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  • Question 13

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    This question asks whether you had international related party dealings of a non-revenue (capital) nature, apart from the dealings covered by questions 5 to 11.

    The dollar amounts or values asked for in this question are all based on your accounting records.

    We expect the majority of international related party dealings entered into by taxpayers to come within the types of dealings covered by questions 5 to 11.

    An international related party dealing that you included at questions 5 to 11 should not be included at this question, regardless of whether it was reported using tax or accounting figures.

    Attention

    Note that amounts included in your answers to questions 2 to 4 may be included again at questions 5 to 11.

    End of attention

    Capital or revenue in nature?

    Whether dealings are capital or revenue in nature is a matter to be decided based on the facts and circumstances of each case. The leading Australian case on this topic is Sun Newspapers Ltd and Associated Newspapers Ltd v. FC of T (1938) 61 CLR 337; 5 ATD 87. This case established that expenditure incurred in establishing, replacing and enlarging the profit yielding structure (ie the business entity/structure) is of a capital nature and should be contrasted with working or operating expenses incurred to operate the business or profit yielding structure. The test laid down in the Sun newspapers case requires the following three factors to be considered and weighed in deciding whether expenditure is capital or of a capital nature:

    • The nature of the benefit or advantage obtained or secured by the incurrence of the expenditure - for example, whether the expenditure secures an enduring benefit.
    • The manner in which the benefit or advantage so obtained or secured is to be relied upon or enjoyed.
    • The means adopted to obtain or secure the benefit or advantage.

    There are many other decisions of the Australian courts applying these principles in Sun Newspapers to various cases. For more information, refer to ATO guidance such as taxation rulings. We strongly recommend that you obtain appropriate guidance or professional advice in relation to the particular facts and circumstances of your case.

    If you had international related party dealings of a non-revenue (capital) nature, apart from the dealings covered in questions 5 to 11, answer 'Yes' at label A of question 13 and complete the following labels.

    Item 13a is completed as follows in relation to your international related party dealings of a non-revenue (capital) nature involving tangible property:

    • At label C, write the total consideration paid in respect of these international related party dealings of a non-revenue (capital) nature involving tangible property.
    • At label D, write the total amount of consideration received in respect of these international related party dealings of a non-revenue (capital) nature involving tangible property.
    • At label G, write the Appendix 10 code for the principal method you used for pricing these acquisitions or disposals involving the tangible property.
    • At label F, write the Appendix 10 code for the percentage of your international related party dealings of a non-revenue (capital) nature involving tangible property for which you have documentation. 'Percentage of dealings with documentation' refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation (as per TR 98/11) expressed as a percentage of total dollar value of transactions reported at this question.

    Item 13b is completed as follows in relation to your international related party dealings of a non-revenue (capital) nature involving intangible property:

    • At label C, write the total consideration paid in respect of these international related party dealings of a non-revenue (capital) nature involving intangible property.
    • At label D, write the total amount of consideration received in respect of these international related party dealings of a non-revenue (capital) nature involving intangible property.
    • At label G, write the Appendix 10 code for the principal method you used for pricing these acquisitions or disposals involving the intangible property.
    • At label F, write the Appendix 10 code for the percentage of your international related party dealings of a non-revenue (capital) nature involving intangible property for which you have documentation. 'Percentage of dealings with documentation' refers to the aggregate dollar amount of transactions reported at this question for which you have relevant documentation (as per TR 98/11) expressed as a percentage of total dollar value of transactions reported at this question.
    Further Information

    For the list of:

    • percentage of dealings with documentation codes, see Appendix 9
    • capital asset pricing methodology codes, see Appendix 10.
    End of further information

    Example

    An Australian taxpayer had the following international related party dealings of a non-revenue (capital) nature during the income year that are not covered at questions 5 to 11. The taxpayer had documentation for 100% of the dealings.

    Nature of dealing

    Country

    Expenditure

    Revenue

    Pricing methodology code

    Tangible property

    Plant and machinery

     

    Germany

     1,550,000

     

    2

     

    Japan

     2,200,000

     

    3

    Total

    3,750,000

       

    Intangible property

    Trademarks

    New Zealand

     

    1,875,000

    2

    Total

     

    1,875,000

     

    With this information the Australian taxpayer completes question 13 as follows:

    With this information the Australian taxpayer completes question 13

    Last modified: 08 Aug 2014QC 26054