INCOME TAX ASSESSMENT ACT 1997
|CHAPTER 2 - LIABILITY RULES OF GENERAL APPLICATION
|PART 2-5 - RULES ABOUT DEDUCTIBILITY OF PARTICULAR KINDS OF AMOUNTS
Div 26 heading substituted by No 121 of 1997.
You can only deduct reasonable amounts paid to related entities
If, under another provision of this Act, you can deduct an amount for a payment you make, or for a liability you incur, to a *related entity, then you can only deduct so much of the amount as the Commissioner considers reasonable.
This section has a special operation if the payment is made, or the liability is incurred, by a partnership in which a private company is a partner: see section 65 (Payments to associated persons and relatives) of the Income Tax Assessment Act 1936.
Meaning of related entity
A related entity is any of the following:
(a) your *relative; or
(b) a partnership in which your relative is a partner.
In the case of a partnership, a related entity is any of the following:
(a) a *relative of a partner in the partnership;
(b) an individual who is or has been a director of a company that is a partner in the partnership and is a *private company for the income year;
(c) an entity that is or has been a shareholder in a company of that kind;
(d) a *relative of an individual who is or has been a director or shareholder of a company of that kind;
(e) a beneficiary of a trust if the trustee is a partner in the partnership;
(f) a *relative of a beneficiary of a trust if the trustee is a partner in the partnership;
(g) another partnership, if a partner in the other partnership is a *relative of a partner in the first partnership.
However, a partner in a partnership is not a related entity of the partnership.
If you can't deduct, then related entity doesn't include amount as income
To the extent that subsection (1) stops you deducting an amount, the amount is neither assessable income, nor exempt income, of the *related entity.
(Repealed by No 75 of 2010)
S 26-35(5) repealed by No 75 of 2010, s 3 and Sch 6 item 7, effective 29 June 2010. S 26-35(5) formerly read:
Amendments of assessments
26-35(5) The Commissioner can amend an assessment at any time for the purpose of giving effect to subsection (4).
An amount was not included in the related entity's assessable income because at the time you could not deduct the amount. At a later time you discover that you could deduct the amount and your assessment is amended. The Commissioner can amend the entity's assessment so that the amount is included in the entity's assessable income.
S 26-35 inserted by No 121 of 1997.