific research ......................................


73A(4)

 

securities

 

 

see investments

 

 

services

 

 

see co‑operative companies, employment, loans and trusts

 

 

shareholders

 

 

excessive remuneration or retirement payment from company ............................................................................


109

 

loans, payments and credits from company ......................

Division 7A of Part III

 

see also dividends

 

 

shares

 

 

acquired in a debt/equity swap, profit on the disposal cancellation or redemption of ........................................


63E(4)

 

bonus shares, cost of ............................................................

6BA

 

buy‑backs ................................................................................

159GZZZJ to 159GZZZT

 

employee share acquisition schemes ..................................

26AAC, 139 to 139GH

 

holding company shares held by a subsidiary, cancellation of ..................................................................


159GZZZC to 159GZZZI

 

small‑medium enterprise, profit on disposal of shares in .

128TG to 128TL

 

see also dividends

 

 

shipping

 

 

goods shipped in Australia, amounts paid to foreign shipowners and charterers for .......................................


129

 

small‑medium enterprises (SMEs)

 

 

see shares

 

 

subsidies

 

 

...................................................................................................

15‑10

 

sugar industry exit grants

 

 

...................................................................................................

15‑65

 

superannuation

 

 

benefits generally ...................................................................

Divisions 301 to 306

 

benefits in breach of legislative requirements ...................

Division 304

 

benefits received from older superannuation funds .........

26AF, 26AFA

 

complying fund becomes non‑complying, effect of .........

295‑320 (table item 2)

 

contributions to an approved deposit fund .......................

Subdivisions 295‑C and 295‑D

 

contributions to an RSA .......................................................

Subdivision 295‑C

 

contributions to a superannuation fund ............................

Subdivisions 295‑C and 295‑D

 

death benefits .........................................................................

302‑75
302‑85
302‑90
302‑145

 

foreign superannuation funds and schemes, benefits from ....................................................................................

305‑70

 

member benefits .....................................................................

301‑20
301‑25
301‑35
301‑40
Subdivision 301‑C

 

foreign fund becoming Australian, effect of ......................

295‑320 (table item 3)

 

no‑TFN contributions income ..............................................

295‑605

 

returned contributions ..........................................................

290‑100

 

trustee’s liability to pay tax ..................................................

295‑5(2) and (3)

 

see insurance

 

 

tax avoidance

 

 

see avoidance of tax and transfers of income

 

 

tax exempt entities

 

 

treatment of income and gains on becoming taxable ........

Schedule 2D

 

taxes

 

 

see dividends, foreign investment funds, interest and recoupment

 

 

termination of employment

 

 

see directors, eligible termination payments, leave payments and shareholders

 

 

theft

 

 

see recoupment

 

 

trading stock

 

 

change in interests in ............................................................

70‑100

 

death of trader and .................................................................

70‑105

 

difference between opening and closing value of ............

70‑35

 

disposal not at arm’s length..................................................

70‑20

 

disposal of outside ordinary course of business ..............

70‑90, 70‑95

 

see also compensation and tax exempt entities

 

 

transfers of income

 

 

consideration for transfer of right to income .....................

102CA

 

payments for transfer or disposal of property ...................

262

 

transferee, effect on of transfer of right to income ...........

102C

 

transferor, effect on of transfer of right to income ............

102B

 

travel expenses

 

 

see car expenses

 

 

trusts

 

 

beneficiary under legal disability or with a vested and indefeasible interest in trust income .............................


100

 

deceased estates, income of .................................................

101A

 

discretionary trusts ................................................................

101

 

net income of a trust estate, your present entitlement to

97, 101

 

non‑resident beneficiaries, liability to tax of ......................

98A

 

non‑resident trust estates to which you have transferred property or services, income of .....................................


102AAZD

 

property of applied for benefit of beneficiaries .................

99B

 

trust estate includes income from another trust estate

94(5)

 

trustees’ liability to tax...........................................................

98, 99, 99A, 102, 102K, 102S

 

see also avoidance of tax and superannuation

 

 

unearned income

 

 

see child

 

 

units

 

 

acquired in a debt/equity swap, profit on the disposal, cancellation or redemption of ........................................


63E(4)

 

water conservation

 

 

see recoupment

 

 

winding‑up

 

 

see insurance and liquidation

 

 

wool clips

 

 

double wool clips, treatment of ............................................

