ATO Interpretative Decision
ATO ID 2001/616 (Withdrawn)
Income Tax
Management/Administrative FeesFOI status: may be released
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This ATO ID is withdrawn as it does not accurately reflect the ATO view.This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allowable to a taxpayer for management or administrative fees on an investment which have been deducted by a financial institution before a net amount is paid to the taxpayer?
Decision
Yes, a deduction under section 8-1 of the ITAA 1997 is allowable to a taxpayer for management or administrative fees on an investment which have been deducted by a financial institution before a net amount is paid to the taxpayer.
Facts
The taxpayer is entitled to receive an amount of income from a financial institution.
The taxpayer is charged annual management/administrative fees by the financial institution on their investment.
For convenience the financial institution deducts the amount of the fee from the amount that would have been otherwise payable to the taxpayer. No payments are made directly by the taxpayer to the financial institution.
When payments on the investment are made by the financial institution to the taxpayer the management/ administrative fees have already been deducted. The taxpayer therefore receives the net amount.
Reasons for Decision
The taxpayer was entitled to receive the gross amount of the income earned on the investment from the financial institution. The gross amount is included in assessable income under section 6-5 of the ITAA 1997.
Deductions for management and/or administrative fees paid to a financial institution fall for consideration under the general provisions of section 8-1 of the ITAA 1997.
For the taxpayer to be entitled to a deduction under section 8-1 of the ITAA 1997 the taxpayer must have incurred the expenditure.
The meaning of 'incurred' is discussed in Taxation Ruling TR 97/7. The taxpayer had a presently existing liability to pay the fees. This liability was discharged when the amount was withheld by the financial institution from amounts otherwise payable to the taxpayer. The taxpayer has incurred the management/administrative fee expense and would be entitled to a deduction under section 8-1 of the ITAA 1997.
Date of decision: 13 Augst 2001
Legislative References:
Income Tax Assessment Act 1997
section 6 -5
section 8-1
Related Public Rulings (including Determinations)
TR 97/7
Keywords
Administrative expenses
Deductions and expenses
Management fees expenses
ISSN: 1445-2782
| Date: | Version: | |
| 13 August 2001 | Original statement | |
| You are here | 18 December 2003 | Archived |