Section DB 48 — Income Tax Act 2007: Restrictive covenant breached

DB 48 Restrictive covenant breached When this section applies (1) This section applies when an employee ( person A ) makes a payment to another person ( person B ) in the following circumstances: (a) person A derives assessable income under section CE 9 (Restrictive covenants); and (b) person A breaches a term of the undertaking they gave to person B; and (c) person A is, consequently, required to make the payment to person B. Deduction (2) Person A is allowed a deduction for the payment. Amount of deduction (3) The amount of the deduction is the lesser of the following: (a) the assessable income that person A derives under section CE 9 ; and (b) the payment that person A makes to person B, excluding interest, punitive damages, exemplary damages, and person B’s legal costs and other expenses. Timing of deduction (4) The deduction is allocated to the income year in which person A makes the payment to person B. Link with subpart DA (5) This section supplements the general permission and overrides the employment limitation. The other general limitations still apply. Defined in this Act: amount , assessable income , deduction , employee , employment limitation , general limitation , general permission , income year , interest , pay , supplement , Compare: 2004 No 35 s DB 39