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Edited version of private advice
Authorisation Number: 1051545061193
Date of advice: 24 July 2019
Ruling
Subject: Bailment arrangement
In order to protect the privacy and commercial in-confidence components of this private binding ruling the following summary is provided.
Question 1
Is the Bailment Agreement between A and B a 'financing arrangement' pursuant to section 974-130 of the Income Tax Assessment Act 1997 (ITAA1997)?
Answer
Yes.
Question 2
If the Bailment Agreement is a 'financing arrangement', is it a 'debt interest' within the meaning of section 974-20 of the ITAA 1997?
Answer
Yes.
Question 3
Is the Bailment Agreement 'debt capital' pursuant to subsection 995-1(1) of the ITAA 1997?
Answer
Yes.
Question 4
If the Bailment Agreement is a 'debt interest' within the meaning of section 974-20 of the ITAA 1997, are the fees payable to B treated as 'debt deductions' within the meaning of section 820-40 of the ITAA 1997 and subject to the thin capitalisation provisions under Division 820 of the ITAA 1997?
Answer
Yes.
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