Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (No. 4) 1988 No. 95 of 1988 - SECT 46

46. After Subdivision G of Division 3 of Part III of the Principal Act the
following Subdivision is inserted in Division 3 of Part III:

"Subdivision H-Period of deductibility of certain advance expenditure
Interpretation

"82KZL. (1) In this Subdivision, unless the contrary intention appears:
'agreement' means any agreement, arrangement, understanding or scheme, whether
formal or informal, whether express or implied and whether or not enforceable,
or intended to be enforceable, by legal proceedings;
'eligible service period', in relation to an amount of expenditure incurred
under an agreement, means the period from the beginning of:

   (a)  the day, or the first day, on which the thing to be done under the
        agreement in return for the amount of expenditure is required, or
        permitted, as the case may be, to commence being done; or

   (b)  if the expenditure is incurred on a later day-the day on which the
        expenditure is incurred;
until the end of:

   (c)  the day, or the last day, on which the thing to be done under the
        agreement in return for the amount of expenditure is required, or
        permitted, as the case may be, to cease being done; or

   (d)  if that day or last day ends more than 10 years after the beginning of
        the period-10 years after the beginning of the period;
'excluded expenditure' means an amount of expenditure:

   (a)  less than $1,000;

   (b)  required to be incurred by a law, or by an order of a court, of the
        Commonwealth, a State or a Territory;

   (c)  under a contract of service; or

   (d)  to the extent that it is of a capital, private or domestic nature;
'transfer' includes assign.

"(2) Without otherwise limiting the generality of references in this
Subdivision to expenditure being incurred under an agreement in return for the
doing of a thing under the agreement:

   (a)  where expenditure incurred under an agreement consists of a payment of
        loan interest or a payment of a similar kind, the expenditure shall,
        for the purposes of this Subdivision, be taken to be incurred in
        return for the making available or continued making available, as the
        case requires, of the loan principal, or other amount of a similar
        kind, under the agreement during the period to which the payment
        relates;

   (b)  where expenditure incurred under an agreement consists of a payment of
        rent, a lease payment or a payment of a similar kind, the expenditure
        shall, for the purposes of this Subdivision, be taken to be incurred
        in return for the making available or continued making available, as
        the case requires, of the thing rented or leased, or other thing of a
        similar kind, under the agreement during the period to which the
        payment relates; and

   (c)  where expenditure incurred under an agreement consists of a payment of
        an insurance premium or a payment of a similar kind, the expenditure
        shall, for the purposes of this Subdivision, be taken to be incurred
        in return for the provision or continued provision, as the case
        requires, of insurance against the risk concerned, or of a thing of a
        similar kind, under the agreement during the period to which the
        payment relates. Period of deductibility of certain advance
        expenditure

"82KZM. Where:

   (a)  a taxpayer incurs expenditure under an agreement entered into after 25
        May 1988;

   (b)  the expenditure is:

        (i)    incurred in return for the doing of a thing under the agreement
               that is not to be wholly done within 13 months after the day on
               which it is incurred; and

        (ii)   not excluded expenditure; and

   (c)  a deduction under section 51 in respect of the expenditure would,
        apart from this section, be allowable from the assessable income of
        the taxpayer of the year of income in which the expenditure is
        incurred; then, for the purposes of this Act, instead of the deduction
        under section 51 being allowable as mentioned in paragraph (c), a
        proportion of the deduction is allowable from the assessable income of
        the taxpayer of each year of income during which the whole or part of
        the eligible service period in relation to the expenditure occurs,
        being a proportion ascertained in accordance with the formula:
Period in year
------------------------
Eligible service period where:
Period in year is the number of days in the whole or the part of the eligible
service period that occurs in the year of income;
Eligible service period is the number of days in the eligible service period.
Transfer etc. of rights under agreement

"82KZN. Where:

   (a)  under an agreement entered into either before or after the
        commencement of this section, a taxpayer (in this section called the
        'original taxpayer') incurs expenditure in return for the doing of a
        thing during a period after the incurring of the expenditure; and

   (b)  either:

        (i)    the original taxpayer transfers to another taxpayer (in this
               section called the 'recipient taxpayer') all of his or her
               rights under the agreement in relation to the doing of the
               thing during the remainder of the period; or

        (ii)   the agreement is discharged (whether by performance or
               otherwise) in so far as it relates to the doing of the thing
               during the remainder of the period; the following provisions
               have effect for the purposes of this Subdivision:

   (c)  if the whole or part of a deduction under section 51 in respect of the
        expenditure is, because of this Subdivision, allowable from the
        assessable income of the original taxpayer of any year of income
        occurring after the year of income in which the transfer or discharge
        occurs-that deduction is instead allowable from the assessable income
        of the year of income in which the transfer, assignment or discharge
        occurs;

   (d)  if the recipient taxpayer incurs expenditure in return for the
        transfer-the recipient taxpayer shall be taken to have incurred, under
        an agreement entered into at the time of the transfer, so much of that
        expenditure as is not of a capital, private or domestic nature in
        return for the doing of the thing during the remainder of the period.
        Partnership changes where entire interest in agreement rights is not
        transferred "82KZO. Where:

   (a)  under an agreement entered into after 25 May 1988, a person (in this
        section called the 'original person'), or the partners in a
        partnership (in this section called the 'original partnership'),
        incurs or incur expenditure in return for the doing of a thing during
        a period after the incurring of the expenditure;

   (b)  either of the following (in this section called a 'partnership
        change') happens:

        (i)    a partnership is formed or the original partnership is
               dissolved, or both; or

        (ii)   the constitution of the original partnership, or the interests
               of the partners in the original partnership, is or are varied;
with the result that, after the partnership change:

        (iii)  a person (in this section called the 'later person'), or the
               partners in a partnership (in this section called the 'later
               partnership'), holds or hold all of any rights under the
               agreement to have the thing done during the period after the
               partnership change; and

        (iv)   the original person, or one or more of the partners in the
               original partnership, has an interest in the rights after the
               partnership change; and

   (c)  the whole or part of a deduction under section 51 in respect of the
        expenditure (which whole or part is in this section called a 'spread
        deduction') is, because of the application of this Subdivision,
        allowable from the assessable income of the original person or the
        original partnership of the year of income in which the partnership
        change happens or a subsequent year of income; the following
        provisions have effect:

   (d)  if a spread deduction is allowable in relation to the year of income
        in which the partnership change occurs-the entitlement to the
        deduction shall, for the purposes of this Act but subject to any later
        application of this section, be apportioned between the original
        person or original partnership and the later person or later
        partnership according to the portions of the eligible service period
        in the year of income (or, if the case requires, of so much of the
        period as occurs after a partnership change resulting from a previous
        application of this section) that occur before and after the
        partnership change;

   (e)  if a spread deduction relates to a subsequent year of income-the later
        person or later partnership, instead of the original person or
        original partnership, shall, for the purposes of this Act but subject
        to any later application of this section, be entitled to the
        deduction;

   (f)  for the purposes of any later application of this section or section
        82KZN, the later person or later partnership, instead of the original
        person or original partnership, shall be taken to have incurred the
        expenditure under the agreement.".