385‑135, 385‑155

 

work in progress

 

 

receipt of a work in progress amount ..................................

15‑50

 

 


 

Division 11Particular kinds of non‑assessable income

Table of Subdivisions

11‑A      Lists of classes of exempt income

11‑B      Particular kinds off non‑assessable non‑exempt income

Subdivision 11‑ALists of classes of exempt income

Table of sections

11‑1A       Effect of this Subdivision

11‑1          Overview

11‑5          Entities that are exempt, no matter what kind of ordinary or statutory income they have

11‑10        Ordinary or statutory income which is exempt, no matter whose it is

11‑15        Ordinary or statutory income which is exempt only if it is derived by certain entities

11‑1A  Effect of this Subdivision

                   This Subdivision is a *Guide.

11‑1  Overview

                   Ordinary income or statutory income which is exempt from income tax can be divided into 3 main classes:

                     (a)  ordinary or statutory income of entities that are exempt, no matter what kind of ordinary or statutory income they have (see table in section 11‑5);

                     (b)  ordinary or statutory income which is exempt, no matter whose it is (see table in section 11‑10);

                     (c)  ordinary or statutory income which is exempt only if it is *derived by certain entities (see table in section 11‑15).

11‑5  Entities that are exempt, no matter what kind of ordinary or statutory income they have

                   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.

Note:          Special rules apply to entities that cease to be exempt. See Schedule 2D to the Income Tax Assessment Act 1936.

 

charity, education, religion or science

 

charitable fund, public...............................................................

50‑5

charitable institution..................................................................

50‑5

educational institution, public..................................................

50‑5

religious institution....................................................................

50‑5

scientific institution....................................................................

50‑5

scientific research fund..............................................................

50‑5

scientific society etc...................................................................

50‑5

community service

 

community service society etc.................................................

50‑10

employees and employers

 

employee association.................................................................

50‑15

employer association.................................................................

50‑15

trade union...................................................................................

50‑15

film

 

Australian Film Finance Corporation.......................................

50‑45

funds established by will or trust

 

contributions to other funds.....................................................

50‑20

government

 

constitutionally protected fund................................................

50‑25

local governing body.................................................................

50‑25

municipal corporation................................................................

50‑25

public authority...........................................................................

50‑25

state/territory bodies..................................................................

24AK to 24AZ

health

 

health benefits organisation.....................................................

50‑30

hospital.........................................................................................

50‑30

medical benefits organisation...................................................

50‑30

HIH rescue package

 

..... HIH Claims Support Trust ..................................................

322‑10

mining

 

British Phosphate Commissioners Banaba Contingency Fund.................................................................................................


50‑35

Phosphate Mining Company of Christmas Island.................

50‑35

primary or secondary resources, and tourism

 

agricultural society etc. .............................................................

50‑40

aviation society etc. ..................................................................

50‑40

horticultural society etc. ...........................................................

50‑40

industrial society etc. ................................................................

50‑40

manufacturing society etc. .......................................................

50‑40

pastoral society etc. ..................................................................

50‑40

tourism society etc. ...................................................................

50‑40

viticultural society etc. ..............................................................

50‑40

sports, culture or recreation

 

animal racing society etc. .........................................................

50‑45

art society etc. ............................................................................

50‑45

game society etc. .......................................................................

50‑45

literature society etc. .................................................................

50‑45

music society etc. ......................................................................

50‑45

sport society etc. .......................................................................

50‑45

11‑10  Ordinary or statutory income which is exempt, no matter whose it is

                   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.

 

dividends or shares

 

pooled development fund company dividend ......................

124ZM

pooled development fund company shares, income from sale of ....................................................................................


124ZN

financial transactions

 

infrastructure borrowings, income in relation to ...................

159GZZZZE

pooled development fund company dividends.....................

124ZM

pooled development fund company shares, income from sale of ....................................................................................


124ZN

foreign aspects of income taxation

 

Australian‑American Education Foundation, grant from.....

51‑10

interest

 

judgment debt, personal injury.................................................

51‑57

non‑cash benefits

 

business benefit..........................................................................

23L(2)

exempt fringe benefit..................................................................

23L(1A)

prizes

 

Prime Minister’s Prize for Australian History ........................

51‑60

Prime Minister’s Prize for Science ...........................................

51‑60

sugar industry exit grants

 

.......................................................................................................

53‑10

superannuation

 

benefits from non‑complying funds .......................................

305‑5

11‑15  Ordinary or statutory income which is exempt only if it is derived by certain entities [see Note 5]

                   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.

 

copyright collecting societies

 

copyright income....................................................................

51‑43(2)(a)

non‑copyright income up to certain limits..........................

51‑43(2)(b)

credit unions

 

interest......................................................................................

23G

defence

 

Defence Force member, allowances.....................................

51‑5

Defence Force member, compensation payments for loss of deployment allowance for warlike service................


51‑5

F‑111 Deseal/Reseal Ex‑gratia Lump Sum Payments.........

51‑5

Former Reserve Defence Force member, compensation payments for loss of pay and/or allowances................


51‑5

Reserve Defence Force member, pay and allowances.......

51‑5

education

 

Apprenticeship Wage Top‑Up payment, recipient of.......

51‑10

bursary, educational allowance etc. ....................................

51‑10 and 51‑35

Commonwealth Trade Learning Scholarship, recipient of


51‑10

CRAFT scheme, employer’s income from...........................

51‑10

foreign student, scholarship and bursary to......................

842‑105

full‑time student, income from a scholarship, bursary, other educational allowance or educational assistance..........................................................................



51‑10 and 51‑35

isolated child, income for the provision of education of..

51‑10 and 51‑40

secondary student, income for the provision of education of ......................................................................


51‑10 and 51‑40

family assistance

 

baby bonus..............................................................................

52‑150

child care benefit ....................................................................

52‑150

child care tax rebate................................................................

52‑150

family tax benefit ....................................................................

52‑150

maternity allowance ...............................................................

52‑150

maternity immunisation allowance.......................................

52‑150

maternity payment..................................................................

52‑150

one‑off payment to families ..................................................

52‑150

payments to families under the scheme determined under Schedule 3 to the Family Assistance Legislation Amendment (More Help for Families—One‑off Payments) Act 2004 ........................................................




52‑150

foreign aspects of income taxation

 

approved overseas project, income from ...........................

23AF

Commonwealth of Nations country officer, official salary and foreign income ..........................................................


768‑100

consul and official staff member, official salary and foreign income ..................................................................


768‑100

Defence Force member, pay and allowances from being on eligible duty ................................................................


23AD

Defence Force member, foreign resident, pay and
allowances of ....................................................................


842‑105

Defence Force member, pay and allowances from performing duties in operational areas .........................


23AC

defence of Australia, overseas person’s income from assisting in Australia’s defence.....................................


842‑105

diplomat and official staff member, official salary and foreign income ..................................................................


768‑100

educational, scientific, religious or philanthropic society, income of a visiting representive of ..............................


842‑105

expert, foreign resident, remuneration of ............................

842‑105

foreign society or association representative, income of

842‑105

government representative and members of the entourage, foreign resident, income of .........................


842‑105

non‑resident, foreign sourced income ................................

23(r)

OBU off‑shore investment trusts, income to which subsection 121D(6) applies ...........................................


121EL

OBU investment trusts for overseas charitable institutions.........................................................................


121EL(2)

overseas charitable institutions, income from OBUs........

121ELA(1)

overseas employment income, resident, income of ..........

23AG

persecution victim, payments to ..........................................

768‑105

press representative, foreign, income of ............................

842‑105

resistance fighter and victim of wartime persecution, payments to ......................................................................


768‑105

Territory resident, income from sources in a prescribed Territory ............................................................................


24G

Territory resident company or trust, income from sources outside Australia ..............................................


24F

United Nations, income from service with .........................

23AB

United States projects, income from approved overseas projects ..............................................................................


23AA

life insurance companies

Subdivision 320‑B

small business retirement exemption

 

payment by company or trust, arising from CGT event ...

152‑310(2)

social security or like payments

 

ABSTUDY scheme, payment under.....................................

Subdivision 52‑E

child disability assistance......................................................

Subdivision 52‑A

Commonwealth education or training payment..................

Subdivision 52‑F

DFISA bonus and DFISA bonus bereavement payment.

52‑65

disability services payment ..................................................

53‑10

exceptional circumstances relief, payment for ...................

53‑10 and 53‑15

farm help income support......................................................

