Commonwealth Numbered Acts

TAXATION LAWS AMENDMENT ACT (No. 2) 1990No. 57, 1990 - SECT 11

11. After section 79D of the Principal Act the following sections are
inserted: General domestic losses of post-1989 years of income

"79E. (1) For the purposes of this section, a taxpayer incurs a loss in a
post-1989 year of income equal to the amount (if any) by which the taxpayer's
non-loss deductions for the year of income exceed the sum of the taxpayer's
assessable income and net exempt income for that year.

"(2) In spite of subsection (1), if Subdivision B of Division 2A applies in
relation to a taxpayer in relation to a post-1989 year of income, then, for
the purposes of this section, the taxpayer incurs a loss in the year of income
if, and only if, the taxpayer's current year loss amount for the year exceeds
the taxpayer's net exempt income for the year, and the amount of the loss is
equal to the excess.

"(3) Subject to this section, so much of a taxpayer's losses incurred in any
of the post-1989 years of income before a particular year of income as has not
been allowed as a deduction from the taxpayer's income of any of those years
is allowable as a deduction in accordance with the following provisions:

   (a)  where the taxpayer has not derived exempt income in the particular
        year of income, the deduction is to be made from the taxpayer's
        assessable income of that year;

   (b)  where the taxpayer has derived exempt income in that year, the
        deduction is to be made successively from the taxpayer's net exempt
        income and from the taxpayer's assessable income of that year;

   (c)  where a deduction is allowable under this section in respect of 2 or
        more losses, the losses are to be taken into account in the order in
        which they were incurred.

"(4) Where a taxpayer has incurred a loss in a post-1989 year of income for
the purposes of this section and has also incurred a loss in that year for the
purposes of section 79F, only the excess (if any) of the former loss over the
latter loss is to be taken into account for the purposes of subsection (3).

"(5) The losses referred to in subsection (3) are not allowable as a deduction
from foreign income of a taxpayer except to the extent provided in an election
under subsection (6).

"(6) A taxpayer who has derived foreign income in a year of income may elect
that the whole or a specified part of the losses referred to in subsection (3)
be allowable as a deduction from the taxpayer's foreign income of that year.

"(7) An election under subsection (6):

   (a)  must be exercised by notice in writing to the Commissioner; and

   (b)  must be lodged with the Commissioner on or before the date of lodgment
        of the return of income of the taxpayer for the year of income to
        which the election relates or within such further period as the
        Commissioner allows.

"(8) In spite of any other provision of this section, if, before a year of
income, a taxpayer:

   (a)  has become a bankrupt; or

   (b)  not having become a bankrupt, has been released from any debts by the
        operation of an Act relating to bankruptcy; then no loss incurred by
        the taxpayer before the day on which the taxpayer became a bankrupt or
        was so released is an allowable deduction in respect of the year of
        income under subsection (3).

"(9) Where:

   (a)  in a year of income (in this section called the 'payment year'), a
        taxpayer pays an amount in respect of a debt incurred by the taxpayer
        in a preceding year of income; and

   (b)  that preceding year of income (in this section called the 'loss year')
        is a year in which the taxpayer incurred a loss to which subsection
        (8) applies; then, subject to subsection (10), the amount paid by the
        taxpayer is an allowable deduction for the payment year, but only to
        the extent (if any) that it does not exceed so much of the debt as the
        Commissioner is satisfied was taken into account in calculating the
        amount of the loss.

"(10) The total deductions allowable to the taxpayer for the payment year
under subsection (9) are not to exceed the amount of the loss reduced by the
sum of:

   (a)  the deductions (if any) allowed under subsection (9) from the
        taxpayer's income of a year or years of income before the payment year
        in relation to the payment of other amounts in respect of debts
        incurred by the taxpayer in the loss year; and

   (b)  so much (if any) of the loss as has been allowed under subsection (3)
        as a deduction or deductions from the taxpayer's income (including the
        taxpayer's net exempt income) of a year or years of income before the
        payment year; and

   (c)  so much (if any) of the loss as, but for subsection (8), would have
        been allowed or allowable under subsection (3) as a deduction or
        deductions from the taxpayer's net exempt income of the payment year
        or of a year or years of income before the payment year.

"(11) Subsections 80 (5), (6) and (7) have the same effect in relation to
deductions under subsection (3) of this section as they do in relation to
deductions under subsection 80 (2).

