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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 1 - INTRODUCTION AND CORE PROVISIONS  

PART 1-4 - CHECKLISTS OF WHAT IS COVERED BY CONCEPTS USED IN THE CORE PROVISIONS  

Division 12 - Particular kinds of deductions  

SECTION 12-5  

12-5  List of provisions about deductions  

 View history reference
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
[ averaging of incomes] (Omitted by No 46 of 1998) 
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
 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, R & D 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  
 income producing buildings, capital allowances .......... Division 43
 see also heritage conservation work  
capital allowances  
 generally .......... Division 40
 balancing adjustments .......... 40-285(2) , 40-370
 business related costs .......... 40-880
 electricity and telephone lines .......... 40-645
 environmental protection activities .......... 40-755
 exploration or prospecting .......... 40-80(1) , 40-730
 in-house software .......... 40-335 , 40-455
 intellectual property .......... Subdivisions 40-B and 40-I
 IRUs .......... Subdivision 40-B
 landcare operations .......... 40-630
 low-value and software development pools .......... Subdivision 40-E
 mining and quarrying .......... Subdivision 40-H and Subdivision 40-I
 new business investment, additional deduction .......... Division 41
 Petroleum Resource Rent Tax .......... 40-750
 project pools .......... 40-830 , 40-832
 reducing deductions .......... 40-25 , 40-27 , 40-290 and 40-291
 spectrum licences .......... Subdivision 40-B
 tax preferred use of asset .......... Division 250
 telecommunications site access rights .......... Subdivision 40-B
 trees in carbon sink forests .......... Subdivision 40-J
 water facilities, horticultural plants, fodder storage assets and fencing assets .......... Subdivision 40-F
capital gains  
 no deduction for an amount that would otherwise be deductible only because a net capital gain is included in assessable income .......... 51AAA
 small business retirement exemption, no deduction for payments made directly or indirectly to CGT concession stakeholder so company or trust complies with section 152-325 .......... 152-310
 see also foreign residents  
capital loss  
 net capital loss, no deduction for .......... 102-10
 net capital loss, transfer within company group .......... Subdivision 170-B
car disposal  
 see capital allowances  
car expenses  
 generally .......... Division 28
 " cents per kilometre " method .......... Subdivision 28-C
 " log book " method .......... Subdivisions 28-F and 28-G
 substantiation of car expenses .......... Division 900
 see also transport expenses  
car expenses of employee  
 employee ' s car expenses where car provided by employer can be used for private purposes, no deduction for .......... 51AF
carried interests  
 carried interests, no deduction for .......... 118-21
car parking  
 employee ' s car parking expenses, no deduction for .......... 51AGA
children ' s income  
 generally .......... 102AA to 102AH
 taxable income of a child, deductions taken into consideration in calculating .......... 102AD
[ clean energy] (Repealed by No 83 of 2014) 
club fees  
 club fees, no deduction for .......... 26-45
 see also subscriptions to associations  
Commonwealth places windfall tax .......... 26-17
companies, co-operative and mutual 
 generally .......... 117 to 121
 distributions of assessable income .......... 120
companies, private  
 excessive payments to shareholders directors and associates, reduced deduction .......... 109
conservation covenants .......... Division 31
consolidated groups and MEC groups 
 assets in relation to Division 230 financial arrangement .......... 701-61(4)
controlled foreign companies  
 generally .......... 316 to 468
 bad debts .......... 399A
 decline in value of depreciating assets .......... 398
 finance share dividends .......... 394
 taxes paid .......... 393
