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Edited version of private ruling
Authorisation Number: 1011510996998
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Ruling
Subject: Deductibility of fee
What this ruling is about:
This private ruling relates to an arrangement whereby a subsidiary member of a tax consolidated group pre-paid a fee (the Fee) to an entity in relation to the subsidiary member's business activities.
The head entity of the tax consolidated group (taxpayer) asked the Commissioner to determine firstly, whether it was entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the Fee, and whether section 82KZMD of the Income Tax Assessment Act 1936 (ITAA 1936) would apply to set the amount and timing of the deduction. Secondly, to the extent that the Fee was not deductible under section 8-1 of the ITAA 1997, whether the taxpayer was entitled to a deduction for the Fee under section 40-880 of the ITAA 1997.
The Commissioner ruled that:
Firstly, the taxpayer was not entitled to a deduction under section 8-1 of the ITAA 1997 and thus, it was not necessary to consider the tax treatment of the Fee under section 82KZMD of the ITAA 1936.
Secondly, the taxpayer was not entitled to a deduction under section 40-880 of the ITAA 1997.
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
The scheme commenced on:
1 July 2009
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 82KZMA
Income Tax Assessment Act 1936 Subsection 82KZMA(1)
Income Tax Assessment Act 1936 Section 82KZMD
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 40-880
Income Tax Assessment Act 1997 Subsection 40-880(2)
Income Tax Assessment Act 1997 Paragraph 40-880(2)(a)
Income Tax Assessment Act 1997 Subsection 40-880(3)
Income Tax Assessment Act 1997 Subsection 40-880(5)
Income Tax Assessment Act 1997 Paragraph 40-880(5)(f)
Income Tax Assessment Act 1997 Subsection 40-880(6)
Income Tax Assessment Act 1997 Subsection 40-880(7)
Income Tax Assessment Act 1997 Subsection 40-880(9)
Income Tax Assessment Act 1997 Part 3-90
Income Tax Assessment Act 1997 Section 701-1
Does Part IVA apply to this ruling?
Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.
We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.
If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.
For more information on Part IVA, go to our website and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.