The following examples will help you complete your RTP Schedule.
Example 1: Category A RTP
AusCo is an Australian investment company. For many years, it has invested in the share market with an average turnover of about 10% of the value of the total share portfolio, maintaining a consistent yield on its capital invested in shareholdings in Australian companies. AusCo had no particular exit strategy and treated any sales as the realisation of investments and on capital account.
During the 2017–18 income year, in order to refinance after having liquidity problems, AusCo sold 30% of its shares. AusCo considered these shares to be 'growth' shares as opposed to 'value shares'. These shares were sold on the market at a loss.
AusCo concludes that the facts associated with the disposal of the shares are relatively the same or similar for the purposes of the position and that a common conclusion is reached on the tax treatment of those transactions – that is, there is a common basis for lodgment. So, AusCo treats the disposals of the sale shares as a single position.
AusCo decides to treat the losses from the sale of the shares as arising from an isolated transaction and on revenue account. If this treatment is not sustained, the potential adjustment would equal or exceed AusCo's materiality amount.
Exercising reasonable care, AusCo concludes that this treatment is about as likely to be correct as incorrect – so, AusCo must disclose the position as a Category A RTP.
The information on the RTP schedule could be completed for this RTP as follows:
RTP number |
2018–1 |
Have you discussed this position with the ATO? |
No |
RTP category |
A |
Concise description
AusCo is an Australian investment company. AusCo has continuously invested in the Australian share market since early 2000.
From 1 July 2009 to 30 June 2016, AusCo had a 10% average turnover of the value of its total portfolio of Australian shares. It maintained a consistent yield on its capital invested in shareholdings in Australian companies.
During the 2017–18 income year, AusCo experienced urgent liquidity problems because it was unable to re-finance a loan facility. As a direct result, AusCo had to urgently sell 30% of its shares.
While the shares had to be sold quickly, AusCo carefully considered which shares should be sold (the sale shares). In line with a strategic decision made by AusCo's board, the sale shares were those shares that AusCo considered to be 'growth' shares (as opposed to 'value' shares).
The disposal of the sale shares was effectively a forced sale – AusCo sold into a falling market, with the result that the sale shares were sold at a loss.
The sale shares comprised of shares in a number of different Australian listed companies actively traded on the Australian Stock Exchange. Each parcel of shares was sold at a loss.
The sales of the shares have been treated as a single position.
Basis for position
The position taken by AusCo on its 2017–18 income tax return is that the loss arising on the disposal of the sale shares is deductible under section 8–1 of the Income Tax Assessment Act 1997.
In adopting this treatment, regard was had to the following relevant authorities, industry and administrative practices:
- section 8–1 Income Tax Assessment Act 1997
- London Australia Investment Co Ltd v. FC of T (1977) 138 CLR 106; AGC (Investments) Limited v. FC of T 92 ATC 4239; Trent Investments Pty Ltd v. FC of T 76 ATC 4105
- TR 92/3 Income tax: whether profits on isolated transactions are income
- TR 2005/23 Income tax: listed investment companies
- TD 2011/21 Income tax: does it follow merely from the fact that an investment has been made by a trustee that any gain or loss from the investment will be on capital account for tax purposes?
Example 2: Category A RTP
BCo is an Australian company that is not a member of a tax consolidated group. During the 2017–18 income year, all of the shares in BCo were sold to unrelated parties, resulting in BCo failing the continuity of ownership test. The new shareholders also introduced changes in BCo's operations. BCo decides to write off a material long-term receivable as unrecoverable and 'bad'.
BCo concludes that it satisfies the same business test and is entitled to treat the bad debt write-off as deductible.
If this treatment is not sustained, the potential adjustment would equal or exceed BCo's materiality amount.
Exercising reasonable care, BCo concludes that this treatment is about as likely to be correct as incorrect – so, BCo must disclose the position as a Category A RTP.
The information on the RTP schedule could be completed for this RTP as follows:
RTP number |
2018–1 |
Have you discussed this position with the ATO? |
No |
RTP category |
A |
Concise description
Since 2010, BCo Pty Limited (BCo) has continuously owned and operated the retail business known as 'B retail'. In August 2014, BCo provided services for an agreed fee to XYZ, an unrelated third party, through its 'B retail' business. In September 2016, XYZ started experiencing serious financial difficulties. XYZ did not pay for the services provided by BCo in line with the agreed terms.
In December 2016, XYZ advised BCo that it was not able to pay for the services provided. In March 2017, after undertaking appropriate investigations and enquiries, BCo determined that the long-term material receivable from XYZ was unrecoverable and ‘bad’. BCo then took all necessary steps to write off the XYZ receivable as bad, including writing off the receivable from its accounts.
In November 2016, the legal and beneficial interests in all of the shares in BCo were sold to unrelated parties. The new shareholders of BCo have implemented changes to BCo’s operations, focusing on improving the profitability of 'B retail'.