"(12) In this section:
'class of income' has the same meaning as in section 160AFD;
'current year loss amount', in relation to a taxpayer to whom Subdivision B of
Division 2A applies in relation to a year of income, means the amount
calculated using the formula:
Excess notional loss + Excess deductible amount where:
'Excess notional loss' means the amount (if any) by which the sum of the
taxpayer's notional losses in respect of relevant periods (within the meaning
of that Subdivision) in relation to the year of income exceeds the eligible
notional loss (within the meaning of that Subdivision) of the taxpayer in
relation to the year of income;
'Excess deductible amount' means the amount (if any) by which the deductible
amount referred to in the application of subsection 50C (2) in relation to the
taxpayer in relation to the year of income exceeds the income amount referred
to in that subsection;
'foreign source' has the same meaning as in section 160AFD;
'net exempt income', in relation to a taxpayer, means:

   (a)  where the taxpayer is a resident - the amount by which the taxpayer's
        exempt income derived from all sources exceeds the sum of the expenses
        (not being expenses of a capital nature) incurred in deriving that
        income and any taxes payable in respect of that income in any country
        or place outside Australia; and

   (b)  where the taxpayer is a non-resident - the amount by which the
        taxpayer's exempt income derived from sources in Australia (other than
        income, if any, to which section 128D applies) exceeds the sum of the
        expenses (not being expenses of a capital nature) incurred in deriving
        that income;
'non-loss deduction' means an allowable deduction other than one allowable
under this section or section 79F, 80, 80AAA or 80AA;
'post-1989 year of income' means the year of income commencing on1 July 1989
or any later year of income.

"(13) In applying the definition of 'net exempt income' in subsection (12) in
relation to a taxpayer:

   (a)  if the taxpayer is a resident, there is to be disregarded so much of
        any net exempt income from petroleum (within the meaning of Division
        10AA) derived by the taxpayer in a year of income as does not exceed
        the amount that would be the unrecouped capital expenditure of the
        taxpayer (within the meaning of that Division) as at the end of the
        year of income if the taxpayer had not derived that net exempt income
        from petroleum; and

   (b)  for the purposes of paragraph (b) of the definition, exempt income to
        which subsection 26AG (1) applies is to be taken to be derived from
        sources in Australia and any taxes payable in respect of that income
        in any country or place outside Australia are to be taken to be
        expenses incurred in deriving that income.

"(14) For the purposes of the definition of 'non-loss deduction' in subsection
(12), where the amount of a class of income derived by a taxpayer in a year of
income from a foreign source is exceeded by the sum of:

   (a)  any deductions allowed or allowable from the assessable income of the
        taxpayer of the year of income that relate exclusively to income of
        that class derived from that source; and

   (b)  so much of any other deductions allowed or allowable from that
        assessable income (other than apportionable deductions) as, in the
        opinion of the Commissioner, may appropriately be related to income of
        that class derived from that source; then the amount of the excess is
        to be disregarded. Film losses of post-1989 years of income

"79F. (1) For the purposes of this section, a taxpayer incurs a film loss in a
post-1989 year of income if:

   (a)  the amount of the taxpayer's film deductions for the year exceeds the
        sum of the taxpayer's assessable film income and net exempt film
        income for the year; and

   (b)  the taxpayer incurs a loss for the year for the purposes of section
        79E.

"(2) The amount of the film loss is so much of the excess referred to in
paragraph (1) (a) as does not exceed the amount of the loss referred to in
paragraph (1) (b).

"(3) In spite of subsection (1), if Subdivision B of Division 2A applies in
relation to a taxpayer in relation to a post-1989 year of income, then, for
the purposes of this section, the taxpayer incurs a film loss in the year of
income if, and only if:

   (a)  the taxpayer's current year loss amount for the year exceeds the
        taxpayer's net exempt film income of the year; and

   (b)  the taxpayer incurs a loss in the year of income for the purposes of
        section 79E.

"(4) The amount of the film loss is so much of the excess referred to in
paragraph (3) (a) as does not exceed the amount of the loss referred to in
paragraph (3) (b).

"(5) In determining for the purposes of subsection (3) whether a taxpayer has
a current year loss amount, the only assessable income of the taxpayer to be
taken into account is assessable film income and the only allowable deductions
of the taxpayer to be taken into account are film deductions.