53‑10 and 53‑15

farm household support payment made by way of a grant of financial assistance............................................................................................. .


53‑10 and 53‑15

farm household support converted into a grant................

53‑25

2006 one‑off payment to older Australians under the Social Security Act 1991................................................


52‑10

payments under the scheme determined under item 1 of Schedule 2 to the Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments to Increase Assistance for Older Australians and Carers and Other Measures) Act 2006....................................................................................






52‑10

2006 one‑off payment to older Australians under the Veterans’ Entitlements Act 1986...................................


52‑65

payments under the scheme determined under item 2 of Schedule 2 to the Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments to Increase Assistance for Older Australians and Carers and Other Measures) Act 2006....................................................................................






52‑65

2007 one‑off payment to older Australians under the Social Security Act 1991................................................


52‑10

payments under a scheme determined under item 1 of Schedule 2 to the Social Security and Veterans’ Affairs Legislation Amendment (One‑off Payments and Other 2007 Budget Measures) Act 2007.............




52‑10

2007 one‑off payment to older Australians under the Veterans’ Entitlements Act 1986...................................


52‑65

payments under the scheme determined under item 2 of Schedule 2 to the Social Security and Veterans’ Affairs Legislation Amendment (One‑off Payments and Other 2007 Budget Measures) Act 2007.............




52‑65

2008 one‑off payment to older Australians under the Social Security Act 1991................................................


52‑10

payments under a scheme determined under item 1 of Schedule 2 to the Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments and Other Budget Measures) Act 2008.....




52‑10

2008 one‑off payment to older Australians under the Veterans’ Entitlements Act 1986...................................


52‑65

payments under the scheme determined under item 2 of Schedule 2 to the Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments and Other Budget Measures) Act 2008.....




52‑65

one‑off payment to carers (carer allowance related) or one‑off payment to carers (carer payment related) .....


52‑10

payments to carers under the scheme determined under Schedule 3 to the Family Assistance Legislation Amendment (More Help for Families—One‑off Payments) Act 2004 ........................................................




52‑10

2005 one‑off payment to carers (carer payment related), 2005 one‑off payment to carers (carer service pension related) or 2005 one‑off payment to carers (carer allowance related)..................................................

52‑10

payments under the scheme determined under Schedule 2 to the Social Security Legislation Amendment (One‑off Payments for Carers) Act 2005

52‑10

2006 one‑off payment to carers (carer payment related), 2006 one‑off payment to carers (wife pension related), 2006 one‑off payment to carers (partner service pension related), 2006 one‑off payment to carers (carer service pension related) or 2006 one‑off payment to carers (carer allowance related) ................






52‑10

payments under the scheme determined under Schedule 4 to the Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments to Increase Assistance for Older Australians and Carers and Other Measures) Act 2006 ...................................................................................






52‑10

2007 one‑off payment to carers (carer payment related), 2007 one‑off payment to carers (wife pension related), 2007 one‑off payment to carers (partner service pension related), 2007 one‑off payment to carers (carer service pension related) or 2007 one‑off payment to carers (carer allowance related).................






52‑10

payments under the scheme determined under Schedule 4 to the Social Security and Veterans’ Affairs Legislation Amendment (One‑off Payments and Other 2007 Budget Measures) Act 2007.............




52‑10

2008 one‑off payment to carers (carer payment related), 2008 one‑off payment to carers (wife pension related), 2008 one‑off payment to carers (partner service pension related), 2008 one‑off payment to carers (carer service pension related) or 2008 one‑off payment to carers (carer allowance related).................






52‑10

payments under the scheme determined under Schedule 4 to the Social Security and Veterans’ Entitlements Legislation Amendment (One‑off Payments and Other Budget Measures) Act 2008.....




52‑10

pension bonus and pension bonus bereavement payment..............................................................................

52‑10 and 52‑65

persecution victim, payments to ..........................................

768‑105

private health insurance.........................................................

52‑125

resistance fighter and victim of wartime persecution, payments to ......................................................................


768‑105

social security, payment to ...................................................

Subdivision 52‑A

travelling expenses for Australian participants in British nuclear tests .....................................................................


Subdivision 52‑CB

veteran, Australian and United Kingdom, payment to ....

53‑20

veteran, payment to ...............................................................

Subdivisions 52‑B and 52‑C

wounds and disability pension ............................................

