Rulings
Effective life of depreciating assets
We have made rulings about effective life for assets used in film and video production which took effect from 1 January 2006.
TR 2002/13 Income tax: Australian films - Division 10B - tax avoidance schemes
This ruling examines tax avoidance schemes connected with films. Specifically, it examines tax benefit transfers under which film makers who cannot benefit directly under Division 10B of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) enter into contrived financial (and other) arrangements with taxpayers who obtain the benefit of the Division 10B of deductions with little or no commercial exposure to the success or failure of the film.
Division 10B contains provisions which ensure that the tax concession will be available in a variety of factual circumstances. The analysis presented in this ruling is intended to provide guidance to taxpayers who want to invest in Australian films and to access the Division 10B tax concession. The Division 10B tax concession will prima facie be available to investors in cases other than those described in paragraphs four and six, or which have similar effects; that is, cases where the arrangements are not geared to achieve results, such as those listed in paragraph 31.
This ruling does not deal with any of the following:
- investments under the Film Licensed Investment Company measures
- the source of income under film distribution agreements with non-residents or section 79D of the ITAA 1936
- arrangements under which investors are actually exposed to the real risks and benefits of ownership of certified Australian films
- property other than Australian films, which from 1 July 2001 is subject to Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) and which from the 1998-99 income year to 30 June 2001 is subject to Division 373 of the ITAA 1997.
This ruling was issued on 26 June 2002.
IT 2646 Income tax: television program licences
This ruling clarifies our views about the deductibility for income tax purposes of the costs incurred by television stations in acquiring licences to televise programs (known as program licences). The ruling covers the following two aspects of acquiring program licences:
- Is the expenditure on program licences revenue or capital in nature?
- When is the expenditure incurred?
Most acquisitions of program licences will involve the television station (or network company) entering into a television film licence agreement, television program licence agreement or similar agreement. These agreements will usually grant a licence to show a program for a particular number of years and for a particular number of runs within those years.
Most written agreements provide either for payment in full on signing (or within 30 days) or for payment by way of regular and pre-agreed instalments. If there is no written agreement, payment is usually on demand by invoice.
This ruling was issued on 11 July 1991.
IT 2629 Income tax: taxation incentives for the Australian film industry
This ruling clarifies the relationship between Divisions 10B and 10BA of the Income Tax Assessment Act 1936. It provides an overview of the two Divisions that give a tax deduction for investment in Australian films. The ruling is relevant to taxpayers who are considering investing in Australian films and should be read in conjunction with Taxation Rulings IT 2111 and IT 2476.
The ruling highlights the fundamental differences between the two Divisions on a point-by-point basis. It includes a table that summarises the key differences between them.
Areas covered include all of following:
- Division 10B
- Division 10BA
- certificates - Divisions 10B and 10BA
- election that Division 10BA not apply
- acquisition of initial and existing copyright
- disposal of copyright
- expenditure claimable under the two Divisions
- interaction of Division 10B and Division 10BA.
This ruling was issued on 21 March 1991.
IT 2533 Income tax: film and video tape royalties - whether licensor's liability to tax is calculated on gross or net receipts
Section 136A of the Income Tax Assessment Act 1936, in conjunction with the Income Tax (Film Royalties) Act 1977, imposes liability to income tax at the rate of 10% upon income derived by a non-resident as consideration for the use of, or the right to use films and video tapes, deemed to have been derived from a source in Australia. This ruling considers whether the gross distribution receipts, or some lesser amount, should be treated as royalties derived by the non-resident licensor for the purposes of section 136A.
IT 2476 Income tax: taxation incentives for Australian film industry
This ruling clarifies a number of issues about the interpretation and operation of the provisions of the income tax law relating to investment in Australian films. The provisions are contained in Divisions 10B and 10BA of the Income Tax Assessment Act 1936.
Division 10B provides, among other things, that capital expenditure incurred in acquiring rights in or under copyrights relating to Australian films may be deducted over two income years. The two-year write-off concession is available for the capital cost of Australian film rights in cases where the rights or films to which they relate are first used for the purpose of producing assessable income after 21 November 1977.
Division 10BA provides concessional treatment for capital expenditure incurred on or after 1 October 1980 in relation to an Australian film. The deduction is allowable in the year of income the expenditure is incurred.
Areas covered include all of the following:
- certificates - Division 10B and Division 10BA
- increase in film budget
- operation of two bases of deduction - Section 124ZAFA
- donation of services.
The ruling was issued on 9 June 1988.
IT 2283 Income tax: assessability of film and video print costs paid to non-residents
A royalty (or royalties) is defined in subsection 6(1) of the Income Tax Assessment Act 1936 to include, among other things, payments as consideration for the use of or the right to use motion picture films and films or video tapes for use in connection with television. If payments for these purposes are made by residents of Australia to non-residents, the payments are deemed by section 6C to have a source in Australia. This ruling considers the liability to income tax of certain payments made by a resident company to a non-resident under film distribution licensing agreements.
The ruling was issued on 11 April 1986.
IT 2111 Taxation incentives for the Australian film industry
This ruling clarifies a number of issues in relation to the interpretation and operation of Division 10BA of Part III and Division 6 of Part VI of the Income Tax Assessment Act 1936 and sections 23H and 26AG of the ITAA 1936.
Areas covered includes all of the following:
- section 124ZADA declaration - 'appropriate person'
- timing of contributions towards the production of a film
- moneys expended 'in producing or by way of contribution to the cost of producing a film'
- film-related expenditure that is not deductible under section 124ZAFA
- application of section 124ZAFA and other provisions in respect of taxpayers with substituted accounting periods
- the 'at risk' rule
- exemption of film income.
This ruling was issued on 18 October 1984.
Last Modified: Friday, 15 February 2013