Basis for position
The position taken by BCo on its 2017–18 income tax return is that the full amount of the XYZ debt that BCo wrote off as bad in the 2017–18 income year is deductible under sections 25-35 and 165-120 of the Income Tax Assessment Act 1997.
In adopting this treatment, regard was had to the following relevant authorities, industry and administrative practices:
- sections 25-35, 165-120, 165-126, 165-129 and 165-210 of the Income Tax Assessment Act 1997
- TR 92/18 Income tax: bad debts
- TR 1999/2 Income tax: deductibility of expenditure incurred on tailings dams or similar mining residue, waste storage or disposal facilities (the operation of sections 165-13 and 165-210, paragraph 165-35(b), section 165-126 and section 165-132)
- Dinshaw v. Bombay Commissioner of Taxes (1934) 50 TLR 527
- Avondale Motors (Parts) Pty. Ltd. v. Federal Commissioner of Taxation (1971) 124 CLR 97.
Example 3: Category A and B RTPs – New legislation
On 1 June 2018, new income tax legislation took effect that allowed taxpayers to claim a deduction in certain circumstances. Due to uncertainty about the application of the new law, the ATO started consultation with taxpayers following the enactment of the new provisions. A number of issues were raised by taxpayers during this consultation, including issues surrounding the requirements for claiming the deduction; these were noted for consideration by the ATO.
FCo is the head company of a tax consolidated group. At the time of preparation and lodgment of its 2018 income tax return, issues surrounding the requirements for claiming the deduction remain unresolved and consultation with the ATO was still underway.
FCo prepares and lodges its 2018 income tax return on the basis that the deduction is available to the company in that year. FCo's audited consolidated financial statements for the period ended 30 June 2018 recognise (whether as a provision, contingent liability or otherwise) the additional amount of tax payable in the event that FCo's deduction is subsequently disallowed by the ATO.
If this treatment is not sustained, the potential adjustment would equal or exceed FCo's materiality amount. Exercising reasonable care, FCo concludes that this treatment is about as likely to be correct as incorrect – so, FCo must disclose the position as a Category A RTP.
As the difference between the treatment of the position on FCo's income tax return and on FCo's financial statements is equal to or exceeds FCo's materiality amount, FCo must disclose the position as a Category B RTP. A position that is both a Category A and B RTP, is reported as Category A in the RTP schedule.
The information on the RTP schedule could be completed for this RTP as follows:
RTP number |
2018–1 |
Have you discussed this position with the ATO? |
No |
RTP category |
A |
Concise description
On 1 June 2018, [insert details of legislative change] took effect. The policy intent of this legislation as outlined in the [insert details] is to allow taxpayers such as FCo to claim a deduction in certain circumstances [insert details] under sections [insert details of relevant sections].
There is uncertainty regarding the interpretation of this provision and consultation is still ongoing with the ATO. At the time of lodgment of this schedule, the issue of how subsection [insert details] applies to [insert specific details] is unresolved and is the subject of ongoing consultation with the ATO through a NTLG working group.
FCo comes within the class of taxpayers entitled to claim a deduction under [insert details] because [insert details]. Accordingly, FCo claimed a deduction under [insert details] and is lodging this tax return on this basis.
FCo's audited consolidated financial statements for the period ended 30 June 2018 recognise a contingent liability representing the additional amount of tax payable in the event that the outcome of the current consultative process with the ATO is not favourable to FCo.
Basis for position
The position taken by FCo on its 2017–18 income tax return is that [insert details] is deductible under subsection [insert details] of the Income Tax Assessment Act 1997.
In adopting this treatment, regard was had to the following relevant authorities, industry and administrative practices:
- [Insert details of the amending legislation]
- [Insert details of the Explanatory Memorandum]
- [Insert details of the consultative process / ATO published guidance].
Example 4: Category C RTP
AusCo enters into an arrangement whereby capital is raised from shareholders in order to fund the payment of a special dividend to shareholders.
This arrangement is an RTP covered by Question 2 of Category C. The required information to be provided on the RTP schedule for this RTP is as follows:
RTP Category C question |
2 |
RTP Category C subcategory |
|
Optional comments
It is not compulsory to complete the optional comments section and AusCo chooses not to provide any optional comments.
End of exampleExample 5: Category C RTP
An Australian mining company (AusCo) has a related party in Thailand (ForCo). ForCo sells minerals on behalf of other members in the Group (including AusCo) to third parties in Malaysia, for which it is remunerated on a commission basis by the members including AusCo.
In considering PCG 2017/1, AusCo identifies that it is involved in an offshore marketing hub arrangement and the arrangement falls in the blue zone.
Marketing hub arrangements are covered by Question 9 of Category C, with the blue zone covered by subcategory 3.
The required information to be provided on the RTP schedule for this RTP is as follows:
RTP Category C question |
9 |
RTP Category C subcategory |
3 |
Optional comments
Offshore marketing hub arrangement is in relation to export of zinc from Australia to Malaysia.
Note: it is not compulsory to complete the optional comments section.
End of example