ATO Interpretative Decision
ATO ID 2001/229 (Withdrawn)
Income Tax
Deduction - agency fee paid to overseas company for servicesFOI status: may be released
-
This ATO ID is withdrawn from the database as it is a straight application of the law and does not contain an intepretative decision.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer, an Australian resident company, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the monthly agency fee paid to a non-related overseas company for various services?
Decision
Yes. The taxpayer, an Australian resident company, is entitled to a deduction under section 8-1 of the ITAA 1997 for the monthly agency fee paid to a non-related overseas company for various services.
Facts
The taxpayer enters into an agency arrangement with the non-related overseas company for the sourcing of the goods, coordinating deliveries between the factories overseas and monitoring production schedules to ensure the goods are produced on time. The taxpayer has two subsidiary companies to import and retail products. The income of the taxpayer consists of management fee receivable from both subsidiary companies.
Reasons for Decision
Section 8-1 of the ITAA 1997 provides that expenditure will generally be deductible if its essential character is that of expenditure that has a sufficient connection with the operations or activities which more directly gain or produce assessable income, provided that the expenditure is not of a capital, private or domestic nature.
There is a sufficient nexus between the management and service fees derived and the agency fees paid by the taxpayer to the unrelated overseas agent to satisfy the provisions of section 8-1 of the ITAA 1997. The monthly agency fee is an outgoing of a revenue nature, therefore, it is an allowable deduction.
Date of decision: 22 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 8-1
Keywords
Deductions & expenses
Management fees expenses
ISSN: 1445-2782
| Date: | Version: | |
| 22 June 2001 | Original statement | |
| You are here | 13 June 2008 | Archived |