convertible notes  
 see interest  
copyrights  
 expenditure in obtaining registration .......... Subdivisions 40-B and 40-I
currency exchange gains and losses  
 see foreign exchange  
death of timber owner  
 see timber  
debt interests  
 certain returns in respect of debt interests .......... 25-85
depreciation  
 see capital allowances  
designs  
 expenditure in obtaining or extending registration .......... Subdivisions 40-B and 40-I
disposal of depreciating assets  
 see capital allowances  
dividends 
 dividends including LIC capital gain component .......... 115-280
 franking credits, companies and foreign residents .......... 207-95(2) , 207-95(3) , 220-405(3)
 franking credits, pooled development funds (PDFs) .......... 124ZM
 non-share equity interests, no deduction for return in respect of .......... 26-26
 unfranked non-portfolio dividends .......... 46FA
education expenses  
 Higher Education Contribution Scheme, no deduction unless provided as fringe benefit .......... 26-20
 limit on deduction .......... 82A
 see also overseas debtors repayment levy 
 see also student start-up loans 
election expenses  
 Federal and State Parliament election expenses .......... 25-60 , 25-70
 local government election expenses, limited deduction for .......... 25-65 , 25-70
electricity connections  
 see capital allowances  
embezzlement 
 see theft  
employees  
 pensions, gratuities or retiring allowances for ex-employees .......... 25-50
 Seasonal Labour Mobility Program, delayed deduction for salary, wages etc. paid to employees under program until Seasonal Labour Mobility Program withholding tax payable has been paid .......... 26-25A
 see also shares  
entertainment 
 expenditure, no deduction for some .......... Division 32
 meal entertainment, calculation of deductible amount .......... 51AEA to 51AEC
environment  
 see capital allowances  
excess non-concessional contributions tax 
 no deduction .......... 26-75
exploration and prospecting  
 see capital allowances  
family 
 no deduction for maintaining spouse or child .......... 26-40
[ family tax benefit] (Repealed by No 56 of 2010) 
farm management deposits  
 see primary production  
[ film income] (Repealed by No 164 of 2007) 
film licensed investment companies (FLICs)  
 see shares  
financial arrangements 
 losses from .......... 230-15(2) and (3)
 see also borrowing expenses, interest, leases and securities
foreign exchange 
 losses .......... 775-30
foreign financial entities ' Australian permanent establishments  
 generally .......... Part IIIB
 thin capitalisation .......... Subdivision 820-FB
 transfer of losses .......... Subdivisions 170-A and 170-B
[ foreign income] (Repealed by No 143 of 2007 ) 
[ foreign investment funds (FIFs)] (Repealed by No 114 of 2010) 
[ foreign life assurance policies] (Repealed by No 114 of 2010) 
[ foreign residents] (Repealed by No 79 of 2007 ) 
[ foreign tax credits] (Repealed by No 143 of 2007 ) 
forestry managed investment schemes  
 payments under scheme .......... 394-10(1)
franchise fees windfall tax .......... 26-15
freight  
 freight for shipped goods .......... 135A
fringe benefits  
 contributions for private component, no deduction for .......... 51AJ
 employee ' s car expenses where car provided by employer can be used for private purposes, no deduction for .......... 51AF
 employee ' s car parking expenses, no deduction for .......... 51AGA
 expense payment fringe benefits, reduced deduction .......... 51AH
general insurance companies and companies that self insure 
 claims paid .......... 321-25 and 321-95
 increase in value of outstanding claims liability .......... 321-15 and 321-85
 increase in value of unearned premium reserve .......... 321-55
gifts  
 general .......... Division 30
 limit on deduction .......... 26-55
 see also tax avoidance schemes  
[ grape vines] (Repealed by No 129 of 2004) 
[ GST - acquiring or upgrading plant to meet GST obligations etc] (Repealed by No 77 of 2001) 
horticultural plants ..........  
