Edited version of your private ruling

Authorisation Number: 1012565660480

Ruling

Subject: Consolidation - rights to future income

Question 1

Is the right of Company A to receive trail commission from the Lender under the lender agreement in respect of loans introduced by Company B and settled by the Lender before the joining time, an unbilled income asset as defined by subsection 701-63(6) of the Income Tax Assessment Act 1997 (ITAA 1997) as inserted by Part 1 of Schedule 3 to Tax Laws Amendment (2012 Measures No. 2) Act 2012 (the pre rules) of Company A at the time it joined the consolidated group?

Answer

No.

However, the right of Company A to retain (receive) a percentage of the trail commission payable by the Lender to Company B in respect of those loans, pursuant to the broker agreement between Company A and Company B, is an unbilled income asset as defined by subsection 701-63(6) of the pre rules.

Question 2

Is the right referred to in question 1 covered by section 716-410 of the pre rules at the joining time?

Answer

The right identified in the answer to question 1 (being the right of Company A to retain (receive) a percentage of the trail commission payable by the Lender pursuant to the broker agreement between Company A and Company B) is covered by section 716-410 of the pre rules at the joining time.

Question 3

If the answers to questions 1 and 2 are yes, does section 716-405 of the pre rules apply to the right referred to in question 1?

Answer

Section 716-405 of the pre rules applies to the right identified in the answer to question 1 (being the right of Company A to retain (receive) a percentage of the trail commission payable by the Lender pursuant to the broker agreement between Company A and Company B).

Question 4

If the answer to questions 1, 2 or 3 is no, can the taxpayer calculate its taxable income from the trail commissions on a profit emerging basis?

Answer

It is not necessary to answer this question.

Question 5

If the answer to question 4 is yes what value should be used by the taxpayer when considering the applicable cost of the rights to receive trail commissions?

Answer

It is not necessary to answer this question.

Question 6

If the answer to question 4 is yes, on what basis is the emerged profit calculated?

· Can the taxpayer use a straight line amortisation over 5.5 years?

· Can the taxpayer use an actual loan book method assuming a first in first out (FIFO) basis?

· Should the taxpayer adopt another method?

Answer

It is not necessary to answer this question.

This ruling applies for the following periods

Date X 20xx to 30 June 2010

Each income year beginning after 30 June 2010 and ending before 1 July 2016

The scheme commenced on:

Date X 20xx

Relevant facts and circumstances

Consolidation history and business of taxpayer

1. Company H, a company incorporated in Australia, became the head company of a consolidated group ('the Group') upon its formation on Date X 20xx.

2. On Date Y 20xx, Company A joined the Group.

3. The Group operates as an aggregator of mortgages, particularly in the home loan financing sector. As a mortgage aggregator the Group collects commissions from the various financial institutions in respect of loans introduced to those institutions by brokers under the Group umbrella. The Group then pays the appropriate portion of these commissions to the actual mortgage brokers (whilst retaining income for itself in the process).

4. An aggregator has a number of responsibilities, including accreditation of the brokers and management of the relevant trial commission payments to the various brokers. By using an aggregator, the financial institutions do not have to deal with, contract with and manage payments to many different brokers. Rather the financial institutions effectively outsource that requirement to a mortgage aggregator.

5. Company A was an aggregator at the time of joining the Group. As such, it was an intermediary between a number of lenders (its 'panel of lenders') and a number of brokers that operated separate businesses, undertaking their own advertising, managing their own brand and utilising their own employees for the purposes of finding customers and introducing these to the relevant lenders.

Relationship between the parties

6. At the joining time, the Lender was one of Company A's panel of lenders, and Company B was a mortgage broker that introduced customers to loan products provided by the panel of lenders, utilising a software platform provided by Company A.

7. The commercial relationship between the Lender and Company A is governed by an agreement called the lender agreement, while that between Company A and Company B is governed by the broker agreement.

The lender agreement between the Lender and Company A

8. Clause x of the lender agreement confers on Company A the authority to refer potential home loan borrowers to the Lender (via the submission of completed home loan application forms).

9. Clause y requires Company A to make members of its 'staff' available for training in the Lender's procedures. The term 'staff' includes any of Company A's agents or contractors. Clause y also provides that only members of Company A's 'staff' who have received training and been accredited by the Lender are allowed to complete and submit loan application forms.