53‑10

structured settlements and structured orders

 

annuities and lump sums........................................................

Subdivisions 54‑B, 54‑C and 54‑D

student

 

see education

 

superannuation and related business

 

approved deposit fund, continuously complying fixed interest, income from 25 May 1988 deposits ...............

295‑390 of the Income Tax (Transitional Provisions) Act 1997

approved deposit fund, income from a grant of financial assistance under Part 23 of the Superannuation Industry (Supervision) Act 1993 ..................................

295‑405 (table item 1)

approved deposit fund, non‑reversionary bonuses on policies of life assurance ................................................

295‑335 (table item 1)

pooled superannuation trust, income from constitutionally protected funds ...................................

295‑335 (table item 2)

pooled superannuation trust, income from current pension liabilities of complying superannuation funds ..................................................................................

295‑400

pooled superannuation trust, non‑reversionary bonuses on policies of life assurance ...........................................

295‑335 (table item 1)

superannuation fund, income from other assets used to meet current pension liabilities ......................................

295‑390

superannuation fund, income from segregated current pensions assets ...............................................................

295‑385

superannuation fund, non‑reversionary bonuses on policies of life assurance ................................................

295‑335 (table item 1)

superannuation fund, regulated, income from a grant of financial assistance under Part 23 of the Superannuation Industry (Supervision) Act 1993 ...

295‑405 (table item 1)

United Nations

 

Australian Federal Police member in Cambodia, pay and allowance ..........................................................................


23ADA

United Nations Service, income from ..................................

23AB

venture capital

 

eligible venture capital investments, gain or profit from realisation of......................................................................

51‑54

eligible venture capital investments by ESVCLPs, income derived from.......................................................................

51‑52

venture capital equity, gain or profit from realisation of...

51‑55

vice‑regal

 

Governor‑General, official salary and foreign income.......

51‑15

State Governor, official salary and foreign income............

51‑15

welfare

 

Handicapped Persons Assistance Act 1974, bonus from

51‑30

maintenance payment.............................................................

51‑30 and 51‑50

rent subsidy.............................................................................

51‑30

Note:          The following provisions of the Income Tax Assessment Act 1936 give rise to notional exempt income and not exempt income. For this reason the provisions do not appear in the lists of kinds of exempt income.

                   The provisions are: paragraphs 384(1)(b) and 385(1)(b), subsection 402(2) and sections 403 and 404.

Subdivision 11‑BParticular kinds of non‑assessable non‑exempt income

Table of sections

11‑50        Effect of this Subdivision

11‑55        List of non‑assessable non‑exempt income provisions

11‑50  Effect of this Subdivision

                   This Subdivision is a *Guide.

11‑55  List of non‑assessable non‑exempt income provisions

                   The provisions set out in the list make amounts non‑assessable non‑exempt income.

                   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.

 

alienated personal services income

 

associate, non‑deductible payment or obligation to.............

85‑20(3)

entitlements to a share of net income that is personal services income already assessable to an individual.....


86‑35(2)

payments by personal services entity or associate of personal services income already assessable to an individual...............................................................................



86‑35(1)

personal services entity, amounts of personal services income assessable to an individual...................................


86‑30

bonds

 

see securities

 

dividends

 

demerger dividends....................................................................

44(4)

later dividend set off against amount taken to be dividend.

109ZC(3)

employment

 

early retirement scheme payment, tax free amount of ..........

83‑170

employment termination payment ...........................................

82‑10
82‑65
82‑70

foreign termination payment ....................................................

83‑235
83‑240

genuine redundancy payment, tax free amount of ...............

83‑170

unused long service leave payment, pre‑16/8/78 period .....

83‑80

see superannuation and sections 82‑10A and 82‑10C of the Income Tax (Transitional Provisions) Act 1997

 

firearms surrender arrangements

 

compensation under...................................................................

59‑10

foreign aspects of income taxation

 

attributed controlled foreign company income......................

23AI

attributed foreign investment fund income............................

23AK

dividend from a foreign country, non‑portfolio.....................

23AJ

branch profits of Australian companies..................................

23AH

distributions of conduit foreign income..................................

802‑20

income derived by temporary residents..................................

768‑910

interest paid by temporary residents.......................................

768‑980

superannuation fund, foreign, interest and dividend income of ............................................................................................