 see capital allowances  
higher education assistance .......... 26-20
illegal activities .......... 26-54
income equalisation deposits  
 see primary production  
industrial property  
 see intellectual property and R & D  
infrastructure 
 see tax losses 
[ insurance and annuity business] (Repealed by No 101 of 2004) 
insurance with non-residents  
 generally .......... 141 to 148
 insurance premiums, no deduction unless arrangement to pay tax .......... 145
 reinsurance, no deduction for resident carrying on insurance business in Australia for reinsurance premiums paid to a non-resident .......... 148
intellectual property  
 see capital allowances  
interest 
 convertible notes, interest on, generally .......... 82L to 82T
 foreign residents, debt creation involving, generally .......... 159GZY to 159GZZF
 foreign residents, delayed deduction for interest paid to until withholding tax payable has been paid .......... 26-25
 life assurance premiums, interest etc. on loans to finance, no deduction for .......... 26-85
 superannuation contributions, interest etc. on loans to finance, no deduction for .......... 26-80
 underpayment or late payment of tax, interest for .......... 25-5
international agreements  
 see transfer pricing  
international profit shifting  
 see transfer pricing  
investment company  
 see shares  
IRUs 
 see capital allowances  
land degradation 
 see primary production  
lease document expenses .......... 25-20
lease, authority, licence, permit or quota 
 expenditure to terminate .......... 25-110
leases 
 finance leases and arrangements, use of property if end-user an exempt public body or use outside Australia to produce exempt income .......... 159GE to 159GO
 leases of assets being put to tax preferred use .......... Division 250
 leveraged arrangements, property used:
    · other than to produce assessable income; or
    · by a non-resident outside Australia; or
    · by a previous owner ..........
51AD
 payment for failure to comply with lease obligation to repair premises .......... 25-15
leases of luxury cars  
 accrual amounts .......... 242-35
 adjustment amounts (lessee) .......... 242-70
 adjustment amounts (lessor) .......... 242-65
 lease payments not deductible .......... 242-55
 payments to acquire car not deductible .......... 242-85
leave payments  
 accrued leave transfer payments .......... 26-10
 no deduction for leave payments until paid .......... 26-10
leisure facilities 
 no deduction for .......... 26-50
[ life assurance companies ] (Repealed by No 89 of 2000) 
life insurance companies .......... Subdivision 320-C
limited recourse debt  
 later payments .......... 243-45
 later payments (replacement debt) .......... 243-50
loans  
 see borrowing expenses, interest and securities  
losses  
 foreign exchange .......... 775-30
 profit-making undertaking or scheme .......... 25-40
 property sale .......... 25-40
 traditional securities, loss on disposal or redemption of .......... 70B
 see also tax losses  
managed investment trusts 
 losses from carried interests .......... 275-200(4)
management and investment company shares  
 see shares  
membership of associations  
 see subscriptions to associations  
mining  
 see capital allowances  
misappropriation 
 by employee or agent .......... 25-47
mortgage  
 expenses of discharging a mortgage .......... 25-30
motor vehicles  
 see car expenses and leases  
National Disability Insurance Scheme  
 National Disability Insurance Scheme expenditure .......... 26-97
non-cash transactions  
 non-cash business benefits .......... 51AK
 non-cash consideration, money value deemed to have been paid or given .......... 21
non-commercial business activities  
 deferral of non-commercial losses .......... Division 35
non-resident trust estates  
 generally .......... 102AAA to 102AAZG
 modified application of depreciation provisions .......... 102AAY
 modified application of trading stock provisions .......... 102AAZ
 no deductions allowable under Division 36 .......... 102AAZC
notional sales and loans  
 adjustment amounts (lessee) .......... 240-110(1)
 adjustment amounts (lessor) .......... 240-105(3)
 arrangement payments, no deduction for .......... 240-55
 notional interest .......... 240-50 , 250-155
 deemed loan treatment for financial benefits provided for tax preferred use of asset .......... Subdivision 250-C
 payments to acquire property, no deduction for .......... 240-85
offshore banking units  
 generally .......... 121A to 121EL
 deductions for .......... 121EG
overseas debtors repayment levy 
 limit on deduction .......... 82A
 payment made to reduce a liability to overseas debtors repayment levy under the Student Loans (Overseas Debtors Repayment Levy) Act 2015 , no deduction unless provided as fringe benefit .......... 26-20
partnerships 
 foreign hybrid loss exposure adjustment .......... 830-50
 losses, partner ' s share of partnership loss .......... 90 , 92
patents 
 expenditure relating to grant of patents, etc. .......... Subdivisions 40-B and 40-I
penalties  
 no deduction for penalties .......... 26-5
personal services income  
 alienated personal services income .......... Subdivision 86-B
 general .......... Division 85
[ petroleum prospecting and mining] (Repealed by No 77 of 2001) 
[ plant and articles] (Repealed by No 77 of 2001) 
political contributions and gifts 
 denial of certain deductions .......... 26-22
 deductions for individuals .......... Subdivision 30-DA
pooled development funds (PDFs) .......... 124ZM to 124ZZD
[ pooled software] (Repealed by No 77 of 2001) 
prepaid expenditure  
 see advance expenditure  
primary production  
 farm management deposits .......... Division 393
 see also capital allowances and timber  
property 
 arrangements relating to assets being put to tax preferred use .......... Division 250
 arrangements relating to use of property if end-user an exempt public body or use outside Australia to produce exempt income .......... 159GE to 159GO
 leveraged arrangements, property used:
    · other than to produce assessable income; or
    · by a non-resident outside Australia; or
    · by a previous owner ..........