10. Under clause w, the Lender agrees to pay commission to Company A in respect of loans approved and settled. Clause w provides for both upfront and trailer payments of commission, with the rate of trail commission (of 0.20% pa to 0.30% pa) depending on the "book balance". Trail commission is calculated on the loan balance at the end of the month and is paid monthly in arrears, within ten (10) business days of the last business day of each month. No trail commission is payable on a loan that has been in arrears for a consecutive period of two (2) months or more or if volume (book balance) requirements are not met. Clause w states that Company A is solely responsible for distributing any portion of any commission due to a member of its 'staff'.

The broker agreement between Company A and Company B

11. The broker agreement contains two recitals. Recital A states that Company A carries on the business of mortgage aggregation, mortgage management and providing access to a panel of Lenders and administrative support for brokers. Recital B states that the broker wishes to become a member of Company A's group of brokers in accordance with the terms of the agreement.

12. Clause xx of the broker agreement authorises Company B (on a non-exclusive basis) to refer loan applications to Company A panel lenders via Company A. Clause xx requires that the applications must be referred to the panel lender via the IT Platform or application forms authorised or provided by the panel lender.

13. Clause yy of the broker agreement provides that Company A must provide access to the IT Platform as well as IT support, training, updates and backups in relation to the Platform. Additionally, Company A agrees to provide various other services such as product updates from panel lenders, regular training and professional development and consulting advice regarding sales and marketing.

14. All trail commission paid by a panel lender (in respect of loans submitted by Company B and settled by that lender) will be paid to Company B by Company A and the rate will be between 80% to 95% depending upon the average of all loans settled in the preceding six months by Company B.

15. The commission is paid monthly in arrears and is contingent upon Company A first receiving payment from the panel lender.

16. If the agreement between Company B and Company A is terminated trailing commission paid by a panel lender in respect of loans submitted by Company B will continue to be paid to Company B by Company A until the amount of such commission is less than $200 per month.

17. If a panel lender claws back an amount of commission paid to Company A, Company B must pay the appropriate percentage of the amount back to Company A. No commission is payable in respect of loans that are in default.

Other relevant facts

18. Company H's income tax return for the year ended 30 June 2010 was lodged 2 Mar 2011. However, no deduction for trail commissions was claimed in that year.

19. The Group has not made an election under subitem 103(2) of Schedule 1 to Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 to apply Division 230 of the ITAA 1997 to its financial arrangements from 1 July 2009. Nor has it elected under subitem 104(2) of Schedule 1 to Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 to bring its financial arrangements already existing at 1 July 2010 within that Division.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 Division 230,

Income Tax Assessment Act 1997 section 230-455,

Income Tax Assessment Act 1997 subsection 701-1(1)

Income Tax Assessment Act 1997 subsection 701-1(2)

Income Tax Assessment Act 1997 section 701-10

Income Tax Assessment Act 1997 section 701-55

Income Tax Assessment Act 1997 subsection 701-55(1)

Income Tax Assessment Act 1997 subsection 701-55(5C),

Income Tax Assessment Act 1997 paragraph 701-55(5C)(a),

Income Tax Assessment Act 1997 paragraph 701-55(5C)(b),

Income Tax Assessment Act 1997 paragraph 701-55(5C)(c),

Income Tax Assessment Act 1997 section 701-63,

Income Tax Assessment Act 1997 paragraph 701-63(3)(c)

Income Tax Assessment Act 1997 subsection 701-63(4),

Income Tax Assessment Act 1997 subsection 701-63(5),

Income Tax Assessment Act 1997 subsection 701-63(6),

Income Tax Assessment Act 1997 subsection 705-25(5),

Income Tax Assessment Act 1997 section 705-35,

Income Tax Assessment Act 1997 subsection 705-35(1),

Income Tax Assessment Act 1997 section 716-405

Income Tax Assessment Act 1997 subsection 716-405(1)

Income Tax Assessment Act 1997 paragraph 701-405(1)(b),

Income Tax Assessment Act 1997 subsection 716-405(2)

Income Tax Assessment Act 1997 subsection 716-405(4)

Income Tax Assessment Act 1997 subsectino 716-405(5)

Income Tax Assessment Act 1997 section 716-410

Income Tax Assessment Act 1997 paragraph 716-410(a)

Income Tax Assessment Act 1997 paragraph 716-410(b)

Income Tax Assessment Act 1997 paragraph 716-410(c)

Income Tax Assessment Act 1997 paragraph 716-410(d)

Tax Laws Amendment (2012 Measures No 2) Act 2012 Schedule 3 Part 1

Tax Laws Amendment (2012 Measures No 2) Act 2012 Schedule 3 Part 4.

