Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 166.40

  (1)   This Subdivision modifies the way Subdivision   165 - C applies to a company that is:

  (a)   a * widely held company at all times during the * current year; or

  (b)   an * eligible Division   166 company at all times during the current year; or

  (c)   a widely held company for a part of the current year and an eligible Division   166 company for the rest of the current year.

Note 1:   Subdivision   165 - C is about the conditions a company must meet before it can deduct a bad debt.

Note 2:   A company can choose that this Subdivision is not to apply to it: see section   166 - 50.

Note 3:   See section   165 - 255 for the rule about incomplete current years.

Meaning of test period

  (2)   The company's test period is the period:

  (a)   that begins at whichever of the following times the company chooses:

  (i)   the start of the income year in which the debt was incurred;

  (ii)   the start of the * first continuity period; and

  (b)   that ends at the end of the * second continuity period;

and includes any intervening period.

Note:   See section   165 - 255 for the rule about incomplete test periods.

Substantial continuity of ownership

  (3)   The company is taken to have met the conditions in section   165 - 123 (about the company maintaining the same owners) if there is * substantial continuity of ownership of the company as between the start of the * test period and:

  (a)   the end of each income year in that period; and

  (b)   the * end of each * corporate change in that period.

Note:   See sections   166 - 145 and 166 - 175 to work out whether there is substantial continuity of ownership and a corporate change.

No substantial continuity of ownership

  (4)   The company is taken to have failed to meet the conditions in section   165 - 123 if there is no * substantial continuity of ownership of the company as between the start of the * test period and:

  (a)   the end of an income year in that period; or

  (b)   the * end of a * corporate change in that period.

Satisfies the business continuity test

  (5)   However, if the company satisfies the * business continuity test for the * second continuity period (the business continuity test period ), it is taken to have satisfied the condition in section   165 - 126.

Note 1:   For the business continuity test, see Subdivision   165 - E.

Note 2:   See section   165 - 255 for the rule about incomplete test periods.

  (6)   Apply the * business continuity test to the * business that the company carried on immediately before the earlier of the following times (the test time ):

  (a)   the end of the first income year;

  (b)   the first time in the test period that a * corporate change in the company * ends;

for which there is no * substantial continuity of ownership of the company as between the start of the * test period and that time.