51AD
 sale of property, profit or loss .......... 82(2)
 see also capital allowances and losses  
public trading trusts  
 generally .......... 102M to 102T
qualifying securities  
 see securities  
[ quarrying] (Repealed by No 77 of 2001) 
R & D .......... Division 355
rates and land taxes  
 premises used to produce mutual receipts .......... 25-75
rebatable benefits 
 no deduction for .......... 26-19
[ regional headquarters (RHQs)] (Repealed by No 47 of 2016) 
registered emissions units 
 expenditure incurred in becoming the holder of .......... 420-15
 expenditure incurred in ceasing to hold .......... 420-42
 excess of opening over closing value of .......... 420-45
reimbursements  
 expense payment fringe benefits, reduced deduction .......... 51AH
reinsurance  
 see insurance with non-residents  
related entities (including relatives) 
 reduction of deduction for payment or liability to .......... 26-35 , 65(1B) and (1C)
repairs  
 general .......... 25-10
 repair covenants, payment for non-compliance with covenant to repair under lease .......... 25-15
[ research & development] (Repealed by No 93 of 2011) 
roads  
 see timber  
royalties  
 royalty, no deduction for royalty paid to a foreign resident until the withholding tax payable has been paid .......... 26-25
scientific research  
 see R & D  
securities  
 qualifying securities .......... 159GP to 159GZ
 substituted securities .......... 23K
 traditional securities, loss on disposal or redemption of .......... 70B
shares  
 buy-backs .......... 159GZZZJ to 159GZZZT
 cancellation of subsidiary ' s shares in holding company .......... 159GZZZC to 159GZZZI
 employee share schemes, deduction for provider of ESS interests .......... Subdivision 83A-D
 ..........  
 see also dividends and securities  
[ small-medium enterprises (SMEs)] (Repealed by No 23 of 2018) 
Software  
 see capital allowances  
spectrum licences  
 see capital allowances  
State or Territory bodies (STBs)  
 body ceasing to be STB, some deductions not allowed .......... 24AW to 24AYA
student start-up loans 
 limit on deduction .......... 82A
 payment made to reduce a debt to the Commonwealth under Chapter 2AA of the Social Security Act 1991 (student start-up loans), no deduction unless provided as fringe benefit .......... 26-20
 payment made to reduce a debt to the Commonwealth under Part 2 of the Student Assistance Act 1973 (ABSTUDY student start-up loans), no deduction unless provided as fringe benefit .......... 26-20
subscriptions to associations .......... 25-55
substantiation  
 work, travel and car expenses .......... Division 900
superannuation  
 see insurance and annuity business and interest  
superannuation and related business  
 generally .......... Part 3-30
 asset disposals .......... 295-85
 death or disability benefits, deduction for future service element .......... 295-470
 death or disability cover, premiums for .......... 295-465
 financial assistance levy .......... 295-490(1) (table item 3)
superannuation contributions surcharge  
 no deduction .......... 26-60
superannuation - deductibility of contributions  
 generally .......... Division 290
 contributions for employees etc. .......... Subdivision 290-B
 contributions to non-complying funds .......... sections 290-10 and 290-75
 limit on deduction .......... 26-55
 no deduction under any other provision of the Act .......... section 290-10
 personal contributions .......... Subdivision 290-C
[ superannuation - employer contributions] (Repealed by No 15 of 2007) 
superannuation guarantee charge  
 no deduction for .......... 26-95
 late contribution offset, no deduction for .......... 290-95
superannuation supervisory levy  
 late lodgment amount, no deduction for .......... 26-90
tax agent ' s fees  
 see tax related expenses  
tax avoidance schemes  
 companies, use of tax losses or deductions to avoid tax .......... Division 175
 diverted assessable income .......... 121F to 121L
 dividend stripping .......... 177E
 gifts .......... 78A
 imputation, manipulation of .......... 207-150(2) , 207-150(3)
 prepaid outgoings to avoid tax .......... 82KJ
 recouped expenditure .......... 82KH to 82KL
 tax avoidance scheme, no deduction allowable where deduction the result of .......... 177A to 177G
 trading stock .......... 70-20 , 52A
tax exempt entities  
 treatment of losses and outgoings on becoming taxable .......... Schedule 2D
tax losses  
 bad debts, companies .......... 165-120
 change of ownership or control of a company
    generally ..........