Reasons for Decision

1. As Company A joined the consolidated group before 12 May 2010 with no claim (for the trail rights) being made by the head company of the Group in a Notice of Assessment served before the 31 March 2011, the application rules in Part 4 of Schedule 3 to Tax Laws Amendment (2012 Measures No 2) Act 2012 determine that the amendments introduced by Part 1 of that Schedule to that Act ('the pre rules') apply.

2. Accordingly, references below to the following provisions of the ITAA 1997 are references to those provisions as they existed following the amendments to that Act by the pre rules:

· subsection 701-55(5C)

· section 701-63

· subsection 705-25(5)

· subsection 705-35

· section 716-405

· section 716-410, or

· any of the constituent parts of the above provisions.

Question 1

Summary

3. Whilst Company A is contractually entitled to be paid the full amount of the trail commission by the Lender (in respect of loans introduced by Company B and settled by the Lender before the joining time) it is beneficially entitled to only a percentage of this commission being the amount it is not contractually bound to pay to Company B under the broker agreement. It is beneficially entitled to retain (or receive) that percentage in return for the provision of mortgage aggregation services to Company B and that percentage only is assessable as ordinary income of Company A. It is Company A's right (as at the joining time) to that percentage of the commission in return for the provision of those services before the joining time that is the relevant right to be tested against the definition of 'unbilled income asset' in subsection 701-63(6) of the ITAA 1997.

Detailed reasoning

4. The amendments made by the pre rules limit the deduction (under section 716-405) to the tax cost setting amount of a *right to future income that is an unbilled income asset.

5. A right to future income is defined in subsection 701-63(5) as follows:

A right to future income is a valuable right (including a contingent right) to receive an amount for the performance of work or services or the provision of goods if:

(a) the valuable right forms part of a contract or agreement; and

(b) the *market value of the valuable right (taking into account all the obligations and conditions relating to the right) is greater than nil; and

(c) the valuable right is neither a *Division 230 financial arrangement nor part of a Division 230 financial arrangement.

6. A *right to future income that is an unbilled income asset is defined in subsection 701-63(6) as follows ; -:

An asset that is a *right to future income is an unbilled income asset if:

(a) the asset:

(i) is in respect of work (but not goods) that has been performed, or partially performed, by an entity for another entity; or

(ii) is in respect of goods (other than *trading stock) or services that have been provided, by an entity to another entity; and

(b) a recoverable debt has not yet arisen in respect of the work, goods or services.

7. Subsection 701-63(4) applies to a *right to future income asset that is not an *unbilled income asset (being a *non-deductible right to future income asset). A non-deductible right to future income asset is treated as forming part of goodwill (paragraph 701-63(3)(c)).

8. A brief consideration of the nature of the business of the parties to both agreements (the lender agreement and the broker agreement of which Company A is common) makes the economics of the arrangement clear. The Lender wishes to make home loans to customers (potential borrowers) and is willing to pay third parties (brokers) to locate and submit completed home loan application forms on behalf of these customers (where loans result from such submissions). The Lender does not however wish to deal separately with such third parties (or with large numbers of individual brokers). Company B requires access to a wide variety of loan products to offer its customers (potential borrowers) but is restricted in its ability or capacity to deal separately with a large number of lenders (due to volume and other requirements of these lenders).

9. Company A by entering into lender agreements (by providing a panel of lenders to its broker members) provides lenders with access to a large third party (broker) referral network and provides brokers with access to a large variety of loan products that they may offer to their customers (potential borrowers).

10. In view of the above, the situation at the joining time can be described as follows. Company B has submitted (prior to joining time) on behalf of its customers a number of loan applications to the Lender (via the IT Platform) that have been approved and settled (loans made by the Lender) at this time. It is therefore expected that the Lender will be required to calculate and pay trail commission (on these loans) at monthly intervals after the joining time out of which Company A is entitled to retain between 5% to 20% (pay between 95% to 80% to Company B) pursuant to the broker agreement. It is also expected that a market value for this trail commission (the right to receive or retain between 5% to 20% of future expected trail commission payments) may be determined at the joining time (with contingencies such as the borrower repaying the loan early or defaulting on the loan affecting the value (but not the existence) of this right).

