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Edited version of private ruling
Authorisation Number: 1011867343403
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Ruling
Subject: Deductibility of payment
Question 1
Does section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) permit a deduction to an entity for a specific payment (the Payment)?
Answer
Yes.
This ruling applies for the following period/s:
Income year ended 30 June 2012
Income year ended 30 June 2013
Income year ended 30 June 2014
The scheme commences on:
During the year ended 30 June 2012
Relevant facts and circumstances
An entity proposes to make the Payment.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Subsection 8-1(1)
Income Tax Assessment Act 1997 Subsection 8-1(2)
Income Tax Assessment Act 1997 Paragraph 8-1(2)(a)
Income Tax Assessment Act 1997 Paragraph 8-1(2)(b)
Income Tax Assessment Act 1997 Paragraph 8-1(2)(c)
Income Tax Assessment Act 1997 Paragraph 8-1(2)(d)
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 www.ato.gov.au 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.
Reasons for decision
Detailed reasoning
It is considered that the Payment has the character of a loss or outgoing incurred in the course of gaining or producing assessable income or in carrying on a business for the purpose of gaining or producing assessable income.
The Payment is not considered to be a loss or outgoing of capital or of a capital nature. On the basis that paragraphs 8-1(2)(b) of the ITAA 1997 to paragraph 8-1(2)(d) of the ITAA 1997 have no application, the entity will be entitled to claim a deduction for the Payment pursuant to subsection 8-1(1) of the ITAA 1997.