"(6) Subject to this section, so much of a taxpayer's film losses incurred in
any of the post-1989 years of income before a particular year of income as has
not been allowed as a deduction from the taxpayer's income of any of those
years is allowable as a deduction in accordance with the following provisions:

   (a)  where the taxpayer has not derived exempt income in the particular
        year of income, the deduction is to be made from the taxpayer's
        assessable income of that year;

   (b)  where the taxpayer has derived exempt income in that year, the
        deduction is to be made successively from the taxpayer's net exempt
        income and from the taxpayer's assessable income of that year;

   (c)  where a deduction is allowable under this section in respect of 2 or
        more losses, the losses are to be taken into account in the order in
        which they were incurred.

"(7) For the purposes of applying subsection (6) in relation to a taxpayer in
relation to a year of income:

   (a)  the amount of the deduction to be made from the taxpayer's net exempt
        income of the year of income is not to exceed the amount of the
        taxpayer's net exempt film income of the year of income; and

   (b)  the amount of the deduction to be made from the taxpayer's assessable
        income of the year of income is not to exceed the amount of the
        taxpayer's net assessable film income of the year of income.

"(8) In spite of any other provision of this section, if, before a year of
income, a taxpayer:

   (a)  has become a bankrupt; or

   (b)  not having become a bankrupt, has been released from any debts by the
        operation of an Act relating to bankruptcy; then no film loss incurred
        by the taxpayer before the day on which the taxpayer became a bankrupt
        or was so released is an allowable deduction in respect of the year of
        income under subsection (6).

"(9) Where:

   (a)  in a year of income (in this section called the 'payment year'), a
        taxpayer pays an amount in respect of a debt incurred by the taxpayer
        in a preceding year of income; and

   (b)  that preceding year of income (in this section called the 'loss year')
        is a year in which the taxpayer incurred a loss to which subsection
        (8) applies; and

   (c)  the debt was incurred in the course of deriving or gaining amounts to
        which section 26AG applies in relation to the taxpayer in relation to
        any year of income; then, subject to subsection (10), the amount paid
        by the taxpayer is an allowable deduction for the payment year, but
        only to the extent (if any) that it does not exceed so much of the
        debt as the Commissioner is satisfied was taken into account in
        calculating the amount of the loss.

"(10) The total deductions allowable to the taxpayer for the payment year
under subsection (9) are not to exceed the amount of the film loss reduced by
the sum of:

   (a)  the deductions (if any) allowed under subsection (9) from the
        taxpayer's income of a year or years of income before the payment year
        in relation to the payment of other amounts in respect of debts
        incurred by the taxpayer in the loss year; and

   (b)  so much (if any) of the loss as has been allowed under subsection (6)
        as a deduction or deductions from the taxpayer's income (including the
        taxpayer's net exempt income) of a year or years of income before the
        payment year; and

   (c)  so much (if any) of the film loss as, but for subsection (8), would
        have been allowed or allowable under subsection (6) as a deduction or
        deductions from the taxpayer's net exempt income of the payment year
        or of a year or years of income before the payment year.

"(11) Subsection 80AAA (12) has the same effect in relation to deductions
under subsection (6) of this section as it does in relation to deductions
under subsection 80AAA (7).

"(12) In this section:
'assessable film income', in relation to a taxpayer in relation to a year of
income, means so much of the amount, or the sum of the amounts, to which
section 26AG applies in relation to the taxpayer in relation to the year of
income as is assessable income;
'current year loss amount' has the same meaning as in section 79E;
'exempt film income', in relation to a taxpayer in relation to a year of
income, means so much of the amount, or the sum of the amounts, to which
section 26AG applies in relation to the taxpayer in relation to the year of
income as is exempt income;
'film deductions', in relation to a taxpayer in relation to a year of income,
means:

   (a)  deductions allowable to the taxpayer in respect of the year of income
        under sections 124ZAF and 124ZAFA; and

   (b)  deductions allowable to the taxpayer in respect of the year of income
        that are deductions to which section 124ZAO applies in relation to the
        taxpayer in relation to the year of income;
'net assessable film income', in relation to a taxpayer in relation to a year
of income, means the amount of the assessable film income of the taxpayer of
the year of income as reduced by the film deductions of the taxpayer of the
year of income;
'net exempt film income', in relation to a taxpayer in relation to a year of
income, means the amount of the exempt film income of the taxpayer of the year
of income as reduced by the sum of:

   (a)  any taxes payable in respect of that exempt film income in any country
        or place outside Australia; and

   (b)  any expenses (not being expenses of a capital nature) to the extent to
        which they were incurred in the year of income in deriving that exempt
        film income;
'net exempt income' has the same meaning as in section 79E;
'post-1989 year of income' means the year of income commencing on 1 July 1989
or any later year of income.".