11. The question asked of the Commissioner is whether Company A's right (as at the joining time) to receive the trail commissions from the Lender in relation to the above loans is an unbilled income asset as defined by subsection 701-63(6) of the ITAA 1997. The answer to that question is 'no' because that right is not a right to future income as defined by subsection 701-63(5) of that Act.

12. Although Company A has a right to receive an amount for the services that it performs or provides, that amount is not the whole of the trail commission that the Lender is obligated to pay pursuant to the lender agreement. The trail commission is paid by the Lender in respect of the services (the completion and submission of home loan application forms) performed by Company B. Company B is able to perform these services (complete and submit loan applications to the Lender on behalf of its customers) by virtue of its membership of Company A's group of brokers. Company A's role as aggregator is to enter into lender agreements (arrange a panel of lenders) on behalf of its broker members and to provide administrative support which includes the passing through of commission paid by lenders on loan applications successfully submitted by its broker members. In return for the performance of mortgage aggregation services Company A is entitled to retain (as its fee) a percentage of the commission paid by lenders to the brokers.

11. The 'conduit' role of Company A in respect of the lender commission is evidenced, in clause 7, as follows ;

· Company A will not pay any commission to the broker(s) until it receives payment from the lender(s) (i.e. payment of trail commission to Company B is contingent on Company A first receiving payment from the Lender);

· Company A will continue to pay trail commission to the broker after termination of the broker agreement (meaning it will continue to pass through trail commission paid by the lender even where that broker is no longer a member of group of brokers);

· If the Lender requires the repayment (or claw-back) of any commission paid then it is the broker who must also repay or refund their commission.

12. Therefore, Company A, in its capacity as a mortgage aggregator, does not beneficially derive the entire trail commission paid by the Lender. The amount it does derive as ordinary income is limited to the percentage it is entitled to retain (or withhold) from the amount it must forward or pay to Company B pursuant to the broker agreement. This is based on the following principles:

· For an amount to be income according to ordinary concepts, it must be a gain by the taxpayer who derived it and there is no gain unless an item is derived by the taxpayer beneficially - see Countess of Bective v. Federal Commissioner of Taxation (1932) 47 CLR 417 per Dixon CJ.

· The character of a receipt must be determined from the point of view of the recipient; from its quality in the hands of the recipient and not from the standpoint of the payer or some other person - see Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514 per Windeyer J at 526 and GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1989-1990) 170 CLR 124; 90 ATC 4413 at CLR 136-137; ATC 4419. The latter case also makes the point that Hill J noted in Lees & Leech Pty Ltd v FC of T 97 ATC 4407 at 4419 with the words: 'I am conscious of the warning emanating from GP International Pipecoaters … that the character of a receipt is not to be determined by reference to outgoings which a taxpayer may be required to make.'

· An amount derived in the ordinary course of the taxpayer's business is income (not capital) and therefore in order to determine the nature of a receipt it is necessary to identify the nature and scope of the taxpayer's business - see FC of T v The Myer Emporium 87 ATC 4363.

13. In Pipecoaters, the taxpayer contracted to construct a plant for coating pipes to be used in a pipeline for the transport of natural gas. The taxpayer received a sum of money from the State Energy Commission of WA under the contract for (amongst other things) the construction of the plant. The issue for decision was whether this amount was income in the hands of the taxpayer. The High Court (at 170 CLR 138; 90 ATC 4420), with reference to Myer Emporium, pointed to the importance of ascertaining the scope of the taxpayer's business in determining the character of the receipt in its hands. It decided that the amount was income of the taxpayer because the taxpayer's business involved not only the coating of the pipes, but extended to the construction of the plant.

14. In the present case, consideration of the nature of Company A's business as mortgage aggregator mitigates against the payment of trail commission from the Lender being income of Company A except to the extent of the percentage thereof that it is entitled to retain by virtue of the broker agreement.

