Income Tax Act 2007 section 574

Allowable deductions

Section 574 sets out the rules governing when and to what extent a payer of manufactured dividends can claim a tax deduction for those payments.

• A payer of manufactured dividends may claim a deduction, but only to the extent not already deductible as a trading expense or under other general income tax relief rules.
• The deduction is restricted: it is only allowable to the extent that the manufactured dividend payment is matched with a corresponding dividend-type receipt received by the payer.
• Matching can also occur where the payer has deemed interest arising under a repo arrangement, which similarly supports the deduction.
• General income tax relief rules take priority — if the manufactured dividend is already deductible as a trading expense, it cannot also be deducted under this section.