Division 165
     for earlier income years .......... Subdivision 165-A
     for income year of the change .......... Subdivision 165-B
 designated infrastructure project entities .......... Division 415
 earlier income years .......... Division 36
 life insurance companies .......... Subdivision 320-D
 pooled development funds .......... Subdivision 195-A
 transfer between companies in same wholly-owned group .......... Subdivision 170-A
tax preferred asset financing 
 generally .......... Division 250
 denial of capital allowance deductions in relation to asset being put to tax preferred use .......... 250-145
 reduction in capital allowance deductions in relation to asset being put to tax preferred use .......... 250-150
tax related expenses .......... 25-5
telecommunications site access rights  
 see capital allowances  
telephone lines  
 see primary production  
[ termination payments surcharge] (Repealed by No 23 of 2018) 
theft  
 by employee or agent .......... 25-45
thin capitalisation  
 disallowing of deductions .......... Division 820
timber  
 death of owner of land carrying trees, deduction of the part of land cost attributable to trees .......... 70-120
 disposal of land carrying trees, deduction of the part of land cost attributable to trees .......... 70-120
 felling trees, deduction of cost of land attributable to trees felled or of cost of right to fell trees .......... 70-120
 see also capital allowances  
trade support loan 
 limit on deduction .......... 82A
 payment made to reduce a debt to the Commonwealth under the Trade Support Loans Act 2014 , no deduction unless provided as fringe benefit .......... 26-20
trading ships  
 see capital allowances  
trading stock  
 Commissioner may determine whether consideration paid for chose in action is reasonable .......... 52A
 excess of opening stock over closing value .......... 70-35(3)
 expenditure deemed not to be of a capital nature .......... 70-25
 prepayments, when stock becomes trading stock on hand .......... 70-15
 see also tax avoidance schemes and timber  
traditional securities  
 see securities  
training guarantee  
 training guarantee charge, no deduction for .......... 51(7)
transfer pricing  
 arm ' s length principle for cross-border conditions between entities .......... Subdivision 815-B
 arm ' s length principle for permanent establishments .......... Subdivision 815-C
transport expenses  
 incurred in travel between workplaces .......... 25-100
travel expenses  
 accompanying relatives, no deduction for some travel expenses .......... 26-30
 travel related to the use of residential premises as residential accommodation .......... 26-31
 see also substantiation 
trees in carbon sink forests  
 see capital allowances  
trusts  
 trust income, deductions considered in calculating .......... 95 to 102
 see also foreign residents , non-resident trust estates and public trading trusts  
uniforms  
 non-compulsory uniforms .......... Division 34
United Medical Protection Limited support payments .......... 25-105
uranium mining  
 see mining  
water facilities  
 improvements .......... 26-100
 see also capital allowances 
work expenses  
 see substantiation  
work in progress  
 payment of a work in progress amount .......... 25-95

[ CCH Note: S 12-5 will be amended by No 132 of 2017, s 3 and Sch 1 item 7, by inserting " first home super saver scheme re-contribution .................. section 290-168 " after " contributions to non-complying funds .............................. sections 290-10 and 290-75 " in table item headed " superannuation - deductibility of contributions " , effective 1 July 2018.]


 



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