15. In view of the above, the subsection 701-63(5) right to future income asset held by Company A at the joining time is the right of Company A to receive (retain) a percentage of the trail commission payable by the Lender (in respect of loans introduced by Company B and settled by the Lender before this time) for mortgage aggregation services performed or provided by Company A, with this right

· forming part of the broker agreement with Company B;

· having a market value of greater than nil (at the joining time); and

· being neither a Division 230 financial arrangement nor part of one, as the joining time was before 1 July 2010 and VFHPL made no election under subitem 103(2) or subitem 104(2) of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 year.

16. This subsection 701-63(5) right to future income asset meets the definition of a subsection 701-63(6) unbilled income asset as:

· it is in respect of services (mortgage aggregation services) performed or provided (to a third party) before the joining time (that resulted in a loan being made by the Lender before this time); and

· a recoverable debt has not yet arisen in respect of these services (as a recoverable debt will not arise until the Lender calculates and pays the trail commission at the end of each month).

Question 2

Summary

17. The only provision in Part 3-90 of the ITAA 1997 (as amended by the pre rules) that directly references section 716-410 of that Act is subsection 701-55(5C) of that Act, which requires as one of the conditions for its application that section 716-410 'covers' the asset at the joining time. When an unbilled income asset held by an entity that joins a consolidated group has its tax cost set at the joining time, it is subsection 701-55(5C) that directs how the asset's tax cost setting amount (TCSA) is to be used in applying other provisions of the income tax law. In particular, it directs that the TCSA is to be deducted in the manner set out in section 716-405 of the ITAA 1997 as the unbilled income asset yields income following the joining time.

18. The sole purpose of section 716-410 of the ITAA 1997 is to pick up rights to future income (in practice, unbilled income assets) which are held by an entity just before it joins a consolidated group (and therefore will have their tax costs set under section 701-10 of the ITAA 1997 at the joining time), are likely in the future to generate assessable income of the entity or another entity (e.g. the head company of the group that the entity joins) and are not Division 230 financial arrangements. If these conditions are satisfied at a time, section 716-410 'covers' the asset at that time.

Detailed reasoning

19. Section 716-410 states that:

This section covers an asset at a time if:

(a) the asset is a *right to future income; and

(b) the asset is held by an entity just before the time (the joining time) it became a *subsidiary member of a *consolidated group; and

(c) it is reasonable to expect that an amount attributable to the asset will be included in the assessable income of the entity or any other entity after the joining time; and

(d) Division 230 does not apply in relation to the asset (disregarding section 230-455).

20. The right identified in paragraph 15 is an asset that is a right to future income as defined. Therefore, the condition in paragraph 716-410(a) of the ITAA 1997 is satisfied.

21. Because Company A held the right just before it joined the consolidated group (the joining time) the condition in paragraph 716-410(b) of the ITAA 1997 is satisfied.

22. It is reasonable to expect that an amount attributable to the right will be included in the assessable income of Company A or another entity after the joining time. That is, it is reasonable to expect, as at the joining time, that the Lender will make trail commission payments after the joining time, some of which Company A will be entitled to retain as its own income. While the right is an asset of the head company, due to the application of the single entity rule, the portion of any amounts eventually received in trail commissions under the right that does not have to be paid to Company B would be included in the assessable income of Company H under section 6-5 of the ITAA 1997. Therefore the condition in paragraph 716-410(c) is satisfied.

23. As previously determined (see paragraph 15), Division 230 of the ITAA 1997 does not apply to the asset. Therefore the condition in paragraph 716-410(d) is satisfied.

24. Therefore section 716-410 of the ITAA 1997 covers the right at the joining time.

Question 3

Summary

25. The purpose of 716-405 of the ITAA 1997 is to permit a deduction over time for the TCSA of an unbilled income asset.

26. Before that section can apply, the asset's tax cost must be set, its TCSA worked out, and it must be determined how the TCSA is to be dealt with for the purposes of the income tax law in relation to the asset under section 701-55 of the ITAA 1997.

27. The right identified in paragraph 15, being an asset of Company A at the joining time (disregarding the single entity rule), has its tax cost set at that time under section 701-10 of the ITAA 1997, and its TCSA is worked out under Division 705 of the ITAA 1997. The right is a reset cost base asset so its TCSA is worked out together with the other reset cost base assets according to its proportionate market value under subsection 705-35(1) of the ITAA 1997.