128B(3)(jb)

withholding tax, dividend royalty or interest subject to.......

128D

GST

 

GST payable on a taxable supply.............................................

17‑5(a)

increasing adjustments..............................................................

17‑5(b) and (c)

life insurance companies......................................................................

Subdivision
320‑B

mining

 

withholding tax, payments to Aboriginals and distributing bodies subject to..................................................................


59‑15

mutual receipts

 

amounts that would be mutual receipts but for prohibition on distributions to members.............................................


59‑35

non‑cash benefits

 

fringe benefits.............................................................................

23L(1)

notional sale and loan

 

arrangement payments a notional seller receives or is entitled to receive.................................................................


240‑40

luxury car leases, lease payments that the lessor receives or is entitled to receive.............................................................


42A‑40 in Schedule 2E

deemed loan treatment for financial benefits provided for tax preferred use of asset....................................................


250‑160

offshore banking units

 

assessable OB income other than eligible fraction................

121EG

related entities

 

amounts from, where deduction reduced for..........................

26‑35(4)

repayable amounts

 

previously assessable amounts...............................................

59‑30

securities

 

securities acquired at a discount on or before 30 June 1982, amount received on sale or redemption of.......................

23J

special bond, amount received on redemption of..................

23E

small business assets

 

income arising from CGT event, company or trust owned asset continuously for 15 years.........................................


152‑110(2)

social security or like payments

 

older Australians, bonus payments made to..........................

59‑5

superannuation

 

benefits generally ......................................................................

Divisions 301 to 306

commutation of income stream, under 25 years ....................

303‑5

death benefits .............................................................................

302‑60
302‑65
302‑70
302‑140

departing Australia superannuation benefits .......................

301‑175

foreign superannuation funds, lump sum benefits ...............

305‑60
305‑65
305‑70

member benefits .........................................................................

301‑10
301‑15
301‑30
301‑225

release authorities, payments from .........................................

304‑15

roll‑over superannuation benefits ...........................................

306‑5

unclaimed money payment .......................................................

306‑20

tax loss transfers

 

consideration received by loss company from income company, generally..............................................................


170‑25(1)

consideration received by loss company from income company, net capital loss....................................................


170‑125(1)

temporary residents

 

see foreign aspects of income taxation

 

trading stock

 

disposal outside ordinary course of business, amounts received upon.......................................................................


70‑90(2)

trusts

 

attributable income, amounts representing............................

99B(2A)

family trust distribution tax, amounts subject to...................

271‑105(3) in Schedule 2F

windfall amounts

 

business franchise fees, refund of when invalid...................

59‑20

State tax on Commonwealth place, refund of when invalid..

59‑25

withholding taxes

 

see foreign aspects of income taxation and mining

 


 

Division 12Particular kinds of deductions

12‑1  Effect of this Division

                   This Division is a *Guide.

12‑5  List of provisions about deductions [see Notes 2 and 6]

                   The provisions set out in the table contain rules about specific types of deduction.

                   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.

 

accrued leave transfer payments

 

.....................................................................................................

26‑10

advance expenditure

 

generally ....................................................................................

82KZL to 82KZO

avoidance arrangements .........................................................

82KJ

when deductible .......................................................................

82KZM to 82KZN

bad debts

 

deduction reduced because of forgiveness of debt if debtor and creditor are companies under common ownership and agree on the reduction...........................



245‑90 of Schedule 2C

general .......................................................................................

25‑35, 63F

companies .................................................................................

Subdivisions
165‑C, 166‑C and 175‑C

debt/equity swaps ...................................................................

63E, 63F, 709‑220

deduction of a debt that used to be owed to a member of a consolidated group or MEC group by an entity that used to be a member of the group ..................................

Subdivisions
709‑D and 719‑I

money lenders, listed country branches, no deduction
for .........................................................................................


63D

see also losses

 

balancing adjustment

 

see buildings, capital allowances, industrial property, research & development and tax exempt entities

 

banks

 

foreign banks, Australian branches of .................................

160ZZVA to 160ZZZJ

boats

 

deferral of deductions .............................................................

26‑47

borrowing expenses

 

.....................................................................................................

25‑25

bribes to foreign public officials .......................................................

26‑52

bribes to public officials .....................................................................

26‑53

buildings

 

inc