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Edited version of private ruling
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Ruling
Subject: Deductibility of settlement costs - section 8-1 of the ITAA 1997
The rulee asked the following questions and the Commissioner has ruled on each of the specific questions.
Issue 1
Question 1
Does the cash component of the settlement consideration meet the requirements to be an allowable deduction under subsection 8-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for Company X for the year ended 30 June 2010?
Answer
Yes.
Question 2
Does the share component of the settlement consideration meet the requirements to be an allowable deduction under subsection 8-1(1) of ITAA 1997 for Company X for the year ended 30 June 2010?
Answer
No.
Question 3
If the answer to questions 1 and/or 2 above is "yes", is the settlement consideration prevented from being an allowable deduction under section 8-1 of the ITAA 1997 as being capital or of a capital nature for the purposes of subsection 8-1(2) of the ITAA 1997?
Answer
No, the cash component is not prevented from being an allowable deduction under section 8-1 of the ITAA 1997.
Issue 2
Question 4
If the answer to question 3 above is "yes", is the settlement consideration an allowable deduction under section 40-880 of the ITAA 1997 for the year ended 30 June 2010 and the subsequent 4 income years?
As the answer to question 3 above is 'No', and the share component is not a 'loss' or 'outgoing', there is no need to rule.