28. Subsection 701-55(5C) of the ITAA 1997 appropriately deals with the question of how the TCSA is to be utilised for the purposes of the income tax law in relation to the right. If the conditions in that subsection are satisfied in relation to the right, section 716-405 may apply in relation to the right.

Detailed reasoning

29. Subsection 705-55(5C) of the ITAA 1997 states:

If:

(a) the asset's tax cost is set because an entity becomes a *subsidiary member of a *consolidated group at the particular time; and

(b) section 716-410 … covers the asset at the particular time; and

(c) the asset is not a *non-deductible right to future income;

the expression means that section 716-405 may apply in relation to the asset after the particular time.

30. With reference to subsection 701-55(1) of the ITAA 1997, this means that if the conditions in paragraphs (a), (b) and (c) of subsection 701-55(5C) of that Act are satisfied, the effect of setting the tax cost of the asset at the joining time is that section 716-410 of that Act may apply in relation to the asset after the joining time.

31. The conditions in paragraphs (a) and (b) of subsection 701-55(5C) of the ITAA 1997 are satisfied. As for paragraph (c), a non-deductible right to future income is defined in subsection 701-63(4) of the ITAA 1997 as being a right to future income that is not an unbilled income asset. As the right identified in paragraph 15 is a right to future income that is an unbilled income asset (see paragraphs 15-16), it follows immediately that the condition in paragraph 701-55(5C)(c) is satisfied. Since the right's tax cost was set at the joining time, it follows from subsection 701-55(5C) that section 716-405 of the ITAA 1997 'may' apply in relation to the right after the joining time.

32. Subsection 716-405(1) of the ITAA 1997 states that:

This section applies if:

(a) an entity (the joining entity) became a subsidiary member of a *consolidated group at a time (the joining time); and

(b) subsection 701-55(5C) applies in relation to the asset at the joining time.

Note: Subsection 701-55(5C) deals with assets covered by section 716-410 (Rights to amounts that are expected to be included in assessable income after joining time).

33. The note following the subsection makes it clear that the reference in paragraph (b) of that subsection to 'the asset' is the same asset as is considered under subsection 701-55(5C) of the ITAA 1997. Therefore, section 716-405 of the ITAA 1997 applies in respect of the right identified in paragraph 15.

34. Subsection 716-405(2) of the ITAA 1997 states that an entity that is qualified for a deduction under subsection 716-405(5) of that Act may deduct, for an income year ending after the joining time:

· the TCSA of the asset in full in the first income year ending after the joining time if the entity is the head company and expects that a recoverable debt at least equal to the TCSA will arise for the services mentioned in subsection 701-63(6) of the ITAA 1997 in relation to the asset within 12 months after the joining time (per paragraph 716-405(2)(a)); or

· if paragraph 716-405(2)(a) does not apply and one or more recoverable debts arise in that income year for the services mentioned in subsection 701-63(6) of the ITAA 1997 in relation to the asset, the lesser of the 'unexpended tax cost setting amount' for the asset for that income year and the total of those recoverable debts (per paragraph 716-405(2)(a)); or

· if neither paragraph 716-405(2)(a) nor (b) applies, no amount is deductible under section 716-405 in respect of the asset for the income year.

35. Under subsection 716-405(5) of the ITAA 1997, the head company is qualified for a deduction under that subsection for an income year for the asset if it held the asset at a time in that income year, whether directly or because of the operation of the single entity rule.

36. The 'unexpended tax cost setting amount' for the asset for an income year is defined in subsection 716-405(4) of the ITAA 1997 as being the TCSA of the asset reduced by the amounts (if any) of all deductions under section 716-405 of the ITAA 1997 in respect of the asset for previous income years ending after the joining time.

37. Company H has held the right identified in paragraph 15 because of the operation of the single entity rule since the joining time. It has therefore qualified for a deduction under subsection 716-405(5) of the ITAA 1997 for each income year that has ended since the joining time for the right (and will similarly qualify in future income years during which it continues to hold the right).

38. Company H is not able to deduct the TCSA of the right in full under paragraph 716-405(2)(a) of the ITAA 1997. It can deduct amounts under paragraph 716-405(2)(b) of that Act for each income year ending after the joining time, subject to it being qualified as explained at paragraph 37 and subject to a recoverable debt arising for the services provided or performed in relation to the right in that income year.

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