Commonwealth Consolidated Acts

[Index] [Table] [Search] [Search this Act] [Notes] [Noteup] [Previous] [Next] [Download] [Help]

INCOME TAX ASSESSMENT ACT 1997 - SECT 20.45

Effect of balancing charge

             (1)  This section may affect the operation of section 20- 35 or 20-40 (as appropriate) if:

                     (a)  a balancing adjustment is required for the * current year (or for an earlier income year) because you have deducted or can deduct an amount for an income year for the loss or outgoing; and

                     (b)  an amount (the balancing charge ) is included in your assessable income for the * current year (or for the earlier income year) because of the balancing adjustment.

To find out about balancing adjustments, see Subdivision 40-D.

Effect on section 20- 35

             (2)  In applying section 20- 35, treat each of the following as reduced by the balancing charge:

                     (a)  the amount of the loss or outgoing;

                     (b)  the total of what you can deduct for the loss or outgoing for the * current year, or have deducted or can deduct for an earlier income year.

Effect on section 20-40

             (3)  In applying the method statement in subsection 20-40(2), reduce the total deductions for the loss or outgoing by the balancing charge.

Example:    Continuing the example in subsection 20-40(2): at the start of the 2005-06 income year, the company:

*       receives a further $10,000 as recoupment; and

*       sells the depreciating asset for $75,000.

                   As a result of the sale, a balancing adjustment of $5,000 is included under section 40- 285 in the company's assessable income for that income year.

                   How much of the recoupment amount received in the 2005-06 income year is assessable for that income year?

                   Applying the method statement in subsection 20-40(2):

                   After step 1: the total assessable recoupment is $30,000 (received during 2002-03 and 2005-06).

                   After step 2: the recoupment already assessed is $20,000 (for 2002-03 and 2003-04).

                   After step 3: the unassessed recoupment is:
total assessable recoupment minus recoupment already assessed,
i.e. $30,000 minus $20,000 = $10,000.

                   After step 4: the total deductions for the loss or outgoing are $30,000 ($10,000 for each of 2002-03, 2004-04 and 2004-05), reduced by $5,000 (the amount included in assessable income for the balancing adjustment), i.e. $25,000.

                   After step 5: the outstanding deductions are:
total deductions for the loss or outgoing minus recoupment already assessed, i.e. $25,000 minus $20,000 = $5,000.

                   After step 6: the unassessed recoupment (step 3) is greater than outstanding deductions (step 5), so the amount of the outstanding deductions is included in assessable income, i.e. $5,000.



AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback